Cases and Materials on Creditors' Rights 9781487576783

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CASES AND MATERIALS ON CREDITORS' RIGHTS

CASES AND MATERIALS ON CREDITORS' RIGHTS MARK R. MacGUIGAN PH.D., J.S.D.

Dean Faculty of Law, University of Windsor

UNIVERSITY OF TORONTO PRESS

Second edition

© University of Toronto Press 1967 Printed in Canada Reprinted in 2018 ISBN 978-1-4875-7742-1 (paper)

Preface After many years of comparative obscurity the area of debtor-creditor relations has recently become a subject of popular and legislative concern in Canada. The new interest is reflected at the federal level by the extensive 1966 amendments to the Bankruptcy Act (Stat. Can., c. 32) and by the intensive further scrutiny to which the Bankruptcy Act is now being subjected by a federal departmental committee of experts, and at the provincial level by the debate sparked by the new opting-in provision of the Bankruptcy Act ( s. 198) relating to the orderly payment of debts and by the new legislation on interest disclosure in a number of provinces. In Ontario public interest has led to the establishment of a credit counselling service in Toronto, and the Report of the Select Committee of the Ontario Legislature in 1965 gave rise to new legislation in 1966. Perhaps most remarkable of all is the ambitious series of legislative changes approved by the 1967 session of the Ontario Legislature to complement the newly enacted Personal Property Security Act, 1967. Royal Assent to this Act on June 15, 1967, brought into force its administrative provisions so that the registration system for securities on personal property might be set up as soon as possible. When the system is in operation, a threeyear transitional period will commence during which documents will be registered as at present but will also be recorded in the central office under the new system. Thus at the end of this period the central office will have a record of all unexpired registrations and the remaining sections of the Act can be proclaimed. The passage of the Personal Security Act, 1967 necessitated the enactment of the following complementary legislation: The Sale of Goods Amendment Act, 1967; The Assignment of Book Debts Amendment and Repeal Act, 1967; The Conditional Sales Amendment and Repeal Act, 1967; The Bills of Sale and Chattel Mortgages Amendment and Repeal Act, 1967; and The Bills of Sale Act, 1967. Like the Personal Property Security Act itself, this additional legislation will be brought into effect in two stages, with the second stage following the end of the three-year transitional period. It is of the first importance that legal problems and solutions in the debtorcreditor field should not be isolated from their social context, and I have endeavoured, to the extent that existing information allows, to present the law in its social setting. The basic social fact, obviously, is the extent of consumer credit. Thus in the United States, where fuller statistics are available, the rise in bankruptcies since 1945 has been at approximately the same rate as the rise in consumer credit: consumer credit increased from $5.6 billions in 1945 to $62.3 billions in March 1963, an increase of 11 times, while bankruptcies grew from 12,862 in 1945 to 155,493 in 1963, an increase of 12 times (Misbach, Personal Bankruptcy in the United States and Utah, 1964). It has been necessary, however, to limit the scope of the book from the

vi

PREFACE

conceptual viewpoint, if only to make it appropriate for a course of 45-60 hours.

In a sense, all problems of creditors' rights may be said to be secondary legal

problems, arising out of previous legal relationships. I have approached the subject with this bias, and also with the conviction that a working knowledge of the principal security devices must be presupposed. In fact, the book focusses on the unsecured creditor, and deals with the secured creditor only as he appears as a competitor of the unsecured creditor. Hence the book covers only enforcement of judgment, fraudulent conveyances and preferences, and bankruptcy, and omits any consideration of matters such as mechanics' liens and the personal property recording acts which some teachers might like to see included. The first (multilith) edition of this casebook appeared in 1962. I was indebted then, and am still, to David G. Kilgour's Cases and Materials on Creditors' Rights, published in multilith form by the University of Toronto Press in 1956, which was the first Canadian book in the field of creditors' rights. I have also benefited from a mimeographed casebook produced at Osgoode Hall Law School in 1961 by J. F . W. Weatherill, as well as by advice from Professor C. R. B. Dunlop of the University of British Columbia and Professors Daniel Hurley and G. V. LaForest of the University of New Brunswick. Finally, I should like to express my gratitude to Mr. Donald G. Smith of the University of Toronto Press for his assistance and to Mrs. Ruby Richardson of Osgoode Hall Law School for her herculean labours in preparing the manuscript. MARK

Osgoode Hall Law School Toronto, Canada June, 1967

R.

MACGUIGAN

Contents Preface Table of Cases Acknowledgments CHAPTER ONE: DEBTOR AND CREDITOR

PART I.

V

ix xiv 3

Creditors' Remedies Short of Bankruptcy Liquidation

CHAPTER TWO: ENFORCEMENT OF JUDGMENT

27

Section 1 : Execution A. General Introduction to the Writs of Execution B. Pieri Facias at Common Law C. Issuance and Continuance of Pieri Facias D. Property Eligible Under Pieri Facias E. Position of Sheriffs and Bailiffs F. Priorities Among Creditors G. Discovery in Aid of Execution H. Exemptions Section 2: Attachment and Garnishment A. Supreme Court Procedure B. Attachment of Wages C. Property Subject to Garnishment D. Garnishment of Joint Bank Accounts Section 3: Receiver by Way of Equitable Execution

21 27 40 42 49 111 151 174 177 193 193 200 221 286 301

CHAPTER THREE: FRAUDULENT CONVEYANCES AND PREFERENCES

330

Section 1: The Statute of 13 Elizabeth Section 2: Transfers With Inadequate Consideration or With Actual Intent to Defraud A. Impeachment of Voluntary Transfers under the Fraudulent Conveyances Act B. Impeachment of Transfers for Consideration Under the Fraudulent Conveyances Act C. Impeachment of Fraudulent Preferences D. The Constitutionality of Provincial Fraudulent Preference Legislation

330 336 336 366 380 406

viii

CONTENTS

PART II:

Bankruptcy

CHAPTER FOUR: HISTORY AND JURISDICTION

428

Section 1. History of Bankruptcy in Canada Section 2: Jurisdiction A. Constitutional Jurisdiction B. Statutory Jurisdiction C. Appellate Jurisdiction

428 431 431 446 454

CHAPTER FIVE: BANKRUPTCY ADMINISTRATION

460 460 463 475 481 486 502 503 523 524

Section 1: Commencement of Bankruptcy A. Persons Subject to Bankruptcy B. Who is a Creditor? C. Judicial Discretion as to Petitions Section 2: Acts of Bankruptcy Section 3: Voluntary Bankruptcy Section 4: Administrative Officials and Administration Section 5: Examination of the Bankrupt Section 6: Bankruptcy Offences CHAPTER SIX: AGREEMENTS AND PROPOSALS

Section 1: General Assignments Section 2 : Creditors' Agreements Apart from The Bankruptcy Act Section 3: Proposals Under The Bankruptcy Act

525 525 531 543

CHAPTER SEVEN: ASSETS OF THE ESTATE

565 565 565 571 580 580 587 588 595 595 608 612 613 635

CHAPTER EIGHT : CLAIMS AND DISTRIBUTION

665 665 665 668 67 4

Section 1: Status of Third Parties in Transactions with Bankrupt A. The Time of Commencement of Bankruptcy B. Transactions regarding After-Acquired Property Section 2 : Property of the Bankrupt A. Rights of Action B. Defeasible Interests C. Proceeds of Insurance Policies D. Miscellaneous E. After-Acquired Property F . The Problem of Double Bankruptcy G. Property Situate Outside Canada Section 3 : Property in Which an Interest is Claimed by Others Section 4: Fraudulent Preferences Section A. B. Section

1 : Claims Provable Claims Secured Creditors 2 : Distribution

CHAPTER NINE: DISCHARGE

Section 1: When Discharge Will Be Granted Section 2: Effects of Discharge Index

684 684 694 711

Table of Cases [An italicized page number indicates that a case is reproduced more or less in full. Other references are to cases referred to in editorial notes. Cases mentioned in judicial opinions and in articles have not been included.]

A&~& A.-G. Que. et al. v. Larue et al. Alberta Wes tern Wholesale Lumber Limited, Re Aldrich v. Aldrich Allen Theatres Ltd. in Re Ashley v. Brown Asselin, Re Atlantic Acceptance Corporation Ltd. v. Distributors Acceptance Corporation Ltd. Avery, In re

2~ 408

Bagley v. Winsome Re Bak, Balls v. Thick Bank of Montreal v. Bailey Bank of Nova Scotia v. Jordison Bartley's Trustee v. Hill B.C. Boat Sales Ltd. Casson v. Redisco of Canada Ltd. B.C. Millwork Products Ltd. v. Overhead Door Sales (Vancouver) Ltd. Beau Monde Ladies' Tailoring Co. v. Garrett Beavis v. Maguire Bendall v. McWhirter Beneficial Finance v. Durward Benjamin Moore & Co. Ltd. v. Finnie Benrush Holdings Ltd. v. Mercantile Bank of Canada et al. Bishop and Traders Finance Corporation Ltd. et al, Re Blades, Re Board of Trade of City of Chicago v. Johnson Bohn v. Kingcrest Motor Sales Limited and Jones

281 567 129 45 192 530

555 39 551 402 312 346 431

640 255 174 376 634 700 155 583 129 696 595 104

Bomasuit, Re Boscher, Re Bozanich, Re 635, Brady, In Re Brandt v. Burrows Brown, Re Bryant, Isard & Co. Ex Parle Higginson, In Re Buell, Re Burstein, Ex parte Peace Bridge Brokerage Ltd., Re Bye and Holy Rosary Parish (Thorold) Credit Union Ltd., Re Jacobsen and Thorold Community Credit Union Ltd.

577

647 416 489 280 527 507 685 683

703

Canadian Bank of Com merce v. Dabrowski and Dabrowski and Hunt 244 Canadian Credit Men's Association 385 Ltd. v. Jenkins Canadian Credit Men's Trust Association Ltd. v. Beaver Trucking Ltd. and California Standard Co . 668 Canadian Credit Men's Trust Association and Arthur C. Weeks Ltd., Re 571, 672 Canadian Imperial Bank of Commerce and Ash 397 Canadian Surety Company v. Spencer 44 Carmichael v. Drill Stem Testers Ltd. and Oilfield Consultants Ltd. 108 Caulfield, Burns & Gibson Ltd. v. Kitchen and Brooks 385 141 Cave v. Capel 197 Century Indemnity Co. v. Rogers 600 Chemesco Construction Co., Re City Construction Co. Ltd. v. Van563 couver, Re

X

TABLE OF CASES

Clarkson v. McMaster & Co. Clemenshaw Workmen's Compensation Board v. Canadian Credit Men's Trust Association Ltd., Re Cluff Bros., Re C.N.R . v. Croteau Cohen v. Mitchell 571, Cohen, Re Coles, George, Ltd., In re Colthart, Re Columbia Properties Ltd., Re 455, Commercial Credit Corporation v. Niagara Finance Corp. Ltd. 99, Cook et al and Duncan, Re Corsbie v. J. I. Case Threshing Machine Co. Craig, Re Craig and Leslie, Re Cummer-Yonge Investments Ltd. v. Fagot et al Curran v. Newpark Cinemas, Ltd. Curtis, Helene Ltd. v. Towell Curtis v. Maloney Dainty Confections Limited Trustee v. Hopper, In Re Davidson v. Davidson Davis, Nash and Davis v. Royal Bank of Canada, Re Debtor, In re a Denny's Trustee v. Denny and Warr Di Guilo v. Boland Doe dem Hazen v. Hazen, In Doe! v. Kerr Dominion Foundry Co. Ltd. Continental Forwarding Ltd. et al. v. Canadian Credit Men's Association Ltd., Re Dominion Shipbuilding & Repair Co . Limited, In re Dommerich & Co . Inc. v. Canadian Admiral Corp. Ltd. Dowell v. Aikenhead Dubisky, J. & Sons Wholesale Ltd. et al. v. Crystal Dairy Ltd. Durocher, In Re Dyster v. Randall and Sons

18

672 471 209 574 680 431 596 481 108 68 118 70 301

580 237 36 105 87 60 297 464 367 602 43 45

457 433 236

320

93 92 514

Edmonton Mortgage Co . v. Gross Elliott Lake Ready-Mix Ltd., Ex Parte Smith, Re Emerson v. Simpson et al. Empire Fertilizers Ltd. v. Cioci

665 171 286

Fair & Co. and Livingstone v. Wardstrom Fairweathers Ltd., Re Fallis v. Wilson Feldman, In Re

136 452 203 518

159

Ferguson v. Lawtewka 370, Ferland v. Desjardins Ferrie v. Cleghorn Fintry Estates, Re Flack Bros. Ltd. v. Petroutsas Forsyth, John, Co . Ltd. v. Thorburn Fouad Bishara Jabbour v. State of Israel Freeholders Oil Co . Limited, In Re Freeman v. Pope

376 454 96 571 38 93

Gainers Ltd. v. Crystal Dairy Ltd. Gallant v. Neilson Gamble v. Howland Gandy & Allison Ltd. v. Erectors & Construction Ltd : Brunswick Builders Ltd., Garnishee Garage Causapscal Limitee, Traders Finance Corporation v. Levesque, Re 203, Garner v. Strickland Garry Finance Corporation Limited (Plaintiff) v. Heizman (Defendant) Respondent and Smith (Third Party) Appellant Gartrell, Re Gauthier v. Woollatt Gibson v. Carruthers Gillingham Estate, In Re Gingras Automobile Ltee. Les Produits de Caoutchouc Marquis Inc. v. Trottier, In the Bankruptcy of Gladstone v. Padwick Goldenberg and Glass, Re Grand Trunk v. Dearborn Graves v. Sprague Greer, M. B. & Company, Re

141 43 27

Hale v. Ross Hamill and Canadian National Railways, Re Hansard Spruce Mills Ltd., Re Harrods, Ltd. v. Tester Hart Equipment Corporation Limited, In Re Hayoz v. Patrick et al. Herold v. Budding Hinks v. Sowerby Hirschorn v. Evans 304, Holmes v. Millage Holt v. Heatherfield Trust Ltd. Holt Motors Ltd., Canadian Credit Men's Association Ltd. v. Stonewall Credit Union Society Holy Rosary Parish (Thorold) Credit Union Ltd. v. Premier Trust Co. Holy Rosary Parish (Thorold) Credit Union Ltd. v. Bye

270 486 337

260 511 205

315 464 358 580 482

674

129 79 22

117 443

155 209 571 294

519

192

323

129

287 301 242

648 603 705

TABLE OF CASES

Hopkins, Re Humberstone v. Trelle

546 109

Imperial Bank of Canada v. Boyd Imperial Oil Ltd. v. Abilene Contracting Co. Ltd. Industrial Acceptance Corporation Ltd. and the T. Eaton Co. Limited of Montreal v. Lalonde et al. Industrial Development Bank v. Valley Dairy Ltd. Irving Oil Co. Ltd. v. Murphy Israelson v. Dawson (Port of Manchester Insurance Company Limited, Garnishees)

199 257

684 251 502 272

Jaeger v. Kelly Jones v. Boutilier Jones Bros. v. Woodhouse

366 502 94

Karch, Re Kare v. North West Packers Ltd. and McGuckin Kates, Re Keene, In re Kemp v. Reaume Kemper, Re Kenmore Building Material Ltd., Re Kimniak v. Anderson Kinnear v. Kinnear Kinsman v. Steel Klagsbrun v. Stankiewicz, Re 376, Koop v. Smith Koppers Co. Inc. and Dominion Foundries & Steel Ltd. et al, Re Kuss v. Kuss

317 252 75 595 376 698 676 52 97 502 79 395 672 307

475, 481 Lakin Builders Co. Ltd., Re 349 Lane-Fox, In Re Langdon v. Traders Finance Corp. 187 Ltd. Et Al. 63 La Rose v. White Packing Co. 57 Lawson v. Lawson Leighton v. Muir and Windsor 387 Supply Co. Ltd. 34, 38 Link v. Thompson 492 Little, In re 693 Litz, Re Lloyd v. Milton et al 226 439 Lo/sky, Re London and Canadian Loan and Agency Company v. Merritt, 39 The 209 Lougheed v. Shackleton 179 Lyons, Re 320 McCart v. McCart and Adams Mccready Products Ltd. v. United Building Supplies Ltd. and Stasiuk 248

xi

Macdonald & Company Limited, 623 Re C. A. Macdonald & Company Limited 627 (No. 2), Re C. A. McDonald v. The Royal Bank of 57 Canada McGillan v. McGillan 376 353 McGuire v. Ottawa Wine Vaults McIntosh, D. W. Ltd., In re 431 McIntosh-Marshall Equipment Ltd. Nash v. Guelph Engineering Co., Attorney-General of Alberta Intervenant 421 Mackay v. Douglas 351 McMinn and Sheldrick, In re 611 McMulkin v. Traders Bank 195 Major-Way Trailers Ltd., Ex Parte Nelson and Harvey Ltd., Re 683 Malouf v. Labad 83, 111 Manchester v. Parkinson 301 Mandelin Et Al. v. Stan Reynolds Auto Sales Ltd. Et Al. 139 Manning Wanless Building Supplies Ltd. v. Puskas and Flemke 321 Maple Leaf Fruit Co., Re 441 Martens v. Peters and Peters 375 Martindale v. Booth 334,336 Mendelson, Re 589 Mercer, Ex Parte 341 Metro Cab Co. Ltd. v. Munro 187 Mike's Roofing & Insulation Ltd. 226 v. Harder: Thomas, Garnishee 485 Milady's Shoppe Limited, In re 271 Mitchell v. Fournier 82 Montgomery & Wright Ltd., Re 299 Moon v. Maloff 308 Morgan v. Hart 114 Morris v. Salberg 377 Mulcahy v. Archibald Mutual Finance Corp. Ltd. v. Ganley 84 Nash v. Dickenson Nelson v. Nelson Nelson, R. A., Construction Ltd., Re Newman, Re Newton v. Wolvin Niagara Canning Co., Re Nova Scotia Trust Co. v. Standard Construction Co. Ltd. Nova Holdings Ltd. v. Western Factors Ltd. et al. Ontario W oodsworth Memorial Foundation v. Grozbord et al. Overby v. McLean Overn v. Strand Overseas Aviation Ltd., Re Owen Sound General and Marine Hospital v. Mann

129 39 672 608 595 481 663 67 250 97 132 42 376

xii

TABLE OF CASES

684 687

Palach, Re (1953) Palach, Re ( 1955) Paramount Attraction and Sales Company Limited v. Lust Parks v. Simpson Pascoe, In re 574, Pearson v. Drake Peterboro Dist. Co-op Services v. Raison Phillips and La Paloma Sweets Limited, Re Pickstock v. Lyster Piette et Frere; Inns and Hamel v. La Banque Provinciale du Canada, In re Plaza Music Co., Inc., In re Poje v. A. G. B. C. Polycoating & Films Ltd. Pommier, Re Pommier, In Re Brockelsby v. Freedman-Ellis Limited Potapofj v. Klee/ Potato Distributors Inc. v. Eastern Trust Co. Poucher v. Wilkins Power v. Grace Pszon, In re

466

Quercetti v. Tranquilli

205

209 39 577

108

44 83 525 648 536 33 676 410

381 514 504 48 71

Rabbidge, Ex Parte 565 Rat Portage Lumber Co. v. Harty 227 Regina v. Beneficial Finance Co. of Canada 141 Regina v. Doucette, Dongen and McNutt 146 R. v. Minden and Minden's Limited 569 Reynolds, Re 434 Rice and Rice v. Copeland et al. 689 696 Ridder, In re Riggs, In re 67, 162 Ritenburg v. Crown Trust Company 584 157 Roach v. McLachlan Roberts, In re 595 51 Robinson v. Moffatt 184 Robinson v. Robinson Rodi & Wienenberger 180 Aktiengesellschaft v. Kay Rosenthal v. Goldstein 595 656 Ross v. Royal Bank of Canada 42 Rossiter v. Toronto Street Railway Rotenberg, In re 449 Royal Bank v. Dumart 588 Royal Bank of Canada v. Sullivan and Herr 397 Ruscheinsky v. A. Spencer & Co. Ltd. et al 97, 91 Ryan v. Charlesworth 376 Ryan v. Eatock 268

Saddy v. Prosser St. Joseph's Co-operative, Re Sandwich Foundry Company, Limited, In Re Sandy v. Yukon Construction Co. Ltd. Sangster v. Pugsley Schneeberger v. Quality Woodwork Co. Ltd. et al. Scott v. Sc holey Seabrook Estate Co. Ltd. v. Ford Seizures Act, Butterwick v. Imperial Investment Corporation Ltd. et. al., Re Selkirk, Re Shafer (Administrator of Shafer Estate) v. Jones (No. 2) Shaughnessy Super Market and Codville Company Ltd., Re Shelley v. Boothe Shephard, In re Sinclair v. Woodward, Re Skinner, Re Spartan Services Limited, In Re Squires Bros., Re Society Shirt Co., Re Solicitor, Re Solloway, Re Soltykofj, Re Stacey Lumber Co. v. Cazier et al. Sternschein. Sternschein v. The Queen, Re. Stoehr et al. v. Morgan Strang v. Beal Stuart v. Grough Sudbury Daily Star Ltd. v. Moxon's Furniture Ltd., Re Supreme Court Rules, Re. Re Canada Creosoting Company Limited's Application

177 484 531 221

177

561 40 226

173 494 319 648 376 301

108

403 683 467 433 44 446 463 200 169 301 313 277 162 113

602 Tai/by v. The Official Receiver Taxi Owners' Reciprocal Insurance Association, Re 473 496 Tenenbein, In re Thakar Singh v. Pram Singh 46 Thellusson Ex Parte Abdy, In re 567 The Man With the Axe Ltd., In re 553 Thompson v. Don/ands Properties Ltd. 45 Toronto-Dominion Bank v. Shannon and L'Heureux 200 Toronto Permanent Furniture Showrooms Company, Limited, In re 561, 680 Totem Radio Supply Company Limited v. Stone 416 415 Trenwith, Re 78 Tully, Re Twyne's Case 331

xiii

TABLE OF CASES

Union Bank of Canada v. Taylor Union Fish Co. Uxbridge Hardware Co. Ltd. v. Musselman •Validity of the Orderly Payment of Debts Act, Reference Re Vater v. Styles Vendors and Purchasers A ct and Sale East Half Lot 23, Concession 3, Torbolton, In re the Vesterfelt, Re Victor v. Victor 694, Voluntary Assignments Case, The Walkeam, Re Walter's Trucking Service Ltd., Re. The Queen In Right Of The Province of Alberta v. Attorney-General of Canada Watson v. Murray Waugh v. Esquimalt Lbr. Co. v. Pedneault

161 469 242 418 269 635 93 696 406 469 163 JI 9 564

Webb v. Stenton Weidman v. Mcclary Man. Co. Weiner v. Persin Wells, In re Whitbread v. Watt White, In re Wiggins Ltd., Re Wilson v. Fleming 200, Wilson v. Tumman Wilson v. United Counties Bank, Limited Windsor Home Furniture, Re Workmen's Compensation Bd. v. Hilco Lumber Ltd. Wright and Johnson v. Galishef]

273 67 702 485 567 633 436 203 111

Yasmanicki, In re Yates v. Terrv young V. Lambert

498 235 97

Zimmerman, Re

580 543 108 272

65, 61

Acknowledgments Grateful acknowledgment is made for perm1ss10n to reproduce parts of the following: Bates, "The Wage Assignment" (1966) 24 Fae. of Law Rev. 123; Duncan and Honsberger, Bankruptcy in Canada, 3rd ed. 1961; Ellis, "The Charging Order: A Neglected Means of Enforcement" (1962) 20 Fae. of Law Rev. 35; Fox, "Practice in Contempt of Court Cases" (1922) 38 L. Q . R. 185; Glenn, Fraudulent Conveyances and Preferences, rev. ed. 1940 (Baker, Voorhis & Co., Inc); Gordon, Note (1954) 32 Can. Bar Rev. 1141; Hanna and MacLachlan, Cases and Materials on Creditors' Rights and Corporate Re-organization, 5th ed. 1957 (Foundation Press, Inc.); Heighington, "Executions against Land in Ontario" (1929), 7 Can. Bar Rev. 475; Houlden and Morawetz, Bankruptcy Law of Canada, 1960; Kilgour, Cases and Materials on Creditors' Rights, 1956; La Forest, "Some Aspects of the Writ of Pieri Facias" (1959) 12 Univ. N. B. Law J. 39; MacLachlan, Handbook of the Law on Bankruptcy, 1956 (West Publishing Company); McKeon, Division Court Handbook, 2nd ed. 1966 (Carswell's); Murray, "The Share Margin Account: Segregation of Securities and Bankruptcy" ( 1956), 14 Fae. of Law Rev. 95; Treiman, "Acts of Bankruptcy: A Medieval Concept in Modern Bankruptcy Law" (1938), 52 Harv. L. Rev. 189 (Copyright 1938 by the Harvard Law Review Association. Reprinted by permission); Weatherill, "The Effects of Discharge in Bankruptcy and their Avoidance" (1956), 14 Fae. of Law Rev. 63; also Note, 71 Harv. L. Rev. 557 (Copyright© 1957, 1958 by the Harvard Law Review Association. Reprinted by permission), and Time Essay, "The Pleasures and Pitfalls of Being in Debt," Time, July 2, 1965 (Reprinted by permission from TIME The Weekly Newsmagazine; © Time Inc. 1965). Grateful acknowledgment is also made to Burroughs & Co. [Eastern] Ltd., Canada Law Book Company Ltd., and the Incorporated Council of Law Reporting for England & Wales for permission to reproduce cases from their series of reports.

Chapter One: Debtor and Creditor This book is intended as a study of the debtor-creditor relationship, with particular attention to the position of the unsecured creditor. It approaches this relationship from the viewpoint of the remedies available to the creditor, because this is the more positive aspect of the relationship : apart from the statutory device of bankruptcy, debtors' rights are almost entirely negative in character, consisting of gaps in the remedies available to creditors or statutory exemptions deliberately protective of debtors. In general it is only creditors who have rights; debtors have corresponding responsibilities coupled with interstitial alleviations from responsibility. From whatever viewpoint it is approached, however, the fundamental reality is the same, viz. a debt. Hence R. G. Hawtrey begins his essay in the Encyclopaedia of the Social Sciences on "Credit" with a discussion of debt: "Etymologically the word credit means belief or trust; in its technical usage it has come to be confined to the trust placed in a debtor. Credit, in fact, is best understood as simply another name for debt. The two parties to a debt are called debtor and creditor, and the same relation which from the debtor's standpoint is called a debt is called from the creditor's standpoint a credit" [vols. III-IV ( 1930) 545]. However, there are debts and debts. One of the pervasive problems in the subject is to determine whether the word "debt" in a particular context means a judgment debt or a simple contract debt. To quote from the same Encyclopaedia again, in his essay on "Debt" Max Radin comments that the relationship of debt "may be created by failure to pay wergild or damages to an injured party or a fine to the community. But ordinarily debt implies that the debtor has received something from the creditor in return for which he is to make repayment at a later time." [vols. V-VI (1931) 32]. A contract debt, admittedly, is the primary instance of the concept of debt as used generally in the law, but we must hasten to add that this usage is not verified in the field of creditors' rights. If anything, the more usual meaning of the word in creditors' rights is that of judgment debt, with no limitation as to the type of action from which the judgment debt arose, though in some sectors of the field ( e.g. fraudulent conveyances and preferences, bankruptcy) the meaning is more ambiguous. The conclusion to be drawn, then, is that one must approach the field of creditors' rights with an awareness that the meaning of debt may shift from context to context. But with this caveat in mind it is important to take account of the fact that the social dimensions of the problems encountered in the field spring almost entirely from the difficulties of a large number of people in meeting their contract debts as they become due.

THE PLEASURES & PITFALLS OF BEING IN DEBT Time, July 2, 1965, pp. 20-21. Reprinted by permission from TIME the weekly Newsmagazine; © Time Inc. 1965. . . . The U.S. citizen as well as the U.S. Government is deeply in debt - and not only deeply but permanently. Increasingly, tycoons measure their millions as much by what they owe as by what they own. The federal budget shows a deficit of $3.8 billion for fiscal 1965, and Congress has just raised the debt ceiling from $324 to $328 billion. Personal debt, rising faster than the Government's, is above

4

CASES AND MA TE RIALS ON CREDITORS' RIGHTS

$264 billion; this year it will climb another $26 billion, or more than the combined gross national products of Ireland, Israel, Norway and Belgium. The debt of the average American family now stands at an awesome 60% of its after-tax income for one year. In a generation, most of the facts and beliefs about debt have profoundly changed. Virtually dead is the Puritan ethic that condemned spending beyond one's immediate earnings and followed Emerson's maxim: Wilt thou seal up the avenues of ill? Pay every debt, as if God wrote the bill. The whole atmosphere of U.S. life invites more and more borrowing. Bankers cannot seem to shovel their cash out fast enough, are less interested in what a person or company can put up in the way of hard collateral than in what they have to offer in future earning power. Madison Avenue dances 1,500 advertisements a day before the average U.S. consumer, further tempting him to borrow and buy. The Government encourages borrowing not only by keeping interest rates low but also by making almost all interest payments tax-deductible. Says Donald A. Webster, the Minority (Republican) Economist for the Congressional Joint Economic Committee: "Thrift is the danger today." Credit is, of course, at the very heart of capitalism: every capitalist society requires credit for expansion. What is new is the concept that not merely business but the individual consumer can "expand" by massively borrowing against future earnings. Inevitably, questions arise as to whether Americans are really steering a course between "profligacy and parsimony" or whether some accidents might be ahead. Prosperity on the Cuff Much of U.S. business prosperity is due directly to credit-fueled consumer purchasing. The automobile industry this year will sell close to 9,000,000 cars - three-fifths of them on credit. The nation's fastest-growing new industry, color television, this year will sell 2,300,000 sets - more than one-half on credit. Many an American sends his youngsters to college on a "dollars-for-scholars" loan, is up to his eaves in mortgage payments, buys his clothes on the cuff (65% of department-store purchases are charged), and then gets away from it all on a fly-now-pay-later plan. People who count their pleasures in purchases are only too eager to adopt the new, ingenious forms of credit that have been invented. Some department stores offer special charge accounts for teen-agers, breaking them into the habit with weekly payments of as little as $1. Other stores buy up lists of credit customers, then mail them unsolicited charge cards. Credit cards are a $633 million-a-year business and can be used to charter planes, get haircuts, or take an African safari. One of the fastest-rising innovations is the rubber check that does not bounce; under such catchy names as "instant money," banks extend a line of credit to their checking-account customers, permit them to write checks up to that amount, charge them interest of 12 % . Customers almost feel square if they do not borrow, so insistent and friendly have the bankers become. As Ogden Nash put it: Yes, bankers used to be like Scrooge before he encountered the ghost of Marley. But along came TV and now they are Good Time Charlie. Money & Masochism The Good Time Charlies and other merchants of debt do not talk too freely

DEBTOR AND CREDITOR

5

about the true cost of all this credit, and too many borrowers have no idea what they are really getting into. "Wow! Just like a raise in pay!" exclaims a happy housewife in an ad for "revolving" charge accounts at a Chicago department store. What is seldom mentioned is that the interest on such credit amounts to 18% yearly. Finance companies charge up to 40%. Even the banks commonly advertise installment loans at 4¼ % yearly - but the true rate is 8½ % , because the lender keeps paying interest on the whole amount while the principal steadily declines. Anything bought on a three-year installment loan usually costs at least 25% more than when bought with cash. What upsets some experts is that the consumer debt is unevenly divided: half the population has practically no installment debt, and the other half carries most of the load. The people heaviest in debt are: 1 ) men who get a raise in pay and then spend prodigiously in the often mistaken belief that they will continue to climb; 2) newlyweds, who sometimes spend twice their annual income in the first year of marriage; 3) middle-aged couples with children to support. People with the least debt tend to be bachelors, spinsters, childless couples and New Englanders. About 2 % of the debtors are dangerously in the hole, have to lay out 40% of their earnings to quiet persistent collectors. Declaring bankruptcy was once resorted to mostly by businesses; in the past decade, the number of personal bankruptcies has more than trebled, to last year's 155,000. Many habitual debtors prefer to extricate themselves with the aid of one of the credit society's important specialists, the financial counselor, who is part psychologist, part father image and part accountant. The client turns over his salary checks to the counselor, who then gives him a meager allowance and gradually pays off his bills. Usual charge for the disciplinary services : from 3% to 5% of the client's income. In such chronic debtors, many psychiatrists detect a glint of masochism. "Consider the language of debt," says Manhattan's Dr. Harold Greenwald. "People have to 'beat someone out of his money,' or debtors are 'pushed to the wall' by their creditors." One of Greenwald's patients wept after he paid off his last creditor; he felt as if he were leaving someone who needed him. San Francisco's Dr. Alfred Auerback believes that overwhelming debt creates enormous tensions and strains within families. "Young people today," says he, "assume they should have a car, a television set, nice clothes and the other luxuries merely for the asking." Philosophers and theologians have always debated the morality of debt. Aristotle condemned the charging of interest as "most unnatural," the early Christians considered it sinful, and the Schoolmen of the Middle Ages equated it with usury - until the Reformation, and notably John Calvin defended interest under certain conditions. The last of the Schoolmen really was Karl Marx, who preached that interest meant exploitation. Only lately have some of the Communist governments in Eastern Europe begun to move away from this paralyzing doctrine. Obviously, whether debt is moral or immoral depends on its use. It can be highly moral when it implies trust between man and man and a civilized respect for contracts. Some clergymen are a bit embarrassed that in a national rating of 42 types of credit risks, the clergy ranked a mediocre 17th (best risks are business executives, worst are farm laborers). Union Theological Seminary's Professor Roger Shinn says that the key to the moral issue is whether credit enhances or restricts personal freedom. "Debt is wrong if it overburdens and blocks a person and destroys his freedom to act," says Shinn. "It is also wrong if

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it is used for self-indulgence or without intent to pay. But there is responsible debt too." The U.S. Government may or may not serve as a model of responsibility, but it has become deeply committed to deficit financing. The Treasury in effect admits that the current national debt will never be substantially reduced. When a spurt of tax revenues during this year's first quarter temporarily narrowed the deficit to only $100 million, many of Washington's activist economists actually grew nervou$; the last thing they want the Administration to do is balance the budget. They feel that the recent tax cuts are not enough to keep the economy stimulated and that increased Government spending is necessary. This is the new orthodoxy expounded by that old revolutionary, Britain's late John Maynard Keynes, the century's most influential economist. In brief, Keynes considered purchasing power, or "aggregate demand," to be the most important force in any economy; the best way to maintain high demand, he said, is for the Government to borrow money and pump it into the economy to supplement private investments. Washington has been raising Keynes since New Deal days; in 25 years the budget has been balanced only six times. The antiKeynesian arguments - notably that the system is bound to lead to Government control of the economy, that it can be inflationary, and that indefinite borrowing is impossible without a day of reckoning _sooner or later - are still heard, but feebly. As long as the gross national product and the population expand, pro-Keynesians see no reason why Government borrowing should not continue to expand too. Not everyone accepts Keynes as gospel. Treasury Secretary Henry Fowler refuses to be classified as Keynesian; he does not believe that debt necessarily leads to development, or that surplus necessarily leads to deflation. Economist Raymond Saulnier of Barnard contends that the economy has been expanding not because of Keynesian policies but largely because U.S. business has increased productivity faster than U.S. labor has pushed up wage costs - with the result that prices have held relatively stable. But even economic conservatives have lately accepted the idea of using deficits to stimulate the economy in slack years. Sighs Virginia Senator Harry Byrd: "Franklin Roosevelt was elected on a platform that pledged to cut governmental expenditures by 25%. Nobody would dare run on such a platform today." By modern standards, the federal debt is actually not growing very fast. In the past decade, while consumer debt has more than doubled and corporate debt has jumped 360%, Federal Government debt has gone up only 15% . And because the federal debt is rising much more slowly than the U.S. population, the per capita federal debt has declined in the past 20 years from $1,900 to $1,600 meaning that Americans are by no means saddling their grandchildren with an unbearable load. Building Around the World The ability to go into debt has launched many new nations, and preserved or vastly changed old ones. A postwar proliferation of international credit agencies - notably the World Bank- has provided 5½% credit that has strung railroads through jungles in Colombia, built highways in Ethiopia, and industrialized Italy's Mezzogiorno. Some countries have borrowed too enthusiastically. Overwhelming debts have brought inflation and economic chaos to Indonesia,

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Argentina, Ghana and other extravagant governments, which perhaps will never be able to pay up. Significantly, the attitude toward consumer credit in most foreign lands remains nearly medieval. All industrialized countries have taken to installment buying since World War II, but not in the relaxed American manner. In Japan, it is still considered vaguely dishonorable. Even in such countries as France and Mexico, borrowing is for the well-to-do, bankers and borrowers have a wellfounded suspicion of each other, and mortgages are high and hard to get. In Germany, where the word for "debt" still retains its Biblical meaning of "guilt" (Schuld), consumer debt averages out to only $32.50 per person. Europe's credit famine has not only slowed the Continental boom and made housing scarce, but also has led to a rush of foreign borrowing in the U.S. that has aggravated the U.S.'s balance-of-payments deficits. The confident handling of credit has been a mighty force in the growth of the domestic American economy, and a decisive reason why the U.S. has expanded faster than Europe. But considerable concern remains that Americans may be getting themselves too deeply in the red. There are three specific worries: 1) that generous credit will lead to the kind of overbuying, overbuilding and overpricing that could set the nation up for inflation and recession; 2) that if recession comes, it could bring a wave of defaults and repossessions; and 3) that if the economy slows down, Americans might sharply cut back on their buying and borrowing, and thus aggravate the recession .... Betting on the Future Though nobody really knows if credit has reached a peril point, there are some disturbing signals. Private debt lately has been increasing at a somewhat faster rate than the nation's gross national product, personal income or personal savings. The number of businessmen who fell into bankruptcy last year because they could not collect the debts owed to them by other businessmen was higher than in almost any other year since World War II. The percentage of personal income that went for installment payments, which held at 13% in the late 1950s, jumped in 1962 to 14 % and is pushing this year toward 15 % . Mortgage foreclosures have doubled since 1960 ( to last year's 109,000). In a society where advertising and merchandising are highly seductive, there are bound to be weak or credulous people - perhaps too many - who fail to keep their debts in line. On the other hand, Americans have traditionally been sound risks, even during the Depression. Today's rate of installment delinquencies is small ( 1.58% ). Besides, figures on failures can be misleading unless they also take account of the changes in the quality of American life. Consumer credit is expanding not only because people are borrowing more, but also because more people are borrowing - as an increasing number of Americans rise to the affluent middle and upper-middle classes. A generation or two ago, the average American family made regular payments for rent, streetcar fares, laundry service, blocks of ice and movie tickets - none of which counted as payments of debt. Today the family makes regular payments to finance a house, a second car, a home laundry a refrigerator and a color TV - all of which count toward installment debt. If Americans can be criticized for enjoying now and paying later, they can also be praised for building equity and acquiring assets. And the assets of ordinary Americans are much bigger and faster growing than their liabilities. For the

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great majority of Americans, debt is a means - to acquire one's own house, to achieve mobility, to invest in education or travel or plain comfort. Properly used and managed, it is not a sign of trouble but a bet on the future. At the beginning of 1966 Canadians owed about $7.1 billion in consumer credit, exclusive of mortgage and medical debts. Nearly $2 billion of this was owed to banks on personal loans; loan companies, credit unions and sales finance companies were each owed about $1 billion. About $500 million was owed to department stores, $500 million to insurance companies for loans on policies, $400 million to jewelry and clothing stores and fuel dealers; and $ 100 million on service station credit cards.

FINAL REPORT OF THE SELECT COMMITTEE OF THE ONTARIO LEGISLATURE ON CONSUMER CREDIT. July 10, 1965. Sessional paper No. 85. 26 There does not appear to be any precise identification of the types of credit which may be properly included under the heading of "consumer credit". 27 Credit arrangements for a business purpose are excluded. The exclusion may also apply to the retail "open" accounts receivable type of debt which might be repaid according to the normal terms of trade, regarding which no identifiable finance charge is made. 28 The use of credit cards for dining, travel and vehicle expenses is sometimes included in the term "consumer credit". Because no identifiable finance charge is made or deferred payment involved, the Committee feels that inclusion of such arrangements is inappropriate. 29 The Committee considers consumer credit to include any obligation, undertaken by an individual in the course of acquiring property, goods or services for his own use or benefit, involving deferred payment and in respect to which a charge is made for the right to defer .... Chief Participants in the Granting of Credit The Chartered Banks 38 The Banks said that one basic reason instalment credit was successfully used by a majority of Canadians was that most Canadian families were good credit risks. Consumers had both the willingness and ability to pay the obligations they assumed and had showed a remarkable record of meeting these obligations in good and bad times. 39 Banks were primarily concerned with a borrower's ability, capacity, and intention to repay loans as well as his personal and financial characteristics. Secondary was the security offered or available for pledging to support the applicant's promise to repay the loan. Generally, the banks said, it was safe for the average borrower to assume instalment obligations up to 15 per cent of net income, exclusive of residential mortgages. 40 Most loans were repayable over periods from 6 to 36 months, the latter being the maximum. Most personal instalment loans were life insured. Should the borrower die, the balance was retired by the insurance company. Cost of the life insurance was included in the charge. The Life Insurance Companies 41 The life insurance companies fit into the consumer credit picture with

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policy loans and mortgage loans. The right to obtain a policy loan was a contractual right. It was not necessary for the applicant to establish a credit rating nor did the rate of interest he was charged vary according to his circumstances or the size of the loan. 42 While there was no investment risk connected with policy loans, the option of the policy owner to borrow or repay at any time could have an adverse effect on the company. It was suggested to the Committee that the insurance companies did not encourage this type of loan because the borrowings were often heavier when other forms of investment were most attractive and repayments increased when general interest rates were low.. .. 44 All life insurance companies invest money in mortgage loans in more or less degree. With some companies mortgage investment reaches as high as 70 per cent of invested assets. Many life insurance companies involved in mortgage loans are members of the Dominion Mortgage & Investments Association and subscribed to its brief presented on August 13, 1963. The Trust Companies 45 The trust companies form the country's largest lenders on the security of real estate first mortgages. Member companies are authorized to make mortgage loans on improved property where the amount of money advanced or the purchase price together with the amount of any claim on the real estate ranking equal or prior, does not exceed two-thirds of lending value. 46 Because lending value is a matter of educated opinion, there were variations in the amount of money which various lenders were prepared to loan on property. 47 The interest rate charged for conventional residential loans across the country was 6½ per cent to 8 per cent. The minimum rate was usually one-half of one per cent above the current National Housing Association rate. In Ontario, the interest rate spread was 63/4 per cent to 7½ per cent, with most loans being made at 7 per cent to 7 ¼ per cent. Interest on all loans was compounded semi-annually and a preponderanc~ of loans, said the trust companies, were on a monthly repayment basis. Such payments were "blended" with interest and principal. 48 The basis, and criterion, for mortgage interest rates is the rate established periodically by the market for Government of Canada bonds. Credit Unions 49 When credit unions were first formed, their structure required, among other things, that they: 1. Restrict membership to small individual groups of people. 2. Stress loan services at low rates. 3. Hold an indivisible reserve, or guarantee fund. 4. Do not pay for officers' services. 50 These principles were given legal expression by The Credit Unions Act. Section 8 requires a common bond between members. Section 29 provides that interest together with all charges and penalties should not exceed 1 per cent per month on the unpaid balance of any loan. Section 29 requires that 20 per cent of yearly profits be set aside in a guarantee fund as a reserve against losses on loans. (In practice, Item 4 above, is still upheld by a majority of credit unions although the Act does permit payment to officers.)

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51 A person borrowing from a credit union knew that his complete charges could not exceed 12 per cent per annum of the amount received as this was the maximum rate permitted by The Credit Unions Act, enforced by the Ontario Department of Insurance.... The Sales Finance Companies 53 The 43 members of The Federated Council of Sales Finance Companies accounted for 70 per cent of the sales finance credit extended to consumers and 90 per cent of the instalment credit provided to business for machinery and equipment purchases. Ninety per cent of all automobiles sold in Canada were said to be financed in this manner. In 1962, the sales finance industry purchased retail instalment contracts of $836 million for durable goods and $381 million worth of contracts for commercial and industrial equipment. 54 This method of extending credit is called point-of-sale financing - the credit function being created only as the result of the sale. In this way, sales finance credit differed from many other forms of financial institutional credit, with which it competed. The sales finance companies played no direct role in the creation of credit and emerged only after the deal was complete and the dealer "sold" the instalment contract to a sales finance company .... The Small Loans Companies 56 Information presented to the Committee showed that the regulated consumer loan business developed in response to an urgent social and economic need for cash loans to service families of modest means. This need followed Canada's change from an agrarian to an industrial economy, with consequent shift of population from rural to urban areas. One result of this was the dependence of more people on cash income rather than the physical products of their own hands. 57 Consumer small loans companies generally made cash loans as distinct from instalment sales financing. These loans were most frequently made to enable families to reorganize their financial affairs and to help them recover from situations created by unexpected demands or interruption of income. This allowed families to work their way out of debt at a pace suited to their earnings. 58 The range of consumer loans was so wide, that it was unlikely ever to be adequately served by one type of institution - banks, credit unions or consumer loans companies. While the banks had a larger share than either credit unions or consumer loans companies, these last two between them were said to be involved in half of the business in consumer loan transactions. The Retailers 59 Witnesses told how, since World War II, there had been an upsurge in use of consumer credit and in the variety of credit facilities available. New types of accounts had been developed to make shopping on credit terms quick and efficient. These included revolving ( or cycle), budget, deposit and charge accounts. 60 Before World War II, some retail firms found that quotation of the total cash cost of merchandise was discouraging to many prospective buyers. So these firms started to quote prices not as cash, but as a price that included all credit service charges. Thus a bedroom suite would be shown as

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"$25.00 down and 18 monthly payments of $20.00 each". If a purchaser wanted to pay cash ( or pay up the balance owing part way through the contract) the amount of discount - if any - off the time price, would often be the subject of hard bargaining. 61 Another merchandising technique was to include part of the charge for instalment payment service in the price of the article. Some firms not only levied a direct charge but also advertised "instalment terms at 5 per cent". The extra cost of the artificially-low credit terms was reflected in the price of the article sold. Generally, these practices were said to have been abandoned in the retail store trade. The public was now given a cash price and the amount of the instalment service .... Central Mortgage And Housing Corporation 63 The Federal Government's activities in housing are defined by the National Housing Act, 1954. On behalf of the Government, these activities are administered by the Crown Corporation established by the Central Mortgage and Housing Corporation Act, 1945. 65 To assist the financing of new housing construction, both for home ownership and for rental, and to aid in conversion of existing units, C.M.H.C. insures mortgage loans. Most life insurance, trust and loan companies, the chartered banks and the Quebec savings banks have been approved as lenders. 66 Under this system, the borrower obtains a larger loan, repayable over a longer period of time (up to 35 years), on more favourable terms than are available in the conventional field. Maximum interest rate for insured loans is related to the return on long-term Government of Canada bonds. The rate was set at 6¼ per cent on June 14, 1963. 67 The N.H.A. interest rate for loans made to the average home-owner, builder or rental project may not exceed the interest rate on long-term Government of Canada bonds by more than 2¼ per cent. This gap is usually narrower and when C.M.H.C.'s brief was submitted (June 25, 1963) it was 1½ per cent. C.M.H.C. also makes direct loans. The Committee's Recommendations 291 For quick reference, the Committee's recommendations in the main areas of consumer credit are shown below. The numbers in parentheses at the end of each recommendation refer to the paragraph numbers of the recommendations as they appear in the body of the Report. 292 1. Educating the Public in Consumer Credit The Committee concludes that a two-pronged educational programm1: should be instituted and recommends that: (a) The Legislature direct the Department of Education to prov1ae consumer credit instruction for young people in the secondary school curriculum as part of an existing course of study, such as household economics or mathematics. (b) The Legislature direct the appropriate Department of Government to provide consumer credit information to the adult population, using booklets, pamphlets, mass advertising media and other modern methods in co-operation with financial and commercial organizations. It may well be that this would be best done through the proposed Consumer Fraud Bureau. (76)

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293 2. The Jnfiuence of Advertising in Consumer Credit If it is within the power of the Ontario Legislature, the Committee recommends that, to restrict misleading advertising, an Act similar to the HirePurchase Act in the United Kingdom should be enacted, providing that where a rate of interest is advertised it shall be stated as a true annual rate and should cover all grantors of credit, and if details of repayment are included, the effective rate of interest must also be specified. ( 85) 294 3. Debt Counselling Service There is a real need for a debt counselling service in Ontario. The Committee believes it preferable that such a service should not be operated by, or under the control of, the Government, though it may be that the Government should consider giving some financial aid to services of this kind and encouragement to institutions in the field. (90) 295 4. Consumer Fraud Bureau The Committee recommends that a branch be established in the AttorneyGeneral's Department to carry out functions similar to those of the Consumer Protection and Fraud Bureau of the State of New York, which deals with all kinds of consumer complaints and is not restricted to credit transactions. (98) 296 5. Door-to-door Selling The Committee recommends that all persons or firms employing door-todoor salesmen should be registered, they in turn being responsible for their individual salesmen. Certain types of door-to-door salesmen (for example, farmers selling their agricultural products) could be exempt from registration by regulation. This requirement for registration should not interfere with the present licensing powers of the municipalities. ( 113) 297 6. Cooling-off Period The Committee recommends the enactment in Ontario of legislation similar to that in force in the United Kingdom, providing for a "coolingoff" period when a sale is made on credit at a place other than the ordinary place of business of the seller, thus giving the householder the right to repudiate a sale made at the door if notice of repudiation is given within two days. ( 122) 298 7. Compulsory Minimum Down Payments The Committee is of the opinion that at this time no down payment legislation should be enacted. ( 130) 299 8. Licensing of Finance Companies After a careful consideration of all representations, the Committee concludes that as virtually all finance companies are now licensed under the Small Loans Act, and are thus adequately supervised, there is no present need for a provincial license. ( 136) 300 The Committee recommends that the use of the word "finance" or "acceptance" in a company's name should only be permitted when the Provincial Secretary is satisfied with the bona tides and financial stability of the applicants. ( 137) 301 9. "Hot" (or Non-recourse) Paper The Committee recommends that such notes should be subject to all rights and obligations which the purchaser might have asserted against the seller. (150) 302 10. Rebates for Prepayment if Contract Paid before Maturity The Committee recommends that the buyer be entitled to a rebate or

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304

305

306

307

308

309

310

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refund of a portion of finance charges, determined on the principle of the Rule of 78ths, subject to retention by the lender of a reasonable acquisition charge. Such charge should be proportionate to the total amount of the contract, such as $12.50 for motor vehicle contracts and $5.00 in other cases. (157) 11. Mortgage Form Requirements The Committee is of the opinion that a clear, concise method of arriving at interest figures should be evolved and further is of the opinion that the Statement of Mortgage Form should require that the maximum (rather than the minimum) interest payable be shown. (162) 12. The Second Mortgage Market The Committee is of the opinion that the entry into this field of the major institutional lenders and their anticipated extension of operations into rural areas, combined with effective advertising, which is making the public increasingly aware of their presence, should eliminate the remaining defects in this type of mortgage financing. ( 166) 13. Balloon Payments and Bonuses The Committee recommends that institutional lenders should be encouraged to make money available for residential property mortgages. The Federal Government's recent encouragement to the Chartered Banks to become involved in such financing should have excellent repercussions in this area. ( 172) The Committee further recommends that the words: "This mortgage is not paid off when the mortgage matures" should be included on the Statement of Mortgage Form and should be printed in ink of a different colour from that used on the other parts of the Form in those contracts where there is a balloon payment. ( 173) 14. Central Registration System The Committee recommends that Ontario enact legislation similar to that proposed by the draft Personal Property Security Act which was prepared by the Catzman Committee under the aegis of the Attorney-General of Ontario and which adopts a Province-wide system of registration for chattel encumbrances. ( 180) 15. Wage Assignments The Committee is opposed to the blanket or automatic type of wage assignment and recommends that legislation be enacted in Ontario prohibiting any assignment, or order, for payment of any salary, wages, commission or other compensation for services or any part thereof earned or to be earned. ( 192) 16. Seizure of Goods- Repossession The Committee recommends the adoption of the sense of the English legislation which permits repossession only by Court Order after a prescribed percentage of the purchase price has been paid and therefore recommends that after two-thirds of the contract price has been paid, repossession should be permitted only on application to the Court with notice to the buyer. (201) The Committee is of the opinion that a seller should not be able to obtain a lien on goods other than the goods that were the subject of the immediate sale and recommends the enactment of legislation requiring that no contract other than one for services should provide for a lien on any goods fully paid for, or which have not been sold by the seller. (202)

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311 17. Disclosure of the Cost of Borrowing The single most controversial matter considered by the Committee was that of disclosure. Almost all of the witnesses who appeared before the Committee agreed that the lender should make full disclosure of credit costs in that he should inform the borrower when the loan is made, or the credit given, of the full and detailed cost of the loan and precisely how and when it is to be repaid. The sharp differences of opinion concerned the way in which those costs should be expressed. On the one hand it was argued that the statement of loan costs in dollars was the simple, meaningful and accurate method. On the other hand some consumer associations, and Senator Douglas and those who support his "Truth in Lending Bill", argued with equal vigour and conviction that the most meaningful statement of loan costs was by expressing them as an annual interest percentage. Some witnesses expressed the view that the loan costs should be stated both as dollar absolutes and as percentages. (285) 312 The Committee strongly recommends that there be full disclosure of loan costs, and is impressed by the way disclosure is provided for in the legislation of the States of California and New York. Neither of those States, nor indeed any legislature in North America ( other than Nova Scotia in an Act which received the Royal Assent on April 7, 1965), does at this time compel' disclosure as an annual interest percentage, although it would seem to be conceded that, except as to cyclical or revolving credit accounts, it is feasible so to do. (286) 313 After the fullest consideration, the Committee has come to the view that disclosure should be made both in dollar amounts and as an annual interest percentage. If, because of the Federal control of Banks, this Legislature cannot make such legislation applicable to all lenders, it is suggested that there should be either comprehensive Federal legislation by which all lenders would be bound, or alternatively, complementary Federal and Provincial legislation. It would certainly be preferable if the legislation compelling disclosure were Canada-wide, as there would arise many practical difficulties if some Provinces required a percentage disclosure and others did not. (287) 314 As to cyclical accounts, it was conceded that the difficulties in expressing the loan cost as an annual percentage are almost insurmountable, but it was also conceded that there was no difficulty in expressing the cost as a percentage of the last monthly balance; i.e., 1 per cent, 1½ per cent, 2 per cent, or as the lender chose, added to the balance at the date chosen, say, the first of the month preceding. Indeed, many grantors of cyclical credit do now charge on a percentage basis. They should also be permitted to stipulate for a minimum monthly add-on, to cover those accounts where even a 2 per cent add-on would be inadequate recompense for the service given; e.g., accounts under, say, $20.00, or whatever floor the lender may select. The Committee therefore recommends that as to cyclical accounts the charges should be disclosed as a monthly percentage add-on, with a minimum charge if the lender so desires. The percentage to be charged, and the minimum char_ge if any, should be disclosed to the borrower when the credit is granted. These provisions with respect to cyclical accounts should also be made to apply to open account credits which are subject to repayment at anv time and with respect to which a charge is made. (288) 315 Although it is a Federal measure, the Committee is of the opinion that

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contracts for loans obtained under the Small Loans Act should include disclosure of the effective rate of interest applicable to the entire principal for the entire term of the loan. (see Appendix 36). (289)

An Ontario Retail Instalment Sales Act 316 The Committee is of the opinion that all the recommendations contained in this Report should be incorporated in a comprehensive statute called "The Ontario Retail Instalment Sales Act". (290)

As a result of the recommendations contained in this Report the Ontario Legislature enacted the Consumer Protection Act, 1966 ( c. 23) and the Consumer Protection Bureau Act, 1966 ( c. 24), and both Acts were proclaimed in force during 1967. S. 2 of the Consumer Protection Bureau Act will provide that the Consumer Protection Bureau established by s. 1 shall: "(a) disseminate information for the purpose of educating and advising consumers respecting consumer protection and lending and borrowing practices; ( b) promote and assist existing counselling services in respect of consumer credit; (c) receive and investigate complaints of conduct in contravention of legislation for the protection of consumers; (d) enforce legislation for the protection of consumers; and (e) perform any other duties given to it by any Act." The Consumers Protection Act will require registration of door-to-door sellers ( s. 3), a "cooling-off" period on contracts made with them ( s. 18), and the disclosure of the cost of borrowing in dollars and cents and in some cases in percentages. Cf. The Time Sale Agreement Act, Man. 1961-62, c. 76, am . 1963, c. 87 . S. 18 (1) of the Ontario Act will be as follows : "Where a seller solicits, negotiates or arranges for the signing by a buyer of an executory contract at a place other than the seller's permanent place of business and under which credit is extended, the buyer may rescind the contract by delivering a notice of rescission in writing to the seller within two days after the duplicate original copy of the contract first comes into the possession of the buyer, and the buyer is not liable for any damages in respect of such rescission." Collection agencies are regulated in Ontario by the Collection Agencies Act, R. S. 0 . 1960, c. 58, as amended by 1962-63, c. 16 and by 1964, c. 7. S. 2 of that Act establishes the office of registrar and s. 20 ( e) provides that "no collection agency or collector shall ( e) use any form or form of letter to collect or attempt to collect money from a debtor unless a copy of the form or form of letter is filed with the registrar." However, since by s. 1 (a) 'collection agency' is defined as "a person ... who carries on the business of collecting debts for other persons", so-called "house agencies" are not covered by the legislation. These house agencies are actually the creditor himself ( and so exempt from the law) but take the name of a fictitious collection agency ( and so intimidate the debtor) . Their common method of operation is to send out legal-like letters on the letterhead of a false-front collection agency threatening to sue, to garnish wages, and to ruin a debtor's credit rating. This device is used principally by book and magazine publishers and distributors. In the United States, under pressure from the Federal Trade Commission, a number of publishers have agreed to discontinue the practice, but it is still legal in Canada. An 83-yearold widow reportedly received 15 dunning letters from a magazine publisher when she attempted to cancel a contract made with a door-to-door salesman [Ron Haggart, "The Magazine Boys Have a New Stunt," Toronto Daily Star, June 24, 1965, p. 7]. The letters usually presuppose a favorable judicial finding in a way that a licensed collection agency would not be allowed to do and make threats on the basis of the presupposition.

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THE CREDIT COUNSELLING SERVICE OF METROPOLITAN TORONTO

Description taken from a pamphlet published by the organization. History

Sparked by interested citizens, the Social Planning Council of Metropolitan Toronto formed a committee early in 1965, under the chairmanship of Mr. David Vanek, Q.C., to investigate and act towards the organization of a credit counselling service for the benefit of citizens of the Metropolitan Toronto area. A charter was obtained from the Province of Ontario on September 28, 1965, and committees on finance and budget, premises, forms and procedures, and personnel were established. After co-ordination of the decisions of the various committees, the first general meeting of the corporation was held on December 13, 1965, the first officers chosen and by-laws adopted. In June, 1966, an Executive Director was appointed to put the Credit Counselling Service of Metropolitan Toronto into operation beginning the end of July, 1966. Need Recognizing that most people use credit to good advantage and manage their affairs in such a way as to obtain articles and services advantageously on credit terms, it is increasingly evident that a small segment of the general population does become involved to the point of difficulty. This difficulty may be caused by any number of reasons such as: illness, employment difficulties, reduced income, poor management, and so on. When an individual becomes embroiled in a complicated credit situation, getting out unassisted is sometimes almost hopeless. The result can be extremely hazardous to the victim's well being, sometimes jeopard;sing employment, home life, and even health and mental stability. Creditors lose confidence in the individual and increase their pressure for payment accordingly. An impartial public service organization devoted primarily to the rehabilitation of the individual can very frequently do much to restore stability and enable the unfortunate debtor to recover. Purposes (a) To provide debt counselling, both remedial and preventive, assistance in debt consolidation where appropriate, and education in the uses and abuses of the credit facility; (b) To provide advice on budgeting matters and generally to assist persons and families with their financial problems, to co-operate with public and private agencies, organizations and associations; ( c) To seek the co-operation of merchants, lending institutions, banks and others, individually and through their associations and organizations and also the co-operation of public officials and officers, to achieve the purposes set out herein; ( d) To promote budgeting, thrift and the guidance of individuals and families facing embarrassment and difficulties in financial matters, with particular emphasis upon situations arising out of the use of consumer credit; ( e) To conduct educational projects in order to acquaint the public with the proper uses of the credit facility and propose corrective and remedial measures,

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where necessary, including such as may require governmental or legislative action; (f) To act as intermediary between debtors and creditors in working out satisfactory arrangements for the orderly payment of debts and, as incidental thereto and the other objects herein, to act as a trustee for the distribution of payments to creditors or in any other fiduciary capacity either with or without fees for such services. How A Credit Counselling Service Works Generally the following is an outline of procedures used in most cases: Step 1. The client comes to the C.C.S. office, by appointment, date and time usually arranged by a social service agency, creditor, or other interested organization. A client is required to bring data on debts. Step 2. The counsellor interviews the client and obtains full information on the family financial picture. Creditors, amounts, payment dates, are obtained to the best of the client's ability to present them. Step 3. An appointment is set up, preferably for both husband and wife, a day or so later for a personal discussion with the counsellor at the C.C.S. office. Step 4. Creditors are contacted and notified of the client's application and requested to suspend any collection activity for one week after the counselling date. At the same time, unpaid balances and terms are verified. Step 5. The counsellor reviews the file of facts obtained and recommends the best solution to the problem, discussing it with the social worker where necessary. Step 6. The counsellor meets with the client, going over the whole situation and analysing the problems, outlining a possible solution and the action to be taken. He confirms his recommendation in writing to the client and when advisable sends copies to the creditors and the agency who referred the client to the Credit Counselling Service originally. Step 7. On any involved cases requiring prorating, the creditors are contacted and the situation explained to obtain their co-operation in acceptance of the plan set up. Most creditors want to be helpful and will accept a revision of payment if recommended by the counsellor as part of a definite composite plan. After agreement, an arrangement is established whereby the client pays the agreed weekly, bi-weekly, semi-monthly, or monthly amount directly to the C.C.S. office. Step 8. On a suitable disbursement date, C.C.S. makes out and mails cheques to each of the creditors. Step 9. As time passes, balances are reduced and problems eliminated or adjustments made as new ones arise. Having established the pattern, the client is encouraged to take over management of his own affairs and make his own payments under the program with advice from C.C.S. only when needed. Financing The essential factor is that C.C.S. operates at no cost to the client, who cannot afford to pay for this vital service because of his involved debt situation. The entire cost of C.C.S. operation is born by partnership of the credit granting business community, the Province of Ontario through the Attorney General's Department and the Government of Canada through the Department of Health and Welfare. Organization The Credit Counselling Service of Metropolitan Toronto is a non-profit organi-

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zation incorporated under the laws of the Province of Ontario to act in the public interest. Officers of the corporation, all of whom act without fee of any kind, are drawn from outstanding business leaders and social welfare agencies personnel operating in the Metropolitan Toronto area. In its first two months of operation the Credit Counselling Service handled 61 cases. Of this number 28 were referred to it by the Family Service Association, 7 by the Department of Veterans' Affairs, 6 by the Children's Aid Society, 3 each by Ontario Probation Services, employers, and members of the Legislative Assembly, and 11 by other sources. These cases involved 557 creditors and $201,954 of debt. Of the 61 clients 9 were completely rehabilitated during this period, 20 had a solution worked out and were paying the C. C. S. office for a prorated distribution to creditors, 19 were still being processed, and only 13 were rejected as being problem cases beyond the scope of C. C. S. assistance; some of this latter group were referred to other social service agencies. Unlike some comparable agencies in the United States the Credit Counselling Service operates without charge either to debtors or creditors and is supported by organizational affiliates, business members, and individual members. CLARKSON v. McMASTER & CO. Supreme Court of Canada. 1895. 25 S.C.R. 96.

STRONG, C. J. C.: In the view which I take of this case it is not necessary that I should express any positive opinion as to the validity and bona fides of the mortgage so far as it is impeached upon the grounds of the mortgagor's insolvency and as a fraudulent preference, and therefore I refrain from doing so. I may say, however, that upon facts disclosed by the evidence, which are undisputed and therefore open for consideration by an appellate court, I should entertain grave doubts as to the validity of the transaction as against the creditors of the mortgagor, apart altogether from the non-delivery of possession, the want of registration, and the express agreement not to register the mortgage, questions which I propose to consider. Under the statute law regulating chattel mortgages in the province of Ontario, applicable to the mortgage now in question, I am of opinion that the appellants were entitled to attack the transaction, thus differing from the majority of the Court of Appeal, and agreeing in the conclusion of the learned Chief Justice of Ontario. The general Act relating to mortgages of chattels was amended and extended by Ontario statute 55 Vic. c. 26. By the second section of that act it was enacted as follows: "In the application of the said act, and of this act extending and amending the same, the words 'void as against creditors' in said act shall extend to simple contract creditors of the mortgagor or bargainor suing on behalf of themselves and other creditors, and to any assignee for the general benefit of creditors within the meaning of the Act respecting Assignments and Preferences by Insolvent Persons, and amendments thereto, as well as to creditors having executions against the goods and chattels of the mortgagor or bargainor in the hands of the sheriff or other officer." And Section 4 of the same act provides: "A mortgage or sale declared by said Act to be void as against creditors and

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subsequent purchasers or mortgagees shall not, by the subsequent taking of possession of the things mortgaged or sold by or on behalf of the mortgagee or bargainee, be thereby made valid as against persons who became creditors, or purchasers, or mortgagees, before such taking of possession." These enactments were undoubtedly intended by the legislature to obviate the construction which the courts had put upon the provisions embodied in the chapter 125 of the Revised Statutes of Ontario. Section 1 of that act provides that: "Every mortgage of goods and chattels, not accompanied by immediate delivery, etc., shall within five days from the execution thereof be registered, etc." And section 4 of the same act provides that: "In case such mortgage or conveyance and affidavits are not registered as hereinbefore provided, the mortgage or conveyance shall be absolutely null and void as against creditors of the mortgagor, and against subsequent purchasers or mortgagees in good faith for valuable consideration." The mortgage now in question was not registered within the prescribed time, nor was there any immediate delivery of the mortgaged goods. A line of decisions in the courts of the province had, previously to the passing of the Act of 1892, established that in the construction of the first section of the Chattel Mortgage Act just set forth, the word "creditors" was to be construed as meaning "judgment creditors," and the words "null and void" as meaning "voidable." It was also held that the mortgagee might at any time validate a mortgage invalid for want of possession or registration by taking possession of the mortgaged property. If it were necessary now to determine whether this construction was or was not correct, I am compelled to say, with great respect for the opinions referred to, that I should find great difficulty in agreeing with these decisions. First, I see no reason why the word "creditors" should be restricted to a particular class of creditors, viz., judgment creditors. Why should the same word receive a different construction in this Act from that which it has received as used in the statute of the 13th Elizabeth? I see no reason for any such distinction. It is true that equitable execution as consequential on the avoidance of a transaction under the 13th Elizabeth could not, under the old system of separate jurisdictions for law and equity, have been obtained by any but judgment creditors, but the deed was nevertheless held to be void as against simple contract creditors. In Reese River Mining Co. v. Atwell, it was held by Lord Romilly M.R. that simple contract creditors were entitled to a decree declaring a deed void under the Statute of Elizabeth, though not having obtained a judgment at law they could not have had equitable execution, and, as is pointed out in May on Fraudulent Conveyances (2nd ed. p. 528), this was only carrying out what is said in the judgment of Lord Hardwicke in Higgins v. York Buildings Co., where occurs the following passage: "I do not know in the case of fraudulent conveyances that this court has ever done anything more than remove fraudulent conveyances out of the way . . . nor any instance of a decree for sale, but equity follows the law and leaves them to their remedy by elegit without interfering one way or the other." And that an instrument fraudulent under the statute was void against all creditors, was also demonstrated by the well established practice of courts of equity in administering assets, which was not to require a judgment at law, but to treat deeds fraudulent under the statute as void against all creditors, and to deal

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with the property purported to be conveyed by such instruments as assets for the payment of simple contract as well as all other creditors. Then, there are reasons which, in my opinion, require a liberal construction of the word "creditors," derived from the manifest policy of the Chattel Mortgage Act. Registration or possession were required manifestly for the protection, not only of actual creditors, but of those who might become creditors relying on the visible possession of property by their debtor, and the absence from the appropriate registry of any charge upon that property; and this for the protection of those who had not had the opportunity of recovering judgment, creditors payment of whose claims might be deferred, or who had not had time to get judgment. Again, I am not impressed with the soundness of the construction which reads the terms "absolutely null and void" as "voidable." So to cut down the words of the Act is, I venture to say, in direct conflict with the manifest policy of the legislature, and is not justified by the consideration that creditors could not have the mortgaged chattels applied in payment of their debts until they had recovered judgment. The rule requiring a judgment at law to entitle a party to equitable execution is to be ascribed to the reluctance of the equity courts in former times to entertain legal questions; such questions were always sent to a court of law to be determined. The creditor's right to recover his debt was a purely legal question and therefore he had to establish it by a judgment at law. This, however, by no means involved the necessity of saying that a deed was not void under the Statute of Elizabeth as against simple contract creditors. The authorities I have already referred to show that this proposition must be correct. Then, for these reasons, deduced from the Statute of Elizabeth and the decisions on that Act, and on the policy which led to the legislation embodied in the Chattel Mortgage Act, I should have thought the word "creditors" in the latter act ought to be construed as embracing all creditors. It follows from this that there was no sound reason for cutting down the expression "absolutely null and void" to "voidable." Lastly, if a chattel mortgage not registered within the limited time, and where no possession had been taken, was absolutely null and void at the expiration of five days as against all creditors, I am unable to see how such a void security could be revived by the creditor simply taking possession of the goods. In the case of Barker v. Leeson, the learned Chancellor of Ontario delivered a judgment which, in my opinion, contains not only a correct construction of the statute, but also a sound exposition of the policy of the law and the intent of the legislature in enacting it. The Act of 1892 was, however, passed by way of altering and amending the law as established by the authorities referred to, and it impliedly recognizes the construction thus placed upon the first statute as being, at the time of the passing of the later act, the existing law. I do not, therefore, intend to decide this case upon my own view as to the proper interpretation of the original act, but assuming that the previous decisions are binding authorities, I propose to place the decision of this appeal entirely upon the amending Act 55 Vic. ch. 26, thus following the course of the learned Chief Justice of Ontario, who did not conceive himself in any way precluded by the state of the authorities from so doing. And doing this I come to the same conclusion as the learned Chief Justice. The second section of the Act announces that it is the intention of the legislature thereby "to extend and amend" the existing law. How any extending or amending effect can be attributed to the act consistently with the judgment now under appeal, I am unable to see. Nothing can be more explicit and distinct than the declaration of the legislature, that mortgages in relation to which the requirements of the original act have not been complied with shall be void as against

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simple contract creditors. I do not construe this declaration as in any way fettered with any condition as to the form of suit; all I understand to have been meant by the words "suing on behalf of themselves and other creditors," was just this, that the mortgage, being void as to all, any action which might be brought to obtain the benefit of the nullity enacted by the statute should be on behalf of all creditors, so that all, and not merely those suing, might obtain the benefit of the Act. Then, applying this in the present case, this mortgage became absolutely null and void at the expiration of the five days allowed for registration. Then, the same second section provides that this avoidance shall enure to the benefit, not only of creditors who may sue on behalf of themselves and others, but also to the benefit of all creditors suing by their representative the statutory assignees for the benefit of creditors, who undoubtedly represents the creditors just as much as does in England an assignee in bankruptcy; and we constantly find cases reported in which such last mentioned assignees maintain actions to set aside deeds executed before their appointment. That being so, this mortgage being thus absolutely void under the Act of 1892, when the term for registration had elapsed, whatever the law may have been before, the assignee was entitled to maintain this action so soon as the assignment to him was completed, and I should be prepared so to hold even if there was not now a single creditor whose debt existed at the date of the mortgage, but only creditors whose debts had been contracted subsequently, for I think in construing these Acts (the Revised Statutes and the amending Act together) we ought not to restrict the avoidance of the mortgage to actual creditors at its date, but to extend its benefits to subsequent creditors, and that not only for the reasons stated in the judgment of the Chancellor before referred to, but on the very words of the fourth section of 55 Vic. ch. 26. This fourth section, in my opinion, very clearly indicates that creditors subsequent to the mortgage were intended to be included, for it expressly provides that taking possession under a mortgage void as against creditors shall not validate it against creditors who became such before taking possession. Then, did the subsequent taking possession validate this mortgage if it was, at the time possession was taken, absolutely "null and void"? If the foregoing reasons and conclusions are correct this may be answered in the very words of section four itself, which says in so many words that a mortgage declared to be void as against creditors and subsequent purchasers or mortgagees shall not, by the subsequent taking of possession of the things mortgaged, be thereby made valid as against persons who became creditors before such taking of possession. Creditors now represented by the assignee became creditors before the taking of possession; and, therefore, upon the express words of the Act which require no construing, since what is already plain and explicit does not bear interpretation, the possession did not set up this mortgage against the assignee nor against the creditors suing conjointly with him. Lastly, I am of opinion that this mortgage ought to be avoided on a ground altogether distinct from that before considered. Not only was there a noncompliance with the conditions of the Act in respect of registration and taking possession, but there was a distinct agreement between the mortgagor and mortgagee that there should be neither registration nor immediate possession; in other words, that a transaction which the law required should be open and notorious, to be made so either by registering the mortgage or taking possession of the goods, should be concealed from subsequent creditors, purchasers and mortgagees. This mortage was therefore given in pursuance of an agreement to contravene the statute and was, therefore, on grounds of public policy void ab initio. Whether the mortgagor was, or was not, insolvent at the date of the mort-

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gage, this agreement, in my opinion, constituted what has been called a fraud upon the statute, and this upon the authority of the cases of Jones v. Kinney, Ex Parle Fisher, and Clarkson v. Sterling, cited in the appellant's factum, in itself constitutes a distinct ground for holding the mortgage to have been a nullity as against creditors from the beginning and therefore void as against such persons even before the expiration of the term allowed for registration had expired. I have seen the case of Morris v. Morris, but I find nothing in that authority to alter the opinion I had previously formed. The statute there under consideration differed in important respects from that which applies to the present case. The appeal must be allowed with costs in this court and in the Court of Appeal, and the judgment of Mr. Justice MacMahon must be restored. [The concurring judgment of GWYNNE, J., in which TASCHEREAU, J. joined, is omitted. SEDGEWICK and KING, JJ. concurred in the result.] The words "simple contract" before "creditors" in the Ontario statute were dropped in the 1897 consolidation of all Ontario statutes.

GRAND TRUNK v. DEARBORN Supreme Court of Canada. 1919. 58 S.C.R. 315. DAVIES, C. J. C.: This appeal comes to us by way of appeal per saltum from a judgment of Mr. Justice Ives delivered on the trial of an interpleader issue in which the Grand Trunk Pacific Railway Co. was directed to be the plaintiff and the respondent Dearborn defendant for the purpose of testing the validity of a chattel mortgage given on the 29th day of January, 1914, by the Edmonton Gravel Co. Ltd. in favour of the Northern Trust Co., of which chattel mortgage the respondent Dearborn had become assignee. On the 16th day of April, 1917, the Grand Trunk Pacific Railway Co. obtained judgment against the Edmonton Gravel Co. in the sum of $7,808 and costs, and on the 4th of May, 1917, a writ of fi. fa. for the amount of the judgment and costs was placed in the sheriff's hands with instructions to levy the amount thereof on the goods and chattels of the Edmonton Gravel Co. On the 5th of April, 1917, a distress warrant was placed in the hands of the sheriff by the defendant Dearborn as assignee of the mortgage bill of sale from the Edmonton Gravel Co. with instructions to take possession of and sell the goods and chattels set out and assigned in the said mortgage and pursuant thereto the sheriff did actually seize and take possession of the said chattels. A portion of them were actually sold by the sheriff and the remainder held by him subject to the order of the court on interpleader issue. The learned trial judge held that the facts did not constitute a delivery of possession by the mortgagor, and also held that while he agreed personally with the contention of the plaintiff and the dissenting judgment of Chief Justice Harvey in the case of The Security Trust Co. Ltd. v. Stewart, that failure on the part of the mortgagee of the bill of sale or its assignee to file the renewal statement required by the statute made void the mortgage against all creditors and that there was no sufficient justification for qualifying the term "creditors" in section 17 of the Ordinance respecting the registration of Bills of Sale so as to read "execution creditors," he was nevertheless bound by the judgment of the court in that case and precluded from giving effect to his own opinion. In this appeal the question is squarely raised before this court, which is, of course, not bound by any provincial judgments, whether under the Bills of Sales Ordinance, ch. 43 of the Consolidated Ordinances of the N. W. Territories, the

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defendant's mortgage, not having been renewed on or before the 18th of January, 191 7, as required by section 17 of the Ordinance, had in the words of the Ordinance "ceased to be valid" as expressed in section 6 or had become "absolutely null and void" as expressed in section 11 against the creditors of the mortgagor, and whether the courts should limit the meaning of the term "creditors" in the section to execution creditors only. The Ordinance in question is substantially a copy of the Ontario statute upon the same subject before it was amended by enacting that the word "creditors" should not be limited to "execution creditors" as it had been by the judgments of the courts of Ontario. Upon this question, as to the meaning of the word "creditors" in the section as originally enacted by the Ontario Legislature and substantially copied by the Ordinance of the N. W. Territories, there has been a great difference of judicial opinion. In Holmes v. Vancamp, Ch. J. Robinson, delivering the judgment of the court, says at p. 515: "It is established clearly that he (Vancamp) was in fact a creditor ( of the mortgagor) when this mortgage was given, and when he shews that, he compels us to hold the mortgage void as against him from the first and not merely from the time his judgment was entered." In a case in the Chancery Division of Barker v. Leeson, it was held by Chancellor Boyd that "a chattel mortgage which has expired by effluxion of time under R.S.O. ch. 119, sec. 10, and has not been renewed or refiled, ceases to be valid as against all creditors of the mortgagor then existing."

The chancellor, in giving judgment, said at p. 117: "The language of the statute is, that every mortgage shall cease to be valid as against the creditors of the person making the same after the expiration of one year from the filing thereof, unless there be a statement of renewal filed, as provided in the 10th section of the Act: R.S.O. ch. 119. Why should this be read as meaning judgment or execution creditors?" The recovery of judgment merely facilitates the proof of the party who is the creditor, but he is as much a creditor before as after judgment. The object of the Act is plainly, by means of registration, to inform everybody that goods apparently in the possession and ownership of A. are not in truth his, but are held by him subject to the claim of B. under a chattel mortgage or bill of sale. The object of the Act is to enforce a visible and actual transfer of possession upon every change of ownership, or to compel the recording of the instruments which manifest the change of property. The intent is, that persons who are about to become the creditors of others by parting with money or money's worth, may, by searches in the public office, obtain information for their guidance; and that the ostensible owners of chattels may not gain fictitious credit on the faith of property which is either encumbered or belongs to other people. By the statute then, where the mortgagee has not renewed his security by refiling at the year's end, and is not in possession of the chattels, his mortgage ceases to be valid against creditors. The case chiefly relied upon by the respondent was that of Parkes v. St. George. There the appeal court held (Patterson J. dissenting) that a creditor who is not in a position to seize or levy on an execution on the property cannot maintain an action to have the instrument declared "invalid," and that holding

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was, of course, followed in the Ontario courts in a series of decisions until the Act was amended eight years afterwards by declaring that the word "creditors" in the statute should not be limited to execution creditors. In the Province of Alberta, in the case of the Security Trust Company Ltd. v. Stewart, the court, Harvey, C. J. dissenting, followed the Ontario decision of Parkes v. St. George, and limited the word "creditors" in the Act to such as were either execution or attaching creditors. I agree fully with the dissenting Chief Justice Harvey in his statement, that he could see "no sufficient reason for concluding that when the legislature said a mortgage would cease to be valid as against the creditors of the mortgagor, it meant anything different from what it said. To prefix the word 'execution' before the word 'creditors' would be a perfectly legitimate amendment but it is only the legislature that has the right to make such amendment." See also judgment of Walsh, J. in Graf v. Lingerell. The same question came before this court in the case of Clarkson v. McMaster. Chief Justice Strong, in his judgment, referring to the decision of the Ontario Court of Appeal in Parkes v. St. George, above referred to, and the cases which followed it, said at p. 100 : "If it were necessary now to determine whether this construction was or was not correct I am compelled to say, with great respect for the opinions referred to, that I should find great difficulty in agreeing with these decisions. First I see no reason why the word creditors should be restricted to a particular class of creditors, viz., judgment creditors. Why should the same word receive a different construction in this Act from that which it has received as used in the statute of the 13th Elizabeth? I see no reason for any such distinction. It is true that equitable execution as consequential on the avoidance of a transaction under the 13th Elizabeth could not, under the old system of separate jurisdictions for law and equity, have been obtained by any but judgment creditors, but the deed was nevertheless held to be void as against simple contract creditors." And again at p. 101: "Then, there are reasons which, in my opinion, require a liberal construction of the word 'creditors,' derived from the manifest policy of the 'Chattel Mortgage Act.' Registration or possession were required manifestly for the protection, not only of actual creditors, but of those who might become creditors, relying on the visible possession of property by their debtor, and the absence from the appropriate registry of any charge upon that property; and this for the protection of those who had not had the opportunity of recovering judgment, creditors payment of whose claims might be deferred, or who had not had time to get judgment." I have no hesitation myself in putting the construction upon the section of the Ontario Legislature, from which the Ordinance was substantially copied, adopted by Chief Justice Robinson in Holmes v. Vancamp, Chancellor Boyd in Barker v. Leeson. and Patterson, J. in Parkes v. St. George. and also by Chief Justice Strong in Clarkson v. McMaster, and, upon the N. W. Ordinance which is a substantial copy of the Ontario enactment, by Chief Justice Harvey, dissenting in the Appeal Court and Simonds, J., the trial judge, in Security Trust Company v. Stewart, and by Walsh, J. in Graf v. Lingerell, on the N. W. Ordinance before us.

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I cannot admit the right of the courts where the language of a statute is plain and unambiguous to practically amend such statute either by eliminating words or inserting limiting words unless the grammatical and ordinary sense of the words as enacted leads to some absurdity or some repugnance or inconsistency with the rest of the enactment, and in those cases only to the extent of avoiding that absurdity, repugnance and inconsistency. I think the word "creditors" as used in this Ordinance means just what it says and embraces all creditors and not merely execution creditors. Such a construction has in scores of cases in the English and in our courts been put upon the same word "creditors" in the Statute of Elizabeth. I think the object and purpose of the legislation being construed was to compel either registration of a mortgage or other bill of sale from the owner in possession of the chattels to him so that persons might not be entrapped or misled into advancing moneys or credits to others in ostensible possession of chattels and goods under the belief that they were the owners of the goods. It was intended to prevent the ostensible owner of goods from obtaining undeserved credit on the faith of his being the real owner of property which was either encumbered by secret bills of sale or belonged to other people. It does not require an actual change in the ostensible possession of property but it does require, if there is no such change of possession, that the security taken upon the property should be recorded in a public office; and it further requires that from time to time, as specified in the Act, such security should be renewed on the registry so as to conform with the actual existing facts. These requirements were not enacted surely for the benefit of execution creditors merely. They were so enacted for the benefit and protection of all who were or might become creditors before there was an open, visible change of actual possession of the goods and chattels or a registration in a public office of a mortgage of such goods. It comes down to this, that either registration and renewal or actual transfer of possession were required for the protection as well of existing as for future creditors who might rely upon such possession and the non-registration or non-renewal of charges in the proper registry. Being a remedial statute to prevent fraud and protect honest dealers it should rather be construed, if its language is doubtful, liberally and to advance the object the legislature clearly had in view. For these and other reasons I will not stop to enlarge upon, I would allow the appeal and direct judgment as prayed for in the statement of claim. If a majority of the court does not agree with my construction I would still allow the appeal upon the second ground that the plaintiffs appellants having become execution creditors, and the goods not having been sold when the execution was placed in the hands of the sheriff, they were still held under the mortgage which had become invalid as against the plaintiffs as execution creditors and that as such these latter had priority over the claimant under the void chattel mortgage .... ANGLIN, J.: The defendant having failed to renew the registration of his chattel mortgage on or before the 18th January, 1917, as required by section 17 of the Bills of Sales Ordinance (Con. Ord. N.W.T., ch. 43), it "ceased to be valid as against the creditors" of the mortgagor. The plaintiff, the Grand Trunk Pacific Railway Co., was then a simple contract creditor of the mortgagor. It became an execution creditor on the 4th of May, 1917. Meantime, on the 5th of April, the defendant had caused what he asserts was a seizure to be made of the goods covered by his chattel mortgage and they were, formally at least, still under such seizure when the plaintiff company's execution was lodged with the sheriff on

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the 4th of May and when he was directed, on the 19th of October, to hold the chattels or proceeds of the sale thereof to meet it. Upon these facts, Ives, J. following, as he was bound to do, the decision of the Appellate Division of the Supreme Court of Alberta in Security Trusts Co. Ltd. v. Stewart, ( although he expressed his personal preference for the dissenting opinion of Harvey C. J.), dismissed the plaintiffs' claim to have the chattel mortgage declared void as against them and for payment over to them of the proceeds of the sale of the goods in question (made without prejudice under an arrangement with the parties) by the sheriff in whose hands they are. From that judgment the plaintiffs appeal to this court - per saltum by consent. The appeal rests on two distinct grounds: ( 1) that the word "creditors," in section 17 of the Bills of Sales Ordinance, means all or any creditors of the mortgagor and not merely "execution creditors," as was held by the Appellate Division in the Stewart case; (2) that the goods being only under seizure and not yet sold when the first execution was placed in the sheriff's hands, they were still held under the mortgage, which had become invalid as against the plaintiffs, if not before, at least immediately upon their attaining the status of execution creditors, and that as execution creditors they acquired a right to have the goods in question seized and disposed of for their benefit superior to that of the defendant as chattel mortgagee. On the first point, notwithstanding Mr. Macdonald's very able argument and the powerful judgment of the late Chief Justice Strong in Clarkson v. McMaster, by which he supported it, I am of the opinion that the word "creditors" in the Bills of Sales Ordinance has been properly held to mean execution creditors creditors whose claims are in such a form as gives them a lien on the property and entitles them to seize it - creditors having rights in respect of the goods to the exercise of which the security to be avoided would, if valid, present an obstacle. The judgments in Parkes v. St. George have convinced me that the legislature cannot have meant to give a simple contract creditor what would be tantamount to execution before judgment. It would be useless at the suit of such a creditor to set aside a mortgage which (subject to the statute against fraudulent preferences) could be at once replaced ( no creditor having acquired a right to seize the goods covered by it and no subsequent purchaser or mortgagee having intervened) unless such goods should be held to meet the suitor's claim when he should have recovered judgment against his debtor. On this branch of the case, however, I merely desire respectfully to express my concurrence in the judgment in Parkes v. St. George, and the numerous decisions which have followed it. But upon the other aspect of the case, I think the appellants are entitled to succeed on the ground on which Heaton v. Flood, was decided in favour of the execution creditor . . . . [The concurring judgments of BRODEUR and MIGNAULT, JJ. and the dissenting judgment of lDINGT0N, J. are omitted.]

PART I: CREDITORS' REMEDIES SHORT OF BANKRUPTCY LIQUIDATION

Chapter Two: Enforcement of Judgment SECTION 1: EXECUTION A. General Introduction to the Writs of Execution When the plaintiff in a lawsuit obtains a favourable judgment against the defendant,

he has not yet completely attained his objective, which is not merely to obtain a

declaration from the court that he is in the right, but primarily to get actual possession of the money, chattel, or land over which the suit has been fought. Indeed, if the defendant is uncooperative or in financial difficulties, obtaining judgment may be only the beginning, rather than the end, of the plaintiff's legal troubles. The reason for this anomalous situation is that the fact of obtaining judgment does not automatically set in motion any set of procedures to ensure that it is paid, and the responsibility for collecting the judgment, in the event the judgment debtor does not voluntarily and immediately pay, rests not on the court but on the judgment creditor. The law goes no further than to provide certain institutions and procedures to aid the creditor in his endeavor to collect his legal due from the debtor, and it is up to the creditor to take advantage of these institutions and to set in motion these procedures. Otherwise nothing will be done, and despite the judgment against him, the debtor will escape. The ordinary and primary way of enforcing judgment is by execution of the judgment. In Gamble v. Howland (1852), 3 Gr. 281, at p. 308, Spragge, V.C., gave the following definition of execution: "Bacon defines execution to be 'the obtaining actual possession of a thing recovered by judgment of law,' and Coke calls it 'fructus finis et effectus legis.' Both are speaking of common law executions; but taking that definition to apply to what is analogous to it in courts of equity, it could only be the process by which the court enables the successful party to obtain actual possession of the thing recovered by its judgment and decree." The Final Report of the [English] Committee on Supreme Court Practice and Procedure (1953), Cmd. 8878, p. 126, gave the following description of execution : "374. Execution may be said to be a word to describe those steps by which a party who has judgment entered in his favour obtains the fruits of the judgment from the unsuccessful party. The first distinguishing feature of execution . . . is undoubtedly that of self help. The Court, having entered judgment, takes no step to obtain for the judgment creditor the fruits of the judgment. It is left to the judgment creditor to decide which of many alternative steps he will take, and to take those steps at his own expense except in so far as he may later be able to recover such expense from the judgment debtor. The second distinguishing feature is that the system of execution . . . is not a planned system. Like many of our institutions it has grown up haphazardly and has been altered from time to time to meet such needs as seemed to arise. It is a structure of some complexity, and much of it exists only in its present form for historical reasons."

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If the regular judgment of the court, after the decision of the suit, be not suspended, superseded, or reversed . . . the next and last step is the execution of that judgment; or putting the sentence of the law in force. This is performed in different manners, according to the nature of the action upon which it is founded, and of the judgment which is had or recovered. If the plaintiff recovers in an action real or mixed, whereby the seisin or possession of land is awarded to him, the writ of execution shall be an habere facias seisinam [that you give him seisin], or writ of seisin, of a freehold; or an habere facias possessionem [that you give him possession], or writ of possession, of a chattel interest. These are writs directed to the sheriff of the county, commanding him to give actual possession to the plaintiff of the land so recovered: in the execution of which the sheriff may take with him the posse comitatus, or power of the county; and may justify breaking open doors, if the possession be not quietly delivered. But, if it be peaceably yielded up, the delivery of a twig, a turf, or the ring of the door, in the name of seisin, is sufficient execution of the writ. ... In other actions, where the judgment is that something in special be done or rendered by the defendant, then, in order to compel him so to do, and to see the judgment executed, a special writ of execution issues to the sheriff according to the nature of the case. As, upon an assize of nuisance, or quod permittat prosternere [that he permit to put down], where one part of the judgment is quod nocumentum amoveatur [that the nuisance be abated], a writ goes to the sheriff to abate it at the charge of the party, which likewise issues even in case of an indictment. Upon a replevin, the writ of execution is the writ de retorno habendo [to have returned]: and, if the distress be eloigned, the defendant shall have a capias in withernam [that you take in withemam]; but on the plaintiff's tendering the damages and submitting to a fine, the process in withernam shall be stayed. In detinue, after judgment, the plaintiff shall have a distringas, to compel the defendant to deliver the goods, by repeated distresses of his chattels: or else a scire facias [that you cause to know], against any third person in whose hands they may happen to be, to show cause why they should not be delivered: and if the defendant still continues obstinate, then (if the judgment hath been by default or on demurrer) the sheriff shall summon an inquest to ascertain the value of the goods, and the plaintiff's damages: which (being either so assessed, or by the verdict in case of an issue) shall be levied on the person or goods of the defendant. So that, after all, in replevin and detinue, ( the only actions for recovering the specific possession of personal chattels,) if the wrong-doer be very perverse, he cannot be compelled to a restitution of the identical thing taken or detained; but he still has his election, to deliver the goods, or their value: an imperfection in the law, that results from the nature of personal property, which is easily concealed or conveyed out of the reach of justice, and not always amenable to the magistrate. Executions in actions where money only is recovered, as a debt or damages, ( and not any specific chattel,) are of five sorts: either against the body of the defendant; or against his goods and chattels; or against his goods and the profits of his lands; or against his goods and the possession of his lands; or against all three, his body, lands, and goods. 1. The first of these species of execution is by writ of capias ad satisfaciendum

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[that you take to satisfy]; which addition distinguishes it from the former capias ad respondendum [that you take to answer], which lies to compel an appear-

ance at the beginning of a suit. And, properly speaking, this cannot be sued out against any but such as were liable to be taken upon the former capias. The intent of it is, to imprison the body of the debtor till satisfaction be made for the debt, costs, and damages; it therefore doth not lie against any privileged persons, peers or members of parliament, nor against executors or administrators, nor against such other persons as could not be originally held to bail. And Sir Edward Coke also gives us a singular instance, where a defendant in 14 Edw. III was discharged from a capias, because he was of so advanced an age quod poenam imprisonamenti subire non potest [that he is not able to undergo the punishment of imprisonment]. If an action be brought against a husband and wife for the debt of the wife, when sole, and the plaintiff recovers judgment, the capias shall issue to take both husband and wife in execution: but, if the action was originally brought against herself, when sole, and pending the suit she marries, the capias shall be awarded against her only, and not against her husband. Yet, if judgment be recovered against a husband and wife for the contract, nay, even for the personal misbehavior of the wife during her coverture, the capias shall issue against the husband only: which is one of the many great privileges of English wives. The writ of capias ad satisfaciendum is an execution of the highest nature inasmuch as it deprives a man of his liberty, till he makes the satisfaction awarded; and therefore, when a man is once taken in execution upon this writ, no other process can be sued out against his lands or goods. Only, by statute 21 Jae. I. c. 24, if the defendant dies while charged in execution upon this writ, the plaintiff may, after his death, sue out a new execution against his lands, goods, or chattels. The writ is directed to the sheriff, commanding him to take the body of the defendant and have him at Westminster on a day therein named, to make the plaintiff satisfaction for his demand. And, if he does not then make satisfaction, he must remain in custody till he does. This writ may be sued out, as may all other executory process, for costs, against a plaintiff as well as a defendant, when judgment is had against him. 2. The next species of execution is against the goods and chattels of the defendant, and is called a writ of fieri facias [that you cause to be made], from the words in it where the sheriff is commanded, quod fieri faciat de bonis, that he cause to be made of the goods and chattels of the defendant the sum or debt recovered. This lies as well against privileged persons, peers, etc., as other common persons; and against executors or administrators with regard to the goods of the deceased. The sheriff may not break open any outer doors, to execute either this or the former writ, but must enter peaceably; and may then break open any inner door, belonging to the defendant, in order to take the goods. And he may sell the goods and chattels ( even an estate for years, which is the chattel real) of the defendant, till he has raised enough to satisfy the judgment, and costs: first paying the landlord of the premises, upon which the goods are found, the arrears of rent then due, not exceeding one year's rent in the whole. If part only of the debt be levied on a fieri facias the plaintiff may have a capias ad satisfaciendum for the residue. 3. A third species of execution is by writ of levari facias [that you cause to be levied]; which affects a man's goods and the profits of his lands, by commanding the sheriff to levy the plaintiff's debt on the lands and goods of the defendant; whereby the sheriff may seize all his goods, and receive the rents and profits of

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his lands, till satisfaction be made to the plaintiff. Little use is now made of this writ; the remedy by elegit, which takes possession of the lands themselves, being much more effectual. ... 4. The fourth species of execution is by the writ of elegit [he hath chosen]; which is a judicial writ given by the statute Westm. 2, 13 Edw. I. c. 18, either upon a judgment for a debt, or damages, or upon the forfeiture of a recognizance taken in the king's court. By the common law a man could only have satisfaction of goods, chattels, and the present profits of lands, by the two last-mentioned writs of fieri facias, or levari facias; but not the possession of the lands themselves; which was a natural consequence of the feodal principles, which prohibited the alienation, and of course the encumbering, of the fief with the debts of the owner. And, when the restriction of alienation began to wear away, the consequence still continued; and no creditor could take the possession of lands, but only levy the growing profits: so that, if the defendant aliened his lands, the plaintiff was ousted of his remedy. The statute therefore granted this writ, ( called an elegit, because it is in the choice or election of the plaintiff whether he will sue out this writ or one of the former,) by which the defendant's goods and chattels are not sold, but only appraised; and all of them ( except oxen and beasts of the plough) are delivered to the plaintiff, at such reasonable appraisement and price, in part of satisfaction of his debt. If the goods are not sufficient, then the moiety or one half of his freehold lands, which he had at the time of the judgment given, whether held in his own name, or by any other in trust for him, are also to be delivered to the plaintiff; to hold, till out of the rents and profits thereof the debt be levied, or till the defendant's interest be expired; as till the death of the defendant, if he be tenant for life or in tail. During this period the plaintiff is called tenant by elegit, of whom we spoke in a former part of these commentaries. We there observed that till this statute, by the ancient common law, lands were not liable to be charged with, or seised for, debts; because by these means the connection between lord and tenant might be destroyed, fraudulent alienations might be made, and the services be transferred to be performed by a stranger; provided the tenant incurred a large debt, sufficient to cover the land. And therefore, even by this statute, only one half was, and now is, subject to execution; that out of the remainder sufficient might be left for the lord to distrain upon for his services. And upon the same feodal principle, copyhold lands are at this day not liable to be taken in execution upon a judgment. But, in case of a debt to the king, it appears by magna carta, c. 8, that it was allowed by the common law for him to take possession of the lands till the debt was paid. For he, being the grand superior and ultimate proprietor of all landed estates, might seise the lands into his own hands, if any thing was owing from the vassal; and could not be said to be defrauded of his services, when the ouster of the vassal proceeded from his own command. This execution, or seising of lands by elegit, is of so high a nature, that after it the body of the defendant cannot be taken: but if execution can only be had of the goods, because there are no lands, and such goods are not sufficient to pay the debt, a capias ad satisfaciendum may then be had after the elegit; for such elegit is in this case no more in effect than a fieri facias. So that body and goods may be taken in execution, or land and goods; but not body and land too, upon any judgment between subject and subject in the course of the common law. But, 5. Upon some prosecutions given by statute; as in the case of recognizances or debts acknowledged on statutes merchant, or statutes staple, (pursuant to the statutes 13 Edw. I. de mercatoribus, and 27 Edw. III. c. 9;) upon forfeiture of

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these, the body, lands, and goods may all be taken at once in execution to compel the payment of the debt. The process hereon is usually called an extent, or extendi facias, because the sheriff is to cause the lands, etc., to be appraised to their full extended value before he delivers them to the plaintiff, that it may be certainly known how soon the debt will be satisfied. And by statute 33 Hen. VIII. c. 39, all obligations made to the king shall have the same force and of consequence the same remedy to recover them as a statute staple; though, indeed, before this statute the king was entitled to sue out execution against the body, lands, and goods of his accountant or debtor. And his debt shall, in suing out execution, be preferred to that of any other creditor who hath not obtained judgment before the king commenced his suit. The king's judgment also affects all lands which the king's debtor hath at or after the time of contracting his debt, or which any of his officers mentioned in the statute 13 Eliz. c. 4 hath at or after the time of his entering on the office; so that, if such officer of the crown aliens for a valuable consideration, the land shall be liable to the king's debt even in the hands of a bona fide purchaser; though the debt due to the king was contracted by the vendor many years after the alienation. Whereas, judgment between subject and subject related, even at common law, no further back than the first day of the term in which they were recovered, in respect of the lands of the debtor, and did not bind his goods and chattels but from the date of the writ of execution; and now, by the statute of frauds, 29 Car. II. c. 3, the judgment shall not bind the land in the hands of a bona fide purchaser, but only from the day of actually signing the same; which is directed by the statute to be punctually entered on the record: nor shall the writ of execution bind the goods in the hands of a stranger or the purchaser, but only from the actual delivery of the writ to the sheriff or other officer, who is therefore ordered to endorse on the back of it the day of his receiving the same. These are the methods which the law of England has pointed out for the execution of judgmenti.: and when the plan tiff's demand is satisfied, either by the voluntary payment of the defendant or by this compulsory process or otherwise, satisfaction ought to be entered on the record, that the defendant may not be liable to be hereafter harassed a second time on the same account. But all these writs of execution must be sued out within a year and a day after the judgment is entered; otherwise the court concludes prima facie that the judgment is satisfied and extinct: yet, however, it will grant a writ of scire facias, in pursuance of statute Westm. 2, 13 Edw. I. c. 45, for the defendant to show cause why the judgment should not be revived, and execution had against him; to which the defendant may plead such matter as he has to allege in order to show why process of execution should not be issued; or the plaintiff may still bring an action of debt, founded on this dormant judgment, which was the only method of revival allowed by the common law . . . . But, in case of injury accompanied with force, the law, to punish the breach of the peace, and prevent its disturbance for the future, provided also a process against the defendant's person in case he neglected to appear upon the ... process of attachment, or had no substance whereby to be attached; subjecting his body to imprisonment by the writ of capias ad respondendum [that you take him to answer] .... If therefore the defendant being summoned or attached makes default, and neglects to appear; or if the sheriff returns a nihil, or that the defendant hath nothing whereby he may be summoned, attached, or distrained; the capias now usually issues: being a writ commanding the sheriff to take the body of the

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defendant if he may be found in his bailiwick or county, and him safely to keep, so that he may have him in court on the day of the return, to answer to the plaintiff of a plea of debt or trespass, etc., as the case may be. This writ, and all others subsequent to the original writ, not issuing out of chancery, but from the court into which the original was returnable, and being grounded on what has passed in that court in consequence of the sheriff's return, are called judicial, not original writs; they issue under the private seal of that court, and not under the great seal of England; and are teste'd, not in the king's name, but in that of the chief (or, if there be no chief, of the senior) justice only. And these several writs, being grounded on the sheriff's return, must respectively bear date the same day on which the writ immediately preceding was returnable. This is the regular and ordinary method of process. But it is now usual in practice to sue out the capias in the first instance, upon a supposed return of the sheriff; especially if it be suspected that the defendant, upon notice of the action, will abscond; and afterwards a fictitious original is drawn up, if the party is called upon so to do, with a proper return thereupon, in order to give the proceedings a color of regularity .... But where a defendant absconds, and the plaintiff would proceed to an outlawry against him, an original writ must then be sued out regularly, and after that a capias. And if the sheriff cannot find the defendant upon the first writ of capias, and return a non est inventus [he is not to be found], there issues out an alias writ, and after that a pluries, to the same effect as the former; only after these words, "we command you," this clause is inserted, "as we have formerly," or, "as we have often commanded you:" - "sicut alias," or "sicut pluries, praecepimus." NORTH, LIFE OF LORD KEEPER GUILFORD (1742) 197. Sequestrations were not heard of till the Lord Coventry's Time, when Sir John Read lay in the Fleet (with £10,000 in an Iron Cash-Chest in his Chamber) for Disobedience to a Decree, and would not submit and pay the Duty. This being represented to the Lord Keeper as a great Contempt and Affront put upon the Court, he authorised Men to go and break up his Iron Chest, and pay the Duty and Costs, and leave the rest to him, and discharged his Commitment: From thence came Sequestrations; which now are so established as to run of course after all other Process fails, and is but in Nature of a grand Distress, the best Process at Common Law after a Summons, such as a Subpoena is; what need all that Grevance and Delay of the intervening Process? ANONYMOUS Dyer, 188b, note (1631).

"Richardson ch. Just. de C. Banc al Assises at Salisbury in Summer 1631. fuit assault per prisoner la condemne pur felony que puis son condemnation ject un Brickbat a le dit Justice que narrowly mist, & pur ceo immediately fuit Indictment drawn per Noy envers le prisoner, & son dexter manus ampute & fix al Gibbet sur que luy mesme immediatement hange in presence de Court." Such direct contempts in the presence of the Court are always criminal, as also

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are acts which, though done outside the Court, directly obstruct the cause of justice. But disobedience to an order of the Court is merely civil contempt, unless accompanied by some element that brings justice into disrepute. KELLOCK J. in POJE v. A.G. B. C. [1953] 1 S.C.R. 516, at pp. 517-522.

The Court of Chancery has for centuries enforced its orders by contempt proceedings, but it is well settled that such orders, when made merely in aid of execution of process for the benefit of a party, are to be regarded as purely civil in nature. It is equally well settled that conduct which renders appropriate contempt proceedings in aid of execution may have a criminal aspect as well.... "There are many statements in the books that contempt proceedings for breach of an injunction are civil process, but it is obvious that conduct which is a violation of an injunction may, in addition to its civil aspect, possess all the features of criminal contempt of court. In case of a breach of a purely civil nature, the requirements of the situation from the standpoint of enforcement of the rights of the opposite party constitute the criterion upon which the court acts. But a punitive sentence is called for where the act of violation has passed beyond the realm of the purely civil .... "In my opinion the statement in Oswald, the 3rd edition, at page 36, correctly distinguishes between civil and criminal contempts: " 'And, generally, the distinction between contempts which tend to bring the administration of justice into scorn, or which tend to interfere with the due course of justice, are criminal in their nature; but that contempt in disregarding orders or judgments of a Civil Court, or in not doing something ordered to be done in a cause, is not criminal in its nature. In other words, where contempt involves a public injury or offence, it is criminal in its nature, and the proper remedy is committal - but where the contempt involves a private injury only it is not criminal in its nature.' " JOHN C. Fox, THE PRACTICE IN CONTEMPT OF COURT CASES (1922), 38 L. Q. R. 185, 189-195. Reprinted by permission.

We see at once the distinction between criminal contempt and contempt in procedure. Criminal contempt is an offence against the State and the punishment is in the interest of public justice and not in that of an individual litigant. Contempt in procedure is a failure to obey some order or process of the Court and the punishment is for the protection of private rights; yet the remedy in such a case must be force, for otherwise the suitor for whose benefit the order is made must lose the fruits of it. The procedure to punish the latter class of. contempt is a form of civil execution .... "Process of contempt" is nowhere defined in the rules [English Rules of the Supreme Court], nor is the punishment for contempt provided for. We know that the processes of contempt at common law were attachment and committal, and the punishment, imprisonment at discretion, fine at discretion and binding to the peace; but if authority for these propositions is called for we might begin with Glanville and cite cases, records and text-books from the twelfth century to the present time. So the framers of the rules left the definition of contempt and its

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punishment where they stood, perhaps with an ultimate view to the codification of the law by Act of Parliament. To the process of attachment the Court of Chancery added sequestration, and since the Judicature Acts this has become applicable in all divisions of the High Court. . . . In the Court of Chancery in modern times contempts of a criminal nature were punished by committal on motion and no writ of attachment issued. Breach of an injunction was also punished by committal, being considered a more serious offence than a mere failure to comply with an order directing an act to be done, for which ... attachment issued without any order. It is true that in some cases where committal was the strictly appropriate remedy the Court of Chancery allowed an attachment to issue, but in the ordinary course attachment was limited to cases in which it issued without leave; the prosecuting party simply filed an affidavit proving the default and the writ issued as of course. Since the Judicature Acts the writ never issues without an order of the Court.... The question is often asked, 'What is the difference between attachment and committal?' It is important to know, because in matters affecting the liberty of the subject the Court is careful to apply the rules of practice strictly, and if committal is applied for, when attachment is the appropriate remedy, the application will probably fail ... . Before the Judicature Acts a decree or order of the Court of Chancery requiring a person to do an act was enforceable by attachment and a decree or order to abstain from doing anything by committal. It has been said that . . . both classes of order are now enforceable by attachment or committal ( D. v. A. [ 1900] 1 Ch. at p. 488). This involves another variation from the rule that a writ of attachment is to have the same effect as the writ which formerly issued from the Court of Chancery.

LINK v. THOMPSON Supreme Court of Ontario. 1917. 40 D.L.R. 222. CLUTE, J.: This was a motion to commit the defendant, Margaret Thompson, for contempt in failing to comply with the terms of the order and judgment of this Court, dated the 3rd day of May, 1917, whereby she was ordered and adjudged to appear personally before the Deputy Registrar of this Court at London, at his office in the city of London, on the 5th day after the service of the said order on the defendant, and then and there to produce Grace Jean Link (an infant, in the pleadings referred to, and then and there deliver to the plaintiff the possession of the said Grace Jean Link, in that the said defendant did not then and there produce and did not then and there deliver to the plaintiff the possession of the said Grace Jean Link. The judgment referred to was that of Masten, J., at the trial, whereby he declared that the plaintiff is entitled to the custody of Grace Jean Link, in the pleadings mentioned, and did order and adjudge that the defendant, Margaret Thompson, appear before the Deputy Registrar, at his Chambers in London, on the fifth day after service thereof, and then and there produce Grace Jean Link, in the pleadings referred to, and then and there deliver to the plaintiff the possession of the said Grace Jean Link. This order and judgment was served upon her personally, the original being exhibited at the time of such service. It appears from the certificate of the Deputy Registrar, H. S. Blackburn, dated

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the 29th May, 1917, that the defendant, Margaret Thompson, did appear before him at his Chambers at the day and time appointed in said order and judgment, but did not then and there produce the said Grace Jean Link, referred to in the said order and judgment; that thereupon the Deputy Registrar asked the said defendant where the said Grace Jean Link was, and in response the said defendant said, "I refuse to answer;" that he then drew her attention to the particular requirements of paragraph 3 of the order and judgment, and asked her if she understood the same; that she answered that she did; that he then asked her if she intended to disobey the said order and judgment, and she answered that she did; that he further asked her if she realised that her disobedience of the said order and judgment would probably result in her being imprisoned, and she assented. The defendant, although duly served, did not appear upon the motion, which is made under Rule 545, which provides that a judgment requiring any person to do an act other than the payment of money, or to abstain from doing anything, may be enforced by attachment or committal. Rule 545 [now 552] corresponds with English 0 . 42, r. 7. The former distinction between attachment and committal is pointed out in Harvey v. Harvey ( 1884 ), 26 Ch. D. 644, at p. 654, where Chitty, J., says: "By Order XLII., rules 7 and 24 . . . attachment and committal are apparently placed on the same footing, and in a case of Sprunt v. Pugh (1878), 7 Ch. D. 567, on a motion against a receiver, in which I myself was counsel, the late Master of the Rolls (Sir G. Jessel) stated his opinion, though it does not appear in the report, that the distinction between committal for contempt and attachment for contempt was practically abolished; the difference between them seems mainly to be in the more summary process of the former and in the degree of inconvenience and expense attending it. The distinction between an order for committal and an attachment for contempt was formerly considered to be, that committal was the proper remedy for doing an act prohibited by injunction or the like, whereas attachment was the remedy for neglecting to do some act ordered to be done. Committal for contempt never took place except by order of the Court." The more recent cases shew that the former distinction in practice made between attachment and committal still obtains . . .. This is a case falling within Rule 545 [now 552]. Under the practice prior to the Judicature Act, it is clear that the appropriate remedy was by attachment. In my opinion, it would not be illegal, since the Judicature Act, in a case like the present, to order commitment; but it is, in my view, better practice to follow the old distinction, where attachment was the only proper remedy for disobedience of a judgment or order of the Court in refusing to do that which was ordered to be done. This being a motion to commit, and not for a writ to issue, the question arises whether a writ of attachment may issue without re-service. In Piper v. Piper, [1876] W.N. 202, an application was made for a writ of attachment against a defendant in contempt who did not appear. The notice of motion was for an order to commit. It was contended that the Court might order a writ of attachment on the notice of motion. The Vice-Chancellor held that, on the principle that the greater includes the less, he had power to order the writ to issue, and he ordered accordingly. Following this case, and having regard to the fact that the defendant in the present case has been personally served with a notice and with a copy of the judgment, I hold that a writ of attachment may issue; and this, I think, is the

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proper remedy in the present case, and order the same accordingly, although an order might be made for committal. See Form 120, Holmsted's Judicature Act, 4th ed., for the writ of attachment. It is not alone from the fact that a writ of attachment issued in a case like the present under the old practice that I make the order, but also because I think it more appropriate, carrying with it, as it does, the right of the plaintiff to a writ of sequestration: Rule 547 [now 554]. HELENE CURTIS LTD. v. TOWELL Ontario Division Court. [1962] O.W.N. 130.

This was an application by the plaintiff judgment creditor for a committal order against the defendant judgment debtor for non-attendance on the return of a judgment summons. The issue before the Court was the right of the Judge to make a committal order against a married woman in the circumstances in the light of existing legislation. SWEET, C. C. J., quoted ss. 132-3 of the Division Courts Act, R.S.O. 1960, c. 110. He pointed out that up till 1950 the law was settled that under the Division Courts Act a married woman could not be committed to gaol for the reason that such committal was in the nature of a personal coercion to compel payment of the debt and was not a committal for contempt. Further until after the time when Re Stewart v. Edwards (1906), 11 O.L.R. 378, was decided the Division Court was not a Court of record. This law was enunciated by a series of decisions of which Re Stewart v. Edwards, supra, was the latest, which in turn was founded on a long line of previous cases all stemming from Exp. Dakins (1855), 16 C.B. 77. He referred to statements in Bicknell & Seager, Division Court Manual, 5th ed., p. 383, McKeon, Division Court Handbook, p. 126 (to the same effect as the statement in Bicknell & Seager), 5 C.E.D. (Ont.) p. 691. He pointed out that the statement in the 1st ed., of C.E.D. was omitted from the 2nd edition: see 9 C.E.D. (Ont.) p. 359. He then examined at length the various cases cited in these texts and pointed out that the ratio of all the judgments was that a married woman was immune from imprisonment for debt and that the Division Court was not a Court of record. He also pointed out that some of the cases in this line of authority were cases other than those of a married woman but proceeded on the same principle namely that the judgment debtor in those cases by reason of some position held by him such as that of a clergyman or a member of the provincial parliament was immune from imprisonment for debt. He deduced from the examination of these cases that the only possible conclusion was that if the present legislation was essentially and basically the same as the legislation in force at times relevant to the cases mentioned, that is, if committal for non-attendance pursuant to a judgment summons in the Division Court was in the nature of execution or qualified execution or to coerce payment then a married woman was not liable to be committed because of her non-attendance. The Married Women's Property Act, s. 3 ( 1) only made her liable in respect of and to the extent of her separate property. On the other hand if an order for committal for non-attendance was by way of punishment for contempt of Court then it would seem that a married woman might be summoned to be examined as to her separate property and in the event of her non-attendance she was liable to be committed for default if her non-attendance was wilful. He then contrasted the provisions of ss. 186-7 of the Act prior to 1950 with the corresponding

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sections ss. 136-7 and pointed out that while in the former sections on committal the judgment debtor was entitled to be discharged on payment of the debt, that provision was dropped in the re-enactment of 1950. He also referred to s. 131 ( 4) of the 1950 statute which expressly gave the Judge the right to commit for contempt of Court. The present legislation was practically the same as that re-enacted in 1950. He then concluded from the changes made in the statute by the re-enactment of 1950 that it was the manifest intention of the legislature that if a committal order was made because of non-attendance it was punishment for contempt of Court and not by way of execution to coerce payment. It was not necessary to decide whether a committal order might be made because of some situation other than non-attendance and he did not decide it. What he did decide was only whether a married woman might be committed to gaol because of non-attendance when duly served with a judgment summons properly issued. He points out that Bicknell & Seager, op. cit. C.E.D. 1st ed., were both written prior to the enactment of the 1950 Act and considered that the statement in McKean, op. cit., published subsequent to the 1950 statute might have been a matter of inadvertence on the author's part. He concluded therefore that an order for committal made under judgment summons procedure under the present legislation for failure to attend in compliance with the summons was punishment for contempt of Court and not a means for coercing payment and was not in the nature of an execution or partly in the nature of an execution. Since it was in the nature of punishment for contempt then it was applicable to all persons including married women. Married women are punishable for contempt of Court and they have no immunity in that regard: Aylesford v. G.W.R., [1892] 2 Q.B. 626. He also pointed out that the Division Court is now a Court of record. He concluded therefore that there was now authority in a Judge to commit to gaol a married woman who did not attend as required by a judgment summons duly issued and served provided the Judge was satisfied that the non-attendance was wilful. He pointed out that the issue of a committal order was discretionary and in the circumstances of this case he therefore ordered that the judgment debtor be given another opportunity to attend for examination. If she did not attend on the new day evidence might be adduced and submissions made in respect of the question as to whether or not the failure of the judgment debtor attend was wilful. In the meantime the decision as to whether a committal order should be issued on the present application was reserved. The Rules of Practice and Procedure of the Supreme Court of Ontario now make provision for eight writs of execution: ( 1) The writ of fieri f acias ( or fi. fa.), the commonest writ, is covered by rules 540 and 545 and forms 115-119; besides the ordinary form (115) there are also special forms for use against an executor or administrator ( 116), a married woman (117), on a judgment or order for costs (118), and where judgment has been assigned under rule 573 (119) . (2) The writ of capias ad satisfaciendum (or ca. sa. ), which deprives a person taken into custody of his liberty until he has made the satisfaction awarded by the judgment. This writ filled the debtors' prisons in England (reportedly 7114 debtors were imprisoned in Britain in the year ending January 5, 1830) until its use was restricted by the Debtors Act of 1869. The closest present-day counterpart in Canada to the earlier English legislation is the Nova Scotia Collection Act, R.S.N.S. 1954, c. 38. S. 30(4) of that Act provides that where upon an examination before a special examiner "it appears to the special examiner that the debtor has without reasonable excuse refused or neglected to pay

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the instalment mentioned in such order [previously made by a Court], and is possessed of means or income sufficient to pay the same, he may make an order that an execution directed to the proper officer to take the body of the debtor shall issue." S. 30(6) formerly provided that the person imprisoned might apply for relief under the Indigent Debtors' Act, R.S.N.S. 1954, c. 121, or that after 14 days in jail he was entitled to a review by a County Court Judge of his case, with power in the Judge to direct his release "if the imprisonment is imposing undue hardship on the debtor or his family;" however, by Stat. 1963, c. 19, s. 1, the 14-day period preceding judicial review was reduced to 2 days. Estimates of the number of people incarcerated annually under this legislation have run as high as 300 ("Jailed for Being in Debt," Toronto Daily Star, Feb. 24, 1965, p. 7) . The writ ca. sa. still exists in modified form in Ontario under form 124 and s. 27 of the Fraudulent Debtors Arrest Act, R.S.O. 1960, c. 133. Under this Act the writ is available where there are "such facts and circumstances as satisfy the judge that there is good and probable cause for believing either that the defendant, unless he be forthwith apprehended, is about to quit Ontario with intent to defraud his creditors generally or the plaintiff in particular, or that the defendant has parted with his property or made some secret or fraudulent conveyance thereof in order to prevent its being taken in execution." (Under the corresponding s. 11 of the Nova Scotia Collection Act a warrant for the arrest and imprisonment of a debtor may issue on the sworn belief that the debtor is about to leave the Province but without the necessity of stating the ground for such belief). Where the creditor had reasonable cause to believe that the defendant was about to quit the Province, he may be protected from a subsequent action for false imprisonment by the debtor where his belief turns out to be in fact erroneous: Flack Bros. Ltd. v. Petroutsas (1964), 45 D.L.R. (2d) 190. Of course in Ontario committal of a debtor is still possible under s. 132 of the Division Courts Act, R .S.O. 1960, c. 110. ( 3) The writ of venditioni exponas ( which directs the sheriff to expose to sale). There are two forms for this writ (127 and 128), depending on which of the courses allowed by rule 546 is taken. The writ is directed to the sheriff only when he has already taken goods or lands into his hands under a writ of execution and has been unable to sell them for a reasonable price; it allows him to sell them for the best price he can get, regardless of how inadequate that price may be. If the debtor owns other goods or land, fi. fa. may be had along with the venditioni exponas. ( 4) The writ of possession enables the enforcement of judgments for the recovery or delivery of possession of land (rules 547-549 and form 122). (5) The writ of delivery provides for the recovery of specifically awarded goods and chattels ( rule 5 51 and form 123) . (6) The writ of attachment for contempt (rules 551(3), 552-555, 561 and form 125). Attachment was traditionally distinguished from committal. Committal was the proper remedy for doing an act prohibited by injunction, whereas attachment was the remedy for neglecting to do some act ordered to be done. A man was committed for doing what he ought not to do, and attached for not doing what he was ordered to do. Committal was the remedy for doing something wrong, attachment for failing to do something right. Before the Judicature Act, though an order of committal had to be served personally upon the defendant, an attachment issued as a matter of course without any notice to the defendant. This was changed by the Judicature Act, and as rule 553 now indicates attachment for contempt cannot be issued without leave of the Court or a Judge, and such leave can be obtained only on notice to the party. There is therefore some question whether since the Judicature Act there is any distinction remaining between attachment and committal. But see Link v. Thompson, supra. By rule 552 a writ of attachment cannot be obtained for a money judgment. (7) The writ of sequestration, which orders the sheriff to enter on the defendant's lands and collect and sequester (i.e., hold) the rents and profits of his lands and also to sequester all his goods and chattels, on the theory that depriving the defendant

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of the use of his property will bring him to compliance. Sequestration may be used as a supplement to a writ of attachment (rule 554) or to a fine (rule 561), or in lieu of a writ of attachment where the defendant cannot be found within the jurisdiction (rule 555), or generally where the defendant fails to pay money as ordered by the Court (rule 556). Rule 560 allows use of sequestration against a corporation. The writ is directed to the sheriff (rule 557) and in all cases the same form (126) is employed. The writ of sequestration is to be employed as a last resort and it is a condition precedent to the issuance of a writ of sequestration that the applicant should show that the ordinary procedure for the recovery of a money judgment has been exhausted, that is, for example, that fi. fa. is of no use. This naturally would be a rare case. In Nelson v. Nelson (1874), 6 P.R. 194, at 199, Proudfoot, V. C., said: "And considering that under the fi. fa. goods, and [the] order attaching debts, and the fi. fa. lands, nearly everything obtainable by sequestration can be had, except the immediate possession of the lands, I think that following the analogy of proceedings at law the fi. fa. goods should be first used, then the order attaching debts, and that a sequestration should only issue when the lands are insufficient to satisfy the debt, and it therefore becomes of importance to realize the profits during the year that must elapse before they can be sold under fi. fa.; or where the interest of the debtor is of such a nature that it cannot be taken under a fi. fa." A further restriction on the issuance of sequestration appears in The London and Canadian Loan and Agency Company v. Merritt (1882), 32 U.C.C.P. 375, at 380 and 382 per Osler, J.: "I can find no case [under the Court of Chancery, before the Judicature Act] in which attachment or sequestration following thereon was awarded unless the decree or order stated the time after service of the decree or order in which the money was to be paid or the act to be done. It has been held that an order to do an act or to pay money forthwith sufficiently specified a time. . . . "Now, the judgment on which the writ of sequestration here in question was issued, is an ordinary judgment for a debt recovered at law before the passing of the Judicature Act. It is not in any sense an order to pay money, and no time is limited for payment of money recovered thereon. The debtor could never, under the former practice, either at law or in equity, have been attached for contempt for non-payment of such a judgment .... [l]n my opinion it will not support a writ of sequestration." (8) The writ of assignment of dower is covered by rule 550 and forms 127 and 128 and enables a woman adjudged entitled to dower to obtain her dower rights in defendant's lands. There also remains the theoretical possibility of an action on a judgment, but there would appear to be a judicial policy against this type of action on the ground that it is vexatious and oppressive. In any event "it is only a judgment for the payment of money upon which an action may be brought:" Parks v. Simpson (1915), 33 O.L.R. 382, at 386, per Meredith C.J.O. The most recent case in which an action on a judgment has been allowed in Ontario appears to be Aldrich v. Aldrich (1893), 24 O.R. 124.

FINAL REPORT OF THE [ENGLISH] COMMITTEE ON SUPREME COURT PRACTICE AND PROCEDURE (1953) Cmd. 8878, p. 129. "382. It is clear that any satisfactory system of execution should seek to hold a fair balance between the judgment creditor and the judgment debtor. On the one

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hand the judgment debtor owes the money and ought to pay it. Indeed, the ·inability of a judgment creditor to obtain what is due to him may cause grave hardship to the judgment creditor. Moreover, if it is known, or thought, that the prospects of recovering the amount of judgment debt are small, credit will be greatly restricted by those who now give credit. It has also to be borne in mind that there are undoubtedly judgment debtors who can pay their judgment debts but have no intention of doing so unless they are made to do so. On the other hand, it must also be borne in mind that a man may become involved in a liability which he cannot at once discharge through no fault of his own. And where a man who could pay if given a reasonable time has his home sold up and loses his employment, the true interests of the community are not served." B. Fieri Facias at Common Law SCOTT v. SCHOLEY King's Bench, England. 1807. 8 East 467. Action on the case against the defendants, as Sheriff of Middlesex, for a false return of nulla bona to a writ of fieri facias. LORD ELLENBOROUGH, C. J.: The question of law arising out of these facts is, whether the residuary beneficial interest of Mr. Coleman, under the trusts upon which a lease for years in the new theatre in the Hay-Market, and the apparatus, &c. belonging to the same had been assigned, and which remains to him, after satisfying the several debts and incumbrances thereupon, and indemnifying the trustees acting under the trust deed, were liable to be taken in execution by a writ of fieri facias for the debt of the plaintiff, a judgment creditor? Which question in other and fewer words amounts to this, viz., whether an equitable interest in a term of years can be sold under a fieri facias? The sheriff's authority is derived under a writ, by which he is commanded to cause to be made of the goods and chattels of the defendant the sum recovered; and which sum is of course to be made by a sale of the things taken under the execution. If the sheriff should not be able, before his writ is returnable, effectually to execute it in this particular, he is allowed to excuse himself by returning that the goods remain in his hands unsold for want of buyers: upon which another writ issues, commanding him to expose to sale the goods so remaining in his hands unsold. The language of these writs and return evidently imports, that the goods and chattels, which are the object of them, are properly of a tangible nature, capable of manual seizure, and of being detained in the sheriff's hands and custody, and such also as are conveniently capable of sale and transfer by the sheriff, to whom the writ is directed, for the satisfaction of a creditor. The legal interest in a term of years, both in respect of the possession of which the leasehold property itself is capable, and also in respect of the instrument by which the term is created and secured, (both of which are capable of delivery to a vendee,) has been always held to answer the description of the writ and to be saleable thereunder. (Dyer, 363 a.) But no single instance is to be found in the history and practice of the Courts of Common Law, in which an equitable interest in a term of years has ever been recognized as saleable, (seizable of course it cannot be,) under a fieri facias . . . . In the absence therefore, of any authority in favour of the sale of such an equitable interest under a common law execution against goods, we are of opinion ... that the sheriff's return of nu/la bona in this case, where the defendant in the execution had no other property besides the trust property in question, was not a false return . ...

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G. V. LA FOREST, SOME ASPECTS OF THE WRIT OF FIERI FACIAS (1959), 12 U.N.B. Law J. 39. Reprinted by permission. The writ of fieri f acias ( or fi fa) is the maid of all work in the law of execution. So much is this so that in ordinary parlance when we speak of issuing execution we mean the fieri facias. It commands the sheriff to cause to be made (fieri facias) out of the lands and chattels of a judgment debtor an amount sufficient to pay the judgment creditor with costs. The writ has been the most usual mode of execution for a long time; it is of great antiquity, dating to the earliest days of the common law. This explains many things about the writ. It explains, first of all its extreme technicality, and, as we shall see, it assists in determining what property of the debtor may be seized under the writ. A discussion of problems respecting what property is seizable under the writ comprises the major portion of this talk, but before dealing with this I want to say a few words concerning a matter that is in crying need of reform - the binding effect of the writ. Binding Effect of Writ At common law, the writ had effect from its teste. As soon as it was issued it bound the goods of the execution debtor into whosoever hands they came. So that if an execution debtor sold his goods after the issue of the writ, the execution creditor had a right to seize them even as against a bona-fide purchaser for value without notice. The English Statute of Frauds made an important alteration to this law. It provided, in effect, that the writ should not bind the goods of an execution debtor until it was delivered to the sheriff to be executed.... It should be observed that the provision in the Statute of Frauds merely postpones the time when the writ binds the goods of the execution debtor; it does not otherwise alter the law. So that if a judgment debtor sells goods to an innocent purchaser after the writ has been placed in the hands of the sheriff for execution, the sheriff may seize the goods in the hands of the innocent purchaser. This blemish on the law was removed in England by section 1 of the Mercantile Law Amendment Act, 1856, which provided that no writ of fieri facias should prejudice the right of any person to goods acquired from an execution debtor in good faith, for valuable consideration and without notice. This section and the provision of the Statute of Frauds just mentioned, were reenacted by section 26 of the English Sale of Goods Act .. . . At common law, if several writs of fieri facias were delivered to the sheriff he had to execute them in accordance with the order in which he received them. Priority as between judgment creditors, therefore, was based on the time they placed their executions in the sheriff's hands. The Creditors' Relief Act altered this .... What May Be Seized Under The Writ (a) The Common Law Position

In its origin only goods could be seized under the writ. This is only to be expected, for in feudal times land was much too important a commodity to allow it to be taken by a mere judgment creditor. In those days, it will be remembered, the relation of a man to his land determined his status in society. It was not until 1285 that by the Statute of Westminster II land was made exigible by another writ, the writ of elegit. But this writ did not authorize the land to be seized and sold. Rather, after seizure the land was delivered to the judgment creditor who held it as a tenant by elegit until his debts were paid out of the profit of the

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land. In so far as Canada and other British possessions are concerned . . . sale of lands was later permitted but that was not so in England. There the writ of elegit continued to be the appropriate remedy available to a judgment creditor against the lands of his judgment debtor until 1956. The important point to notice about this is that the writ of elegit is a very different remedy from the writ of fi fa and English cases on executions against land must be read with considerable caution. A second point to note is that seizure of land by fi fa must be done under authority of statute. I also said that the writ was a common law writ. Now as everybody knows equitable interests were not recognized in common law courts. Equitable interests could, therefore, not be seized under a writ of fi fa, and any seizure of equitable interests today must consequently be effected under some statute. A third lesson can be learned from the great age of the writ. At its inception the forms of property were not diverse as they are in our commercial community. Intangible property, such as stocks and patents, was unknown. Only tangible goods, chattels, could be seized under the writ. To the extent that intangible property can be seized today it must be done pursuant to statute. From the foregoing you can surmise that most of what can be seized under the writ is done as a result of statutory enactment. The scope of the writ has been expanded piecemeal over the centuries as need arose and while it is today very broad, there are surprising and unjustifiable gaps. A study of these followed by a comprehensive statute would remove much unnecessary technicality. The idea stands as an open invitation to those who seek the reform of the law. Although land was not exigible under fi. fa. in England (levari facias gave the right to seize the crops and elegit the right to the use of half of the debtor's lands), it became exigible in the English Colonies in America in 1732 by 5 George II, cap. 2, "An Act for the More Easy Recovery of Debts in His Majesty's Plantations and Colonies in America," which provided that land should be subject "to the like remedies, proceeding and process in any court of law or equity" towards the satisfaction of debts and "in the like manner" as personal property. After the English conquest of Canada the writ of fi. fa. lands as well as that of fi. fa. goods was established by an ordinance in 1777 affecting what later became Upper Canada. From that time on fi. fa. applied in Upper Canada to goods and chattels, lands and tenements, though for a few years after the creation of the provinces of Upper and Lower Canada the courts of Upper Canada were in some doubt as to whether lands could be taken in execution. The issue was finally settled by the Privy Council in 1809 in favor of fi. fa. lands. See W. R. Riddell, "Fi. Fa. Lands" in Upper Canada (1929), 7 Can. Bar Rev. 448. S. 34 of the Administration of Justice Act finally abolished eligit in England in 1956, and S. 35 of that Act introduced a new system of charging orders. S. 36(1) provides: "The power of the High Court and of the County Court to appoint a receiver by way of equitable execution shall be extended so as to operate in relation to all legal estates and interests in land." See Re Overseas Aviation Ltd. [1962) 3 W.L.R. 594. C. Issuance and Continuance of Pieri Facias After judgment has been signed by the registrar of the court in which the action was brought, the successful plaintiff's solicitor will issue execution. In all jurisdictions the entry of the judgment or order is the usual preliminary to the issuance of execution, and in some it is a condition precedent. Ord. 38, r. 10, of the Newfoundland Supreme Court Rules prescribes, for example: "No writ of execution shall be issued without the production to the officer by whom the same should be issued of the judgment or order upon which the writ of execution is to issue, or an office copy thereof, showing the date of entry." In Ontario, however, it was held in Rossiter v.

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Toronto Street Railway (1908), 15 O.L.R. 297 that a judgment creditor may issue execution upon a judgment as soon as it is signed by the registrar, without waiting for it to be entered. Similarly in Gallant v. Neilson (1947), 20 M.P.R. 1 the Appeal Division of the New Brunswick Supreme Court held that a clerk's failure to enter a minute of a judgment for costs was a purely ministerial failure and not a ground for setting aside a writ of fi . fa. Execution is issued on praecipe in the proper court office and then delivered to the sheriff of the county where the judgment debtor resides; execution can be issued also to the sheriff of any other county in which the debtor has assets. A sheriff will not go out on a writ of fi. fa. until he is instructed to make a levy, and he will usually prefer to wait until the creditor has ascertained from examination of the judgment debtor or from other sources of information what property the judgment debtor owns. By s. 10 of the Ontario Execution Act "land and other hereditaments and real estate" are made "subject to the like remedies, proceedings and process for seizing, selling or disposing of the same towards the satisfaction of . . . debts, duties and demands, and in like manner as personal estate is seized, sold or disposed of," and by s. 9 ( 1) a writ of execution binds both goods and lands from the time of delivery to the sheriff, subject to the Land Titles Act. In Doe dem. Hazen v. Hazen (1854), 8 N .B.R. 87, at 96 the New Brunswick Supreme Court commented that "'hereditaments' [in the equivalent New Brunswick statute] ... is a most comprehensive word, and includes everything, whether corporeal or incorporeal, which may be inherited or come to the heir, or does not fall to the executor, as chattels do," and held that legal estates in remainder and reversion, as well as estates in possession, are therefore liable to be taken and sold under execution. The Ontario Land Titles Act, R.S.O., 1960, c. 197 provides in s. 145 that where land is registered in the Land Titles Office the execution must be sent on to the Master of Titles in order to bind it. This can be done at the same time that the writ is delivered to the sheriff. However, by Ontario rule 566 land may not be sold by the sheriff for twelve months after delivery of the writ ( except in the case of an absconding debtor - rule 567), and then only after a return of nulla bona by the sheriff (rule 568) and the advertisement of sale in the Ontario Gazette (rules 570 and 571). In New Brunswick with respect to lands the registration of a memorial of a judgment is an alternative procedure to the issuance of a writ of fi. fa. and its deliverance to the sheriff. S. 4 of the Memorials and Executions Act, R.S.N.B. 1952, c. 143 establishes the right to register a memorial of a judgment with a registrar of deeds, and s. 5 provides that the registration of a memorial in the registry office of the county in which a judgment debtor's lands are situate shall bind those lands. However, s. 5 provides alternatively that the issuance of a writ of fi. fa. and its delivery to the sheriff for execution shall also bind a judgment debtor's lands, and s. 11 allows the sale of lands only under execution and not under a memorial of judgment. The memorial procedure is little used. Professor G. V. LaForest, "Some Aspects of the Writ of Fieri Facias" (1959), 12 U.N .B. Law J. 39, at 41 details another anomaly of the New Brunswick legislation: "But a judgment debtor, of course, does not have to issue a writ of execution. He may instead choose to file a memorial of judgment in the Registry Office. If he does, under section 5 of the Memorials and Executions Act it binds the lands, though not the goods, of the judgment debtor. This gives rise to the following problem. Suppose A, a judgment creditor, files a memorial of execution in the Registry Office against his debtor X. Subsequently, C, D and E issue execution and X's land is sold to a third party Y. Under section 4 of the Creditors Relief Act, C, D and E share rateably in the proceeds of the sale. Y acquires the land but it is a recognized principle that a purchaser at a sheriff's sale acquires the rights of the judgment debtor but no more. Now by virtue of section 5 of the Memorials and Executions Act, this land is bound by A's memorial. Does this mean that A may, following the sheriff's sale, issue execution to seize the lands in the hands of Y, the purchaser under the sheriff's sale? In the absence of judicial legislation, this would appear to follow from the language

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of the Memorial and Executions Act and common law principle. Surely there should be legislation to clarify the situation." RULES OF PRACTICE AND PROCEDURE Supreme Court of Ontario, R.R.O. 1960, Reg. 396. 572. As between the original parties to a judgment, execution may, without leave, issue at any time within six years from the date of the judgment. 573. Where the six years have elapsed or any change has taken place by death or otherwise in the parties entitled or liable to execution, or where a party is entitled to execution upon a judgment of assets in futuro , the party alleging himself to be entitled to execution may apply for leave to issue execution accordingly or to amend any execution already issued. 578 ( 1) A writ of fieri facias remains in force for three years from its issue, unless renewed before its expiration, when it is in force for a further period of three years from the date of such renewal, and so on from time to time. It was held in Canadian Surety Company v. Spencer (1963), 37 D.L.R. (2d) 646 by the Appeal Division of the New Brunswick Supreme Court that where an order for payment of a judgment by instalments has been made the judgment creditor no longer is entitled to have a writ of execution issued, whether more or less than 6 years have elapsed from the date of the judgment; his remedy is either attachment proceedings or new actions for debt in respect of each instalment.

RE SOLICITOR Ontario High Court of Justice, The Master. [1959] O.W.N. 8. This was an application by the solicitor for leave to issue a writ of execution. The solicitor taxed his bill and the report of the taxing officer was made 28th May 1953. A writ of execution was issued but by an oversight was not delivered to the sheriff. More than three years having elapsed and the writ not having been renewed the solicitor now applied for leave to issue a new writ of execution. The Master refused the application. The solicitor had the right to issue an execution at any time within 6 years from the confirmation of the taxing officer's report: Rule 565 [now 572]. The proper practice in the circumstances was to apply to the registrar for the issue of an alias writ on material showing that the original writ was no longer in force and that the judgment had not been satisfied: Mason v. Johnston (1893), 20 A.R. 412. The material should include a return from the sheriff to whom the original writ was directed that the writ not having been delivered to him no steps had been taken thereon and there are no goods of the judgment debtor in his hands whereon to levy to satisfy the judgment. In the circumstances the application must be dismissed as unnecessary. PETERBORO DIST. CO-OP. SERVICES v. RAISON Ontario High Court of Justice, The Senior Master. [1960] O.W.N. 495. This was an application by the plaintiff for an order under Rule 176 [now 178] extending the time for renewal of a writ of execution or in the alternative under Rule 566 [now 573] for the issue of an alias writ. The plaintiff had issued a writ of execution but had failed to renew it before

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it expired and now made this application to remedy his default. The Senior Master in a written judgment said that many attempts had been made in the various Provinces of Canada to persuade the Courts to extend the time for renewal of a writ of execution where through inadvertence it had not been renewed within the time prescribed. Those attempts so far as the reported cases were concerned had all failed. The only concession the cases made was that, if the failure to renew the writ was the fault of an officer of the Court, the Court would make an order renewing the writ nunc pro tune: Lowson v. Can. Farmers' Mut. Ins. Co. (1882), 9 P.R. 309, Labrosse v. Choquette, [1917] 1 W.W.R. 491, Johnston v. Dimond, [1934] 3 W.W.R. 340. Those cases referred to and relied on English decisions dealing with renewals of writs of summons: Clarke v. Smith (1858), 2 H. & N. 753, Nazer v. Wade (1861), 1 B. & S. 728, Doyle v. Kaufman (1877), 3 Q.B.D. 7, 340, Hewett v. Barr, [1891] 1 Q.B. 8 However, they were also based on the express provisions of the relevant rules which were in substance the same as Ontario Rule 571. It was true that in Brown v. Humble, [1959] O.R. 586, the Court of Appeal decided that the Court had a discretion to extend the time for renewal of a writ of summons in exceptional cases and to that extent the English cases referred to would not now be of such strong authority as formerly. However, apart from those decisions it seemed clear that the reason for the express provision in Rule 571 [now 578] requiring the writ to be renewed before its expiry was to ensure a stable practice which would obviate difficulties arising respecting the priority of the execution and existing or new charges against lands bound by the execution. As pointed out in the Labrosse case if an extension was granted some means would have to be provided to protect persons acquiring an interest in such land in the meantime. Therefore, notwithstanding that one reason for the decisions in question might be somewhat qualified by the Brown case, by reason of the express provisions of Rule 571 [now 578] and for the reasons given the Court should not depart from the well settled practice of not extending the time for renewal. Therefore, the only manner in which a judgment creditor could re-establish his execution was to obtain an alias writ under Rule 566 [now 573]: Sacks v. Glazier, [1945] O.W.N. 205. The alternative application for leave to issue an alias writ should therefore be granted. As the plaintiff would have been entitled to the costs of renewing the writ, he should have the costs of issuing the alias writ. As, however, this application was necessitated by the plaintiff's default in renewing, there would be no costs of the application. What is the limitation period for judgments? In Ontario S. 45 ( 1) (b) of the Limitations Act, R.S.O. 1960, c. 214 provides for a twenty year limitation period on actions brought "upon a bond, or other specialty," and it was believed for many years that judgments were specialties. But in Thompson v. Don/ands Properties Ltd., [1934] 4 D.L.R. 234, O.R. 541 the Ontario Court of Appeal, without referring to an earlier decision of its own, Doe/ v. Kerr (1915), 25 D.L.R. 577, 34 0.L.R. 251, in which it had held, at least implicitly, that judgments were specialties and subject to a twenty year limitation period, held that judgments are not specialties and so may be sued on even after twenty years have run . When the issue arose again in Bank of Montreal v. Bailey [1943] 3 D.L.R. 517, Hope J. felt obliged to follow the later expression of the appellate court view, but he in effect negatived the Thompson v. Don/ands Properties Ltd. by founding a twenty year limitation period on the equitable doctrine of !aches. His decision was strongly criticized by an editorial note in the D.L.R. report on the ground that the doctrine of !aches could have no effect in barring the enforcement of a legal right

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as opposed to an equitable claim. The note suggested that the same result could be reached on the more desirable basis of the old common law presumption of payment after twenty years. McDonald C.J.B.C. in Thakar Singh v. Pram Singh, [1942] 2 D.L.R. 492, at p. 494 outlined this common law presumption as follows: "There was no statutory limit affecting judgments until 1833 .... But from the earliest times the common law imposed effective limitations of its own through restricting execution. By the time of Edward I, a rule was established that a personal judgment was so conclusively presumed to be satisfied after a year and a day that no execution could issue; the judgment creditor's only remedy was to bring action on the judgment and obtain a new one, on which he issued execution. The obscure and vague provisions of the Statute of Westminster (1285) 13 Edward 1, Stat. 1, c. 45, were held to obviate the need for this, and to provide the alternative remedy of sci. fa. proceedings on the judgment after the year and a day. For some time, apparently, these sci. fa. proceedings could be brought without any limit in time, but eventually they were effectually limited, without statutory provision, by the fiction of law that after 20 years the judgment must be presumed to be satisfied ...." The issue was settled in Ontario by legislative action in 1949 (1949, c. 51, ss. 1-2) by adding the word 'judgment' to s. 45 ( 1) ( c) and s. 50( 1) of the Limitations Act and thus establishing a twenty year limitation period for actions on judgments. But quaere whether this twenty year limitation period regarding actions on judgments affects the enforcement of executions more than twenty years after the date the cause of action arose; i.e. to what degree is an execution dependent on the judgment on which it is founded?

LIMITATIONS ACT R.S.O. 1960, C. 214.

23. ( 1) No action shall be brought to recover out of any land or rent any sum of money secured by any mortgage or lien, or otherwise charged upon or payable out of the land or rent, or to recover any legacy, whether it is or is not charged upon land, but within ten years next after a present right to receive it accrued to some person capable of giving a discharge for, or release of it, unless in the meantime some part of the principal money or some interest thereon has been paid, or some acknowledgement in writing of the right thereto signed by the person by whom it is payable, or his agent, has been given to the person entitled thereto or his agent, and in such case no action shall be brought but within ten years after the payment or acknowledgement, or the last of the payments or acknowledgements if more than one, was made or given. (2) Notwithstanding subsection 1, a lien or charge created by the placing of an execution or other process against land in the hands of the sheriff or other officer to whom it is directed, remains in force so long as the execution or other process remains in the hands of the sheriff or officer for execution and is kept alive by renewal or otherwise. 45. ( 1) The following actions shall be commenced within and not after the times respectively hereinafter mentioned: (a) an action for rent, upon an indenture of demise, ( b) an action upon a bond, or other specialty, except upon a covenant con-

tained in an indenture of mortgage made on or after the 1st day of July, 1894, (c) an action upon a judgment or recognizance, within twenty years after the cause of action arose.

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A. C. HEIGHINGTON, EXECUTIONS AGAINST LANDS IN ONTARIO ( 1929) 7 Can. Bar Rev. 4 75. Reprinted by permission. No settled practice seems to have been adopted by solicitors as to how far back searches are to be made for executions. Some solicitors contend six years are enough, on the ground that a fi,. fa. cannot be issued ( except by leave) after six years from the judgment; others say that it is necessary to go back twenty years on the ground that judgments are only good for twenty years at common law [See Coke. 2 Inst. 470; Mortimer v. Piggott (1834), 2 Dowl. 615] and that the Statute of Limitations is to the same effect. There does not seem to be any case deciding that either period is sufficient; in fact there is a decision to the contrary: Poucher v. Wilkins. [(1915), 33 O.L.R. 125] It was there held that an execution which had been duly renewed and was still in the sheriff's hands was binding on the lands of the judgment debtor, although the last renewal had been effected more than twenty years after the date of the judgment. In that case it was argued that the judgment was invalid for any purpose after twenty years under section [45 ( 1) (b)] of the Statute of Limitations, which says that an action upon a bond, or other specialty, must be brought within twenty years, but the Court held, notwithstanding the definition of the word "action" in that Act, that " 'action' shall include an information on behalf of the Crown and any civil proceedings," and that the Act did not prevent the renewal of a fi. fa. more than twenty years after the judgment when the execution had properly issued, and had been regularly renewed. The ground for the decision was that a renewal was merely a ministerial act of an officer of the court and not the institution of an action or any civil proceeding. If, however, after the expiry of twenty years, leave to issue execution is asked for it cannot be given as the granting of such le~ve is a judicial, not a ministerial act and is, therefore, an action or civil proceeding within the above mentioned Act. [Doe[ v. Kerr ( 1915), 34 O.L.R. 251]. Section 23(2) of the Limitations Act, is not mentioned in Poucher v. Wilkins and presumably was not cited to the Court but seems to settle the matter. It is as follows: "Notwithstanding the provisions of subsection 1, a lien or charge created by the placing of an execution or other process against land in the hands of the sheriff, or other officer to whom it is directed, shall remain in force so long as such execution or other process remains in the hands of such sheriff or other officer for execution and is kept alive by renewal or otherwise." Sub-section ( 1) of section 23, above referred to, limits the enforcement by action of any claim for the recovery "out of any land or rent any sum of money secured by mortgage or lien, or otherwise charged upon or payable out of any such land for rent" to ten years "after a present right to receive same accrued, etc." This was first enacted as 10 Edward VII, c. 34, sec. 24 in 1910 and was passed no doubt in consequence of the decisions in Neil v. Almond, [(1897), 29 O.R. 63] and in Re Woodall, [ (1904), 8 O.L.R. 288] where it had been held that an execution against lands, though kept renewed, must be enforced by sale within ten years from delivery to the sheriff, otherwise the lien created thereby would be barred under the Limitations Act. But even without the assistance of section 23(2), the case of Poucher v. Wilkins settles the law. On the authority of Poucher v. Wilkins it would seem that a search must be made on the date of closing to see if there is an execution then in the sheriff's

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hands against the owner or any former owner and such execution may be there on a judgment over twenty years old. What then is the date to which one must search? One might think the answer is found in the precursor of the present rule 571 [now 578), which limits the valid existence of a fi,. fa. to three years from date of issue. The reason for this assumption is that if one can find a time at which a definite limit of validity was first placed upon existing executions it can then be ascertained when that period would expire and after that such execution would be invalid and could not be renewed ( except, of course, by special leave of the court) . Thus when one sees that by the Act respecting limits of execution, [ (Ont.) 57 Viet., c. 26, s. 2, assented to May 5th, 1894], it was enacted that no longer should it be necessary to renew writs of execution every year, but that all writs "now in the hands of a Sheriff or hereafter issued . . . . shall remain in force for a period of three years or until satisfied .... or withdrawn," it is clear that the earliest date of a valid fi. fa. is the 5th of May, 1897. Some solicitors have adopted the practice of searching back to this date. Unfortunately for this assumption even a search against all owners back to the 5th of May, 1897, does not afford absolute protection because an execution validly in the sheriff's hands on the 5th of May, 1897, against an owner prior to that date, might have been renewed regularly ever since the issue and thus on the authority of Poucher v. Wilkins would still bind the lands. Furthermore, as to judgments up to twenty years old, there seems no way of overcoming the difficulty created by the power of the court to grant special leave to issue execution after the expiry of the fi. fa. This may be done at any time and may revive an execution on a judgment as old as twenty years but not older, because the Limitations Act prevents any new action or civil proceeding thereon [See Price v. Wade (1891), 14 P.R. 351; McMahon v. Spencer (1886), 13 O.A.R. 430]. So the conclusion must be that twenty years is the minimum period of search and there must in addition be a search as to all those executions validly in the sheriff's hands on the 5th of May, 1897, as some one or more of them may have been kept renewed ever since. As to these latter the search of the names of those formerly owning the land will have to go back to the Crown because prior to May 5th, 1897, executions against a former owner may have been validly renewed from year to year ( as the law was then) and if thus renewed and if kept renewed would still be valid in the sheriff's hands on the 5th of May, 1897. Possibly the easiest way would be to make a search, once for all, of all those executions in the sheriff's hands on the 5th of May, 1897, irrespective of whether such names appeared on the abstract in question; then arrange them alphabetically and consult this list every time before closing. The difficulty, of course, could be overcome by legislation and this might well be done without hardship after this length of time. The renewal notice sent to solicitors by one Ontario sheriff before the expiry date of writs of execution filed with him states: "The continuous renewal of Fi. Fa. has the effect of keeping the judgment alive notwithstanding the limit of twenty years," citing Poucher v. Wilkins. Most Ontario solicitors make a practice of searching executions back at least 20 years and many go back 40 years to the root of title. However, s. 2( 1) of the Investigation of Titles Act, R.S.O. 1960, c. 193, which provides that no claim which has been in existence longer than the forty-year root-of-title period affects the

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land is of no avail because "claim" is restricted in s. 1(a) to interests based upon a registered instrument. The Sheriff of the County of York in Ontario maintains a list of executions more than 20 years old which are still outstanding but does not guarantee the completeness of the list. By 1966, c. 21, s. 1 the P.E.I. Legislature amended s. 11 of the Judgment and Execution Act, R.S.P.E.I. 1951, c. 78 so as strike out the right to renew "judgments, decrees, and orders" every ten years. Since in the P.E.I. Act executions relate to goods and chattels rather than to lands, and judgments themselves are capable of binding lands ( s. 1), no issue will arise as to whether the phrase "judgments, decrees, and orders" includes executions as well.

D. Property Eligible Under Fieri Facias EXECUTION ACT R.S.O. 1960, c. 126, as amended by the Execution Act, 1960-61, c. 25. 8. The sheriff to whom a writ of execution against lands is delivered for execution may seize and sell thereunder the lands of the execution debtor, including any lands whereof any other person is seized or possessed in trust for the execution debtor and including any interest of the execution debtor in lands held in joint tenancy. 9. (1) Subject to The Land Titles Act and to section 9a, a writ of execution binds the goods and lands against which it is issued from the time of the delivery thereof to the sheriff for execution, but save as to bills of sale and chattel mortgages, no writ of execution against goods prejudices the title to such goods acquired by a person in good faith and for valuable consideration unless such person had, at the time when he acquired his title, notice that such writ or any other writ by virtue of which the goods of the execution debtor might be seized or attached has been delivered to the sheriff and remains in his hands unexecuted. (2) The sheriff shall, upon the receipt of the writ and without fee, endorse thereon the day of the year, the month, the hour and minute when it was received. ( 3) Subsection 1 does not apply to an execution against goods issued out of a division court, which binds only from the time of the seizure. 10. Subject to The Judicature Act and the rules of court, land and other hereditaments and real estate belonging to any person indebted are liable to and chargeable with all just debts, duties and demands of whatsoever nature or kind owing by any such person to Her Majesty or to any of her subjects and are assets for the satisfaction thereof and are subject to the like remedies, proceedings and process for seizing, selling or disposing of them towards the satisfaction of such debts, duties and demands, and in like manner as personal estate is seized, sold or disposed of. 11. (1) Shares and dividends and any equitable or other right, property, interest or equity of redemption in or in respect of shares or dividends in a chartered bank or a corporation having transferable shares shall be deemed to be personal property found in the place where notice of the seizure thereof is served, and may be seized under execution and sold thereunder in like manner as other personal property. 15. The sheriff may seize and sell any equitable or other right, property, interest or equity of redemption in or in respect of any goods, chattels or personal property, including leasehold interests in any land of the execution debtor, and, except where the sale is under an execution against goods issued out of a division

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court, the sale conveys whatever equitable or other right, property, interest or equity of redemption he had or was entitled to in or in respect of the goods, chattels or personal property at the time of the delivery of the execution to the sheriff for execution, and, where the sale is under an execution against goods issued out of a division court, the sale conveys whatever equitable or other right, property, interest or equity of redemption the debtor had or was entitled to in or in respect of the goods, chattels or personal property at the time of the seizure. 18. ( 1) If a sheriff is informed on behalf of the execution creditor that the execution debtor is a mortgagee of land arid that the mortgage is registered, or that he is entitled to receive a sum of money charged upon land by virtue of a registered instrument, and, if the sheriff is required on behalf of the execution creditor to seize the mortgage or charge and is furnished in writing with the information necessary to enable him to give the notice hereinafter mentioned, he shall, upon payment of the proper fees, forthwith deliver or transmit to the registrar or master of titles in whose office the mortgage or other instrument is registered, who shall forthwith register it, a notice in the form or to the effect following: [the form of the notice is omitted]. (2) Upon registration of the notice, the interest of the execution debtor in the mortgage or other instrument and in the land therein described and in the money thereby secured and in all covenants and stipulations for securing payment thereof is bound by the execution, and such registration is notice of the execution and seizure to all persons who may thereafter in any way acquire an interest in the mortgage, land, money or covenants, and the rights of the sheriff and of the execution creditor have priority over the rights of all such persons subject, as regards the mortgagor or person liable to pay the money secured by the mortgage or charge, to section 19. 19. ( 1) A notice similar to that mentioned in section 18 shall also be served upon the mortgagor or the person who is liable to pay the money secured by the registered instrument, and after such service the person served shall pay to the sheriff all money then payable and, as it becomes due, all money that may become payable to the execution debtor so far as may be necessary to satisfy the execution. 23. Where an execution debtor is a mortgagee of chattels and the mortgage is registered as required by law, sections 18 to 22 are applicable, except that the notice to be given by the sheriff shall be delivered or transmitted to the clerk of the county or district court or other officer in whose office the chattel mortgage is registered. 24. (2) The sheriff to whom an execution against the lands and tenements of a mortgagor is directed may seize, sell and convey all the interest of the mortgagor in any mortgaged lands and tenements. ( 3) The equity of redemption in freehold land is saleable under an execution against the lands and tenements of the owner of the equity of redemption in his lifetime, or in the hands of his executors or administrators after his death, subject to the mortgage, in the same manner as land and tenements may now be sold under an execution. 25. ( 1 ) Any estate, right, title or interest in land which, under section 10 of The Conveyancing and Law of Property Act, may be conveyed or assigned by any person, or over which he has any disposing power that he may, without the assent of any other person, exercise for his own benefit, is liable to seizure and sale under execution against such person in like manner and on like conditions as land is by law liable to seizure and sale under execution, and the sheriff selling it may

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convey and assign it to the purchaser in the same manner and with the same effect as the person might himself have done. ROBINSON v. MOFFATT Appellate Division of the Supreme Court of Ontario. 1916. 37 O.L.R. 52. [Specific performance of a contract for the purchase and sale of land had been awarded in favor of the plaintiff, but the plaintiff now brings a motion for further relief on the ground that the vendor cannot convey the land in fee simple free from encumbrances. The plaintiff contends that the vendor cannot convey a clear title for two reasons: ( 1 ) because there are some restrictive building conditions with which the land is burdened; (2) because of a writ of execution against the goods and lands of the vendor in the hands of the sheriff of the county in which the land is. Discussion of the first point is omitted. On the second point the defendant's counsel argued that the case of Parke v. Riley (1886), 3 E. & A. 215, was authority for the proposition that where a vendor has made an agreement to sell, and a writ issues against his lands before conveyance, the writ does not bind the legal estate in his hands, and a sale thereof by the sheriff under the writ passes nothing]. MEREDITH C. J. C. P.: On the other ground, the contention of the purchaser seems to me to be, plainly, right, that is: that he cannot be compelled to take the land in question until the effect of the fi. fa. is removed. The writ was placed in the sheriff's hands for execution long after the agreement in question was made; but the greater part of the purchase-money is yet unpaid; and the question which seems to have given trouble to the Master, to whom it was referred to ascertain and state whether a conveyance could be made, namely, what effect, if any, the writ of execution has upon the vendor's power to convey, seems to me to be one easily answered, and in respect of which the reason for the answer easily can be given. Both at law and in equity, the vendor is the owner of the land in the sense of having the lawful title to it; the purchaser has only an equitable right to it; but, to that extent, if the agreement be carried out, is treated in equity as substantially the owner, the real owner, or formal owner, if you choose to call him such, though that would not be strictly accurate; the vendor is a trustee for the purchaser, but bound to convey to him only on fulfilment by the purchaser of all things agreed to be done, on his part, before getting the conveyance. An agreement may never be carried into effect, it may end in nothing by various ways, and it may be that Equity, however measured, may refuse specific performance, and so the vendor may remain owner, unaffected by the agreement, without the aid of any Court. But, whether he does or not, he is still owner and can convey his ownership, subject of course to any equitable right which the purchaser may have: he has none at law except a personal action against the vendor if he should refuse or be unable to carry out his contract. That being so, on what ground, or with what reason, can it be urged that an execution creditor of the vendor cannot acquire any charge upon the land, though a purchaser from the vendor would acquire right and title? He cannot, of course, acquire any higher right than his debtor had; but why not that much? I have no manner of doubt that the execution creditor, assuming that his execution is valid, has such a right in the land in question, but of course to be worked out in the regular way by sheriff's sale of the judgment debtor's interest in the land. In a case in which the judgment debtor has no real interest in the legal estate in the

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land, as, for instance, if all the purchase-money had been paid, or validly assigned before the writ took effect, the execution could not stand, substantially, in the way of a conveyance to the purchaser free from incumbrance: and all this seems to me to be quite in accord with the judgment of the Court of Error and Appeal of this Province in the case of Parke v. Riley, 3 E. & A. 215: whilst, if the views of the dissenting Judge in that case could be accepted, the same result should follow now, even if it could not, as he contended, then. That view was that vendor and purchaser must, in all things and inflexibly, be looked upon as mortgagee and mortgagor: and of course in some respects they are in equity substantially the same; and in some cases, for some special purposes, expressly they have been made so, by legislation: see the Mechanics and Wage-Earners Lien Act, R.S.O. 1914, ch. 140, sec. 14 (2). And, since the case of Parke v. Riley, the scope of the Execution Act has been widened from time to time, and is now so comprehensive that the dissenting judgment in that case, even if it had been the judgment of the Court, might not govern the question now involved in this case: see McPherson v. Temiskaming Lumber Co. Limited, [1913] A.C. 145. This view of the matter is one which makes care on the part of a purchaser of lands, before parting with his purchase-money, necessary: but that is a care which, I have always understood, was and is well-known to be necessary; hence searches in the sheriff's office for executions, which have always, I have thought, been the general practice. Upon the vendor clearing the way to a conveyance of the land free from all incumbrances, within 10 days, the transaction should be closed; and in that event the vendor should pay all costs subsequent to the judgment for specific performance, to be set off against the costs now payable, under that judgment, by the purchaser to the vendor: otherwise there should be the usual judgment upon the failure to convey after reference; and the vendor should pay all costs subsequent to the judgment for specific performance, but not the costs prior to that, because that judgment was made on the terms of payment of such costs, and these costs should be set off against the costs awarded to the purchaser, and if there be a balance in the vendor's favour, the amount of it may be deducted from the purchase money to be returned. [The concurring judgments of RIDDELL and MASTEN JJ.A., are omitted. LENNOX, J. A. concurred without reasons]. KIMNIAK v. ANDERSON Ontario Court of Appeal. [1929] 2 D.L.R. 904

The judgment of the Court was delivered by HODGINS, J. A.: The defendant Scharlp has and had an execution against the lands of the plaintiff in the hands of the defendant Anderson, the sheriff of Essex, who thereunder advertised what he understood to be the plaintiff's lands for sale. The plaintiff brought this action to restrain the defendants from proceeding further with the sale. The plaintiff's case is that his interest in the land is not salable under a writ of fieri facias against land. His interest arises under the following documents: 1. On June 19, 1923, Walker & Sons Ltd., agreed to sell to J. Chowats lot 83, plan 1025, in Ford City for $655, payable in equal monthly instalments of $10 each, including interest at 6% the balance to be paid within 5 years. Chowats by the agreement accepted the vendor's title, agreed that time was to be the essence of the contract, and that on default of payment of any instalment the vendor

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might rescind the agreement and sell, paying the purchaser the balance over the purchase-money, etc. 2. On January 3, 1925, J. Chowats and Katrina, his wife, parties of the first part, the plaintiff of the second part, and Walker & Sons Ltd. , the trustees, of the third part, entered into an agreement under seal ( ex. 2). This agreement recites that Chowats and his wife owe the plaintiff, Kimniak, $300, that they have no children to care for their declining years, and that Kimniak, "in consideration of the provisions of this agreement," agrees to support them for their lives, that they have purchased the lands as above, that a considerable amount of purchasemoney is owing to Walker & Sons Ltd., and that they have executed a joint will leaving all their property to Kimniak and appointing him sole executor. It then proceeds: "Now this indenture witnesseth that the parties hereto, in consideration of the mutual covenants herein and of the sum of $1 now paid by the party of the second part to the parties of the first part, agree with each other as follows : "1. The parties of the first part hereby assign and set over to the part of the second part all their interest in No. 1350 Hickory St., Ford City, being lot 83 according to registered plan No. 1025, upon trust that the party of the second part shall support the parties of the first part for the remainder of their lives and on their death pay all their debts and funeral expenses when the trust shall cease and the party of the second part shall be entitled to all the interest of the parties of the first part in the property free from any trusts whatsoever. "2. The party of the second part agrees to pay to the parties of the third part the balance still owing by the parties of the first part under their agreement of purchase of the said property and to pay all future taxes. "3. The party of the second part agrees to lodge, clothe, and supply proper food for the parties of the first part for the remainder of their lives and on their deaths to pay all their debts and funeral expenses. "4. The parties of the first part agree to deposit their agreement of purchase with the party of the third part and the party of the third part agrees to give to the party of the second part a statement of the amount still owing on the said property and the terms of payment." There are further provisions which deal with the giving of a deed when necessary, etc., relating to Walker & Sons Ltd., but they do not sign the document. Exhibit 3 seems to have no direct bearing on the question raised. Chowats' equitable interest as a purchaser, if transferred to the plaintiff by this agreement, gives the latter no estate in the lands save to the extent to which a Court of Equity would give Chowats specific performance of the agreement with Walker & Sons Ltd., and that interest would be taken by Kimniak as a trust estate as specified in the document. If Chowats has no salable estate or interest, then the plaintiff has none; but, if Chowats' interest can be sold under a writ of fieri facias, so can that of the plaintiff, unless the existing trust imposed on it prevents this. The trial Judge, in another case, that of Re Reek & Koven (1927) , 33 O.W.N. 9, has expressed himself as in doubt as to the salability of the interest of a purchaser of land where his right still rests in contract, and refers to the conflict of views on the subject. In Robinson v. Moffatt (1916), 31 D.L.R. 490, at p. 492, 37 O.L.R. 52, the Second Divisional Court held that a vendor having the legal estate in the lands under a contract for sale, occupied the position described by Meredith, C.J.C.P.:

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"The vendor is a trustee for the purchaser, but bound to convey to him only on fulfilment by the purchaser of all things agreed to be done, on his part, before getting the conveyance. An agreement may never be carried into effect, it may end in nothing by various ways, and it may be that Equity, however measured, may refuse specific performance, and so the vendor may remain owner, unaffected by the agreement, without the aid of any Court. But, whether he does or not, he is still owner and can convey his ownership, subject of course to any equitable right which the purchaser may have: he has none at law except a personal action against the vendor if he should refuse or be unable to carry out his contract." This leaves the equitable right of the purchaser undefined, but correctly states the relative positions of vendor and purchaser under a contract for the sale of land and follows the late cases in England on the subject. In Holroyd v. Marshall (1862), 10 H .L.C. 191, the House had laid it down that: " In Equity it is not necessary for the alienation of existing property that there should be a formal deed of conveyance. A contract to transfer the property, given for valuable consideration, provided it is capable of being the subject of a decree for specific performance, passes it at once, and the vendor becomes a trustee for the vendee." In Rose v. Watson (1864), 10 H.L.C. 672, Lord Westbury, L.C., said (pp. 678-679) : "When the owner of an estate contracts with a purchaser for the immediate sale of it, the ownership of the estate is, in Equity, transferred by that contract. Where the contract undoubtedi? is an executory contract, in this sense, namely, that the ownership of the estate is transferred, subject to the payment of the purchase-money, every portion of the purchase-money paid in pursuance of that contract is a part performance and execution of the contract, and, to the extent of the purchase-money so paid, does, in equity, finally transfer to the purchaser the ownership of a corresponding portion of the estate. "In conformity, therefore, with every principle, the purchaser paying the money acquired an interest in the estate by force of the contract, namely, the payment of that portion of the purchase-money." These propositions have been considerably modified since 1864. In Ridout v. Fowler, [1904) 1 Ch. 658, Farwell, J., an eminent authority on Equity, deals at some length with the decisions on the subject, both before and since the foregoing cases were decided by the House of Lords. He says, at p. 661 : "Now the rights of vendor and purchaser have been explained so often that it is sufficient to refer to what Lord Hatherley says in Shaw v. Foster ( 1872), L.R. 5 H.L. 321, 356, where, quoting from his own decision, he says : 'It is quite true that authorities may be cited as establishing the proposition that the relation of trustees and cestui que trust does, in a certain sense, exist between vendor and purchaser : that is to say, when a man agrees to sell his estate he is trustee of the legal estate for the person who had purchased it, as soon as the contract is completed, but not before.' That was in reference to the actual conveyance. The expression used by Sir Thomas Plumer in Wall v. Bright (1820), 1 Jae. & W. 494, 503, 21 R.R. 219, 225, which has I think been just read by the noble and learned Lord who preceded me, is this : 'The vendor, therefore, is not a mere trustee; he is in progress towards it, and finally

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becomes such when the money is paid, and when he is bound to convey.' James, L. J., puts it perhaps more clearly in Rayner v. Preston (1881), 18 Ch.D.1, 13. He says: 'I agree that it is not accurate to call the relation between the vendor and purchaser of an estate under a contract while the contract is in fieri the relation of trustee and cestui que trust. But that is because it is uncertain whether the contract will or will not be performed, and the character in which the parties stand to one another remains in suspense as long as the contract is in fieri. But when the contract is performed by actual conveyance, or performed in everything but the more formal act of sealing the engrossed deeds, then that completion relates back to the contract, and it is thereby ascertained that the relation was throughout that of trustee and cestui que trust. That is to say, it is ascertained that while the legal estate was in the vendor, the beneficial or equitable interest was wholly in the purchaser. And that in my opinion, is the correct definition of a trust estate. Now here it is quite clear that the relationship of trustee and cestui que trust never was created by the completion of the contract, and therefore there never was any estate in land in the events that have happened on which this order by way of equitable ex~cution could have operated. That disposes of the question of any charge upon· the real estate, because by reason of the events that have happened, and which the plaintiff in the present action could not interfere with or prevent, no actual estate in the land ever belonged to the debtor at all." This decision was affirmed in [1904) 2 Ch. 93. In 1915, in Howard v. Miller, [1915) A.C. 318, 326, 327 the Judicial Committee stated very clearly the position of a purchaser under a contract for the sale of land, the judgment being written by Lord Parker of Waddington, an admitted master of Equity law: "The interest conferred by the agreement in question was an interest commensurate with the relief which Equity would give by way of specific performance, and if the plaintiff Miller had in his application attempted to define the nature of his interest, he could only so define it. Further, if the registrar had, as in their Lordships' opinion he ought to have done, specified on the register the nature of the interest which he registered as a charge, he could only have so specified it. Had he attempted further to define the interest, had he, for example, stated it as an equitable fee subject to the payment of the purchasemoney, he would have been usurping the function of the Court, and affecting to decide how far the contract ought to be specifically performed.... "At most, therefore, the plaintiff Miller became the registered owner of an interest commensurate with the interest which, under all the circumstances, Equity would decree by way of specific performance of the agreement." In Central Trust and Safe Deposit Co. v. Snider, [1916) 1 A.C. 266, Lord Parker again deals with the same question in this way (p. 272): "It is often said that after a contract for the sale of land the vendor is a trustee for the purchaser, and it may be similarly said that a person who covenants for value to settle land is a trustee for the objects in whose favour the settlement is to be made. But it must not be forgotten that in each case it is tacitly assumed that the contract would in a Court of Equity be enforced specifically. "If for some reason Equity would not enforce specific performance, or if the right to specific performance has been lost by the subsequent conduct of the party in whose favour specific performance might originally have been

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granted, the vendor or covenentor either never was, or has ceased to be, a trustee in any sense at all. Their Lordships had to consider this point in the case of Howard v. Miller, [1915] A.C. 318, in connection with the law as to the registration of titles in the Province of British Columbia, and came to the conclusion that, though the purchaser of real estate might before conveyance have an equitable interest capable of registration, such interest was in every case commensurate only with what would be decreed to him by a Court of Equity in specifically performing the contract, and could only be defined by reference to the relief which the Court would give by way of specific performance." He then discusses the right to specific performance in that case, and comes to the conclusion that it can only be granted on condition that the person seeking it must abandon any claim to a legacy given to her in the will of the testator who had covenanted to settle the estate in question. In Equity, it was said, she could not have both. It is necessary to observe that the Act which was being discussed in both these cases was one permitting the registration of any instrument "purporting to transfer, charge, deal with, or affect any land or interest, either at law or in equity, in such land." The Court held that the document on which the registration proceeded was one "purporting to affect land," and therefore might be registered, but that the section of the Act which permitted this imposed a penalty on nonregistration of an instrument by rendering the instrument inadmissible in evidence in certain cases, but had "no further operation." This explains why such an interest as Miller had could be registered, namely, because it "purported" to affect land, but the Act did not give it any further effect than was the legal consequence of the instrument itself. It was upon this basis that, while registrable, its effect was such as Lord Parker described. And the judgment proceeds to admit, as against the registered instrument, an unregistered deed as a material circumstance which the Court must take into account in deciding the extent to which specific performance ought to be granted. These modern views of the interest taken by a purchaser under a contract for the sale of land have, I think, completely destroyed the notion that what is acquired can be an equitable estate or interest which vests in a stranger to the contract on a sale under an execution against the purchaser. The difficulties and complications which would arise in working out the rights and interests of vendor, purchaser, and his successor, a stranger to the contract, imposed on the vendor by a sale in invitum, are such as to make the original conception of trustee and cestui que trust untenable. In view of the fact that the interest of a purchaser under a contract for the purchase of real estate is expressly subject to what a Court of Equity thinks and decrees that it ought to be, the nature and extent of which cannot be predicated, and that it is also always liable before the Court is seized of it to be lost or to vanish in cases of default, I am of opinion that the interest of such a purchaser is not properly saleable under a writ of fieri facias, but can only be reached, if it can be reached at all, by way of equitable execution where the Court can protect all parties and exercise or anticipate the rights which would flow from a contract if recognized in Equity as not merely one capable of specific performance but in fact entitled to be so enforced. The estate which Chowats, if his interest is assignable, handed on to the plaintiff is an interest subject to the uncertainties I have mentioned, and, if assigned or sold under a fieri facias, it would be in a sense merely the assignment or sale of

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a law-suit or of a right to go to a Court of Equity and there accept whatever it might decree as just and equitable under the circumstances submitted to it when a decision was asked for. This is not the nature or quality of an estate, in my judgment, to which sec. 34 [now s. 25] of the Execution Act, R.S.O. 1927, ch. 112, applies. The plaintiff, standing as he must in the shoes of Chowats, has no saleable interest vested in him by virtue of exhibit 2, and so the plaintiff is entitled to restrain the intended offering for sale, and the sale itself. But, apart from that, and if the Chowats interest was such as could be assigned or sold under a fi,. fa., there is another ground on which the plaintiff would be entitled to succeed. Section 8 of the Execution Act, R.S.O. 1927, ch. 112, has no application, as the plaintiff is the trustee; no lands are "held in trust for the execution debtor." The plaintiff is a trustee for both Chowats and his wife. He, by exhibit 2, has acquired the interest of Chowats in the land to hold in trust to perform certain duties and obligations. This imports a charge on the land until those obligations are discharged, as it is then and then only that his beneficial interest in the land will arise. The Chowats, husband and wife, are entitled to have it held by their obligor on a trust till it is completely performed, while a sale to a third party would deprive them of their security, the transfer of which formed the consideration for the trust and its obligations. I can find no authority for the proposition that a trust estate can be sold under an execution against a trustee for his own debt, on the ground that, if he fully performs the trust, he will at some future time acquire a beneficial interest in the estate. His interest at present is that of a trustee only, and as such it cannot be sold under the Execution Act to pay his liabilities. See Blackburn v. Gummerson, 8 Gr. 331; McLean v. Fisher, 14 U.C.R. 617; Digby v. Irvine (1844), 6 Ir. Eq. R. 149, which, though not in point on the precise question now dealt with, may be usefully looked at. The plaintiff should have judgment setting aside the judgment below and restraining the sale, with costs against the defendant Scharlp, who should also pay the costs of the sheriff. See Hutchings v. Ruttan ( 1857), 6 U.C.C.P. 452. In Lawson v. Lawson (1964) 2 0.R. 321 Grant J. held that a contingent interest in land ( a vested one-third interest in the residue of an estate after a life interest, subject to being divested if the remainderman dies before the life tenant) is an asset liable to seizure and sale under s. 25. McDONALD v. THE ROY AL BANK OF CANADA Ontario Court of Appeal. (1933] O.R. 418. The judgment of the court was delivered by MIDDLETON J. A. : An appeal by the defendant from the judgment of the Honourable Mr. Justice Raney pronounced on the 17th of December, 1932, after the trial of the action declaring that the plaintiff as execution creditor of one Donald M. McDonald, is entitled to be paid out of the moneys in the hands of C. W. Morris the full amount of his judgment and costs in priority to the claim of the defendant to such money and directing the defendant to pay to the plaintiff his costs of the action. The facts giving rise to this litigation are exceedingly simple. In January, 1932, the plaintiff recovered judgment against the said McDonald for $1,208 and costs

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and placed an execution in the hands of the sheriff of the County of Middlesex, who thereupon made seizure of a mortgage made by one David R. McArthur to the execution debtor. This mortgage was claimed by the Royal Bank to which it had been assigned by the debtor in December, 1925. At the time of the assignment the duplicate original of the mortgage had been delivered to the bank and the mortgagor had been duly notified of the assignment. The bank, however, failed to register this assignment in the Registry Office and the plaintiff had no notice or knowledge of the assignment at the time the sheriff registered the necessary notice of seizure as required by The Execution Act. By consent of the parties the mortgage money has been released and has been deposited in a special account pending the result of this litigation. The bona fides of the assignment to the bank is not disputed but the learned trial Judge held that the registration of the notice under The Execution Act constituted the execution creditor a bona fide purchaser for value without notice and gave him priority over the bank's assignment by virtue of the provisions of The Registry Act. In this we are all of opinion that the learned Judge erred. Ever since the decision of the House of Lords in the case of Eyre v. McDowell (1861), 9 H.L.C. 619, the matter is free from doubt. As said by the Chief Justice of Canada in Jellet v. Wilkie (1896), 26 S.C.R. 282, at p. 288, "no proposition of law can be more amply supported by authority than . . . that an execution creditor can only sell the property of his debtor subject to all such charges, liens and equities as the same was subject to in the hands of his debtor." The case in the House of Lords is singularly parallel to that in hand because it deals not only with the right of the execution creditor but it deals also with the problem presented by the registry of the judgment. The case came from Ireland and under the Irish Statute the judgment could be registered and upon the registration the statute provided that the execution creditor should be deemed to be a purchaser of the lands as under a deed in which the execution debtor was vendor, the execution creditor purchaser and the amount of the execution the consideration for the conveyance. The Irish Court had held that this made the execution creditor after the registration a purchaser for value and as he had no notice of the unregistered conveyance, his title as execution creditor defeated the right of the grantee under the unregistered instrument. This decision was reversed in the Lords by Lord Cranworth, Lord Wensleydale, and Lord Kingsdown after a most exhaustive argument by very eminent counsel. Lord Cranworth gives as the reason for his opinion that apart from the statute the sheriff could only seize the debtor's beneficial interest, that which, if there had been no judgment, the debtor might have appropriated for the payment of the debt. The debtor could not have appropriated the land to the liquidation of his debt without first satisfying the claim of his equitable mortgagee and the statute did not intend to and did not enable the creditor to take that which the debtor could not give. The effect of the statute was not to vary the rights of the debtor and the creditor by putting them in a position different from that in which they stood apart from the statute. Its intention and effect were that nothing should be transferred except that which the debtor could transfer to a purchaser or mortgagee with notice of all prior titles, that is, that to which the debtor was beneficially entitled. Lord Wensleydale entirely agrees. The provision for registration only affected the debtor's actual interest. It conveys only the real beneficial interest of the debtor and no more. Its effect cannot be increased or lessened by the absence from or

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presence on the registry of the previous equitable charge. In the Supreme Court, in the case already referred to, it was held that the registration of an execution did not defeat a prior unregistered transfer made by the debtor even when the land was registered under the Torrens System. It was, however, pointed out that if the sheriff sold under the fi. fa. a purchaser from the sheriff would be protected by virtue of the provisions of The Registry Act. In the case of Whitworth v. Gaugain (1846), 1 Ph. 728, Lord Cottenham reviewed the early cases and decided that notwithstanding a statutory provision which gave to a judgment the effect of an equitable charge upon the lands of the debtor, a prior equitable mortgagee retained his right in equity to enforce his security against the title of a creditor under a subsequent judgment although the latter had acquired the legal seisin and possession of the land under an elegit without notice of the mortgage. This decision was approved in the case in the Lords. It is needless to multiply references for, since the decision in the Irish case, I find no discordant note. I would, however, refer to Madel[ v. Thomas, [1891] 1 Q.B. 230, a decision of the Court of Appeal, particularly to what is said by Lord Justice Kay on page 238, where a title by estoppel was set up as against a trustee in bankruptcy: "Nothing is clearer than that upon general principles a trustee in bankruptcy or an execution creditor will be bound by it just as much as the bankrupt or execution debtor himself ... a trustee in bankruptcy or execution creditor is in privity with the bankrupt or execution debtor. He takes under the bankrupt or execution debtor and not as a purchaser for valuable consideration and it has been decided over and over again that he only takes what was vested in the bankrupt or execution debtor. Where property is subject to any rights by which it would be bound in the hands of the bankrupt or execution debtor nothing can be more clear as a general principle than that it would be subject to such rights as against the trustee in bankruptcy or execution creditor. The defendant's counsel admitted that as a general rule this was so, but he said that we are here dealing with a statute that gives special rights to a trustee in bankruptcy or execution creditor because it avoids as against them a document which may be good as between the parties. I do not think that answer is sufficient. The Act of Parliament does not purport to give to a trustee in bankruptcy any benefit in the way of avoiding an estoppel that would bind the bankrupt. If a transaction would be such as would create an estoppel as between the grantor and grantee of a bill of sale, I do not see anything in the Act to prevent such estoppel extending to a trustee in bankruptcy or execution creditor." This is alone sufficient to dispose of the appeal. I would, however, draw attention to the fact that there are other difficulties in the plaintiff's way. The notice of the execution is not an instrument within the meaning of the Registry Act. The Registry Act is plainly concerned with protecting the rights of actual purchasers or mortgagees under registered instruments as against claims under unregistered documents. It does not in any way deal with the rights of creditors. Furthermore the learned Judge has misinterpreted the Execution Act, R.S.O. 1927, ch. 112. Under sec. 19 [now 16] the sheriff is only empowered to seize mortgages, etc., "belonging to the person against whom the execution has been issued." Section 24 [now 18] only provides for the mode of taking in execution a mortgage which is made exigible under the earlier section, that is, a mortgage which belongs to the execution debtor. For these reasons the appeal must be allowed with costs and the action dismissed with costs.

60

CASES AND MATERIALS ON CREDITORS' RIGHTS DAVIDSON v. DAVIDSON Supreme Court of Canada. [1946] S.C.R. 115.

The judgment of RINFRET, C.J., and KERWIN, TASCHEREAU and ESTEY, JJ., was delivered by ESTEY, J. : The appellant holds against the respondent two judgments registered respectively on the 23rd day of July, 1943, and the 30th day of March, 1944, in the Kamloops Land Registration District in the Province of British Columbia. The respondent has been, at all times material to these proceedings, the registered owner of the lands in question under a Certificate of Indefeasible Title dated the 9th day of November, 1936, and issued out of the Kamloops Land Registration District. The District Registrar at Vancouver has, after hearing the interested parties, certified "that the interest of the said judgment debtor liable to be sold under and to satisfy the said judgment consists of the entire fee, being the entire right, title and interest registered in the name of the judgment debtor under the said Certificates of Indefeasible Title and standing in his name upon the records of the said Land Registry Office * * *" He then specified the lands in question. This certificate was confirmed by the Honourable Mr. Justice Wilson, whose decision was reversed in the Court of Appeal. A further appeal is now taken to this Court. The respondent's contention is that prior to the registration of the judgments he had executed and delivered a transfer of these lands to the Minto Trading and Development Company Limited in payment of 20,000 shares of stock allotted to him by that company. This instrument of transfer was executed and delivered on June 10th, 1935, and as a consequence he contends that since that time he has had no beneficial interest in the said lands. The company has never applied for registration of this transfer, nor does it now indicate any intention with respect thereto. At common law "an execution creditor can only sell the property of his debtor subject to all such charges, liens and equities as the same was subject to in the hands of his debtor": per Strong, C. J., Jellett v. Wilkie [1896] 26 Can. S.C.R. 282, at 288. The important issue, therefore, is what interest the judgment debtor had at the time the executions were registered in the Land Registry Office, or more particularly in this case, what is the significance and effect of the delivery by the respondent of the transfer duly executed to the Minto Trading and Development Company Limited. The determination of this question must be had from the provisions of the Land Registry Act. The following section of the Land Registry Act, R.S.B.C. 1936, Ch. 140, is relevant: "34. Except as against the person making the same, no instrument * * * purporting to transfer, charge, deal with, or affect land or any estate or interest therein, shall become operative to pass any estate or interest, either at law or in equity, in the land* **until the instrument is registered in compliance with the provisions of this Act; * * *" The respondent relies upon the decision of Entwisle v. Lenz & Leiser [ (1908) 14 B.C.R. 51]. There the holder of an unregistered transfer brought action to have the judgment registered against the land, since the execution and delivery of the transfer, removed as a cloud upon his title. The learned trial judge decided

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under the then section 74 (now section 34 of the Land Registry Act) in favour of the execution creditor. His decision was reversed in the Court of Appeal where the learned judges did not discuss the provisions of the Land Registry Act, but rested their decision upon section 3 of the Judgments Act, R.S.B.C. 1899, Ch. 33 (now section 35, Execution Act, R.S.B.C. 1936, Ch. 91): "Immediately upon any judgment being entered or recovered in this province, the judgment may be registered in any or all of the Land Registry Offices in the province, and from the time of registering the same the judgment shall form a lien and charge on all the lands of the judgment debtor in the several land registration districts in which the judgment is registered, in the same manner as if charged in writing by the judgment debtor under his hand and seal; and after the registering of the judgment the judgment creditor may, if he wishes to do so, forthwith proceed upon the lien and charge thereby created." This section was construed in the Entwisle case as effecting no change in the common law. Somewhat similar statutes have been so construed. Eyre v. McDowell [(1861) 9 H.L.C. 619]; Case v. Bartlett [(1898) 12 Man. R. 280, at 286]. The Entwisle case was criticized but not overruled in Bank of Hamilton v. Hartery [(1919) 58 Can. S.C.R. 338]. The criticism was based upon the provisions with respect to the effect of registration under the Land Registry Act. In 1921 certain amendments were made to that Act. Counsel for the respondent submits that at least some of these amendments were made, as a consequence of the criticism in this Court, for the purpose of clarifying the statute and continuing the law as laid down in Entwisle v. Lenz & Leiser. That was the view of the majority of the learned judges in Gregg v. Palmer [(1932) 45 B.C.R. 267]. One of the 1921 amendments inserted at the beginning of section 34 the words: "Except as against the person making the same". The section prior to that amendment read in part: "No instrument * * * purporting to transfer * * * shall pass any estate or interest, either at law or in equity, in the land * * * until the instrument is registered * * *" It is apparent that prior to the insertion of these words the statute emphasized the importance of registration and it provided for what Lord Moulton described as "the absoluteness of the effect of the registration", Lake Yew v. Port Swettenham Rubber Co. Ltd. [(1913) A.C. 491, at 504]. It was, no doubt, the criticism of the Entwisle case that brought to the attention of the legislature this conflict between section 34 and the decision in the Entwisle case. This conclusion is strengthened by the fact that section 34 had remained in the statutes without amendment since prior to the Entwisle decision in 1908, but immediately following that criticism it was amended. These words, "except as against the person making the same", expressly make operative an unregistered instrument against the party making the same. Therefore, the transfer executed by the respondent was operative to transfer to the Minto Trading and Development Company Limited whatever estate, either at law or in equity, he was in possession of. As a consequence the respondent, as execution debtor, had prior to the registration of this judgment divested himself of his interest in the land here in question. The conclusion, therefore, appears to be well founded that the legislature by this amendment has continued the decision in the Entwisle case as law in British Columbia. The Minto Trading and Development Company Limited is not asking to have the transfer registered under sections 175, 176 and 177 of the Land Registry Act,

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as enacted in 1921. They were, however, enacted at the same time as the words inserted in section 34 and may be helpful in understanding the meaning and effect of these words inserted at the beginning of section 34. Sections 175, 176 and 177 have to do with judgments in relation to those who apply for registration as owner or holder of a charge. A judgment is different from other encumbrances in that as registered it constitutes a blanket charge upon all the lands of the judgment debtor in that Land Registration District. Because of this a different system of registration is adopted and all judgments are listed under the name of the judgment debtor in a "Register of Judgments". Under this system questions arise with respect to the identity of owners and judgment debtors, for which a summary procedure is essential. But these sections go beyond the decision of such issues. In section 175 it expressly contemplates "where application has been made to the Registrar to register the applicant as owner of land * * * and there is a judgment registered against the grantor of the fee-simple* * *" Then in section 176, "* * * any judgment creditor * * * shall be entitled to be paid * * * as costs of investigating the bona fides of the claim of the applicant that he is entitled to priority to the judgment." Then in section 177 it is provided that where the instrument is entitled "to priority over the registered judgment" the Court may nevertheless allow costs to the judgment creditor

"if in the opinion of the Court the judgment creditor was justified under the circumstances * * * in requiring the applicant to have judicially established the bona fides and validity of the execution of the instrument under which the applicant claims." These sections indicate that upon such applications the question of priority shall be determined, a matter which, prior to the amendments of 1921, was settled by the provisions of the sections corresponding to sections 34, 36 and 37. Indeed, the implication appears to be that, if the instrument is found to be bona fide and validly executed, it is entitled to priority over the judgment creditor under circumstances such as obtain in this case. These statutory provisions, read, as they must be, in association with section 34, retain the common law rule with respect to rights of judgment creditors. Under that rule the execution creditor can only attach that interest which exists in the execution debtor. The respondent having disposed of his entire interest before the registration of the judgment, this judgment cannot attach the land in question as certified by the Registrar. The learned judge, in confirming the District Registrar's report, based his judgment upon the amendment made to the Land Registry Act in 1913 to the then section 22, now section 37. The material portion of that amendment substituted "conclusive evidence at law and in equity" for the words "conclusive evidence in all Courts of Justice". With deference to the learned trial judge, this amendment does not appear to effect the change which he suggests. All the Courts having to do with these matters apply the rules and principles of both law and equity. Moreover, it appears that the amendments made in 1921 and already discussed deal more specifically with the subject and if section 37 ( section 22 in 1913) was intended to effect such a change as suggested by the learned trial judge, the legislature would, no doubt, have further amended that section in 1921 .

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In my opinion, the appeal should be dismissed with costs. [The concurring judgment of KELLOCK, J. is omitted.] LA ROSE v. WHITE PACKING CO. Supreme Court of Ontario. [1937] 2 D.L.R. 765. Action by mortgagee to remove execution liens from the register and for foreclosure of mortgage. MACKAY, J.: The plaintiff is a married woman residing at Sudbury. The defendants Jean Paul Mageau and Anne Margaret Mageau are husband and wife, living together at the Town of Kapuskasing. These defendants entered an appearance and filed an affidavit of merits but did not deliver a statement of defence. Pleadings were noted closed against them and they were served with a notice of trial, at which time they filed and served a withdrawal of their defence. The defendants White Packing Co. Ltd. & Gypsum Lime & Alabastine Ltd. are corporations with head offices at the City of Stratford and the Town of Paris, respectively. By transfer No. 11895, Cochrane, dated October 14, 1931, and registered October 16, 1931, one Joseph A. Leblanc became the registered owner of certain lands situate in the Town of Kapuskasing, hereinafter described, as the owner in fee simple with absolute title under the Land Titles Act, R.S.O. 1927, c. 158. On October 14, the said Joseph A. Leblanc by charge or mortgage dated October 14, 1931, and registered on October 16, 1931, as No. 11896 Cochrane, charged or mortgaged the said lands to the plaintiff to secure payment of the sum of $3,000 with interest at the rate of 6% per annum. On July 20, 1935, the defendant Jean Paul Mageau purchased the said lands from Joseph A. Leblanc and the plaintiff, under an agreement whereby the purchaser agreed to assume the said mortgage No. 11896 and pay the plaintiff the amount owing thereunder, together with the arrears of taxes against the said lands, and to pay the balance of the purchase-price to the said Joseph A. Leblanc. The bargain of purchase and sale was completed on July 20, 1935, and was consummated at Kapuskasing some 70 miles from Cochrane, the District town. The said transaction of purchase and sale, as a matter of detail and form, was part evidenced by the plaintiff executing and delivering to the purchaser, Jean Paul Mageau a discharge or cessation of charge of mortgage No. 11896 and receiving in the place and in lieu thereof a charge or mortgage to secure payment of a sum of $1,732, with interest at the rate of 6% per annum, and the delivery on July 20, 1935, by the said Leblanc to the defendant Jean Paul Mageau of a transfer of his equity in the said lands in form suitable for registration under the Land Titles Act. At this date July 20, the amount actually owing to the plaintiff Larose on the mortgage of October 14, 1931, amounted to $1,900 more or less, and upon delivery to her of the mortgage of July 20, 1935 for $1,732 plus $300 in cash or its equivalent, she delivered a discharge or cessation of charge of the mortgage of October 14, 1931 to J. A. Leblanc and Jean Paul Mageau. The evidence adduced at the trial generally and with particular reference to the testimony of the plaintiff and Jean Paul Mageau and the examination for discovery of the latter, clearly establish that the deal was closed on July 20, 1935 in the manner aforesaid, and the registration of the transfer, the cessation of charge and the mortgage to the plaintiff were regarded by all three parties as a mere matter of form, the details of which might be attended to at leisure by Mr. Jean

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Paul Mageau, subject to this, that the plaintiff relied upon the defendant Jean Paul Mageau to provide her with a new mortgage as valid and as sound a security as the mortgage which she was discharging. The transfer, cessation of charge and mortgage were mailed by the defendant J.P. Mageau from Kapuskasing for registration at Cochrane on July 22 (July 20, 1935 was a Saturday), but did not reach Cochrane in the ordinary course of mail in time to be tendered for registration in the office of Land Titles at Cochrane until July 24, 1935, upon which date the instruments were duly tendered for registration. The transfer and cessation of charge were in proper form, but the mortgage was rejected by the Local Master of Titles because the instrument lacked the prescribed affidavit to the effect that the mortgagor J. P. Mageau and the defendant Anne Margaret Mageau were man and wife and both over the age of 21 years. This affidavit was duly made and attached to the mortgage, but resulted in such delay in effecting registration that the transfer and cessation of charge were not registered until July 25, and the mortgage until July 26, 1935. In the meantime, and being on July 22, 1935, an execution No. 572, for $268.56 against J. A. Leblanc in favour of the defendant White Packing Co., was filed in the office of Land Titles at Cochrane, and an execution, No. 573 for $172.28 against J. A. Leblanc in favour of the defendant Gypsum Lime & Alabastine Ltd. was filed in the office of Land Titles at Cochrane. These two executions are still registered against the title to the lands in question, namely, Lot 822 situate in the Town of Kapuskasing as shown on a plan filed in the office of Land Titles at Cochrane as M. 45 (Kapuskasing), otherwise Parcel 377 in the register for Central Cochrane. This action is brought for a declaration that the two executions while prima facie having priority over the plaintiff's mortgage, are in fact subsequent thereto and should, moreover, be removed from the register so far as they affect the lands. The action is also brought for foreclosure of the mortgage against the defendant J. P. Mageau and his wife, the defendant Anne Margaret Mageau, and the said Anne Margaret Mageau, a subsequent purchaser from the defendant J. P. Mageau and for possession and for a judgment on the covenants contained in the mortgage to pay principal, interest, insurance and taxes. The rights of the parties to a transfer of land in a Land Titles Office before the entry of the transfer on the register were considered by the Appellate Division of the Supreme Court of Ontario in Guest v. Coch/in, [1929] 3 D.L.R. 790, 64 O.L.R. 165. In that case Orde, J. A., at p. 796 says: "When the absolute owner transfers his whole estate the equities immediately created are identical with those arising from an uncompleted contract of sale. The transferor by virtue of s. 37 of the Act, still holds the legal estate, but the transferee is in equity the real owner, for him and for all those claiming under him the transferor holds the legal estate in trust." I am of opinion that where the execution debtor has completely assigned his interest before the lien of the execution attaches, the assignee takes free and clear of any claim of the execution creditor. McDonald v. Royal Bk., [1933], 2 D.L.R. 680, O.R. 418, which was a case where a mortgage had been assigned to the bank before the filing with the Sheriff of a writ of execution against the assignor, it was held that notwithstanding the registration of the writ of execution in the Registry Office before the registration of the assignment, the assignee had priority. Middleton, J. A., at p. 682, referring to Jellett v. Wilkie ( 1896), 26 S.C.R . 282 says: "In the Supreme Court in the case already referred to it was held that the registration of an execution did not defeat a prior unregistered trans-

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fer made by the debtor even when the land was registered under the Torrens System." There is a reference in Falconbridge on Mortgages, 2nd ed., p. 125, referring to Russell v. Russell (1881), 28 Gr. 419; the headnote of that case states: "An execution creditor does not occupy as favourable a position under the Registry Act as a purchaser for value without notice; and he may be defeated by a deed made before though registered after the lodging of the execution in the hands of the sheriff." In Re Vilneff & Waugh (1926), 31 O.W.N. 79, the late Mr. Justice Wright appears to have assumed that if the sale were completed prior to the filing of the writ of execution in the Land Titles Office, the lien did not attach. Section 62 of the Land Titles Act, provides for the sending of a copy of the writ of execution by the Sheriff to the Master of Titles. Under that section "No registered land shall be bound by any such writ until such copy has been received by the master." It was therefore open to Leblanc to transfer his interest free and clear of any claim of the execution creditor on July 20. The section goes on to say that after the receipt by him, i.e., the Master, of the copy, "no transfer by the execution debtor shall be effectual, except subject to the rights of the execution creditor under the writ." It is clear, therefore, that the rights of the execution creditors, the defendants White Packing Co., and the defendant Gypsum Lime & Alabastine Ltd. must be determined as of the date upon which the writs were received by the Master, namely, July 22, 1935. The writs are a lien only upon the interest of the execution debtor at that date. The evidence establishes that there had been a complete transfer in good faith in equity of all Leblanc's interest before the lien of the writ attached ( namely before the copies had reached the Master of Titles.) Leblanc, on July 22, had a bare legal estate, the beneficial interest being in Jean Paul Mageau. On this basis Jean Paul Mageau would take free and clear of the executions and this being so, the plaintiff Larose, claiming under Mageau, would also take free and clear of these executions. It may be that the writs would attach the balance of the purchase moneys, if any, unpaid at the date of their filing with the Master of Titles. See Robinson v. Moffatt (1916), 31 D.L.R. 490, 37 O.L.R. 52. Judgment should therefore be entered as follows: (a) Declaring executions Nos. 572 and 573 Cochrane invalid as regards mortgaged land and to be removed from the register in so far as they affect such lands; ( b) In favour of the plaintiff for possession and foreclosure, with a reference to the Master to make all necessary inquiries, take all proper accounts, tax costs and complete the foreclosure proceedings in accordance with the Rules. (c) Against the defendant Jean Paul Mageau under his covenants for such amount as may be found due by the Master. (d) In favour of the plaintiff against the defendant, The White Packing Co. and the defendant Gypsum Lime & Alabastine Ltd. for the costs of this action.

RE ZIMMERMAN Ontario Weekly Court. [1956] O.W.N. 745. STEWART, J.: On 27th November 1952 George A. Caldwell, by an unregistered agreement for sale, agreed to sell Lot 55 as shown on Plan 425 for the County

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of Peel to Donald A. Zimmerman for the sum of $1,800. On 12th January 1955 the purchaser assigned his interest in this agreement to the applicant Aileen M. Zimmerman for love and affection and the sum of $500, the balance then due the vendor. On 5th November 1953 the Bank of Montreal issued an execution against the vendor, Caldwell, for $2,126.65 and I assume, although this is not altogether clear, that there was then only $500 owing to the vendor under the agreement for sale. Other executions were subsequently filed against Caldwell. Efforts were made to cause the execution creditors to withdraw their executions against Lot 55 upon payment of $500, but without success. Mrs. Zimmerman now applies under Rule 603 [now 610] for an order declaring that upon payment into court, or to the sheriff of Peel County, of $500, the applicant's title to Lot 55 will not be subject to these or subsequent executions. Counsel for the respondent urges upon me the theory that it was the land itself that was capable of seizure and sale under the writ of execution. With this I cannot agree. What is exigible is only the debtor's precise interest in the lands and no more: Wickham et al. v. The New Brunswick and Canada Railway Company et al. (1865), L.R. 1 P.C. 64 at 75. " ... an execution creditor can only sell the property of his debtor subject to all such charges, liens and equities as the same was subject to in the hands of his debtor." Per Strong C.J.C. in Jellett v. Wilkie et al. ( 1896), 26 S.C.R. 282 at 288-9. Or, put slightly differently, "a judgment creditor could only take what his debtor could give him"; per Matins V.C. in In re The Blakely Ordnance Company (1876), 25 W.R.111. In a case where the plaintiff leased a farm and cows but agreed to feed all hay grown on the leased land to the cows thereon it was held that although the hay might legally belong to the lessee, yet because he did not have the beneficial use of it, such hay was not exigible, the creditor having no higher right than the debtor : Snotzinger v. Leitch et al. (1900), 32 O.R. 440. In Russell v. Russell (1881), 28 Gr. 419, it was pointed out that an execution creditor was not in the favourable position of a bona fide creditor for value without notice, and might be defeated by a deed made before, but registered after, the filing of the writ of execution. In Jellett v. Wilkie et al., supra, a case where an execution creditor had filed a writ of execution subsequent to the transfer of three properties but prior to the registration of the three deeds, the Chief Justice said at pp. 288-9: "No proposition of law can be more amply supported by authority than that which the respondents invoke ... namely, that an execution creditor can only sell the property of his debtor subject to all such charges, liens and equities as the same was subject to in the hands of his debtor." In McDonald v. The Royal Bank of Canada, [1933] O.R. 418, [1933] 2 D.L.R. 680, it was held that the assignee of a registered mortgage had priority over an execution creditor, even though the assignment was unregistered and the sheriff, without actual knowledge of the assignment, had registered a notice of seizure of the mortgage. In La Rose v. White Packing Co. Ltd. et al., [1937] O.R. 470, [1937] 2 D.L.R. 765, the O.R. headnote accurately summarizes the judgment of J. K. Mackay J. as follows: "If an execution debtor, who is the registered owner of lands under The Land Titles Act, R.S.O. 1927, ch. 158, completely transfers his interest in the lands before the Master of Titles receives a copy of the writ of execution the transferee takes free and clear of the execution or any lien thereunder even thought the writ of execution is subsequently received by the Master of Titles before the transfer of the lands is registered." In Parent v. Drouillard, [1937] O.W.N. 238 at 241, Hogg J. said: "The right of an execution creditor is a lien or a charge upon the lands of the execution debtor, but it is only a lien or charge upon such interest

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as he has in such lands." He held that the dower of the widow of a deceased execution debtor was to be calculated without taking the execution into account. The respondent relied upon Robinson v. Moffatt (1916), 37 O .L.R. 52, 31 D.L.R. 490, in support of his contention that the debtor's land could be sold under the execution without considering the applicant's interest. In my view this case can give him little solace. Meredith C.J .C.P. said at p. 55 : "He [i.e., the execution creditor] cannot, of course, acquire any higher right than his debtor had; but why not that much?" Here, then, the execution creditors have a lien or charge upon Caldwell's interest in the lands, which is subject to the applicant's interest therein. I declare therefore that upon payment to the Sheriff of the County of Peel of the sum of $500 less the taxed costs of this application ( which costs the applicant shall have) the title of the applicant to Lot 55 shall not be subject to the execution issued by the Bank of Montreal or to any subsequent executions against such lands. Quaere whether Re Zimmerman is reconcilable with Weidman v. McClary Man. Co. (1917), 33 D.L.R. 672 (Sask.), where the court held that, although a vendor's interest is exigible, instalments of purchase money due under an agreement of sale cannot be reached by fi. fa. but only by garnishee proceedings or equitable execution. In Nova Holdings Ltd. v. Western Factors Ltd. et al (1965), 51 D.L.R. (2d) 235 subsequent to the registration in the Land Titles Office of executions totalling about $7100 against the owner of real property he entered into an agreement for the sale of the property for $4800, which was agreed to be a fair price. Before the executions were discovered by the purchaser, it had substantially completed two houses on the property. It was held by the Alberta Court of Appeal that the execution creditors had no interest in the improvements in the land made subsequent to the filing of the executions, since an execution binds only the interest of the execution debtor; accordingly the $4800 which the purchaser sought to pay into Court was the largest sum of money which the Sheriff could have realized in pursuance of the writs.

IN RE RIGGS Supreme Court of Ontario in Bankruptcy. 1938. 19 C.B.R. 222. URQUHART, J.: The only further question of priorities which remains to be decided was the place to be taken by Strachan's first execution. On December 2, 1932, Strachan secured judgment and filed an execution against the debtor, Alvin C. Riggs, for the sum of $5,246.85, plus $180.75 costs. Nothing has ever been paid on this execution. At the time that this execution was filed in the sheriff's office at Sandwich, the land which has since been sold pursuant to my order of March 31, was free and clear of encumbrance. On January 18, 1934, the debtor executed a mortgage of the lands in question, which were then affected by the above execution, to his wife Margaret Riggs for $7,000 and interest. Nothing was ever paid on this mortgage, and the validity of this mortgage is in dispute. Subsequent to the registration of this mortgage, four other executions were filed in the sheriff's office against the debtor Riggs. On the argument before me on March 31, Mr. Ferris, acting for the first mortgagee, conceded that the Strachan execution would have priority over his mortgage against the said lands. On this motion for the determination of priorities he abandoned all claim upon the mortgage as such, but claims to rank as an ordinary creditor on the covenant for payment contained in the said mortgage and alleges

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that his claim must be paid pari passu with all other ordinary claims, including those of all execution creditors. Two questions therefore arise; does the Strachan execution, being the first execution against the lands, take priority (a) to other executions, (b) to Margaret Riggs' estate mortgage money if its said claim is a valid one? In argument, Mr. Kelly [for Strachan] contends that the effect of Alva A. Riggs making a mortgage upon freehold property which was bound by his execution was to crystallize his client's execution as a charge, or what amounts virtually to a mortgage prior to the mortgage held by Mrs. Riggs, in which case he would be first of all on the first of priorities and would eat up the whole fund. He points out that his execution is the only execution which is against the legal estate or unencumbered property of the debtor, and that The Bankruptcy Act does not interfere with title or something which is pretty nearly akin to title. All of the other executions are against the equity of redemption only, and the trustee never had a legal estate in the property. He argues further that by virtue of The Execution Act, R.S.O. 1937, ch. 125, sec. 9 ( 1) his writ of execution binds the lands and that by virtue of the interposition of the aforesaid mortgage, it has become a charge as above stated. . . . I am afraid that, ingenious as are the arguments of the solicitor for the first execution creditor, I am unable to find that he has a prior charge or claim upon the lands in question or the proceeds thereof. When The Execution Act, R.S.O. 1937, ch. 125 says - as it does in sec. 9 - that the lodging of the execution with the sheriff binds the lands, it does not mean that thereby any estate or charge upon the lands is effected. All that it means is that the sheriff is entitled to realize upon the said lands at the proper time and distribute the moneys in accordance with The Creditors Relief Act, i.e., after allowing for the costs of the first execution creditor, the proceeds would be divided pari passu among all execution creditors and those creditors who had lodged certificates under the Act. The Execution Act in effect gives by law the right to the sheriff after a certain period to dispose of the land or equity therein. In this case, while the sheriff had taken possession and collected some rents, he had not sold the property, and the property automatically passed to the trustee under secs. [40 and 42] of The Bankruptcy Act . ... RE COOK ET AL AND DUNCAN Ontario Court of Appeal. [1956] O.W.N. 571. The judgment of the Court was delivered by SCHROEDER, J .A.: The purchaser appeals from an order of His Honour Judge McCombs, of the County Court of the County of Wentworth, made on the 28th June 1955 on an application brought by the respondents under the provisions of The Vendors and Purchasers Act, R.S.O 1950, c. 407, whereby it was declared that the vendors had satisfactorily answered a requisition on title submitted by the purchaser. Although the learned County Court Judge purported to make the order as local judge of the Supreme Court of Ontario, which he had no power to do, the appellant waived his right to question the order on that ground inasmuch as the learned County Court Judge was empowered to hear and dispose of the application as a judge of the County Court pursuant to the provisions of s. 3 of the Act as re-enacted by 1952, c. 110, s. 1. The appellant therefore consented to having the appeal heard and disposed of as if the application had originally been

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dealt with by the learned judge as a judge of the County Court of the County of Wentworth. The respondents are the executors of Harold Millston Cook, who died on the 30th March 1952. The appellants had made an offer, on the same day, to purchase the lands in question and this offer was later accepted in due form by the respondents. The deceased had many creditors and several executions had been filed in the office of the Sheriff of the County of Wentworth in his lifetime. When the appellant's solicitor became aware of this fact he submitted a requisition in the following terms: "Required payment and discharge of the various executions now on file in the Sheriff's office in the City of Hamilton." The solicitor for the respondents replied to this requisition stating that the deceased had creditors other than those who had taken judgment and delivered executions to the sheriff, and that the estate was in fact insolvent. He referred to ss. 48 and 56 of The Trustee Act, R.S.O. 1950, c. 400, and to the judgment of Middleton J. in Re Williamson; Pennell v. McCutcheon (1917), 39 O.L.R. 413, 36 D.L.R. 783, and claimed that by virtue of the sections of The Trustee Act mentioned the assets of the deceased had become in the hands of the executors a trust on behalf of all the creditors whose debts were entitled to be paid pari passu, and without any preference or priority of debts of one rank or nature over those of another. It was contended that the trusts thus created had priority over and prevailed against any execution. The learned County Court Judge gave effect to this argument and held that upon payment by the purchaser of the balance of the purchase-price of the property and on his receiving a conveyance the land in question would not be bound by the executions in the hands of the sheriff; that the purchaser had no duty to see that the said purchase-money was properly distributed and that the vendors had thus made an adequate reply to the requisition submitted, or, as it was put by the learned County Court Judge: "U pan the occurrence of these events the requisition has been satisfactorily answered." With respect, I am unable to agree with this disposition of the matter. It is quite properly objected that only two of several execution creditors were served with notice of the application before the learned County Court Judge, and were represented before this Court on the appeal. The order appealed from ignores the true import of ss. 9 and 10 of The Execution Act, R.S.O . 1950, c. 120, and the consequences which flow from the filing of a writ of execution in the office of the sheriff. Such a writ, once it has been filed, "binds the goods and lands against which it is issued". The authorities make it plain that a conveyance of property by an execution debtor does not defeat the right of the execution creditor to require the sheriff to follow the property in the hands of the purchaser and seize and sell it to satisfy the judgment debt owing by the vendor of the property: Re Corrigan et al. and Everill et al., [1933] O.W.N. 718, affirmed at p. 816; Re The Trusts Corporation of Ontario and Medland et al. (1892), 22 O.R. 538; see also Armour on Titles, 4thed.1925,p.178. The death of the debtor against whose goods and lands the writ of execution has been delivered to the sheriff of the county in which the goods and lands are situate, does not affect or diminish the right of the execution creditor to require the sheriff to proceed with seizure and sale of the property of the debtor pursuant to the provisions of The Execution Act. One who purchases from the legal personal representative of a deceased execution debtor is in no better position than one who purchases from the execution debtor in his lifetime. In either case a writ of

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execution delivered to the sheriff's hands binds the lands of the debtor or of his estate as long as the writ remains in force. The order in appeal is based upon a misconception of the effect of the decision of Middleton J. in Re Williamson; Pennell v. Mccutcheon, supra. In that case the executors of a deceased person suffered the goods belonging to his estate to be sold by the sheriff under execution. After the sale an order was made for administration of the insolvent estate of the deceased, and the matter came before Mr. Justice Middleton at the instance of the sheriff, who desired to pay into court the amount realized by him on the sale. The Court denied the claims of the execution creditors to preferred treatment of their claims and directed payment to be distributed pari passu among all the creditors of the estate in accordance with the provisions of The Trustee Act mentioned above. That case is not authority for the proposition that the mere averment by a legal personal representative of a deceased person that the estate of such person is insolvent enables him to confer title to real property of a deceased debtor bound by a writ of execution in the sheriff's hands freed and discharged of the charges created by ss. 9 and 10 of The Execution Act, and that the purchaser is bound to accept the title without any further or other assurance. In the Williamson case Middleton J. indicated indirectly the proper course to be followed in such circumstances as appears from the following passage from his judgment at p. 414: "His executors, instead of taking any proceedings to prevent the creditors suing pending realisation of the estate - Rule 613 (b) gives the Court power to make an administration order so that all action by creditors will be stayed while the executor continues his administration and realisation allowed the goods of the deceased to be sold ... " The proceedings authorized by the provisions of The Vendors and Purchasers Act are limited by the terms of the statute and it is not competent for the Court on the present application to make an order affecting the claims of the execution creditors of this estate. If judgment for administration were sought and obtained the rights of all the creditors, including the execution creditors, and the rights of the appellant as purchaser of the property in question, could be determined by the Master and an appropriate order could be made to protect the interests of all parties concerned. This would be a more expeditious and less expensive method of dealing with the problem involved than to resort to the proceedings prescribed by The Bankruptcy Act, R.S.C. 1952, c. 14, s. 22. In the absence of an effective order of the Court staying the hands of the sheriff in respect of the writs of execution in his hands binding the lands in question, the purchaser cannot fairly be required to accept the title offered by the vendors, because the lands would still be subject to seizure and sale by the sheriff. I would therefore allow the appeal with costs and substitute for the order in appeal an order declaring that the vendors have not satisfactorily answered the purchaser's requisition on title. RE CRAIG Ontario Court of Appeal. [1929) 1 D.L.R. 142. Appeal by A. G. Craig, wife of H. Craig, from the judgment of Fisher, J., affirming the order of a local Judge for partition. On May 25, 1921, one Andrew conveyed the W. ½ of lot 21, con. 4, of the Township of Moore, in the County of Lambton, to H. Craig and A. G. Craig, his wife, as joint tenants, and not as tenants in common, subject to a mortgage.

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Under an execution dated December 14, 1926, issued under a judgment in favour of one Littleproud, in an action against H. Craig, the sheriff of the County of Lambton sold at public auction on April 19, 1928, to A. Weir, " an undivided half share or interest and all other the right, title, interest, and equity of redemption of the said defendant H . Craig in, to, and out of' the said lands, and by deed dated April 20, 1928, conveyed H. Craig's interest to Weir. Weir, on May 10, 1928, moved the local Judge at Sarnia for an order for partition or sale of the lands so to effect a severance, and an order for partition or sale was made on May 15, 1928. THE COURT dismissed the appeal with costs without giving reasons in writing, holding that the joint estate was severable and the interest of one joint tenant could be sold under an execution, and applying Spring v. Kinnee, [1928] 4 D .L.R. 723, 62 O .L.R. 562, against the appellant's contention that she and her husband took an estate by entireties, which was not exigible at Common Law. Whittaker, J. followed Re Craig in Morrow v. Eakin [1953] 2 D .L.R. 593, at 595 (B.C.) : "The interest of a joint tenant is exigible and may be sold under execution, and after sale the purchaser may obtain a partition order : Re Craig, [1929] 1 D .L.R. 142, 63 O.L.R. 192; Toronto Hospital for Consumptives v. Toronto (1930), 38 O.W.N . 196." The Court held that an execution creditor might not have partition of land held in joint tenancy until he had first had the interest of the indebted joint tenant sold under the execution, since the right to possession is a prerequisite to partition. Western Canada is under the Torrens land registration system, but the effect of executions on land differs somewhat in British Columbia and Manitoba from that in the other Western jurisdictions. The Judgments Act, R.S.M. 1954, c. 129, and the Execution Act R.S.B.C. 1960, c. 135, expressly prohibit the affecting of land by writs of elegit and fi. fa. The procedure in both provinces is that a judgment may be registered in any registry office and from that time on it forms a lien and charge on any lands of the judgment debtor in the registry district; in Manitoba, however, proceedings to realize upon a registered judgment cannot be commenced until one year after the date of its registration. In both provinces such a registered judgment ceases to form a lien or charge after two years from registration unless renewed. In Alberta (The Land Titles Act, R.S.A. 1955, c. 170, s. 128), the Territories (Land Titles Act, R.S.C. 1952, c. 162, s. 125) , and Saskatchewan (The Land Titles Act, R.S.S. 1965, c. 115, s. 180) the writ of fi . fa. is used to charge the lands of the judgment debtor. The sheriff is required to transmit to the registrar by registered letter a copy of the writ and from the time of the registrar's receipt of the copy all legal and equitable interests of the execution debtor there or thereafter registered in his name are bound by the execution; any subsequent dealing with such interest by the debtor may be registered only subject to the rights of the execution creditor. For a full analysis see Thom, Canadian Torrens System, 2nd ed. ( 1962) 411-432.

POWER v. GRACE Ontario Court of Appeal. [1932] 2 D.L.R. 793. HODGINS, J .A., agrees with RIDDELL, J . A . RIDDELL, J .A.: The important facts on this appeal are few and simple. The defendant (Mrs. ) Grace and her mother (Mrs.) Ough were joint-tenants in certain lands in Ontario; judgment was recovered by the plaintiff against the mother,

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and fi. fa. goods and lands placed in the hands of the sheriff; but before anything was done by the sheriff under the writ, the mother died - the question was raised whether the daughter, the defendant (Mrs.) Grace thereupon took the whole estate, or whether the interest of the mother during her lifetime continued notwithstanding her death and subject to be sold under the fi. fa. A wrong proceeding was adopted in Power v. Ough [ 19 31] 0 .R. 184; but the matter is properly before the Court in the present proceeding. In my view, there is little advantage to be gained by an elaborate discussion of the principles of joint estates and their destruction, as the question here may be made to rest upon a few simple considerations. In the first place, it has been undoubted law for centuries that where a writ under which an interest in land may be taken by the sheriff has been placed in his hands against a joint-tenant, and the joint-tenant dies before execution, the other joint-tenant surviving holds it discharged of the execution. Lord Abergavenny's Case, 6 Co. Rep. 78b, 77 E.R. 373. This law has never been doubted; and the sole question for decision is whether the delivery of the writ to the sheriff is "execution." The proposition that such is the case, is conclusively met by the language of the statute and rules. That "delivery" of the writ to the sheriff is not the equivalent of "seizure" by him is plain from the Execution Act, R.S.O. 1927, c. 112, s. 9 (3) in the case of goods and s. 8 in the case of lands - it would savour of absurdity to say that a sheriff "to whom a writ of execution against lands is delivered for execution may seize and sell thereunder" if the delivery itself was equivalent to seizure. But still stronger, if possible, is the effect of our R. 564 [now 571] corresponding to former statutory provisions; the Rule says that, "The advertisement in The Ontario Gazette of any lands for sale under a writ of fieri facias, during the currency of the writ, shall be deemed a sufficient commencement of the execution ... " This would be nonsense if the delivery of the writ to the sheriff, itself, was ipso facto, the commencement of the execution. It is argued, however, that the statute, s. 9 providing that the "writ shall bind the . . . lands . . . from the time or the delivery thereof," gives the delivery of the writ the effect of severing the joint-tenancy; but it must always be borne in mind that "statutes are not presumed to make any alteration in the common law, further or otherwise than the Act does expressly declare:" Arthur v. Bokenham, 11 Mod. 148, at p. 150, E.R. 957; see Craies on Statute Law, 3rd ed., pp. 112, 278 et seq. Sufficient effect is given to the statute by interpreting it according to its language and I see no necessity for extending its meaning. Restating in tabular form, the principles upon which I proceed: ( 1) At the Common Law, a joint-tenancy is not affected by the delivery of a writ which may be effective against land, to the sheriff; (2) Even after such delivery, the death of the joint-tenant before the "execution" of the writ at once terminates the joint-tenancy in favour of the other joint-tenant; delivery is not any part of "execution". ( 3) Our statute does not expressly or by necessary implication change the common law in that regard- the implication, if any, being the other way. The result is that the common law is still in force, and the joint-tenancy was dissolved on the death of the mother. The case was argued with great learning and ingenuity; but I think these elementary considerations are sufficient to dispose of it. I think the appeal must be dismissed with costs.

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GRANT, J. A.: An appeal from Widdifield, Co. Ct. J., [1932] 1 D.L.R. 801, who gave judgment on November 23, 1931, in defendant's favour, upon a statement of facts agreed upon by counsel. The defendant Grace and her mother Mrs. Ough, (now deceased) were owners in joint-tenancy of certain lands; the plaintiff obtained judgment against Mrs. Ough for a money claim and placed a writ of fi. fa., goods and lands in the hands of the sheriff, within whose bailiwick the lands were situate. Before any seizure of the lands, and before any step was taken by the sheriff under the writ, Mrs. Ough died. The neat question is, was the joint-tenancy severed or destroyed by the mere filing of the writ of fi. fa., lands in the office of the sheriff, without more, or did the joint-tenancy continue until the death of Mi:s. Ough, and by the right of survivorship, did the title pass to Mrs. Grace as sole owner and freed from the execution? The learned County Judge held that the entire estate became vested in the survivor Mrs. Grace. It is elementary law that the destruction of any one of the four unities of jointtenancy, namely possession, interest, title or time, will terminate the tenancy and therewith the right of survivorship. To the continued existence of this right, the maintenance of these unities is essential. Not every dealing with the interest of one of the joint-tenants will operate to sever or terminate the tenancy. For example, a lease for years, by one of two joint-tenants in fee, of his share, does not sever the tenancy; but where they hold for a term of years only, it will do so. Where one of two joint-tenants in fee, grants his interest to a stranger for life, the joint-tenancy is merely suspended; if during such life estate, either of the jointtenants dies, there is no right of survivorship and the joint estate is permanently severed; but if the life tenant dies before either of the joint-tenants, the joint estate is revived. (Vide 24 Hals., pp. 204-5, and cases cited). "In order that a grant by one joint-tenant may bind his fellows, it must be the grant of an estate, and not the grant of a mere incumbrance or burden on the estate, such as a rent-charge or a right of common:" Co. Litt., p. 185a, cited in footnote to Challis on Real Property, 3rd ed., p. 367. Turning to the statutory provisions regarding execution, we find that the Execution Act, s. 9 ( 1 ) , reads in part as follows: "Subject to the provisions of The Land Titles Act, a writ of execution shall bind the goods and lands against which it is issued from the time of the delivery thereof to the sheriff for execution." It is to be noted in passing that the delivery of the writ to the sheriff, is "for execution;" the mere delivery is not execution, but empowers the sheriff to take the steps necessary to obtain or effect execution: i.e., "seizure, selling or disposing" as mentioned in s. 10, relating to lands. The meaning to be given to the word "bind" as used in s. 9 has been stated in numerous authorities. "The writ is said to 'bind' the property in the goods of the judgment debtor in the bailiwick. Where it is said that the goods, or the property therein, are 'bound,' what is meant is that the sheriff acquires a legal right to seize such goods. The ownership or general property, notwithstanding the binding effect of the writ, continues in the judgment debtor until the sale, and he can legally, until seizure, deal with the goods himself or, until sale pass the property to others. Any transfer or assignment of the goods after the date at which the binding power of the writ operates will ( except in the cases of a purchaser in market overt or of a bona fide purchaser for value without notice) be subject to the sheriff's right to follow up and seize the goods under the writ:" 14 Hals.,. p. 42, para 87.

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"The meaning of the expression, that the property of the goods is 'bound', is, not that the property in them is altered, but that the defendant ... cannot dispose of them, unless in market overt, so as to prevent their being taken in execution:" Edward's Law of Execution (1888), p. 114. Also, to the same effect is Anderson's Law of Execution (1889), pp. 219-21. The point is discussed at some length by Mellish, L. J. (with whom James L. J. concurred) in Exp. Williams, Re Davies (1872), L.R. 7 Ch. 314, at pp. 317-8, a decision that has been cited with approval, and followed in many later cases. The following excerpts may be pertinent: "It is necessary, therefore, to consider what is the effect of the seizure. Now, at common law the goods were said to be bound from the teste of the writ, for the goods which the debtor then had were what the sheriff was ordered to seize, and consequently no dealing with them by the debtor could take away the sheriff's right to seize them if he could find them within his bailiwick. The Statute of Frauds altered this by carrying the time down to the delivery of the writ to the sheriff, but that was only as between the creditor and third parties, for there are cases to shew that as against the debtor himself the goods were still bound from the teste of the writ. . . . Still the sheriff had no property in the goods till seized. The debtor may remove them into another bailiwick; that is not illegal, for the sheriff has no property in the goods, he has only a right to seize them; but after he has seized them he has a special property in them: Wibraham v. Snow, 2 Wms. Saund. [47, 85 E.R. 624] so that he can maintain trover for them, as is said in the note there to have been decided in Clerk v. Withers, [6 Mod. 290, 87 E.R. 1030] on the ground that the sheriff having once seized the goods, was liable for their full value .... The effect of seizure, therefore, is, that upon seizure the sheriff ceases to have merely a right to seize, and acquires a qualified property in the goods like that of a factor who is under advances, and from whom the goods may be claimed back on payment of those advances. This qualified property differs from a mortgage, inasmuch as at law the mortgagee has an absolute title to the property, and the title of the debtor is only in equity; but in this case there is at law a qualified property with a power of sale. The Court of Exchequer held, in Slater v. Pinder, L.R. 6 Ex. 228, that when the goods have been seized by the sheriff, the creditor has a security upon them. Are we to hold that he has a security upon them before they were seized? ... A mere right to seize property cannot properly be called a security; and I think that the proviso only applies to cases where the creditor has the absolute property or a special property in goods, not a mere right to seize them."

As will have been noted, s. 9 of the statute uses the words "shall bind" with respect to goods and lands indiscriminately. The seizure to be made of goods or lands, thereby putting them "in execution" is covered by other sections of the Act and by the Consolidated Rules, to which reference has been made by my brother Riddell in his opinion which I have been privileged to read. The effect of the authorities to which I have referred is, as I understand them, that, until execution against the lands is actually commenced by advertisement (R. 564) or probably by an actual seizure upon the lands themselves, as illustrated in Doe d. Miller v. Tiffany (1848), 5 U.C.Q.B. 79, 6 U.C.Q.B. 426, cited in Bradbourn v. Hall (1869), 16 Gr. 518, there is no such effect wrought upon the title or interest of the joint-tenant (the judgment debtor) as will operate to sever the jointtenancy. The filing of the writ of fi. fa. with the sheriff merely gives the right to

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seize the lands, and until the withdrawal, discharge or expiry of the writ, the lands continue "bound" in that sense. The change which may subsequently be made in "title and interest" is potential only, contingent upon the lands being placed in execution by seizure with a view to sale as by law provided. I am therefore of opinion in the case at bar, that the joint-tenancy was not severed or destroyed by the filing of the writ of fi. fa. in the sheriff's office; that as the death of Mrs. Ough occurred before any seizure was made or commenced, by right of survivorship the whole estate in the lands freed from the execution became vested in Mrs. Grace, the other joint-tenant, who is the defendant in this action, and that the judgment in her favour should be affirmed, and the appeal therefrom dismissed with costs. RE KATES Supreme Court of Ontario. [1951] 4 D.L.R. 260. KELLY, J.: This is an application made by the plaintiffs under s. 98 [now s. 129] of the Highway Traffic Act, R.S.O. 1950, c. 167, for an order directing the Minister of Highways to pay out of the Unsatisfied Judgment Fund the amount of the plaintiffs' judgment together with the plaintiffs' taxed costs of the action. The plaintiffs recovered judgment against the defendant on December 21, 1950, by which the infant plaintiff recovered $500 and the adult plaintiff recovered $307. The plaintiffs taxed their costs on the party and party scale at $378.30 and further taxed solicitor and client costs in addition to the party and party costs of $88.50 which amount by the terms of the judgment was directed to be paid out of the infant plainiff's judgment and the balance of the infant's judgment was directed to be paid into Court to the credit of the said infant. On this application the adult plaintiff filed material in an endeavour to comply with s. 98 of the Act and such material shows that the only asset of the defendant, who is alleged to be 65 years old, is a joint interest with his wife, Margaret C. Morrison in house and premises known as 594 Markham St., Toronto. The material also discloses that 594 Markham St. is subject to a first mortgage which originally secured a loan of $4,200 and upon which there is now owing approximately $3,800. The applicants contend that they are entitled to an order for immediate payment of the judgment out of the Unsatisfied Judgment Fund and that they have shown by the searches and inquiries made by them that the defendant is not possessed of any real or personal assets which may be sold and applied in satisfaction of their judgment. The applicants further contend that the joint interest of the defendant in 594 Markham St., Toronto, is not exigible under execution and contend that until seizure of the said lands is actually made the defendant may legally pass his interest in the property to others. Section 98(2) of the Act provides in part as follows: "98(2) Upon the hearing of the application the applicant shall show, " ( e) that, by such searches, inquiries and examination, "(i) he has learned of no assets, real or personal, possessed by the judgment debtor and liable to be sold or applied in satisfaction of the judgment debt, or " (ii) he learned of certain assets, describing them, owned by the judgment debtor and liable to be seized or applied in satisfaction of the judgment, and has taken all necessary actions and proceedings for the realization thereof, and that the amount thereby realized was insufficient to satisfy the judgment,

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stating the amount so realized and the balance remaining due on the judgment after application of the amount realized." The applicants filed a writ of fieri facias with the Sheriff of the City of Toronto in the month of February, 1951, and a return of nulla bona was made by the Sheriff on February 27, 1951. Section 9(1) of the Execution Act, R.S.O. 1950, c. 120, provides as follows: "Subject to the provisions of The Land Titles Act, a writ of execution shall bind the goods and lands against which it is issued from the time of the delivery thereof to the sheriff for execution." The Rules of Practice and Procedure of the Supreme Court of Ontario contain the following provisions: "559 [now 566]. The Sheriff shall not expose lands for sale under a writ of fieri facias, or sell the same within less than twelve months from the day on which the writ is delivered to him." "Rule 563 [now 570], provides that before the sale of lands under a writ of fi. fa., the Sheriff shall publish an advertisement of the sale in the Ontario Gazette once, no less than three months and not more than four months preceding the proposed sale. "564 [now 571]. The advertisement in the Ontario Gazette of any lands for sale under a writ of fieri facias, during the currency of the writ, shall be deemed a sufficient commencement of the execution to enable the same to be completed by a sale and conveyance of the lands after the writ has become returnable." It has been held that a joint interest in real property is severable and may be sold under execution : see Re Craig, [1929] 1 D.L.R. 142, 63 O.L.R. 192. It has also been held that the filing of a writ of execution does not sever a joint tenancy but it would appear from R. 564 [571] that an execution against lands is commenced by the advertising of the proposed sale in the Ontario Gazette. However, in the interval between the filing of the writ of fi. fa. and the commencement of the execution there is a potential interest which may be sold under the execution, and should the defendant die during that interval it is evident that by right of survivorship the whole interest in the lands would pass to the surviving joint tenant. It was also urged that the plaintiffs should not be required to wait for the determination of the contingency of either the defendant or his wife dying, before the commencement of the execution. It was further urged that the plaintiffs should not be required either to wait for a year after the filing of their writ of fi. fa. or to undertake the expense of the sale of the defendant's interest in the lands by partition or sale. The discretion which the Judge hearing the application should exercise, is set out by s. 98 ( 4) of the Highway Traffic Act, which provides as follows : "98( 4) If the judge is satisfied, "(a) of the truth of the matters shown by the applicant as required by sub-section 2; "(b) that the applicant has taken all reasonable steps to learn what means of satisfying the judgment are possessed by the judgment debtor; " ( c) that there is good reason for believing that the judgment debtor, " ( i) has no assets liable to be sold or applied in satisfaction of the judg-

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ment or of the balance owing thereon, and "(ii) is not insured under a policy of insurance by the terms of which the insurer is liable to pay, in whole or in part, the amount of the judgment; and " ( d) that the applicant has fully pursued and exhausted all remedies available to him for recovering compensation for the damages that are the subject of the action in respect of which the judgment is given by, "(i) commencing action against all persons against whom the applicant might reasonably be considered as having a cause of action in respect of such damages, "(ii) prosecuting every such action in good faith to judgment or dismissal, "(iii) taking all reasonable steps available to him to recover upon every judgment so obtained, and " (iv) taking all other reasonable steps available to him to recover compensation for such damages, the judge may make an order directed to the Minister requiring him, subject to subsection 5, to pay from the Fund the amount of the judgment or the balance owing thereon."

If the defendant owned an absolute interest in land, it is quite evident that before the plaintiff could satisfy the requirements of s. 98 of the Act, he would be required to prosecute proceedings under execution and recover as much of his judgment as possible from the sale of the said lands before he could apply for payment out of the Unsatisfied Judgment Fund. The passing of the provisions allowing payment out of the Unsatisfied Judgment Fund did not in any way alter the procedure for seizure and sale of lands under execution and it has always been considered reasonable under the law for a plaintiff to be required to wait a year after execution has been issued against lands before he might recover out of the sale of the said lands. It is, therefore, not unreasonable, apart from the provisions of the Highway Traffic Act to expect the plaintiff to prosecute his ordinary rights of recovery which require him to wait a year before lands subject to execution may be sold. Further, the provisions of s. 98 of the Act, especially s-s. (2) ( e) (ii) , do not make any exception where expense is entailed in the judgment creditor's effort to recover under a judgment. The amendments to the Highway Traffic Act providing for payment out of the Unsatisfied Judgment Fund are beneficial in character and designed to relieve against hardship through loss from damage (up to limited amounts) suffered by the public through motor collisions in cases where they are unable to recover against the parties responsible for such loss or damage. Such provisions were never intended either as a sort of free insurance or as a more convenient method of recovery under their respective judgments. By the very wording of s. 98 of the Act, the judgment debtor is required to exhaust every reasonable effort against the parties responsible. In my opinion, the defendant owns a substantial interest in 594 Markham St., Toronto, which may be sold under the plaintiffs' writ of execution. In the event of the defendant dying within a year after the filing of the writ of execution, the plaintiffs may then renew their application for payment out of the Unsatisfied Judgment Fund. In the event of the defendant surviving the year, the plaintiffs will be required to proceed under their writ of execution to recover from the sale of the defendant's said asset. The application fails in respect of recovering out of the Unsatisfied Judgment Fund at this time and it will stand adjourned until the contingency of the defendant's death has been determined or the sale of the defendant's interest in 594

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Markham St., Toronto, has been had, whichever event shall first happen. This application may be brought on for rehearing on two days' notice by any party to the application. RE TULLY Supreme Court of Ontario. [1953] 4 D.L.R. 798.

VENDORS AND PURCHASERS APPLICATION for an order that a requisition by the purchaser had been satisfactorily answered by vendors. The vendors Tully, husband and wife, were joint tenants of certain property which they purchased in that character in 1949, subject to a mortgage of $12,500. The husband was personally indebted to a bank, with the loan being guaranteed by the wife, and as further security for the loan the spouses executed a second mortgage to the bank for $18,911.09 in 1950. On August 14, 1952, the vendors contracted to sell the property to the purchaser Klotz, the first mortgage to be assumed by the purchaser. After the second mortgage was put on and before the contract of sale to Klotz, three executions were successively filed against the husband Tully in amounts totalling over $6,500. The purchaser asked "that these executions be liquidated [before closing] so that the purchaser can obtain a clear certificate of execution". The vendors replied that the executions were of no concern to the purchaser for the following two reasons : "1. The property in question was owned by Mr. and Mrs. Tully as joint tenants and therefore the executions have not attached against the land and the land may be sold free of these executions. 2. The second mortgage on this property to the Bank of Nova Scotia is collateral security to a loan made by Mr. Tully personally with the Bank, and the mortgage recites this fact. The fact that the mortgage was given to secure a debt owed solely by Mr. Tully in effect means that Mrs. Tully is entitled to one-half of the equity of redemption in this property in her own right subject only to the first mortgage. The executions could only attach against Mr. Tully's share in the equity of redemption which share has been mortgaged." The purchaser was not satisfied with this answer and the vendors launched their application. In their argument the vendors, confining themselves to the first of the answers to the requisition, submitted that where lands are held by joint tenants and are subject to a mortgage, the mere filing of a writ of execution against one joint tenant does not bind the lands; and moreover, such filing does not sever the joint tenancy: Power v. Grace [1932], 2 D.L.R. 793, O.R. 357. The rights of an execution creditor against lands which are subject to a prior mortgage and where the debtor owns only an equity of redemption are set out in ss. 31 and 32 [now s. 24] of the Execution Act, R.S.O. 1950, c. 120. Under the applicable case law, these sections apply where there is one mortgagor only. An equity of redemption is a unit, whole and indivisible, and anyone having an interest is entitled to redeem the whole. Hence, where lands are held by joint tenants subject to a mortgage, and an execution is filed against one joint tenant only, his share is not exigible nor is his share in the equity of redemption bound: Armour on Titles, 4th ed., p. 184; Cronn v. Chamberlin (1880), 27 Gr. 551; Can . Bank of Commerce v. Rolston (1902) , 4 O.L.R. 106. While Re Craig, [1929] 1 D.L.R. 142, 63 O.L.R. 192, would appear to be contra, an examination of the report thereof indicates that the agreement [argument?] submitted herein was not made there; and, further, a Sheriff's sale of the interests of one joint tenant had been made before the matter came to Court. Since equity of redemption is not exigible and since there is no severance, the

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purchaser Klotz takes a clear title, and the execution creditors are limited to following the purchase-money into the hands of their debtor. Alternatively, the vendors argued that even apart from any mortgage on lands held in joint tenancy or in common the right of partition is paramount to the rights of execution creditors of one co-tenant : see Freeman on Judgments, 5th ed., at p. 1999, based on United States authorities, as follows: "A judgment against one of several co-tenants cannot impair their right to make partition of the common property, either by suit or agreement. On such partition being made, the lien ceases to affect an undivided interest in the lands, and attaches to the tract set off to the judgment debtor in severalty, or in case partition is accomplished by a sale, then to his share of the proceeds." BARLOW, J. delivered judgment, without written reasons, holding that the requisition had been satisfactorily answered. [Our information is that the judgment was based on the first of the arguments advanced by the vendor : Editor, D.L.R.J Such a decision that an execution against a joint tenant does not bind his share in the equity of redemption would not bind the execution creditor in a subsequent action brought by him against the purchaser, but rule 609 has been passed to guard against this possibility. In Re Goldenberg and Glass (1925) 56 O.L.R. 414, at p. 417 Middleton J.A. commented on rule 609 as follows : "Before the passing of this Rule a peculiarly awkward situation existed. In an action for specific performance as between a vendor and purchaser the Court was compelled to determine the validity of the vendor's title, and so pass it on, even to an unwilling purchaser, without any binding decision protecting the purchaser from subsequent litigation with a possible claimant. Upon the passing of the Vendors and Purchasers Act the same practice prevailed under its provisions. It merely simplified the procedure as between the vendor and purchaser, and left the situation substantially the same. To obviate this, Rule 602 [now 609] was enacted . . .. Since the passing of this Rule the practice has been to give notice to all adverse claimants, so that the purchaser is protected not merely by the opinion of the Court as to the state of title, but by a decision binding upon the adverse claimants, so that, whether a decision is right or wrong, the matter becomes res judicata, and the purchaser is completely protected. It is true that the Rule is not obligatory in its terms, but the protection of the purchaser calls for notice in all but exceptional cases".

RE KLAGSBRUN v. STANKIEWICZ Supreme Court of Ontario. [1954] 1 D.L.R. 593 .

APPLICATION for an order for payment out of the Unsatisfied Judgment Fund (Ont. ) . GALE, J. (orally) : There will be an order for payment of the amount of the judgment and costs and interest out of the Fund, but I cannot leave this matter without mentioning the very great assistance which I have been given by both counsel in a difficult matter, or without referring at some length to the problems which it has raised. The application involves consideration of the provisions of s. 98( 4) (iii) [re-enacted 1953, c. 46, s. 20 (2)] of the Highway Traffic Act, R.S.O. 1950, c. 167, for the Minister has alleged that the defendant in this action made a fraudulent conveyance of property which would otherwise be exigible, and that the plaintiff not having taken steps to set aside that conveyance and realize upon the asset which would be the fruit of such litigation, is not entitled to payment of the amount of his judgment out of the Fund. Before an order for payment out of the Fund may be made the Judge hearing the application must be satisfied, inter alia, that the applicant has fully pursued

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and exhausted all remedies available to him for recovering compensation for the damages that are the subject-matter of the action in respect of which the judgment has been given and in particular has taken all proceedings which are reasonable to set aside any fraudulent conveyances made by the judgment debtor. It is my view that if the Minister wishes to resist an order under s. 98 ( 4) ( d) (iii), he is obliged in the first instance to show the Court that there is reason to think that a fraudulent conveyance of property has been made by the judgment debtor. In other words, it is not incumbent upon the plaintiff to negative such a conclusion except in reply to an allegation to that effect based upon the evidence. In this particular case counsel for the Minister asserts that such a prima facie case has been shown. The accident, which is the subject-matter of the action occurred in 1950. In August, 1952, the defendant and his wife purchased certain lands as joint tenants. The trial of this action was first reached in the early part of January, 1953, at which time the defendant did not appear. The trial was put over for several weeks and the defendant was present when it was called on the second occasion. In the meantime, and a week before the trial was actually conducted, the defendant conveyed his interest in the property to his wife. I should have said that when the property was purchased the defendant and his wife paid a total of $1,375, of which the husband advanced $375 in cash and a mortgage was given back for the balance of $1,000. When the property was conveyed by the husband to the wife on January 22, 1953, a new mortgage was given by the wife in the sum of $1 ,500 and the former mortgage was discharged a few days later. In those circumstances, and bearing in mind the principles referred to by my brother Le Bel in Ferguson v. Lastewka, [1946] 4 D.L.R. 531, O.R. 577, I am of the opinion that the Minister has shown good reason to suspect that the conveyance made by the defendant to his wife in January, 1953, was fraudulent within the meaning of that term as it is used in s. 2 of the Fraudulent Conveyance Act, R.S.O. 1950, c. 148. I think, too, that on the authority of Bell v. Williamson , [1946] 1 D.L.R. 372, [1945] O.R. 844, the plaintiff in this action is a person who is entitled to bring proceedings to set aside that conveyance. That being so, I hold that it was then for the plaintiff to satisfy me that this failure to take proceedings to set aside that conveyance was not unreasonable. I think that he has shown that. His first argument is that even if it were possible to set aside the conveyance as fraudulent, and he concedes that there is much in the evidence which would suggest that it was given by the defendant to his wife to defeat the claim of the plaintiff, the execution would not operate against the defendant's share or interest in the equity of redemption, his contention being that a writ of execution will not be effective against an equity of redemption of one person in a property held by joint tenants. In support of that Mr. Robins relies heavily upon the decision given by my brother Barlow in Re Tully et al., [1953] O.W.N. 661 and the authorities therein cited. An examination of the Tully case and Armour on Titles, 4th ed., pp. 183-4, a text deserving of great respect, would indicate that the proposition put forward on behalf of the plaintiff in this aspect of the matter is sound. However, there is also a judgment of my brother Kelly in Re Kates et al. v. Morrison, [1951], 4 D.L.R. 260, O.W.N. 701, in which it was held that the joint interest in real property is severable and that one of such interests may be sold under execution. That judgment is, of course, in direct conflict with the decision in Re Tully, and is based upon a decision of the late Mr. Justice Fisher and the Court of Appeal for Ontario in Re Craig, [1929] 1 D.L.R. 142, 63 O.L.R. 192. I have examined Re Craig and it would seem to provide authority for the

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proposition stated by my brother Kelly, the report stating that "the Court dismissed the appeal ... holding that the joint estate was severable and the interest of one joint tenant could be sold under an execution" and there the joint estate was in an equity of redemption. Barlow J. suggests that Re Craig did not govern the situation before him in Re Tully because the argument presented to him was not submitted to the Court of Appeal in Re Craig, and also because the Sheriff in Re Craig had actually sold the interest of the one joint tenant. It would seem to me that the argument heard by Barlow J. was advanced to the Court of Appeal to suggest that its decision was based upon the fact that the Sheriff had made an actual sale. If the execution was ineffective the sale was bad and I would have expected the Court of Appeal to have said so. For those reasons, and notwithstanding the statements contained in the Tully case and in Armour on Titles, I am inclined to the view that Kelly J. was right when he followed Re Craig and held that a joint interest in an equity of redemption may be sold under a writ of execution. It is to be observed that the cases upon which Mr. Armour bases his conclusions are old ones and that the last edition of his work was published in 1925, some 3 years before the Court of Appeal decided Re Craig. Moreover, it would appear that Re Kates was not cited to Barlow J. A decision on that point is not really necessary, however, because I am not by any means satisfied that the plaintiff should be expected to take proceedings to set aside the conveyance. In other words, I do not think it would be reasonable to ask him to do so in the circumstances of this case and in that respect I refer to the instructive judgment of the former Chief Justice of Ontario in Re Abramson v. Johnson, [1952) 1 D.L.R. 394, [1951) O.W.N. 792, which is as important today as it was before the passage of the new sub-clause (iii) of s. 98 ( 4) ( d) . Counsel for the plaintiff admitted that the property in question today had a value of about $5,200. He also conceded that the mortgage had been reduced to about $1,350, which would mean that the defendant's interest would have a marketable value of $1,925 upon an orderly realization. However, I do not think for one moment that enough would be recovered on a sale of this property, which would necessarily have to be made by the Sheriff, to warrant the expensive litigation upon which the plaintiff would have to embark to reach the point where a sale could take place. The judgment and costs in this action come to approximately $3,000 and even if the plaintiff did succeed in having ·the defendant's interest in the property re-established, it is difficult to imagine that anything but a very small amount would be realized on a sale, having regard to the value of his interest in the property, the fact that very few persons, if any, would wish to buy a half interest in that property in the present state of affairs, the fact that any outsider who did purchase would thereby incur the possibility of further litigation, and, lastly the fact that it would appear that the wife, who is the other person interested therein, is not a person of means and thus would be unable to make any reasonable bid for her husband's half-interest on a forced sale. If proceedings were taken to set aside the conveyance the plaintiff would be required to undertake an expense in costs which might reasonably exceed the amount realized on the sale of the defendant's half-interest. In the circumstances therefore, I hold that all reasonable steps have been taken by the plaintiff to recover on his judgment and that the amount of it and costs may be paid out of the Fund. There is one other matter to which I should perhaps make reference. Mr. Leitch, in his exhaustive argument, contended that, even without the conveyance from the husband to the wife in January, 1953, the plaintiff should be obliged to bring

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proceedings for a declaration that the wife has no interest in the property whatsoever, by reason of what took place when it was acquired in 1950. I do not give effect to that argument. The Minister would have to show that such a proceeding would probably be successful and I do not see how he could do that in the face of the presumption of advancement in favour of the wife and because of the evidence which suggests that she contributed something toward the property. Because this application is quite out of the ordinary, I am going to order that the costs be truced. This suggestion does not meet any opposition from Mr. Leitch. In Ontario, by an amendment to the Execution Act, 1957 Stat., c. 31, s. 4, the words "and including any interest of the execution debtor in lands held in joint tenancy" were added to s. 8, thus clearly making a joint tenant's interest in land exigible. RE MONTGOMERY & WRIGHTS LTD. Supreme Court of Ontario. 1917. 38 O.L.R. 335. MOTION by J.D. Montgomery, the vendee at a sheriff's sale of one share of the capital stock of Wrights Limited, an incorporated company, for a mandatory order directing the company to record the applicant as owner of the share. MIDDLETON, J. : Under a writ of execution against C.F. Wright dated the 15th November, 1915, the sheriff seized and sold one share of stock standing in the name of the said C.F. Wright to the applicant, who paid $80 therefor; and this sum has now been paid over to the creditors holding executions, under the provisions of the Creditors Relief Act, R.S.O. 1914, ch. 81. The seizure was, I assume, made after the 2nd February, 1916, on which date Wright was examined as a judgment debtor, and stated on oath that he owned the share. After the sale by the sheriff, Roland C. Nelles, an employee of the company, made claim to the ownership of the stock or to some lien thereon, asserting that he had "the stock," which, as I understand it, means the certificate, in his possession since the 15th January, 1916, as security for $306 advanced by him to Wright. It is now argued that the execution bound the share from the time it was placed in the sheriff's hands; and that, assuming the statement of Nelles to be true, he has no title as against the purchaser. I do not so understand the law. At common law an execution bound goods from the date of its issue. The Statute of Frauds changed this and made it bind only from the time it was placed in the sheriff's hands for execution; and now this is again modified by protecting the rights of a bona fide purchaser without notice of the writ being in the sheriff's hands for execution: Execution Act, R.S.O. 1914, ch. 80, sec. 10 [now 9 (1) ]. But this applied only to goods which were by common law exigible under the writ; and when, by statute, other property was made exigible, it was, generally speaking, made liable only from the time of actual or constructive seizure. This was so determined by that master of common law practice, Mr. Dalton, as to stock, in Hatch v. Rowland (1870), 5 P.R. 223; and as to choses in action by Van Koughnet, C., in McDowell v. McDowell (1862), 1 Ch. Chrs. 140; and as to the equity of redemption in chattels, in Allan v. Place (1908), 15 O.L.R. 476. A transfer of stock must, it is true, be duly recorded to complete the title but any unrecorded dealing is not void, but is valid as "exhibiting the rights of the

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parties thereto towards each other." Companies Act, R.S.O. 1914, ch. 178, sec. 60. An execution creditor can take only the true interest of the execution debtor, and this principle applies to cut down the apparent to the true title in the case of stock. The true interest alone is exigible : Morton v. Cowan ( 1894 ) , 25 O.R. 529. The purchaser must therefore elect to take an issue with Nelles as to the bona tides of his claim, or the application must be refused. If an issue is taken, costs will be reserved to the trial. If not - no costs. In Malouf v. Labad (1912), 3 O.W.N. 1235 at p. 1236, Riddell J. similarly stated: "In the application of a statute making exigible what was not exigible at the common law, we must attend to the exact wording of the statute . .. . There can be no doubt that .. . stock would not have been exigible at the common law".

RE PHILLIPS AND LA PALOMA SWEETS LIMITED

Supreme Court of Ontario. 1921. 51 O.L.R. 125.

Motion by one Phillips for a mandatory order directing the proper officers of La Paloma Sweets Limited, an incorporated company, to record a transfer of shares of the company's stock and to issue a proper share certificate to the applicant. MIDDLETON, J.: By letters patent issued on the 25th July, 1917, Bistrey's Limited was incorporated pursuant to the provisions of the Ontario Companies Act, the letters of incorporation containing the provision that the company shall be a private company, and the following provisions shall apply thereto : " ( 1 ) The shares of the company shall not be transferred without the consent of the board of directors." The number of shareholders is limited to 50, and any invitation to the public to subscribe for shares, debentures or debenture stock, is prohibited. On the 25th June, 1918, the name of the company was changed to La Paloma Sweets Limited. The capital stock of the company consisted of 4,000 shares of $10 each. According to the certificate produced, 1,103 shares have been issued, of which one Ginoff appears to hold 100. On the 1st June, 1921, an execution against Ginoff having been placed in the hands of the sheriff, the sheriff served a notice, based upon the writ of execution, seizing the shares standing in his name, and in due course, on the 27th June, this stock was sold.to Phillips by the sheriff, Phillips having paid to the sheriff $955 for the $1,000 of stock. Phillips then requested that the transfer to him should be recorded, but this was refused by the company upon the ground that, according to the terms of the charter, the stock could not be effectually transferred without the consent of the directors, and that the directors did not desire to admit Phillips as a shareholder. Phillips asserts that the stock is worth at least $12 per share, or 20 per cent above par, and expresses his readiness to transfer the stock to any nominee of the company or its directors at an advance upon its cost to him sufficient to compensate him for his trouble and expense with a reasonable profit. What motive led to the purchase of the stock is not disclosed. Phillips is not an execution creditor, and does not appear to have been interested in the matter before he purchased the stock. Under the statute (the Ontario Companies Act, R.S.O. 1914, ch. 178) a "private company" is one in which, inter alia, "the right to transfer its shares is restricted", sec. 2 ( c) ( i) ; and by sec. 56 (1 ) , shares are to be transferable "in such manner and subject to such conditions and restrictions as by this Act . . . (or) the letters patent .. . may be prescribed."

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The provision in the charter is, therefore, valid. It is elementary law that an execution creditor, apart from some statutory provision, has no greater right than the execution debtor, and that the sheriff's sale can only give to the purchaser the right and title of the debtor; so here the applicant has no greater or other right than the execution debtor unless he can point to some statute assisting him. The case law is collected and discussed in Lindley on the Law of Companies, 6th ed., vol. 1, p. 647, and it is there stated as the result that when by the constitution of the company the consent of the directors is required, "the power of assenting or dissenting to a transfer is reposed in them as trustees, and they must exercise that power accordingly, and not capriciously. At the same time, if their consent to a transfer is necessary, and, in giving or refusing their consent to a transfer, they act bona fide, with a view to the protection of the interests of the company, the exercise of their discretion will not be interfered with .... If the directors refuse their consent to a transfer they are not bound to state their reasons for refusal . . . ; if their conduct is questioned the onus of proving that they have acted improperly is on the person complaining of their conduct." In the case of a private company the situation is not essentially different from a partnership, and it is almost impossible to imagine any case in which the Court would interfere unless some flagrantly improper motive could be shewn, e.g., an attempt by the directors to force a sale to themselves at a gross under-valuation. No suggestion of mala tides is here made. Reliance is placed upon the provisions of the Execution Act, R.S.O. 1914, ch. 80, sec. 12 [now 11) et seq. That statute provides only for the seizure and sale of "transferable shares." That, I think, does not include shares which can be transferred only with the consent of the directors, but applies only to shares which the debtor can freely transfer. The provision found in the Companies Act, sec. 60, must be regarded as subordinate to the wider provision in sec. 56 ( 1), and cannot be intended to conflict with the power which it gives to restrict the right to transfer. It is said that this will leave an execution creditor of a shareholder in such a company without remedy. I do not think that that is so, as a receiver may be appointed to receive all dividends payable. Apart from the statute, this was the only remedy of the creditor of one member of a partnership. Subsequent to this case the present s. 12 was added to the Ontario Executions Act (Stat. 1929, c. 35, s. 4), thus providing statutory authority for the seizure and sale of shares in a private company. Quaere whether s. 12 would apply to a Dominion company, or to one incorporated in another province.

MUTUAL FINANCE CORP. LTD. v. GANLEY Supreme Court of Ontario. [1934) 1. D.L.R. 451. MOTION for judgment in action for a declaration as to the validity of a chattel mortgage. FISHER, J.A.: This is a motion for judgment. The plaintiffs' action is for a declaration that a certain chattel mortgage held by the defendant against the goods and chattels of one McAllister, is not a valid security as against the plaintiff, an execution creditor of McAllister. A statement of defence was filed and counsel for both parties agreed to state a case for the opinion of the Court under Consolidated Rule 126 [now 128).

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The facts - agreed upon - and about which there is no dispute are: On November 30, 1931, Raphael McAllister and his wife Elizabeth executed a chattel mortgage upon his goods and chattels in favour of the defendant and the mortgage was filed within the statutory period. On January 22, 1932, the plaintiffs recovered judgment against McAllister for $1,481 and costs, and an execution was issued and under it the sheriff made a seizure on January 27, 1932. The defendant claimed the goods under his chattel mortgage and the seizure was abandoned. The defendant filed a renewal statement of a chattel mortgage on September 23, 1932. According to s. 24 ( 1) of the Bills of Sale and Chattel Mortgage Act, R.S.O. 1927, c. 164, the renewal statement should have been filed "within thirty days next preceding the expiration of the said term of one year," and admittedly the renewal statement filed on September 23, 1932, was not within that period. Because the renewal statement was not filed, as by statute required, the plaintiffs relying on s. 24 of the Bills of Sale and Chattel Mortgage Act that the mortgage was void as against creditors of the mortgagor, caused the sheriff to make a second seizure on June 8, 1933, and on June 16, 1933, the sheriff was instructed to interplead. Subsequently, on June 19, 1933, the defendant made an ex parte application to the County Judge under s. 2 of 1933 (Ont.), c. 3 amending s. 24 of the Bills of Sale Act, for leave to permit the filing and registering of a new renewal statement. The goods and chattels seized have remained in custodia legis since the seizure was made on June 8, 1933. Section 2 of 1933 (Ont.), c. 3 amending s. 24 reads: " ( 11 ) Where a statement of renewal is not duly registered within the time prescribed by this section, the judge of the county or district court may permit the same to be registered at a later date upon being satisfied by affidavit, or affidavits, that the failure to register arose from misadventure, ignorance or some other cause which constitutes a reasonable excuse, and that the parties have acted and are acting in good faith, but in such case the renewal statement shall as against creditors of the mortgagor, or as against subsequent purchasers or mortgagees, in good faith for valuable consideration who have purchased or have given credit after the expiry of the mortgage but before registration be deemed to have been executed and to be effective only from the date of registration." The learned Judge made the order and from that order there has been no appeal. The question submitted for the opinion of the Court is: "Were the goods and chattels referred to in the defendant's chattel mortgage protected thereby from seizure on June 8, 1933, by the plaintiff, an execution creditor in the circumstances herein set forth." The Act received the Royal Assent on and became effective from April 18, 1933. The intention of the Legislature in passing the 1933 amendment was to give relief ( subject to the limitations therein set out) to a chattel mortgagee, if a Local Judge upon an application to him, was convinced that the parties had acted in good faith and that the failure to file a renewal statement within the statutory period arose from or was due to "misadventure, ignorance or some other cause which constitutes a reasonable excuse." The question submitted concerns only the meaning of s. 2 amending s. 24. In my opinion the amending Act is to be read and given a prospective and not a retrospective meaning and that if so read, it is clear that any renewal statement

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filed pursuant to the order of the County Judge becomes effective only from its date of registration. In this case the registration of the renewal statement was at a time subsequent to the order of the Local Judge, and as a consequence the chattel mortgage ceased to be valid against the plaintiffs' execution and the seizure made thereunder. The same result may be reached by a consideration of the said s. 24 ( 11 ) when read withs. 9 of the Execution Act, R.S.O. 1927, c. 112, as amended by 1929 (Ont.), c. 35, s. 2. Under s. 9 as amended an execution against goods binds goods from the time of the delivery of the fi. fa . to the sheriff but except in case of bills of sale and chattel mortgages, purchasers are protected where no actual seizure has been made by the sheriff and there is no actual notice of the writ of execution. This clearly must mean that the bargainee in the bill of sale or a chattel mortgagee must take subject to any execution in the sheriff's hands, at the date of execution of his bill of sale or chattel mortgage with or without notice thereof, and whether or not a seizure has been made. In the case before me, therefore, when the fi. fa. was filed with the sheriff on January 27, 1932 the execution creditor's rights were subject to the chattel mortgage. When, however, the chattel mortgage expired, not having been properly renewed on November 30, 1932, and thereupon under s. 24(1) of the Bills of Sale and Chattel Mortgage Act became void against creditors of the mortgagors, the execution creditors under s. 9 of the Execution Act, acquired a vested right against the goods defeasible only by the acquisition of rights by an innocent purchaser and also when the seizure was made by the sheriff on June 8, 1933 that vested right became indefeasible under s. 9 of the Execution Act. Under the news. 24( 11) a renewal statement filed late by leave of the County Judge is only effective "from the date of registration" as against creditors who have given credit after the expiry of the mortgage. This clearly is intended to protect creditors who have acquired vested rights in the interval between expiry of the mortgage and its renewal and a liberal construction of the subsection in aid of those rights intended to be protected requires an interpretation under which creditors who have given credit be held also to include creditors who have acquired vested rights as the execution creditors in this case. It should be noted that s. 24 ( 1 ) does not permit the validity of a renewal statement filed at a too early date. Also, as I have pointed out before, the news. 24( 11) is not retrospective in its operation and the execution creditors having acquired vested rights under their execution by virtue of s. 9 of the Execution Act on the expiry of the mortgage on November 30, 1932, the amended statute which came into force on April 18, 1933, is not effective to permit of a renewal statement being filed even with the requisite leave so as to take away those vested rights. On all these grounds, therefore, the priority obtained by the plaintiffs on the expiry of the defendant's chattel mortgage was not affected by the subsequent renewal of that mortgage by leave of the County Judge. If I may so state, I think that a County Judge on applications to him under the amended Act, should exercise caution before making an order, because if granted without disclosure of the plaintiff's intervening rights, it amounts practically to an abuse of process, and if the plaintiff's rights were disclosed, should not have been granted at least not ex parte. There will therefore be judgment for the plaintiffs declaring that the defendant's chattel mortgage ceased to be valid against the plaintiffs upon its expiry by failure to renew in accordance with the statute.

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The plaintiffs are entitled to their costs of the action including the costs of this motion. IN RE DAINTY CONFECTIONS LIMITED. TRUSTEE v. HOPPER. Ontario Court of Appeal. 1936. 18 C.B.R. 67. LATCHFORD, C. J. A. (dissenting): The facts of this matter are not in dispute and are accurately stated in the judgment appealed against. On June 18th, 1936, McEvoy, J., sitting as a Judge in Bankruptcy, decided, on an appeal from the report of the Registrar in Bankruptcy, ( 1936), 17 C.B.R. 195, that a chattel mortgage not duly renewed within the time limited by sec. 24( 1) of The Bills of Sale and Chattel Mortgage Act, R.S.O. 1927, ch. 164, was invalid and void as against the trustee and the creditors of Dainty Confections Limited, notwithstanding an order made pursuant to the amendment of the Act by 1933 (Ont.), ch. 3. I think that upon the true construction of the amendment of 1933 the chattel mortgage as renewed cannot prevail against the trustee in bankruptcy. The authorized assignment in bankruptcy of The Dainty Confections Company had been made on February 13, 1936, and on March 6th, the respondent had been duly appointed trustee of the bankrupt. The date of the registration of the renewal was March 25th, 1936. Failure to file the renewal statement within the time prescribed by sec. 24 ( 1) of The Bills of Sale and Chattel Mortgage Act rendered the chattel mortgage invalid as against the creditors of the mortgagor. The "expiry" - to use the word in the amendment of 1933 - continued until the registration of the statement on the 25th March. By sec. [41 ( 5)] of The Bankruptcy Act as soon as the receiving order was made the bankrupt ceased "to have any capacity to dispose of or otherwise deal with his property affected by the receiving order". That was to be deemed to be in the custody of the Court. Then, upon the appointment of a trustee, such property, subject to the rights of secured creditors, if any, forthwith passed to and vested in the trustee. The mortgagee in this case was not a secured creditor as against the trustee. When he failed to file a renewal statement within the time fixed by sec. 24( 1) of The Bills of Sale and Chattel Mortgage Act, he lost any priority to other creditors which he previously had. The filing of the renewal statement, if effective, was only so from the date of its registration. In the meantime, the mortgagee had ceased as against creditors of the bankrupt to have any interest in the chattels covered by the mortgage. After March 6 the trustee was vested with the mortgaged property both as a trustee in bankruptcy and as a "creditor" under the interpretation clause 1 ( b) of The Bills of Sale and Chattel Mortgage Act. If in the interval between the expiry of the mortgage as against creditors and its renewal, a sale of certain of the mortgaged property had been made by the mortgagor for valuable consideration to a purchaser acting in good faith, the sale would be valid as against the trustee and as against other creditors. However no such sale took place. Similarly the claim of a person who had in the same interval given credit to the mortgagor would to the extent of such credit be protected, but there is no evidence that any credit whatever was so given. Hence the protection afforded to such purchasers and creditors by the amendment of 1933, ch. 3, sec. 2 has no application to this case.

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I therefore think the appeal should be dismissed with costs. FISHER J. A.: This is an appeal by the defendant from the order of McEvoy, J., dismissing an appeal from the report of the Registrar in Bankruptcy. The debtor made an authorized assignment on February 17, 1936. On the 10th December, 1934, the debtor had given a chattel mortgage to the defendant. The trustee impeached the validity of the mortgage before the Registrar upon two grounds: (a) that the affidavit of bona fides was sworn to prior to the execution of the mortgage, and ( b) that a proper renewal statement was not filed within the time limited by sec. 24( 1) of The Bills of Sale and Chattel Mortgage Act, R.S.O. 1927, ch. 164. There is no appeal on ground (a). It is admitted that the renewal statement was filed seven days before the time limited by sec. 24( 1) and the contention of the trustee is that by failure to file the renewal statement pursuant to sec. 24 ( 1 ) the defendant ( the mortgagee) was not under the chattel mortgage entitled at the date of the assignment to rank as a secured creditor. It appears that the defendant was not aware of the error made in not filing his renewal as required by the Act until the 20th March, 1936, when he received a letter from the trustee. After the defendant had received the letter from the trustee, he instructed his solicitor to make an application to the County Judge under sec. 24(11) of The Bills of Sale and Chattel Mortgage Act, as enacted by 1933 (Ont.), ch. 3, sec. 2, for leave to file a fresh renewal statement. His Honour Judge Jackson, to whom the application was made granted leave to the defendant to file a new renewal statement. The order is dated March 24, 1936, and is in these words: "It is ordered that the said Garnet H. Hopper be at liberty to register a renewal statement of the chattel mortgage dated the 10th day of December, 1934, and registered in the office of the Clerk of this Court on the 15th day of January, 1935, notwithstanding that the renewal statement was not registered within the thirty days immediately preceding the 15th day of January, 1936." Subsequently an order was made on April 2, 1936, by McEvoy, J., directing the trial of an issue between the trustee and the defendant and the question to be tried was, "Whether the said chattel mortgage may be amended and validated and the error or errors or omissions, if any, in the said chattel mortgage corrected and whether the renewal statements filed in connection with the said chattel mortgage are valid under the provisions of The Bills of Sale and Chattel Mortgage Act being R.S.O. 1927, ch. 164 and amendments thereto." Upon the trial of the issue the learned Registrar found in favour of the trustee, (1936), 17 C.B.R. 295, and McEvoy, J., on application to him, without written reasons confirmed the Registrar's findings. The neat question for determination is, did the order of the County Judge permitting a new renewal to be filed so validate the mortgage as to make it good, valid and subsisting security "as against creditors of the mortgagor, or as against subsequent purchasers or mortgagees in good faith for valuable consideration who have purchased or have given credit after the expiry of the mortgage but before registration, be deemed to have been executed and to be effective only from the date of registration"? The order of the County Judge was not appealed against. Something was said during the argument before this Court that the County Judge had not been informed prior to his making the order that the debtor company had made an

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authorized assignment, but in the view that I take of this matter that need not be considered. The purpose of sec. 24 ( 11) as enacted by 1933 (Ont.), ch. 3, sec. 2, in permitting a renewal statement to be filed at a later date, providing the failure arose from "misadventure, ignorance or some other cause which constitutes a reasonable excuse, and that the parties have acted and are acting in good faith", was in relief of an honest mistake made. But the new renewal, if granted, was not to restore the mortgage to the secured classes to the prejudice of creditors of the mortgagor and subsequent purchasers or mortgagees in good faith and who had extended credit to the mortgagor between the time the renewal should have under the statute been filed and the date of the order of the County Judge. A further purpose of the Act was to prevent innocent persons giving credit or purchasing, on the strength of the title suggested by possession of goods and being defrauded by the intervention of prior rights of holders of securities upon goods of which creditors or purchasers had no notice. It is admitted that no creditors or mortgagees or purchasers arose during the intervening period and the only thing that did happen before the order was made, was the authorized assignment in bankruptcy. Under the cases a trustee in bankruptcy is a creditor but the question is, Is a trustee in bankruptcy a creditor who has given credit for valuable consideration after the expiry of the mortgage but before the registration of the renewal? If he is, the renewal is not effective as against him. The fact is that not one dollar of credit had been extended to the debtor by anyone during the period in question. It was stated in Mutual Finance Corpn. Ltd. v. Ganley, [1934] O.W.N. 1, that creditors who gave credit included creditors who may have acquired a vested interest in the debtor's property, but in my opinion that statement means a vested interest acquired for which valuable consideration was given. The mortgage in the Ganley case had expired before the 1933 Act and as that Act was not a retroactive one, cannot be considered as a binding authority in this appeal. The case referred to by the learned Registrar in his reasons, In re Parsons; Ex parte Furber, [1893] 2 Q.B. 122, 62 L.J.Q.B. 365, is not applicable here, as that decision was under the English statute and entirely different to ours. My conclusion is that the defendant's mortgage is a good, valid and subsisting security and he is entitled to rank as such. I would allow the appeal with costs here and below. MACDONNELL, J.A.: ... It is obvious that the purpose of this enactment [S. 24(11) of The Bills of Sale and Chattel Mortgages Act, as enacted by 1933, c. 3, s. 2, and amended by 1935, c. 5, s. 2] is to give the holders of chattel mortgages relief against innocent mistakes. A mortgagee is evidently to be put, as far as is just, in the position he would have been in if a mistake had not been made; at the same time provision is made to prevent the rectification of a mistake from working to the detriment of persons who deserve to be protected. It seems clear that, generally speaking, the registration of a renewal statement at a later time takes the place of registration as required by sec. 24 ( 1 ) ; if such registration is made, the mortgage never ceased to be valid. But there is this limitation, that the renewal statement is to be effective, as against certain persons, only from the date of registration; and this must mean that, during the interval between the time when registration should have been made under sec. 24( 1) and the time when it was later made under sec. 24 ( 11 ) , the mortgage is invalid as against those persons. But who are those persons? Here a difficulty arises because of the wording and punctuation of the enactment. For the defendant it is contended that the persons meant are those, and only those, who have made purchases or have given credit in the interval named. On the other hand it is said that the enactment cannot be so interpreted, for by the

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wording of it the persons meant are distinctly divided into two classes, ( 1) creditors of the mortgagor and (2) subsequent purchasers or mortgagees who have purchased or have given credit in the interval. The difference is important, for in the latter view the mortgage is invalid as against all creditors, while in the former the creditors against whom it is invalid are only those that have given credit in the interval. The matter turns upon whether or not the words "have given credit" should be regarded as relating back to "creditors of the mortgagor." It is said that, as a matter of grammatical construction, they cannot be so regarded, that the insertion of a comma after "creditors of the mortgagor" and the repetition of the words "as against" prevent such a construction. But is this the case? Is it not merely a matter of punctuation, a matter of inserting in its proper place the comma omitted by the draftsman? A comma has been inserted after "creditors of the mortgagor" but is not followed by another corresponding to it; yet clearly another is required. Where is it to be put? Is it to be inserted after the words "for valuable consideration" or before the words "be deemed to be effective"? In my opinion there can be no doubt that the former position is to be preferred. We then have two distinct classes of persons mentioned, the same two classes as are mentioned in sec. 24 ( 1), first, creditors of the mortgagor, and, second, purchasers or mortgagees in good faith for valuable consideration; and each class is limited to those who have purchased or have given credit in the interval. So read, the enactment is grammatical; the words are used in their ordinary sense; both classes of persons are treated with equality; and the evident intention of the Legislature is fulfilled. For the alternative construction little can be said except that it succeeds in being grammatical. What is to be made of the expression "have given credit", as applied to purchasers or mortgagees? It is quite inappropriate as applied to purchasers. If mortgagees are regarded as being a kind of purchaser (National Discount Corpn. v. Frech and Jackson (1928), 61 O.L.R. 659), it is again inappropriate; if they are regarded as creditors, the question arises why mortgagees as creditors should be given lesser rights than other creditors? In any event, on what principle should creditors who have not given any credit in the interval be put in a preferred position? Can it be thought that such was the intention of the Legislature. It may be remarked that the expression "the expiry of the mortgage" cannot be taken literally. If it were so taken, it would make the whole provision meaningless; nobody would ever register a renewal statement after the mortgage itself had expired. Obviously what is meant is the expiry of one year from the day of the registration of the mortgage, the expression used in sec. 24 ( 1 ) . And in this sense it may be understood; to quote the famous words of Lord Wensleydale in Grey v. Pearson (1857), 6 H.L. Cas. 61, at p. 106, 26 L.J. Ch. 473: " . . . in construing wills and indeed statutes, and all written instruments, the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity, or some repugnance or inconsistency with the rest of the instrument, in which case the grammatical and ordinary sense of the words may be modified, so as to avoid that absurdity and inconsistency, but no farther." The conclusion must be that "have given credit" relates back to "creditors of the mortgagor" and that, where permission is given later to register a renewal statement, the only creditors against whom a mortgage is invalid are such as have given credit in the interval.

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The plaintiff, as trustee, is no doubt a creditor; but he is not one that has given any credit in the interval; no credit of any kind was so given. Why then should the mortgage not be a valid security as against him? The plaintiff denies the right of the Court to make such an order as the one in question after once bankruptcy has intervened; and for authority he relies on the decision in In re Parsons; Ex parte Furber, [1893] 2 Q.B. 122, 62 L.J.Q.B. 365. In that case the holders of a bill of sale had neglected to renew registration within the time limited, the debtor had become bankrupt, and application was made to the Court under The Bills of Sale Act, 1878, to extend the time for registration. The Court of Appeal was unanimous in refusing the relief asked, the ground for refusal being simply that the property had vested in the trustee and that it was not right, even if the Court had the power, to rectify the blunder after some third person ( the trustee) had acquired a vested interest in the property. But what, it may be asked, is vested in the trustee? Only the title of the debtor. The trustee stands in the shoes of the debtor and whatever title he takes to the debtor's property is subject to all equities and to every right that can be asserted against the debtor himself. The title of the debtor is subject to this mortgage. It is not a case of divesting in any way the property from the trustee; it is a case solely of determining what property is vested in him. In In re Eastgate; Ex parte Ward, [1905) 1 K.B. 465, 74 L.J.K.B. 324, it was stated (p. 467) that the trustee took subject to the rights of third parties and that one of these rights was the right of the vendor to disaffirm a contract and retake possession of the goods. Similarly, in the case at bar, the trustee takes subject to the rights of the defendant; and one of these rights is, by virtue of sec. 24(11), to have the validity of his mortgage continued as against all persons except such as are specifically mentioned. Although both the English Act and ours deal with similar subject matter, the provisions of the one differ in important respects from those of the other. The English Act, by sec. 14, provides that "Any judge of the High Court of Justice on being satisfied that the omission to register . . . within the time prescribed . . . was accidental or due to inadvertence, may in his discretion order such omission . .. to be rectified ... by extending the time for such registration on such terms and conditions . . . as he thinks fit to direct." In this there is no indication of what persons are to be protected; it was therefore open to the Court to declare that no interference should be made with the position of a trustee in bankruptcy. But the situation with us is quite different, for our Act specifically names the classes of persons to be protected; in accordance with the maxim inclusio unius est exclusio alterius, therefore, the Court should not attempt to protect persons not named. If the Legislature wishes to protect trustees in bankruptcy or execution creditors, or others, it should say so. It is said that the defendant, in obtaining the order in question here, is improving his relative position among creditors after the intervention of bankruptcy, which is contrary to the scheme of the Bankruptcy Act (In re General Fireproofing Co. of Canada, 17 C.B.R. 371, at p. 378, [1936) O.R. 510, at p. 524). Distinction must be made, however, between the taking of some step that one has chosen not to take or has neglected to take and the mere curing of a technical defect in some step already taken. To allow such a defect as we have here to be rectified, in accordance with a statute passed expressly for the purpose, is not so much an improvement of the creditor's relative position as an assertion of what was his proper position at the date of the bankruptcy. Both from the point of view of natural justice and from that of technical application of the law there appears to be no reason why the mortgage in question

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should not be held to be a valid security for the defendant as against the trustee. I would therefore allow the appeal; the defendant is entitled to his costs here and below from the trustee, who may recoup himself out of the estate. IN RE DUROCHER Supreme Court of Ontario in Bankruptcy. 1957. 36 C.B.R. 122. SMILY, J.: On October 29 last an application by the applicant, who is the trustee of the estate of the above-named bankrupt, for an order : "(1) declaring that a Chattel Mortgage dated the 5th day of February, 1955 made between Edward Elie Durocher as Mortgagor and one Gordon Y oungson Disley as Mortgagee and covering the stock in trade of the Mortgagor located at the LG.A. Store, Notre Dame Street, in the village of Belle River, in the County of Essex is Null and Void against the said Omer W. Cox, the Trustee of the Estate of the said Edward Elie Durocher in that the said Chattel Mortgage and the regisration thereof does not comply with the provisions of The Bills of Sale and Chattel Mortgages Act" was dismissed on counsel for the applicant representing to the Court that he considered he was bound by the judgment of the Court of Appeal in the case ofln re Dainty Confections Limited (1936), 18 C.B.R. 67, 1 Abr. Con. (2nd) 1022, wherein it was held that a chattel mortgage which had not been renewed within one year from the day of the registration thereof by the filing of a renewal statement, as provided in The Bills of Sale and Chattel Mortgages Act, (then R.S.O. 1927, c. 164, s. 24(11), as amended by 1933 c. 3, s. 2), but where after an assignment in bankruptcy by the chattel mortgagor an order was obtained from a Judge of the County Court allowing a renewal statement to be registered and the same was then registered, was a valid security for the chattel mortgagee as against the trustee. As counsel for the applicant did not wish to proceed with the application it was accordingly dismissed. The said applicant, the trustee of the said above-mentioned estate, now asks for a re-hearing of the application upon the ground that there are creditors who gave credit "between the expiry of the chattel mortgage and the date of the sale of the business by the bankrupt" and that, therefore, the said case of In Re Dainty Confections Limited is distinguishable. It appears that upon the return of the application on October 29, 1957, counsel for the applicant, the trustee in bankruptcy, was not aware that there were creditors who had given credit after the expiration of the year from the registration of the chattel mortgage, and in the Dainty Confections Limited case it was pointed out that there were no creditors who had given credit after the expiration of the year from the registration of the chattel mortgage and before the bankruptcy of the chattel mortgagor, or the order granting leave to register the renewal statement. The facts of the two cases are similar with respect to the fact that the order permitting registration of a renewal statement was in each case made after the assignment in bankruptcy. It was held by the majority judgment in the Re Dainty Confections Limited case that where permission is given later to register a renewal statement, the only creditors against whom the mortgage is invalid are such as have given credit in the interval between the expiration of the year and the registration of the renewal statement, and, as there were no such creditors in that case, it was held that the mortgage in question was a valid security for the chattel mortgagee as against the trustee. The difference between the case at bar and the Re Dainty Confections Limited case is only that in the case at bar there are credi-

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tors who have given credit between the expiration of the year and the registration of the renewal statement, or, in particular, before the date of the sale of the business by the bankrupt. Section 144 of The Bankruptcy Act provides, in subs. 5: "(5) Every court may review, rescind or vary any order made by it under its bankruptcy jurisdiction." Counsel for the respondent, the chattel mortgagee, contended that it was in the discretion of the Court to refuse to review the previous order and that it should exercise its discretion here by so doing. However, it is not suggested that the chattel mortgagee is prejudiced by the Court reviewing the previous order other than by the possibility of making a different disposition of the application. In my view, there is no reason why the Court, in this case, should refuse to review the order if it appears from the facts not to be the correct one. While the applicant is asking that the said chattel mortgage should be declared null and void as against the trustee, I am of the opinion that I am bound by the judgment in the case of In Re Dainty Confections Limited, supra, and, according to the judgment therein, the chattel mortgage in question in the case at bar is invalid only as against all creditors who have given credit in the interval between the expiration of the year and the registration of the renewal statement, or, in this particular case, the sale of the business by the mortgagor, the bankrupt, as, of course, there were no creditors of the bankrupt after the sale of the business which would be in question. I think this result is plainly covered by the judgment, in particular, of Macdonnell J.A., and his reasoning is applicable to the facts of this case with respect to such result. There will be a declaration accordingly. The order of October 29 will of course be rescinded. The costs of the trustee for the applicant should be paid out of the estate, and the respondent should be paid, out of the estate, his costs lost or thrown away by reason of the re-hearing such as the attendance upon the previous hearing on October 29 and the proceedings following that hearing until the re-hearing, but not including attendance or counsel fee on the re-hearing. There should be no further order as to costs. In J. Dubisky & Sons Wholesale Ltd. et al. v. Crystal Dairy Ltd. ( 1964), 45 D.L.R. (2d) 478 the Appellate Division of the Alberta Supreme Court, interpreting s. 13 of the Bills of Sale Act, R.S.A. 1955, c. 23 (which is substantially identical withs. 24(1) of the Ontario Bills of Sale and Chattel Mortgages Act), held that an execution creditor was not a person who could claim that failure to renew a chattel mortgage within the proper time rendered the mortgage invalid as against him, since he was neither a creditor of the mortgagor nor a subsequent purchaser or mortgagee claiming from or under the mortgagor in good faith for valuable consideration and without notice. It was held in John Forsyth Co . Ltd. v. Thorburn (1963), 42 D.L.R. (2d) 692 (Ont.) by Donnelly J. that, where a chattel mortgagee failed to renew his mortgage in time (but later had it renewed by leave), a seizure and sale by him under the mortgage is valid to protect the purchaser at the sheriff's sale against another creditor who obtained execution subsequent to the renewal. The Court held that, on failure to renew, a chattel mortgage becomes voidable, not void, and that, even if the renewal was invalid (because of a failure to produce the proper affidavit before the County Judge), the seizure and sale were still valid if completed before the other creditor obtained fl. fa. Similarly, in Re Vesterfelt (1963), 40 D.L.R. (2d) 137 (Ont.) Smily J. held that, where the reason for the invalidity of the chattel mortgage is a defective affidavit of bona fides, the chattel mortgage is merely voidable; and that therefore, where the

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chattel mortgagee has taken possession of the chattels and sold them before any action has been taken by the trustee in bankruptcy, the proceeds of the sale cannot be recovered by the trustee.

JONES BROS. v. WOODHOUSE King's Bench Division, England. [1923] 2 K.B. 117. BAILHACHE, J.: This is an appeal by the plaintiffs from the judgment of the learned judge of the Clerkenwell County Court in an action in which they claim to recover from the defendant a certain sum as money had and received by her to their use. On March 19, 1921, the defendant, by whom certain premises were let to one Martelaere, obtained judgment against him for arrears of rent and a writ of fieri facias was afterwards issued thereon. The sheriff seized and eventually sold all the goods upon the premises including certain furniture of about half their total value which belonged to the plaintiffs and had been let by them to Martelaere on hire purchase. The sale realized £105 8s. 8d., of which after deduction of the sheriff's charges and certain other sums £52 10s. was received by the defendant in respect of her judgment debt. The plaintiffs say that the sum received by the defendant represents the proceeds of the sale of their goods and not of the goods of the execution debtor, and that the defendant is liable to pay that sum to them as money had and received by her to their use. To this claim the defendant sets up two main defences. First, she says that the plaintiffs are prevented by estoppel from maintaining the action. The estoppel is alleged to arise on these facts: The plaintiffs were informed by Martelaere of the seizure of the goods soon after it had taken place. Their manager then went to see the house and found it stripped of all the goods and the furniture gone. The plaintiffs made no further inquiry and gave no notice to the sheriff or to the defendant that certain of the goods seized were their property, which had been let by them to Martelaere on the hire system. They took no steps to stay the execution, which accordingly proceeded, the goods being sold by the sheriff and the proceeds of sale applied in making the payments already mentioned. It is well settled that in order to create an estoppel there must be a duty owing by the person estopped towards another person to speak or to act, which he has failed to perform, and damages must thereby have resulted to that other person. No one can rely upon the estoppel except the person to whom the duty was owing and who has suffered the damage. It is here said that the plaintiffs owed some duty to speak to the sheriff as the agent of the defendant or otherwise, and that the sheriff has been damaged by their neglect of that duty. It does not appear, however, that the plaintiffs were under any duty to tell the sheriff anything. It may perhaps be that if they had known beforehand that it was intended that the goods should be sold, they would have been under a duty to tell the sheriff that the goods were theirs and that they did not want them to be sold; but before they knew of the intended sale it had already taken place. Further, even if the plaintiffs were under a duty to make that statement to the sheriff, it cannot be said that the sheriff has been in any way damnified by their failure to make it. In the present case the plaintiffs' claim is not barred by the estoppel alleged, inasmuch as there was no duty to speak owing by the plaintiffs to the sheriff, and if there was the sheriff has not been damaged by their silence. These considerations dispose of the main point relied upon by the defendant. Another point taken on behalf of the defendant relates to the amount which the plaintiffs are entitled to recover in the action, and on this point it seems to me

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that the contention of the defendant is right. The plaintiffs' goods and the other goods upon the premises were of practically equal value. The sale of all the goods realized £105 8s. 8d., of which about one-half, or upwards of £52, was attributable to the plaintiff's goods. It is admitted that, after deduction of sheriff's charges and other payments, the defendant received a sum of £52 10s. 6d. in satisfaction of her judgment debt and costs. That sum, however, does not represent the proceeds of sale of the plaintiffs' specific goods only but of the whole of the goods sold. It was the balance of the gross price of all the goods sold, which it so happened was almost exactly twice as great. That being so not more than about one-half of the £52 10s. received by the defendant can be recovered by the plaintiffs in respect of their goods, and there must therefore be an apportionment of that sum as between the plaintiffs and the defendant. McCARDIE, J.: I am of the same opinion. The goods seized by the sheriff at the house in question included certain goods of about one-half the total value, which were the property of the plaintiffs, being covered by the hire-purchase agreement between them and the judgment debtor. In April, 1921, the plaintiffs' agent, having been told that the goods had been seized went to the house and found it stripped of all the goods including those of the plaintiffs. At the time he did not know how the goods had been taken or seized and he made no inquiry. Subsequently, in May, 1922, he did make inquiries, and he then found that the goods had been seized and sold by the sheriff under a writ of fieri facias and that the defendant had received a certain sum in respect of them. The plaintiffs bring this action to recover that sum from the defendant as money had and received by her to their use. By the Bankruptcy and Deeds of Arrangement Act, 1913, s. 15, where goods in the possession of an execution debtor at the time of seizure by the sheriff are sold by the sheriff without any claim having been made to them, the purchaser of the goods he sold is protected, and the sheriff is protected also, unless in either case he had notice or might have found that the goods were not the property of the execution debtor. It is reasonably clear from the section that it is not intended to interfere with the right of the true owner of the goods to recover their value from the execution creditor at whose instance they have been seized. There can be no doubt that in a case of this kind an action for money had and received is well founded: see Leake on Contracts, 3rd ed., p. 74. It is said, however, on behalf of the defendant that the plaintiffs are prevented by estoppel from maintaining their claim. Mr. Matthews submitted that the Court was bound to hold that there was a duty owing by the plaintiffs to the sheriff as the agent of the defendant to give notice of their claim, and that they are estopped by their disregard of that duty. In support of that view he cited two cases. The first of these was Dean v. Whittaker. I have looked at that case with care, and I find that there the goods were not sold and the main question was as to the form of action and its essential ingredients in the circumstances. Even if the dicta there expressed by Abbott C.J. are right, that case has no bearing upon the present. The other case was Duffill v. Spottiswoode. In that case the facts were equally peculiar and the goods had not been sold. The observations there made by Best, C. J. can only apply to the special circumstances with which he was dealing, and that case, like the former, has no bearing upon this. On behalf of the defendant, however, reliance was also placed upon the broad principle of estoppel of common law, which covers not one but many particular states of facts. The principle is laid down in Pickard v. Sears, which is a most useful case. The facts there were as follows: The owner of certain machinery, which was in the actual possession of another person, for several months abstained

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from claiming it and so acted as to lead a third party to believe that it belonged to the person in whose possession it was and to act on that belief, and it was held that in these circumstances .the owner was estopped from denying that the machinery belonged to the person in possession of it. The Court there referred to the person estopped as having by his words or conduct "wilfully" caused another to believe in a certain state of facts and to alter his position. That observation should however, be read in the light of Freeman v. Cooke and Carr v. London and North Western Ry. C(?., which show that the conduct of the party estopped need not be wilful. The principle of estoppel at common law is well explained and illustrated by these three cases, and the facts of the present case fall far short of those which are required to bring a case within that principle. There was here no duty on the part of the plaintiffs to inform the sheriff of their rights. If there was, they did not abstain from informing him of their rights. There is no evidence of prejudice either to the sheriff or to the execution creditor by any conduct of the plaintiffs which could be complained of. Coincident with the common law doctrine of estoppel there is an equitable doctrine, which is explained in several well-known cases. In Ramsden v. Dyson Lord Cranworth L.C. made the following weighty observation : "If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own." In a case of that description the estoppel rests upon the particular basis of actual acquiescence. I think that that is the true ground of the decision in De Bussche v. Alt. In that case Thesiger, L.J., delivering the judgment of the Court of Appeal, said : "If a person having a right, and seeing another person about to commit, or in the course of committing an act infringing upon that right, stands by in such a manner as really to induce the person committing the act, and who might otherwise have abstained from it, to believe that he assents to its being committed, he cannot afterwards be heard to complain of the act." In Willmott v. Barber, Fry, J ., in stating the doctrine of acquiescence, forcibly observed that the acquiescence which will deprive a man of his legal rights must amount to dishonesty. The case of Gregg v. Wells seems to me to have no bearing on this matter. In my judgment there was nothing here to enable the county court judge to find that the plaintiffs were estopped either at common law or in equity. As to the other point I agree that there should be a fresh ascertainment of the precise amount which the plaintiffs are entitled to recover from the defendant. Professor G . V. La Forest, Some Aspects of the Writ of Fieri Facias (1959), 12 U.N .B. Law J. 39, at pp. 44-45, comments on the present law with respect to chattel mortgages and conditional sales. "In law, all the mortgagor has left is a contractual right against the mortgagee, but this is not property and cannot be seized. Equity, however, gives him a species of property called an equity of redemption. This, at common law, could not be seized because it was an equitable interest. Now, however, by virtue of section 23 (1) of the Memorials and Executions Act [R.S.N.B. 1952, c. 143] an equity of redemption in goods may be seized, and by virtue of section 1 ( a) of that Act this term includes the interest of a person who has given a second mortgage on the goods. But suppose a writ of fi fa is issued against the mortgagee of a chattel. Can his interest be seized? According to the Ontario Court of Appeal in Ferrie v. Cleghorn [(1860) 19 U.S.Q.B. 241 , at 244] "the interest of a mortgagee in goods mortgaged to him is not an interest that can be sold under a fi fa ... " It would be necessary to obtain a garnishee order to attach the debt owed to the mortgagee under the mortgage. There is, therefore a remedy

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available to the judgment creditor, but I think a simpler procedure than a garnishee order could be devised. "Far more common than the chattel mortgage as a security device is the conditional sale. There A, the conditional seller, transfers possessions of a chattel to the conditional buyer, B, but A retains title to the goods. Can the sheriff seize the interest of the conditional buyer in the goods? There is nothing in our statutes, as there is in the statutes of some of the other provinces, permitting the seizure of a conditional buyer so we must turn to the common law. If it is an equitable interest as some judges suggest, it cannot be seized under a writ of fieri facias because equitable interests are not seizable under a fi. fa. in the absence of statute, and even if it is legal the cases of Ruscheinsky v. Spencer [ [1948] 2 W .W .R. 58) and Overby v. McLean [ [1928] 4 D.L.R. 917) indicate that it cannot be seized. If, therefore, A buys a car worth $3,000 under a conditional sale agreement, it is very doubtful if the car can be seized by A's creditors even if he has paid, say $2,500. It seems to me that the interest of a conditional buyer should be exigible and that legislation should be passed accordingly. "Let us take the opposite situation. A sells a car to B under a conditional sale. Can the creditors of A, the conditional seller, have the car seized under a fieri facias? It would appear that the car cannot be seized because the conditional buyer is rightfully in possession. Taking possession under these circumstances would constitute a trespass, and this the sheriff is not empowered to do. However, the creditor should be able to garnishee the debt owing under the conditional sale, but the garnishee is, as you know, rather a complicated remedy. "The principle that the sheriff cannot commit a trespass against a third person applies in other cases as well. Thus if a judgment debtor has pledged or leased goods, they cannot be seized while in the possession of pledgee or lessee [Young v. Lambert (1870), L.R. 3 P.C. 142; Kinnear v. Kinnear (1924), 26 0.W.N. 111)."

RUSCHEINSKYv. A. SPENCER& CO. LTD. et al. Supreme Court of British Columbia. [1948] 2 W.W.R. 58

MACFARLANE, J.: Interpleader by the sheriff of the county of Vancouver. The sheriff pursuant to a writ of execution placed in his hands at the direction of the plaintiff, an execution creditor of the defendant Gim Foon Wong, seized a motor cycle which had been sold to the defendant by Fred Deeley Limited under a conditional-sale agreement. It was duly registered in the proper office. The defendant had made default in payment provided by the conditional-sale agreement amounting to $96.40. The value of the motor cycle is admitted to be under $500. The defendant claims exemption under sec. 25 of the Execution Act, RSBC, 1936, ch. 91. The sheriff's seizure took place on March 17, 1948, and the claim for exemption was filed with him on March 19, 1948. On the day following, notice of seizure was given by Fred Deeley Limited, that is, on March 20, 1948. Both the defendant and Fred Deeley Limited resisted the attempt to sell the motor cycle, the defendant claiming exemption and Fred Deeley Limited claiming that the defendant has no property in the motor cycle and that it is therefore not subject to seizure and sale. The questions arising are: ( 1 ) Whether the execution creditor has any right at all to seize and sell the motor cycle in view of the fact that it is held under a conditional-sale agreement which provides that the title to the property shall remain in the vendor until payment in full? (2) If the execution creditor is entitled to seize and sell the interest of the purchaser in the motor cycle, whether the defendant, the purchaser, is then entitled to claim exemption under sec. 25 of the Execution Act?

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The right to seizure depends, I think, on the construction to be placed on the words, "may seize and sell the interest or equity of redemption in any goods or chattels of the execution debtor" found in sec. 16 of the Execution Act. As I have indicated the conditional-sale agreement provides that while the vendor agrees to sell to the purchaser the motor vehicle in question, "the property is now and shall remain the absolute property of .the vendor until after further and complete payment of the purchase price therefor." To state the question again, it is whether the interest (if any) of the claimant in the motor vehicle is an interest in goods and chattels of the execution debtor, that is, the purchaser under the conditional-sale agreement. The purchaser has a right of possession until default and seizure. He has also a right or option to complete the purchase or title by payment of the balance of the purchase-money. He has a right also of assignment of his interest and also, I think, it has been held a right of charging by way of mortgage that interest. In Overby v. McLean [1928] 3 WWR 328, at 331, 37 Man R 525, Dennistoun, J.A. says : "The judgment creditor can take only the interest in this motor car that the debtor has, and that is nothing, for the title and right of possession is still in the claimant... ." The claimant there was the vendor under an unregistered conditional-sale agreement. Fullerton, J.A. in the same case says at p. 329: "It may be that the execution creditor was entitled under sec. 12 of The Executions Act, R.S.M. 1913, ch. 66, to seize and sell the equitable interest which Ratkowski had in the car,. but what the execution creditor is here seeking is a sale of the car itself."

It seems to me that the language of Dennistoun, J.A. is perhaps too wide and that it was used in connection with the particular circumstances of that case. I might say that sec. 12 of The Executions Act referred to is the same as our sec. 16. It seems to me that in view of the factors which I have mentioned, notwithstanding that the property shall remain the absolute property of the vendor until after full and complete payment, the purchaser has an equitable interest, or an interest in the goods and chattels, being the motor cycle, under sec. 16 of our Act. I think it is clear, of course, that it can only be sold subject to the claim of Deeley Limited, but I think there is here an interest such as is referred to in sec. 16 of the Act. Question 2 then arises, that is, as to whether the claimant, the execution debtor, is entitled to an exemption in respect of these goods and chattels. The decision of that question involves an interpretation of sec. 25. This section, in part, says as follows :

"25. The following personal property shall be exempt from forced seizure or sale by any process at law or in equity; that is to say, the goods and chattels of any debtor at the option of such debtor * * * to the value of five hundred dollars * * *." The difference between this section and sec. 16 is, I think, significant. If sec. 16 omitted the words "the interest or equity of redemption in," then I do not think the goods and chattels could be described as the personal property of the execution debtor in view of the terms of the contract of conditional sale. My attention has been called to certain decisions in respect of chattel mortgages and some reversionary interests in land, but I do not think that these decisions are relevant

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because in them the title to the property in question has passed and the fact that the property is mortgaged or subject to some outstanding charge or estate would not deprive the person in whom the title to the property rests from the right to claim an exemption. It is only because I think that there is an interest which is specifically provided by statute to be subject to seizure that the interest is subject to seizure and sale under sec. 16. In order to hold that this interest is subject to exemption I must hold that it is personal property of the character set out in sec. 25, namely, the goods and chattels of any debtor, but I cannot see how the motor cycle in these circumstances can be personal property of the character described in sec. 25. I would, therefore, hold that the claim for exemption must fail and direct the sale of the motor cycle subject to the claim of the claimant Fred Deeley Limited. Deeley was compelled to make his claim in order to obtain protection and I think should have his costs of the interpleader payable out of the sale moneys, next after the satisfaction of his claim. The execution creditor is entitled to his costs and, after payment of these and the sheriff's costs, the balance realized will be applied on the judgment. COMMERCIAL CREDIT CORPORATION v. NIAGARA FINANCE CORP. LTD.

Supreme Court of Canada. [ 1940] 3 D.L.R. 1.

DAVIS, J.: A bailiff of the First Division Court of the County of Welland in the Province of Ontario, acting under executions issued pursuant to judgments of the said Court, seized the motor car in question in these proceedings and purported to sell the same under the executions to the respondent. The purported sale between the bailiff and the respondent was carried out and possession of the car delivered by the bailiff to the respondent. The car some six months prior to the seizure and sale had been purchased by Robert Teakle, the execution debtor, from Mills Motor Sales under a conditional sale agreement. Mills Motor Sales, on its part, assigned the conditional sale agreement to the appellant. Teakle took possession of the motor car at the time of the making of the conditional sale agreement and continued in possession until the time of the bailiff's seizure. In the interval, however, he had made default in payments called for under the agreement and by the terms of the agreement the appellant ( as assignee of the conditional vendor) had become entitled to retake possession of the car, though it had not in fact done so. It is plain that the property in the car never passed from the conditional vendor to the conditional purchaser. Subsequent to the bailiff's sale and delivery of the car to the respondent, the appellant made demand upon the respondent for possession of the car and, upon refusal to deliver or to pay the balance owing under the conditional sale agreement, the appellant commenced this action in the County Court of the County of Welland against the respondent claiming damages for detention or conversion of the car. The amount of the purchase price unpaid under the conditional sale agreement at the time amounted to $245.25, together with arrears of interest. The respondent defended the action upon the ground that it became a purchaser for value in good faith for valuable consideration without any notice of the appellant's claim and took the position that the conditional sale agreement, not having been filed, was invalid as against the respondent. It is admitted that a copy of the conditional sale agreement had not been filed in the office of the Clerk of the County Court as provided by s-s. ( 1) (b) of s. 2 of the Ontario

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Conditional Sales Act, R.S.O. 1937, c. 182. The County Court Judge dismissed the appellant's action and the Court of Appeal for Ontario [[1939] 4 D.L.R. 311] affirmed the judgment, Robertson, C.J.O. dissenting. By special leave of the Court of Appeal, a further appeal was taken to this Court. A bailiff or sheriff to whom an execution is directed has authority only to seize and sell the property of the execution debtor. While the execution debtor here may have been in possession of the motor car, he had never acquired the property in the car. But by the combined force of s. 165 of the Division Courts Act, R.S.O. 1937, c. 107, ands. 18 of the Execution Act, R.S.O. 1937, c. 125, the bailiff had authority to sell the interest or equity of the execution debtor in the chattel and the sale by the bailiff, being under executions against goods issued out of a Division Court, would convey whatever equitable or other interest the execution debtor had or was entitled to in or in respect of the chattel at the time of the seizure. It is not disputed that the bailiff seized and sold the motor car as if it had been the property of the execution debtor and no doubt the respondent purchased the car from the bailiff thinking it was acquiring the ownership of the car. But a purchaser from a sheriff or bailiff acquires only the interest in the goods which the sheriff or bailiff had the right to sell. As Middleton, J. (as he then was) said in Re Phillips & La Paloma Sweets Ltd. (1921), 66 D.L.R. 577 at pp. 578-9, 51 O.L.R. 125: "It is elementary law that an execution creditor, apart from some statutory provision, has no greater right than the execution debtor, and that the sheriff's sale can only give to the purchaser the right and title of the debtor; so here the applicant has no greater or other right than the execution debtor unless he can point to some statute assisting him." And as was said in Overn v. Strand, [1932] 1 D.L.R. 490 at p. 506, [1931] S.C.R. 720: "A purchaser, therefore, at a sale under execution is under no obligation to go behind the writ, but, in order to make sure that he will acquire title to the goods he buys, he must see that the Court issuing the writ had jurisdiction to do so; that the writ is regular on its face; and that the goods sold by the sheriff are the goods of the execution debtor." Apart then from any statutory provision which may be invoked by the respondent in the circumstances of the case to defeat the appellant's claim to the property in the car, the respondent purchased from the bailiff nothing more than the execution debtor's interest or equity in the car. But there is really no controversy about the position of the bailiff and his sale. The real controversy turns upon the provisions of the Conditional Sales Act, R.S.O. 1937, c. 182. What the respondent has said throughout is that by virtue of s. 2 the appellant was not entitled to set up the conditional sale as against the respondent because a copy of the agreement had not been filed in the office of the Clerk of the County Court of the county in which the conditional purchaser resided at the time of the agreement to sell and that it, the respondent, had purchased from the bailiff without notice, in good faith, and for valuable consideration. But the respondent to gain advantage under said s. 2 must be a subsequent purchaser "claiming from or under" the original conditional purchaser. That is exactly what the respondent claims to be and if it is, then the conditional sale agreement which provided that the ownership was to remain in the conditional vendor until payment, is invalid as against the respondent. The determination of the appeal turns solely upon the question of the proper construction of s. 2 of the Conditional Sales Act, that is whether or not the respondent as purchaser from the bailiff became "a subsequent purchaser ...

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claiming from or under" the original conditional purchaser. In my opinion the respondent did not; it purchased whatever it did purchase from the bailiff and it got only what the bailiff had to sell. We are not entitled to strain the plain language of the section so as to bring the respondent within its reach as a subsequent purchaser "from or under" the original conditional purchaser. It is to be observed that s-s. ( 1) of s.. 2 is for the protection of "a subsequent purchaser or mortgagee claiming from or under the purchaser, proposed purchaser or hirer, without notice in good faith and for valuable consideration." Subsection ( 3) of the same section specifically provides that where the possession of goods is delivered "to any person for the purpose of resale by him in the course of business" such provision (i.e., s-s ( 1)) "shall also, as against his creditors, be invalid and he shall be deemed the owner of the goods unless the provisions of this Act have been complied with." As Meredith, C.J.C.P. said in Re Alcock, Ingram & Co., [1924] 1 D.L.R. 388 at p. 392, 53 O.L.R. 422, in considering the statute: "In short, sub-sec. 1 is for the benefit of 'subsequent purchasers or mortgagees,' sub-sec. 3 is for the benefit of creditors." It may be observed that the Bills of Sale and Chattel Mortgages Act, R.S.O. 1937, c. 181, which is a statute in pari materia, provides by s. 4 that: "Every mortgage of goods and chattels in Ontario, which is not accompanied by an immediate delivery and an actual and continued change of possession of the things mortgaged, shall be registered ... " as stipulated in the statute; and by s. 7, "If the mortgage and affidavits are not registered as by this Act provided, the mortgage shall be absolutely null and void as against creditors of the mortgagor, and as against subsequent purchasers or mortgagees in good faith for valuable consideration." The word "creditors" as defined by s. 1 (b) of that Act includes creditors having executions against the goods and chattels of a mortgagor in the hands of a sheriff or other officer. While I do not find it necessary to resort to the history of the Ontario legislation under the Conditional Sales Act to determine the question in issue, it is reassuring to the view I take of the particular section of the statute involved in this appeal to follow through the course of the legislation. The statute was originally enacted in 1888 by 51 Viet. c. 19, to come into force on January 1, 1889. The statute only applied to manufactured goods and chattels and conditional sales were only to be valid as against subsequent purchasers or mortgagees without notice in good faith for valuable consideration in the case of such goods which at the time possession was given had the name and address of the manufacturer, bailor or vendor of same plainly attached thereto and unless the bailment was evidenced in writing signed by the bailee or his agent; or, alternatively where there was registration of the conditional agreement with the Clerk of the County Court of the county in which the bailee or conditional purchaser resided at the time the bailment or conditional purchase was made. The original statute, with slight amendments made by 53 Viet., c. 36 and by 60 Viet., c. 14, s. 80, was carried into the Revised Statutes of 1914 as c. 136. In the 1911 statute the word "goods" was defined so as to include "wares and merchandise" and the statute was made more comprehensive in its scope in that it was no longer limited to manufactured goods. The invalidity of a conditional sale accompanied by delivery of possession as against a subsequent purchaser or mortgagee where a copy of the agreement was not filed in the office of the Clerk of the County or District Court, remained. But the special provision (now found in amended form as s-s. (3) of s. 2 of the present Act) that where the delivery is made to a trader or other person for the

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purpose of resale by him in the course of business, the agreement "shall also, as against his creditors, be invalid and he ( the conditional purchaser) shall be deemed the owner of the goods," which appeared for the first time in the 1911 Conditional Sales Act, had been introduced originally into the Bills of Sale and Chattel Mortgage Act in 1892 (by 55 Viet., c. 26, ss. 5 and 6) whereby it was provided that if possession of goods was to pass to a trader or other person for the purpose of resale by him in the course of business, but not the absolute ownership until certain payments were made or other considerations satisfied, "any such provision as to ownership shall as against creditors, mortgagees or purchasers be void, and the sale or transfer be deemed to have been absolute," unless the agreement was in writing signed by the parties to the agreement, or their agents, and unless such writing was filed in the office of the County Court Clerk of the county in which the goods were situate at the time of making the agreement. Subsections (3) and ( 4) of s. 3 of the 1911 statute, 1 Geo. V, c. 30, produced into the Conditional Sales Act the provisions as to delivery to a trader or other person for the purpose of resale in the course of business, and s. 10 repealed the old provision that had been s. 41 of the Bills of Sale and Chattel Mortgages Act, R.S.O. 1897, c. 148. In the 1927 revision of the Ontario statutes the Conditional Sales Act as it then stood became c. 165 and remained substantially unchanged. The present statute, R.S.O. 1937, c. 182, has remained practically unaltered from 1927. It may not be without interest that the draft Conditional Sales Act, revised and approved by the Conference of Commissioners on Uniformity of Legislation in Canada in 1922 (See Falconbridge: Cases on the Sale of Goods, 1927, pp. 682-88, provided (at p. 683) that: "After possession of goods has been delivered to a buyer under a conditional sale, every provision contained therein whereby the property in the goods remains in the seller shall be void as against subsequent purchasers or mortgagees claiming from or under the buyer in good faith, for valuable consideration and without notice, and as against creditors of the buyer who at the time of becoming creditors have no notice of the provision and who subsequently obtained judgment, execution, or an attaching order, under which the goods, if the property of the buyer, might have been seized, and the buyer shall, notwithstanding such provision, be deemed the owner of the goods, unless the requirements of this Act are complied with." The subsequent revision of the Ontario statute in 1927 did not adopt the draft by giving protection, where the conditional sale agreement was not filed, not only to subsequent purchasers or mortgagees but to "creditors of the buyer who at the time of becoming creditors have no notice of the provision and who subsequently obtained judgment" etc. The Legislature adhered to the provision as it had stood in the statute whereby the invalidity was limited to "subsequent purchasers or mortgagees claiming from or under" the original purchaser, except in the case where the goods were delivered "to any person for the purpose of resale by him in the course of business," in which latter case the invalidity was extended to creditors. It is plain that the Legislature in enacting the provisions of the Conditional Sales Act did not, except in the case of the delivery of possession to a person for resale in the course of business, intend the protection to extend to creditors. Of course the respondent is not a creditor. It is a purchaser, but a purchaser from a bailiff who had no higher title to pass than that of the execution debtor. The bailiff in enforcing the creditors' judgments under the executions never acquired

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the property in the motor car. The respondent cannot be said to be a subsequent purchaser "from or under" the conditional purchaser, within the meaning of s-s. ( 1) of s. 2; it bought in the execution creditors' rights against the car. It is contended, in effect by counsel for the respondent that the statutory provision in favour of "subsequent purchasers or mortgagees" ought to be interpreted so as to give to it what is called a convenient and practical application. But in R. v. Com'rs of Customs & Excise, [1928] A.C. 402 at p. 409, Viscount Dunedin in the House of Lords referred to the "stern warnings" that had been given in the cases "to those who in order to read in words into a statute which are not there, or to divert words used from their ordinary and natural meaning, permitted themselves to speculate as to what the aim and attainment of the Act was likely to be." I would allow the appeal and direct judgment to be entered for the appellant in the sum of $250 with costs of the action and of the appeal to the Court of Appeal for Ontario. It was a condition of the leave to appeal granted by the Court of Appeal that the appellant should not ask for costs of its appeal to this Court. [DUFF, C.J.C. joined in the judgment of DAVIS, J. The concurring Judgments of CROCKET, KERWIN, and HuosoN, JJ. are omitted.] The view of Masten, J.A. in the majority in the Ontario Court of Appeal, [1939] 4 D.L.R. 311, at p. 318, was decidedly contrary: "I think that the Act does apply and supports the respondent's defence. The words of the Act make the ownership which remains in the original vendor invalid generally as against a subsequent purchaser without notice, in good faith and for valuable consideration if he claims 'from or under' the original purchaser. "I think that the respondent claims 'under' Teakle. His title, however colourable it might be apart from the statute, comes through Teakle, and I think that 'under' means 'through.' In my opinion the intention of the legislation is to protect every bona fide sub-purchaser claiming under the original vendee as against an unregistered sales agreement. "This is made plain because the statute admittedly renders invalid the unregistered conditional sales agreement where the original purchaser fraudulently assumes to sell to the sub-purchaser the whole property and possession in the goods. The test is not the validity of his conveyance but the bona fides of the sub-purchaser. I think that this Court is not at liberty to read into subsec. 1 of sec. 2 of the Act additional words so as to confine the benefit of the section exclusively to subsequent purchasers, to whom a voluntary sale is made by the original vendee. "Nor can we by implication import into the statute supplementary prerequisites to its application beyond those which are expressly stated and which I have just enumerated. "In further support of this view I point out that as regards the right to sell to a sub-purchaser in such circumstances as here exist, the bailiff was in a stronger position than Teakle, for Teakle was precluded or estopped by the terms of Exhibit 1 from selling, and any attempt by him to do so would be fraudulent on his part. "But there is nothing to interfere with the power conferred on the bailiff by sec. 18 [now 15] of the Execution Act, R .S.O. 1937, ch. 125, to sell the proprietary interest of Teakle in the motor vehicle. On seizure he had lawful possession coupled with a power to sell Teakle's interest. He did so. He received from the respondent the purchase price of $135.00, and he delivered to the respondent the motor vehicle in question. "Subsequently the appellant for the first time attempts to assert its claim under its unregistered conditional sales agreement, but in my opinion it is precluded from enforcing such claim because the statute declares it to be invalid as against the respondent a bona fide sub-purchaser.

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"For these reasons, I think that if the statute would apply to protect a subpurchaser from the original vendee, much more does it apply to protect the respondent who honestly acquires the interest of Teakle through the bailiff. "But apart from my verbal examination of the words of sec. 2, I think that a consideration of the whole Act in the light of the general rules of statutory construction leads to the same conclusion as I have just stated . What was the mischief which the Legislature sought to remedy? Surely it was the harshness of the common law which rendered liable to an action of conversion every person who innocently intermeddled with property covered by a secret unregistered instrument. "The remedy which the Legislature devised for the purpose of obviating the mischief is to declare that the conditional sales agreement unless registered shall be invalid as against the subsequent purchaser who buys from or under the original vendee bona fide and without notice. As it appears to me, the benefit of the statute was intended to pass to every bona fide purchaser and is not conditioned on the power or authority of the party who assumes to sell to the sub-purchaser. "But in another aspect, there is in my view no injustice in the conclusion at which I arrive. The appellant for its own advantage concluded not to register its contract and to take the chances that its claim might be defeated by force of the statute. It probably failed to envisage the circumstances of the present case or, if it did, then in my view it misinterpreted the statute. In any event it took its chances and it still has its claim against Teakle personally. As its omission to register has given rise to the present situation where some one must suffer, it is equitable that the one whose omission has originated the situation should bear the loss rather than that the respondent should lose the $135.00 paid to the bailiff and also be condemned in damages as a wrongdoer".

BOHN v. KINGCREST MOTOR SALES LIMITED AND JONES Supreme Court of British Columbia. 1951. 3 W .W .R. (N.S.) 623. WHITT AKER, J.: This is the trial in a summary manner of an interpleader issue. The sheriff seized a motor car on behalf of the judgment creditor under a writ of fi. fa. The claimant claims that the car belongs to him, he having left it with the judgment debtor for sale on February 24, 1951. Statements made by the claimant's wife and by the claimant's father are not admissible against the claimant. The claimant's evidence is corroborated by a document dated February 21, 1951, addressed to the claimant, signed by the judgment debtor, and reading as follows :

"This is to acknowledge receipt of your 1949 Chevrolet sedan, licence number 118607, on consignment for sale. The net price to you when sold to be One Thousand Five Hundred Dollars ($1500.00)." The judgment debtor did not sell the claimant's car. During the time the car was in the judgment debtor's possession the judgment debtor gave an unauthorized mortgage to a finance company, which mortgage was never registered, presumably because the records in the motor records office showed the claimant to be the registered owner of the car. At the time of the delivery of the car by the claimant to the judgment debtor the claimant signed a form of transfer in blank. I think, however, that was merely for the purpose of facilitating a sale. I must hold that the car belongs to the claimant. The car remained in the possession of the judgment debtor from February 24, 1951, until the date of seizure under the writ of fi. fa. on September 28, 1951, notwithstanding that in August of this year Mr. McLean, the judgment debtor's manager, told the claimant that he was in financial difficulties and might have to go out of business. Moreover, at the time of seizure, the car was on the street in front of Mr.

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McLean's residence and not upon the judgment debtor's used car lot. The claimant explains this by saying he had given Mr. McLean permission to use the car until it should be sold. I think that under these circumstances the claimant's conduct was such as to lead the judgment creditor to believe that the car belonged to the judgment debtor and that the claimant should therefore pay the costs of the seizure. There will be an order for the sale of the car, the proceeds to be applied in payment of the judgment creditor's costs of seizure and sale, including the sheriff's costs, the balance of said proceeds to be paid to the claimant. CURTIS v. MALONEY King's Bench, England. [1950] 2 All E.R. 201. Affirmed by Court of Appeal at 982.

In 1948 the plaintiff left a motor cabin cruiser in the care of Messrs. V. Radley & Sons, boatwrights, who subsequently got into financial difficulties with the result that a judgment was obtained against them. In execution of a writ of fieri facias against Messrs. Radley & Sons the sheriff of Essex seized the boat, and on Jan. 25, 1949, by the sheriff's order it was sold by auction, no claim having been made to the sheriff by any third party in respect thereof. On Feb. 25, 1949, the plaintiff claimed the return of the boat from the purchaser, and on Mar. 30, 1949, he served the writ in the present action, claiming from the purchaser the return of the boat, or £450 its value, and damages for its detention. The purchaser relied on the Bankruptcy and Deeds of Arrangement Act, 1913, s. 15, and also brought in as third parties the sheriff and the auctioneers, against whom he claimed an indemnity under the Law Reform (Married Women and Tortfeasors) Act, 1935, s. 6, and, alternatively, damages for breach of the warranty implied by the Sale of Goods Act, 1893, s. 12 (1). FINNEMORE, J.: The first point which arises in this case is the construction of the Bankruptcy and Deeds of Arrangement Act, 1913, s. 15. It is by no means an easy matter, because the section is difficult to construe if one is to give full effect to everything which is in it, including what is commonly called the operative part of the section and the proviso thereto. The section provides: "Where any goods in the possession of an execution debtor at the time of seizure by a sheriff, high bailiff, or other officer charged with the enforcement of a writ, warrant, or other process of execution, are sold by such sheriff, high bailiff, or other officer, without any claim having been made to the same, the purchaser of the goods so sold shall acquire a good title to the goods so sold .... " It then goes on to say that no person shall be entitled to recover against the sheriff, high bailiff, or other officer, subject to certain provisions about notice. Then there is the proviso:

"Provided that nothing in this section contained shall affect the right of any claimant who may prove that at the time of sale he had a title to any goods so seized and sold to any remedy to which he may be entitled against any person other than such sheriff, high bailiff, or other officer as aforesaid." The important parts for the purpose of this case are, first, the words "the purchaser of the goods so sold shall acquire a good title to the goods so sold" and, secondly, the proviso. It is argued for the plaintiff that the purpose of this.

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section was to give protection to the sheriff, a protection which he had not enjoyed before, the courts of this country always having been jealous to guard the rights of owners of property and to preserve their rights against people who wrongfully disposed of their property. It is then argued that, that being the object and purpose of the section, the proviso leaves open every possible right to the true owner against everybody except the sheriff. It is argued that that includes a right against the innocent purchaser of the goods so sold to whom previously the section had purported to give a good title. On the other side, it is said that the proviso must be limited, because, if you construe it in the way for which the plaintiff contends, you destroy any meaning that could be given to the words relating to the acquisition of a good title by the purchaser of goods sold by the sheriff after seizure. The Act provides that the purchaser of the goods so sold shall acquire a good title. It is said that he cannot acquire a good title if the true owner can assert against him his better title and claim the goods which the purchaser bought from the sheriff. There appears to be no authority on the point. A number of text books have been referred to, but the only one, I think it is fair to say, which gives a plain opinion on this matter is Halsbury's Laws of England, Hailsham ed., vol. 14, p. 69, para. 116, where the writers say : "A sale by the sheriff is not a sale in market overt, but where any goods in the possession of an execution debtor at the time of seizure by the sheriff are sold by the sheriff without any claim having been made to them, the purchaser acquires a good title subject to the right of any person, who may prove that at the time of sale he had a good title to any of the goods, to any remedy to which he may be entitled against the purchaser." That is a plain expression of opinion by the writers of that title in favour of the argument contended for by the plaintiff. I do not think that Goodeve on Personal Property, 8th ed., does any more than set out in the writer's own words the section, with the possible exception that on p. 496 he says: "This, however, does not affect the right of any claimant who proves that at the time of the sale he had a title to any goods so seized and sold to seek any remedy he may be entitled to against persons other than the sheriff or other officer concerned, for example, the judgment creditor." Of course, "for example, the judgment creditor" does not exclude the innocent purchaser, though it may be argued that, for what it is worth, it is an expression of opinion of the probable meaning of this proviso as not including the purchaser. In Jones Bros. (Holloway), Ltd. v. Woodhouse the true owners of some furniture proceeded against the execution creditor for the proceeds of the sale of their property as money had and received by him for their use, and it was held that the action was well founded. Doubt was expressed whether there was any estoppel and also how much of the money received by the judgment creditor could be recovered. Section 15 was not under review. While at first sight one might be surprised that, if the plaintiff's view of the section which is argued before me is right, the plaintiffs in Jones Bros. (Holloway), Ltd. v. Woodhouse should have proceeded against the judgment creditor for money had and received, there may be many explanations of that. One obvious one is that the proceedings were more than a year after the sale. The sale was of articles of furniture, and it may well be that they had gone past recall, or were not worth claiming by the time that the proceedings were taken, but the plaintiff's counsel in argument seems to have

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assumed that there was no right against the purchaser. McCardie, J ., in that case plainly states his view of the effect of this section. He says ([1923] 2 K.B . 126) : "By the Bankruptcy and Deeds of Arrangement Act, 1913, s. 15, where goods in the possession of an execution debtor at the time of seizure by the sheriff are sold by the sheriff without any claim having been made to them, the purchaser of the goods so sold is protected, and the sheriff is protected also, unless in either case he had notice or might have found that the goods were not the property of the execution debtor. It is reasonably clear from the section that it is not intended to interfere with the right of the true owner of the goods to recover their value from the execution creditor at whose instance they have been seized." Again it has to be pointed out that the question which arises here was not argued in that case. I think, therefore, there is no authority which gives any real guidance, and I must do the best I can to give to this section a meaning which I think is the proper one. It has been argued that, while the purchaser of the goods obtains a good title, that title cannot prevail against the true owner, because by the proviso the true owner is entitled to any remedy which he has against any person other than the sheriff or such officer. It is said that, had it been intended to protect the purchaser as against the true owner, nothing would have been more easy than to have put it in plain terms in the proviso. The conclusion to which I have come is that the section says in the plainest possible terms: ". . . the purchaser of the goods so sold shall acquire a good title to the goods so sold." I think a "good title" must mean a good title against everybody, including the person who might at a later date show that he had got a better title as being the true owner. It then goes on to exempt from any liability the sheriff who has by his sale given that good title to the innocent purchaser. Then comes the proviso, and I think that "any claimant who may prove that at the time of sale he had a title to any goods" includes the true owner. The proviso reserves to him any remedy to which he may be entitled against anybody other than the sheriff. I think, however, that it must be read subject to the original enactment that the purchaser of the goods so sold shall acquire a good title. Otherwise the proviso contradicts that part of the section, and renders it meaningless, and I do not think it is necessary to read it in that sense. I think the purpose and object of this section is, first, to protect the innocent purchaser who buys from the sheriff; secondly, to protect the sheriff against any action against him; and, thirdly, to preserve to the true owner whatever other rights he has by action against anybody except the sheriff. It is probably right to say that the true owner did not need any provision in this section to be able to pursue his right for money had and received against the judgment creditor, but one can understand that in a section of the nature of s. 15 there might well be an express proviso to preserve all other rights than against the purchaser or the sheriff. I have come to the conclusion therefore, that the plaintiff is not entitled to sue the defendant in detinue as he has done, and his action against the defendant fails . Judgment for the defendant against the plaintiff with costs. Judgment for the third parties against the defendant with costs. A conditional sale purchaser of certain oil drilling equipment quitclaimed all his interest in the equipment before writs of execution were issued against him. Neither

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the original con~itional sales agreement nor the quitclaim were registered. Held, by the Saskatchewan Court of Appeal, following Commercial Credit Corp . Ltd. v. Niagara Finance Co., that since the debtor had no property in the chattels at the time of the delivery of the writs to which they could attach, the chattels were not subject to the executions : Carmichael v. Drill Stem Testers Ltd. and Oilfield Consultants Ltd. (1963), 38 D.L.R. (2d) 94. This case was distinguished from a previous Saskatchewan case, Workmen's Compensation Bd. v. Hilco Lumber Ltd. (1962), 37 D.L.R. (2d) 159 where it was held that a quitclaim deed executed subsequent to the issuance of a writ of fi. fa. could not defeat it, even though seizure under the execution was not effected until after the date of the deed. In Pearson v. Drake [1937] 1 D.L.R. 417 the Appellate Division of the Alberta Supreme Court held (by a 2-1 margin) that furniture and equipment of a hotel business owned and operated by an individual, but which was in fact partnership property under a secret partnership agreement, is subject to execution under a judgment obtained by a creditor against the ostensible owner as an individual on a debt in connection with the operation of the business and that the silent partner is estopped from claiming any interest as partner as against the rights of an execution creditor.

RE SINCLAIR v. WOODWARD Ontario Court of Appeal. [1952] 1 D.L.R. 398. The judgment of the Court was delivered by LAIDLAW, J.A. : This is an appeal by the Minister of Highways from an order made by Barlow J. in Chambers on March 20, 1951, that certain moneys be paid to the respondent out of the Unsatisfied Judgment Fund. The respondent recovered judgment against one F. C. Woodward for $565 .20 together with costs taxed in the amount of $202.20, after trial before Gale J. on March 9, 1950, in an action brought to recover damages caused by the negligence of a driver in charge of a motor vehicle. A writ of execution issued on or about October 27, 1950, was returned nulla bona. The judgment creditor made a motion for payment of the amount of the judgment and costs out of the Unsatisfied Judgment Fund. When the motion came on for hearing before Barlow J., it appeared from material filed by the applicant that the judgment debtor was employed by Key System Transit Lines in Emeryville, California, U.S.A., at a salary of about $3,200 per annum. It appeared also that he was the owner of an automobile. It was stated in the material that "he has a good employment record and works full time", that he had a "reputation of trying to pay debts promptly", and that he was " making progress financially". In the course of argument in this Court, counsel for the respondent admitted frankly that since he learned of the whereabouts and position of the judgment debtor no attempt has been made on behalf of the judgment creditor to collect the whole or any part of the judgment sum from the judgment debtor. No communication has been sent to him. No inquiry was made to ascertain whether or not he would endeavour to meet his obligation. The Court has no evidence or information before it to decide whether the judgment creditor is or is not able to recover any portion of the unsatisfied judgment. The simple fact is that no steps whatever have been taken by the judgment creditor to recover upon the judgment since the Sheriff's return of nulla bona to the writ of execution. Before a Judge may make an order directed to the Minister of Highways requiring him to make a payment from the Unsatisfied Judgment Fund, the applicant must satisfy the Judge in respect of the matters expressly set out in s. 98(4) of the Highway Traffic Act, R.S.O. 1950, c. 167. One of those matters is cl. (d) :

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"that the applicant has fully pursued and exhausted all remedies available to him for recovering compensation for the damages that are the subject of the action in respect of which the judgment is given by, "(iii) taking all reasonable steps available to him to recover upon every judgment so obtained, and "(iv) taking all other reasonable steps available to him to recover compensation for such damages." In the circumstances of this case those statutory conditions have not been satisfied by the applicant. Therefore, the applicant was not entitled to an order for payment from the Unsatisfied Judgment Fund. It is, perhaps, desirable to comment upon the purpose and use of the Unsatisfied Judgment Fund as established under the provisions of the Highway Traffic Act. I first repeat what was said by my Lord the Chief Justice of Ontario in Re Abramson v. Johnson, [1952) 1 D.L.R. 394 at p. 396, [1951] O.W.N. 792, "that it is not the judgment debtor, but the judgment creditor, to whom the Legislature intended to grant relief out of the special Fund created". But that Fund is not available to every judgment creditor. It is available only in cases falling within the provisions of the Act. The Fund is made up of contributions from members of the public, and the Court is, in a sense, the guardian of the Fund. Therefore, much care and vigilance are required before the Court can be satisfied that the conditions of the statute have been fulfilled, or before it may dispense with the necessity for complying with any of the statutory requirements in a particular case. Every provision of the Act designed for protection of the Fund should be given full consideration and effect. The burden is on a judgment creditor making application for an order directing payment out of the Fund to show that the case clearly falls within the provisions of the Act, and that he is entitled to an order directed to the Minister requiring him to make a payment from the Fund. Upon proper interpretation of the statutory provisions, it is plain that it was not the intention of the Legislature to make access to the Fund easy, and each application for an order directing payment out of the Fund should be closely examined to ensure that the intention of the Legislature is given full effect. In the course of my consideration I read, and now refer to, Re Carson v. Ribble, [1949] O.W.N. 665, and Rossiter v. Chiasson, [1950) O.W.N. 265. The appeal should be allowed with costs. The order made by Barlow J. should be set aside and in place thereof the application of the respondent should be dismissed with costs. HUMBERSTONE v. TRELLE Supreme Court of Alberta in Chambers. 1910. 14 W.L.R. 145. Application by the plaintiff to stay the execution issued, or about to be issued, on behalf of the defendant Trelle for his costs in this action, which the plaintiff was ordered to pay, the action being dismissed. BECK, J.: The action was brought alleging a lease to the Belmont Coal Co. and breaches of the covenants therein, and asking a declaration of forfeiture and possession. The other defendants were alleged to be in possession. In the action it was held on appeal, affirming the judgment below, that there was no breach of the conditions established, and that, therefore, the plaintiffs could not succeed against the original lessees, nor, in the aspect he had put upon the case by his pleadings and by the method of presenting the case at the trial, against the other defendants. The

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relationship between the plaintiff and the other defendants was left undetermined; whether, for instance, there was an equitable assignment of the lease, not coming within the covenant of the lease not to assign or sublet without leave. After the trial and before the hearing of the appeal, an application was made to me in Chambers for an order appointing a receiver to receive the sum of $1,100, or thereabouts, alleged to be - and I think it was not denied - in the hands of Trelle. This sum represented the number of tons of coal taken from the leased property, at the rate fixed in the lease by way of royalty. I reserved my decision, and shortly afterwards, having decided to grant the application, made a note to that effect upon the papers left with me, and handed them into the clerk's office. The solicitors for the parties were not notified, and the papers were mislaid, with the result that my decision was not made known to any of the parties until after the judgment of the Court en bane dismissing the plaintiff's appeal from the judgment at the trial. On the present application I have before me an affidavit of the plaintiff, one by Mr. Newell, his solicitor, and, as exhibits, three letters passing between the solicitor for the plaintiff and Trelle. This material shews that, whether Trelle is an under-tenant and therefore bound by the rate fixed by way of royalty by the lease, or was in occupation in some other capacity, there is in his hands $1,100, or thereabouts; that Trelle is willing to pay the amount, but only if the plaintiff will accept it expressly as royalty under the lease; that the plaintiff refuses to accept it as such; Trelle asserting that the lease is in force and that he is entitled to the benefit of it; the plaintiff contending that Trelle has no rights under the lease and is liable to the extent of the $1,100, or thereabouts, for use and occupation or otherwise. The affidavit of the plaintiff also shews that, if he pays the costs which he is ordered to pay to Trelle, and Trelle refuses to pay $1,100 odd, the plaintiff will probably be unable to collect the amount. The question is whether, in these circumstances, I should stay the execution. In Freeman on Executions, 3rd ed., p. 115, para. 32, it is said: "During the time within which the plaintiff is otherwise entitled to execution, his right thereto may be suspended or destroyed by what is commonly known as a stay of execution granted by the Court in which the judgment was rendered, or by some other Court of superior authority, or arising, without any formal order of any Court, as the result of proceedings authorised by statute. These stays of execution may be regarded as of three classes: first, those which are ordered by the Court in which the judgment was rendered, but not as the result of any appellate proceedings, and which proceed upon the ground that, for some cause, the execution of the judgment ought to be postponed to some subsequent date, or, perhaps, ought not to take place at all; second, those which are a consequence of or attend appellate proceedings; and, third, those which result from statutes granting the defendant a further time in which to satisfy the judgment upon his giving certain security therefor. The power of Courts temporarily to stay the issuing or execution is exercised in an almost infinite variety of circumstances in order that the ends of justice may be accomplished; in many cases this power operates almost as a substitute for proceedings in equity, and enables the defendant to prevent any inequitable use of the judgment or writ." In the American Digest, the Century edition, vol. 21, tit. "Execution, Stay, Quashing, Vacating, and Relief against Execution," col. 932, par. 448 (Alleged Indebtedness of Execution Plaintiff), a number of cases are quoted in which a stay of execution was granted, on the principle stated in Freeman, so as to afford an opportunity to the execution debtor to obtain a counter-judgment with the view

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of the two judgments being ultimately set off, the one against the other, according to the well-settled practice: 1 Chitty's Q.B. Prac., 14th ed., p. 781; Masterman v. Malin, 7 Bing. 435. I approve and adopt the practice as laid down by Freeman and applied in the American cases referred to. I will make an order to the following effect. The execution will be stayed for 10 days; if within that time the plaintiff commences an action against Trelle to recover the moneys in question, the stay will continue until 10 days after the decision upon the trial, or other earlier determination of the action; the plaintiff is to proceed promptly in all respects with the action, and Trelle may apply to raise the stay at any time and from time to time, if he fails to do so; the plaintiff will be at liberty to apply, within 10 days after the decision upon the trial, for further stay, if so advised; the costs of this application will be paid by the plaintiff to Trelle, but execution for these costs will be included in the stay I now grant. The question of the lien of Trelle's solicitors upon the $1,100 is one which can be dealt with upon the application to set off the present j~dgment against Trelle. A number of questions touched upon during the argument before me, for instance, whether, if the plaintiff in proceedings against Trelle sues in the alternative, in the one alternative for money payable for use and occupation or ( waiving the tort) for coal sold and delivered, and in the other alternative for money payable by way of royalty - he places himself in such a position as to enable the defendant to pay the money into Court with an admission of liability upon the latter alternative aspect and so exclude the plaintiff from ever putting forth the other alternative - I leave without expressing an opinion. E. Position of Sheriffs and Bailiffs In Malouf v. Labad (1912), 3 O.W.N. 1235, Riddell J. said, in holding a Sheriff's seizure of stock invalid because the Sheriff had gone outside his county to serve the company: "Like the vice-comes whose place he has taken, [the Sheriff's) authority is confined to the county of which he is Sheriff; if he executed a writ out of his county, he was a trespasser. . . I do not, of course, suggest that a Sheriff may not do any act out of his county which a private individual may do, as, e.g., serve a writ of summons, etc.; what is meant is, that he cannot act officially out of his county. In none of the cases in our Courts in which the matter has come up was there a seizure by a Sheriff except when the head office of the company was in his bailiwick ... Nowhere, however, can I find any suggestion that the Sheriff's power in the case of stock is any greater than in the case of visible chattels. The legislature, recognizing the limitations of the Sheriff's power, and that the service by him required by the statute is an official service, have given him power to serve, not only when the company is within his bailiwick, but also when there is a place within his bailiwick where he can serve upon the company as though the company were there domiciled. But this is the whole extent of his power."

WILSON v. TUMMAN English Court of Common Pleas. 1843. 6 Man. & G. 236. Trespass, de bonis asportatis. Plea, by each defendant separately, not guilty. At the trial before Parke B., at the last assizes for the county of York, the following facts appeared. In November 1842, the plaintiffs took possession of the goods in question,

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under a deed of assignment from Jeremiah New, to whom the goods had previously belonged, and in whose house they still were. On the 3d of December 1842, these goods were seized and taken away under some process directed to the sheriff is respect of a debt due from New to Tumman. Neither of the defendants authorized this seizure before, or at the time, it was made. Both the defendants were, on the same day, served with notice that the plaintiffs claimed the goods. On the 3d of December, the defendant Fretson, who was Tumman's attorney gave a notice in writing to Mrs. Fearn, - to whose house the goods had been removed the day before, - in which he said, "I am coming about the goods which were seized," and desired her not to part with the goods to any person except Tumman. On the 5th of December Fretson sent her a written indemnity for retaining them. On the 19th of January 1843, notice was given to the defendants that an action would be brought against them and the sheriff and his officers for the seizure. The person who served Tumman with the notice asked if he had any claim on the goods; to which he answered "Yes, I have; and a just claim I consider." Upon this evidence the learned judge directed the jury, that as the order given by Fretson had not been acted upon by any refusal on the part of Mrs. Fearn to deliver the goods to the plaintiffs, the only question for their consideration was, whether the seizure on the 3d of December was made by order of the defendants or either of them. That an order to seize the goods was in this case necessary, to charge the defendants with the trespass; that although the subsequent assent and ratification by B. of an act done by A., professing to act for and on account of B. is sufficient to make that act the act of B., by relation, here, the sheriff's officers acted as ministers of the law, without any intention to act as agents of the party suing out the process; that as to Fretson, the question of ratification did not arise, inasmuch as the seizure could not be for his benefit. The learned judge therefore asked the jury to find, whether the defendants, or either of them, gave any previous authority for making the seizure, and whether the defendant Tumman had authorized or had merely given a subsequent assent to a seizure. The jury found that neither of the defendants had originally authorized the seizure, but that Tumman had subsequently sanctioned and authorized such seizure. The learned judge directed the verdict to be entered for both the defendants, reserving leave to the plaintiffs to move to enter a verdict for £2 16s. against Tumman, if the court should be of opinion that his ratification made him liable as a trespasser. Bompas Serjt. in the following term moved to enter a verdict for £2 16s. against Tumman, or for a new trial on the ground of misdirection. TINDAL, C.J.: This case comes before us on a rule obtained by the plaintiffs, by leave of the learned judge at the trial, to enter a verdict for them against the defendant Tumman, for £2 16s. if the court should think that his subsequent ratification made him liable, as a trespasser, for the original seizure. The seizure of the plaintiffs' goods was made by some officers of the sheriff, without any precedent authority from Tumman, who appeared upon the evidence at the trial to be a plaintiff in some suit, the nature of which did not transpire, but who is found by the jury, not to have given any precedent authority to take the goods of the plaintiffs, but to have ratified the taking after it was made. The question, therefore, is a dry question of law, whether the subsequent ratification by this defendant, of a taking under such circumstances, is the same

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in its consequence, as a precedent command of the defendant. And we think, under the authorities, and upon the reason of the thing itself, that it is not. That an act done, for another, by a person, not assuming to act for himself, but for such other person, though without any precedent authority whatever, becomes the act of the principal, if subsequently ratified by him, is the known and well established rule of law. In that case the principal is bound by the act, whether it be for his detriment or his advantage, and whether it be founded on a tort or a contract, to the same extent as by, and with all the consequences which follow from, the same act done by his previous authority. Such was the precise distinction taken in the Year-book, 7 Hen. 4, fo. 35 - that if the bailiff took the heriot, claiming property in it himself, the subsequent agreement of the lord would not amount to a ratification of his authority, as bailiff at the time; but if he took it, at the time, as bailiff of the lord, the subsequent ratification by the lord made him bailiff at the time. The same distinction is also laid down by Anderson C. J. in Godbolt's Reports, 109. "If one have cause to distrain my goods, and a stranger, of his own wrong, without any warrant or authority given him by the other, takes my goods, not as bailiff or servant to the other, and I bring an action of trespass against him, can he excuse himself by saying that he did it as his bailiff or servant? can he also father his misdemeanor upon another? He cannot; for once he was a trespasser, and his intent was manifest." In the present case the sheriff's officers, who were the original trespassers by taking the goods of the plaintiffs, were not servants or agents of the defendant Tumman, but the agents of a public officer or minister, obeying the mandate of a court of justice. They did not assume to act, at the time, as agents or bailiffs of the then plaintiff Tumman, but they acted as the servants of another, viz., the sheriff, by virtue of the process directed to him by the court. And this forms the distinction between the present case and that of Parsons v. Lloyd [3 Wits. 341] relied upon in the argument. In the present case the sheriff, or the sheriffs officers, seized under process, which is not suggested to have been void or irregular, but must be taken to be valid process. In the case in Wilson [Parsons v. Lloyd] the writ had been set aside as irregular; and, consequently, the arrest had been made without any authority. In that case, therefore, the sheriff had acted, not under any authority of the _court, but under the direction of the plaintiff in the original action, who, by suing out void process, was in the same situation as if he had orally desired the sheriff or his officer to make the arrest. And on the latter supposition, where a ca. sa. or fi. fa. has been set aside for irregularity, it becomes a nullity, and no doubt the sheriff acts as the servant, and by the command, of the plaintiff who sued it out, and who is consequently liable, as a principal, for the act of his agent. If the defendant Tumman had directed the sheriff to take the goods of the present plaintiffs, under a valid writ, requiring him to take the goods of another person than the defendant in the original action, such previous direction would undoubtedly have made him a trespasser, on the principle that all who procure a trespass to be done are trespassers themselves, and the sheriff would be supposed not to have taken the goods merely under the authority of the writ, but as the servant of the plaintiff. But where the sheriff, acting under a valid writ by the command of the court and as the servant of the court, seizes the wrong person's goods, a subsequent declaration by the plaintiff in the original action, ratifying and approving the taking, cannot upon the distinction above taken, alter the character of the original taking, and make it a wrongful taking by the plaintiff in the original action

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On the ground of this distinction, we think the defendant Tumman is not shewn to be a trespasser, and that the rule must be discharged. Rule discharged. MORRIS v. SALBERG

English Court of Appeal. 1889. 22 Q.B.D. 614. APPEAL from the judgment of Stephen J. at the trial with a jury. The facts were in substance as follows: The action was for trespass and wrongful seizure of the plaintiff's goods. The defendant had recovered judgment in an action on bills of exchange against the plaintiff's son, G. M. Morris. A writ of fieri facias directing the sheriff to levy the amount of the judgment upon the goods of G. M. Morris was taken out by the defendant's solicitor, who indorsed the writ, "Levy £ 170 16s. 11 d. on the goods of the defendant, &c. : the defendant is a gentleman who resides at Sarnau Park, Llandyssil, Cardigan, South Wales, in your bailiwick." The address so given was the residence of the plaintiff G. Morris, not of his son, who resided elsewhere. The sheriff entered on the premises so described and seized goods of the plaintiff. The learned judge left to the jury the question whether the sheriff seized the goods of G. Morris the plaintiff instead of the goods of G. M. Morris the execution debtor because he was misled by the direction he received from the defendant's solicitor. The jury answered the question in the affirmative, and assessed the damages at £100. The learned judge, however, on the authority of the case of Childers v. Woofer (2 E. & E . 287], entered the judgment for the defendant notwithstanding the finding of the jury. It was admitted by the defendant's counsel during the argument . . . that, if a subsequent ratification by the defendant of the act of the sheriff in seizing the plaintiff's goods were possible in law, circumstances existed which amounted to such ratification. It is therefore unnecessary to set out the facts with regard to that point. LORD EsHER, M. R. : In this case the sheriff was directed by a writ of fieri facias to seize the goods of the judgment debtor, but he has seized the goods of the wrong person. The question is whether the execution creditor is liable in respect of such wrongful seizure. The writ directed the sheriff to seize the goods of G. M. Morris. The execution creditor's solicitor indorsed on the back of the writ a description, which, I apprehend, is no part of the writ, in the following terms: "The defendant is a gentleman who resides at Sarnau Park, Llandyssil, Cardigan, South Wales." The residence so given was not that of the execution debtor but that of his father. The question is whether that indorsement on the writ was a direction to the sheriff or not. The case of Rowles v. Senior [8 Q.B. 677] appears to supply the answer to that question. There the indorsement was "the defendant resides at Wolverton, and is an innkeeper," whereas, in truth, the person who kept the inn was the defendant's mother-in-law; and her goods having been seized it was held that that was evidence of a direction to the sheriff to seize them. That case seems to shew that such an indorsement may amount to a direction. The question in any case whether it does amount to a direction to seize the particular goods seized appears to be a question of fact for the jury or other tribunal which has to decide the facts. Therefore we have in this case something indorsed on the writ by the defendant's solicitor, by whose action in making such indorsement the defendant is bound; and, even if it was not meant to be a direction to seize the goods seized, yet I think if it was in such a form as to mislead the sheriff into thinking that it was, the result would be the same:

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for, if a person makes a statement that may well mislead, and does in fact mislead, the sheriff into thinking that he was directed to seize the goods seized, it seems to me that such a statement renders the maker of it liable as if he had intended to give such a direction. The learned judge at the trial left to the jury the question whether the sheriff seized the goods of the plaintiff instead of the execution debtor's goods because he was misled by the direction which he received from the execution creditor's solicitor. The jury would, in order to answer this question, have to consider whether the direction was intended to point to the particular goods seized or was a direction given in such a form as was likely to mislead the sheriff into seizing those goods. The jury answered the question in the affirmative. The learned judge afterwards came to the conclusion that the result of the decided cases was that nothing indorsed on the writ, whether by the execution creditor or his solicitor, could amount to a direction to the sheriff so as to affect the question of liability for the seizure of the goods. It is difficult to reconcile that conclusion with the case to which I have before referred, in which such a direction was held to be evidence of a direction to the sheriff to levy on the goods seized. Another authority to which reference must be made on the subject is Jarmain v. Hooper [6 M. & G. 827]. It is true that the point expressly decided in that case was that the execution creditor was bound by what was written on the back of the writ by his attorney, because it was within the scope of the attorney's authority to give the direction: but the terms of the indorsement, which was precisely similar to the one in the present case, were before the Court on the motion for a new trial. The counsel for the execution creditor undoubtedly assumed that such a direction given by the execution creditor himself would render him liable, the point he took being that the direction given by the attorney did not bind the execution creditor, being beyond the scope of his authority. The Court certainly seem to have had their attention called to the terms of the direction in that case, and it would appear from the observation of Maule, J., in the course of the argument that the question as to the effect of the indorsement must have been present to their minds. Under those circumstances, it seems to me that the conclusion at which they arrived really amounts to a decision that such an indorsement on the writ may be equivalent to a direction to the sheriff, and may constitute the sheriff the bailiff of the execution creditor, and that, though it be given, not by the execution creditor himself, but by his attorney, the execution creditor will be liable. It was said that the case of Jarmain v. Hooper has been overruled by Childers v. Wooler. The decision being one of the Common Pleas the Queen's Bench can hardly have assumed to overrule it. They did not assume to do so. Cockburn, C. J., in delivering the judgment of the majority, says with regard to Jarmain v. Hooper that the inciorsement in that case was much more specific, and that, as there clearly was a ratification of the illegal seizure which had been made for the benefit of the execution creditor, there was other evidence in that case besides the mere indorsement, and that therefore the point whether the indorsement had the effect contended for by the plaintiff was not raised or decided in Jarmain v. Hooper. He therefore distinguished that case from the one before him on two grounds. I confess I cannot see any real distinction on the ground of the terms of the indorsement being more specific. Then, with regard to the question of ratification, I think that the defendant's counsel is in a dilemma. He admits that, if such ratification is possible in law, there has been a ratification in this case by the execution creditor of the seizure of the goods. If there cannot be such a ratification in law, then the distinction taken by the majority of the Court in Childers v. Woofer with regard to Jarmain v. Hooper, on the ground that that case proceeded on ratification,

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must necessarily fall to the ground. In that case the two decisions would be in conflict: and the question would be which way we are to decide. I think we must take the same view as was taken by the Court of Appeal in Smith v. Keal [9 Q.B.D. 340]. In giving judgment in that case, Jessel, M. R., said, with regard to Jarmain v. Hooper : "That case is not technically binding on the Court of Appeal, but, whether rightly or wrongly decided it, it was decided nearly forty years ago and has never been questioned since. It has been frequently cited and commented on, and has got into the text-books, and the Court of Appeal ought not now to disturb it. There are two classes of cases which must be distinguished. Where an old case is contrary to the principles of the general law, the Court of Appeal ought not to shrink from overruling it, even after a considerable lapse of time. But where an old decided case has made the law on a particular subject, the Court of Appeal ought not to interfere with it, because people have considered it as establishing the law and have acted upon it." So if one of the two cases has to be overruled, I think we have the authority of the Court of Appeal for saying that it would be Childers v. Wooler not Jarmain v. Hooper. If Jarmain v. Hooper is not overruled it seems to me to be in point. Lindley, L. J., says, in giving judgment in Smith v. Keal, with regard to Jarmain v. Hooper : "I have often had occasion to consider that case and I do not think it has been shaken by any subsequent decision. Whatever objections to it may have been felt by some judges, it has been taken as good law and has been constantly acted on." The Court of Appeal in Smith v. Keal took the distinction that in the case before them the direction was not by indorsement in writing on the writ but by word of mouth after the delivery of the writ. They do not say that such a direction by word of mouth, if given by the execution creditor himself, would not have rendered him liable, but they say that the execution creditor's solicitor can only bind him by a direction given in writing on the writ, and therefore the defendant was not liable in respect of the direction given verbally by his solicitor's clerk. In the present case there is an indorsement on the writ which was evidence for the jury upon the question which was put to them, and they answered that question in the affirmative. I think that their finding brings this case within Jarmain v. Hooper and that the learned judge ought to have given judgment accordingly. The appeal must, therefore, be allowed and judgment entered for the plaintiff for the damages found by the jury. FRY, L. J.: I am of the same opinion. The principle on which this case must be decided seems to me to be very clearly laid down by Tindal, C. J. , in giving judgment in Wilson v. Tumman. He there says: "If the defendant Tumman had directed the sheriff to take the goods of the present plaintiffs under a valid writ, requiring him to take the goods of another person than the defendant in the original action, such previous direction would undoubtedly have made him a trespasser, on the principle that all who procure a trespass to be done are trespassers themselves, and the sheriff would be supposed not to have taken the goods merely under the authority of the writ, but as the servant of the plaintiff. But when the sheriff, acting under a valid writ by the command of the Court and as the servant of the Court, seizes the wrong person's goods, a subsequent declaration by the plaintiff in the original action ratifying and approving the taking, cannot, upon the distinction above taken, alter the character of the original taking and make it a wrongful taking by the plaintiff in the original action." The question, therefore, is, whether such a direction was given by the defendant in the present case as made the sheriff his servant for the purpose of seizing these goods. The indorsement on the writ was relied on for the plaintiff as amounting to such a direction. It was argued for the defendant that the indorsement cannot

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be regarded as such a direction to the sheriff: and in support of the argument our attention was directed to the case of Childers v. Wooler. If in that case the Court meant to decide that such an indorsement cannot under any circumstances be regarded as a direction to the sheriff, so as to constitute him the servant of the execution creditor for the purpose of seizing goods, I think the decision was inconsistent with the earlier cases on the subject, such as the case of Jarmain v. Hooper, which was affirmed in this Court in Smith v. Keal. The Court of Queen's Bench in Childers v. Wooler took the distinction that Jarmain v. Hooper does not turn merely on the existence of a direction, but also on the fact that there had been a ratification. It appears to me that this view is inconsistent with Rowles v. Senior, an earlier case: and I think that the distinction so taken is not tenable. In my opinion the defendant's counsel was right in saying that, if a direction was given, no ratification would be necessary, but, if no direction were given, then, as the sheriff in seizing the goods acted as the servant of the Court or the Queen, not of the execution creditor, there could be no ratification by the execution creditor. But, if this be the correct view, it certainly undermines the authority of the case of Childers v. Woo/er, and shews that the distinction there taken was untenable. But whether this case is looked at with reference to the decision in Jarmain v. Hooper, or with reference to that in Childers v. Wooler, the result seems to be the same. If Jarmain v. Hooper be com~ct, then the indorsement on the writ was a sufficient direction to the sheriff to make the execution creditor liable for his act in seizing the goods, and the case will be governed by that decision. If on the other hand Childers v. W ooler be right, if follows that subsequent circumstances shewing a ratification would be admissible to fix the defendant with liability, and it is admitted that, if there can be a ratification, there was one in this case. The true view appears to me to be that the previous direction of the execution creditor may make the sheriff his servant for the purpose of seizing the goods, and an indorsement on the writ may amount to such a direction, and it is a question of fact whether in the particular case it does so. In the present case the jury have in substance found that the indorsement on the writ did amount to such a direction. No objection has been taken to such finding, and I can see none. I think the judgment ought to have followed the finding of the jury. For these reasons I think this appeal should be allowed. LOPES, L. J. concurred. GRAVES v. SPRAGUE Appeal Division, Supreme Court of New Brunswick. 1920. 48 N.B.R. 36. The judgment of the Court was delivered by C. J.: The sole question raised by the appellant on his appeal is as to whether or not there was in fact or in law conversion by the defendant William A. Sprague of the hay belonging to the Robinson plaintiffs. The question as to whether there was a trespass to plaintiff's real estate or not is not raised by the appellant, no doubt because admittedly the defendant Sprague had gone upon the plaintiff's land with the constable, showed him the hay which was seized and sold, and further went there on the day of the sale. With respect to conversion, the point involved is this, - did the defendant Sprague personally take part in the seizure and sale of this hay under the execution? The authorities are clear that if a party or his attorney in any way intervenes, directs or takes part in the acts of an officer under an execution, then the party so intervening, directing or taking part constitutes the officer his agent for the purposes of that act, and is HAZEN,

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responsible for all matters ensuing as a result of the action of the officer. See Clerk and Linsell on Torts, Can. ed., 1908, at page 198: "Just as a party makes himself liable for what is done under process issued without jurisdiction by officiously intervening in its execution, so where a process is within the jurisdiction of the court, if he takes on himself to give orders or directions to the officers entrusted with its execution and in consequence of those orders and directions a wrongful act is committed he will be liable since he will have made the officer his agent. * * * * * If the execution creditor positively affirms to the officer of the court that a certain person is the man or that certain goods are the property of the man, that amounts to an authority to the officer, and the creditor is answerable for the consequences of obeying his directions." Now in this case it appears from the evidence of the constable, Gough, that William Sprague and Squire Cannon employed him to seize some hay, and told him to go and levy on the hay that William Sprague put up, and sell it; that William Sprague went with him, told him what barn to go to, came down with him to the barn - "and Sprague went down and attended to the barn and said to levy on the hay in there." The defendant Sprague says he did not tell Gough to go and take the hay; that he told him that that was the hay that Mrs. Graves said was hers that he cut, and that she gave him her obligation to pay; that he was with Gough and went down and showed him the hay but he did not know the barn or the hay he cut from anybody else's. It appears therefore that the defendant after delivering the execution to the constable took him down upon the land owned by the Robinson plaintiffs, showed him the hay owned by the Robinson plaintiffs, and said that that was the property of Mrs. Graves, and in my opinion this constitutes a case of interference on the part of the defendant, and the defendant is answerable for the consequence of what the constable did in obeying his instructions. Reading all the evidence, I think it is clear that in levying on the hay that was the property of the Robinson children, the constable was acting under instructions received from the defendant Sprague. The learned trial judge regarded Sprague's evidence as being unsatisfactory, and evidently attached little or no credence to it. As stated before, the trial judge did not specifically find as a fact that Sprague interfered with and directed the constable, but having found the defendant Sprague liable for the conversion, the Appellate Court will assume that he found the facts in favor of the respondent, and that judgment will not be disturbed if there is evidence to justify such finding: See Johnson v. Jack ( 1901) 35 N.B.R. 492. It is open to the court in any event to draw inferences that might have been drawn by the trial judge, and it is impossible to read the evidence in the case without coming to the conclusion that Sprague interfered in such a manner as to render himself liable for the action of the constable in improperly seizing the hay of the Robinson plaintiffs under an execution in a suit to which they were not parties, and there is ample evidence to support the judge's finding as I understand it to have been, and it ought not, I think, to be disturbed .... Where an execution creditor instructs the sheriff not to sell certain of the property advertised for sale under the execution at a price less than a specified sum, such instruction is equivalent to an offer by the creditor to buy in at the sum so specified if the sheriff is forced to withdraw the property from sale for insufficient bids: Corsbie v. J. I. Case Threshing Machine Co . (1913), 14 D.L.R. 55. Lamont, J. commented (at 59): "The instructions to the sheriff by the company [execution creditors] not to sell for less than $1,200 are equivalent to an offer by them of that amount. That offer, being the highest one made, must in the light of the sheriff's conduct and of the

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defendant's letter of January 9, 1907, and their offering to sell the machine to Ross, and their subsequent disposal of a part of it, be held to have been accepted by the sheriff, and the machine to have been sold to the defendants. Certainly the defendants, after conduct such as theirs, cannot now be heard to deny that there was a sale to them of the machine, or, at least, a contract with the sheriff equivalent to a sale. That being so, the plaintiff is entitled to have a credit of $1,200 on his judgment as of the date of the sale. This, in addition to the credits admitted and endorsed on the execution, shews that the defendants have collected more than sufficient to satisfy their claim, and the plaintiff is entitled to have judgment against them for the excess. That excess amounts to $294. "There will, therefore, be judgment for the plaintiff for $294, and interest thereon from January 16, 1903, and costs."

WATSONv. MURRAY Queen'sBenchDivision,England. [1955) 1 AllE.R. 350.

HILBERY, J.: This is a claim for damages for alleged trespasses to goods and land of the plaintiff by the defendants acting as officers of the Sheriff of Surrey, coupled with a claim for £18 as damages for detinue or conversion of two women's dresses, the property of the plaintiff, alleged to be of that value. The alleged trespasses complained of by the plaintiff were all acts said to have been done by the defendants acting as sheriff's officers in the course of executing writs of fi. fa. delivered to them. The plaintiff alleges that in January, 1952, in March, 1952, and in May, 1952, there were excessive seizures by the defendants when executing writs of fi. fa. and that the defendants thereby trespassed on the plaintiff's goods. Next, the plaintiff alleges and complains that in the course of executing the writs the defendants took possession of her shop and excluded her from the control thereof on two occasions, viz., on Jan. 15 and Jan. 16, 1952, and on June 25, and during part of July 1 and July 2, and the whole of July 3, 1952. The material facts, in outline only, are as follows. In March, 1951, the plaintiff bought the business of a ladies' and children's outfitter then being carried on under the name of Augusta at 48 High Street, Camberley, Surrey, for £7,014 made up of £2,000 for the lease and goodwill, £4,514 for stock and £500 for fittings, etc. The living premises over the shop were included in the lease and the plaintiff went there to live and lived there until the business was finally closed. The plaintiff was without any previous experience in the ownership and control of such a business and by January 1952, through overbuying of stock, she was beginning to be in grave financial difficulties. On Jan. 2, a firm called Seton Cotterall signed judgment against her for £393 2s. 6d. On Jan. 5 the plaintiff executed a bill of sale on a large number of the articles comprising the stock of her shop to secure a loan of £500, the lender of the £500 being Mr. Mitchener. On Jan. 7, the defendants, having received a writ of fi. fa. in respect of the judgment debt and costs, called at the plaintiff's shop, by Mr. May their employee and representative, to demand payment of the amounts due or failing payment to levy execution. Whether what took place amounted to a seizure by the sheriff and, if so, whether such seizure was excessive, are matters which are in issue and fall to be decided. The plaintiff signed a form of "walking possession" agreement offered for her signature by the defendants' representative, Mr. May. Taking this "walking possession" agreement so signed by the plaintiff with him, Mr. May left the plaintiff's premises. On Wednesday, Jan. 16, at about 1.45 p.m. Mr. Mitchener the holder of the bill of sale, paid the amount then demanded by the defendants as

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representatives of the sheriff. On Feb. 20, 1952, a firm called Portenay signed judgment against the plaintiff for £235 5s. 2d. and £13 costs. Having received a fi. fa. in respect of this judgment and costs, on Mar. 3, the defendants sent their same representative, Mr. May, to the plaintiff's premises for the same purposes as on the occasion of his call in January. Again the plaintiff signed the same form of walking possession contract as she had signed in January with the same result, viz., that the sheriff's man did not remain on the premises. On Mar. 18, the defendants removed 120 garments from the plaintiff's stock for sale by auction. On Mar. 24, the money required by the sheriff was found and paid by the plaintiff. Again whether there was a seizure on this occasion and, if so, whether such seizure was excessive, are questions which fall to be decided. On May 15, a firm called Hubert Gowns, Ltd., obtained judgment against the plaintiff for £132 10s. On May 16, having received a writ of fi. fa. in respect of this judgment, the defendants again sent their representative, Mr. May, for the same purpose as on the previous occasions and again the plaintiff signed the same form of walking possession agreement. Exactly similar calls were made by the defendants having received prior to each of such calls writs of fi. fa. in respect of judgments against the plaintiff for £21 ls. 6d., £60 11s., £102 8s. 6d. and £51 6s. respectively, making a total of indebtedness on the judgment of £556 17s. in addition to which there were sums for costs and sheriff's fees, charges and expenses. On June 24, or June 25, the defendants put "lot" tickets on a number ot articles in the plaintiff's shop with a view to holding an auction sale thereof at the plaintiff's shop. It is now conceded that they locked the shop, excluding the plaintiff therefrom, from about 4.30 of June 24, until the morning of June 25. The defendants prepared and published posters advertising this proposed sale and advertised it in the press. The poster and the advertisements announced that the sale was to be without reserve at 48 High Street, Camberley, on July 4, and was to be a sale of "the valuable stock of a high class costumier and ladies' outfitter". Then followed a list of what was announced for sale concluding with a statement that the articles were to "be sold by auction by Messrs. H . W. Smith & Moon on the premises as above on Friday, July 4, 1952, at 12 o'clock noon." The defendants posted more than one of these posters on the window of the plaintiff's shop. They were found in that position when the plaintiff returned from London during the afternoon. Mr. Bond's evidence was that on July 2, when he and Mr. Greer left the premises the shop was again locked up for the night. The plaintiff's evidence was that the defendants' representatives had been at the premises all day on July 1, and had closed the shop during that day. I think the plaintiff has here been confused about the exact sequence of events because Mr. Bond's evidence, and I thought him reliable, was that he was not in fact at the premises between June 24 and July 2, and could not therefore have been one of the defendants' representatives there on July 1, as the plaintiff asserted. On July 2, he and Mr. Greer, the sales foreman, who was with him, found that forty-eight of the lot numbers which had previously been put on various garments, were missing. They had obviously been removed by the plaintiff. Mr. Bond and his colleague then re-lotted the selected garments while the plaintiff continued her business in the shop. Four rails of garments were lotted and put aside as also were the garments which they had so re-lotted. The next day, July 3, the defendants opened the premises again, this being the day advertised for viewing the goods which were to be sold. I cannot accept the plaintiff's evidence that Mr. Moon was at the premises on Thursday, July 3, in face of his denial that he was there on July 2 and 3. It

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is the fact that on July 3 the defendants were exercising complete control over the premises and the goods which had been lotted, and were inviting viewers to come and inspect the goods which were in the catalogue for the sale. On July 4, the day fixed for the sale, the defendants' own evidence given by Mr. Moon was that their posters were outside the premises and that there were people arriving for the sale at 11.15. However, Mr. Moon, at the premises, was informed by his partner Mr. Coombs by telephone that all moneys due had been paid and that the sale must be stopped. It was announced to those outside the shop, who were there waiting for the sale to begin, that the sale would not take place. The plaintiff asserts that Mr. Moon then stood outside the shop, and when asked why there would be no sale said "she has paid her debts". Mr. Moon denied that he ever said this and I am not satisfied that these were the words that were used. After the sale was stopped it was found that two of the garments which had been included in the catalogue were missing. It is clear not only from the evidence of the plaintiff but also in my view from the evidence given by Mr. Moon that the plaintiff at all times objected, and made it clear to the defendants that she objected, to their holding a sale on her premises. The first question to be considered is whether what took place when Mr. May went to the premises on Jan. 7, armed with the writ of fi. fa., amounted in law to a seizure of the plaintiff's goods. Mr. May is now dead, but his report on his visit is in evidence. He states that on calling he informed the plaintiff of the nature of his visit and was told by her that there was a bill of sale on all the stock and fittings in the shop in favour of Mr. Mitchener; she stated that her solicitor had tried evidently unsuccessfully to arrange for payment of the debt by instalments and that she was not in a position to pay anything on account that day. Mr. May reported that it was a very good class shop and fairly well stocked with ladies' dresses, suits, gloves, stockings, etc. The plaintiff's evidence was that Mr. May came at about 10.30 a.m. on Monday, Jan. 7, handed the plaintiff the defendants' card showing that they were sheriff's officers and he was their representative, and said that he must take charge of everything in the shop; that she said she did not want him in the shop and asked what right he had to stay there, that Mr. May then produced a printed form and said that if she signed it and guaranteed to pay him the money which she took, except whatever was required for staff wages, he need not stay all the time. Thereupon the plaintiff signed the printed form which the defendants regularly use and which is known as a "walking possession" agreement. It is in the following terms: "Dated (blank) To the Sheriff of the County of Surrey and to Messrs. Murray & Co., his officers. (Blank) v. (Blank) In consideration of your not keeping the man in charge of the goods seized herein in close possession, and allowing him to leave each night and attend each day ( or as may be arranged) I hereby authorise and empower you and your representative to re-enter my house and premises, No. (blank) [address] at any time you may think proper, under a writ of fi. fa. in the above action dated (blank) and if necessary to use force for that purpose, and I also undertake not to remove, or allow to be removed, any of the goods in the meantime, and to pay the possession money day by day."

It was argued for the defendants - these being the facts, and I think the plaintiff's evidence here is substantially accurate - that there was no seizure: that all that Mr. May did and said only amounted to an explanation by him of what the legal situation would be if the plaintiff did not either satisfy the judgment debt or sign the walking possession agreement and that as the plaintift

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thereupon signed the agreement no seizure was made and the defendants contented themselves with the notional possession which resulted from the agreement. I am unable to accept this contention. On the subject of what is sufficient to constitute a levy of seizure by the sheriff in execution of a writ of fi. fa. there is fortunately some authority. In Bissicks v. Bath Colliery Co. Ltd. where the sheriff's officer went to the plaintiff's premises and told him he had a warrant to execute a writ of fi. fa. for £28 7s. 2d. and that he required immediate payment, otherwise further proceedings would be taken and the man must remain in possession, the plaintiff paid the sums demanded, including poundage on levy fees, the court held that the sheriff was entitled to both these items. Cockburn, C. J., said (2 Ex.D. at p. 462) : "We must look to see if the writ has been virtually executed", and Cleasby, B., said (ibid.) : ". . . I think in this case there was in substance an actual levy. . . ." On appeal from that decision Bramwell, L. J., said (3 Ex.D. at p. 175) : "The question is whether, upon the facts, there was a seizure . . . upon the whole I think there was a seizure, for the officer did threaten to leave a man in possession." Brett, L.J. said (ibid.) : "I agree that there must be a seizure; but upon the facts I think there was a seizure.The sheriff's officer went to the plaintiff's house with a man, he obtained entry into the house, and whilst he was there the plaintiff's goods were under his control; he spoke as if he had made a seizure, and he treated what he was doing as if it was a seizure ... ." In addition it has been expressly stated by Brett, L. J., in Mortimore v. Cragg (3 C.P.D. at p. 219) that ". . . Where an execution issues the transaction may be divided into four parts: 1. The delivery of the writ to the sheriff: 2. Seizure: 3. The possible payment of money after seizure: 4. If no payment, sale." There can be no doubt that Mr. May went on each occasion armed with a warrant for the purpose of executing a writ of fi. fa. When he says in his report that he informed the plaintiff of the nature of his visit, and the plaintiff, as I believe, asked what right he had to stay there and expressed her objection to his staying, and when I find that he took an agreement in the form in which he did take it, I am satisfied that there was what amounted to a seizure. The opening words of the agreement are "in consideration of your not keeping the man in charge of the goods seized herein in close possession". Those are only consistent with the fact that goods have been seized. Furthermore, by the concluding words of the agreement the plaintiff undertook "not to remove, or allow to be removed, any of the goods in the meantime, and to pay possession money day by day". Again, those words are only consistent with there having been a seizure. In Gladstone v. Padwick one of the questions was whether what was done by the sheriff's officer on a certain date amounted to an actual seizure, and Bramwell, B., said in the course of his judgment (L.R. 6 Exch. at p. 212): "It is admitted, and it is clear, that it is not necessary for the sheriff to lay his hand on a single article. . . . I am of opinion that, where property is all one holding, as it was here, if the sheriff goes and makes known . . . that he is come to seize and does, so far as words and intention can go, seize all the goods on that holding, he has done enough ... " Those words are applicable to what took place on each of the occasions in January, March, May and June when Mr. May called at the plaintiff's shop and

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premises to execute the several writs of fi. fa. which figure in this case. It was urged for the defendants that the position of the sheriff which resulted from what was done and said on each of the occasions when Mr. May called on the plaintiff, and entered her premises for the purpose of executing the writ, was not that the defendants as sheriff's officers had seized, but that they had obtained contractual rights under the several walking possession agreements which the plaintiff signed the result of which was to give them a notional possession. It is true that in Lumsden v. Burnett A. L. Smith L.J., spoke of such an agreement as giving only a constructive possession and Chitty, L. J., spoke of it as giving a possession merely constructive or notional. In that case, the court held that the existence of such an agreement was strong evidence to show that the officer leaving the premises in the terms of such an agreement was not abandoning possession. In that case, as in this after leaving the premises having obtained the walking possession agreement, the officer paid a subsequent visit or visits to the premises to see that the goods were not being removed. I think it is right to say that after seizure the sheriff may continue in possession either actually by leaving a man in the premises or notionally under such a walking possession agreement as was obtained on each occasion from the plaintiff in this case. Since therefore in my view there was on each occasion a seizure, it becomes necessary to consider whether in January and March or in May and June the seizures were excessive so as to give rise to an action on the case against the sheriff. That an excessive seizure gives such a cause of action was decided in Gaw/er v. Chaplin. In that case the first alleged breach of duty on the part of the sheriffs was that they had wrongfully seized goods of the plaintiff of greater value than sufficient to pay the debt, interest, poundage and expenses, although they well knew part would be sufficient. On motion in arrest of judgment after verdict the question was whether that alleged breach was good in law. It was held that it was. In giving the judgment of the court Parke, B., said (2 Exch. at p. 507): " ... in the first instance, the duty of the sheriff is confined to seizing goods that would be reasonably sufficient, if sold, to pay the sum endorsed on the writ - that is, the debt, interest upon the debt, poundage, and expenses; and if the sheriff seizes more, prima facie he is a wrongdoer . . ." There can be no doubt on the evidence that the stock in the plaintiff's shop was far more extensive than it was necessary to seize to satisfy the judgment debt in respect of which either of the writs of fi. fa. in hand in January and February was issued even including the other charges enumerated by Parke, B. There was therefore in my judgment a seizure on each occasion which was excessive; but it resulted in no damage to the plaintiff. She was allowed to carry on her business as before and did so until the sheriff was paid. With regard to the alleged seizure in March on the fi. fa. issued in respect of the Portenay judgment for £235 odd and i 13 costs, I am satisfied that when May called to execute the writ of fi. fa. substantially the same course was followed, and that there was therefore what amounted in law to seizure in the first place of all the plaintiff's stock at her shop, and this was an excessive seizure. Again, however, there was an exactly similar walking possession agreement signed by the plaintiff and again she was allowed to carry on her business without interruption and with power to dispose of any of the items which formed part of the stock by way of sale until Mar. 18. On Mar. 18, however, the defendants took actual possession of 120 dresses and removed them for sale, and it was conceded in the course of the case that this actual seizure and removal was not excessive. The only claim therefore which remains is for the technical seizure of the whole stock, prior to

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the selection and removal of the 120 garments made on this occasion when the defendants' man Mr. May called to execute the writ of fi. fa. on Mar. 3. True that general seizure was in law effective until the particular seizure of the 120 garments only was made on Mar. 18, but again it resulted in no damage to the plaintiff inasmuch as she was left by agreement with power to deal with the whole of that stock in the ordinary course of her business. The sale of the goods so collected and removed was arranged for Mar. 25, at the auction rooms of Messrs. E. Reeves, Ltd. at 114 Church Street, Croydon, but on Mar. 24, the execution was paid out and the sale was abandoned. I turn now to the happenings in May and June. On May 16, the defendants having received a writ of fi. fa. in respect of judgment for £132 10s. obtained against the plaintiff, sent their representative Mr. May to the plaintiff's shop to execute the writ. Once again, from the plaintiff's evidence and Mr. May's written report, I find that substantially the same procedure was gone through between Mr. May and the plaintiff as on the previous occasions and I am satisfied that he then made what amounted in law to a seizure of the contents of the shop. That the defendants themselves regarded what Mr. May did on that date as a seizure there can be no doubt for there is a letter from them to the judgment creditors' solicitors dated May 28, headed "Hubert Gowns, Ltd. v. Watson" which begins: "We duly seized under this execution on the 16th instant". On May 26, being in possession of a writ of fi. fa. in respect of a judgment for £210 ls. 6d. obtained by a firm called Stafford, Ltd., the defendants again sent Mr. May to execute the writ. Mr. May's written report as to what passed, using the same language as before, says that he informed the plaintiff of the nature of his visit. Again, I can only conclude that he purported to make a seizure. On May 27, through her solicitor the plaintiff pleaded with the defendants to defer action, saying there were funds due to the plaintiff which he hoped would become available to satisfy the two executions. By a letter of May 30, Mr. Mitchener, the holder of the bill of sale, wrote that with regard to these two executions he made no claim against "their goods", whatever that may mean. It was apparently taken to mean that he abandoned any claim he might have under the bill of sale. On June 10 there was a third execution in respect of a judgment obtained by Lennox Knitwear Ltd., for £60 1 ls. On June 13 there was another execution in respect of a judgment obtained by Sidney J. Lindsay, Ltd., for £ 102 8s. 6d. Again in his reports Mr. May uses the same language as before to describe what passed between him and the plaintiff when he called to execute each of the writs of fi. fa. issued in respect of these two judgments. On June 20 the defendants received yet another writ of fi. fa. in respect of a judgment obtained by Wallace Thorn, Ltd., for £51 6s. and armed with the appropriate warrant Mr. May called on the plaintiff and informed her, as he reported, of this judgment. Again, I think that he intended what he did when he called as execution of the writ of fi. fa. and there is no doubt that the plaintiff regarded and accepted it as ·such. In view of what subsequently transpired, it is not unimportant to notice that in response to the plaintiff's solicitor's plea to them to defer the actual sale of the plaintiff's goods to satisfy the executions of May 16, and 26, the defendants not only delayed action for the seven days asked for but agreed by a letter of June 3 to refrain from taking any steps towards auction until June 6, and that the plaintiff's solicitor, Mr. Barnes, in a telephone conversation on June 10, agreed that, if the necessary money was not forthcoming by June 11, the defendants must proceed with a sale. Again on June 11, by which time there were, as I have pointed out, these several executions current, Mr.

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Barnes was writing that funds were expected and would undoubtedly come into his hands very shortly, but that he appreciated that the defendants could not refrain from carrying through the executions indefinitely and must therefore proceed. In addition to being a partner in the defendant firm Mr. Moon owns and conducts the business of an auctioneer under the name of H. W. Smith & Moon. Mr. Coombs, who is Mr. Moon's partner in the defendant firm, had all the executions in question in his hands. On June 21, writing in the name of the defendant firm, he instructed H. W. Smith & Moon, that is to say Mr. Moon, his partner, in his capacity as the auctioneer, to attend at the plaintiff's premises as soon as possible to make an inventory and catalogue of sufficient effects to realise the sum of £608 plus 8s. 6d. per day after June 23 and Mr. Moon's charges. He informed Mr. Moon in the same letter that there was no claim being made any longer by Mr. Mitchener. He then concluded the letter as follows: "We leave it to you as to whether it is best to either remove for sale or sell upon the premises. If the latter course is decided upon by you we must ask you to hold the sale at the very earliest moment, in any event not later than July 2 or 3, next. Furthermore, if the sale is being conducted on the above premises, particular care must be taken to safeguard the effects and stock, that, the premises must be closed and the keys held. If there is any risk of goods being disposed of by the [plaintiff], they had better be removed for sale." On receipt of that letter Mr. Moon by telephone tried to arrange as before with Reeves, Ltd., for auction rooms for a sale of whatever articles he decided must be taken from the plaintiff's stock to satisfy the current executions and charges. Reeves, Ltd., however, refused facilities for the sale. On June 23 they wrote giving their reasons, saying: Our auction rooms are open for the reception of goods for absolute sale at any convenient time, but where goods have to be withdrawn after the sale has been advertised and prepared it entails not only pecuniary loss as on the last occasion, but upsets the timing of the sale of other lots besides putting us in disfavour with the trade." Pursuant to his instructions Mr. Moon attended to prepare for a sale, deciding in his own mind that in the circumstances the sale must be held on the premises. I am satisfied that he decided he must hold the sale on the premises in good faith, and not with any malice towards the plaintiff. By the delays which the defendants had conceded, they were in danger so far as the several judgment creditors were concerned. It was urgently necessary that they should sell and satisfy the several writs and executions then in hand before what had occurred constituted an act of bankruptcy on the part of the plaintiff. From experience they knew that it would be most difficult to find any auctioneer with an auction room which could accommodate the goods for sale who would be willing to hold the sale. From experience they knew that any such auctioneer would make the same objection as Reeves, Ltd. had made when refusing to undertake the sale, more especially as all auctioneers knew that the remuneration allowed them on a sheriff's sale was much less than that which they ordinarily charged and received. Any auctioneer would know that he might be allowed only seven per cent. if the sheriff's bill was taxed, as against their ordinary remuneration of twelve and a half per cent. The

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defendants had delayed selling the plaintiff's goods at the request of the plaintiff to give the plaintiff time to get in hand the moneys which her solicitor was saying were expected and which would enable her to pay out the executions. The consequence was that the selling of the goods had become a matter of extreme urgency. It was for these reasons that Mr. Moon decided to sell on the premises. He attended at the premises on June 23, and went over the whole stock intending to sell something of everything to an extent which would provide the amount required and to leave stock which would enable the business to be carried on. He prepared a posting bill and sent it to the printers that day in order to announce the sale as soon as possible. He informed the plaintiff that he intended to hold the sale on the premises. That the plaintiff objected there is no doubt, and that Mr. Moon knew that she objected I have no doubt. On June 24 Mr. Moon again attended all day at the shop and lotted for catalogue purposes about 280 lots. He made a rough assessment of what they might fetch under the hammer. He calculated that they might make an overall average of 50s. a lot. That afternoon, when he left, he caused the shop to be locked up thereby excluding the plaintiff from her own premises because, he said, he felt an element of risk. If there was an element of risk the duty of the sheriff was to leave a man in possession or to remove the goods which he intended to sell. It is no answer to say that today he cannot obtain a man who will do this at the scale fee allowed to a sheriff for a man in possession. In my view it was a trespass on the plaintiff's property to put himself into exclusive possession of her premises by locking them against her and taking possession of the keys. Either on that day or on June 25, 1952, the defendants kept the shop locked all day. On July 2 posters were stuck on the windows of the shop on the defendants' instructions. On July 3 some of the defendants' men were at the premises keeping the premises open for viewing but allowing the plaintiff to carry on her business so far as she could in such circumstances. The goods for sale which were there to be viewed were put at the back of the shop and in one show case. The defendants' representatives did not keep a continuous watch on the viewers and the goods which they had lotted and separated. It was admitted by the defendants that they left the premises for meals. The result was that the next day after the executions had been satisfied and the proposed sale abandoned it was found that two of the lotted garments were missing. Apparently they had been stolen. There is no evidence that the plaintiff had sold them, and I am satisfied that the plaintiff is not dishonest and would not have insisted as she did on having a written acknowledgment by the defendants' man on the premises that these two garments were missing if she had been conscious that she had herself taken them and sold them. Even if, as it was argued for the defendants, the plaintiff can only recover the value of these lost garments if she proves that they were lost through the defendants' negligence, I am of opinion that she has shown that. If the defendants were keeping the shop open for anyone to come in and view the garments lotted for sale and taken by them into their possession and control, they were guilty of ngeligence if they left those garments unattended. The plaintiff's claim for £18, the value to her of these lost garments, is, therefore, in my view well founded. After the viewing was over the defendants again locked up the premises and kept the keys. On July 4 the premises were opened by the defendants for the holding of the sale but it was stopped, and no sale took place because the necessary moneys were paid on the plaintiff's behalf. The questions which have to be decided in connection with these happenings in

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June and July are first, did the defendants trespass by preparing for this sale on the premises and by using the premises for their preparations for the sale and by posting the bills announcing the sale on the plaintiff's premises without her permission and in spite of her objection of which they knew, and second, did the defendants on this occasion make an excessive seizure in taking for sale what appears in the catalogue. On the second question there was much evidence on both sides. The plaintiff's contention that the seizure was excessive is mainly based on evidence that at such a sale you might ordinarily expect to realise a certain fraction or percentage of the retail prices of the articles and on the fact that at a later date the fixtures which were included in the catalogue sold for a comparatively large sum and the other articles realised, when sold by tender, about twenty-five per cent. of their retail price. On the other hand the defendants' evidence and contention was that it is in the highest degree uncertain what such goods will fetch under hammer, much depending on whether there is a good or a poor attendance at the sale : that a sale such as this will be likely to realise less if held in the country than if held in a London auction room; that such a sale largely depends on the weather and on the trade buyers attending, and that the sheriff must always allow a margin as he has a duty to the execution creditors to execute the writ so as to make of the goods sufficient to satisfy the execution. I am satisfied that the defendants, in lotting and cataloguing what they did, acted in good faith, and I am not satisfied, having regard to the hazards attending such a sale, that there was an excessive seizure. It must be remembered that most of the goods in question were seasonal and fashion goods. Moreover, it by no means follows that anything like all the lots would necessarily have got a bid at all. The serious question which remains is the question whether the defendants had any right in law to insist on using the plaintiff's premises as they did for the purposes connected with holding this sale there. It is clear that the writ of fi. fa. does not require or authorise the sheriff to seize the land or premises of a debtor. It requires him to make of the goods of the debtor sufficient to satisfy the execution creditors' judgment debt. It gives the sheriff a right to remain on the debtor's premises for a reasonable time and no longer (see Ash v. Dawnay), and it empowers him to sell sufficient of the debtor's goods to satisfy the debt in respect of which the writ was issued. Reed v. Harrison is authority for saying, as the headnote to that case expresses it, that on attachment of goods, the officer cannot legally continue in possession of the defendant's house, or keep the goods therein for a long and unreasonable time, but must remove them to a place of safe custody: else he is a trespasser ab initio. At common law the sheriff's duty is to remove the goods to some place where they can be safely kept until they are sold, but I cannot find any English authority which decides that he can, if he chooses, use the debtor's premises for the purpose of holding a sale there. It does not appear to me that in this case it is established that it was impossible to hold the sale anywhere else than on the plaintiff's premises. It was no doubt extremely difficult in the particular circumstances to arrange for it elsewhere, and no doubt the defendants decided that it was expedient to hold the sale at the plaintiff's shop, but the plaintiff objected and they knew that she objected. They must in those circumstances, it seems to me, show that they had a legal right to do what they did notwithstanding the plaintiff's objection. In Mather on Sheriff and Execution Law (3rd Edn. at p. 126) there is refer-

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ence to an Irish case in which, it is said, it was held that a sale should as a rule take place on the execution debtor's premises (Re Purcell), but the learned editor immediately goes on to say: " It would certainly be better that the sheriff should obtain the debtor's licence to hold the sale upon his premises, as there appears to be some doubt as to his authority to use the premises for the purpose of a sale." In my view an examination of the facts and the judgment in the Irish case shows that the statement that it was there held that a sale should as a rule take place on the execution debtor's premises is an over-statement. That opinion was expressed passim by Miller, J., when he said (13 L.R. Ir. at p. 496) : " . .. he (the sheriff) does not allege that he made any attempt whatever to make any sale of the goods upon the premises of the execution debtor, which was his primary duty . . .. " The statement was made in a part of his judgment when the learned judge was commenting on the sheriff's claim to his expenses in removing and returning goods of the debtor to the debtor's premises, but after he had already decided that the sheriff could recover only the fees and expenses which were provided for him by the Act 6 Anne c. 26, s. 16 ands. 23, and by the Act 43 Geo. 3 c. 46, s. 5, and that these expenses of removal and of return of the goods were not provided for the sheriff by those statutes. The case is not, therefore, in my view a direct authority for the proposition that it is the duty of the sheriff to sell the debtor's goods on the debtor's premises. Counsel before me in this case have not found ( nor have I been able to find) any authority which decided that such is the duty of the sheriff acting under a writ of fi. fa. The defendants' evidence in this case shows that the practice is to remove and sell in an auction room such goods as were here seized. It may be that if the sheriff can show that it was not possible to sell the goods except on the debtor's premises, it would be lawful for him so to do. Part of his duty is to sell the goods so as to make of them sufficient to satisfy the debt which is the subject of the writ of fi. fa. which he has to execute and the law will not require of him that which is impossible. But the defendants in this case have not established that it was impossible to remove and sell the goods away from the plaintiff's premises. They have shown that by the concessions they had made to the plaintiff it had become extremely difficult for them so to do before an act of bankruptcy by the plaintiff was committed, but their evidence does not amount to more than this. There were, therefore, in my view trespasses on the plaintiff's property committed by them when they did those acts which were solely done for the purposes of and incidental to the holding of the sale on the plaintiff's premises. The acts which in my view were such trespasses were the locking of the plaintiff's premises so as to exclude her therefrom when they had lotted the goods; the opening of the plaintiff's premises to the public for the viewing of the goods catalogued and the admission by them to the plaintiff's premises of all who chose to come in for the ostensible purpose of viewing the goods; and the posting of their posters on the plaintiff's premises. What damage the plaintiff suffered in consequence it is difficult to say, but the poster certainly was in terms which would convey to anyone reading it that the plaintiff's stock and the fixtures in her shop were being sold, and anyone reading it might reasonably have concluded that the business life of the shop was ended. The result was said to have been that the plaintiff's takings thereafter were so prejudicially affected that she was obliged finally to sell up and close down. That her takings afterwards were trifling compared with what they formerly had been

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was shown by the accounts of the business, but to what extent this would inevitably have been the case owing to her grave financial difficulties it is not possible to decide. But I do not think it can be doubted that the posting on the premises of such bills as were put there must have been damaging to her chances of making a business recovery. Moreover the fact that the bills were there on the viewing day and on the morning of the day of the intended sale in spite of her protests and in spite of the fact that she had once before then abated the trespass by removing the poster bills amounted to conduct which aggravated the damage and which may properly be taken into consideration. I assess the damages for these trespasses, therefore, as more than nominal and award £300. In Hincks v. Sowerby (1879), 4 O.A.R. 113, at p. 115 Moss CJ.A. said: "We think that what was done by the bailiff was sufficient to constitute a seizure. In considering what acts must be done to amount to an actual seizure, regard must be had to the circumstances. For example, in Nash v. Dickenson, L.R. 2 C.P. 252, it was held that the mere production of the warrant to the defendant upon his premises, and demand of the debt and costs without doing or saying anything more, was not a seizure. There it did not appear upon what he could well have levied, and he did not even profess to make a seizure. In Balls v. Thick, 9 Jur. 304, Lord Denman expressed the opinion that any act done by a person having authority which distinctly intimates to the party that he intends to execute the writ, is sufficient to constitute a seizure. That would seem to shew that much depends upon the nature of the chattels, their position and other surrounding circumstances. In the important case of Gladstone v. Padwick, L.R. 6 Ex. 202, it was said by Bramwell, B., to be clear that the sheriff need not lay his hand upon a single article. Here, part of the [sawing] machine was in the premises of a person named Salkeld, and the bailiff marked that part with the word 'seized.' Another part was in the premises of the present plaintiff, with whom Ralph Hincks [the judgment debtor] was then residing, and the bailiff went to it and told the parties that he seized it. The roads were blocked with snow, and it was impossible for him to remove the machine at that time. He could not be expected to have slept in the open air himself and to have kept another man, in order to watch and keep physical control over these parts of a machine, which was scarcely worth $15". RE BISHOP and TRADERS FINANCE CORPORATION LTD. et al.

Ontario Court of Appeal. 1966. 56 D.L.R. (2d) 685.

The judgment of the Court was delivered by Kelly, J. A.: In order to determine the issues directed to be tried, there are other questions which must first be resolved: (a) Was the tobacco crop, the proceeds of the sale of which are represented by the cheques referred to, at the time of its sale by the Board, subject to a seizure made by the Sheriff pursuant to a writ of fi. fa. in his hands? (b) Were the documents of February 22, 1963, and November 19, 1963, authorizing the Board to include the name of Agrospray on cheques for the proceeds of the sale of DeBruyne's tobacco crop effective equitable assignments to Agrospray of a debt or debts owing by the Board to DeBruyne? [The Court's discussion of this issue is omitted]. In dealing with the alleged seizure and its effect, it will be helpful to review briefly the rights and obligations of a Sheriff with whom is lodged a writ of fi. fa. The Execution Act, R.S.O. 1960, c. 126, s. 9(1) [am. 1960-61, c. 25, s. 1], provides that a writ of execution binds the goods and lands against which it is issued, i.e., the judgment debtor's goods and lands in the Sheriff's bailiwick,

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from the time of delivery thereof to the Sheriff for execution. The apparent effect of this section is modified by the interpretation which has been placed on the word "binds". As here used with respect to goods, "binds" means that the Sheriff acquires a legal right to seize such goods: 16 Hals., 3rd ed., p. 43, para. 64. The ownership of goods as distinguished from land, by the execution debtor and his ability to pass the property therein to others is not affected by the presence in the Sheriff's hands of a writ of fi. fa. upon which the Sheriff has not made a seizure. When a Sheriff actually seizes goods he acquires a special property in them which enables him to retain possession and control over them and in due course to sell so much of the goods as may be necessary to realize the amount due on the writ. When a Sheriff effects a sale he can convey to the purchaser the judgment debtor's title to the goods : and he is entitled to retain the purchase price till it becomes distributable under the provisions of the Creditors' Relief Act. To bring into existence the Sheriff's special property in the goods, it is essential that he make a seizure, and to keep alive the special property it is essential that until sale he retain possession of the goods seized. While it is not requisite that the Sheriff remove the goods into a place where they are in his actual and sole possession and control, nevertheless he must in some manner assert his possessory right. This is commonly done by keeping a bailiff in possession in the premises where the goods are found when seized. Another acceptable and more common procedure is for the Sheriff, after making a formal seizure and taking an inventory of the goods to take from the debtor a written undertaking not to remove the goods nor to permit their removal by anyone else. This relieves the debtor of the annoyance and expense of the constant attendance of the Sheriff or his officer on the premises. This is referred to as "walking possession" and is a clear demonstration that the Sheriff is continuing to assert his property in these goods. If, however, the Sheriff holding no such undertaking from the judgment debtor discontinues his actual possession of the goods seized, and does not continue to assert that the right to possesion is his alone, the goods cease to be under seizure and the Sheriff's special property ceases to exist: Blades v. Arundale (1813), 1 M. & S. 711, 105 E.R. 265; Ackland v. Paynter (1820), 8 Price 95, 146 E.R. 1142; Young v. Dencher; Bank of Toronto v. Adames, Sheriff of Acadia, [1923) 1 D.L.R. 432 at p. 436, 18 A.LR. 496, [1923) 1 W.W.R. 136. It has been held in some cases that a temporary absence of the Sheriff's bailiff, e.g., for the purpose of getting a meal, will not necessarily break the continuity of the possession but under these circumstances it is incumbent for the Sheriff to show that the absence of the bailiff was caused by some urgent necessity and was consistent with an evident intention of non-abandonment. The record does not set out the actual steps taken by the Sheriff with respect to the tobacco crops of DeBruyne with the particularity which one would have wished; but from a careful reading of the "Notice of Seizure" received by the Board from the Sheriff there can be no conclusion other than that, even if an actual seizure had been made, the Sheriff permitted DeBruyne himself to deliver the tobacco crops to the Board and that the only claim or title to the tobacco crops asserted by the Sheriff was to have his name included as one of the payees on any cheque to be issued by the Board for the proceeds of the sale of the tobacco crops. Had the Sheriff actually seized the crop, delivered it to the Board for sale by the Board as his agent and in so delivering it insisted that the proceeds of the sale up to the amount necessary to satisfy the writs in his hands be paid to him

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in priority to all other persons claiming from DeBruyne any part of the purchase price of DeBruyne's crop, it might have indicated that the Sheriff continued in possession of the tobacco crop by his agent, the Board; or if the Sheriff had actually seized the crop and taken from DeBruyne a written undertaking that the goods would not be removed by DeBruyne or any other person, had directed DeBruyne to deposit the tobacco crop in the Board warehouse, that might have indicated that the Sheriff was continuing in possession through the agency of the Board. If the Sheriff had asserted the same right to the proceeds of the sale by the Board as he would have asserted with respect to the proceeds of a sale conducted by him, he might have contended that the Board was only used by him as a means of conducting the sale he was entitled to hold, no other means being available by reason of the Regulation of the Board. But a fair reading of the "Notice of Seizure" convinces me that the Sheriff did not remain in possession and that his direction that his name be included as one of the payees is quite inconsistent with the position which he would be required by his office to maintain, i.e., that he was entitled to receive the proceeds to be dealt with by him as he was required by law to deal with them. In my view any seizure made by the Sheriff, if there was one, was not followed by his continuous possession down to the time of sale and that, therefore, the tobacco crops ceased to be subject to seizure and the Sheriff ceased to have in them the special property above referred to, prior to the time the crops were sold by the Board .... The reasons for judgment of the Court below contain a statement to the effect that the Regulations of the Board would prevent the Sheriff from marketing DeBruyne's tobacco crop and make it obligatory that DeBruyne should market his own crop. Although I do not feel called upon to deal directly with the Regulations under the Farm Products Marketing Act, R.S.O. 1960, c. 137, whether made by the Farm Products Marketing Board or by the Ontario FlueCured Tobacco Board, I cannot, by silence, give my approval to the statement by the learned trial Judge that the Regulations of the Board would prevent the Sheriff from carrying out his duties. It would appear that the Sheriff was under the same misapprehension as was the learned trial Judge. His notices of April 16, 1963, and February 5, 1964, went at least as far as acquiescing in the projected delivery to the Board by DeBruyne of the tobacco crops which the Sheriff alleged that he had seized and, in so doing, I think he has misinterpreted the duties and privileges of his office. The Sheriff was commanded by the writ of fi. fa. issued out of the Supreme Court of Ontario "that of the goods and chattels and lands and tenements in your bailiwick of Refin DeBruyne you cause to be made the sum of $4,158.00." By virtue of the writ and the powers vested in him by his office, it then became his duty to seize and sell such goods and chattels of the judgment debtor as were liable to seizure, within which definition fell the tobacco crops grown by DeBruyne. If it had been the intention of the Legislature that the Farm Products Marketing Board or the Ontario Flue-Cured Board ( as a local Board) should have power to interfere with the performance by the Sheriff of the duties incumbent upon him by virtue of his office, it would have required that that power be expressly given in unequivocal words. In the absence of such clearly defined intention, the power of making Regulations conferred on either of these Boards must be interpreted so as to recognize the duties of the Sheriff and not in such a manner as to place any limit or restriction on the Sheriff in the performance by him of his duties. The interpretation to be given to the Regulations made by the

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Board must leave the Sheriff free to carry out his duties with regard to a writ of

fi. fa. as he would have been if the Regulation did not purport to place restric-

tion on the sale of tobacco. The Sheriff should not permit the Regulation of the Board or the Board's interpretation of those Regulations to influence him in the proper discharge of his duty of taking possession, retaining possession, and selling the tobacco crop of a judgment debtor against whom a writ of fi. fa. is lodged with the Sheriff.. .. OVERN v. STRAND Supreme Court of Canada. (1931] S.C.R. 720. [In this action the plaintiff appellant, Mrs. Overn, claimed damages for loss suffered by reason of the wrongful sale of her goods and chattels. She claimed against the defendant Strand, because he issued execution on what purported to be a judgment made by the judge of the County Court of Cariboo, which judgment she alleged to be a nullity, and also because he caused her goods to be seized and sold to satisfy an execution which he had against one John Weisner. She also claimed against the defendant respondent Peters, because, as sheriff of the county of Cariboo, he wrongfully seized and sold her goods and chattels. On April 9, 1928, Mrs. Overn purchased for $1000 the business and "river outfit" of J. H . Weisner, and then employed Weisner to run the boats for her. Subsequently she purchased from wholesalers goods to the amount of some $6000 or $7000 for trading purposes. Strand, a creditor of Weisner, then began an action to set aside the bill of sale from Weisner to Mrs. Overn as a fraudulent conveyance and he obtained judgment in his action. The formal judgment of His Honour Judge Robertson of the County Court of Cariboo, after declaring the sale set aside, contained the following paragraph: "And this court doth declare that all stock-in-trade in the possession of the defendant, Elizabeth Overn, is in law the property of the defendant, John H. Weisner, and subject to the claims of his creditors." On September 14 Strand issued execution against the goods of Weisner for $2,705.63 and the following day he issued execution against the goods of Mrs. Ovem and of Weisner for $497.25 being the costs taxed against them in the action setting aside the bill of sale. These writs were handed to the sheriff who forwarded them to J. D. McIntosh, his agent, who, on September 28, against the protests of Mrs. Ovem, seized not only the river outfit but all the stock-in-trade which she had brought to the Post two months before and which she says was worth $12,000. On October 4 McIntosh sold all the goods to the Hudson's Bay Company by private sale for $4,850. Mrs. Overn subsequently brought this action]. LAMONT,J.:

The defence of the sheriff is: ( 1 ) That in seizing and selling the property in question he was merely carrying out the direction of the court, and (2) That in any event all the goods seized and sold were the goods of Weisner.

The sheriff seized under two writs of execution, one commanding him to make out of the goods of Elizabeth Overn and John H . Weisner the sum of $497 .25;

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and the other to make out of the goods of John H. Weisner the sum of $2,705.63. Both writs were issued out of the Supreme Court Registry. It has long been established law that where a sheriff seizes and sells property under a writ of execution which is regular on its face and was issued out of a court of competent jurisdiction, he is protected by the writ unless the goods are not in fact the goods of the execution debtor. This protection he enjoys even although the order in which the writ is founded may, subsequently be set aside for irregularity or is in fact a nullity. In Barker v. Braham (1773), 95 E.R. 1104, the Lord Chief Justice stated the rule as follows: "A sheriff, or his officers, or any acting under his or their authority may justify themselves by pleading the writ only, because that is sufficient for their excuse, although there be no judgment or record to support or warrant such writ; but if a stranger interposes and sets the sheriff to do an execution, he must take care to find a record that warrants the writ, and must plead it; so must the party himself at whose suit an execution is made." Whether the judgment or order justifies the issuing of the writ is in each case a question to be determined by the court issuing it, and not by the sheriff. In Ramanathan Chetty v. Meera Saibo Mariker [1931] A.C. 82, the Privy Council said: "A distinction must be drawn between the acts done without judicial sanction and acts done under judicial sanction improperly obtained. If goods are seized under a writ or warrant which authorized the seizure, the seizure is lawful, and no action will lie in respect of the seizure, unless the person complaining can establish a remedy by some such action as for malicious prosecution. If, however, the writ or warrant did not authorize the seizure of the goods seized, an action would lie for damages occasioned by the wrongful seizure without proof of malice." The writ against the appellant's goods for $497.25 was regular on its face and the Supreme Court of British Columbia was competent to issue it. The sheriff was, therefore, justified in realizing out of her goods the amount called for by that writ. In doing so he was acting with judicial sanction and no action lies against him therefore. He, however, proceeded to sell the balance of the appellant's goods under an execution directing him to levy on the goods of John H. Weisner. The goods sold to satisfy this execution were the stock-in-trade of the appellant, purchased with her own money and situate in her own buildings. These goods could not in any way be said to be the goods of Weisner. In this statement of claim the sheriff seeks to justify the sale of these goods on the ground that in the order of Judge Robertson of August 22, all goods in the possession of the appellant had been declared to be the property of Weisner and, therefore, when he seized and sold them he was selling Weisner's goods. I find it difficult to believe that Judge Robertson intended to hold that all the stock-in-trade in the appellant's possession, no matter by whom it was in fact owned, was the property of Weisner. To reach that conclusion the judge would have to be satisfied that the business she was carrying on was the business of Weisner, or that the money with which she purchased the stock-in-trade was Weisner's money. The appellant has explained that she obtained the money to make payments on the stock-in-trade she purchased in 1928, by taking over, in

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1927, trading supplies which Weisner had brought to lgenika but which, through illness, he was unable to trade with the Indians. These supplies she took to the White Water Post under an agreement in writing with Weisner and traded them through the fall of 1927 and the winter of 1927-28, making a profit thereon. Neither in this action nor in the action before Judge Robertson has anyone challenged the bona fides of that transaction, or alleged that the profit which she obtained from such trading was not rightfully her money. In the case before Judge Robertson all the allegations in the statement of claim and all the evidence given at the trial were directed against the bill of sale, and, in the examination of Weisner for discovery put in evidence by counsel for Strand, the questions impliedly admit that the goods taken north in 1928 were the property of the appellant. The only statement before Judge Robertson which is apparently not consistent with the evidence that the money with which the goods were bought was the appellant's money, is that of Weisner who thought she made the original purchase in 1927 for her husband's business, which was that of trapping. The husband, however, said that "Practically Mrs. Ovem owns the business." In view of the allegations and the evidence it is, to my mind, hardly conceivable that Judge Robertson intended to make the sweeping declaration contained in the clause in question in his order, although no doubt the language used, if taken by itself apart from the context, is sufficiently wide to carry the construction sought to be put upon it. The clause to my mind should be construed in accordance with the well known maxim that general words may be aptly restrained to the subject matter with which the speaker or writer is dealing. Broom's Legal Maxims, page 415 ; Willes, J., in Chorlton v. Lings (1868) L.R. 4 C.P. 374, at 387; Moore v. Rawlins (1859) 141 E.R. 467 at 480. Construing it thus the declaration would apply only to the contents of the bill of sale. If, however, the language of the clause be given its broad and literal meaning it still affords no protection to the sheriff for the declaration as well as the rest of the order in which it is found, is, as I have already pointed out, a nullity having been made without jurisdiction and, as such, cannot support or justify anything purporting to be done under it. It is from the writ of execution and not from the judgment or order on which it is founded that the sheriff derives his protection. Moreover there is no evidence that the sheriff had any knowledge of the existence of the order. What he had was a letter from Strand asking him to instruct his deputy to seize all the goods and chattels of Weisner and the appellant, including the goods in the appellant's store. There was nothing in the writ of execution indicating that the goods in the possession of the appellant belonged to Weisner, so that in carrying out the instructions in Strand's letter the sheriff was not following the directions in the writ, but was acting as Strand's agent. The goods sold not being the property of Weisner the sheriff is equally liable with Strand for their conversion. It was also argued that as the sheriff was entitled to seize and sell the appellant's goods under the execution against her, the sale of all her goods was valid even if excessive because no claim had been expressly made for excessive seizure. The claim that he had no right to seize or sell any of the appellant's goods is, in my opinion, sufficient to cover a claim for excessive seizure. The sheriff's duty was to sell sufficient of the appellant's goods to satisfy the execution against her. When he had done that she was entitled to immediate possession of the remainder. In Batchelor v. Vyse ( 1834 ), 4 Moore & Scott 552, it was held that:

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"If the sheriff sells under an execution more goods than are sufficient to satisfy the debt and costs he is liable in trover in respect of the excess." To the same effect is the case of Stead et al v. Gascoigne ( 1818), 129 E.R. 488, where Dallas, C.J., with whom the other members of the court concurred, said: "A sheriff has no right to sell more than is necessary: the defendant in this case has, in my opinion, committed a tortious act; and trover is the proper action." In the present case there was no occasion to sell the appellant's goods in bulk - they consisted of groceries, dry goods, hardware and tobacco, and were, therefore, saleable in small packages. The defence of the respondents, the Hudson Bay Company, is that they were bona fide purchasers for value from the sheriff of goods sold by him under execution. A sale by a sheriff is not a sale in market overt and the purchaser acquires thereby only the interest in the goods which the sheriff has the right to sell. Unless, therefore, the goods sold are the goods of the execution debtor, the sheriff does not, by his writ, acquire any right to sell them and cannot transfer any right to a purchaser as against the real owner. The rights of a purchaser at a sale under execution were discussed by the Privy Council in Rewa Mahton v. Ram Kishen Sing [(1875) 3 Indian Appeals 106), and it was pointed out that if the court issuing the execution had jurisdiction, a purchaser was not bound to inquire into the correctness of the order or judgment upon which the execution issued. A purchaser, therefore, at a sale under execution is under no obligation to go behind the writ, but, in order to make sure that he will acquire title to the goods he buys, he must see that the court issuing the writ had jurisdiction to do so; that the writ is regular on its face, and that the goods sold by the sheriff are the goods of the execution debtor. The writ for $497 .25 against the appellant's goods, as I have already pointed out, fulfilled these requirements. The title to the goods sold to satisfy that writ, therefore, passed to these respondents and no action lies against them for their conversion. They, however, unfortunately for themselves, did not see that the remainder of the goods which they purchased were the goods of the execution debtor mentioned in the writ under which they were sold. And as they were not his goods these respondents obtained no title whatever to them and, having taken possession of them, must account to the appellant for their value. I am, therefore, of opinion that the respondents are liable for the loss suffered by the appellant, but I do not think each of the respondents is liable for the whole loss. For the reasons I have given, the respondents, Wilson & Wilson are responsible for the loss caused by the sale of the appellant's goods to satisfy the writ for $497.25; the other respondents are liable for the balance. The total damage suffered was $11,000; the amount of the two writs was $3,202.88. The liability of each respondent is, therefore, a matter of calculation. If the parties do not agree as to the amounts the matter may be referred to the Registrar for computation. The appeal will therefore be allowed as to all the respondents; the judgment below set aside, and the judgment of the trial judge restored but modified in the way I have indicated as to the amount for which each respondent is liable. The appellant is entitled to her costs throughout against all the defendants.

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CASES AND MATERIALS ON CREDITORS' RIGHTS FAIR & CO. AND LIVINGSTONE v. WARDSTROM Appellate Division, Alberta Supreme Court. 1919. 47 D.L.R. 16.

HARVEY, C. J. and BECK, J. concurred with Simmons, J. SIMMONS, J.: The plaintiffs are execution creditors of one Graham for $235.83 and $251.22 respectively. At the request of the plaintiffs the sheriff on behalf of all execution creditors of the judgment debtor issued his warrant directed to the defendant as his bailiff to levy on the goods and chattels of the judgment debtor. Pursuant to this warrant, seizure was made of the furniture and fittings of the Lakeview Hotel in the Village of Strome. Pursuant to further instructions from the sheriff, the defendant advertised for sale and placed on sale said goods and chattels. The sheriff suggested to the defendant that the goods should be sold in block if the defendant thought he could obtain as good a price as by selling the articles separately. The sale was advertised for 1 p.m. but did not open till about 1.30 p.m. Bidding was not very active and was at the last stages confined to one Nelson, a secondhand dealer from Wetaskiwin and one Graham, a brother of the execution debtor, to the latter of whom the goods were sold for $460. At the opening the defendant asked those in attendance whether he should sell in block or in separate parcels. Nelson suggested sale in block and apparently on Nelson's suggestion the sale was conducted in this way. The defendant says he did not know which was the best way to sell, but he thinks he would not have sold in block if the sheriff had not suggested it. The purchaser disposed of a portion of the goods and chattels (just how much does not appear) by private sale and sold the balance by auction in parcels for $1,200. Plaintiffs claim the sale was conducted improvidently, negligently and in collusion with the purchaser. The claim that there was collusion was abandoned on the appeal and argument was confined to the allegation that a sale en bloc under the circumstances was improvident, and a further allegation that one McMillen, a prospective bidder, was not given an opportunity to bid. The trial judge found in favour of the defendant on all grounds set up by plaintiffs. As to the claim in regard to McMillen I think there is sufficient evidence to justify his conclusion. In regard to the sale en bloc, the trial judge says the sale was made in accordance with the sheriff's instructions. I think he misconceived the effect of the evidence on this head. The instructions of the sheriff left it to the judgment and discretion of the defendant, although suggesting a sale en bloc. The responsibility was clearly upon the defendant. It does not require citation of authority for the proposition that once the responsibility for the conduct of the sale is located that the party assuming this responsibility cannot be held to have discharged his duties unless he has exercised the judgment and discretion which a reasonably careful business man would exercise under the circumstances. The subsequent sale of a part of the goods at such an increase in price within a short period of the former sale furnishes, in my opinion, a prim.a facie case of an absence of that reasonable care. This prima facie case might be met by defendant producing evidence of unusual circumstances, which would excuse him. He admits, however, that he did not exercise any discretion, other than accepting a suggestion of the sheriff and the suggestion of a probable bidder. There is nothing to suggest any further inquiry by him. This seems to be very far short of the investigation that a careful business man would make. The honesty of the defendant does not excuse him, if there was a failure of his duty to use

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reasonable precautions against a sacrifice of the goods. I think he should have made a return that the goods remained in his hands unsold for want of a buyer and he ought to have waited for a writ of venditioni exponas. Keightley v. Birch (1814), 3 Camp. 521. I would, therefore, allow the appeal and give judgment to plaintiffs in damages in the sums of $36.88 and $39.27, being the respective deficiencies on the plaintiff's executions. As to the claim to include in the damages an item of $40, solicitor and clients' fees, for investigating the circumstances of the sale, I think this is too remote on the very indefinite evidence produced, and should not be allowed. The plaintiff to have the costs of the trial and appeal. McCARTHY, J. (dissenting): The trial judge has found, and I entirely agree with him in so finding, that the evidence failed to establish any fraud, collusion or conspiracy, and indeed counsel for the plaintiff upon the hearing before us agreed that there was no evidence to support such an allegation. There remains, therefore, to be considered the other grounds of complaint with regard to the conduct of the sale, namely, that the chattels were sold en bloc and not piece by piece, whereas it is alleged that if the latter course had been followed a much larger sum would have been realized and a sum sufficient to have satisfied the plaintiffs' executions in full, and if such ground is open upon the pleadings, which I doubt, the fact that a larger sum than that procured by the bailiff was realized by a subsequent sale by an experienced auctioneer, piece by piece, shortly after the sheriff's sale. Assuming that the ground of liability in damages is negligence, I am clearly of the opinion that there was no negligence in selling en bloc and not piece by piece. The goods sold were the ordinary furnishings of a country hotel and included amongst other things "one long bar and a gasoline lighting outfit" and a number of other things which, it would be reasonable to suppose, would be better sold en bloc. It should be noted however that the first suggestion as to selling en bloc came from the sheriff. On November 9, 1917, the defendant wrote to the sheriff as follows: "Re Livingston & Ross: I enclose sale notice in the above. I have got permission from John Graham (execution debtor) to have the sale in the hotel and he also guaranteed that everything would be looked after, so I did not put a man in charge. I would like to know if I can engage an auctioneer and clerk and pay them out of the proceeds." To which letter on November 10, 1917, the sheriff replied as follows: "In reply to your letter, you may employ a clerk, but you will have to auction the chattels yourself. Try and sell en bloc if you think you could get as good a price that way as selling articles separately. Some one may wish to buy the whole thing in to keep the hotel running."

Under the circumstances I think it was not an unwise suggestion to make that the sale should be en bloc and at the most, in view of what occurred afterwards, I think the worst that can be said of the action of the sheriff and his bailiff was. that they committed an honest mistake in judgment. If it can be said to be negligence to sell en bloc and not piece by piece, I think that, on the facts of this case, the negligence would be that of the sheriff who, as would appear, took charge of and conducted the proceedings with the

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exception of the actual conduct of the sale on the day of the sale, but, as I have said, I do not think any negligence can be imputed to the sheriff. In my opinion the case of Great Northern Ins. Co. v. Young (1916), 32 D.L.R. 238, is distinguishable. There remains to be considered the question of whether the sale by the bailiff, having been made at a price less than what at first sight may appear to be the true value of the goods sold of itself, makes the bailiff liable in damages. There is authority for the proposition that the execution debtors' goods ought not to be sacrificed. See Keightley v. Birch, 3 Camp. 521, wherein it is laid down that the sheriff having taken goods in execution under a {i. fa. is not justified in selling them to the highest bidder greatly under their value, but if he cannot obtain a reasonable price, should return that they remain in his hands for want of buyers. In this case Lord Ellenborough said, p. 523: "If the goods taken in execution really were worth £300 or £400, I think the sheriffs are liable for selling them for £72 15s. 10d. The return ought to have been that they had taken goods which remained in their hands for want of buyers. If a chattel worth £1,000 is put up for sale, and only £5 is bid for it, the sheriff ought not to part with it for that sum, and he may fairly say that it remains in his hands for want of a buyer. He ought to wait for a venditioni exponas, the meaning of which is 'sell for the best price you can obtain.' "

See also Mather on Sheriff Law, 2nd ed., at p. 105. In my view of the matter, the mere fact that the goods were sold piece by piece, by an experienced auctioneer for a higher price, is not sufficient evidence that the goods were sold "greatly under their value," and the conditions which have existed in this province for many years are such that it will be placing too serious a liability upon sheriffs and bailiffs if in a case such as this they could be made liable to pay the difference between what was obtained in a sale bona fide en bloc and what could be obtained by an experienced auctioneer selling some of the furniture piece by piece. In my view, it would not be unwise to inform the sheriff's bailiffs of their duties and to give them proper means of ascertaining values and of conducting sales to the best advantage. To hold that the bailiff at Strome acting bona fide and under the advice of his sheriff must know, at his peril, the value say of a prize bull for which a fancy price might be obtained if the value were known, is placing too high a standard of care upon him. I think, therefore, that it should not be held in this case that there was any negligence in selling at the price obtained. Furthermore, there is no evidence of any damage to the execution creditors as there is nothing in the evidence to shew that the execution debtors have not other property out of which the small balances could have been realized, and, in my opinion, the onus is clearly upon the plaintiff to shew that there has been misfeasance or negligence, and upon this ground alone, apart from the other considerations I have mentioned, I would dismiss the appeal with costs. It is unnecessary for me to consider the point raised on the argument as to the possible difference between the rights of the owners of the goods, namely, the execution debtors, and the rights of the execution creditors. I content myself with finding that no damage has been proved, assuming that the execution creditors may have the same rights as the owners to complain of the conduct of the sheriff or his bailiff. I would dismiss the appeal, with costs.

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MANDELIN ET AL v. STAN REYNOLDS AUTO SALES LTD. ET. AL. Supreme Court of Alberta, 1961. 31 D.L.R. (2d) 697. RILEY, J.: The action herein revolves around a seizure made at the instance of the defendant Reynolds under the direction of Reynold's employee, the defendant Maki, through the instrumentality of the defendant Schafer, a Sheriff bailiff. The seizure was made under a chattel mortgage, ex. 1 herein. The chattel mortgage by its express terms gave the right to Reynolds to take possession of and remove the chattels covered by the said chattel mortgage. The plaintiffs contend that they were not indebted to Reynolds, or if they were the debt was so small that a seizure was not justified.... In the case of a distress under chattel mortgage such as the instant distress, the question as to whether the extent of the distress is justified by the amount of the debt may not arise to the same extent as the case of a distress for rent or a seizure on a judgment. A judgment creditor, since he has available to him for seizure all the exigible assets of his judgment debtor, is prevented from seizing a quantity of assets which is clearly far in excess of the quantity required to satisfy his writ. The reasons for this rule are obvious. Clearly, however, these reasons do not apply in the case of a distress under chattel mortgage. In the first place the mortgagee has available to him for distress not the whole exigible estate of the mortgagor but merely those assets specifically mortgaged. In addition, the mortgagor, unlike the tenant or the judgment debtor, has ab initio contracted with the mortgagee that upon a default being made, all the mortgaged assets may be distrained upon without regard to their value or without the necessity of comparing them with the extent of the default .... The plaintiffs' third contention is that some of their equipment was damaged when the distress was effected, and refer particularly to a small and somewhat dilapidated sawmill. Force was used, but no more than was reasonably necessary to effect the distress. Further, the plaintiffs mortgaged that very equipment. If therefore, the plaintiffs put the equipment in such a position and condition that force was required to remove it, and if as a result of the reasonable force the equipment was damaged, it cannot be said that the mortgagee can say to the mortgagor "Either waive your rights under your mortgage or face my claim for damages resulting from your lawful exercise of your rights". The plaintiffs' fourth contention is that if the distress itself was lawful the subsequent removal of the distrained articles from their farm was not lawful. A right of distress carries automatically with it a right of removal. While it is true that Sheriffs frequently exercise their discretion by leaving seized or distrained upon articles in the possession of the debtor, surely the plaintiffs cannot be heard to complain because in this case a Sheriff through his bailiff exercised his proper and lawful discretion by removing the distrained upon goods. Again, it is important that the instant distress was based upon a contract, and that contract specifically allowed removal upon default. The plaintiffs' final contention is that the goods were unlawfully removed from the Judicial District of Red Deer and taken to the Judicial District of Wetaskiwin. The removal of the goods out of the Judicial District of Red Deer was, in my view, unlawful. It was done on the specific and definite instructions of the defendants Reynolds and Maki. The removal was concurred in by the bailiff Schafer. Such removal did not result in damage to the plaintiffs. The goods being gone from their farm in any event, it would in fact make no difference to them whether the goods were stored in Red Deer or Wetaskiwin. The act of removal was somewhat high-handed; it was an unlawful act, and the plaintiffs are entitled

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to exemplary damages in the sum of $300, even though in fact no real damage ensued. Before dealing with the further question as to whether the defendant Schofer is entitled to indemnity from his co-defendants, I should perhaps say a word about the substantial claims for damage advanced by the plaintiffs for such things as the loss of the tractor for 12 days, in which the plaintiffs say they drove 1,231 miles in search of an alternative one; the loss of the use of the caterpillar; Norman Mandelin claims that he was making $80 a day clear with the caterpillar, and yet in the period of one year when the caterpillar was operating, the plaintiffs were unable to keep up the payments owing under the conditional sales contract. The unharvested grain; the grain was frozen the very night that the initial seizure steps were made, namely September 20, 1958. The evidence of the independent witness, Elgert, was that there would be no more damage done to the grain in the swath than there would have been if the grain was left standing. All in all, the plaintiffs have failed to prove damage by any reliable acceptable evidence. Now with reference to indemnity in the instance of Schofer, it is to be remembered that the warrant which resulted in the distress in question was directed to the Sheriff at Red Deer by Reynolds on September 19, 1958. It contained the following paragraph : "Stan Reynolds Auto Sales Ltd. undertakes to indemnify you against any action which may be brought against you by reason of your acting under the authority of the foregoing." The Sheriff placed upon the warrant an authorization to Schofer as his bailiff to execute the warrant and forwarded the warrant to Schofer for action. In my opinion Schofer is entitled to the benefit of that indemnity. A bailiff in this Province is not in any sense an independent contractor. His duties, rights and obligations are defined by statute. Section 18 of the said Seizures Act makes it clear that Schofer effected this distress strictly in his capacity as bailiff. It is notorious in this Province that writs and warrants directed to the Sheriff are not dealt with by the Sheriff personally, but rather by bailiffs acting as tools of the Sheriff. Section 23 of the Seizures Act allows Sheriffs and bailiffs to receive proper indemnity before executing warrants. The indemnity given by Reynolds in this instance was intended to cover and did cover the bailiff Schofer. When the Sheriff transmitted the warrant to the bailiff Schofer, he transmitted not only the authority to distrain contained in that warrant, but also the agreement of indemnity contained therein. It is interesting to note that s. 2 (i) of the Seizures Act includes the "sheriff's bailiff" in the word "sheriff". I am not suggesting that the indemnity agreement covers the bailiff for negligence or unauthorized action or wilful wrong-doing, but here, if the bailiff Schofer made any errors, they were honest errors and made bona fide and at the express instructions of his co-defendants. Had Schofer refused to act upon the warrant he would have been liable to an action by Reynolds. Having instead executed the warrant, he now finds an action by the plaintiffs. The law seems to be therefore, that since the Seizures Act allows Reynolds thus to put the bailiff Schofer "between two fires", and since Reynolds in fact exercised his right to do so by issuing a distress warrant, Reynolds is bound to indemnify the bailiff Schofer against claims arising from Schofer's actions upon the warrant. In the old case of Humphreys v. Pratt (1831), 5 Bli. N.S. 154, 5 E.R. 269 and 2 Dow. & Cl. 288, 6 E.R. 735, it is held that where a Sheriff is instructed to effect a seizure, there is an implied agretment to indemnify the Sheriff. It seems clear that in this jurisdiction and at this time where seizures are effected by

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bailiffs the reasoning of Humphreys v. Pratt would apply to bailiffs. The ruling was made by the learned Judge in Humphrys v. Pratt because the Sheriff is "between two fires" . In Sheffield Corp. v. Barclay (1905), 74 L.J.K.B. 747, this principle is extended and it is held that where any person instructs a creature of statute to to take an action which the statute requires its creature to take upon being so instructed, then that creature is entitled as a right to be indemnified by the person giving the instructions. In the result there will be judgment against the defendants, with costs on Column 1, including examinations for discovery, Rule 738 not to apply. The defendant Schafer is entitled to be indemnified by his co-defendants and each of them in respect of the said judgment and costs. In addition the defendant Schafer is entitled to the costs of his third party proceedings, to be taxed on Column 5 of the Consolidated Rules of Court. Alberta has been unique among Canadian provinces in requmng all seizures of property to be made by a sheriff or his deputy. The Extra-Judicial Seizures Act, first enacted in 1914 (c. 5), continued in force until 1933 and bys. 2(1) required that "every distress or seizure" was to be made by or through the Sheriff "and by no other person whatsoever." S. 18 of the present Seizures Act, R.S.A. 1955, c. 307 no longer contains the word "seizures" and Tavender D.C.J. has held that it is now only distresses, and not seizures, which must be made by or through the Sheriff: Reg. v. Beneficial Finance Co. of Canada (1964) , 49 D.L.R. (2d) 186. However, it is clear from Gainers Ltd. v. Crystal Dairy Ltd. (1963), 41 D.L.R. (2d) 424 that seizures of chattels on behalf of chattel mortgagees may continue to be made by sheriffs (Milvain J.) . In Ontario sheriffs do not seize under chattel mortgages and would probably have no more rights than a private bailiff if they did.

CAVEv. CAPEL English Court of Appeal. [1954] 1 All E .R. 428. APPEAL by the plaintiff from an order of ORMEROD, J. dated July 31, 1953, and reported [1953] 2 All E.R. 929. The defendant was at all material times high sheriff of the county of Somerset. On Oct. 29, 1952, a bailiff, William Hext, acting on behalf of the defendant as sheriff's officer, in pursuance of two warrants was instructed to levy execution on the goods of one A. H . Cave in respect of two judgments. At the address of the judgment debtor the bailiff found no property on which to levy execution except a caravan in which Mrs. Cave, the plaintiff, the judgment debtor's mother, was residing. She informed the bailiff that the caravan was not the property of her son, but refused to say to whom it belonged and declined to leave it. The bailiff made inquiries of the judgment creditor's solicitor and others, and concluded that it was his duty to levy execution on the caravan. Accordingly, on Oct. 30, 1952, he removed the caravan to the judgment creditor's farm . The plaintiff had refused to leave the caravan and had locked herself in. At the farm the caravan was put in a barn with the plaintiff still inside and the main doors of the barn were locked, but a side door was left open through which the plaintiff eventually left. On Oct. 31, 1952, notice was given to the bailiff by a Mrs. F. M. Carr on her solicitors that she was the owner of the caravan, and the sheriff withdrew from possession. On Apr. 24, 1953, the plaintiff issued a writ against the defendant claiming damages for wrongful execution, false imprisonment, trespass and assault. The defendant took out a summons under R.S.C., Ord. 57, r. 16A, claiming protection under that order. Protection was refused by the master, and, on appeal from

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the master, Ormerod, J., held that the defendant was entitled to protection under Ord. 57, r. 16A. SOMERVELL, L. J. stated the facts and continued: The writ having been issued by the plaintiff, the defendant sheriff applied for protection under R.S.C., Ord. 57, r. 16A. The first Act for the protection of sheriffs to which we were referred was the lnterpleader Act, 1831, which enabled sheriffs to take advantage of the interpleader procedure. Its provisions are now substantially reproduced in Ord. 57. As was pointed out, quite rightly, by counsel for the sheriff, there are two aspects to interpleader proceedings: first, they enable the issue as to title between two contending parties to be conveniently tried; secondly, they give protection in the ordinary case to someone who is in the position of a stakeholder and who claims no interest in the property himself. If proceedings are started against him, interpleader proceedings enable him, in a proper case, to have them stayed. On the other hand, the order may prevent proceedings being taken against him. Indeed, Ord. 57 emphasises that aspect of the matter by commencing with the words "Relief by way of interpleader may be granted-". Order 57, r. 1, reads: "Relief by way of interpleader may be granted . . . (b) Where the applicant is a sheriff or other officer charged with the execution of process by or under the authority of the High Court, and claim is made to any money, goods, or chattels taken or intended to be taken in execution under any process, or to the proceeds or value of any such goods or chattels by any person other than the person against whom the process is issued." In Moore v. Hawkins the sheriff had seized goods. There had then been a claim which the execution creditor had admitted and the sheriff, having received notice of the claim, had withdrawn from possession. Apart from that, it was an ordinary case of the type in which, I think, relief would have been given had interpleader procedure been applicable. The court, however, held that as the sheriff had withdrawn from possession the procedure was inapplicable and it could not protect him. He had not, as it were, the corpus, which is the foundation of interpleader relief which normally an applicant is agreeing to hold at the disposal of the court. Both Pollock, B., and Grantham, J., decided that that was the position. Since the sheriff had elected to withdraw his execution, the matter was at an end, and he no longer had the right to take steps for his own protection as he might have done had he remained in possession. It was obviously thought - and there is no dispute about this - that that was an anomaly and that where an execution creditor is satisfied and the sheriff at once takes the proper course of withdrawing from possession he should be entitled to protection if it were the type of case in which he would have had protection had he interpleaded in the ordinary way. In consequence of that case, r. 16A was added to Ord. 57, and it is that rule with which we are now concerned, because the sheriff in the present case withdrew from possession. Rule 16A reads : "When the execution creditor has given notice to the sheriff or his officer that he admits the claim of the claimant, the sheriff may thereupon withdraw from the possession of the goods claimed, and may apply for an order protecting him from any action in respect of the said seizure and possession of the said goods, and the judge or master may make any such order as may be just and reasonable in respect of the same: Provided always that the claimant shall receive notice of such intended application, and, if he desires it, may attend the hearing of the same, and if he attend, the judge or master

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may, in and for the purposes of such application, make all such orders as to costs as may be just and reasonable." At the same time, we were told, words were inserted in r. 2 which now provides : "The [person seeking relief by interpleader] must satisfy the court or a judge by affidavit or otherwise . . . That the applicant, except where he is a sheriff or other officer charged with the execution of process by or under the authority of the High Court who has seized goods and who has withdrawn from possession in consequence of the execution creditor admitting the claim of the claimant under r. 16 of this order, is willing to pay or transfer the subject-matter into court or to dispose of it as the court or a judge may direct." Counsel for the sheriff said, and, if I may say so, I agree with his submission that the words that I have just read in r. 2 indicate that an applicant under r. 16A is regarded as an applicant within the order. Of course, the special conditions provided by r. 16A have to be satisfied, but he is, nevertheless, a type of applicant for relief under the order. There is no dispute between counsel, and I think they were clearly right in admitting that the type of case in which relief would be given under the normal interpleader procedure is that in which it would be given under r. 16A. If one came to the conclusion that relief would not have been granted had the sheriff been in a position to interplead, one would not give it under r. 16A, and vice versa. It was at one time suggested by the plaintiff that, as she was not the owner of the caravan, but only the occupier, she could not be regarded as the claimant within r. 16A. I agree that she did not write a formal letter, but her claim was clearly a claim through Mrs. Carr, the real owner of the caravan. She was saying that she occupied by virtue of a contract with Mrs. Carr and I have no doubt that Mrs. Carr wrote at her instigation. I think, so far as that is concerned, that the sheriff was in order in saying that that condition of this rule had been satisfied and that the plaintiff was a claimant. I will now turn to the authorities which indicate the circumstances in which protection would be given in what I call the normal interpleader case, because, as I have said, the same considerations must apply tor. 16A. The first case to which we were referred was Winter v. Bartholomew, which was fully considered in Smith v. Critchfield. The point which arose in the latter case was whether protection could be given against an action for trespass, ,the trespass being, if I may so describe it, a mere trespass incidental and necessary to the seizure, the seizure obviously being the main matter of complaint. It was held by the court ( 14 Q.B.D. 873) that: "Where the sheriff in the execution of a fi. fa. enters the premises of a person other than the execution debtor and there seizes goods believing erroneously that such goods belong to the execution debtor, the sheriff may, upon interpleader proceedings, be protected against an action for trespass to the land as well as against an action for seizure of the goods, if no substantial grievance has been done to the person whose premises are wrongfully entered." It is quite clear from the judgment that those last words are not meant to qualify solely the protection against trespass but are necessary if relief is to be given at all. Sir William Brett, M.R., said (ibid., 878) :

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"It is not, of course, in every case that the judge will protect the sheriff. He will be protected when he has only made an honest mistake in executing the process of the court, and but for such mistake everything that he has done would have been justified by the writ."

He then considered whether the sheriff was to be protected against a necessary trespass as well as the seizure. Then he said (ibid.) : "It seems to me th,flt the sheriff is entitled to protection in respect of the whole of the act which through error he has wrongfully done under the writ, that is, in respect of his having entered the house and seized the goods."

He then referred to Winter v. Bartholomew and approved what was said there and he put it in his words (ibid.) : ". . . it is said that the sheriff may be protected in such a case as this in respect both of the trespass to the land and that to the goods where no real grievance has been sustained by the claimant. It is obvious that that cannot mean where there is no legal wrong, because by the hypothesis a tortious act must have been committed. It is clear, therefore, that by 'no real grievance' is meant no substantial grievance beyond the mere entry and seizure of goods, such as might exist if the sheriff's officer were guilty of insolent or oppressive conduct in excess of his duty, and not justified by the writ." Bowen, L. J., referred (ibid., 881) to Winter v. Bartholomew, and again he reiterated the phrase "no substantial grievance" . He then quoted Platt, B., in Winter v. Bartholomew and said (ibid.) : "Platt, B., said that s. 6 of the Act [of 1831] authorized the judge to make such decisions as should appear to be just according to the circumstances of the case, and that nothing could be more just than to prevent the sheriff being harassed by an action in which no more than nominal damages could be recovered. Martin, B., said ' ... If indeed the sheriff in execution of the writ has committed any real grievance the court will allow the injured party to bring an action, but if he has done no real wrong the court will stay proceedings against him'." One has an example of such a case in De Coppett v. Barnett, where it was held that the sheriff was not entitled to protection where a substantial grievance had been done. I agree that in one sense, at any rate, the extent of the grievance, and in some cases its existence, must depend on the decision as to the issues raised in the action, but on what is admitted here it seems to me that this case is wholly outside the type of case for which r. 16A was made. It is quite sufficient to decide the case, in my opinion, to state that on the sheriff's own affidavit the caravan which this plaintiff rightly occupied under a contract with the true owner, was removed from the site where she had it and put in a barn, the main doors of which were kept locked, for four days. No one can say that that was not a "real grievance". It was suggested that we might consider adjourning the application under this order for protection until the trial of the action so that the judge, presumably, having heard the case might then say: "Having heard all I have now heard I think this is a case under which protection might have been given." As a matter of procedure, I do not think that is right. I am not deciding that in no circumstances could an issue be ordered to be tried under this rule. That can be dealt with if the need arises. In my view, the rule is intended to apply in cases where,

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on the evidence before the court, it is clear that protection should be given before a trial and the investigation which a trial involves. It is absurd to suggest that a rule which is intended to be used to stop a trial can, as it were, be kept in vacuo, or in a state of suspense, until the trial has been concluded and then be relied on for some purpose on the question of the order to be made as to costs. That does not appeal to me, but for the reasons which I have given ( and I hope I have said nothing that in any way would pre-judge the issues which may arise), I do not think this is a case for protection under Ord. 57, r. 16A. I should say a word now about what happened below. The learned master took the view which I have taken and he made no order except that the time for the defence was extended for fourteen days. The learned judge made an order that the "appeal be allowed and that the defendant be given protection against the claim of the plaintiff pursuant to the provisions of Ord. 57, r. 16A, and that all further proceedings herein be stayed." Counsel for the sheriff said that he did not submit to the judge that any such order could be made at that stage. He said he submitted that there must be an issue to determine certain facts. No doubt, there may have been a misunderstanding, but the matter became clearer before us and counsel did seek to support the order in that form. He agreed that, there being a dispute between the affidavit and the statement of claim, there must be an issue. For the reasons which I have given I think the master's order should be restored. BIRKETT, L. J.: I am of the same opinion. The facts in this case were, admittedly, most unusual. It so happened that the plaintiff made her home in the caravan which was the subject-matter of a dispute. Although she made a claim that she should be undisturbed, nevertheless, the caravan containing herself and her belongings was taken away from the premises of the judgment debtor to the premises of the judgment creditor and put in a barn for some days and so suffered some humiliation. I think it is quite impossible to say on those facts that this was the ordinary case to which Ord. 57, r. 16A, was intended to apply. On any view of the case the plaintiff here had a substantial grievance. As I read Ord. 57, r. 16A, it was designed to protect a sheriff in what I may call the ordinary or almost inevitable circumstances which are bound to arise in the course of the sheriff's duty. It is almost inevitable that a sheriff will at some time seize goods which ultimately turn out to belong to some claimant. Under r. 16A, when the execution creditor has admitted the claim, ". . . the sheriff may thereupon withdraw from possession of the goods claimed, and may apply for an order protecting him from any action in respect of the said seizure and possession of the said goods, and the judge or master may make any such order as may be just and reasonable in respect of the same." I understand that to mean that when a sheriff has, in fact, seized goods in the name of the judgment creditor which in truth belong to the claimant, there would in the ordinary way, be a cause of action against him at least for nominal damages. The design of this rule, in my view, is to say : "In those circumstances we think it right and proper that the sheriff should be protected". But it was clear from Smith v. Critchfield that Sir William Brett, M.R., was saying that it is not in every case that the judge will protect the sheriff. It would depend on the facts of the particular case. I myself think that the learned judge was unduly influenced by the decision in Smith v. Critchfield. That was a case where one would have said: "If the sheriff has, in fact, wrongfully seized goods he must have entered on the land in order to do so". The learned Master of the Rolls was saying: "You

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cannot separate the two things like that; they are really one and indivisible". The judge in the present case said, in effect, "In this case there can be no separation: if you find that the sheriff has in fact seized goods - in this case this caravan you cannot separate that from the taking away of the plaintiff inside the caravan to the land of the judgment creditor". Indeed, he says ([1953] 2 All E .R. 931): "After some consideration I have come to the conclusion that the words of the rule must be taken to mean what on the face of them they do mean, and that the sheriff is entitled to apply for an order protecting him from any action in respect of the seizure, and not merely from an action in respect of the seizure which may be brought by the claimant." In my view, Ord. 57, r. 16A, was intended to apply to a case where there was admittedly a cause of action because of a mistaken seizure by the sheriff, a cause of action in which nominal damages could be awarded, and in such a case the rule provides protection, but where, as in this case, there was a substantial grievance, I do not think this rule applies. Therefore, for the reasons which have been given by my Lord, I am entirely of the same opinion, and I think that the order of the master should be restored. UPJOHN, J. : I agree. Order 57, r. 16A, confers on the court a valuable discretionary power to protect sheriffs who have wrongfully seized goods under a writ of fi. fa. The order that the court may make is "such order as may be just and reasonable." That is the test we have to apply. In my judgment, those words mean that the order must be just and reasonable, not only from the point of view of the sheriff, but also from that of the claimant (in this case the plaintiff). It may well be just and reasonable to make an order in the ordinary case where the plaintiff or claimant has suffered no real grievance and whose only claim is for nominal damages. I do not propose to refer to the facts, but it is clear that this is not the ordinary case, and, in my judgment, it would be neither just nor reasonable to preclude the plaintiff from pursuing such remedies at law as she may have against the sheriff. I agree that the order of the master should be restored. In Ontario rule 644 of the Rules of Practice and Procedure provides that, where after notice the sheriff withdraws from a wrongful seizure, "no action shall be brought against the sheriff in respect of the seizure of the property." Quaere whether this protection is absolute.

REGINA v. DOUCETTE, DONGEN AND McNUTT Ontario Court of Appeal. 1960. 25 D.L.R. (2d) 380. The judgment of the Court was delivered by SCHROEDER, J. A. : The Attorney-General appeals against the judgment of His Honour Judge Weaver pronounced in the County Court Judges' Criminal Court of the County of York, whereby he acquitted the three respondents upon an indictment preferred against them, wherein it was charged that on or about November 6, 1959, at the Municipality of Metropolitan Toronto in the County of York, they did commit an assault on one John Chappell thereby causing him bodily harm. Under s. 584 of the Criminal Code the Attorney-General may appeal against a judgment or verdict of acquittal which involves a question of law alone. This appeal is based on the ground "that the learned County Court

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Judge has misdirected himself as to the law relating to justification as a defence to a charge of assault". The respondents were duly licensed as bailiffs by the Municipality of Metropolitan Toronto after having received a certificate of qualification in accordance with the provisions of the Bailiffs Act, R.S.O. 1950, c. 30. Under the terms of such licence they were entitled to engage in the business or calling of bailiffs but they were not clothed with any official status as peace officers or as duly authorized officers of any Court. Persons so licensed are frequently engaged by merchants or finance companies to repossess merchandise sold under the terms of conditional sales agreements and when thus engaged they are acting in a private and unofficial capacity as the authorized agents of the vendor of the goods in question or of his assignee. The facts giving rise to the indictment laid against the respondents arose out of a seizure made by them on the afternoon of November 6, 1959, at or about the hour of 4.30 p.m. at the apartment of one John Chappell contained in a building known and described for municipal purposes as No. 2110 Dundas St. West. Chappell occupied a small second storey apartment at that address with his wife and five young children. The respondents had driven to the premises in a station wagon for the purpose of repossessing a television set which had been purchased by Chappell under the terms of a conditional sales contract. The purchaser, Chappell, stated in evidence that the vendor had accepted an old television set in part payment of the purchase-price and that he had paid approximately $15 in cash. A copy of the contract which has been filed does not indicate that any allowance was made for a used television set, but it is not disputed that at the time of the seizure the payments due under the agreement were in arrear. Only Doucette and McNutt entered the premises in the first instance. The front door leading to the ground floor hall was opened to them by Chappell's 11-year old son who called to his father to advise him that some men wished to see him. The visitors did not wait for an invitation to enter Chappell's apartment but immediately proceeded to ascend the stairs. Chappell's evidence is that there was a small gate stretched across the hall entrance to his apartment and placed at the head of the stairs. He stated that the two respondents, while still standing on the stairway, advised him of the purpose of their visit; that they had not at that time passed the gate to enter the upstairs hallway. He then advised them that he would not permit them to take the television set until a policeman could be summoned. He stated that one of the two men then unfastened the gate and pushed him back across the upstairs hall into the living room where the television set was kept. There is a conflict in the evidence upon this point, both Doucette and McNutt having testified that they had not observed the gate referred to; that they did not see Chappell until they entered the living room of the apartment; and that when they announced their intention of repossessing the television set, Chappell stated plainly and emphatically that he objected to their doing so, and when no favourable reaction occurred he attempted to push Doucette out of the room. It is not disputed that Chappell at that time requested his wife to go out to telephone the police and at the same time ordered these two men, Doucette and McNutt, to leave his premises and to remain downstairs until the arrival of the police. They, however, refused to comply with this request and persisted in remaining in the apartment. A fight then occurred between Chappell and Doucette in which McNutt endeavoured to intervene. At this point the third respondent, Dongen, a sturdy man about 6 ft. in height and weighing 240 lbs. entered the room, unbidden by anyone, and his mere presence apparently suf-

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ficed to terminate the fighting. One thing that emerges clearly from the evidence is the fact that Chappell had made it abundantly clear that he protested against the presence of these men on his premises; that he objected to the removal of the television set of which he was at the time in peaceable possession under a claim of right, and that he made it very plain that if they attempted to remove it before the arrival of the police he would resist their efforts. In all the circumstances Chappell's suggestion that they desist from carrying out the seizure until the police were called, emanating from a man who had serious doubts as to his legal rights in this affair, was not unreasonable. Notwithstanding this one of the three accused men scoffingly declared that they would be gone before the police arrived. Then, while Chappell was leaning on the television set, Doucette disconnected the electric plug and Dongen seized the instrument and carried it towards the stairs, followed by Doucette and McNutt. The latter acting as a rear guard, walked backwards with his fists raised in order to hold off Chappell, who was apparently following the trio in a threatening manner. McNutt then pushed forward past Doucette who was on the upper steps, and assisted Dongen in carrying the television set down the remaining steps. Doucette who was then last in line, believing that Chappell was about to strike him, directed a hard blow at Chappell's mouth which felled him to the floor. The three bailiffs left the premises carrying the television set with them before the police could arrive on the scene. The learned trial Judge made no express findings of fact and disposed of the case in these few words: "With respect to the charge of assault in the second indictment, I am satisfied there that the complainant was the author of his own misfortune and that also will be dismissed." It is not easy to discern precisely what the learned Judge meant by these words. If he meant that Chappell, by his conduct, had given provocation to the respondents, provocation would certainly not constitute a defence to a charge of assault, although it would be something which ought to be considered in mitigation of the offence, and would have a bearing on the sentence or penalty to be imposed. If, on the other hand, he took the view that the respondents had made out a case of legitimate self-defence, his conclusion was based upon a misapprehension as to what constitutes in law a defence of justification for assault. I cannot think that the learned trial Judge gave proper consideration to the legal rights and obligations of the respondents in attempting to carry out their object and to the corresponding rights and obligations of the complainant, Chappell. Since there appears to be a popular misconception in the minds of many people, particularly in the minds of persons engaged in the business or calling of licensed bailiffs as to the extent of their rights and privileges, it may serve a useful purpose to review the law bearing upon the issues directly involved in this case. It should be made clear at the outset that the recaption or resumption of possession of goods by the act of the owner through an agent or bailiff acting under his written authority, is not a lawful execution of any process against lands or goods, or is not the making of a lawful distress or seizure within the meaning of s. 110( c) of the Cr. Code which is directed against resistance to or wilful obstruction of any person engaged in the performance of such acts. This is placed beyond question by the decision of the Court of Appeal in R. v. Shand, ( 1904) 8 Can. C.C. 45, 7 O.L.R. 190.

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The limitations upon the right of an owner to repossess his goods without process of law are stated clearly and succinctly in 3 Blackstone's Commentaries at pp. 4-5, from which I quote : "Recaption or reprisal is another species of remedy by the mere act of the party injured. This happens when any one hath deprived another of his property in goods or chattels personal ... in which case the owner of the goods . . . may lawfully claim and retake them wherever he happens to find them, so it be not in a riotous manner, or attended with a breach of the peace. The reason for this is obvious; since it may frequently happen that the owner may have this only opportunity of doing himself justice: his goods may be afterwards conveyed away or destroyed; . .. if he had no speedier remedy than the ordinary process of law. If therefore he can so contrive it as to gain possession of his property again without force or terror, the law favors and will justify his proceeding. But as the public peace is a superior consideration to any one man's private property; and as, if individuals were once allowed to use private force as a remedy for private injuries, all social justice must cease, the strong would give law to the weak, and every man would revert to a state of nature; for these reasons it is provided that this natural right of recaption shall never be exerted where such exertion must occasion strife and bodily contention, or endanger the peace of society." This passage in Blackstone was commented upon and applied by Parke, B., in Patrick v. Colerick, (1838) , 3 M & W. 483, 150 E.R. 1235. See also Davis v. Whitridge (1847), 2 Strobhart (South Carolina Law) 232. It is very clear that whatever rights the vendor or his assignee or their authorized agent might have under the terms of the conditional sales contract ( the purchase-money being in arrear and unpaid) to enter upon Chappell's premises to resume possession of the goods in question, it would be illegal for them to take such possession by force. Traders Bank of Canada v. G. & J. Brown Mfg. Co. ( 1889), 18 O.R. 430, cited by counsel for the respondents is authority for this proposition. In Re Nu-Way Meat Market Ltd. & Grobstein & Commercial Acceptance Corp. (1940) , 22 C.B.R. 46, 46 Rev. de Jur. 418, it was held that the liquidator might claim possession of a truck sold to a debtor under suspensive conditions of property, where the vendor had taken possession of it by force and deceit since the winding-up, and had neglected to furnish the liquidator with the detailed account of what was still owed by the debtor; whatever the terms of the deed, no one had the right to take the law into one's own hands. Reference may also be made on this point to Devoe v. Long, [1951) 1 D.L.R. 203 at pp. 225-6, 26 M.P.R. 357, a judgment of the Appeal Division of the Supreme Court of New Brunswick. The right to resort to self-help was again discountenanced in Nilan v. McAndless (1912), 8 D.L.R. 169, where at p. 171 , Macdonald, J., stated: "He was not justified, however, in taking the law in his own hands when he found that he could not get peaceable possession. His proper course was to obtain possession by legal means." There must be reasonable limits imposed upon the right of self-help assumed and asserted by private individuals in order to preserve peace and tranquility and to avoid the evil consequences which are bound to flow from insistence upon a right to use private force. Under s. 39 of the Cr. Code, the peaceable possessor of movable property under a claim of right is protected from criminal respon-

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sibility ( although not from civil responsibility) for resisting its taking even by the person legally entitled. The principle which must govern in cases of this kind was stated in clear and unmistakable terms by Osler, J. A., in R. v. Shand, 8 Can. C.C. at pp. 52-3, 7 O.L.R. at pp. 196-7, from which I quote the following excerpt: "The law is the same where goods are improperly detained by one in defiance of his agreement to yield them up to the owner with or without demand. If the owner can acquire possession peaceably he may do so. If he attempts to take it forcibly and in a riotous manner as was done in the case before us, he becomes himself a breaker of the law, as much so as one who attempts to take possession of real property by a forcible entry, contrary to 5 Rich. II, stat. 1, ch. 8, even when it has been agreed that he was to re-enter; Edwick v. Hawkes, (1881), 18 Ch. D. 199; and see Beddall v. Maitland, (1881), 17 Ch. D. 174. If resistance is offered or possession refused he should have recourse to his action, and the code, sec. 144, would then have its full force in making unlawful any resistance to seizure made in due course of law. That is what is meant by a lawful seizure. It was never intended to enlarge the civil rights or powers of individuals, or to convert a breach of contract or resistance to private force into a criminal offence." In Edwick v. Hawkes, cited by Osler, J. A., in R . v. Shand, supra, Fry, J., stated (18 Ch. D. at p. 212] : "I have made those observations because, in my judgment, it is important that there should be no misunderstanding as to the position of persons who have a right of entry on land. Their right is to enter in a peaceable and easy manner, and if they cannot do so they must resort to the Courts. In no other way can the peace and quiet of this country be maintained, and in no other way can the relation of landlord and tenant be prevented from resulting in such acts of violence and disturbance as I regret to say have occurred in the present case."

In the same case it was held that a clause in a lease, authorizing the lessor to eject

the lessee forcibly for breach of covenant, or at the end of the term of a lease was void as being a licence to commit an act forbidden by law. It follows logically that if a person enters premises lawfully in the first instance for the purpose of resuming possession of his movable property and subsequently abuses his authority, he becomes in law a trespasser. It is rather singular that three bailiffs had to descend upon the complainant to repossess a chattel which could be borne by one man, unless it was their purpose to make a display of might, against which the complainant's lone opposition, whether right or wrong, could scarcely be expected to prevail. That these men abused their authority after gaining entrance to the premises is too plain for discussion. Once it was made clear to them, as indeed it was, that they would not be suffered to remove the television set without resistance, they grossly exceeded and abused their rights when they persisted in carrying out their project of abducting the television receiver, using force for the purpose if necessary. They thus became trespassers even if their original entry was lawful, a point which, on the evidence, is itself not free from doubt. The learned Deputy Attorney-General contends that by force of the provisions

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of s. 38 (2) of the Cr. Code alone, quite apart from the actual physical force applied by the respondents to the person of the complainant, they must be held to have committed an assault without justification or provocation. Section 3 8 ( 2) reads: "(2) Where a person who is in peaceable possession of movable property lays hands upon it, a trespasser who persists in attempting to keep it or take it from him or from any one lawfully assisting him shall be deemed to commit an assault without justification or provocation." Also by s. 38 ( 1) the person in peaceable possession of such property is justified in preventing a trespasser from taking it if he does not strike him or cause him bodily harm. In my view of the facts, the conduct of the respondents towards the complainant Chappell while exercising their purported right to repossess the television set in question by force is in itself sufficient to support a charge of common assault against them. I agree, however, that if it were necessary for the Crown to rely upon the provisions of s. 38(2) of the Cr. Code, those provisions might successfully be invoked against the respondents. I would allow the appeal, set aside the judgment of acquittal, and direct that a verdict of guilty of common assault be entered against the respondents. I would impose a fine of $50 upon the respondent Doucette, a fine of $25 upon the respondent Dongen, and a fine of $25 upon the respondent McNutt. I cannot depart from this case without observing how fortunate it is that the high-handed course of conduct of these bailiffs in enforcing the supposed rights of their principals was not attended with bloodshed. That was by no means a remote probability. I hope that the expression of this opinion may serve to correct certain impressions which seem to have got abroad that merchants who sell their wares on credit under the terms of hire-purchase agreements, finance companies to whom such agreements are sold and assigned, or bailiffs employed by the vendors or their assignees, may take the law into their own hands and exert private force with impunity. If they are unable to retake their property by peaceful means and without provoking a breach of the peace, the Courts are always open to them and they may institute replevin proceedings or take such other action as they may be advised in order to recover their property. As to the appointment of private bailiffs in Ontario, see The Bailiffs Act, 1960-61, c. 5, as amended by: 1961-62, c. 7; 1964, c. 5; 1965, c. 7; 1966, c. 11. Cf. The Private Investigators and Security Guards Act, 1965, c. 102.

F. Priorities Among Creditors THE EXECUTION ACT R.S.O. 1960, c. 126. 16. (5) Subject to The Creditors' Relief Act, the sheriff shall pay over to the party who sued out the execution the money so paid or recovered, or a sufficient sum to discharge the amount directed to be levied, and if, after satisfaction thereof and of the fees, poundage and expenses of the sheriff, a surplus remains the same shall be paid to the party against whom the execution issued.

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THE WAGES ACT R.S.O. 1960, C. 415. 3. All persons who, at the time of the seizure by the sheriff or who within one month prior thereto, were in the employment of the execution debtor, and who become entitled to share in the distribution of money levied out of the property of a debtor within the meaning of The Creditors' Relief Act shall be entitled to be paid out of such money the wages due to them by the execution debtor, not exceeding three months' wages, in priority to the claims of the other creditors of the execution debtor, and shall be entitled to share pro rata with such other creditors as to the residue, if any, of their claims. THE CREDITORS' RELIEF ACT R.S.O. 1960, C. 78.

3. Subject to this Act, there is no priority among creditors by execution from the Supreme Court or from a county court. 5. ( 1) Where a sheriff levies money under an execution against the property of a debtor or receives money in respect of a debt which has been attached or sold under section 15 of The Absconding Debtors Act, he shall forthwith make an entry (Form 1) in a book to be kept in his office, and such book shall be open to the public for inspection without charge. (2) The money shall thereafter be distributed rateably among all execution creditors and other creditors whose executions or certificates given under this Act were in the sheriff's hands at the time of the levy or receipt of the money, or who deliver their executions or certificates to the sheriff within one month from the entry, subject to the provisions hereinafter contained as to the retention of dividends in the case of contested claims, and to the payment of the costs of the creditor under whose execution the amount was made, and subject also to subsection 6 of section 4, and, as respects money recovered by garnishee proceedings, subject to the payment thereout to the creditor who obtained the attaching order of his costs of such proceedings. ( 3) Subsection 2 does not apply to money received by a sheriff as the proceeds of a sale of property by him under an interpleader order; but upon the determination of the interpleader proceeding in favour of the creditors the money, whether in the sheriff's hands or in court pending such determination, shall, subject to subsection 4, be distributed by the sheriff among the creditors contesting the adverse claim. ( 4) Where proceedings are taken by a sheriff for relief under any provisions relating to interpleader, those creditors only who are parties thereto and who agree to contribute pro rata in proportion to the amount of their executions or certificates to the expense of contesting any adverse claim are entitled to share in any benefit which may be derived from the contestation of such claim so far as may be necessary to satisfy their executions or certificates. ( 12) Where money in the hands of the sheriff for distribution is the proceeds of the property of an absconding debtor against whom an order of attachment has been issued under The Absconding Debtors Act, the period mentioned in subsection 2 shall be two months, and subsection 8 shall be read as if the words "the month" in the first line were "the two months". 6. ( 1 ) If a debtor permits an execution issued against him under which any of his goods or chattels are seized by a sheriff to remain unsatisfied in the sheriff's

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hands until within two days of the time fixed by the sheriff for the sale thereof, or for twenty days after the seizure, or allows an execution against his lands to remain unsatisfied for nine months after it has been placed in the sheriff's hands, the proceedings hereinafter authorized may be taken by other creditors or claimants in respect of debts that are overdue. (2) When a sale has taken place under an execution, the proceedings hereinafter authorized may be taken by any creditor of the execution debtor even though his claim is not then due. 9. ( 1) Where the claim is not contested in the manner hereinafter mentioned, after ten days from the day of service, or after the time mentioned in the order provided for by subsection 4 of section 7, as the case may be, on the application of the claimant and his filing proof of due service of the affidavit and notice, or, where the claim is contested, upon the determination of the dispute in favour of the claimant, either in whole or in part, the clerk of the county court shall deliver to the creditor a certificate (Form 5) and where the claim is disputed as to a part only, the claimant may elect, by a writing filed with the clerk, to abandon such part and shall be entitled to a certificate as to the residue. (2) Upon delivery of the certificate to the sheriff the claimant shall be deemed to be an execution creditor within the meaning of this Act, and is entitled to share in any distribution as if he had delivered an execution to the sheriff, and the certificate binds the lands and goods of the debtor in the same manner as an execution, subject, however, to the debt being afterwards disputed by a creditor as hereinafter provided. (3) For the purpose of interpleading proceedings the certificate shall be deemed to be an execution. ( 4 ) If the certificate is obtained by a solicitor, his name and address shall be endorsed thereon, and, if obtained by the claimant in person, there shall be endorsed thereon a statement of some place in, or within three miles of the county town of the county in which the proceedings are being taken, at which service may be made upon him, and, in default thereof, service of any notice, paper or document may be made upon the claimant by mailing the same by registered post addressed to him at the county town. ( 5) On receiving the certificate the sheriff shall make a further seizure of the property of the debtor to the amount of the debt so claimed and the sheriff's fees, and so from time to time in case further certificates are received. ( 6) A certificate remains in force for three years from the date thereof but may from time to time be renewed in the same manner as an execution. (7) Notwithstanding the expiry of an execution or certificate before the termination of the month during which a notice of money having been levied or received is required to be entered, the execution or certificate, as to any money levied or received during such month, shall be deemed to be in full force and effect. 10. ( 1) The claim may be contested by the debtor or by a creditor of the debtor. 12. (1) Where a claim is contested by a creditor after a certificate has been placed in the sheriff's hands, the sheriff unless the judge otherwise orders, shall levy as if such contestation had not been made, and shall, until the determination of the contestation, retain in the bank the amount which would be apportionable to the claim if valid, and shall as soon after the expiry of the month as is practicable, distribute the residue of the money made among those entitled thereto. (2) The claimant whose claim is contested may apply to the judge for an order allowing his claim and determining the amount, and if he does not make such

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application within eight days after receiving notice of the contestation or within such further time, if any, as the judge allows, he shall be taken to have abandoned his claim. ( 3) Where the contestant is a creditor and there is reason to believe that the contestation is not being carried on in good faith, any other creditor may apply for an order permitting him to intervene in the contestation. 13. ( 1) The judge may determine any question in dispute in a summary manner or may direct an action to be brought or an issue to be tried with or without a jury in any court and in any county for the determination thereof, and make such order as to the costs of the proceedings as he deems just. (2) Where the sum in controversy appears to be over $400 exclusive of costs, the judge shall direct that the action be brought or the issue tried in the Supreme Court, and subject to any order which that court or a judge thereof may make in that behalf, shall name the county in which the trial is to take place. ( 3) Where an issue is directed, the trial shall take place and all proceedings subsequent thereto shall be the same as if it had been an action in the court in which it is ordered to be tried. 26. Where the amount levied by the sheriff is not sufficient to pay the executions and certificates with costs in full, the money shall be applied to the payment rateably of such debts and costs of the creditors, after retaining the sheriff's fees including poundage, and after payment in full of the taxed costs and the costs of the execution to the creditor at whose instance and under whose execution the seizure and levy were made where he is entitled to priority therefor under this Act. 32. ( 1) Where at the time for distribution the money is insufficient to pay all claims in full, the sheriff shall first prepare for examination by the debtor and his creditors a list of the creditors entitled to share in the distribution, with the amount due to each for principal, interest and costs. (2) The list shall be so arranged as to show the amount payable to each creditor and the total amount to be distributed, and the sheriff shall deliver or send by registered post a copy of the list to each creditor or his solicitor. ( 3) If within eight days after all the copies have been delivered or posted, or within such further time as the judge may allow, no objection is made as provided by this Act, the sheriff shall make distribution forthwith pursuant to such list. ( 4) If objection is made the sheriff shall forthwith distribute rateably so much of the money made, and among such persons, as will not interfere with the effect of the objection in case it should be allowed. ( 5) Any person affected by the proposed scheme of distribution may contest the same by giving, within the time mentioned in subsection 3, a notice in writing to the sheriff stating his objection to the scheme and the grounds thereof. ( 6) The contestant shall within eight days thereafter apply to the judge for an order adjudicating upon the matter in dispute, otherwise the contestation shall be taken to be abandoned. (7) The contestant shall, within the time mentioned in subsection 6, obtain from the judge an appointment for hearing and determining the matter in dispute. (8) A copy of the appointment and a notice in writing (Form 7) of the objections stating the grounds thereof shall be served by the contestant upon the debtor, unless he is the contestant, and upon the creditors or such of them as the judge directs. (9) The judge may determine any question in dispute in a summary manner, or may direct an action to be brought or an issue to be tried with or without a jury

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in any court and in any county for the determination thereof, and may make such order as to the costs of the proceedings as he deems just, and subsections 2 and 3 of section 13 apply. ( 10) Where a claimant is held to be not entitled, or to be entitled to part only of his claim, the money retained pending the contestation or the portion as to which the claimant has failed shall be distributed among the creditors who would have been entitled to it as it would have been distributed had the claim in respect thereof not been made. ( 11 ) Where a debtor has executed a mortgage or other charge, otherwise valid, upon his property or a part thereof after the receipt of an execution by the sheriff and before distribution, such mortgage or charge shall not prevent the sheriff from selling the property under an execution or certificate placed in his hands before distribution as if such mortgage or charge had not been given, nor prevent creditors whose executions or certificates are subsequent thereto from sharing in the distribution; but in distributing the money realized from the sale of such property, the sheriff shall deduct and pay to the person entitled thereto the amount of such mortgage or charge from the amount which would otherwise be payable out of the proceeds of such property to such subsequent creditors. ( 12) In the case provided for in subsection 11 the sheriff shall prepare a separate scheme of distribution of the proceeds of the encumbered property without reference to the mortgage or charge, and from the dividends payable according to such scheme to subsequent creditors there shall be deducted the amount of the mortgage or charge, and the amount so deducted shall be paid to the encumbrance. It was held in British Columbia in Hale v. Ross (1958), 26 W.W.R. 47 that, notwithstanding s. 3 of the Creditors' Relief Act, R.S.B.C. 1948, c. 81 (identical with s. 3 of the Ontario Creditors' Relief Act) a judgment creditor who is successful in attachment proceedings prior to the date that any writ or warrant of execution or certificate under the said Act is placed in the sheriff's hands by other execution creditors is under no legal obligation to share with them the fruits of his attachment proceedings. Sullivan, J. said ( at 48) : "The fact that payment of the attached moneys out of court to [the first execution creditor] was made after warrants of execution on behalf of the other claimants were delivered to the sheriff does not affect the matter, because service of the attaching order before judgment created a charge upon the moneys attached in favour of [the first execution creditor] and no interest of the sheriff could arise therein unless at that time there were executions in his hands. To this extent, as learned judges have held heretofore, does the law reward the first attaching creditor for her diligence."

BENJAMIN MOORE & CO. LTD. v. FINNIE County Court, Ontario. (1955) 1 D.L.R. 557. LANG, CO. CT. J. : This is a contestation by Benjamin Moore & Co. Ltd. of a schedule of distribution under the Creditors' Relief Act, R.S.O. 1950, c. 78, prepared by the Sheriff of the County of Waterloo under date of June 10, 1954. On January 13, 1954, the contestant filed in the Sheriff's office a writ of execution in the above case in the sum of $4,263.66 and $61.75 costs. Between that date and January 20, 1954, a notice of seizure of moneys in the hands of Mr. A. W. A. White allegedly owing to the defendant was served on him, and on

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May 7, 1954, Mr. White paid to the Sheriff the sum of $3,628.64 pursuant to the notice. On the same date the Sheriff made an entry in his book in accordance with the provisions of s. 5 ( 1) of the Creditors' Relief Act. In the meantime ten other creditors had obtained judgment against the above-named defendant and had deposited executions in the Sheriff's hands, ranging from March 24 to April 22, 1954. The Sheriff in his statement of distribution, after deducting his own fees and expenses and giving priority to the costs of the contestant, who was the first execution creditor, proposed to divide the balance pro rata among all the execution creditors. The plaintiff served notice contesting the proposed scheme of distribution on the ground that the contestant was entitled to all the moneys by virtue of the provisions of s. 5(2) of the Creditors' Relief Act. Subsections (1) and (2) of s. 5 read as follows : " ( 1 ) Where a sheriff levies money under an execution against the property of a debtor, or receives money in respect of a debt which has been attached or sold under section 15 of The Absconding Debtors Act, he shall forthwith make an entry (Form 1) in a book to be kept in his office, and such book shall be open to the public for inspection without charge. "(2) The money shall thereafter be distributed rateably among all execution creditors and other creditors whose executions or certificates given under this Act were in the sheriff's hands at the time of the levy or receipt of the money, or who deliver their executions or certificates to the sheriff within one month from the entry." Counsel for the contestant based his contention entirely on the meaning of the word "levy". He argued that the words "seizure" and "levy" were synonymous, and that the levy took place and was complete on the date of the seizure, that is, on or before January 20, 1954, and that since no other executions were in the hands of the Sheriff within one month from January 20th the plaintiff was therefore entitled to the entire moneys in the Sheriff's hands. The judgment in Trust & Loan Co. v. Cook (1910), 3 S.L.R. 210, is authority for the proposition that money paid to the Sheriff by a mortgagee in order to secure the discharge and release of an execution is not money levied, and that there can be no levy without a seizure. There are many cases that are of assistance in determining what is a levy. In Badiuk v. Moore, [1930) 1 D.L.R. 47, there was a seizure, a sale was advertised for June 15th and moneys were paid by the debtor to the Sheriff on June 12th. It was contended that "levy" included both seizure and sale and that if there was no sale there was no levy. Ford, J. said at pp. 48-9: "This argument is unsound in my opinion. The money was not paid to the Sheriff because of the order for sale but by the compulsion of the seizure and the means taken to realize. The money was therefore "levied" within the meaning of the Creditors' Relief Act and there being another execution in the sheriff's hands against the property of the debtor the sheriff must act under that statute by the plain terms of which all priority among creditors by execution is abolished. If authority were needed reference may be made to Mortimer v. Cragg (1878), 47 L.J.Q.B. 348. In that case Brett, L. J. said (pp. 350-1) : - 'A levy in its legal meaning seems to me to be where goods are seized and money is obtained by the compulsion of the seizure, and does not necessarily comprise "sale" at all.' And again this Judge says : - 'There

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is a "levy" when anything is obtained by the compulsion of seizure, although there is no sale.' "There is nothing in either Trust & Loan Co. v. Cook (1910), 3 S.L.R. 210, nor in Terminal Grain Co. v. Soderberg, [1925] 1 D.L.R. 313, differing from this view." Stroud's Judicial Dictionary, 2nd ed., vol. 2, p. 1088, cites numerous cases on the meaning of the word "levy", all of which indicates that to levy means to collect or exact or obtain moneys as a result of seizure. It therefore follows that the Sheriff in this case did not complete the levy until May 7th, the date on which he received the money as a result of the seizure made on or about January 20th. He made an entry in the book pursuant to the Creditors' Relief Act on May 7th. All creditors who had executions filed in his hands within one month after May 7th are entitled to receive their pro rata share on distribution. I find that the Sheriff's statement of distribution is properly prepared in accordance with the provisions of the Creditors' Relief Act. It is interesting also to look at Form 1 under the Act, which form is referred to in s. 5 ( 1). That subsection provides that where a Sheriff levies moneys "he shall forthwith make an entry (Form 1) in a book to be kept in his office". It would be impossible for the Sheriff to complete this form until he had received moneys, because the first two lines of the form read as follows : "I have on this day in my hands for distribution under the Creditors' Relief Act among the creditors of C.D. the sum of $ . . .''. It could not be done on the date of the seizure unless the moneys were also received on the same date. The Act is based on the assumption that the levy is complete on the date of the receipt of the moneys and not before. The contestation will therefore be dismissed, and the schedule of distribution as prepared by the Sheriff is confirmed. All parties will pay their own costs of the contestation.

ROACHv. McLACHLAN

Ontario Court of Appeal. 1892. 19 O.A.R. 496. OSLER, J. A.: This is an appeal from the judgment of the Judge of the County Court of the county of Elgin, confirming the sheriff's scheme of distribution under the Creditors' Relief Act, of moneys levied by him under certain writs of fieri facias against the goods of one John McLachlan. The contest, as presented to the learned Judge below, and as it comes before us on this appeal, is between the execution creditors Roach & Miller and a chattel mortgagee John A. Robinson on the one hand, and certain other execution creditors, N. McLachlan, Wm. Porter, W. B. Whitesides and J. McLandres, whose executions were delivered to the sheriff subsequent to Robinson's chattel mortgage, on the other. These last mentioned execution creditors, whose judgments were recovered for wages due to them by the execution debtor, have been held entitled to priority over the first execution creditor in the distribution of the proceeds of the sale, and the whole of such proceeds, after deducting the costs and sheriff's fees, etc. have been accordingly divided between them to the exclusion of the first execution creditor and of the mortgagee. The reason assigned for this decision is, that the Wage Earners' Act, R.S.O. ch. 127, sec. 3, gives the wages creditors priority in the sheriff's scheme of distribution over all other creditors of the execution debtor, and that being thus placed in a position of priority to the first execution

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creditors they necessarily also become prior to the mortgagee to whom those creditors are paramount. This is the only point involved in the appeal. I observe that the mortgagee Robinson was one of the claimants in the alleged interpleader proceedings, but no order was made barring his claim or directing an issue in respect of it, or otherwise disposing of it. He appears here, as he appeared before the sheriff and on the appeal to the learned Judge below, as a person claiming to share in the proceeds of the sale and to be placed on the distribution or dividend sheet, and he seems to have thought that he had gained some right of that kind because, as it is said, he had agreed to contribute pro rata to the expense of contesting the adverse claims which were barred (having been abandoned), as the result of the interpleader proceedings. But that is an entire misapprehension of his position. He is not an execution creditor but a person claiming adversely, or subject, to execution creditors. The Creditors' Relief Act, sec. 4, sub-sec. 3, gives him no right to join with such execution creditors in contesting other claims, or to share in the distribution of the proceeds of the sale under an execution, and he could not, under any circumstances, be placed upon the sheriff's dividend sheet. He had, therefore, no locus standi in any of these proceedings, and has none in this appeal. If his claim be disputed it must be so in the ordinary way, viz., in an interpleader proceeding at the instance of the sheriff. His mortgage, however, is in fact disputed by nobody, and it appears to be a security taken in good faith to secure money actually advanced by him to the execution debtor. The contest is therefore one between the first execution creditors and those who came in afterwards subsequent to the mortgage. I have read, with attention, the very careful judgment delivered by the learned junior Judge, and, with all respect, find myself unable to agree that the subsequent execution creditors are entitled to priority. I think, on the contrary, that as the proceeds of the sale are not sufficient to pay the first execution and the mortgage in full, the effect of the latter is to cut them out altogether. The ground on which I so hold was not, I think, presented to the learned Judge's attention. We must be careful not to extend the Creditors' Relief Act, or the Act respecting wages, to cases which they do not expressly provide for. They are Acts of an exceptional and incomplete character, and necessarily so, being, as it were, even if intra vires, but crippled substitutes for insolvent legislation. Those, therefore, who attempt to take advantage of these provisions must shew that they are clearly within them. Section 3 of the Wages Act, R.S.O. ch. 127, enacts that all persons in the employment of an execution debtor at the time of the entry of the notice mentioned in section 4 of the Creditors' Relief Act, or within one month before such entry, who shall become entitled to share in the distribution of money levied out of the property of a debtor within the meaning of such Act, shall be entitled to be paid out of such money the wages or salary due to them by the execution debtor not exceeding three months' wages or salary, in priority to the claims of the other creditors of the execution debtor and pro rata with such other creditors as to the residue of their claims. This Act and the Creditors' Relief Act profess to deal only with the levy of money upon an execution against the property of the debtor. They do not interfere with the rights of mortgagees or the rights of creditors, as they may be affected or altered by a mortgage or sale of such property after the issue of an execution. Notwithstanding the execution the property remains the debtor's property to sell or mortgage it as he pleases. If he does so, it ceases to be his property

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and becomes the property of the purchaser or the mortgagee subject to the execution. If it is then sold under the execution it is sold, not as the property of the debtor but as that of the purchaser or mortgagee, and executions which come in subsequent to the mortgage cannot be entitled to share in the proceeds of the sale, for the first execution being a charge on the property to the full amount of it, the creditor is entitled to enforce it so long as anything remains due thereon; and therefore whether the property has been sold, or merely mortgaged, if subsequent execution creditors are entitled to share pari passu in the proceeds of the sale under the first execution, it becomes necessary in order to satisfy it to sell more than would have been required for that purpose had there been no other executions. Every dollar which is applied upon such other executions is so much taken from the purchaser or mortgagee, and where the property is, say, of sufficient value to meet the first execution and the mortgage, it is easy to see that by this process the subsequent executions are being placed in the same position as the first execution creditor, and gain a priority over the purchaser or the mortgagee which they never had, and which the Acts referred to do not give them. They have no interest in anything but the equity of redemption, and if they wish to reach that they must pay off the first execution and the mortgage, or confine their claim to so much of the proceeds of the sale under the first execution as may represent it. I cannot see that the fact of the goods having been sold makes any difference in the rights of the parties, or that the first execution creditor or the mortgagee are thereby placed in any worse or different position than they would have been in if the mortgagee had chosen to pay off the execution : Gray v. Coughlin, 18 S.C.R. 553. I entirely agree with the judgment of my brother Rose in Davies Brewing and Malting Co. v. Smith, 10 P.R. 627, the principle of which applies to and covers the case before us. I am therefore of the opinion that the appeal should be allowed: that the sheriff's scheme of distribution should be set aside, and that it should be declared that the whole of the proceeds of that sale are applicable upon the first execution. The respondents must pay the costs of the appeal. S. 32(11) of the Creditors' Relief Act was added only in 1899: 62 Viet. (2), c. 11, s. 13. S. 32(12) was added in a general revision of the statute in 1909: 9 Edw. VII,c. 48, s. 33(12) .

EDMONTON MORTGAGE CO. v. GROSS. Supreme Court of Alberta. 1911 . 18 W.L.R. 385. This was a mortgage action, in which there was a sale. There was a surplus after paying the claim of the plaintiff, the first mortgagee. Subsequent to the plaintiff's mortgage, 3 executions against the defendant - the registered owner of the mortgaged lands - were lodged in the land titles office. Then the defendant gave a second mortgage. Then several other executions against the defendant were lodged. There being a surplus sufficient to pay in full the amounts of the 3 executions preceding the second mortgage and the amount of the second mortgage, BECK, J., ordered the amount of the second mortgage to be paid, reserving for argument the question whether the creditors holding the intervening executions were entitled to be paid in full or only pari passu with the subsequent execution creditors.

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BECK, J.: I have, after having had the benefit of a careful and helpful argument, come to the conclusion that the intervening execution creditors are entitled to be paid in full . In coming to this conclusion, I think I am applying the principles involved rather than the precise reasons adduced in the cases of Roach v. McLachlan, 19 A.R. 486; Breithaupt v. Marr, 20 A.R. 689; Re Massey, 2 Terr. L.R. 84; and Howard v. H. R. Trading Co., 4 Terr. L.R. 109. These cases were all cases in which, either by a bill of sale by way of chattel mortgage, an assignment for the benefit of creditors, or transfer, the property at the time of the attaching of the subsequent executions had ceased to be the property of the debtor - though in some of them he retained an ultimate residuary interest, which, in possible contingencies, might turn out to be a substantial interest. Here, the second mortgage being one under the Land Titles Act, and therefore not operating as a conveyance, but merely as a charge, the land still remained the property of the execution debtor. His interest, however, though of the same character, is a different interest. Previously to the giving of the second mortgage, the interest of the execution debtor was his entire interest, less that portion of it appropriated to the payment of the first mortgage - for the lodging of the executions did not change the property in the surplus interest, but only "bound" that interest, that is, created a charge upon it (Deering v. Gibbon, 7 W.L.R. 178, 1 Alta. L.R. 7), of a quite different character to that created by a mortgage in pursuance of the Act. A mortgage is a specific charge against specific property, which, under certain circumstances, may give rights to the mortgagee in excess of the beneficial rights of the mortgagor. An execution attaches only to the beneficial interest of the execution debtor (Wilkie v. Jellett, 2 Terr. L.R. 133, affirmed 26 S.C.R. 282), "nor did the Court ever presume to enlarge a judgment creditor's rights" (Holmes v. Millage, [1893] 1 Q.B. 551). The second mortgage, therefore, was a specific charge of the interest of the execution debtor, subject to, and, for the purpose of the question under consideration, it seems to me, with the same effect as if expressed to be subject to the rights of the then execution creditors. A new and different interest from that to which the 3 prior executions attached was thus carved out of the debtor's interest, and specifically charged with the second mortgage, leaving again a new and different interest subject to be charged or bound, voluntarily or involuntarily, by the act or default of the debtor; and it is, in my opinion, only this latter interest that became affected by the subsequent executions. The law anterior to the Creditors' Relief Act gave execution creditors priority as between themselves in the order of the time of their being placed in the hands of the Sheriff for execution, and under the Land Titles Act of their being lodged in the land titles office. This law stands, so far as it is not displaced by the provisions of the Creditors' Relief Act. That Act seems never to have contemplated such a case as the present. To bring the three prior executions into the same position as those separated from them by the intervening second mortgage would be to introduce and apply the equitable doctrine of the marshalling of securities for the benefit of the subsequent execution creditors, a thing, as I think, not contemplated by the Act, and effecting, as I think, an "enlargement" of the rights not of all the execution creditors but of those of one class against those of the other. Section 22 of the Act contemplates, I think, one "fund." Here I think there are two funds - one representing the amount necessary to satisfy the 3 intervening executions - the other the ultimate residue. There is nothing to indicate that the first should be thrown in with the other so as to make a single fund. Some such principles as I have endeavoured to indicate are, I think, involved in the Ontario and Territorial cases to which I have referred. Any inclination to

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differ from those decisions - any hesitancy to follow them - were there any, I think should be disregarded, inasmuch as subsequently to those decisions the Territorial Ordinance was replaced by a statute of Alberta (ch. 4 of 1910) amending and consolidating the law, in which there is to be found no indication that the sections then considered, and carried without change into the present Act, had been wrongly interpreted. There will be an order for payment of the amounts actually owing upon the 3 prior executions; the amounts to be ascertained, if necessary, by the clerk; and an order in pursuance of sec. 22 (McDougall v. Inglis, 2 Alta. L.R. 341), for the payment of the surplus to the Sheriff of the district in which the mortgaged lands lie, for distribution in accordance with the Creditors' Relief Act; the costs of all parties to this application being first taxed and paid. UNIONBANKOFCANADAv. TAYLOR Supreme Court of Ontario. 1915. 33 O.L.R. 255. BOYD, C.: The moneys to be distributed in this case were made available for the satisfaction of creditors and incumbrancers by the intervention of the Court in a suit to have a transfer of the property (land) declared void as to creditors. The land was sold subject to the claims of prior mortgagees - prior, that is, to the date of the first execution. The proceeds of the sale are to be distributed among those entitled according to their priorities. Those entitled may be classified thus: first in time, execution creditors having charges on the land; second, the claim of La Banque Nationale under a subsequent mortgage; thirdly, a group of creditors whose executions are later in date than this mortgage; fourthly, another later mortgage to one Douglas and another to one Bickell; fifthly, another group, still later in date, of execution creditors; then a fourth subsequent mortgage, to the Traders Bank; and lastly, another group of creditors whose executions are in the hands of the Sheriff. The amount realised by the sale is enough to pay in full the first group of executions, also the bank mortgage, and probably the next group of execution creditors. The Master has in this way settled the priorities and the manner of payment. It is objected on the appeal that the Master should have followed the directions given to Sheriffs in the Creditors' Relief Act, R.S.O. 1914, ch. 81, sec. 33, sub-secs. 11 and 12. The meaning imputed to that statute is that the groups of execution creditors should be gathered in one scheme of distribution (irrespective of the different mortgages) and the proceeds of the sale divided rateably among all as on equal footing. The result would thus probably be that the bank mortgage would be paid in full, and the execution creditors prior to this mortgage would receive a fraction of their charges. One obvious answer to this is that the first execution creditors are prior to that mortgage, and the second execution creditors are subsequent to that mortgage, and so have their charge on a different estate in the land, lessened in value by the amount of the mortgage. The Act does not appear to contemplate such a state of things as here exists: a succession of mortgages registered at different dates with groups of executions in the intervals between the different mortgages. The effect of the Act appears to be to pay a subsequent mortgage in full by reducing the amount of a prior execution, and this gives to a subsequent mortgage a better status as against a prior execution charged on the lands than existed when the mortgage transaction was effected between the owner and the mortgagee. If this is the meaning and result of the Act, I do not feel disposed to extend its methods to the distribution of assets in this Court.

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I do not think the analogy of the statute should be imported into these equitable proceedings. If the bank mortgage had been enforced by suit, the subsequent executions would have been wiped out if the creditors had not redeemed; and, if foreclosure ensued, that would leave the prior executions in full force . When the mortgage was made, it was subject to the existing executions, and there was no equity to have that mortgage paid out of the land in priority to the prior charges. The course of the Court is well settled and is carefully expounded in the cases cited, and followed by the Master of Roach v. McLachlan (1892) , 19 A.R. 496, and Breithaupt v. Marr (1893 ), 20 A.R. 689. In In re Riggs (1938) , 19 C.B.R. 222, at p. 226, Urquhart, J. said of s. 32 of The Creditors' Relief Act: "In the first place, the section recognizes the validity of a mortgage or charge made by the debtor on his property after the receipt of the execution by the sheriff and before distribution, and subsec. ( 11) provides that such a mortgage would not prevent the sheriff from selling the property under the execution, the same as if a mortgage had not been given, or would not prevent the subsequent execution holders from sharing in the distribution. Under subsec. (12) in distributing the money which results from the sale of the property he first prepares a scheme of distribution of the proceeds of the encumbered property without regard to the mortgage, and from the dividends payable according to that scheme to subsequent creditors he is to deduct the amount of the mortgage from those execution creditors whose executions were filed subsequent to the mortgage. "Taking a practical example, assume that there is a total of $8,000 of executions against a property, $4,000 being prior to a mortgage, $2,500 and $1 ,500 respectively being subsequent to the mortgage. The property sells for $4,000. If $8,000 had been realized for the property, the execution creditors would be paid in full and it might be said that the first execution creditor would have what was virtually a charge upon the property because he would be paid in full, but if only $4,000 were realized he would have to abate half of his claim, and therefore it is readily seen that he has not in the true sense a mortgage or charge on the property." RE SUDBURY DAILY STAR LTD. v. MOXON'S FURNITURE LTD. Ontario District Court. [1955] 5 D.L.R. 590. ST. AUBIN, D. C. J.: In this application the plaintiff contests the proposed scheme of distribution dated July 6, 1955, prepared by the Sheriff for the District of Sudbury and delivered to the creditors of Thomas Moxon, all of which pursuant to s. 32 of the Creditors' Relief Act, R.S.O . 1950, c. 78, and the said plaintiff submits that it should be included and shown as sharing in the said scheme for the amount of its judgment and costs. The grounds alleged in the notice of contestation are that an order under the Absconding Debtors Act; R.S.O. 1950, c. 1, having been made against the said Thomas Moxon and filed with the Sheriff on July 12, 1955, in the action of Journal Printing Co. v. Moxon, the money in the hands of the said Sheriff should be distributed ratably among all execution creditors who delivered their execution to him within 2 months from the entry mentioned in s. 5 ( 1) of the Creditors'

Relief Act. It is argued by counsel for the said contestant that as a result of the order made against Thomas Moxon under the Absconding Debtors Act that s-s. (12) of s. 5 of the Creditors' Relief Act applies and the period of time within which the executions or certificates must be placed in the Sheriff's hands is extended to two months instead of one month ....

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Counsel have not been able to cite any decision in point and I have been unable to find any reported cases in which s. 5 (12) has been interpreted by the Courts. However, Mr. Valin did cite the following cases : Union Bank v. Taylor ( 1915), 23 D.L.R. 679, 33 O.L.R. 255; Benjamin Moore & Co. v. Finnie, [1955] 1 D.L.R. 557, [1954] O.W.N. 772, and Maxwell v. Scarfe (1889), 18 O.R. 529, the latter two cases being of some assistance. These are authorities for the proposition that the levy under an execution takes place when the property of the debtor is sold. Upon such levy it is the duty of the Sheriff forthwith to make the entry under s. 5 ( 1 ) and subsequently to make distribution as provided by and in strict compliance with the Creditors' Relief Act . . .. In the matter before me the Sheriff became responsible to the execution creditors for the moneys received on June 3, 1955, and only the creditors whose executions or certificates were in the Sheriff's hands on or before July 4th were entitled to distribution on July 5th. In my opinion the order of July 12th, made under the Absconding Debtors Act, could not, and did not, effect any change in the period of time provided for bys. 5(2) of the Creditors' Relief Act. A careful consideration of s. 5(2) in the light of the provisions of the Absconding Debtors Act leads me to the conclusion that only the real or personal property of which the absconding debtor is possessed at the time of the making of the order may be seized and taken under an order of attachment under that Act for the satisfying of his debts, and when the order was made on July 12th the property of which the Sheriff still had the proceeds was no longer possessed by the debtor and had not been so possessed since at least the sale on May 30th, when the property became that of the purchaser. It seems to me that the period of 2 months provided for by s. 5 ( 12) applies only to moneys that are proceeds of the property of an absconding debtor seized and taken under an order of attachment for the satisfying of his debts under the Absconding Debtors Act, and does not apply to a levy under executions such as in the present proceedings. It is also of some importance to note that the property attached by the order of July 12, that is, the furniture stored at Warren which was to be seized and taken, was indeed not the property which was sold and levied upon by the Sheriff on May 30th. The contestation of the Sudbury Daily Star Ltd., must therefore fail and the distribution shall be made according to the scheme prepared by the Sheriff and forming part of ex. 2 filed. RE WALTER'S TRUCKING SERVICE LTD. THE QUEEN IN RIGHT OF THE PROVINCE OF ALBERTA v. ATTORNEY-GENERAL OF CANADA Alberta Supreme Court, Appellate Division. 1965 50 D .L.R. ( 2d) 711. APPEAL by the Attorney-General of Canada from a judgment of Kirby, J., 44 D.L.R. (2d) 267, holding in interpleader proceedings that the Crown in right of Canada and the Crown in right of Alberta ranked pari passu for certain debts due by a common debtor. MACDONALD, J. A. concurs with KANE, J. A. PORTER, J. A. (dissenting): The facts and the precedents are set out in the judgments of other members of the Court and need not here be repeated. In Re Silver Bros. Ltd., A.-G. Que. v. A.G. Can., [1932] 2 D.L.R. 673, [1932] A.C. 514, [1932] 1 W.W.R. 764, 53 Que. K.B. 418, 13 C.B.R. 223, the legis-

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lation of Canada expressly created a priority for the claim of Canada which, the decision concluded, did not apply to the Crown in the right of the Province because of the language of s. 16 of the Interpretation Act. In view of the priority created by the statute in that case, the priority of the debt to the Crown at common law was in abeyance: Att'y-Gen'l v. De Keyser's Royal Hotel Ltd., [1920] A.C. 508 at p. 539. I agree with my brother McDermid, J. A., that the Silver Bros. case has no application to the facts of this case. In the present case, Canada did not purport to create any priority by its legislation. The rights of Her Majesty with regard to the debt that the statute creates arise at common law and not from the statute. Section 16 of the Interpretation Act, R.S.C. 1952, c. 158, has no application. The legislation creates a debt to Canada. At common law a debt due the Crown has a priority. It falls, therefore, to determine what rights at common law flow from the prerogative as they affect the Crown in the right of Canada and the Crown in the right of the Province. While the concept has long been that the Crown is one and indivisible, the Crown cannot function under that concept where the powers of the Crown are divided. No one would urge that Her Majesty's advisers in Alberta could properly advise her on a matter that lay within the legislative field of the Federal Government. Nor would the reverse be true. If the Crown is one and indivisible, this lawsuit could not be brought for want of parties, for the Queen could hardly sue herself. Every day we see the Crown acting in two capacities which we commonly describe as the Crown in the right of Canada and the Crown in the right of the Province. It seems to me that the Crown in the right of the Province and the Crown in the right of Canada have well-defined functions under the respective legislative authorities of Parliament and the Provincial Legislature as those authorities are created and divided by the B .N .A. Act. The Crown's authority in the right of Canada and the Crown's authority in the right of the Province must be co-extensive with the division of the sovereign legislative powers made between Canada and the Province by the B.N.A. Act, else the Crown would be taking advice from the wrong Ministers. While it is true that legislative enactments of Parliament and of the Provincial Legislature, and therefore the prerogative in the right of the Province and in the right of Canada, can stand side by side in the same legislative area so long as there is no conflict between the respective legislative enactments in that field, the paramount right must prevail when a conflict arises: Re Silver Bros. Ltd., A.-G. Can. v. A.-G. Que., [1930] 1 D.L.R. 141 at pp. 141-2, [1929] S.C.R. 557, 11 C.B.R. 103, per Anglin, J. Here, the Federal legislation creating this debt is under the clear taxing powers of Canada. In such circumstances, it seems to me that the prerogative attaching to the debt arises in a legislative field in which the legislative authority of Canada is paramount. There was not sufficient money in the bankrupt estate to pay both claims. There is clearly a very real conflict of claims for each authority is claiming the same dollar. In the result, it is my view that the debt created by the legislation of Canada functioning in a field in which it is paramount carries with it the prerogative right to prior payment to the Crown in the right of Canada for the benefit of all the people of Canada. This right cannot be subordinated to or shared with the Crown in the right of the Province serving only some of the people of Canada under legislation which is subordinate to that of Canada. I would allow the appeal of the Crown in the right of Canada.

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JOHNSON, J. A. concurs with KANE, J. A. KANE, J. A.: Her Majesty the Queen in right of Canada became entitled on February 1, 1961, under a judgment of the Exchequer Court of Canada to recover from the debtor, under the Income Tax Act, R.S.C. 1952, c. 148, certain monies being unpaid income tax together with penalty, interest and costs. Writ of execution to the amount of the judgment with costs of the writ was duly issued and filed with the Sheriff of the Judicial District of Calgary on March 3, 1961. Her Majesty the Queen in right of the Province of Alberta obtained three judgments against the debtor for unpaid fines imposed upon it for violation of the Public Service Vehicles Act, R.S.A. 1955, c. 265. These judgments were duly entered and three writs of execution to the amounts thereof, plus costs, were issued and filed with the Sheriff on May 18, 1961. Seizures were made by the Sheriff under the writs. Such seizures did not result in the realization of sufficient monies to pay the full amounts owing to the appellant and respondent. Pursuant to the application of the Sheriff for interpleader relief an issue was directed to determine whether or not the claim of the appellant for taxes as a debt due to the Crown in the right of Canada is entitled in common law to priority in the case of conflict with a claim of the Crown in the right of Alberta. The action was tried before Kirby, J. (44 D.L.R. (2d) 267]. The learned trial Judge held that the claims of the parties, less the proper costs of the Sheriff, should be paid out pari passu. From that judgment the appellant appeals, contending that until the claim of the Crown in the right of Canada has been satisfied, the claim of the Crown in the right of the Province of Alberta cannot be recognized. The Income Tax Act is within the legislative competence of Canada. The Public Service Vehicles Act is within the competence of the Province of Alberta. In Re Silver Bros. Ltd., A.-G. Que. v. A .-G. Can., (1932] 2 D.L.R. 673, [1932) A.C. 514, (1932) 1 W.W.R. 764, 53 Que. K.B. 418, 13 C.B.R. 223, by s. 17 [repealed by 1925 (Can.), c. 25, s. 9) of the Special War Revenue Act Amendment Act, 1922 (Can.), c. 47, liability to the Crown for excise taxes was to rank for payment in priority to all other claims except administration expenses. Article 1357 of the Revised Statutes of Quebec 1909, provided that all sums due the Crown in respect of provincial taxes constituted a privileged debt ranking after law costs. By the Interpretation Act, R.S.C. 1906, c. 1, s. 16, it was provided that : "16. No provision or enactment in any Act shall affect, in any manner whatsoever, the rights of His Majesty, his heirs or successors, unless it is expressly stated therein that His Majesty shall be bound thereby." Silver Bros. Ltd. became bankrupt. Its assets were not sufficient to discharge both a sum due for taxes under a Dominion statute and one due for provincial taxes. The Judicial Committee held that it would have been competent to the Parliament of Canada under the B.N.A. Act of 1867, under s. 91(21) Bankruptcy or head (3) Taxation, to enact the 1915 statute so as to prejudice the rights of the Province, but having regard to s. 16 of the Interpretation Act, the 1915 Act must be read as though it had provided the priority enacted should not so operate as to diminish any right of the Crown in any Province. Viscount Dunedin in delivering the judgment of the Judicial Committee, pointed out that the clause of the Interpretation Act is written into every statute and he said (p. 680 D.L.R.):

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"The effect of s. 16, is so to speak, to add to the words of s. 17, 'but this priority shall not operate against any right in the Crown in a Province, where such right would be diminished by the priority being asserted against it.' " His Lordship pointed out that whether the strict result of this view should be to give to the Province an overriding priority did not need to be discussed as counsel for the Province did not ask for such relief, it being content that the two debts should run pari passu. In the Silver case, Viscount Dunedin (p. 677 D.L.R.) said: "Now, here so far as taxation itself is concerned, the field is clear. The two taxations, Dominion and provincial, can stand side by side without interfering with each other, but as soon as you come to the concomitant privileges of absolute priority they cannot stand side by side and must clash; consequently the Dominion must prevail." Reference may be made to Industrial Development Bank v. Valley Dairy Ltd., [1953] 1 D.L.R. 788, [1953] O.R. 70, [1953] C.T.C. 132, which came before Judson, J., on application by a Sheriff for directions as to distribution of monies in his hands. The Minister of National Revenue claimed for withholding taxes under s. 112 of the Income Tax Act, 1948 (Can.), c. 52. Subsection (6) of s. 112 imposed a personal liability on an employer who failed to remit and a first charge on his assets which ranked for payment "in priority to all other claims including claims of His Majesty in right of a province or in any other right, of whatsoever kind". The charge of the Province of Ontario under the Corporations Tax Act, R.S.O. 1950, c. 72, made the tax "a fust lien and charge upon the property in Ontario of the company". Judson, J., pointed out that by reason of s. 112(6) the charge of the Crown in right of Canada had priority over claims of the Crown in right of Ontario, thus abrogating the principle laid down in the Silver Bros. Ltd. case. The legislation under which the Province obtained its judgment for the fines in the present case does not purport to create a priority in favour of the Province. Section 118 of the Income Tax Act, R.S.C. 1952, c. 148, reads : " 118. All taxes, interest, penalties, costs and other amounts payable under this Act are debts due to Her Majesty and recoverable as such in the Exchequer Court of Canada or any other court of competent jurisdiction or in any other manner provided by this Act." It will be seen that this section does not purport to create a priority for the Crown in right of the Dominion. There being no claim of priority by the Crown in either right - Province or Dominion - the monies in the hands of the Sheriff, following the Silver case, supra, must be shared between them. It was argued that as the Dominion had a paramount right in the legislative field when its legislation under any of the headings of s. 91 of the B.N .A . Act conflicts with provincial legislation, then claims arising from such Dominion legislation, reduced to judgment and execution by executive action, should have priority over similarly created rights arising from provincial legislation. No relevant authority was cited to support such a claim and the Silver case would seem to be a complete answer. It is unnecessary to decide what would be the result where prerogative rights not arising from statutes, conflict. I would dismiss the appeal.

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MCDERMID, J. A.: It is clear that in respect of debts owing to it the Crown has two prerogatives. Referring to the case of Re Henley & Co. (1878), 9 Ch. D. 469, Chitty, J., in Re Oriental Bank Corp., Ex p. The Crown ( 1884 ), 28 Ch. D. 643 at p. 648 stated: "In that case there were two prerogatives brought into question - the one was the prerogative of the Crown, when assets had to be administered, to priority over the subject. ... The other was the prerogative which the Crown, not being bound by the statute, had, notwithstanding the statute, to issue process." See also New South Wales Taxation Com'rs v. Palmer, [1907] A.C. 179; Re F. E. West & Co. (1921), 62 D.L.R. 207 at pp. 213-4, 50 O.L.R. 631 at p. 638 [affd 68 D.L.R. 772, 50 O.L.R. at p. 644]. No argument was addressed to us as to whether Canada or Alberta was entitled to any priority, one over the other, owing to the respective dates that judgments were obtained or writs of fieri facias placed in the hands of the Sheriff. In this appeal we are concerned only with the first, above-mentioned, prerogative, i.e., the priority of the Crown in the distribution of moneys. At common law, debts owing to the Crown in respect of Imperial rights and the Crown in respect of a colony had no preference, one over the other. See The Queen v. Bank of Nova Scotia (1885), 11 S.C.R. 1; Re Oriental Bank Corp., Exp. The Crown, supra. It has been decided by the High Court of Australia that a debt owing to the Crown in the right of the Commonwealth and a debt owing to the Crown in the right of the State of New South Wales are co-existing rights standing on an equality in the absence of valid legislation disturbing that position. In Federal Commissioner of Taxation et al v. Official Liquidator of E. 0. Farley Ltd. (1940), 63 C.L.R. 278, Latham, C. J., at p. 286, stated: "The doctrine of the indivisibility of the Crown meets many difficulties as constitutional development takes place in the Dominions of the Crown. The creation of federal constitutions in Canada and Australia and specific legislation in South Africa and Eire do not readily accord with the theory of indivisibility which, simple and natural in the case of a unitary realm, is now being applied to more complex systems of government. It is, however, still the case that no distinction in respect of the prerogative is drawn in relation to Crown debts owing to the government of the United Kingdom, the government of a dominion, or the government of a colony. All such debts are treated upon the same footing, so that in the case of a deficiency of assets to meet the claims all Crown debts are paid pari passu." In Reference re Farmers' Creditors Arrangement Act, [1936] 3 D.L.R. 610 at p. 617, [1936] S.C.R. 384, 17 C.B.R. 359 [affd [1937] 1 D.L.R. 695, [1937] A.C. 391, [1937] 1 W.W.R. 320, 18 C.B.R. 217] the late Chief Justice Duff stated: " ... the judgment of the Judicial Committee in Re Silver Bros. Ltd., A.-G. Que. v. A.-G. Can., [1932] 2 D.L.R. 673, at pp. 675-7 seems very clearly to lay down and decide that it is competent to the Dominion, in legislating in relation to bankruptcy or insolvency, to deal with the privilege attaching to debts owing to the Crown in the right of a Province and to take away any priority accorded to such debts by the law of a Province. The legislative authority in bankruptcy matters to deal with debts owing to a Province is no less than the authority to deal with debts owing to the Dominion."

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Canada has not exercised its legislative authority. In the instant case, there are no statutory provisions purporting to give either Canada or the Province priority. Section 16 of the Interpretation Act, R.S.C. 1952, c. 158, does not apply as the Acts in question which create the debt to Canada do not affect in any manner whatsoever the right of Her Majesty in the right of the Province. Therefore, in my opinion, resort must be had to the prerogative in order to establish any priority by Canada, for even as against the subject, Canada would have no priority for the debt in question without resorting to the prerogative of the Crown. Unless the prerogative of the Crown in the right of Canada is paramount to the prerogative of the Crown in the right of the Province of Alberta, Canada's claim to priority must fail. As such paramountcy does not arise at common law, if Canada's prerogative has such a paramountcy, it must arise by virtue of the B.N.A . Act. In my opinion, the judgment of the Judicial Committee in Re Silver Bros. Ltd., supra, is not applicable to the case at bar. In that case, their Lordships were. concerned with priorities given by statute. As the right to priorities had been dealt with by statute, the prerogative rights as to priorities were in abeyance : Att'y-Gen'l v. De Keyser's Royal Hotel Ltd., [1920] A .C. 508. The Judicial Committee in the Silver Bros. case was not dealing with a case of claims under the prerogative rights of Canada and a Province but with statutory priorities. In giving the judgment of the Judicial Committee, Viscount Dunedin stated, [1932] 2 D.L.R. at p. 677 : "The two taxations, Dominion and provincial, can stand side by side without interfering with each other, but as soon as you come to the concomitant privileges of absolute priority they cannot stand side by side and must clash; consequently the Dominion must prevail." Read in context, I am of the opinion that Viscount Dunedin, in stating that the Dominion must prevail, was referring to the case where a priority was given by statute to the Dominion tax. He had no reference, in saying the Dominion had priority, to the conflicting claims of Canada and a Province under their respective prerogatives for the payment of a debt. Counsel for the Attorney-General of Canada argued that: " . .. an exercise of executive authority by the Crown in the right of Canada must be treated in the same fashion as an exercise of legislative authority by the Crown in the right of Canada and must be held to override an exercise or attempted exercise of executive authority by the Crown in the right of a province." No doubt, in a case where it would be impossible for both the prerogative of Canada and that of a Province to be exercised, for instance where both claimed possession of an object, then I think the right of Canada must prevail. However, in case of the distribution of moneys between debts I do not think there is such a conflict that Canada's claim must prevail. With a great deal of doubt I have come to the conclusion that the common law rule that the Crown debts are paid pari passu is not abrogated by the B.N .A. Act. It appears to me it was the opinion of Duff, J. (as he then was), in his dissenting judgment in the Silver Bros. case [1930] 1 D.L.R. at p. 144, that where Crown debts are of equal rank they should be satisfied rateably where the matter is not affected by statute. I have been unable to find any Canadian authority touching this matter. I have, however, found it commented on in the following places, but without any

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unanimity of opinion: 10 Can. Bar Rev. 658 (1932); Canadian Constitutional Law, by Bora Laskin, p. 528 (1960); Legislative Power in Canada, by Lefroy, p. 86 (1897-98). Accordingly, I would dismiss the appeal of the Attorney-General of Canada. RE STERNSCHEIN STERNSCHEIN v. THE QUEEN Manitoba's Queen's Bench. 1965. 50 D.L.R. (2d) 762. APPLICATION by the administratrix of an estate for advice and direction respecting payment of the assets of the estate to the creditors and for an order discharging her from her bond. SMITH, J.: This is an application to the Court for advice and direction under s. 70 of the Trustee Act, R.S.M. 1954, c. 273, and for an order directing the applicant to pay out the assets of the estate to the creditors, and for an order thereupon discharging the applicant from her bond to this Court. There is a deficiency of assets in the above estate with which to pay all debts owing by the estate. Included among the unsecured debts are two that are claimed on behalf of the respondent: one being owed to the Department of National Revenue of Canada; and one to the Unemployment Insurance Commission of Canada. Section 58 (1) of the Trustee Act, provides as follows: 5 8 ( 1 ) On the administration of the estate of a deceased person, in the case of a deficiency of assets, debts due to the Crown and to the personal representative of the deceased person, and debts to others, including therein debts by judgment or order, and other debts of record, debts by specialty, simple contract debts, and such claims for damages as are payable in like order of administration as simple contract debts, shall be paid pari passu and without any preference or priority of debts of one rank or nature over those of another; but nothing herein prejudices any lien existing during the lifetime of the debtor on any of his property. Section 23(18) of the Interpretation Act, 1957 (Man.), c. 33, provides: "23(18) 'Her Majesty', 'His Majesty', 'the Queen', 'the King' or 'the Crown' means the Sovereign of the United Kingdom, Canada and Her other realms and territories, and Head of the Commonwealth." At common law the Crown had a prerogative right to priority of payment over other creditors of equal degree, subject to any limitations which had become established in law or created by statute. When Manitoba was created a Province of Canada in 1870, the Crown's right to priority in the Province, including the Crown in the right of Canada, continued to be subject to any limitations then existing. However, I find nothing to indicate that the right of the Crown in right of Canada to priority of payment over other unsecured creditors of the estate of a deceased person, had been taken away or limited at that date. Nor do I find any enactment of the Parliament of Canada since that date which takes away or limits this prerogative right. That the Legislature of Manitoba has no power to limit or restrict the prerogative rights of the Crown in right of Canada is well established.

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In Gauthier v. The King (1918), 40 D.L.R. 353, 56 S.C.R. 176, the Supreme Court was concerned with the effect of ss. 3 and 5 of the Arbitration Act, R.S.O. 1914, c. 65. Section 3 provided : "This Act shall apply to an arbitration to which His Majesty is a party"; and s. 5 made a submission to arbitration irrevocable except by leave of the Court. At common law any party to an arbitration submission could withdraw the authority of the arbitrator at any time prior to the award. It was held that the above provisions of the Arbitration Act of Ontario did not affect the Crown in right of the Dominion. Fitzpatrick, C. J., said, at p. 356: "And, in any event, the provinces have, in my opinion, neither executive, legislative nor judicial power to bind the Dominion Government." Anglin, J., held thats. 5 of the Ontario Act was never intended to apply to the Crown in right of the Dominion. Ifs. 3 had that effect he said, at p. 365: " . . . it would, in my opinion, be pro tanto ultra vires. Provincial legislation cannot proprio vigore take away or abridge any privilege of the Crown in right of the Dominion." In The King v. Lithwick (1921), 20 Ex. C.R. 293, the Crown's claim was for priority in respect of income tax. It was held that any provision in a Provincial Act relating to assignments for the benefit of creditors cannot, "ex proprio vigore, take away any privilege or priority of the Crown as a creditor in right of the Dominion". [headnote) In The King v. Powers, [1923) Ex. C.R. 131, there was Federal legislation in the Soldier Settlement Act protecting the Crown's rights in respect of livestock sold to a settler but not fully paid for. This legislation was held to be intra vires of the Dominion Crown. Audette, J., added at p. 134: "Indeed, the Provincial Legislature cannot proprio vigore take away or abridge any privilege, any right of the Dominion Crown emanating from the royal prerogative or resting upon any competent legislation of the Parliament of Canada." In Re Adams Shoe Co., Ex p. Town of Penetanguishene, [1923) 4 D.L.R. 927, 54 O.L.R. 625, 4 C.B.R. 375, it was held that the claims of the Dominion Government for sales tax and income and business tax profits were payable in priority to municipal taxes which did not constitute a charge or encumbrance on the goods and chattels of the debtor. Fisher, J., stated the principle at p. 931 : "The law has been well settled that no provincial legislation can either bind or affect the prerogative right of the Crown in the right of the Dominion or take away its common law rights. Therefore, provincial legislation passed, which has the effect of attempting to make taxes a claim prior to the claim of the Crown in the right of the Dominion would be ultra vires." In The King v. Star Kosher Sausage Mfg. Co., [1940) 4 D.L.R. 365, 48 Man. R. 147, [1940) 3 W.W.R. 127, the Court was dealing with the claims of execution creditors against the Star Company. Section 25 of the Executions Act, then R.S.M. 1913, c. 66, as amended by C.A.M. 1924, c. 66, s. 2 (R.S.M. 1954, c. 7 6, s. 25) , provided for the distribution of moneys in the hands of the Sheriff under an execution: " . . . in manner following, that is to say, by payment of the costs of all the execution creditors as preferential claims pro rata and by distributing any balance amongst the execution creditors pro rata in proportion to the several respective claims of those creditors, not including costs."

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Adamson, J., held that since the above section did not expressly state that His Majesty was bound thereby, as required by the Interpretation Act, R.S.M. 1913, c. 105, s. 11 (1957 (Man.), c. 33, ss. 15 and 9 respectively), the right of the Crown to prior payment was not affected. He added at p. 367: "Moreover the prerogative of the Crown in the right of the Dominion cannot be affected by provincial legislation : R. v. Powers, [1923] Ex. C.R. 131; Gauthier v. The King (1918), 40 D.L.R. 353 at p. 365 , 56 S.C.R . 176; Re Adams Shoe Co., Exp. Penetanguishene, [1923] 4 D.L.R. 927, 54 O.L.R. 65." In Ottawa Public School Board v. Ottawa, [1953] 1 D.L.R. 692, [1953] O.R. 122, the prerogative right in question was that of exemption from municipal taxation levied under provincial legislative authority. In the course of delivering the judgment of the Ontario Court of Appeal, Roach, J. A., said, at p. 695: "The Province has no jurisdiction to deal with the prerogative of the Crown in the right of the Dominion." It is ordered that the applicant may pay out the assets of the estate of Rudolph Sternschein to the creditors of the said estate, with priority of payment to the respondent as indicated above, and that on such payment being fully completed the applicant shall be discharged from her bond given to this Court on or about May 27, 1963, in the sum of $3,000. The applicant is entitled to her costs of this motion in priority to other creditors. Taking into account the fact that a change of administrator and of solicitors added to the time and research necessary to prepare for and present the motion, I fix the applicant's costs at $150 and disbursements. EMERSON v. SIMPSON et al. British Columbia Supreme Court in Chambers. 1962. 32 D.L.R. (2d) 603. MOTION in a foreclosure action, by the Crown as a judgment creditor, for an order to sell the property subject to the rights of the plaintiff. COLLINS, J. : This is an action by the plaintiff as registered assignee of a registered first mortgage of lands and premises situate in the Municipality of Delta, New Westminster District in this Province in which he seeks foreclosure. An order nisi was made several months ago and the time fixed therein for redemption has not yet expired. The defendants Simpson are the registered owners of the lands and premises in question. Certificate of Encumbrance 185543 dated December 13, 1961 , discloses inter alia. (a) On September 26th, 1960, the plaintiff together with Rodney Phillip Justice and James Davidson as judgment creditors, filed in the Land Registry Office a judgment against one Ernest Simpson for $4,590.00: Counsel agree that he is the same person as the defendant Ernest Alfred Simpson in this action. (b) On December 2, 1960, there was recorded as charge number 294521C a Writ of Extent on behalf of Her Majesty The Queen in Right of Canada. It is because of the Writ of Extent that the Attorney General of Canada Representing Her Majesty The Queen In Right of Canada has been joined as a party defendant. The Writ of Extent was issued out of the Exchequer Court of Canada on November 22, 1960, directed to the Sheriff of the County of Westminster, British

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Columbia. It was received by said Sheriff on the 25th day of the same month and a copy thereof was delivered by him to the Registrar of Land Titles, New Westminster District on December 2nd of the same year. The Writ of Extent discloses that it is a matter of record in the Exchequer Court of Canada that Ernest Alfred Simpson of North Surrey in the Province of British Columbia, building contractor as of November 22, 1960 was indebted to Her Majesty The Queen in Right of Canada in the sum of $6,636.31, and it directs the Sheriff to take the steps therein set forth to satisfy the said debt. The Writ of Extent is a process of execution in the Sheriff's hands . . .. Counsel for the Crown argued that the Crown under the Royal Prerogative was entitled to priority over the prior registered judgment in which the plaintiff was one of the judgment creditors. This makes it advisable to consider something of the history and potency of the Royal Prerogative. The opinions furnished by the majority of the Judges to whom an issue was directed by the Court of Exchequer in Giles v. Grover et al. (1832), 1 Cl. & Fin. 72, 6 E.R. 843, affinned by the House of Lords are very helpful. On the issue directed to them their Lordships decided as stated in the headnote that "Where goods have been seized under a fi,. fa., but remain unsold in the hands of the sheriff, he shall sell them under a writ of extent in chief or in aid, tested after the seizure under the fi,. fa., and shall satisfy the Crown's debt without regard to the previous execution." In Giles v. Grover, supra, Lord Tenterden, C.J.K.B., who furnished one of the majority opinions with which the House of Lords agreed reviewed in summary form some of the history of the Royal Prerogative with respect to the recovery of debts owing to the Sovereign. Several quotations from his opinion will be helpful. From p. 220 : "By the Common Law, the King had a right of preventing any subject from suing any of his debtors; it was the practice, and it was a right which was sometimes exercised, of granting to those who were his debtors a protection, which prevented any of his subjects from bringing any suit against them. Thus the law stood until an Act of Parliament passed, which I shall draw your Lordships' attention to, namely, the statute of the 25 Ed. 3, c. 19. That statute shows what the law was before it was passed, and introduces an alteration in favour of the suitor." From p. 221 : "This statute therefore so altered the law as that it enables the subject to bring an action against his debtor, although he be a debtor to the Crown, which before he could not do; but nevertheless it prevents him from taking out execution unless he first satisfies the debt of the Crown. This was the state of the law before the passing of the statute to which I have referred, namely, the statute of 33 Hen. 8 [c. 39]. The subject might commence an action, and might have proceeded even to judgment, but could have no execution without satisfying the King's debt. All, therefore, that the statute of Hen. 8 does, is to allow a party to have execution without satisfying that debt; it authorizes him to take out his writ, but does not apply to a case in which there are conflicting executions, which is the case in question."

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From pp. 221-2 in referring further to the statute of 33 Hen. 8: "I am therefore of opinion, that the true effect of this statute is to allow the subject to obtain judgment, and even to sue out execution, without first malcing satisfaction to the King; but, nevertheless, to leave the law in all other respects as it stood before; namely, if the King's execution comes while the goods remain the property of the debtor - and, as I have already stated, my opinion is, that they do remain the property of the debtor, although they be talcen possession of by the sheriff - the King's execution shall prevail." Her Majesty the Queen is as truly the Queen of Canada as she is Queen of the United Kingdom and the Royal Prerogative with respect to the recovery of debts due the Crown in the Right of Canada, has not been taken away by anything enacted in the B.N.A. Act. If any authority be needed for this statement it will be found in the reasons for judgment of the Supreme Court of Canada in The Queen v. Bank of Nova Scotia ( 1885), 11 S.C.R. 1. It appears quite clear that a Provincial Legislature has no power to affect the Prerogative of the Crown in the Right of Canada. It therefore follows that nothing in the Land Registry Act or the Execution Act, or in the Creditors' Relief Act, R.S.B.C. 1960, c. 85 can have any limiting effect on that Prerogative. In my view the filing of the Writ of Extent in the Land Registry Office was done for the purpose of warning persons who might wish to enter into some transaction relating to land registered in the name of the defendant Ernest Alfred Simpson that the Crown in the Right of Canada had an unsatisfied debt and had placed in the hands of the Sheriff a process of execution with respect thereto that affected the title to his lands. The filing was not for the purpose of seeking the protection of any provisions of the provincial statute and did not constitute any abandonment of the Crown's Prerogative. On the contrary it is my view that such filing served as some notice that the Crown in the Right of Canada intended to exercise the Royal Prerogative. The order sought by the defendant Attorney-General of Canada, representing Her Majesty The Queen in Right of Canada appears to be a reasonable one in view of the evidence that the land and premises in question have a value substantially in excess of the amount required to pay the plaintiff the amount certified by the Registrar. The order applied for will be made. The plaintiff will be entitled to add his costs of this motion to the amount of costs to be paid to him out of the proceeds of sale and the Attorney-General in his representative capacity will be entitled to recover his costs of this action, including the costs of this motion, out of the surplus proceeds of sale above referred to if they be sufficient for that purpose. There will be liberty to apply. It was held in Alberta that, by virtue of s. 77(5) of The Workmen's Compensation Act, R.S.A. 1955, c. 370, the workmen's compensation board has a charge on an employer's property for unpaid assessments which has priority over all chattel mortgages granted by the employer whether executed previously or subsequently: Re Seizures Act. Butterwick v. Imperial Investment Corporation Ltd. et al. (1963), 43 W.W.R. 367. Similarly in British Columbia the claim of the workmen's compensation board under s. 48 of The Workmen's Compensation Act, R.S.B.C. 1960, c. 413, was held to have priority over the claim of a bank under s. 89(1) of the Bank Act, 195354 (Can.), c. 48: Re Supreme Court Rules. Re Canada Creosoting Company Limited's Application (1962), 41 W.W.R. 350. In the latter case it was also held that the claim

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of woodmen under s. 3(1) of the Woodmen's Lien for Wages Act, R.S.B.C. 1960, c. 411, has priority over the claims of both workmen's compensation board and bank. G. Discovery in Aid of Execution RULES OF PRACTICE AND PROCEDURE Supreme Court of Ontario, R.R.O. 1960, Reg. 396. 587 ( 1) A judgment creditor may, without an order, examine the judgment debtor upon oath before the proper officer of the County in which he resides, touching his estate and effects, and as to the property and means he had when the debt or liability which was the subject of the cause or matter in which judgment has been obtained against him was incurred, or, in the case of a judgment for costs only, at the time of the commencement of the cause or matter, and as to the property and means he still has of discharging the judgment, and as to the disposal he has made of any property since contracting such debt or incurring such liability or, in case of a judgment for costs only, since the commencement of the cause or matter, and as to any and what debts are owing to him. (2) No further examination shall be had without an order until the expiration of one year from the close of the preceding examination. BEAU MONDE LADIES' TAILORING CO. v. GARRETT Supreme Court of Ontario. [1925] 3 D.L.R. 957. RIDDELL, J.: Judgment was obtained in December, 1922, against the defendants by the plaintiffs for $1,215.75; a fi. fa. was returned nulla bona by the sheriff of Toronto. The defendant was, in February, 1923, examined as a judgment debtor, and on this examination it was sworn by the defendant that he, as agent for his wife, purchased for her and had put in her name certain property in Toronto valued at $4,000 - a first mortgage was placed thereon of $6,000 and a second mortgage given to the vendor of $2,000 in addition to $2,000 paid in money - the defendant admits that he has paid over $1,000 for interest, principal, and taxes since the purchase, his wife having no means to pay the same - he says, however, that the payments were made on her behalf. The plaintiffs believe and all the circumstances indicate that they have good grounds for suspecting that the purchase was really the debtor's and not the wife's; and that the property is in reality that of the debtor. Of course the debtor repudiates all interest in it. Moreover, the defendant stated that he paid his wife's mother, Mrs. Larson, from time to time, large sums of money which he says he had borrowed of her. The plaintiffs, with a not undue or unnatural curiosity, desire to examine the wife and mother-in-law as to the estate and effects of the debtor, his property and means at the time when the debt was incurred and now, and particularly as to the real estate and monies expended thereon and as to the payments to the mother-in-law. They thereupon served a notice of motion, under Rr. 583 [now 590] and 584 [now 591], for an order for the examination of the 2 women; and took out an appointment and issued a subpoena duces tecum for the examination of the wife for use on the pending motion. The defendant's wife made an application to set aside the appointment and subpoena the defendant joined in the application and

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the Assistant Master granted the motion, with costs, fixed at $18.50, payable forthwith - the order being specifically made "upon the application of the defendant and Edna Garrett." The plaintiffs now appeal, serving both the defendant and his wife. No written reasons were given for the order appealed from, and neither counsel could inform me of the grounds of the Master's decision; the case, however, was fully argued in the light of existing authorities, and I am now able to dispose of the appeal. The difficulty in the way of compelling an unwilling debtor - and most debtors are unwilling - to pay a judgment against him was notorious and a blemish on the Common Law of England - where personal incarceration failed there was nothing but goods and personal chattels: and the elegit of the early Statute of Westminster II., 1285 (Imp.), 13 Edw. I. c. 18, did not help in most cases, the medietas terre sue being generally wanting. Even before the abolition of personal imprisonment for debt under a ca. sa. means were sought to circumvent the debtor who, having means, was evading payment. The Lord's Act, 1758 (Imp.), 32 Geo. II. c. 28, we should now think too drastic - that ( s. 17) permitted the creditors of an execution debtor charged in execution for a debt under £100 to compel the debtor, on pain of transportation for 7 years, to make discovery and surrender of his effects for their benefit - this Act was enlarged by 1786 (Imp.), 26 Geo. Ill. c. 44; 1793 (Imp.), 33 Geo. Ill. c. 5; 1799 (Imp.), 39 Geo. III. c. 50. This legislation was not adopted in our Province, but is the forerunner, prototype, and, in a limited sense the progenitor, of our system of examination of a debtor after judgment. The value of such examination, of course, largely depends on the lengthened arm of the fi. fa. and the provision for attachment of debts. The provision for the examination of a judgment debtor is now to be found in R. 580 [now 587]: the proceeding has been found very valuable, and it should not be hampered by undue technicality. It is an examination of the strictest character: Beattie v. Barton (1882), 2 C.L.T. 104; Re Central Bk. of Canada, Watson's Case (1893), 15 P.R. (Ont.) 427; 16 P.R. (Ont.) 55 - "any question ... fairly pertinent to the subject-matter of the inquiry ... ought to be answered ... " per Jessel, M. R., Republic Costa Rica v. Strausberg (1880), 16 Ch.D. 8, at p. 12; McLean v. Bruce (1890), 13 P.R. (Ont.) 504. The debtor must post himself by reference to books and all other species of records, etc.: Russell v. Macdonald ( 1888), 12 P.R. (Ont.) 458. Our law goes farther and provides for the examination of other persons who are able, or who probably are able, to throw light on the debtor's means - the clerk or employee, actual or past, the transferee of property (R. 582) [now 589], the persons apparently in possession of any of the debtor's property (R. 583) [now 590], may be examined - and R. 584 [now 591] is still more inclusive: "Where a difficulty arises in or about the execution or enforcement of a judgment, the Court may make such order for the attendance and examination of any party or person as may seem just." In the present case a difficulty has arisen "in and about the execution or enforcement of a judgment;" and, under this Rule, I should without question make the order asked for and have the wife and mother-in-law examined. No honest debtor and no honest relative should object to such an examination. In England, 0. 42 provides for examinations such as are in question here. Order 42, r. 32, authorizes an order to examine a judgment debtor in such cases as those in which we, by Rr. 580 and 581, can now examine without an order - then 0 . 42, r. 33, is the same as our R. 584, except that the English rule

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refers only to judgments or orders other than for the recovery or payment of money - and this distinction it is well to bear in mind. In Sturges v. Countess of Warwick ( 1913), 30 Times L.R. 112, the object and import of 0. 42, r. 33, was considered. The language of Vaughan Williams, L.J., at p. 114, is not to be taken in too narrow a sense, but simply in connection with the facts of the case he was discussing. "He took the view that rule 33" (substantially our R. 584) "had reference to a matter which was not new and that the object of that rule was to make orders which had been made under rule 32" (substantially our Rr. 580, 581) "more efficacious" - I can find nothing in all the legislation or rules indicating that before an order can be made under R. 584 an examination must have been made under R. 580, or R. 581, which required to be made more efficacious. That, however, is not of importance here, as an examination under R. 580 has been in fact made - and the occasion has undoubtedly occurred which R. 584 was intended to cover, and some of the subsequent language of the Lord Justice is fully applicable: -"The information given here was such that a difficulty had arisen in and about the execution and enforcement of the" judgment. . . . "With the information which had been obtained at the first examination, it would have been wrong as well as imprudent for the judgment creditor to attempt to seize or realize this property . .. . It was impossible to know whether the circumstances were such as to justify the judgment creditor by means of execution in availing himself of the property .... " If the parties agree I shall turn this motion into a motion for an order for the examination of the wife and mother-in-law under R. 584, the examination to be unlimited so far as the challenged transactions and the property, past or present, of the debtor are concerned - in which case the order of the Assistant Master will be set aside and the examination will proceed under this order; costs so far to be added by the plaintiffs to their debt. But, if the parties do not agree, other considerations arise. Have the plaintiffs the right to examine the wife as a witness on a pending motion? Rule 228 is perfectly general in its language - although in the former King's Bench Division, the Court, of which I was a member, held that the rule did not apply to a motion against a verdict, I do not find any limitation in respect of such motions as one under R. 584. The case of D. v. W. ( 1912), 3 D.L.R. 293, was cited in support of the Assistant Master's order - but that is nihil ad rem. There the witness had been sworn but declined to answer certain questions; and my brother Middleton held that she was entitled so to decline. That is no authority for the proposition that there was no right to examine at all. I am making no ruling as to what questions must and what question need not be answered on an examination to be held. The proper course to pursue was recently laid down by myself in Trusts & Guar. Co. v. Dodds (1924), 27 O.W.N. 294 - the witness "should attend, be sworn, and raise his objections to the questions that are put - if they are objectionable. . . . The plaintiffs have every opportunity to frame their questions so as to obtain such information as they desire, the solicitor and client have every opportunity to raise objections." Trinity College v. Levinter, [1924) 2 D.L.R. 584, 54 O.L.R. 290, may also be looked at. The appeal should be allowed with costs of the motion before the Assistant Master and of this motion, payable by Edna Garrett and the defendant forthwith after taxation thereof.

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SADDY v. PROSSER Supreme Court of Ontario. [1955] O.W.N. 241. MARRIOTT, SENIOR MASTER: This is an application by Mrs. Lester A. Prosser for an order setting aside the ex parte order made by me on the 23rd November 1954 under Rule 584, granting the plaintiff liberty to examine Mrs. Prosser in aid of execution of the judgment obtained by the plaintiff herein against her husband, the defendant. Rules 584 [now 591] provides: "Where a difficulty arises in or about the execution or enforcement of a judgment, the Court may make such order for the attendance and examination of any party or person as may seem just." It is clear from the authorities that an order granting leave to the judgment creditor to examine a person who is not a party to the action, under Rule 584, should not be made except upon notice to the person to be examined: Blakely v. Blaase (1888), 12 P.R. 565; Re Sovereign Bank of Canada; Wallis's Case (1916), 11 O.W.N. 160. Upon consideration I think this is consonant with the justice of the matter. A stranger to the action should not be obliged to attend before an examiner to be examined without first having an opportunity to show why he should not be examined: see Blakely v. Blaase at p. 567. Nor should he, on an application to set aside such an order, be obliged to give reasons why the order should be set aside on the merits. It is for the plaintiff to justify the order sought, and the onus should be on him. In the case relied upon by counsel for the plaintiff, Beau Monde Ladies' Tailoring Co. v. Garrett, 57 O.L.R. 256, [1925] 3 D.L.R. 957, it appears that notice of motion for such an order was served: seep. 257. In the Sovereign bank case Sutherland, J. set aside a similar ex parte order with costs. An order should therefore go setting aside the ex parte order now in question, but whether in the circumstances the applicant is entitled to costs should be left to be dealt with on the settlement of the order. Mr. Walsh raised the question of the jurisdiction of the Master to make an order for the examination in aid of an execution of a stranger to the action. I do not think there is much doubt about that. It is to be noted that in each of the actions referred to above the order was made by a Master or referee, and no question of his jurisdiction was raised on appeal. In Sangster v. Pugsley ( 1964), 49 D.L.R. (2d) 286 the British Columbia Court of Appeal held that, notwithstanding a long-established rule of practice to the contrary, the issuance of fi. fa. and a return of nulla bona are not conditions precedent to the examination of a judgment debtor, since the long-standing practice was not based on any statutory requirement.

H. Exemptions THE EXECUTION ACT R.S.O. 1960, C. 126. 2. The following chattels shall be exempt from seizure under any writ issued out of any court: 1. The household furniture, utensils and equipment that are contained in

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2. 3.

4. 5.

6.

7.

and form any part of the permanent home of the debtor, provided that this clause shall not apply to furniture, utensils or equipment purchased for defeating the claims of creditors, and provided further that in the case of a writ issued upon a judgment given upon a claim for clothing, food, fuel or shelter supplied for the debtor or his family the exemption under this clause shall be limited to household furniture, utensils and equipment not exceeding in value of $1,000; The necessary and ordinary wearing apparel of the debtor and his family; In the case of a debtor other than a person engaged in the tillage of the soil or farming, such food as the debtor actually has in his possession for the purposes of consumption by himself and his family, and in the case of a person engaged in the tillage of the soil or farming, such food as is necessary for consumption by himself and his family until the next harvest whether such food is in consumable state or requires to be milled, slaughtered or otherwise processed; Such fuel as is within the debtor's home; In the case of a debtor other than a person engaged in the tillage of the soil or farming, live stock, fowl, bees, books, tools and implements and other chattels necessary to and actually in use by the debtor in his business, profession or calling, to the extent of $1,000; In the case of a person engaged solely in the tillage of the soil or farming, live stock, fowl, bees, books, tools and implements and other chattels necessary to and actually in use by the debtor in his business, profession or calling, to the extent of $3,000; In the case of a person engaged solely in farming or the tillage of the soil, sufficient seed to seed all his land under cultivation, not exceeding 100 acres, as selected by the debtor and 14 bushels of potatoes, and where seizure is made between the 1st day of October and the 30th day of April, such food and bedding as is necessary to feed and bed the live stock and fowl which are exempt under this section until the 30th day of April next following.

3. The debtor may, in lieu of the chattels referred to in paragraph 6 of section 2, elect to receive the proceeds of the sale thereof up to $3,000, in which case the officer executing the writ shall pay the net proceeds of the sale if they do not exceed $3,000 or, if they exceed $3,000, shall pay that sum to the debtor in satisfaction of the debtor's right to exemption under that paragraph. 4. The sum to which a debtor is entitled under paragraph 5 or 6 of section 2 or under section 3 is exempt from attachment or seizure at the instance of a creditor. 5. Chattels exempt from seizure are, after the death of the debtor, exempt from the claims of his creditors, and his widow is entitled to retain them for the benefit of herself and his family, or, if there is no widow, the family of the debtor is entitled to them. 6. The debtor, his widow or family, or, in the case of infants, their guardian, may select out of any larger number of chattels exempt from seizure. 7. Nothing in this Act exempts any article including fuel, except beds, bedding and bedsteads (including cradles) in ordinary use by the debtor and his family and the necessary and ordinary wearing apparel of the debtor and his family, from seizure to satisfy a debt contracted for such article.

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THE LANDLORD AND TENANT ACT R.S.O. 1960, C. 206.

S. 55. ( 1) Goods or chattels lying or being in or upon any land leased for life or lives, or term of years, at will, or otherwise are not liable to be taken by virtue of any execution issued out of the Supreme Court or out of a county or district court on any pretence whatsoever, unless the party at whose suit the execution is sued out before the removal of such goods or chattels from the premises by virtue of such execution pays to the landlord or his bailiff all money due for rent of the premises at the time of the taking of such goods or chattels by virtue of such execution if the arrears of rent do not amount to more than one year's rent. (2) If such arrears exceed one year's rent the party at whose suit such execution is sued out, on paying the landlord or his bailiff one year's rent, may proceed to execute his judgment. ( 3) The sheriff or other officer shall levy and pay to the execution creditor as well the money so paid for rent as the execution money. INDIAN ACT 1952 R.S.C. s. 88 ( 1).

88. (1) Subject to this Act, the real and personal property of an Indian or a band situated on a reserve is not subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian.

RE LYONS Supreme Court of Nova Scotia. [ 1934] 1 D.L.R. 432. Dou LL, J.: This is a matter informally stated for my opinion by the City Solicitor of the City of Halifax and Mr. R. Mcinnes, K.C., on behalf of the judgment debtor under certain executions in the City Civil Court. The judgment debtor is a truckman and earns his living solely by the use of a single motor truck. It has been levied on by the City Marshall under the executions referred to. To these proceedings the same list of exemptions from execution is applicable as in the Supreme Court Rules and this is governed by 0. 40, r. 40 of the Supreme Court Rules. The question then is whether the truck is exempt. If the truck is absolutely the only chattel of the debtor under the description of "tools and implements ordinarily used in the debtor's occupation to the value of thirty dollars," I find that the question is covered by authority, Lavell v. Ritchings (1906), 75 L.J.K.B. 287, and that the article being indivisible is protected even if it is worth more than $30. Gonsky v. Durrell, [1918) 2 K.B. 71, cited by the City Solicitor, does not affect the principle, though it does show that the burden of showing that the officer did not leave the statutory exemption is upon the claimant, and possibly

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indicates that a little more formality about this proceeding would have been desirable. My greatest difficulty arises from the fact that the officer making the levy left on the premises a tarpaulin and a set of blocks of a greater value than $30, which would in certain circumstances be used with the truck, but which would be useless to the debtor without it. If these are within the exempted category, the statutory exemption has been satisfied and the truck may be levied on. In 25 Corp. Jur. 51, under the title Exemptions, it is laid down that in exemptions of this kind the word "necessary" for the debtor's trade or occupation usually appears, and where it does not appear it is understood and does not refer to tools merely convenient. If we apply this test we find that the truck is a necessary tool or implement or chattel, while the tarpaulin and blocks while under certain circumstances desirable are not within the definition. With some doubt therefore that the blocks and tarpaulin may be levied on, and deciding the matter on the basis that there is nothing else left on the premises to which this particular exemption can apply, I hold the truck exempt from seizure. RODI & WIENENBERGER AKTIENGESELLSCHAFT v. KAY Alberta District Court. 1959. 22 D.L.R. (2d.) 258. Issue as to whether certain property of execution debtor exempt from seizure under Exemptions Act (Alta.). BUCHANAN, C. J. D. C.: Under its writ of execution, issued out of the Exchequer Court of Canada, the applicant caused seizure to be made of one Remington typewriter and one Remington adding machine, the property of the respondents, who carry on business as wholesale jewellers in the City of Edmonton. Notice of objection, without grounds stated, having been filed by the respondent, as permitted bys. 27 of the Seizures Act, R.S.A. 1955, c. 307, the applicant, after duly serving notice on the respondent, applied in Chambers for an order for sale of the articles seized. Mr. Kay appeared personally but made no claim for exemption of the seized chattels under s. 2(i) of the Exemptions Act, R.S.A. 1955, c. 104. I shall refer herein to that Act as "the Act". Concerned as to the Court's function, when a debtor who has filed notice of objection without stated grounds, appears on the creditor's application for order for sale and makes no claim for exemptions or fails to appear, I suggest to Mr. Cipin, counsel for the applicant, that it might be argued from the phraseology of the exempting section of the Act that the exemption thereby granted is absolute, needs no specific claim by the execution debtor and must be enforced in spite of the debtor's silence; that it might be further argued that the goods seized fall within the class described in s. 2 (i) of the Act which reads thus: "2. The following real and personal property of an execution debtor is exempt from seizure under any writ of execution: . .. "(i) the necessary tools and necessary implements and equipment to the value of one thousand dollars used by the execution debtor in the practice of his trade or profession." Mr. Cipin has filed a most useful brief. He argues firstly, that to obtain the exemption granted by s. 2 (i) the execution debtor must claim his exemption this the respondent failed to do - and secondly, that in any event the typewriter

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and adding machine do not qualify as the necessary tools, implements, or equipment used by the execution debtor in the practice of his trade or profession, as required bys. 2(i). I agree with Mr. Cipin that there appear to be no reported decisions of Alberta Courts authoritatively interpreting s. 2 of the Act in respect of the nature of the exemption, whether absolute or enforceable only when claimed, and whether if absolute and not claimed, the burden then rests on the execution creditor to prove to the satisfaction of the Court that the seized goods do not in fact fall within a particular clause of s. 2, which sets out the chattel and land exemptions. In the Province of Saskatchewan the Courts since territorial days held that there is no duty on the debtor to claim his exemptions; that the Sheriff is bound to leave a debtor what is exempt by law. In respect to s. 2 of the Exemptions Ordinance of the Northwest Territories [C.O.N.W.T. 1898, c. 27] reading thus: "2. The following real and personal property of an execution debtor and his family is hereby declared free from seizure by virtue of all writs and execution, namely:" (and there follow 10 subsections establishing the categories or classes of goods exempt) the interpretation of which was in issue in the case of Re Demaurez (1901), 5 Terr. L.R. 84. McGuire, J. of the Territorial Court en bane, at p. 107, states: "It was objected that he should have pointed out what he claimed as exempt. I think the law is that the sheriff is bound to leave him what is exempt, the debtor having the right, if he chooses to exercise it, to a choice from the greater quantity of the same kind of articles which are exempted." In Purdy v. Colton (1908), 7 W.L.R. 820 at p. 823, Lamont, J. for the Full Court stated: "But, instead of abandoning his rights thereto (i.e., to his exemptions), he expressly claims them, and, even if he did not claim them, it is the duty of the sheriff to leave the exemptions which the law allows." In the case of Korycki et al. v. Korycki, [1940] 3 D.L.R. 45, a judgment of the Saskatchewan Court of Appeal, Gordon, J. A. at p. 47 said: "Although in other jurisdictions it has been held that the debtor must claim his exemptions it has been settled law in this Province for many years that here there is no such duty." The phraseology of the exempting section of the Exemptions Act of Saskatchewan, then before the Court, was almost identical with the phraseology of the corresponding section of the Alberta Act now being discussed. In British Columbia it has been held that exemptions are not a right but only a privilege and if not insisted upon are lost or waived: Re Ley et al. ( 1900), 7 B.C.R. 94; Roy v. Fortin (1915), 25 D.L.R. 18, 22 B.C.R. 282. The pertinent provision of the Homestead Act, R.S.B.C. 1911, c. 100, s. 17, then read as follows: "17. The following personal property shall be exempt from forced seizure or sale by any process at law or in equity; that is to say, the goods and chattels of any debtor at the option of such debtor, or if dead, of his personal representative, to the value of five hundred dollars ... "18. It shall be the duty of every Sheriff or other officer seizing the personal property of any debtor under a writ of fieri facias, or any process of execution, to allow the debtor to select goods and chattels to the value of five hundred dollars from the personal property so seized; and every debtor whose personal property has been seized as aforesaid may, within two days after such seizure or notice thereof, whichever shall be the longest time,

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select goods and chattels to the value of five hundred dollars from the personal property so seized." Manitoba decisions are not helpful since at least as far back as in R.S.M. of 1902, and now in s. 39 of the Executions Act, R.S.M. 1954, c. 76 it is provided: No sheriff, sheriff's bailiff, County Court bailiff, or other officer, charged with the execution of a writ of execution issued out of any court in Manitoba shall seize or take in execution any goods, chattels, or effects, declared by this Act to be free from seizure under writs of execution. Though decisions, even obiter dicta, of Courts of adjacent Provinces are normally of great interest, even if not binding on me, they are not helpful in this instance since on the point at issue, viz., must a debtor claim his exemptions, the Courts of the Provinces of Saskatchewan and British Columbia, take opposite views. Since there are no decisions of Alberta Courts to give guidance I must look for an answer to the first problem - must a debtor claim his exemptions? - the opening phraseology of s. 2 of the Act, "2. The following real and personal property of an execution debtor is exempt from seizure· under any writ of execution." I adopt that well worn rule of interpretation "the grammatical and ordinary sense of the words is to be adhered to, unless that would lead to some absurdity" as enunciated by Lord Blackburn in Caledonian R. Co. v. North British R. Co. (1881), 6 App. Cas. 114 at p. 131. I would hold that the words "are exempt from seizure", mean exactly what they say, viz., cannot be, must not be, seized and are conclusive in their prohibition of the seizure under any writ of execution of such items of personalty and realty as are described in the various clauses of s. 2 and that, regardless of whether the execution debtor claims such exemptions or not - the exemption is absolute. In so holding I am not overlooking s. 10 of the Act, a section appearing in the Exemptions Act of the other Western Provinces and reading thus: "10. If a claim is made for exemptions and a dispute arises thereunder, the sheriff upon his own motion shall refer the matter to a judge of the district court for summary determination, upon such notice as the judge may direct." This section while providing for those cases where a claim for exemptions is filed gives no assistance in those cases where the debtor has failed to claim. I am fortified in my opinion by the dissenting judgment of McPhillips, J. A. in Roy v. Fortin, 9 W.W.R. 407 at p. 417, where he adopts the reasoning of Hunter, C. J. in Dickinson v. Robertson (1905), 11 B.C.R. 155 at p. 156 in reference to s. 17 of the Homestead Act quoted above, expressed thus: "'As to the question of the debtor's right of exemption, in spite of the cases cited I strongly incline to think that it is absolute, and not a mere privilege to be asserted within the two days on peril of the loss of everything.' " It must be conceded that bailiffs if they are acting in conformity with the restriction thus placed upon them, viz., that no exemptions must be seized, will necessarily be persons of outstanding talent. One wonders for example how a bailiff upon visiting a farm debtor with a warrant in hand, looking over the debtor's stock of fowl, grain, vegetables, dairy and agriculture produce to determine the debtor's statutory exemptions can possibly decide the numbers or quantity which "will be sufficient either themselves or when converted into cash to provide: "2. ( c) ( i) food and other necessaries of life required by the execution debtor and his family for the next ensuing twelve months,

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(ii) payment of any sums necessarily borrowed or debts necessarily incurred by the execution debtor "(A) in growing and harvesting his current crop, or, "(B) during the preceding period of six months, for the purpose of feeding and preparing his livestock for market, "(iii) payment of current taxes and one year's arrears of taxes have been consolidated, one year's instalment of the consolidated arrears, and " (iv) the necessary cash outlays for the ordinary farming operations of the execution debtor during the next ensuing twelve months and the repair and replacement of necessary agricultural implements and machinery during the same period;" or equally difficult, how will a bailiff inspecting a farmer debtor's establishment, determined to avoid seizing exemptions, know just what "horses or animals and farm machinery, dairy utensils and farm equipment [are] reasonably necessary for the proper and efficient conduct of the execution debtor's agricultural operations for the next ensuing twelve months;" as set out in s. 2 ( d) of the Act? The problem thus confronting a Sheriff or his bailiff might well test the combined skills of a dietitian, an agriculturist and a chartered accountant. If Chamber experience is any guide, the prevailing practice would appear to be to seize both exempt and unexempt property indiscriminately, with the result that in ignorance of their rights under the Act, debtors frequently fail to claim exemptions, orders for sale go unopposed and injustice is done. In the Korycki case, supra, Gordon, J. A., without making any definite finding on the point obviously viewed with favour the practice in those jurisdictions where a definite duty was imposed upon the Sheriff of advising the judgment debtor of his rights. Having held that the exemptions granted by s. 2 of the Act are absolute, even though not claimed, it remains to determine whether the goods seized, a typewriter and an adding machine, the property of a wholesale jeweller, do in fact qualify under cl. (i) of s. 2 as either "necessary tools" or "necessary implements and equipment". There are actually two questions to be answered : Is the occupation of wholesale jeweller either a trade or a profession as those terms are used in cl. (i)? And if this question be answered in the affirmative are the goods seized necessary tools, implements or equipment of a wholesale jeweller? Firstly, then, is the occupation of a wholesale jeweller properly termed "a trade" as that word is used in c. (i)? I adopt with respect the view of Harvey, C. J., as expressed in Burns v. Christianson (1921), 60 D.L.R. 173 at p. 175, 16 A.L.R. 394, and hold that the word "trade" as used in the section is not synonymous with "business occupation" or "employment" but on the contrary denotes the occupation of one who falls within the mechanic or craftsman or artisan group. One must bear in mind the original purpose of all exemption acts, that of mitigating the severity of the common law, of preventing the working man, the artisan, from being deprived of the tools whereby he earns his livelihood - Mackenzie, J. A., in Burrows v. Johnston, [1928] 4 D.L.R. 865 at p. 867, 23 S.L.R. 185. I find one of the many meanings given the word "trade" in the Oxford Universal Dictionary to be now "restricted to a skilled handicraft, as distinguished from a professional or mercantile occupation on the one hand, and from unskilled labour on the other", and in Webster's New International Dictionary; "especially (applied to)

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mechanical employments as distinguished from the liberal arts, the learned professions and agriculture; as we speak of the trade of a smith, a carpenter, or a mason". Had I been disposed to hold that the wholesale jewellers occupation fell within the classification of "a trade" as used ins. 2(i) I would have had no hesitation in holding that neither typewriter nor adding machine would have qualified as necessary tools, implements or equipment of that trade. It is of interest that in the British Columbia case of Endrizzi v. Peto & Buckley, [1917] 1 W.W.R. 1439, the Court interpreting s. 17 of the Homestead Act cited supra, held that "a safe, cash register, counter, etc." were to be classed as stock-in-trade of a butcher's business, not "tools" and therefore not exempt at the option of the debtor in choosing his $500 worth of personalty. The occupation of a jeweller not being a trade as that term is used in the Act and the articles seized not being in any event tools, implements or equipment necessary to the operation of the jeweller's business it follows that the goods seized are not exempt. The order for sale will therefore go. If the value of the goods seized so justify, costs may be spoken to. ROBINSON v. ROBINSON Ontario Court of Appeal. 1964. 48 D.L.R. (2d) 42.

APPEAL from an order declaring a motor car to be exempt from seizure under execution. The judgment of the Court was delivered by MACKAY, J.A.: The parties in this matter are husband and wife. The wife obtained a judgment in the County Court for arrears of payment for maintenance under the provisions of a separation agreement between the parties. Subsequently the Sheriff, under a writ of fieri facias, seized a motor car owned by the husband and used by him in his business as a salesman. The evidence is that, at the time of the seizure, the market value of the car was $1,700. The husband then brought the present motion for: 1. A declaration that the motor car was exempt from seizure under s. 2, para. 5 of the Execution Act, R.S.O. 1960, c. 126. 2. An order directing the Sheriff to deliver up the motor car to the applicant ( the judgment debtor). 3. An order requiring the execution creditor to pay all the proper costs and charges of the Sheriff and all the loss, costs and damages of the judgment debtor due to the seizure of the motor vehicle. The learned County Court Judge, in a written judgment, held that the motor car was exempt from seizure and directed that it be returned forthwith to the judgment debtor. He made no reference to the judgment debtor's claim for damages and made no order as to costs. The execution creditor appeals from that decision on the following grounds: ( 1) The learned County Court Judge erred as a matter of law in holding

that the said motor vehicle was exempt from seizure by the Sheriff. ( 2) The learned County Court Judge should have found as a matter of law that the motor vehicle in question was not exempt from seizure and was properly and legally seized by the Sheriff under the provisions of the Execution Act, R.S.O. 1960, and was liable to be sold by the Sheriff to

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satisfy the writ of execution in his hands, subject to the judgment debtor being entitled to receive the sum of $1,000 out of the proceeds of the sale, and the balance to be applied in satisfaction of the claim of the execution creditor. (3) The learned County Court Judge should have found that the said motor vehicle was not "necessary" to the judgment debtor in his business, profession or calling within the meaning of s. 2 of the Execution Act, and was accordingly not exempt from seizure. and by supplementary notice of appeal on the ground that the County Court Judge had no jurisdiction to hear the application or make the order and that the said order is a nullity and of no effect. The judgment debtor cross-appeals on the ground that an order should have been made directing that the execution creditor pay the Sheriff's costs and that the judgment debtor was entitled to set off against the execution creditor's judgment his loss and damages due to the seizure of the motor car. Dealing first with the ground raised in the supplementary notice of appeal, I am of the opinion that the proper procedure in the circumstances of this case was for the judgment debtor to make his application as a motion in the action and not as he did by originating motion. The issue of a writ of fieri facias and seizure thereunder is a proceeding in the action. The Judicature Act, R.S.O. 1960, c. 197, s. 15, para. 8, is as follows: "8. The court in the exercise of the jurisdiction vested in it by this Act in every cause or matter pending before it has power to grant, and shall grant, either absolutely or on such reasonable terms and conditions as it deems just, all such remedies as any of the parties appear to be entitled to in respect of any and every legal or equitable claim properly brought forward by them in such cause or matter, so that, as far as possible, all matters so in controversy between the parties may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters avoided." My opinion is that the County Court Judge had jurisdiction to deal with the matter but the application should have been brought as a motion in the action and not as an originating motion. This question was not raised in the Court below and leave will be granted to amend the style of cause to that of a motion in the action. It should perhaps be mentioned that interpleader proceedings were not available to the Sheriff in the circumstances of this case, R. 632 (b): Re Gould v. Hope (1893), 20 O.A.R. 347. As to the merits, with respect I am unable to agree with the conclusions of the learned County Court Judge. The exemption is claimed under s. 2, para. 5 of the Execution Act, R.S.O. 1960, c. 126. The section reads as follows: "5. In the case of a debtor other than a person engaged in the tillage of the soil or farming, live stock, fowl, bees, books, tools and implements and other chattels necessary to and actually in use by the debtor in his business, profession or calling, to the extent of $1,000." Section 4 is also relevant: "4. The sum to which a debtor is entitled under paragraph 5 or 6 of sec-

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tion 2 or under section 3 is exempt from attachment or seizure at the instance of a creditor." The provisions of the Act providing for the exemptions of debtors other than farmers were altered in 1942 when the present wording (except as to the amount of the exemption) was adopted. From 1899 [R.S.O. 1897, c. 77, s. 2, cl. 6; am. 1899, c. 7, s. 1] until 1942, these provisions (except as to the amount of the exemption) were as follows: "(/) Tools and implements of, or chattels ordinarily used in, the debtor's occupation, to the value of $ ..... ... ; but if a specific article claimed as exempt be of a value greater than $........ and. there are not other goods sufficient to satisfy the writ such article may be sold by the sheriff who shall pay $ .... .... to the debtor out of the net proceeds, but no sale of such article shall take place unless the amount bid therefor shall exceed $............ and the cost of sale in addition thereto. [R.S.O. 1937, c. 125; rep. & sub. 1942, c. 16, s. 1]" It is significant that, prior to 1942, the exemption of chattels under the relevant section was "to the value of", a term that is still used in reference to the exemption of household furniture under s. 2, para. 1, whereas, in the present section, it is "to the extent of $1,000". Likewise, s. 4 refers to "the sum to which the debtor is entitled". Section 2, para. 5, in its present form, exempts chattels to the extent of $1,000. If the chattel is of a greater value, s. 4 applies and the debtor is entitled to $1,000 from the proceeds of the sale. Looking at these provisions of the Act, I do not think it was intended by the Legislature to change the previously existing law that clearly provided that a chattel of a greater value than $1,000 would not be exempt from sale. The present wording of the section results in removing the restriction that a chattel over the value of $1 ,000 can only be sold if no other chattels are available to satisfy the judgment. The former provisions as to sale are, I think, unnecessary because, obviously, the Sheriff, in holding a sale, which is by public auction, would not sell the chattel unless the bids exceeded $1,000 because it is the bids at the auction sale that fix the value of the chattel and, if the bids were under $1,000, the chattel would be exempt. The cases referred to by the learned County Court Judge were not cases decided under the Ontario Act and it seems clear, from the judgments to which he refers, that, in those cases, the statutory provisions were not the same as those found in the Ontario Act. It would appear, that in these cases, that the words "to the value of" were used in the statutes being considered. It would also appear, from these judgments, that the statutes being considered in those cases did not contain any provision similar to s. 4 of the Ontario Act. It was also submitted by counsel for the appellant that it was not necessary for the judgment debtor to have the use of the motor car in question in his business, because his employers were paying him an allowance for the use of his car. The question of whether the chattel seized was necessary to and being used in the business of the judgment debtor is a question of fact to be determined on the evidence in each case. In this case, I have not without some doubt, come to the conclusion that the finding of the trial Judge that the motor car was necessary to the judgment debtor in his business should not be disturbed. My reason for this conclusion is while there is evidence as to the amount being paid by the employer to the judgment debtor for the use of his car, there is no evidence as to whether this amount would be sufficient to enable him to hire a car. If it

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were, then the car would not, in my view, be exempt from seizure and sale and the entire proceeds of the sale would be available to satisfy the judgment. The judgment debtor's affidavit states that he paid $3,100 for the car and that its value at the time of seizure was $1,700. It is therefore not exempt from seizure and sale but the proceeds of the sale are exempt to the extent of $1,000 and this sum must be paid to the judgment debtor from the proceeds of the sale. I would allow the appeal with costs here and below and direct that the order below be vacated and in place thereof, an order to go dismissing the application. It follows that the cross-appeal also fails and must be dismissed on two grounds : 1. That the goods seized were not exempt from seizure. 2. In so far as the claim for damages is concerned, this is a claim in tort and cannot be maintained between husband and wife. There will be no order as to costs in respect of the counter-claim. In Metro Cab Co . Ltd. v. Munro (1965), 48 D.L.R. (2d) 701 McGillivray J.A. ( sitting alone) held that it was the debtor's equity in an automobile ( $430) and not the market value of the automobile ($1350) which determined its value for the purposes of the exemption ins. 2(5) of the Ontario Execution Act. LANGDON v. TRADERS FINANCE CORP. LTD. ET AL. Ontario Court of Appeal. 1965. 55 D.L.R. (2d) 12.

The judgment of the Court was delivered by KELLY, J. A.: The appellant was one of the defendants in this action in which the respondent as plaintiff claimed against the appellant and the Sheriff of the County of Wentworth damages for the wrongful seizure and wrongful conversion of a motor vehicle, and sought damages for the loss of use of the motor vehicle and punitive damages. The seizure and sale were by virtue of an execution in an earlier action, in which the appellant was the judgment creditor and the respondent and his wife were judgment debtors. At trial the respondent recovered judgment against the appellant in the sum of $1,700 and costs, the action against the Sheriff having been discontinued before trial. The result was based on findings that the motor vehicle seized and sold by the Sheriff was owned by the respondent and was a tool, implement or other chattel necessary to and actually used by the respondent in his business, profession or calling, within the meaning of s. 2, para. 5, of the Execution Act, R.S.O. 1960, C. 126. To the respondent's claim for damages the corporate appellant set up three defences: (a) That the motor vehicle was owned by the wife of the respondent; (b) that it was not a tool, implement or other chattel which was exempt from seizure; ( c) that the appellant was entitled to set off against any amount found due to the respondent the amount of the judgment held by the appellant against the respondent. As there was evidence to support the finding of the learned trial Judge that the motor vehicle was owned by the respondent, this Court will not interfere with that finding, and only the other issues raised by the defence need be considered.

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The facts relevant to these issues are not in dispute. Prior to December 30, 1961, the respondent and his wife were employees of Diesel Sales Limited, a corporation in which the respondent and his wife had some financial interest. The nature of the respondent's employment by Diesel Sales Ltd. was such that a motor vehicle would not have been "a tool of his calling". As has been found by the learned trial Judge, on November 17, 1961, the respondent purchased the motor vehicle in question. This motor vehicle was registered in the name of the respondent's wife, a fact concerning which th~ respondent alleged he was unaware; at the time of the purchase the respondent borrowed from Keen (Hamilton) Credit Union Limited $1,906 giving as security a chattel mortgage on the motor vehicle. Diesel Sales Ltd. went into bankruptcy around the end of December, 1961; until about the end of January, 1962, the respondent was employed by the trustee in bankruptcy and after that he was unemployed until about March 1st; at this latter date he became employed by Dyck Duck & Mann Limited as a sales representative on a commission basis and in connection with this activity maintained a small office in the basement of his home. The respondent's sales territory extends for 25 miles around Hamilton and the product he was engaged in selling was a patented device designed as a component for use in the erection of scaffolding or working platforms; samples of these devices, four in number, were transported by him to building sites where he desired to demonstrate their use to persons engaged in construction work; the set of four samples weighed about 48 to 49 lbs. and the respondent's contention was that the motor vehicle was necessary for the carrying on of this business as a salesman. The respondent did not use the motor vehicle to deliver articles which he sold; the only use of the motor vehicle which could qualify it for exemption from seizure was the transporting of the respondent and his samples to the places where his prospective customers were. In January, 1962, the appellant recovered judgment against the respondent and his wife on a guarantee which they had signed with respect to the indebtedness of Diesel Sales Ltd. to the appellant. On February 22, 1962, the respondent's wife was examined as a judgment debtor and admitted ownership of the motor vehicle, which, later, under instructions from the appellant, the Sheriff seized and sold. On April 6, 1962, subsequent to the seizure the respondent's solicitor wrote to the solicitor for the appellant claiming: ( 1) That the respondent was the beneficial owner of the motor vehicle; (2) that as "a tool of his trade" it was exempt from seizure under s. 2, para. 5, of the Execution Act. This letter also stated that, if the motor vehicle was not released "I shall have no alternative but to take interpleader proceedings". Since the execution under which the seizure was made was issued against the respondent and his wife, the Sheriff could not apply for relief by way of interpleader: Rule 632 limits use of interpleader by the Sheriff to cases where a claim for goods is made by a person other than the person against whom the process issued. Moreover, there is no evidence that the Sheriff was made aware by the respondent of any claim for exemption. MacKay, J. A., in Robinson v. Robinson, [1965] 1 O.R. 326 at p. 327, 48 D.L.R. (2d) 42 at p. 43, 7 C.B.R. (N.S.) 209, pointed out the course that was open under similar circumstances, it was available to the plaintiff to have made

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an application in the original action to determine the ownership of the motor vehicle and whether it was exempt from seizure as "a tool of his trade". However, the respondent chose to bring this action for damages and did not launch any other proceedings. His rights must be considered in the light of the choice he made. Unless the respondent can establish that the motor vehicle was exempt from seizure as being a tool, implement or other chattel necessary to and actually used by him in his business, profession or calling, the seizure and sale were regular and did not constitute any wrongful act for which the plaintiff is entitled to damages. Since a motor vehicle has been held to fall within the description of a tool, implement or other chattel and since it is beyond question that the respondent actually used the motor vehicle in his business, profession, or calling, the precise question to be determined is whether on the facts of this case the said motor vehicle was necessary to the respondent's business, profession or calling. As was stated in Robinson v. Robinson, supra, the question as to whether any particular chattel is necessary to the debtor's business, profession or calling, is a question of fact to be decided upon the particular circumstances of each case, but a finding in any particular case must be related to the wording of the statute and in this case to the word "necessary" and the words qualifying it. The importance of the word "necessary" in the statute is emphasized by the history of the portion of the Act in which it is now contained. Prior to 1942, the exemption provided by the Act was contained in s. 2(/) [R.S.O. 1937, c. 125] and was framed in these words: "(f) Tools and implements of, or chattels ordinarily used in the debtor's

occupation to the value of$ ... ."

Since the amendment enacted in 1942 [1942, c. 16, s. 1] the wording has been substantially different: the present exemption relates not to tools "of and ordinarily used in the debtor's occupation" but to "tools necessary to and actually used in his profession, business or calling". Accordingly, cases in Ontario decided before the amendment are of little assistance in the interpretation of the present statute. In the absence of any judicial interpretation to the contrary reference may be had to standard dictionaries: R. v. Peters (1886), 16 Q.B.D. 636 at p. 641; Marquis Camden v. Com'rs of Inland Revenue, [1914] 1 K.B. 641 at p. 647. "Necessary" is defined in the Oxford English Dictionary as "indispensable, requisite, essential, needful, that cannot be done without". Support for the application to the word "necessary" of such meaning is to be found in the judgment of Dennistoun, J. A., in Goldsmith v. Harris, [1928] 2 W.W.R. 401 at pp. 402-3, [1928] 3 D.L.R. 478 at pp. 479-80, 37 Man. R. 389, where he was dealing with a claim for exemption in respect of a motor car used by the manager of a large company which was engaged in building houses: "Let us consider what is 'necessary' to the performance of the duties of a manager of a joint-stock company which builds houses. "In the present instance it is not necessary that the defendant should supply a motor car under the terms of his contract. He is employed as manager on salary. His duties are not defined, and no condition is attached as to the mode or method he is to adopt in performing them. It is the magnitude of the business which makes it necessary for the manager to move rapidly from one part of the city to another in performing his duties. If the business

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were of smaller dimensions, a private motor car would be quite unnecessary. Is, then, the size of the business to be the determining factor? I think not. In my opinion it is the nature of the occupation, be it large or small, which must be considered. A saw, a plough, an anvil, a fishing net, a truck, are necessary to a carpenter, a farmer, a blacksmith, a fisherman, or a carter, if he is to follow his occupation at all. A vehicle for a country doctor, books of account to a business man, or a wooden leg to a cripple, are recognized as necessaries as soon as mentioned, for without them the pursuit of their respective occupations is impossible. "The mere statement that a person is a manager of a building company does not import that a private motor car is necessary; it is only after evidence is given to show special circumstances relating to a particular position which involves special duties that Mr. Harris' necessity appears. It is personal to him and not due to his occupation. "If this motor car be sold to pay Mr. Harris' lawful debts, there is no suggestion in the evidence that he will be unable to hold his position, or be rendered incapable of following his present occupation. He may suffer inconvenience, or may have to curtail the extent of his activities, but that is a matter for arrangement with his company and does not concern the judgment creditor." In my view the meaning Dennistoun, J. A., has applied to the word "necessary" which appeared in the statute he was interpreting, is the same meaning given to it in the dictionary quoted. In Ontario in Metro Cab Co. Ltd. v. Munro, a decision of the Court of Appeal for Ontario delivered February, 1965 [ (1965] 1 O.R. 555, 48 D.L.R. (2d) 701, 7 C.B.R. (N.S.) 294], McGillivray, J. A., similarly interpreted the word in coming to the conclusion that a motor vehicle equipped as a taxi-cab was necessary to the business of a man who depended for his living upon the operation of a one-man taxi service. I consider that the conclusion reached by MacKay, J. A., in Robinson v. Robinson, supra, is consistent with this interpretation. In the case before him there was some evidence as to payments made to the judgment debtor for the use of a car, but he was left in doubt as to whether the business, profession or calling could be carried on without the car. MacKay, J. A., with some reluctance supported the finding of the trial Judge that the car was necessary to the judgment debtor in his business. To bring himself within the exemption of the Execution Act, one claiming exemption must show not only that the "tool" is such a convenience that his activities in his business, profession or calling would be restricted by its loss but that it is so essential that the business, profession or calling is physically incapable of being carried on without the tool. Following the ratio in Goldsmith v. Harris, something that is "necessary" to a man's business is something the absence of which would destroy the ability of the man to perform a function the performance of which is essential for his qualification as being engaged in the business. In the present case there was no evidence that it was a condition of the employment of the plaintiff that he supply his own motor vehicle. Had that fact been proven it would have been one of the circumstances which would have had to be taken into consideration. Similarly, had his employment been such that he was required to carry a stock of a product to make delivery to fill the sales he

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had made, this would have been a factor to have been considered in determining whether the motor vehicle was necessary for the purpose of his business, profession or calling; but as the facts were brought out there is nothing to show that loss of the motor vehicle would have completely destroyed his ability to make sales, in accordance with the terms of his employment, of the product which the plaintiff was selling. The examples quoted by Dennistoun, J. A., in Goldsmith v. Harris, and the taxi-cab in Metro Cab Co. Ltd. v. Munro, are examples of this essentiality. A taxi-cab operator whose business is the transportation of passengers would cease to be a taxi-cab operator if he were unable to transport passengers as a result of having ceased to have a taxi-cab. A salesman such as the defendant would not cease to be a salesman simply by reason of the fact that a motor vehicle was not available to him to take him and his samples to the place where sales were expected to be made. Understandably, it was beneficial and a great convenience to him and its loss would curtail the extent of his activities. Without it he might not be as financially successful a salesman of his product, but apart from the extent of his activities it is not inconceivable that he should be a salesman of that product without having a motor vehicle to carry himself and his samples to the place where he proposed to conduct his activities as a salesman. While the motor vehicle is en route to such a place the respondent was not actually engaged in selling. He was engaged only in going to the place where he hoped to sell and when he got to such a place with his samples the motor vehicle formed no part of the equipment necessary for the carrying on of his business calling as a salesman. I refrain from expressing any opinion as to what would have been the result if it had been shown that it was a term of the respondent's employment that he himself should provide and maintain a motor vehicle. I confine my opinion to the facts before the Court in this case. Upon these the respondent has failed to establish that the motor vehicle in question owned by him was exempt from seizure under the Execution Act as being a tool, implement or other chattel necessary to his business, profession or calling. If I had come to the conclusion that the respondent had established a right to damages for the seizure and sale of the motor vehicle, it is my opinion that the assessment of damages could not have stood as it proceeded on the wrong principle. The evidence established that the motor vehicle was subject to a chattel mortgage in favour of Keen (Hamilton) Credit Union and that at the time of the seizure and sale, the respondent had no equity in the motor vehicle. If this be the case and the judgment below so finds, the measure of the respondent's damages could not have been greater than the value of his equity in the motor vehicle. The chattel mortgagee was not before the Court as a party but an officer of it was called and gave evidence to the effect that a very substantial sum was still owing by the respondent to the chattel mortgagee. It must be assumed that the chattel mortgagee has not relinquished its claim against the motor vehicle and that it would be entitled, out of the proceeds of the sale of the motor vehicle, to receive the value of its interest in the motor vehicle. If this be the case and the damages stand as assessed by the Court below, the appellant might be called upon to pay to the chattel mortgagee the full amount which was received upon the sale as well to pay to the respondent the value of the motor vehicle in which the respondent had no equity. The formal judgment provided that there should be no set-off against the judgment for damages of the amount owing under the judgment under which seizure was made. No doubt this provision was included in an attempt to carry

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into effect the provision of s. 4 of the Execution Act which reads as follows: "4. The sum to which a debtor is entitled under paragraph 5 or 6 of section 2 or under section 3 is exempt from attachment or seizure at the instance of a creditor." The appellant has pleaded in its defence that right to set off any amount due to it by the respondent against the amount which might be found due by it to the respondent, but the learned trial Judge has held that the word "may" in s. 128 of the Judicature Act, R.S.O. 1960, c. 197, confers on him the right to allow or disallow such a set-off. In my view, s. 128 confers on the appellant the right to set off against any debt due to it from the respondent the amount of any debt due by the respondent to it. The judgment for damages was such a debt and the right of set-off arose when the second of the mutual debts came into existence. The word "may", to the extent that its import is permissive rather than imperative, implies that the right to set-off only comes into effect when the person seeking to apply the set-off as a defence elects so to do; in other words it is a right which he may waive by not seeking to claim it. No one is compelled to apply set-off if he does not wish to do so: Culotta v. Sitter, [1935] O.R. 81 at p. 83, [1935] 1 D.L.R. 348 at p. 350. But if one, having a debt which may be set off, elects to do so, his right is absolute and it does not depend on the Court deciding to award it to him. The effect of the section is to establish the right of set-off independently of any action of the Court. Accordingly, if the appellant elected to set off the debt due to it as a defence to the claim for damages, that was its right and the Court was not empowered to deny that right. Further, it is doubtful if s. 4 of the Execution Act in prohibiting attachment or seizure at the instance of a creditor can have any effect upon the right to setoff conferred by the Judicature Act. It is not necessary to consider this point since damages is the remedy which the respondent elected to pursue in lieu of proceedings in the original action, to have the Court determine if he was entitled to exemption under the Execution Act. The respondent having proceeded by way of an action for damages, I do not consider that had he been successful in his claim he was entitled as against any judgment for damages to resist the respondent's right to set off the pre-existing judgment debt, and in the face of the claim for set-off have judgment entered in his favour for the full amount at which the damages were assessed. In the result the appeal will be allowed with costs, the judgment below set aside and in its place there shall be judgment dismissing the respondent's action with costs. There has been some difference of opinion among courts over the meaning of "calling" etc. in the "necessary chattel" exemption clause. In Hayoz v. Patrick et al. (1961), 30 D.L.R. (2d) 742 the Saskatchewan Court of Appeal held that a cafe owner was not entitled to have his cafe equipment exempt from execution, since the words "trade, calling or profession" are not synonymous with business: although the word "calling" is more general than "trade" or "profession", its meaning must be restricted to a sense analogous to the less general words, and since "trade" is not synonymous with "business", neither is "calling". However, in Bank of Nova Scotia v. Jordison (1963), 40 D.L.R. (2d) 790 an Alberta District Court Judge refused to follow the Saskatchewan precedent and held that "calling" simply means a person's ordinary occupation or business. In Ontario the word "business" is contained in s. 2 (5) of the Execution Act.

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SECTION 2: ATTACHMENT AND GARNISHMENT A. Supreme Court Procedure RULES OF PRACTICE AND PROCEDURE Supreme Court of Ontario. R.R.O. 1960, Reg. 396. 597. ( 1) The Court, upon the ex parte application of the judgment creditor, upon affidavit stating that the judgment is unsatisfied and or

(a) that some person within Ontario is indebted to the judgment debtor;

(b) that some person not within Ontario is indebted to the judgment debtor and that the debt to be attached is one for which such person might be sued in Ontario by the judgment debtor

may order that all debts owing or accruing from such third person (hereinafter called the garnishee) to the judgment debtor, shall be attached to answer the judgment debt and that the garnishee do at a time named show cause why he should not pay the judgment creditor the debt due from the garnishee to the judgment debtor or so much thereof as may be sufficient to satisfy the judgment debt and the claims of any other execution creditors. Notice of the application to pay over shall, unless dispensed with, be given to the judgment debtor. (Form No. 78) (2) When the garnishee is not within Ontario, and is neither a British subject nor in British dominions, notice of the order and not the order itself shall be served. (Form No. 79) (3) When a debt owing from a firm carrying on business within Ontario, but having members out of Ontario, is attached, service may be effected upon any person having control or management of the partnership business or any member of the firm within Ontario. 598. The garnishee shall be deemed to be indebted, although any debt sought to be attached has been assigned, charged or incumbered by the judgment debtor, if the assignment, charge or incumbrance is fraudulent as against creditors or is otherwise impeachable by them. 599. The order from the time of service shall bind the debts attached. 600. If the garnishee admits his liability he may pay the amount admitted into Court, less $3 for his costs of paying in, and give notice of such payment to the judgment creditor. 601. ( 1) If the garnishee does not pay into Court the amount due from him to the judgment debtor, and does not dispute the debt due or claimed to be due from him to the judgment debtor, or if he does not appear upon notice to him, then the Court may order payment into Court of the debt. (Form No. 80) (2) If the debt be not payable at the time of the attachment, an order may be made for the payment thereof when it becomes payable. 602. If the garnishee disputes his liability, the Court may determine the dispute in a summary way or may order that an issue be tried in such manner as may be directed. 603. ( 1) Where a garnishee has notice of an assignment of the debt or of a claim thereto or charge thereon, he shall give notice thereof, and the court may order the assignee or the claimant to appear and state the nature and particulars of his claim. (2) After hearing the allegations of such third person and of any other per-

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son who by the same or a subsequent order may be ordered to appear, or in the case of such third person not appearing when ordered, the court may order payment of the amount due from the garnishee, or may order an issue to be tried, or may bar the claim of the third person, or may make such other order as seems just. 606. Payment into court or under an order by the garnishee is a valid discharge to him as against the judgment debtor or any assignee or claimant of whose claim he has given notice and who has been called upon to show cause under the preceding rules. INCOME TAX ACT R.S.C. 1952, c. 48; as amended by 1952-53, c. 40, s. 84.

118. All taxes, interest, penalties, costs and other amounts payable under this Act are debts due to Her Majesty and recoverable as such in the Exchequer Court of Canada or any other court of competent jurisdiction or in any other manner provided by this Act. 119. ( 1 ) An amount payable under this Act that has not been paid or such part of an amount payable under this Act as has not been paid may be certified by the Minister (a) where there has been a direction by the Minister under sub-section (2) of section 51, forthwith after such direction, and (b) otherwise, upon the expiration of 30 days after the default. ( 2) On production to the Exchequer Court of Canada, a certificate made under this section shall be registered in the Court and when registered has the same force and effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in the said Court for a debt of the amount specified in the certificate plus interest to the day of payment as provided for in this Act. 120. (1) When the Minister has knowledge or suspects that a person is or is about to become indebted or liable to make any payment to a person liable to make a payment under this Act, he may, by registered letter or by a letter served personally, require him to pay the moneys otherwise payable to that person in whole or in part to the Receiver General of Canada on account of the liability under this Act. (2) The receipt of the Minister for moneys paid as required under this section is a good and sufficient discharge of the original liability to the extent of the payment. ( 3) Where the Minister has, under this section, required an employer to pay to the Receiver General of Canada on account of an employee's liability under this Act moneys otherwise payable by the employer to the employee as remuneration, the requirement is applicable to all future payments by the employer to the employee in respect of remuneration until the liability under this Act is satisfied and operates to require payments to the Receiver General out of each payment of remuneration of such amount as may be stipulated by the Minister in the registered letter. 120. ( 4) Every person who has discharged any liability to a person liable to make a payment under this Act without complying with a requirement under this section is liable to pay to Her Majesty an amount equal to the liability discharged or the amount which he was required under this section to pay to the Receiver General of Canada, whichever is the lesser.

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121. (1) Where a person has failed to make a payment as required by this Act, the Minister, on giving 10 days' notice by registered mail addressed to his last known place of residence, may, whether or not there is an objection to or appeal in respect of the assessment not disposed of, issue a certificate of the failure and direct that the goods and chattels of the person in default be seized. (2) Property seized under this section shall be kept for 10 days at the cost and charges of the owner and, if he does not pay the amount due together with the costs and charges within the 10 days, the property seized shall be sold by public auction. 121. ( 5) Such goods and chattels of any person in default as would be exempt from seizure under a writ of execution issued out of a superior court of the province in which the seizure is made are exempt from seizure under this section. 122. ( 1) Where the Minister suspects that a taxpayer is about to leave Canada, he may before the day otherwise fixed for payment, by notice served personally or by registered letter addressed to the taxpayer, demand payment of all taxes, interest and penalties for which the taxpayer is liable or would be liable if the time for payment had arrived, and the same shall be paid forthwith notwithstanding any other provision of this Act. (2) Where a person has failed to pay tax, interest or penalties demanded under this section as required, the Minister may direct that the goods and chattels of the taxpayer be seized, and subsections (2) to (5) inclusive of section 121 are, therefore, applicable mutatis mutandis. McMULKIN v. TRADERS BANK Divisional Court, Ontario. 1912. 26 O.L.R. 1. An appeal by the plaintiff (judgment creditor) from the judgment of Finkle, Co. C. J ., Oxford, upon the trial of a garnishee issue. The judgment of the Court was delivered by MIDDLETON, J.: The facts are not in dispute. On the 8th August, 1911, the plaintiff recovered a judgment against one Couldridge for $211.33. On the 17th August, 1911, the plaintiff obtained a garnishee order nisi, attaching any debt due from the Traders Bank of Canada, the defendants in the issue, to the judgment debtor. This order was served on the manager of the Traders Bank of Canada at Ingersoll, on the 17th August, and upon the manager at the head office at Toronto, on the 18th August. An issue was directed between the attaching creditor and the garnishees for the purpose of determining whether, at the time of the service of the said order, there was any amount owing from the garnishees to the judgment debtor, and whether the garnishee order "was a valid attachment of such debt." At the trial the learned Judge found against the attaching creditor, no reasons being assigned. It appeared that, at the time of the recovery of judgment, the judgment debtor had $3,415 upon deposit in the branch of the Traders Bank of Canada at Ingersoll. This sum was withdrawn, and on the 9th August was deposited with the branch of the bank at Calgary. When the attaching order was served, it was accompanied by a notice addressed to the bank, warning the bank that the money sought to be attached was upon deposit with the Calgary branch. The general manager forwarded the attaching order to Calgary. It reached the Calgary office before banking hours on the 24th. Notwithstanding this, the bank permitted the withdrawal of the whole $3,415, and it was upon the same day redeposited by the

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judgment debtor to his own credit "in trust;" and, later on the same day, the money so deposited was again withdrawn. There is no doubt that, at the time of the service of the garnishee order, the garnishees were indebted to the judgment debtor. The only question is, whether this indebtedness was subject to attachment at the instance of the judgment creditor in the Ontario Courts. This falls to be determined on Con. Rules 911 [now 597] et seq. These Rules were validated by 58 Viet. ch. 13, sec. 42, and 59 Viet. ch. 18, sec. 15. No notice has been served, as required by sec. 60 of the Judicature Act, if it is intended to contend that this legislation is ultra vires of Ontario. By the Rules in question, it is plain that the intention was to make exigible to answer a judgment recovered in Ontario: (a) any indebtedness to the judgment debtor where the garnishee was within Ontario; or (b) where the garnishee was not within Ontario, but the case would fall within the provisions of Con. Rule 162 [now 25] if the judgment debtor was himself seeking to assert his rights within Ontario. The Rule does not proceed upon any theory as to the situs of the cause of action to be taken in execution, but proceeds upon the theory that the creditor has a right to be subrogated to the position of his debtor, and to assert, for the purpose of enabling him to obtain satisfaction of the judgment, any right which the debtor himself could assert. If the garnishee is within Ontario and can be served within Ontario, the judgment creditor is given the right to collect any debt due by him to the judgment debtor. If the garnishee is not within Ontario and cannot be served within Ontario, then a debt cannot be collected under this process unless it falls within the classes enumerated in Con. Rule 162 [now 25]. This narrows the question for determination to an inquiry whether the debtor could himself sue in Ontario to recover the debt due him by the garnishees. Before the decision of the Privy Council in The King v. Lovitt, [1912] A.C. 212, no one would have doubted this right. The question in that case was not one between the bank and its customer. What was there discussed was the right of New Brunswick to claim succession duty with respect to moneys on deposit in the St. John branch of the Bank of British North America. The head office of the bank was in London, England; the domicile of the testator was Nova Scotia. The right of the Province to tax was said to be limited to assets within the Province. It was argued that the situs of this simple contract debt was either at the residence of the debtor i.e., where its head office was, in London, England - or the domicile of the creditor i.e., Nova Scotia. The Province claimed that the debt was a debt payable at St. John, and that it was primarily recoverable at St. John; the contract, properly understood, being a contract to be implemented at the branch of the bank in St. John. The Privy Council agreed with this, and thought that the locality of the debt was in truth fixed by the agreement between the parties, and that branch banks, although agencies of the bank itself, for certain purposes, may be regarded as distinct trading bodies. Had our Rules been based upon the locality of the debt to be taken in execution, this judgment would be conclusive against the attaching creditor; but, if I am right in thinking that this is not the test, then the decision has no application. The sole test given by our Rules is the ability to serve within Ontario, or the ability to bring the case within Con. Rule 162 [now 25] if service cannot be made within Ontario. Had the contract been made between two residents of Calgary, and had the promise been to pay at Calgary and nowhere else, so that the parties had given as definite and complete a locality to the debt as is possible in the case of simple contract debts, and had the debtor thereafter moved within Ontario, then the debt would none the less be liable to attachment under our Rule,

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which merely requires the existence of a debt and presence of the debtor within Ontario. The debtor would not be exempt from suit at the instance of his original creditor if found and served within Ontario, because the Courts of Ontario have universal jurisdiction in all personal actions, subject only to their ability to effect service within their own jurisdiction: Tytler v. Canadian Pacific R.W. Co., 29 O.R. 654. Upon the argument, much was made of the difficulty that might in some cases arise if the Courts of Ontario were to assume authority to take in execution a debt of this kind, because, it was suggested, foreign Courts might not accord to the judgment of the Ontario Court any extra-territorial recognition. It is a sufficient answer to this to point out that this is a question of policy, affecting those who make the law, and that it cannot be considered by the Courts, who are called upon to administer the law as they find it: Western National Bank of City of New York v. Perez Triana & Co., [1891) 1 Q.B. 304. But it is not likely that in this case any such question can arise, because, at the time of the original suit, the judgment debtor was resident within Ontario, and he appears to be still here, as he was served with a notice of this appeal at Ingersoll. The appeal should be allowed, and the garnishees should be directed to pay to the judgment creditor sufficient to satisfy the judgment debt and the costs of the attachment proceedings, of the issue, and of this appeal. CENTURY INDEMNITY CO v. ROGERS Supreme Court of Canada. [1932] 2 D.L.R. 582. LAMONT,

J.: Two questions arise in this appeal:

1. Are the appellants a "person within Ontario . . . indebted to the judg-

ment debtor," Anna Fitzgerald, within the meaning of R. 590 [now 597] of the Ontario Rules of Court? and 2. If so, is that indebtedness attachable by the respondent to satisfy in whole or in part his judgment? On or about May 23, 1928, the appellants, in consideration of the premiums therein stated, issued in the United States a policy of automobile liability insurance to Anna Fitzgerald, an American subject, by which they agreed to indemnify her against loss by reason of her legal liability to pay damages to others, (a) For bodily injuries to the extent of $5,000, and (b) damages to property to the extent of $1,000 arising out of ownership, operation or use of her automobile within the United States of America or the Dominion of Canada. On October 5, 1928, Miss Fitzgerald, in operating her automobile near Kingston in the Province of Ontario ( a friend of hers at her request being at the wheel), collided with another automobile belonging to the respondent with the result that the respondent was seriously injured and his car badly damaged. He brought an action for damages against Miss Fitzgerald in the Ontario Courts for the injuries received by him and the damage done to his car, and, on November 26, 1929, recovered judgment against her for $8,000 and costs. The $8,000 was made up as follows, - $829 damages to his car, and the balance for personal injuries suffered by himself. The costs were, on December 3, 1929, taxed at $495.60, and were, by the judgment, made payable forthwith after taxation. The respondent immediately issued execution on his judgment, but the sheriff made a

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return of nulla bona to the writ. The respondent, on December 31, 1929, obtained from the local Judge at Kingston, Ontario, an order attaching all debts owing or accruing due from the appellants to the judgment debtor, Anna Fitzgerald, under the above-mentioned policy, which was still in force. On February 24, 1930, a further order was made, "that the judgment creditor and the garnishee do proceed to trial of an issue to settle what amount if any the garnishee must pay to the judgment creditor on account of the aforesaid judgment dated the 26th day of November, 1929.... " That the appellants constituted "a person within Ontario" when the attaching order was served on them seems to admit of no doubt. As pointed out by the Court below, s. 31 (y) of the Interpretation Act, R.S.O. 1927, c. 1, declares that "a person" includes a "body corporate or politic," which the appellants are. They were then doing business in Ontario with a provincial head office there and with considerable sums of money on deposit in a bank in the Province. We, therefore, see no reason why they cannot properly be designated "a person within Ontario" within the meaning of the rule. Then were they indebted to the judgment debtor, Anna Fitzgerald? Under the contract of insurance the appellants agreed to indemnify Anna Fitzgerald against loss by reason of her legal liability to pay damages for injuries caused to a person or his property arising out of the use of her automobile in the Dominion of Canada, and to pay the costs taxed against her in any legal proceedings to enforce a claim therefor. They did more, they fixed the time when recovery under the policy might be had, by inserting in the policy the following clause: "F. Right of Recovery. No recovery against the company by the assured shall be had hereunder until the amount of loss or expense shall have been finally determined either by judgment against the assured after actual trial or by written agreement of the assured, the claimant, and the company, nor in any event unless suit is instituted within two years thereafter." Whether apart from this clause the claim of the insured under the policy would have been a claim for unliquidated damages, it is unnecessary to inquire. By this clause the appellants impliedly agreed that the insured would be entitled to recover on the policy when the legal liability against which she had been insured was determined as to amount by a judgment against her after trial. This, in our opinion, is the meaning which the parties intended the clause to bear. The amount of her loss in this case having been determined by judgment, the right of the insured to recover that amount under the policy could no longer be disputed by the appellants. They were, therefore, under obligation to pay a fixed and definite sum to the insured at the time the attaching order was made. This view is not, in our opinion, in conflict with what was held in Luckie v. Bushby, 13 C.B. 864, 138 E.R. 1443. In that case the policy did not contain an express or implied undertaking to pay whatever amount the parties might agree upon as the extent of the loss. Their agreement, therefore, as to the amount at which the loss should be adjusted was only evidence by which to fix the amount for which judgment should be given. A somewhat similar case came before this Court in Melukhova v. Employers' Liability Ass'ce Co. (1922), 66 D.L.R. 609, where the Court held that, under garnishee proceedings taken under the Rules of Practice of the Province of Quebec, the obligation of the garnishee to pay the insurance money under a policy of indemnity, constituted an indebtedness, although, under the facts of that case, it was only a conditional one. That the contract of insurance was not issued in Ontario, or received by the

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insured in that Province, is, in our opinion, immaterial in view of the fact that the agreement to indemnify was, by express provision, made to cover loss incurred by the insured when operating her automobile in the Dominion of Canada. The only other defence set up was that if the appellants were indebted to Anna Fitzgerald, such debt was not attachable in the Province of Ontario. Since the appellants are a "person within Ontario" and the claim of Anna Fitzgerald to the insurance moneys constitutes a present indebtedness, the attachment, it seems to us, comes squarely within the rule. On the argument before us Mr. Robertson for the appellants took the point that the evidence put in on behalf of the respondent did not, as against the appellants, amount to proof of legal liability on the part of Anna Fitzgerald for the damage caused by the accident, in that, the judgment recovered was not evidence that the damage was caused by her negligence, and he cited Continental Casualty Co. v. Yorke [ [1930] 1 D.L.R. 609]. Cunningham for the respondent, however, stated that this point was not raised either before the trial Judge or the Appellate Division, but that before these Courts the whole issue between the parties was whether the claim for indemnity under the policy constituted a claim for debt or one for liquidated damages, and, if for a debt, was it attachable in Ontario? That this was so would appear from the judgment of the Appellate Division, written by Mr. Justice Hodgins, in which we find the following ([1931], 3 D.L.R. at p. 227, O.R., at p. 346): "The only question therefore to be determined is whether at the date of the attaching order there was a debt, and if there was, whether that debt is attachable here in Ontario." The parties having fought out the issue before both Courts below on these grounds and having taken it for granted the respondents' judgment against Anna Fitzgerald determined the measure of the appellants' liability to her under the policy, the appellants are bound by the manner in which they have conducted their case. The first Appellate Division gave judgment for $6,000 and interest, and costs of $495.60, together with the costs of the issue and of the appeal. We think there was a slight oversight in these figures: the judgment recovered by the respondent for damages to his car was only $829, and the liability of the appellants under the policy for personal injuries is limited to $5,000. The appellants' total liability under these two items is, therefore, $5,829, instead of $6,000. With this slight variation we would dismiss the appeal with costs. ANGLIN, C. J.C., RINFRET, SMITH and CANNON, JJ., concur with LAMONT, J. IMPERIAL BANK OF CANADA v. BOYD Supreme Court of Ontario in Chambers. 1918. 14 O.W.N. 230. Motion by the plaintiffs, judgment creditors, for payment out of Court to them of moneys attached in the hands of the Brandon Shell Company, garnishees, and paid into Court by the liquidator of that company. MEREDITH, C. J. C. P., in a written judgment, said that the fact that the Creditors Relief Act, R.S.O. 1914 ch. 81, sec. 5(2) [now 4(2)], requires payment to a sheriff of moneys attached in garnishee proceedings, whilst Rule 594 [now 601] requires payment into Court- see also form 79 -was plainly no ground for this application, which was not for payment of them to the proper person, but for payment of them to the judgment creditors who attached them,

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and who were entitled to priority over other creditors for their costs of the garnishee proceedings only: Creditors' Relief Act, sec. 5(2); Dales v. Byrne (1916), 35 O.L.R. 495, 9 O.W.N. 419. But, as the motion had been made, and, apparently, all persons at present directly concerned in the moneys, except the sheriff, were represented on the motion, it would be better to deal with the question of payment out now than to increase costs and delay by waiting until another motion should be made; and, in the view of the learned Chief Justice, that could be safely done without waiting to have the sheriff made a party to this motion. The provisions of the Act, dealing directly with the moneys and their disposition, should prevail over those of the Rules, dealing generally with the subject of garnishee proceedings, in any case of conflict between them. The Act makes all necessary provisions for the disposition of the money, including payment to the attaching creditors of their costs of the garnishee proceedings in priority to creditors' claims: so that payment into Court and out again to the sheriff seemed a quite needless, round-about course, for no useful purpose, besides delaying the distribution of the fund, under the Act, as proceedings for that purpose begin only after the moneys come to the hands of the sheriff. The applicants' motion should therefore be dismissed with costs: but the sheriff might take an order for payment to him of the whole of the moneys in Court, to be dealt with by him in accordance with the provisions of the Creditors Relief Act. A similar inconsistency in another Province between the Creditor's Relief Act and the rules of Court was noted by the Appellate Division of the Alberta Supreme Court in Stacey Lumber Co. v. Cazier et al. (1914) 6 W.W.R. 1382, at 1383. When payment is made by a debtor to the sheriff under s. 4(2) of the Ontario Creditors' Relief Act, R.S.0. 1960, c. 78, by s. 5(2) of that Act all other creditors whose executions or certificates were already in the sheriff's hands or who deliver their executions or certificates to him within one month from the date of his entry of the receipt of money. S. 37 of the Ontario Act allows a special sheriff's garnishee - the sheriff can himself garnish a debt owing to the primary debtor in order to get enough money to pay off executions and certificates in his hands. This section seems to be little used by sheriffs. Money in the sheriff's hands is, of course, not subject to garnishee proceedings, not even when the sheriff has been guilty of inaccuracies in procedure, for the executions in the sheriff's hands have priority over all others: Toronto-Dominion Bank v. Shannon and L'Heureux (1964), 46 W.W.R. 695.

B. Attachment of Wages WILSON v. FLEMING Master in Chambers and Divisional Court, Ontario. 1901. 1 O.L.R. 599. THE MASTER IN CHAMBERS: The plaintiff, having recovered a judgment against the defendant on the 17th November, 1892, for the sum of $1,300.90 damages and $19.82 costs, obtained an order nisi on the 30th April, 1900, attaching all debts due or accruing due from the garnishees, the corporation of the city of Toronto, to the defendant, and directing the garnishees to appear and shew cause why they should not pay to the plaintiff the debt due from them to the defendant, or so much thereof as may be sufficient to satisfy said judgment. The application to pay over has been enlarged from time to time to enable the plaintiff to examine the officers of the garnishees in support thereof. It is now

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made to me under Rule [602], and the plaintiff asks that the attaching order be made absolute upon the evidence produced. For the garnishi,es and the judgment debtor (the defendant) it is contended that the attaching brder of the 30th April, 1900, must under the circumstances shewn be discharged with costs. It appears that the defendant was appointed assessment commissioner by the garnishees on the 11th August, 1897, by resolution which was confirmed on the 12th August, 1897, by by-law No. 3505. The third clause of the by-law reads as follows: - "That the said assessment commissioner be paid the sum of $4,000 per annum as salary for his services, payable monthly." By-law 2436 provides that all officers appointed by the council shall be deemed to hold their respective offices during pleasure. The evidence shews that all salaries were paid on the first day of the month, unless the first day of the month was a holiday, when the cheques were delivered on the previous day. It is also shewn very clearly that a number of the officers received payments on account of their salary before it became due. In the present case the order nisi was served between ten o'clock in the morning and one o'clock in the afternoon of the 30th April, 1900. It is also shewn that the judgment debtor had been, prior to the service of the order, paid in full all his salary due for the month of April. The two questions to be considered on this application are: (1 ) Was the service of the order nisi made before there was a debt due or accruing due from the garnishees to the judgment debtor. (2) Were the advances or payments, made to the judgment debtor prior to the service of the order, made under circumstances to disentitle the judgment creditor to an order for payment upon this application. The arguments on behalf of all the parties have been able, and the points raised have been fully discussed, and I have given to them the best consideration in my power. With reference to the first question - namely, the premature service of the order nisi - it is well settled that until a salary is fully earned and due to the debtor, it cannot be attached: Hall v. Pritchett ( 1877), 3 Q.B.D. 215, approving Jones v. Thompson (1858), E .B. & E. 63; Shanly v. Moore (1863), 9 U.C.L.J. 264; Central Bank of Canada v. Ellis (1893 ), 20 A.R. 364. Could the judgment debtor have legally demanded payment of his salary for the whole month at the time of service of the order nisi? Under by-law 2436 the official hours for the transaction of business were from 9 a.m. to 4 p.m., and the evidence of the city treasurer clearly shews that salaries did not become due and payable until the first day of the following month. Here we have the debtor appointed on the 12th day of the month at an annual salary payable monthly, and if he were paid according to the date of his appointment, then the salary would not become due and payable until the 12th or 13th of the following month; but, apparently, the practice followed was to treat all salaries as becoming due and payable on the first day of each month. Whether the debtor only received the proper proportion of a month's salary for the first month of his service is not shewn. In my opinion, the evidence supports the contention that the order nisi was served upon the garnishees at a time when the. debtor's salary had not become due and payable. As to the second question - namely, did the payments on account of his salary prior to the 30th April entitle the garnishees to apply the salary due on the 1st May in payment of such advances? in other words, was it the clear intention of the parties that the debtor assigned to the garnishees his salary to the extent

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of the advances made to him at the time such advances were so made, and if so, were such assignments of such a character as to bind the debtor? - the evidence of the city treasurer clearly shews that from the beginning the debtor obtained advances on his salary under an arrangement made between the two that all advances were on account of salary and were to be stopped from his cheque at the end of the month. This practice was continuous from the appointment of the debtor, 12th August, 1897, to the service of the order nisi herein. The debtor would apply to the treasurer for an advance and give an I.O.U. to the paying teller or cashier, who would thereupon advance the debtor the amount of the 1.0.U. out of the garnishees' funds, and at the end of the month, or rather at the beginning of the following month, the debtor would indorse his cheque for salary, and receive from the teller his 1.0.U.'s, and the difference coming to him between the amount of the I.O.U.'s and the amount of his salary, in cash, and the cheque would be deposited to the credit of the garnishees. In my opinion, these transactions were of such a character as to create equitable assignments of the debtor's salary from time to time and come within the principles laid down by Lord Macnaghten in Tai/by v. Official Receiver (1888), 13 App. Cas. at p. 543, where he says: "It has long been settled that future property, possibilities and expectancies are assignable in equity for value. The mode or form of assignment is absolutely immaterial provided the intention of the parties is clear. To effectuate the intention an assignment for value, in terms present and immediate, has always been regarded in equity as a contract binding on the conscience of the assignor and so binding the subject-matter of the contract when it comes into existence, if it is of such a nature and so described as to be capable of being ascertained and identified." That case did not adopt or follow Holroyd v. Marshall (1862), 10 H.L.C. 191, in applying the principles as above enunciated, and distinctly overruled Belding v. Read ( 1865), 3 H. & C. 9 5 5. Both of these cases were cited by counsel for the judgment creditor to support his contention. I would also refer to the cases of Armstrong v. Farr (1885), 11 AR. 186, and especially the judgment of the late Sir John Hagarty, Chief Justice of Ontario; Trusts Corporation v. Rider (1896), 27 O.R. 593, and (1897), 24 AR. 157, to shew that a parol assignment is valid: see also the cases referred to therein. Again, the garnishees are entitled to set-off of the moneys advanced by them through their officers against the salary of the judgment debtor: Nathan v. Giles (1814), 5 Taunt. 558. In In re General Horticultural Co. (1886), 32 Ch. D. 512, Mr. Justice Chitty in delivering judgment said at p. 515: "The Common Law Procedure Act, 1854, is, so far as attachment of debts is concerned, in pari materia with 1 & 2 Viet. ch. 110, and as to a charging order under these latter Acts it has now been settled that it charges only what the judgment debtor can himself honestly deal with; that rule is now settled... . I apply these principles broadly as against the judgment creditor who has obtained the garnishee order here, and say that he can only obtain what the judgment debtor could honestly give him." It was somewhat strenuously argued that there was collusion between the judgment debtor and the city treasurer and paying teller to deprive the creditors of the defendant from obtaining payment of their just demands. I find that there is not a particle of evidence to support this contention; that, while it is admitted that the debtor obtains a large salary, it is shewn that he was at the time of his appointment in embarrassed circumstances financially; that the advances from time to time made to him by the city treasurer and paying teller were made to him to enable him to pay off creditors that were pressing for payment. I find that all

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the parties have acted in an honest and bona fide manner. Under the circumstances above set forth, I must set aside the attaching order with costs; those of the judgment debtor to be set off against the claim of the judgment creditor; the garnishees' costs to be paid to them forthwith by the plaintiff. With reference to the costs of the order of the 15th November, 1900, reserved to be disposed of when disposing of the garnishee proceeding, it was stated that the plaintiff desired by the examination of Kimber to establish collusion between him and the judgment debtor. I find that there was no collusion shewn, and therefore the plaintiff should pay Kimber the costs of and incidental to that application. The judgment creditor appealed from this decision to MEREDITH, C. J., in Chambers, who affirmed the decision of the Master in refusing to make the order absolute but reversed him as to costs, directing that there should be no costs to any of the parties. The judgment creditor appealed from this decision, and his appeal was heard by a Divisional Court composed of BoYD, C., and FERGUSON, J. May 13. The Court dismissed the appeal with costs thereof to the defendant ( to be set off pro tanto against the judgment debt) and without costs to the garnishees, holding that there was actual payment of the salary in advance, for, although the payment was made without authority, it was merely irregular, and the moneys were the city's; or, if there was not payment, that there was an advance of the city's money to the judgment debtor for which the city could sue him, and which could therefore be set off against any claim made by him for salary; or, even if the moneys advanced were not to be regarded as the city's moneys, that there was a good equitable assignment of the salary which would operate to prevent its being attached. In Fallis v. Wilson ( 1907), 13 O.L.R. 595 the Master said: "There is no Jaw which forbids an employer to pay his servants' wages in advance; and the case of Wilson v. Fleming (1901), 1 O.L.R. 599, seems to shew that salaries of the city officials can never be successfully attached unless they are held over for at least one day, and no cheques are delivered until then. If any one, to save himself annoyance, deliberately pays in advance, the creditor is helpless. If this could not be done the master would be obliged to dismiss the servant, who would starve unless he left the country."

GARNER v. STRICKLAND British Columbia Court of Appeal. [1955] 4 D.L.R. 329. SIDNEY SMITH, J. A.: The case raised the neat point whether wages earned but not payable at the time a garnishing order is served on the employer are well attached. Counsel for the garnishee told us his client in contesting the present attachment was not acting capriciously but simply sought clarification of the principle for its future guidance. This is quite understandable. The defendant is a logger employed by the garnishee. The plaintiff having a judgment against the defendant served a garnishing order on May 18th last and an issue was directed on the garnishee's liability. The order directing the issue did not specify the exact amount of time to which the question of liability was directed. His Honour Judge Hanna giving his decision on the issue states that "the question to be decided by me is whether or not at the time of service of the garnishing order there was an attachable debt".

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This language follows the usual wording of an issue and the case was argued throughout on the basis that liability at the time of service was the bone of contention. On this point reference may be made to an interesting article by Mr. D. M. Gordon, Q.C., in the Canadian Bar Review of last December, viz., 32 C.B.R. 1141. The defendant logger was employed upon a daily basis. He was actually paid twice monthly, and it was a term of his employment that his payments were only to be made up to a date a week earlier than the pay day. He was paid on the 8th of each month for his earnings up to the end of the previous month and on the 23rd for his earnings up to the 15th. The garnishing order here was served, as we have said, on the 18th. The learned Judge who tried the issue decided that the order attached nothing saying: "I am holding that the time of payment is part of the contract of employment, that the employee in this case could not have enforced payment at an earlier time and following the decision in Quercetti v. Tranquilli I hold that the garnishing order was ineffective." The garnishing order, as is usual, attached "all debts, obligations and liabilities owing, payable or accruing due". The respondents before us followed the reasoning of the learned Judge and his factum puts his case thus: "At the time the garnishing order was served the wages of the judgment debtor would only be 'accruing due' if at the moment of time he could have brought action for such wages against his employer". That contention to our minds robs the word "accruing" of all meaning. Hanna Co. Ct. J. and the respondent before us relied upon the dicta of McDonald J. A. in Quercetti v. Tranquilli, [1941] 4 D.L.R. 63, 56 B.C.R. 481, who said: "These words [or accruing due] were the subject of many decisions in Ontario, the result of such decisions I think being that the test to be applied is whether or not the judgment debtor himself could have brought action against the garnishee for the money in question at the moment when the attaching order was served." We have no criticism to make of the decision in Quercetti v. Tranquilli which was perfectly sound, but, with deference, we consider that the above principle is far too broadly stated as the basis of liability under all garnishing orders. In Quercetti v. Tranquilli the order held to be ineffective was served half an hour before the wages sought to be attached were fully earned. Where it is a question whether money has been earned or not then the test proposed by McDonald, J. A., is perfectly sound and it was the right test in the case before him. But the present case is essentially different. There can be debts already owing but not yet recoverable by action because the parties have postponed the date of payment. The debt is a present debt, the payment is to be a future payment. There are many cases in which such debts have been held garnishable; we doubt if this proposition has ever been disputed. We think a striking example of this principle may be found in Tapp v. Jones (1875), L.R. 10 Q.B. 591. There the debtor had agreed to pay the garnishee a sum of money by monthly instalments over a period and it was held that even the future instalments could be attached, though the order absolute against the garnishee could only direct him to pay over the money as it became payable. It would appear that the fact that a garnisheed debt cannot be sued for until a later maturity date has been reached has nothing to do with the matter except so far as it affects the form of the order absolute to be made against a garnishee. · ·There is an obvious distinction between an obligation to pay which is only conditional on the effluxion of time and an obligation which is merely inchoate until

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the other party has fully rendered services which are a condition precedent to the completion of the obligation. In the language of Lamont, J. A, in Barsi v. Farcas, [1924] 1 D.L.R. 1154, 18 S.L.R. 158, the distinction is made between a "perfected debt" and a "conditional one". He illustrates the difference aptly by comparing the money payable under a mortgage with that payable under an agreement for sale which is affected by questions of title, etc. In the Quercetti case if the employee had failed to perform the work which he had been employed to do in the last half-hour of his employment he would not have been entitled to any wages. So his wages were not accruing due. How different to that is the present case. Here the wages were earned from day to day and there was no question of the employer's obligation to pay being inchoate or conditional. Nothing but the effluxion of time was needed to make it absolute. The wages were therefore attachable. Respondent's counsel said that if the defendant had quit his job on the 18th the money then earned would have been payable to him. However, counsel added "but he did not quit". The significance of this circumstance was not apparent. We think it had none. Even if while the defendant was employed he had later done some act that gave the employer a claim against him, it would not have meant anything. The authorities show that a counterclaim or even a set-off arising after the order is served does not cut down the amount attached. Still less could the bare possibility that the counterclaim might arise mean anything of any consequence here. It is not even suggested that any cross-claim ever did arise. The remarks of McDonald, J. A, were obiter and were directed to facts entirely different from those here; therefore we do not feel in any way bound by them. We think that that learned Judge would have been the first to concede that they were not meant to apply to a case like the present. Counsel for the respondent argued in the alternative that the addition of the definition of debt or moneys accruing due and of s-s. (3) to s. 3 of the Attachment of Debts Act, R .S.B.C. 1936, c. 17, by 1944, c. 1, ss. 2 and 3 following the decision in Quercetti v. Tranquilli, supra, was intended to restrict the right to attach salary or wages to those which had accrued due or become payable or which would accrue due or become payable within 4 days after swearing the necessary affidavit. Neither the history nor the language supports that construction. Whatever additional rights of attachment may be conferred by the subsection, salary and wages remain attachable whenever the circumstances meet the requirements of s. 3 ( 1 ) of the Act. We accordingly would allow the appeal. Garner v. Strickland is so obviously in accord with the fundamental principles of the garnishment process that it would appear to be good law in Ontario also, despite the fact that Holmestead and Langton, Ontario Judicature Act, 5th ed. (1940) 1391 indicate that salary not yet payable is not garnishable and that Houlden, Macklem and Baird, Creditors' Rights, Mechanics' Liens and Bankruptcy (1961) 41 cite Quercetti v. Tranquilli as an authority in Ontario.

THE DIVISION COURTS ACT R.S.O. 1960, C. 110. 129 ( 3) Where a person has a judgment in the Supreme Court or in a county or district court and he desires to garnish the wages of the ju~gment debtor, he may file a certified copy of the judgment in the division court having jurisdiction

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to issue a direction to garnish the wages of the judgment debtor, and thereupon the clerk of that court shall enter the judgment in the same manner as a transcript of judgment from another division court, and thereafter directions to garnish the wages of the judgment debtor may issue and subsequent proceedings thereon be taken as though the direction to garnish had been issued under a division court judgment. ( 4) Where directions to garnish are issued under subsection 3 and judgment is given against the garnishee, the judgment shall not be for an amount exceeding the jurisdiction of the court in a personal action. [By s. 54 this amount is $400, exclusive of interest]. 141. For the purposes of garnishee proceedings under this Act, (a) money which is earned or owing, although not yet due or payable, is deemed to be "owing or accruing" ... 142. ( 1) After judgment has been recovered, the clerk of the court in which the judgment was recovered or the clerk of the court to which the judgment has been transcripted shall, upon the filing of an affidavit as required by subsection 2, issue a direction to garnish directing that all debts owing or accruing to the judgment debtor be attached to satisfy the judgment. 145. Service upon the garnishee of the direction to garnishee has the effect, subject to the rights of other persons, of attaching and binding in his hands all debts then owing or accruing from him to the judgment debtor, and payment by the garnishee into court of the debt so attached to the extent to which the judgment is unsatisfied is to that extent a discharge of such debt. 151. ( 1 ) Where a judgment has not been recovered, a plaintiff in an action in which a debt or money demand summons may be issued may cause to be issued out of the court of the division in which the garnishees, or one of them, if they are joint garnishees, reside or carry on business, a garnishment summons with the particulars of his claim against the defendant with reasonable certainty and detail attached thereto or endorsed thereon. 153. Service upon the garnishee of a garnishment summons has the same effect and consequence as service of a direction to garnish. 156. ( 1) A judgment debtor against whom more than two division court judgments remain unsatisfied in whole or in part may apply to the judge of the court of the division in which he resides for a consolidation order. (3a) Upon the application, the judge may make a consolidation order or dismiss the application. ( 4) Before making a consolidation order the judge shall determine the average weekly income of the judgment debtor for the three-month period immediately before the making of the application, making all proper allowances where the occupation is of a seasonal nature, and shall order the following amounts, calculated to the nearest dollar, to be paid into court under the consolidation order, subject always to any variation that, because of extenuating or other special circumstances, the judge deems proper: 1. 15 per cent of the average weekly income, where the average weekly income does not exceed $30. 2. 20 per cent of the average weekly income, where the average weekly income exceeds $30 and does not exceed $40. 3. 25 per cent of the average weekly income, where the average weekly income exceeds $40 and does not exceed $50. 4. 30 per cent of the average weekly income, where the average weekly income exceeds $50.

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162. Notwithstanding subsection 1 of section 161, where a judgment is transferred under subsection 3 of section 129 and a consolidation order has been made against the judgment debtor, the clerk of the court shall add the judgment to the consolidation order but only to the extent of $400 where the court is in a country and $800 where the court is in a provisional judicial district. DIVISION COURT HANDBOOK 2nd ed. (1966), 138-139 and 147-148. @The Carswell Company, Limited, 1966. Reprinted by permission. McKEON,

There are three types of garnishee proceedings in the Division Courts. A debt owing may be garnisheed before judgment in certain cases, a debt owing may be garnisheed after judgment in all cases and there may be garnishee hearings in the Division Courts under the provisions of the Consolidated Rules in cases originally in the Supreme or County Courts. The proceedings provided for by this Act are so different from such proceedings in the higher courts that a careful review of the various sections is essential to ensure in each case that the Act is being complied with properly. Sections 141-155 provide a self-contained code of the procedure and law. In 1950 there was a complete revision of the garnishee sections and the existing sections were changed or replaced in order to provide for a more comprehensive and less technical method of dealing with garnishee problems in order that an equitable result might be arrived at in each case .... The most important single amendment in garnishee proceedings in the 1950 Act was the introduction of the present definition of the important words "owing or accruing due" which render garnishee proceedings in other courts so difficult when the garnishee co-operates with the debtor by payment of the money before the stipulated date for payment. The definition also does away with any possibility of interpretation that the money was not owing or accruing until the time for payment had come and passed. Wages are now subject to attachment although not yet payable or even fully earned. The net result is that the creditor is given a reasonable opportunity to attach money owing to the debtor whereas previously he was likely to be defeated by any number of technical reasons outside of his knowledge or his ability to ascertain or disprove. . . . It is questionable whether a debt that is payable on a condition or contingency other than the passage of time is one that is subject to garnishment at all as being a debt or whether it is a debt subject to the rights of the garnishee to retain it until fulfilment of the condition or happening of the contingency. It is submitted that the enactment of sec. 141 (a) did not make such debts subject to attachment at all. A significant advantage to the transfer of Supreme and County Court judgments to the Division Court for garnishee proceedings is that the attaching creditor can thereby avoid sharing the proceeds of the garnishee with other creditors. For although s. 4( I) of the Division Courts Act provides that a creditor who attaches a debt shall be deemed to do so for all creditors, s. 4(3) provides that this rule does not apply to debts attached in the Division Court. In other words, proceeds of Division Court garnishees are not paid to the sheriff and held for a one-month period but are paid directly to the Division Court clerk and thence immediately to the creditor. Of course, the making of a consolidation order under s. 156 of the Division Courts Act may deprive a creditor of this advantage. In the event of a consolidation order there is a clear ceiling of $400 or $800 on the

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amount any creditor may claim. (He retains the right to enforce any additional part of his judgment after the consolidation order has run its course). Quaere whether, in the absence of a consolidation order, there is any ceiling on the amount which a judgment creditor can attempt to realize by garnishment in the Division Court in the light of the general limit of monetary jurisdiction established bys. 54 ($400). The problem arises, of course, only with respect to judgments transferred from the Supreme or County Courts, where the limits of monetary jurisdiction are higher. The prevailing opinion is that s. 54 has no application to the transfer-of-judgment situation. Notwithstanding any action by way of garnishee proceedings in the Division Court, a judgment creditor who has transferred his judgment from a higher court is still free to pursue simultaneously all remedies available in the higher court ( whether there is a consolidation order or not). Consolidation orders made in Division Courts have no effect on proceedings in other courts. THE WAGES ACT R.S.O. 1960, c. 421, as amended by 1960-61, c. 103.

7. ( 1 ) Seventy per cent of any debt due or accruing due to any mechanic, workman, labourer, servant, clerk or employee for or in respect of his wages is exempt from seizure or attachment, provided that if a creditor of any such mechanic, workman, labourer, servant, clerk or employee, desires to contend that having regard to the nature of the debt and the circumstances of the debtor, it is unreasonable that as much as 70 per cent of such debtor's wages should be exempt, the judge may in any particular case, upon a hearing of the matter, reduce such percentage of exemption, and provided further that this section applies only where the amount of such exemption exceeds the sum of $2.50 for each working day represented by the wages seized or attached and that a portion of such debtor's wages not exceeding the sum of $2.50 for each working day represented by the wages seized or attached is in all cases exempt from seizure or attachment. (2) Nothing in this section applies to any case where the debt to the creditor has been contracted for board and lodging, or where the debtor is an unmarried person and the judge, upon inquiry, finds that he has no one dependent upon him for support. ( 3) If the debtor desires to contend that in the circumstances of any particular case, having regard to the size of his family, the wages he is earning and any other matter or thing which the judge may deem proper to take into account, the exemption allowed by this section should be increased, the judge has power to increase and to make an order providing for an increase of exemption which he may consider just and reasonable under all the circumstances. ( 6) Any contract hereafter made may provide for the assignment by the debtor to the creditor of a portion of the debtor's wages up to but not exceeding the portion thereof that is liable to attachment or seizure under this section, and any provision of any contract hereafter made that provides for the assignment by the debtor to the creditor of a greater portion of the debtor's wages than is permissible under this subsection is invalid. 8. ( 1) Where a garnishment order has been made against the debtor, he may apply to the judge for an order for the release of the garnishment and for the payment of the judgment by instalments and, if the judge deems it proper in all the circumstances of the case, he may make the order, fixing therein the amount and times of payment, and, so long as the debtor is not in default under the order, no further garnishment of the debtor's wages shall be had in respect of the judgment debt.

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9. Proceedings to attach any debt due or accruing due to any mechanic, workman, servant, clerk or employee for or in respect of his wages shall be taken only where the claim of the creditor against the debtor is upon a judgment. The wages of Ontario civil servants cannot be garnished, but may be reached under s. 9 of the Public Service Act, R.S.O. 1960, c. 331. The wages of Dominion civil servants cannot be reached in any way. S. 208 (1) of The Canada Shipping Act, R.S.C. 1952, c. 29, provides that "wages due or accruing to a seaman ... are not subject to attachment or arrestment from any court." In Loughead v. Shackleton, [1955] O.W.N. 922 the Ontario Court of Appeal held that this section is within the legislative competence of the Parliament of Canada and set aside a garnishee order against a seaman serving on a ship engaged in voyages on the inland waters of Canada. In Re Hamill and Canadian National Railways (1961) , 27 D .L.R. (2d) 61 , the P.E.I. Supreme Court en bane held exempt from attachment the wages of a steward on a registered Crown-owned ferry boat operated by the C.N.R., even though anomalously there would be no such exemption for judgment debtors employed in the rail service, as distinct from the connecting ferry service, of the same company [C.N.R. v. Croteau [1925] 3 D.L.R. 1136] Campbell, C.J., delivering the judgment of the court, said of Loughead v. Shackleton ( at p. 64) : "The decision was rendered orally, and without extended reasons, and it is not clear how fully the question involved was presented to, or considered by, the Court. It is, however, the only judgment of a provincial Court of Appeal on the point, and should be followed unless it is shown to be manifestly wrong. I am not satisfied that such is the case, but it is with some hesitation and considerable reluctance that I follow the authority of Loughead v. Shackleton and hold s. 208 ( 1) (a) to be intra vires.

PARAMOUNT ATTRACTION AND SALES COMPANY LIMITED v. LUST Alberta District Court. [1950] 1. W.W.R. 258. S1ss0Ns, D. C. J .: This is an application for an order that the sheriff of the judicial district of Medicine Hat be appointed as a receiver of all moneys which the defendant shall be, may be or shall hereafter be entitled to receive from His Majesty the King in the right of the Dominion of Canada. The application is supported by the affidavit of Neil Victor German, Barrister, deposing that on May 17, 1949, the plaintiff obtained judgment against the defendant in the sum of $382. 71 and costs in the sum of $31.10. The affidavit further deposes that the defendant has been examined in aid of execution and a transcript of the said examination is an exhibit to the affidavit. The examination indicates that the defendant has no property which can be taken by ordinary execution. He owes on his furniture and is indebted to his bank in the sum of $120. He is a young war veteran, married with one child. His only income, other than a 45 per cent war service pension of $64.80 per month, is a salary of $135 a month in respect of his employment by the Dominion Government at the Defence Research Board's experimental station at Suffield, Alberta. The receiver order is desired in respect of these wages. Counsel for the plaintiff has referred me to C.N.R. v. Croteau [1925] S.C.R. 384, and particularly to the following comment at p. 388 of Duff, J. (later C.J.C.): "The real difficulty in attaching moneys payable by the Crown to a third person lies in the inability of the courts to make an order against the Crown. Generally speaking, moneys payable by the Crown are subject to equitable

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execution, the appointment of a receiver operating as an injunction prohibiting the judgment debtor from receiving the fund attached. The process involves no order against the Crown." Reference was also made by counsel to Boucher v. Viala [1947] 2 W.W.R. 277. In this case a sheriff was appointed receiver to receive from the Crown the moneys earned by the debtor to date under his contract with the Postmaster General for the hauling and delivery of mail and parcel post. Counsel submits that these authorities establish that a receiver may be appointed in such a case as the present and that the question is not one of jurisdiction but of discretion. I do not think that the cases cited meet the two objections I see to the application: (1) The rule of public policy that salaries payable by the Crown out of national funds are not subject to attachment or other method of execution; and (2) The principle that future instalments of salary are not attachable. Duff, J . in C.N.R . v. Croteau, supra, was not dealing with the rule as to public policy. He makes this clear in the following words : "It has not been argued, it should be added, that by any rule of public policy the wages attached were inalienable, and no opinion is expressed upon any such question."

The British Columbia Court of Appeal case of Cane v. Macdonald (1902) 9 B.C.R. 297, holds that a receiver cannot be appointed to receive a salary payable by the Dominion Government. In the Alberta case of Hobbs v. Atty.-Gen. of Can. (1914) 7 W.W.R. 256, 7 Alta L.R. 371, 29 W.L.R. 650, an order had been made by Simmons, J. appointing a receiver of money owing by the Crown to the defendant for remuneration to him as a sergeant in the Royal North West Mounted Police. This order was set aside on appeal on the ground that the defendant was a public officer and, as such, his remuneration was not assignable or subject to any form of execution on the ground of public policy. Beck, J., in delivering the judgment of the Appeal Court, reviews the authorities and concludes : "For the reasons indicated I think the judgment debtor holds a public office under the Crown, whose remuneration is payable out of national funds, and that it is contrary to the policy of the law that that remuneration, intended to maintain him in a state of usefulness in the Royal North West Mounted Police Force, should be subject to attachment or other method of execution." His Honour Judge Hanbidge in Boucher v. Viala, supra, quotes the following from the judgment of Beck, J. in Hobbs v. Atty.-Gen. of Can., supra: " 'At all events, in the case of an admitted debt owing by the Crown, which if owing by a private individual would be attachable, there is no need of any attempt being made to take any action or other proceeding against the Crown or any of its officers or officials. The proper proceeding is purely in personam, and by way of an injunction to restrain the creditor from receiving, and a receiver order merely authorizing the receiver to receive and give a receipt for the debt, and in a proper case, to sign the Crown's creditor's name as endorser of any cheque or order for payment of the amount.' " In these remarks Beck, J. was not really dealing with the matter before him, which he had already disposed of on the grounds above mentioned, but was simply answering another point raised during the argument. That point was

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whether there was under any circumstances jurisdiction in the Alberta Supreme Court to make such an order. His Lordship held that under certain circumstances there was such a jurisdiction as a receiver order is not an order against the Crown. He was simply saying what Duff, J. said later in C.N.R. v. Croteau, supra. It will be noted that Beck, J. in these remarks was not dealing with the point of public policy upon which he decided the case then before him. His Honour Judge Hanbidge concludes: "It appears to me from the decision in Hobbs v. Atty.-Gen. of Canada, supra, that I can only give the order to receive wages earned to date." As I read Hobbs v. Atty.-Gen. of Can., it is no authority for the proposition that an order can be made to receive moneys earned to date. On the contrary, Beck, J. said: "The reasoning of all the cases which hold that the remuneration for services in a public office is on grounds of the policy of law not attachable, is almost if not quite equally applicable to moneys due in respect of past services as in respect of future services, and if it was not intended to be applied equally to past services, all these decisions and the reasoning upon which they are founded may be put aside in view of the decision in Holmes v. Millage [1893] 1 Q.B. 551, 62 L.J.Q.B. 380, in which it is held that future earnings by way of wages or salary payable even by a private individual are not attachable." The authority referred to, Holmes v. Millage, supra, was followed by the late Chief Justice Harvey (then Harvey, J.) in Forin v. Wagner ( 1908) 9 W.L.R. 593: "* * * the case of Holmes v. Millage [supra] is a distinct authority that a receiver may not be appointed to receive payments of salary subsequently falling due. The evidence before me does not show that there is any salary due at the present time, and the application is clearly for the purpose of obtaining cheques as they are subsequently issued. This the creditor has no right to do and the application must be refused with costs." Likewise, in the case before me there is no evidence that there is any salary due at the present time, and the application is clearly for the purpose of obtaining cheques as they are subsequently issued. The application is dismissed with costs. R. N. BATES, THE WAGE ASSIGNMENT 1966. 24 Faculty of Law Review (University of Toronto) 123. Reprinted by permission.

Introduction The assignment of wages 1 is becoming an increasingly popular method in Ontario by which creditors can secure their debt and, when enforcement is necessary, avoid court interference with the collection. However, the criticisms of this convenient and efficient method of collecting debts from delinquent debtors have also increased. Such criticism comes from the press, 2 the politicians3 1Throughout this note, the term "wage assignment" applies to the assignment of both future wages and wages already owed. 2Toronto Daily Star, Sept. 2, 1965. One of a series of articles by columnist Ron Haggart in which the wage assignment is regarded as a "vicious weapon". 3 FINAL REPORT OF 1HE SELECT COMMITTEE OF 1HE ONTARIO LEGISLATURE, Sessional Paper No. 85, June 10, 1965.

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and even from the collection agents themselves. 4 Judicial intervention is noticeable only by its absence. The silence results, in part, because of the court's natural bent to refrain from judicial legislation, but chiefly because so few cases in which wage assignments are involved ever reach the courts.5 This note intends to trace the "life-span" of a wage assignment, from inception to successful use. In so doing, both the legal aspects as well as day-to-day commercial attitudes will be discussed and, in addition, consideration will be given to the prospects of change both in the legislature and the courts. The Legal Underpinnings An historical analysis of the legal aspects of the wage assignment is not proposed but, rather, a brief look at its legal foundations will be attempted. An assignment of wages in the commercial world usually includes two legal assignments. The first is for all wages then owing and due from an employer to an employee, and the second includes all wages accruing to the employee from any debtor. Both assignments are usually contained in one document. 6 A typical assignment such as used by one of Canada's large financial institutions reads: "For value received, the Purchaser hereby assigns unto the Vendor the wages, salary, commission and other monies earned or to be earned by him in the employ of his present employer, ........................................ , or any future employers to the extent of ................ per cent per pay-period. The Purchaser hereby authorizes and directs his said employer or any future employer to pay the said wages, salary, commission and other monies to the said assignee and hereby appoints the said assignee or his attorney to take all proceedings which may be necessary for the recovery of any amounts above assigned and to give receipts for same in name of Purchaser."

Date..................................................

Place ....................................................

Vendor... ..........................................

Purchaser................................. ...........

Witness ............................................. One further point should be mentioned. There is some confusion as to whether a wage assignment must conform with the terms of The Conveyancing and Law of Property Act, sec. 54.7 It is submitted that wage assignments are not subject 4THE 0 The

CANADIAN COLLECTOR, Vol. 8, No. 5, Dec. 1964. most recent Ontario case to deal squarely with wage assignments was Lundy v. Niagara Falls Railway Employees Credit Union (1960), 26 D.L.R. (2d) 47, [1961] O.R. 65, 1 C.B.R. (N .S.) 201 (Ont. C.A.). 6 HOULDEN, MACKLEM, BAIRD, CREDITORS' RIGHTS, MECHANICS' LIENS AND BANKRUPTCY 69 (1961). 7 R.S.O. 1960, c. 66, HoULDEN (op. cit. supra note 6) at 68 , suggests that a wage assignment need conform to the Conveyancing and Law of Property Act in three respects only and does not discuss the problem of whether or not it can be "absolute" within the terms of the section. The convenience in conforming with the statute is that it is not necessary to join the assignor as a party when bringing an action against the debtor-employer of the assignor-employee. There is doubt as to whether an assignment of thirty per cent of a debt can be "absolute". The argument is that all of the interest the assignor has in the debt is not assigned. The contrary argument is that there has been an absolute assignment of part of a debt. If the view is taken that the assignment is not absolute, then the assignment is one in equity and the assignee must join the assignor in the action against the debtor.

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to nor will they be required to conform to statutory standards.8 Accordingly, the remainder of this note will proceed on the assumption that assignments of future wages, and wages presently earned, can be enforced, prima facie, in the courts. The Wage Assignment's Inception The wage assignment is used as collateral security when a person, usually as the result of a retail purchase, becomes indebted to the "giver" of credit. The role of the assignment is intended to be analogous to that of the promissory note, which often is signed in conjunction with the assignment of wages. Those persons who require someone to whom credit is being extended to sign a wage assignment can roughly be divided into two classes. On the one hand, there are those whose primary function in the commercial world is lending money. These include banks, finance companies and other such institutions. On the other hand, there is the retail merchant who offers a time payment plan to purchasers of his goods. Few of the financial institutions which enjoy good reputations will ask for an assignment of wages by the debtor as the time of making the loan. The reason is essentially that the chief aim of these companies is the extension of credit. Thus they look carefully to see if the borrower involved is a good risk. The variation in the risk involved will, more often than not, be reflected in the interest rate. 9 The use of the wage assignment by the other major group, the retail merchants, appears, in the writer's opinion, to be the main cause for the concern which assignments for wages has created. Unlike the financial institutions, retail merchants have adopted an unrestricted use of wage assignments, chiefly because they are untethered by the business purposes that bind the former group. Three reasons of a positive nature primarily account for this unrestricted use. They are : ( 1) the emphasis in retailing is placed on "selling", not "loan-making", (2) the high degree of competition in the retail field in which credit purchasing is prevalent, and (3) the need to provide for a fairly quick discount of "time-sale" contracts. The salesman of goods on a retail market usually operates on a commission basis, especially when credit purchases are involved, and as such his chief aim is to sell. Consequently in many cases he tends to be indifferent to whether or not the purchaser can "afford" the goods. The merchant must, however, eventually consider this problem, and the wage assignment, being such an effective, farreaching creditor's weapon, is thus used to counterbalance the salesman's eagerness. Competition requires that a merchant be able to match his business rivals. One of the chief elements in today's economy is that you can buy anything on the time-payment plan. Such plans must be available for customers. Moreover, such plans must be liberal enough to allow the "normal" person to take advantage of them (1 ) with few inconveniences, ( 2) on short notice. The wage assignment, which requires only that the purchaser have a steady job, is custom-made for this purpose. Moreover, it can be and often is, simply included in every sales

8Di

Guilo v. Boland et al., (1958) , 13 D.L.R. (2d) 510, (1958) O.R. 384 (Ont. C.A.) . See also, Canning v. Avigdos, (1961) O.W.N. 59 (Ont. C.A.) . 9 One finance company manager whom the writer interviewed said : "We feel that if there is that much risk involved we shouldn't make the loan." However, this does not preclude such companies from requiring an assignment when the risk unexpectedly increases after the loan was made.

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contract. 10 Herein lies another problem. For the inclusion of such an assignment as a clause in a sales contract simply perpetuates what was designed as a security measure in less-than-good risk cases. Perhaps most ironic, however, is that the wage assignment is looked on as one way of ensuring a "fast" discount of the contract. And it is here that a vicious circle begins. The retail merchant can either retain the wage assignment or "discount" it (i.e. assign it for a sum of money in excess of the price tag on the goods, but at less than the "contract" monthly payment total) to a finance company. The finance company wants to hedge its position because it knows that the usual precautions it takes when making a loan were probably not considered when the sales contract was signed. The best method the finance companies have found of "hedging" is to secure a wage assignment. This in turn is appreciated by the retail merchant, giving him one more reason for requiring a wage assignment when selling "on time". The examination of the wage assignment's inception presents several problems, some of which are in contract. Should the customer be told he is signing a wage assignment? Should it form a separate document with separate consideration? 11 Another contractual consideration is whether we should allow an individual to restrain himself in such a manner. Although the deduction of $24 out of a weekly salary of $80 ( 30% of his wages) from the pay cheque of a married man with one child may be legally supportable, it is tantamount to putting him on welfare. 12 The writer realizes that a court will usually lessen the 30 per cent deduction if it is called upon to consider such a case. 13 But as the situation stands today, there is no assurance that the case will ever be reviewed by a court. The second major problem raised in this area is whether it is proper, considering the rather regimented procedures we have for the satisfaction of creditors, to allow this method of collection to be employed. For it is seen that these essential proceciures otherwise required for enforcement of the rights of creditors are circumvented by allowing assignments of this nature. The Wage Assignment in Operation Once the wage assignment has been signed, the debtor has really only one remedy (assuming the assignment deals with wages as required by The Wages Act 14 ) to prevent it from becoming operative. That method is, of course, to promptly pay off the contract in the appropriate instalments. Failure to make a payment usually activates an "acceleration" clause contained in the contract. The creditor now, by virtue of the "acceleration" clause, has a right to claim as due the full balance outstanding. The creditor can enforce payment by using any of the methods open to creditors, e.g. he can sue on the promissory note, seize goods under the chattel mortgage held, or he can activate the wage assignment.15 several of the "standard form" sales contracts which the writer examined, the wage assignment was found in the final clause, in usual small print, and immediately above the space provided for the purchaser's signature for the whole contract. It is customary to include a photostat of the clause and signature as "proof' of the wage assignment when confronting the employer. 11 This is a practice adopted by several financial institutions who wish in the light of developments subsequent to the loan to further secure it. 12[nfra note 54. 13 Lundy v. Niagara Falls Railway Employees Credit Union, supra note 5, D.L.R. at 49. 14R.S.O. 1960, c. 421, as amended, 1960-61 STAT. ONT., c. 103. 1 5AII that is required to "activate" the assignment is to locate the debtor's employer, give him notice of the assignment, and demand payment. lO[n

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It is important to note that the decision to "activate" a wage assignment does not necessarily involve consideration of either the amount of the payment missed,16 the time by which it is late, 17 or the circumstances surrounding the late payment.18 Before a wage assignment can be effective, the employer named in the original assignment or a subsequent employer must be given notice of the assignment and a demand for payment must be made. This is usually done by mail. Most of the letters are of a "form" nature.19 They are on the letterhead of either a law firm, collection agency, or finance company. In some cases, there are obvious and heavy-handed techniques20 at getting employers to acquiesce to the creditor's demands. One letter written on November 24, 1965, concluded, " . . . It is necessary that the matter be adhered [sic] to in order to prevent your company from becoming liable for the entire amount involved under The Conveyancing and Law of Property Act, R.S.O. 1950 [sic], c. 68, s. 53." Besides Statutes, often these letters cite as their legal authority, cases and digests such as : Niagara Falls Rly. Employees Credit Union v. International Nickel Co. of Canada Ltd. 21 ; Canadian Encyclopedic Digest, v. 5, s. 38 (referred to in the body of the letter as "this act") 22 ; Di Guilo v. Boland23 ; Lundy v. Niagara Falls Rly. Employees Credit Union .24 These letters usually contain a copy of the original wage assignment. 25 In many instances there is no indication by the creditor of what is the actual debt allegedly owed by the employee. One employer discovered that the "balance outstanding" included a $20 "tracing" fee. Once the creditor has made his demand of the employer, whether or not the money is received depends on the employer. As has been pointed out to articling students, "It is almost unnecessary to say that the wage assignment will not work without co-operation of the employer."26 But because of the nuisance involved, employers more often tend to be compliant rather than reluctant, and therefore it is seldom that the creditor is forced to seek recourse in the courts as the only other method of satisfying his debt. Reaction to the Wage Assignment On receiving a wage assignment27 an employer can adopt one of five courses of action. He can, first of all, immediately discharge the employee involved. Obviously (if dismissal is successful) this is one of the quickest and least expen-

16The writer found one case where the assignment was activated over an outstanding bal-

ance of $60. this same case, the debtor had missed payment by only 12 days. 18The nearly nation-wide mail strike during July of 1965 did not prevent the receivers of the then bankrupt Atlantic Acceptance Corporation from "activating" wage assignments where the (in some instances) debtor had been late with only one payment. 190p. cit. supra note 6, at 89. 20The writer appreciates that a reasonably firm approach is normally required. 21(1960] O.W.N. 42, 23 D.L.R. (2d) 215 (Ont. C.A.) . 22This reference from the C.E.D. was used by a collection agency owned by two lawyers. 23Supra note 8. 24Supra note 5. 25Supra note 10. 260p. cit. supra note 6 at 69. 27The assignment is invariably sent by registered mail. 1 71n

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sive 28 choices. At the other extreme, the employer can make the appropriate deductions and either absorb or pass on any expense involved. The third choice is to do nothing and let the creditor decide on the next move. This course clearly exposes the employer to the threat of litigation if the creditor decides to sue the employer. The fourth choice is one which involves extra work and, consequently, is less frequently adopted. This alternative requires the employer to confront the employee concerned, and to try to discover what has happened. Once the details are learned, the choices for the employer are to decide to pay, to do nothing, or to refuse to pay. The final possibility is to try to arrange a settlement with the creditor. Normally this involves arranging for a lesser amount than was assigned to be paid per pay period, thus preserving the solvency of the debtor. At this juncture we should note that an interesting phenomenon has occurred. If there is a negotiation, we have two persons deciding what the legislature intended the courts to do, that is, to review the details of the case, with consideration given to reducing the amount the creditor claims. 29 Suffice it to ask only one question: Is the real interest of the employee-debtor being considered? If the employer refuses to pay, it is unlikely that a suit will be brought against him. The reason for this is essentially that the employer could dismiss the employee, and the most the creditor could recover is the amount paid subsequent to the notice of the assignment which may not exhaust the complete debt. To get more money the creditor would have to start the whole process again. The much wiser course is to obtain judgment on the debtor and then obtain a garnishee. One disadvantage, of course, is that the amount claimed is subject to the review of the courts. Legislation Relevant to Wage Assignments The wage assignment reaches court when the creditor-assignee decides he should enforce, through the proper legal channels, the equitable claim he has upon the property acquired by the debtor-assignor. There is little doubt that prima facie the creditor has a good claim. 30 There appears to be in Ontario but one statutory restriction on such assignments, and that is The Wages Act. 31 One section of that Act which is relevant to this discussion is the limitation contained in section 7 ( 6) , which states that: "any contract . .. made may provide for the assignment by the debtor to the creditor of a portion of the debtor's wages up to but not exceeding the portion thereof that is liable to attachment or seizure under this section, and any provision of any contract hereafter made that provides that for the assignment by the debtor to the creditor of a greater portion of the debtor's wages than is permissible under this subsection is invalid."32 The reference meant by the amount "permissible under this subsection" is to section 7 ( 1 ) of The Wages Act which provides: 28Subject to the cost of rehiring and retraining, which in any event would be minimal when a large corporation is involved and the employee is classed as unskilled labour. 29This would occur only when the employer is sufficiently considerate to consult the best interests of the employee. 30This view was clearly stated in Tailby v. Official Receiver (1888), 58 L.J.Q.B. 75, 13 App. Cas. 523 (H.L.), and recently adopted in the Supreme Court of Canada in Holy Rosary Parish (Thorold) Credit Union v. Premier Trust Co., 51 D .L.R. (2d) 591 at 593. 31 R.S.O. 1960, c. 421 as amended by 1960-61 STAT. ONT., c. 103. 32Emphasis added.

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"Seventy per cent of any debt due or accruing due to any ... employee for or in respect of his wages is exempt from seizure ... " Thus the base amount that can be deducted from the debtor's wages is 30 per cent. It is noteworthy that the statute does not specify gross or net wages. Presumably this is because the statute also gives to the court the power in section 7 (3) to allow the debtor to ask for an increase in the exemption, " ... having regard to the size of his family, the wages he is earning and any other matter or thing that the judge may deem proper to take into account .... " This power parallels the power the judge is given to lower the exemption base " ... if . . . it is unreasonable that as much as 70 per cent of such debtor's wages should be exempt ... " 33 In short, then, the judge looks at all the facts of the case and the financial status of the debtor to decide how much the debtor can afford to pay. His approach is to look at the matter exactly the same as though it were an action for garnishment. 34 For the purposes of our discussion it is essential to note, that if the employer of the debtor has paid to the debtor the full amount of the wages, he ( the employer) could be held liable for that amount paid subsequent to the notice of the assignment. But this liability may not be incurred, for the judge may for several reasons require him to pay nothing - ranging from the judge's apparent power to increase the exemption to 100 per cent, 35 to a finding that the original assignment was the result of fraud. Two further points on the relevant legislation merit discussion. That there are inadequacies in the present legislative provisions is evident from both of these points. The first is the ill-fated Bill 108 which the then Attorney-General of Ontario proposed for legislation in the second session of the 27th Legislature of Ontario. 36 The stated purpose of that Bill was "an Act to amend The Wages Act". In the preamble to the Bill was the following "[the] purpose of the Bill is to remove existing confusion and abuses arising in the granting and enforcement of wage assignments ... Procedures ... are provided ... to ... make wage assignments more effective." The proposed Bill had four important revisions. It proposed lowering the exemption limit from 30 to 18 per cent; it would allow a total deduction of only 25 per cent of the debtor's wages at any one time, whether by means of wage ass. 7 ( 1) of The Wages Act,

supra note 31. discussion, of course, is predicated on the view that procedurally it is possible for the assignor-debtor to get into court. If the creditor sues only the employer, there is often a good chance the "real facts" of the case are never brought out. Nominally the debtor must always be a party. But only where the debt is owed by the employer or where the assignment is disputed by the debtor (assignor) can the "real facts" make an appearance. From the reports, it is clear the debtor rarely makes an appearance. Moreover, s. 7 (3) allows only the debtor to contend that the exemption should be raised. It is doubtful whether an employer could make such a motion. 3 51n an unreported decision of the Division Court, Linkletter v. Equitable Finance, August, 1965, Judge E. L. Weaver raised the exemption to 100 per cent. An appeal was launched but dropped subsequently. See also footnote 3 supra.

34This

361964.

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assignments, garnishments or seizures; it would allow an assignor to enter the action even if not a party and tell of the circumstances surrounding the assignment; and it would, where the employer had some doubts, allow him to pay the money owed into court and thus avoid possible litigation. All four provisions would have made progress towards overcoming problems in the area. Had the Bill come just ten numerical places up on the legislative list, there is little doubt it would be law today. But Mr. Cass's resignation from the Government shortly prior to the scheduled first reading of Bill 108, due to the furor created as the result of his famed Bill 99, "Ontario's Police State Bill", destined Bill 108 to legislative limbo. The second point to be raised is the recent publication of the Final Report by the Select Committee of the Ontario Legislature on Consumer Credit.37 Appointed in April of 1963 this twenty-one-man committee made a thorough survey of wage assignments, inter alia, and reported that at the moment, "Some grantors of credit get from the borrower a blanket wage assignment which permits the grantor without any legal process effectively to garnishee the wages of borrowers ... " 38 As to the effect of wage assignments the committee reported: "Wage assignment~ . .. were not acceptable to some employers who would dismiss an employee rather than accept such direction. As some witnesses observed, no one gets benefited under such an assignment. The finance company gets no money, the employee loses his job and his family often had [sic] to seek welfare." 39 As to its assessment and conclusions the committee said : "The Committee found that almost without exception, wage assignments annoy employers, and frequently imperil the employee's job. The Committee found no reason for creditors not being compelled tc> seek their rights through the courts, where wage garnishments are subjected to judicial discretion. 40 "The Committee is opposed to the blanket or automatic type of wage assignment and recommends that legislation be enacted in Ontario prohibiting any assignment or order for payment of salary, wages, commission or other compensation for services or any part thereof earned or to be earned." 41 In the present session of the Ontario legislature the government indicated legislation in this area would be forthcoming. While it would be speculation to proceed further as to what the legislation will state, suffice it to say that the writer hopes the recommendations of the Select Committee will be fully implemented. How the Courts Stand on the Matter .. . As has been suggested earlier, there is no doubt that the courts have fully recognized that wage assignments prima facie are valid equitable claims which a creditor has on a debtor. The scope of this discussion is to examine this attitude and suggest that the courts could easily attain the end towards which the legislators appear to be groping. note 3. at para 181. Emphasis added. at para. 184. at para. 191. 4 1/d., at para 192. Emphasis added. 31Supra

38/d., 39/d., 40/d.,

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What reasons are there that the courts might offer for not enforcing contracts of this nature? It is submitted that they might well refuse to uphold such contracts on the ground of public policy. True, such an approach is open to objection on two grounds : first, that it appears to be expressly rejected by two Ontario Court of Appeal decisions and by a recent Supreme Court of Canada case; second, that this is nothing better than "judicial legislation" under different wraps. In regard to the first objection, it is submitted that a close examination of these cases shows that they can be distinguished. In Holy Rosary Parish (Thorold) Credit Union v. Premier Trust Co. Ltd., 43 Spence, J. said that the question as to whether wage assignments are void as contrary to public policy was settled in Lundy v. Niagara Falls Railway Employees Credit Union.44 In the latter case, Laidlaw, J. A., had indeed said, when this argument was raised : " . . . [I] cannot say that the assignment of wages made by the appellant

[debtor] to the respondent [creditor] is contrary to public policy." 45

This brief comment on the state of the common law is merely a more general statement of the conclusion reached a year earlier4 6 by the same judge in a case involving the same plaintiff. In that case, Niagara Falls Railway Employees Credit Union v. International Nickel Co. of Canada Ltd., 47 Laidlaw, J. A., said in rejecting the argument of counsel: "Counsel for the respondent sought to support the opinion of the learned trial judge that the assignment of wages . . . was contrary to public policy, and endeavoured to invoke the principle that a document or transaction which is in restraint of trade is contrary to public policy. That is not this kind of transaction. In my opinion counsel for the appellant has effectively and successfully met that argument . .. [with] Horwood v. Millar's Timber and Trading Co. Ltd. 48 , 49 It is submitted that Mr. Justice Laidlaw's general remarks in the Lundy case, that wage assignments, per se, are not contrary to public policy, must be viewed in light of his earlier decision in the Inco case, that such assignments are not contrary to public policy as being in restraint of trade. To conclude that he intended his remarks in the Lundy case to be directed to public policy in general would seem unwarranted in the light of the fact that he gave no further elaboration in that case as to what he meant by public policy, and the fact that counsel bad argued the issue from the aspect of restraint of trade. If this reasoning is correct, then there are three possible methods of distinguishing the above cases. First, there is the clear fact that there has been no ruling on whether wage assignments are void against public policy in the light of the 1960 amendment to The Wages Act. 50 Secondly, Spence, J.'s remark in the 4351 D.L.R. (2d) 591 at 596.

44Supra note 5.

D.L.R. at 49. 46The Lundy case was decided Nov. 15, 1960; the Inca case, Nov. 5, 1959. 47 [1960) O.W.N. 42, 23 D.L.R. (2d) 215. 48(1917), I K.B . 305, 115 L.T. 805, 33 T .L.R. 86 (C.A.). 49Supra note 47. 50This argument has little likelihood of ever being raised because it is doubted that any such assignment, in view of the provisions of s. 7 ( 6) of The Wages Act invalidating contracts claiming more than 30 per cent of wages, would ever be signed today. 45/d.,

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Holy Rosary case was possibly obiter dicta, for, as he himself admits earlier in that case, the argument was only "suggested" by counsel at the Supreme Court level; it was not relied upon. 51 The third method of distinguishing the Holy Rosary, Lundy and Inco cases is to simply state that the remark of Spence, J. was correct and shows that wage assignments at common law were not contrary to public policy but only on the grounds that they were not in restraint of trade. Where does that leave us? It is suggested that it still leaves us with the argument that such contracts can be held unenforceable for being contrary to public policy, notwithstanding conformity with The Wages Act as amended. The policy the writer suggests that is being infringed is the administration of justice, and further submits that this is a settled 'head' of public policy. 52 But before the courts will invoke this doctrine there must be evidence that it is a matter which pre-eminently affects the interests of the public. 53 How is the administration of justice affected? It is submitted that these problems are usually strangers to the court room for the reason that if wage assignments are honoured, it is because a compliant employer agrees to remit the money assigned to the creditor, thereby preventing the assignment from being subjected to judicial review. 54 In so doing, the whole machinery which encourages judicial review of the circumstances is thwarted and the rights of creditors who attempt to follow the usual legal channels are prejudiced. The writer further suggests that the public interest in these transactions is clearly discernible. Suppose, for example, a debtor earns $70 a week and a creditor attempts to enforce a wage assignment. If the employer agrees, we are left with a debtor who now earns $49 a week ($70 less 30%) which is less than the minimum wage prescribed in Ontario. 55 As a result, the machinery of The Wages Act is subverted, and the purpose of the legislation aimed at assisting creditors in general is also frustrated. Surely all these matters indicate such a contract has a great effect on the public interest. With respect to the other main objection to the suggestion that public policy be used to hold such assignments unenforceable, i.e. that to do so would be tantamount to judicial legislation, only a short rebuttal is required. The main argu51Supra note 43 at 594.

52The cases are too many to enumerate. A quotation from Egerton v. Brownlow, (1853), 4 H.L.C. 1, per Lord Lyndhurst, at 163, is ample support for this proposition: "It is admitted that any contract or engagement having a tendency, however slight, to affect the administration of justice is illegal and void." 53Keir v. Leeman, [1846) 9 Q.B. 371. 54At this juncture an interesting situation is to be observed. There is a virtual absence of reported cases of actions to enforce wage assignments other than in matters involving bankruptcy. And this leads to two conclusions. First, most wage assignments are enforced apart from and without the sanction of the court. Second, that in matters of bankruptcy the wage assignment if enforced gives a great advantage to the assignee. In the Holy Rosary case supra note 43 the Supreme Court adopted the distinction between moneys earned by the bankrupt in his personal capacity as an employee and as the operator of a business. In the case of the former, if the bankrupt had signed a wage assignment, the wages, or a portion thereof, go to the assignor not the trustee. The trustee takes, however, in cases of business, profits earned after the bankruptcy petition is filed, since the business was carried on with the consent of the trustee. The effect is to overrule the result if not the reasoning of the Lundy case. 55Minimum Wage Act, R.S.O. 1960, c. 240. In the Toronto area, for example, $60 is considered the minimum wage for a 48-hour week. The Act is admittedly regional in its standards. A man can apply for welfare in Toronto if making the minimum wage and if he has two dependants.

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ment against such a view is well expressed by Professor Friedmann in a letter written in 1954 to the Canadian Bar Review, where he wrote, commenting on judicial policy in labour relations, that : "The irony of the [present] situation is that the courts by and large tend to apply [a] mechanistic interpretation to the judge-made "lawyers-law", that is to a field where the legislator intervenes rarely, accidentally and insufficiently, and where the development of the law in accordance with changing social needs remains, as in the past, a paramount function of the law court. " .. . There is a broad area of law which the legislator traditionally leaves to the courts to develop. The vast majority of contract, tort and property relations, is in that field." 56 The writer submits this situation is also the same with respect to wage assignments. Moreover, here is an area which clearly has been left, even in the legislation, 57 to the courts.

Summary That the present situation concerning wage assignments is less than satisfactory is clear. 58 What is needed now is some remedy that will provide effective protection for the interests of the debtor who has made such an assignment. Various alternatives have been advanced ranging from complete prohibition to a simple increase of the exemption rate. The important question which must be answered is whether the court should abdicate its responsibility in this matter. LAW OF PROPERTY ACT R.S.M. 1954, c. 138 33. (1) In the case of an assignment of wages to be earned in the future, given in consideration of a present loan, advance or payment of less than two hundred dollars, unless it is accepted in writing by the employer, the assignment is not valid against the employer of the person making it. (2) Subsection 1 does not apply to an assignment of wages given to secure a past indebtedness for necessaries, or to secure an amount for necessaries to be thereafter supplied, or partly for each of these purposes. (3) In the case of a married man living with his wife, unless the written consent of his wife to the making of the assignment is attached thereto or endorsed thereon, no assignment of wages to be earned in the future made by him is valid. C. Property Subject to Garnishment SANDY v. YUKON CONSTRUCTION CO. LTD. Alberta Court of Appeal. 1960. 26 D.L.R. (2d) 254. The judgment of the Court was delivered by JoHNSON, J. A.: This is an appeal from an order of Greschuk, J., declaring 5632 CAN. B. REV. 353 (1954). 57See ss. 7 (1), 7 ( 3) of The Wages Act. 58THE FINAL REPORT OF THE SELECT COMMITTEE ON CONSUMER CREDIT, supra note 3, was an all-party committee, and the recommendations for, and assessment of, the problems concerning wage assignments was unanimously presented.

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that moneys paid into Court by the garnishee were not garnishable and ordering payment out of these moneys to the defendant. The garnishee is a construction contractor and the defendant is a subcontractor whose tender for a part of the work was accepted. The subcontractor's price was $19,600 and the acceptance of the tender was made subject to "the terms and conditions overleaf". Two of these conditions, particularly, were relied on by the respondent as showing that no moneys were attachable at the date of the service of the garnishee : ( 3) The amount certified by the Architect to be due in respect of the subcontract work and any authorized variation thereof shall not become payable until fourteen days after the receipt by the Contractor of the appropriate Architects Certificate and remittance from the Employer. (9) If the Sub-Contractor at any time refuses or neglects to supply a sufficient amount of labour or materials of proper quality, or fails in any way to perform the Work according to schedule, or cause stoppage or delay of or interference with the Work of the General Contractor or of other Sub-Contractors or fails in performance of any agreements herein, or becomes insolvent, the General Contractor shall be free after three days' written notice to the Subcontractor, to provide through others such labour and materials and deduct costs of same from any money due or thereafter to be due the Sub-Contractor under this Contract. The General Contractor shall also be free to terminate the services of the Sub-Contractor for said Work and to take possession for purpose of completing Work in this Contract of all materials, tools, and equipment, and to employ others to finish the work and to provide materials therefor. Upon termination no further payment shall be made to the Sub-Contractor until the said Work shall be wholly finished, at which time, if the unpaid balance of the amount to be paid under this Contract shall exceed the expense incurred by the General Contractor, such excess shall be paid to the Sub-Contractor; but if such expense shall exceed such unpaid balance, then the Sub-Contractor shall pay the difference to the General Contractor. The expense incurred by the General Contractor shall include costs of materials, finishing Work and damage result~ ing from Sub-Contractor's fault. The contract was entered into on September 22, 1958, and in January 1959, the architect had issued a certificate and $2,700 was paid to the subcontractor. On August 31, 1959, the defendant, claiming it had completed its work, rendered an account for $15,580. The garnishee was issued September 24th .. . . Our garnishee Rules, 550 et seq., use similar language to that used in the Common Law Procedure Act of 1854 (17 & 18 Viet., see c. 125, ss. 61 to 67) which permitted the attachment of debts owed by third parties to execution debtors. These sections now appear as 0 . 45 , rr. 1 to 10 of the English Rules. As far as this application is concerned, the pertinent words of the English Rule are "all debts owing or accruing from such third person", describing what might be attached. In our Rules, Rule 551 uses "debts, if any, due or accruing due from the garnishee". The learned Chamber Judge gave no written reasons for declaring that the garnishee did not attach any moneys under this contract. The respondent has advanced several arguments in support of this order. One of the principal arguments was that, because at the time the garnishee was issued the defendant could not have sued for these monies, they could not be garnisheed, and a quotations from Faas et al. v. McManus, [1930] 1 D.L.R. 302 at p. 304, 24 A.LR. 317, was relied upon. Hyndman, J. A , giving judgment for the Court,

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quoted a paragraph from the judgment of Sedgewick, J., in Donohoe v. Hull Bros. & Co. ( 1895), 24 S.C.R. 683 at p. 688: "Now one elementary principle runs through all these cases, viz., to enable a judgment creditor to obtain an order compelling a third person ( the garnishee) to pay to him a debt which he would otherwise have to pay the judgment debtor, the debtor must be in a position to maintain an action for it against the garnishee, and the debt must be of such a character that it would vest in the debtor's assignee or trustee in bankruptcy if he became insolvent." [p. 305] While there can be no question of the correctness of Faas et al. v. McManus, the test which has been quoted cannot be said to be strictly correct. To insist that the defendant "must be in a position to maintain an action for it against the garnishee" is to ignore the words "accruing due" in Rule 551. Debts have been held to be attachable when they could not be sued for because they had not yet become due, Tapp v. Jones (1875), L.R. 10 Q.B. 591, and Garner v. Strickland & Western Forest Industries Ltd., [1955] 4 D.L.R. 329. The principal argument was that because the architect was required to give his certificate before any moneys became payable, no debt came into existence until the certificate was given. This can only be so if the giving of the certificate is a condition precedent to any debt coming into existence and not merely a condition precedent to there being any right to receive the debt. I do not think that this is so. O'Driscoll v. Manchester Ins. Committee, [1915] 3 K.B. 499, while not a building contract, was one where the decision of an insurance committee had to be given before doctors, who were a part of the national insurance scheme, could receive their fees. The fees the doctor would receive were dependent both on the amount paid into the pool by the insured and the aggregate amount of all of the doctors' bills submitted, and the Court held that the garnishee was valid even though it had been served before the committee had settled the amount which would ultimately come to the judgment debtor. Bankes, L. J., at pp. 516-7 says: "It is well established that 'debts owing or accruing' include debts debita in praesenti solvenda in futuro. The matter is well put in the Annual Practice, 1915, p. 808: 'But the distinction must be borne in mind between the case where there is an existing debt, payment whereof is deferred, and the case where both the debt and its payment rest in the future. In the former case there is an attachable debt, in the latter case there is not.' If, for instance, a sum of money is payable on the happening of a contingency, there is no debt owing or accruing. But the mere fact that the amount is not ascertained does not show that there is no debt. In the present case there was on April 9, 1914, a debt debitum in praesenti but solvendum in futuro. It is not necessary to say exactly at what moment of time the debt was created."

Swinfen Eady, L. J., at pp. 512-3 says: "Here there is a debt, uncertain in amount, which will become certain when the accounts are finally dealt with by the Insurance Committee. Therefore there was a 'debt' at the material date, though it was not presently payable and the amount was not ascertained. It is not like a case where there is a mere probability of a debt, as, for instance, where a person has to serve for a fixed period before being entitled to any salary, and he has served part

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of that period at the time the garnishee order nisi is served. In such a case there is no 'debt' until he has served the whole period." It is suggested that this contract is an entire contract and no debt arises until the whole work is done. An examination of the agreement does not bear this out. It provides for interim payments as the work progresses with only the final payment retained until the work has been completed and accepted. Nor do I think that certification of the amount by the architect is a condition precedent to there being any indebtedness at all. It is, as condition ( 3) says, a certificate of the amount "to be due". There is nothing to suggest in the granting or refusing of a certificate that there is "the happening of any contingency" ( mentioned by Bankes, L. J., in the O'Driscoll case, supra) preventing the establishment of a debt as the work is done, although, of course, the absence of the certificate in most cases will prevent the contractor from being able to sue. I say in most cases, for there are cases where the Courts have permitted recovery even where no certificate has been given. In Oshawa v. Brennan Paving Co., [1955), 1 D.L.R. 321, S.C.R. 76, the engineer refused to certify and although the Court said that such certificate was a condition precedent to payment, the Supreme Court of Canada dismissed an appeal from a judgment in favour of the contractor. In Panamena Europea Navigacion Compania v. Frederick Leyland & Co. , [1947) A.C. 428, the surveyor required further information before he would certify and when this was not forthcoming, he refused his certificate. The House of Lords held the plaintiff could recover. Lord Thankerton in delivering the judgment said at p. 435:

"This means that an illegitimate condition precedent to any consideration of the granting of a certificate was insisted on by Dr. Telfer and by the appellants. It is almost unnecessary to cite authority to establish that such conduct on the appellants' part absolved the respondents from the necessity of obtaining such a certificate, and that the respondents are entitled to recover the amount claimed in the action." And he cites several passages from other judgments as authority. It is inherent, I think, in both of these judgments that a prior debt existed before the certificate came into existence and that the certificate requirement merely postponed the payment until the certificate had been given. If the indebtedness was conditional upon the certificate, it would have been impossible for the Courts to have given the judgments they did in these cases. The effect of condition ( 9 ) ( quoted above) remains to be considered. Are the rights given to the general contractor - i.e., to complete the work if the subcontractor fails to do so or if the contractor elects to terminate the contract, and to charge the cost of completing the project against the value of the work done inconsistent with the existence of a debt before a certificate is granted? On the contrary, it acknowledges, tacitly at least, that a debt is created as the work is completed and it is this debt that is to be charged with the cost of completing the contract if the contractor invokes this condition. If the contractor took over under this condition before half of the work had been completed, the value of the uncompleted work would, of course, exceed the value of the work done and there would be no debt to garnishee (see Webster v. Webster) (1862), 31 Beav. 393, 54 E.R. 1191). If more than half of the work had been done before the contractor stepped in, there would remain an attachable debt, the amount of which could not be determined until the cost of completing the contract had been determined. It is the facts as they exist when the garnishee is served which must

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determine the existence of a debt. I would gather from the examination of Mr. Ross upon his affidavit that the subcontractor had considered that it had completed its contract and had submitted its final bill before the garnishee was issued. If this work was in fact completed, then the amount subsequently paid into Court is properly attachable by the garnishee. If there is any doubt about this an issue should be directed to determine the amount of the indebtedness when the garnishee was served. I have dealt in some detail with the effect of the architect's certificate because of a recent decision of the Court of Queen's Bench in England, a case which was not referred to in argument. In Dunlop & Ranken Ltd. v. Hendel[ Steel Structures Ltd., [1957] 3 All E.R. 344, the Court, consisting of Lord Goddard, C. J., Donovan and Havers, JJ., held that until the architect's certificate was obtained under an R.I.B.A. form of building contract, there was no debt which could be attached. Lord Goddard, C.J ., adopts a statement which appears in the Annual Practice of 1957 under 0. 45, r. 1 (I have mentioned the similarity to our garnishee Rules 550 and 551) (p. 347): "In the case, for example, of a building contract in the R.I.B.A. form, where the builder is paid on the certificate of the architect, it is plain that money in the hands of the building owner cannot be attached until a certificate is issued, and then only for the amount mentioned in that certificate." The Annual Practice, 1956 gives the authority for this statement as an article headed "Building Contracts and Garnishee Orders" (1941), 191 L.T.Jo. 180. The article concludes with the following: "In a case which recently came before a Master of the King's Bench Division, a summons was issued to make absolute a garnishee order nisi which had been made in respect of monies in the hands of a building owner. There was evidence to the effect that a considerable amount of work had been done by the builder for which he would be entitled to payment on certificate, but there was no certificate. The judgment creditor pressed for an order absolute, relying on O'Driscoll's case ((1915), 115 LT.Rep. 683) . He argued that, inasmuch as work had been done under the contract, there must be money "due" from the building owner to become payable on the issue of the architect's certificate. The Master refused to make the order absolute, holding that nothing could be said to be "due" under the building contract until the issue of a certificate. He pointed out that the architect might never issue a certificate at all and that until he did so the building owner was not liable. "Observe the subtle distinction between this case and that of O'Driscoll. There it was admitted that something was actually due from the garnishee the only question was how much. In a building case, however much work may have been done, payment for it is not due until the architect certifies, and only money 'owing and accruing' can be garnished." The subtle distinction escapes me. The nature of building contracts, unless, of course, they are contracts under which nothing is payable until completion, does not warrant changing the plain wording of 0 . 45, r. 1, from "debts owing or accruing due" to "debts owing and accruing due". The mere fact that the value of the work done may be charged with various amounts which may be owed by the subcontractor to the contractor, does not, unless the amount of these charges exceeds the value of the work done, prevent there being an indebtedness. The R.I.B.A. contract mentioned in the above case, is not reproduced in full and it

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may be that it does contain clauses which prevent any indebtedness ansmg unless the contract is completed. There is nothing in the present contract having that effect. I would allow the appeal and set aside the order appealed from and direct the defendant pay back into Court the amount paid in by the garnishee. Upon this being done, the respondent will be entitled to apply to a Judge of the Trial Division to direct an issue to determine the amount of the garnishee's indebtedness on the date of the service of the garnishee, if it so desires. The appellant is entitled to his costs here and in the Court below. Where one person undertakes to reimburse another his costs of an application to the Court, the amount so incurred is a debt due from the former to the latter, and may be attached: Lloyd v. Milton et al. [1940] 1 D.L.R. 803, (Sask.). Moneys owing by an owner to a contractor and retained by the owner pursuant to the holdback provisions of mechanics' lien legislation are not impressed with a trust in favour of unpaid materialmen, and are therefore garnishable by a judgment creditor of the contractor: Mike's Roofing & Insulation Ltd. v. Harder; Thomas , Garnishee (1964), 46 D .L.R. (2d) 595 (B.C.) .

SEABROOK ESTATE CO. LTD. v. FORD King's Bench, England. [1949) 2 All E.R. 94. HALLETT, J.: This is the trial of an issue between judgment creditors and a garnishee and the question which has to be tried has been pleaded as follows: "The above named plaintiffs affirm and the said defendant Reginald Severne Ford denies that the sum of £559 13s. or part thereof was at the time the said order nisi was served due from the said defendant to the said Hythe Golf Club Co., Ltd." The order nisi was served on Feb. 22, 1949. The point is a nice one and, although counsel on both sides have done their best to help their arguments with authority, I do not feel that any of the cases cited to me are of any real assistance. In order that a sum can be attached there must be an actual debt existing at the time the order is sought, though the debt need not be then payable. There has been a good deal of discussion and authority about the words "debts owing or accruing" [in R.S.C., Ord. 45, r. 1), but I think that the position is reasonably clear having regard to the judgments of the Court of Appeal in Webb v. Stenton. It is now well settled that a sum of money may properly be the subject of a garnishee order although the time for payment of it is in the future - solvendum in f uturo - provided that it contitutes debitum in praesenti, viz., a sum of money the obligation to pay which is in existence at the date when the garnishee order is sought. The facts in the present case are not in dispute. The Hythe Golf Club Co., Ltd., the judgment debtors, have been in a state of suspended animation for some time. On Nov. 3, 1922, they created some 40 debentures of £25 each and in respect of those debentures they now owe the sum of £300 and some interest. On Jan. 1, 1948, one of the registered debenture holders appointed Mr. Ford, the garnishee, as receiver and manager of the premises charged by the debentures. It was the duty of Mr. Ford, as receiver and manager, to collect and realise the assets, to pay out of the sums realised the preferential claims laid down by the relevant provisions of the Companies Act, 1929, to pay the debenture holders their principal and interest, and, having then discharged his duties as receiver and manager to the debenture holders, to terminate his receivership,

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no doubt paying over to the company, or to their liquidator if they had been wound up, the ultimate balance remaining in his hands. On Feb. 22, 1949, he had not arrived at that stage. He had filed with the appropriate authority the two returns required bys. 310 of the Companies Act, 1929, i.e., a return showing his receipts and payments for the first six months of his receivership, viz., up to June 30, 1948, and a return showing his receipts and payments for the second six months of his receivership, viz., up to Dec. 31, 1948, and it is common ground that at the material date, Feb. 22, 1949, the financial position was that shown by those two accounts. There was a balance in the hands of the receiver of £891 1 s. 4d., but it does not follow that that sum was owing by the receiver to the company. On the contrary, it is plain from a perusal of these accounts that nothing had yet been paid in respect of either capital or interest due to the debenture holders. The payments which had been made do not appear to include certain other payments which might well be due to preferential creditors. Since the date of those two accounts, the receiver seems to have provided the prospective garnishors with some further information about the payments he anticipates he will have to make. He anticipates that he will have to pay debenture holders £425, that he will be entitled to certain costs in respect of his receivership, that certain legal charges in connection with his receivership will have to be defrayed, and that there will be a preferential claim for income tax. The document at which I am looking was furnished by the receiver in the course of these proceedings and is a mere estimate of what, at the time of drawing it up, he considered he would have to pay before he brought his receivership to an end. It is said by judgment creditors that, if those anticipations are realised exactly, there will remain, when the receivership comes to an end, a sum of roughly £240 which will be payable to the company and which could, therefore, be the subject of a garnishee order. What, however, the judgment creditors have to establish is that on Feb. 22 there was a debt owing by the receiver to the company . ... The question I have to ask myself on the facts of this case is whether, although its payment might be deferred and its amount might not have been calculated and might, at that time, be incapable of calculation, there was, on Feb. 22, any existing debt from the receiver to the company. In my view, there was not. In my view, it is not correct to say that a receiver for debenture holders is a debtor to the company from time to time of such sum as may ultimately prove to be the balance in his hand after payment of preferential claims and after the discharge of whatever may be due to debenture holders in respect of principal and interest. A time may come when the receiver for the debenture holders will become the debtor to the company, but I do not think that that time had arrived on Feb. 22, 1949. For these reasons, I hold that at the material date there was no debt owing or accruing from the receiver to the company within the meaning of R.S.C., Ord. 45, r. 1, and, accordingly, the order nisi must be discharged. RAT PORTAGE LUMBER CO. v. HARTY Ontario Court of Appeal. 1917. 40 O.L.R. 322. RosE, J.: This is an appeal by the Rat Portage Lumber Company, judgment creditors of James Harty, against the order of Masten, J ., in Chambers, dismissing an appeal by the judgment creditors from an order of the Local Judge at Fort Frances, in Chambers, which dismisssed, save as to a sum of $13.60, an application by the appellants for an order that one of the garnishees, the

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Canadian Bank of Commerce, do pay over a larger sum alleged to be due by the bank to Harty. Harty, who was a customer of the bank, had contracts, dated the 15th February and 6th January, 1916, with the Canadian Northern Railway Company, by which he was to cut and deliver to the railway company, by the 15th May, 1916, certain specified piling, for which he was to be paid a specified price per foot. By an assignment, dated the 19th July, 1916, he assigned to the bank, all the debts, accounts, and moneys, due or accruing due or that might at any time thereafter be due to him under those contracts, and also "all contracts, securities, bills, notices, and other documents" held by him "in respect of said debts, accounts, moneys, or any part thereof." This assignment was sent by the bank to the railway company, and on the 9th August, 1916, the treasurer of the railway company wrote to the bank that certain interests of another bank under a previous assignment had ceased, and said: "It will now be in order for me to accept your assignment, and we are making notation on our records accordingly." On the 27th November 1916, Harty wrote to the bank saying that he expected the railway company to make payment within the next few days, and asking the bank, after deducting what was due them for advances, to credit the remainder to the "James Harty special account", as he had payments to make in getting out the piling, and wished the money kept apart. On the 14th December, 1916, the judgment creditors obtained an order attaching all debts owing or accruing due from the garnishees, the railway company and the bank, to Harty. The date fixed by the order for the attendance of the garnishee before the Judge was the 28th December. On the 28th December the local manager of the bank made affidavit that the bank was not, at the time of the service of the garnishee order or on the day of the date of the affidavit, indebted to Harty, but that Harty was indebted to the bank in the sum of $2,453.79 advanced on promissory notes due on the 4th January, 1917, "but the proceeds thereof have not yet been paid to the said bank." He referred to Harty's letter of the 27th November, and added that he was informed by Harty and believed that the claims against the piling, for labour, towage, etc., would absorb any excess that might remain after payment of the bank's claim. So far as appears, the railway company made no affidavit and gave no evidence - and no officer of the railway company was examined by the judgment creditors; but there is a letter undated, but apparently received on the 28th December, from the railway company's solicitors to the clerk of the Court, saying: "Certain moneys are due the judgment debtor by the C.N.R., but at this date we are not able to say the exact amount, as certain accounts have to be submitted and audited. We will advise you later the exact amount attached." It does not appear that the further information thus promised was ever given. On the 15th January, 1917, the bank-manager was cross-examined upon his affidavit. He produced the bank's ledgers containing the accounts with Harty, which shewed, as of the date of the attaching order, at the credit of the "James Harty" account $4.63, at the credit of the "James Harty special" account $8.97, and at the credit of the "cash collateral" account $144.90; he gave particulars of the advances by the bank to Harty, and shewed that, if all the above-mentioned balance were applied in reduction of the amounts advanced, Harty would owe the bank something over $2,500.00. He told of one payment of $1,008.60 that had been received by the bank from the railway company on the 9th December, 1916, and had gone into the cash collateral account, and had been applied, except the $144.90, in the reduction of Harty's indebtedness; and he also told

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of an interview with Harty when he had seen an informal statement, prepared, as he thought, in one of the offices of the railway company, shewing that the amount due Harty from the company, after deducting Government dues, was $4,636.54, without taking into account the $1,008 .60 paid. His summation of the whole thing was that, if the bank received the amount that he supposed to be coming to Harty from the railway company, Harty would have a balance of $1,302; and he said that Harty had entrusted him with cheques for payments which would dispose of that balance. Harty's instructions to him had been that these cheques were for sums due in respect of services rendered to Harty by the payees in connection with his contracts with the railway company. Harty also was examined, but I do not think that his examination throws any light upon the matter under discussion. He was not able to say what the railway company owed him. The date of the hearing of the motion for payment over does not appear; but it is clear that it was before the 22nd February, 1917, because on that day the Local Judge wrote a memorandum that he found that, at the date of service of the attaching order, the railway company were not indebted to Harty in any amount, and that the bank were indebted to him in the sum of $13.60, to which sum the judgment creditor was entitled under the attaching order. The order giving effect to this opinion was issued at once; it is said because the question of costs remained to be determined. As issued, it is dated the 2nd April, 1917. It does not contain any recital as to who were represented on the motion, or any reference to materials other than the affidavit and examination above-mentioned, nor does it specifically deal with the claim as against the railway company : it simply directs payment of the $13.60 found due by the bank, and provides for the costs of the bank. We are thus left without any information as to how the matter was considered as regards the railway company. It is probable that the delay in issuing the order for payment is the cause of the subsequent motion to Masten, J ., and of this appeal. After the motion had been heard by Masten, J., and, apparently, at his request, counsel for the bank handed in a memorandum in which it is said that "no change took place in any of the accounts . . . until on and after March 20th, 1917, when the bank, in good faith, acted on the order now appealed from . . . . The moneys received by the bank on and after March 20th, 1917, were exhausted by the payment of the debtor's liability to the bank, and the payment of woodmen's liens for wages, etc., against the fund, except the sum of $13.60." The memorandum contains an argument that the amounts payable to discharge wage-claims were covered by the contract with the railway company, and an assertion that the bank received the money from the railway company on the latter's undertaking to pay those wages. I suppose that the argument that the amounts required to pay wages were "covered by the contract" is based upon a provision in the contract that the piling is "to be free of all charges, dues, and incumbrances." There is no evidence in support of the assertion that the bank ever received any money from the railway company to pay the wages; (other than the $1,008.60 paid on the 9th December) is the admission in this memorandum, and I think it is fair that, if we accept the admission, we should accept the statement as to the undertaking also. I think I have now referred to all the evidence before the Court except an examination of William Martin, taken on the 2nd April, 1917, not in the garnishee proceedings, but apparently in pursuance of some order, probably a woodman's lien case. I do not quite know how this gets before us, but all the procedure in the matter has been very loose, and perhaps the examination

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ought to be looked at. Martin said that a few days before the 2nd April, the bank paid a cheque of Harty's in his favour for $775.00. As far as this examination goes, it corroborates the statement of counsel for the bank that any alteration of Harty's account with the bank took place after the 20th March. The evidence, which I have reviewed at, perhaps, unnecessary length, makes it clear that neither on the day of the service of the attaching order, nor on the day of the hearing of the motion for an order for payment, did the bank owe any money to Harty; and that when, at a later date, the bank received from the railway company a sum in excess of Harty's indebtedness, the bank had in their hands directions from Harty (given, it is true, after the service of the attaching order) to pay the excess to persons to whom Harty professed to owe it for services in connection with the cutting and delivery of piling. Under these circumstances, I think the order of the Local Judge was right, except perhaps, as to the $13.60; but we need not trouble about the $13.60, for there has been no appeal against the order for its payment. What Rule 590 provides is that the judgment creditor, upon shewing upon affidavit that some person is indebted to the judgment debtor, may obtain an order that all debts owing or accruing from such third person to the judgment debtor shall be attached to answer the judgment debt and that the garnishee do at a time named shew cause why he should not pay the judgment creditor the debt due from him to the judgment debtor. We do not know what was stated in the judgment creditors' affidavit in this case; but it is clear that, if it had correctly stated the facts, it would have said that the judgment debtor was indebted to the bank and that the bank held security for their claim - not that the bank were indebted to the judgment debtor. If the affidavit had so stated the facts, of course the attaching order would not have been made as against the bank. It must have been made upon some misapprehension of the facts; and I think that, when the true state of facts afterwards appeared, it ought to have been rescinded. See Boyd v. Haynes, 5 P.R. 15. However, it was not set aside, but evidence was taken in support of the motion for an order to pay over; and that evidence shewed, as I have stated, that, even at the time of the application to compel payment, Harty continued to be indebted to the bank; so that, even if the state of affairs at the time of the application governed, and not, as I think, the state of affairs at the time of the order nisi (Halsbury's Laws of England, vol. 14, p. 92), the Judge was right in dismissing the application. It is true that if, at the time of the service of the attaching order, the bank had owed Harty any sum, an order for payment over might have been made, notwithstanding the fact that the exact amount of the bank's indebtedness remained to be ascertained: O'Driscoll v. Manchester Insurance Committee, [1915] 3 K.B. 499; Gilroy v. Conn (1912), 3 O.W.N. 732, 2 D.L.R. 131; but I have not found any case in which it has been held that an attaching order can be made upon proof that if things go well the garnishee will become indebted to the judgment debtor. In O'Driscoll v. Manchester Insurance Committee, the judgment debtor was a panel doctor, who had performed service under an agreement with the Insurance Committee, by which the whole amounts received by the committee from the National Insurance Commissioners were to be pooled and distributed among the panel doctors in accordance with a scale of fees; the total amount available for medical benefit so received by the committee was to be the limit of their liability to the panel doctors; if the total pool was insufficient to meet all the proper charges of the panel doctors, there was to be a pro rata reduction for each doctor, or if the pool should be in excess of the amount required the balance was to be distributed among the doctors. The judgment debtor, Dr. Sweeny, had, before

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the service of the order nisi, on the 9th April, 1914, "completed the whole of the work for 1913 necessary to entitle him to payment for his services for that year. He had received payments on account, but it would be some time before the accounts were settled and the balance due to him for 1913 ascertained. There was, however, no contingency which could happen to deprive him of his right to payment on the figures being finally adjusted. . . . The Insurance Committee were kept in funds for making the necessary payments . . . and when they received all the funds for the year they would be in a position to determine the amount payable to each doctor." Then as to the first quarter of 1914, Dr. Sweeny had completed his services and had become entitled to payment on account for work done, and that right was not subject to be divested by any contingency. Swinfen Eady, L. J., from whose statement of the facts (pp. 511, 512) I have quoted, distinguished the case from those cases in which "the attempt has been made to attach income arising from a fund vested in trustees for a cestui que trust. In such a case," says the learned Lord Justice ( p. 513), "until the trustees receive the income there is no debt owing or accruing from the trustees to the cestui que trust, and consequently there is nothing which can be attached to answer a judgement obtained against the cestui que trust. That consideration does not apply to the present case because it is admitted that the Insurance Committee had at all material times ample funds in their hands for the purpose of paying what might be found due to Dr. Sweeny." Bankes, L. J., drew the same distinction. He said ( pp. 516, 517) : "It is well established that 'debts owing or accruing' include debts debita in praesenti solvenda in futuro. The matter is well put in the Annual Practice 1915, p. 808: 'But the distinction must be borne in mind between the case where there is an existing debt, payment whereof is deferred, and the case where both the debt and its payment rest in the future. In the former case there is an attachable debt, in the latter case there is not.' If, for instance, a sum of money is payable on the happening of a contingency, there is no debt owing or accruing. But the mere fact that the amount is not ascertained does not shew that there is no debt." Now the case before us seems to be much more like the trustees cases referred to by Swinfen Eady, L. J., than like the O'Driscoll case: see Webb v. Stenton, 11 Q.B.D. 518; Fellows v. Thornton, 14 Q.B.D. 335. The state of affairs when the attaching order was served was that, if Harty had earned from the railway company more than the amount of the bank's claim against him, and if the railway company did pay the bank, the bank would become indebted to Harty; but the receipt by the bank of the money and the consequent liability of the bank to Harty were, it seems to me, contingencies such as Bankes, L. J ., refers to, and not a certainty such as existed in the case of Dr. Sweeny's claim against the Insurance Committee. See also Chatterton v. Watney, 16 Ch. D. 378. Then it is said that, even if the case as against the bank be as I have put it, the bank are liable because the money in the hands of the railway company was attached, and the bank took the money with knowledge of the attachment. Even if the bank did come under some liability by reason of the receipt of the money, I do not see how that liability can be enforced upon this appeal, in which we are concerned only with the question whether the bank were indebted at the time of the attachment. But, apart from that consideration, I do not think the claim is established. Even in the hands of the garnishee, the order does not transfer to the garnishor any property in the debt attached: what it does is to enable the garnishor to compel the garnishee to pay an amount equal to the original debt: In Re Combined Weighing and Advertising Machine Co. (1889), 43 Ch. D. 99; Norton v. Yates [1906] 1 K.B. 112. Therefore, when the bank received

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payment from the railway company, the bank did not in any sense receive money belonging to the plaintiffs or money impressed with any trust in favour of the plaintiffs; and this is so even if the learned Local Judge was wrong in holding that the railway company were not indebted to the plaintiffs at the date of the service of the attaching order. I do not suggest that there is any error in his judgment as regards the railway company. There is no appeal before us against that part of the judgment, and we do not even know upon what it was based. It may have been upon the ground that, as between the attaching creditor and the bank, the bank as assignees were entitled, at all events to the extent of their claim: Glegg v. Bromley, [1912] 3 K.B. 474; but, as I have said, we are not concerned with that question, but only with the propriety of the order as regards the bank. I would dismiss the appeal with costs. RIDDELL, J., agreed with RosE, J. LENNOX, J. : I think the appeal should be dismissed with costs. MEREDITH, C. J. C. P. (dissenting): Upon the argument of this appeal I was in favour of allowing it and ordering payment by the garnishees to the judgment creditors, of such amount, if any, as should be found, upon a reference, to have been properly applicable to the payment of the judgment debt; but some of my learned brothers thought that there might be some legal obstacle in the way of the judgment creditors that might prevent justice being done between the parties, and so we retained the case for further consideration; a consideration which, I am glad to be able to say, has convinced me that there is no such real obstacle. Although the proceedings before the local Judge tended more to obscure than make plain the facts of the case, it is really a simple one, in which there can be no controversy as to the material facts affecting the question of liability, though the facts affecting the amount of such liability have been left in a deplorable state of uncertainty, rendering a reference to ascertain that amount unavoidable, if it is to be ascertained. What the respondents ask us to do really is, to give a ruling which will advertise a simple means by which a just and useful means of enforcing payment of just debts - garnishee proceedings - can be very largely thwarted and rendered quite ineffectual. That, it need hardly be said, should not be done if there be any proper means of avoiding it. Public interests require that debtors should be compelled to pay their just debts; and that the Courts should give full effect to all the means which the law provides for that purpose - and, emphatically, that technicalities, and unsubstantial obstacles of all kinds, should be brushed aside. The tendency of the Courts should be, not to narrow, but to widen as much as possible, the usefulness of garnishee proceedings: see Hollinshead v. Hazleton, [1916] 1 A.C. 428 ; and O'Driscoll v. Manchester Insurance Committee, [1915] 3 K.B. 499. These few indisputable facts govern the whole question of liability : The garnishee orders were obtained against, and served upon both the respondents in this appeal and the Canadian Northern Railway Company, on the 14th December, 1916. At that time, and for a long time before, the railway company had been indebted to the judgment debtor in the sum of a little more than $4,600; out of which they had, on the 9th December, 1916, paid to the respondents the sum of a little more than $1,000, leaving a balance still due, on that account, of a little more than $3,600. This sum was not only due but was payable and about to be paid, the delay in payment being occasioned only so that the usual formality in dealing with

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and paying such accounts, in the railway company's method of carrying on their business, might be observed. They could have been sued for the amount due long before that day. The respondents were bankers of the judgment debtor, and he had, on the 19th July, 1916, assigned to them, as security to them for his existing and future indebtedness to them, all his claims against the railway company in respect of their indebtedness to him before mentioned. Notice of this assignment, in writing, was given to the railway company, and was accepted by them and noted in their books on the 9th August, 1916. The sum of a little more than $1,000, before mentioned, was paid by the railway company to the respondents as such assignees of the judgment debtor. As there was sure, at all times, to be a large balance, payable to the judgment debtor, out of these moneys, and as they were then about to be paid over by the railway company to the respondents under that assignment, the judgment debtor, on the 27th November, 1916, gave instructions to the respondents to place that balance to his credit in their bank in a special account in his name, as he had payments to make on account of the work done out of which the railway company's indebtedness to him had arisen, and he wished the money kept in a separate account. The garnishee summons came on for hearing before the Local Judge apparently on the 22nd February, 1917; but was not finally disposed of until the 2nd April, 1917; and then the order disposing of it merely directed payment, by the respondents to the appellants, of $13.60, besides making some provision as to the costs of the garnishee proceedings. A minute endorsed on the garnishee summons, made by the Local Judge, dated the 22nd February, 1917, indicates that the learned Judge then found that the railway company was not indebted to the judgment debtor at the time of the service of the attaching order, but that the respondents were indebted to him in the sum of $13.60, to which sum they were entitled in the garnishee proceedings. On the 20th March, 1917, the railway company paid to the respondents, under the assignment before-mentioned, a little more than $3,600, the balance, payable by them, of their indebtedness to the judgment debtor so assigned to the respondents; the appellants appealed against the order of the Local Judge, dated the 2nd April, 1917, and that appeal was heard, and, after procuring further evidence, was considered by Masten, J., who increased the amount payable by the respondents under the order made by the Local Judge by adding to it the sum of $144.60, but in other respects dismissed the appeal; the amounts thus found due were balances appearing to the credit of the judgment debtor in these separate accounts, kept by the respondents, in their book, with him: none of them was affected by the money received by the respondents from the railway company under the assignment before-mentioned, except to the extent of the payment, on the 9th December, 1916, of a little more than $1,000. So that the learned Judge must have considered that the balance of such assigned moneys, received by the respondents on the 20th March, 1917, were not subject to the garnishee proceedings: but, if not, then there was really no money attachable, for, though these balances appeared in the respondents' books on the day that the garnishee order was served, yet the judgment debtor was then really in debt to the respondents in a large amount upon notes etc., not matured, and which would be charged against the judgment debtor in these accounts only at maturity. So that the order is wrong in any case. The simple question upon these facts is: whether the balance of the moneys. due by the railway company to the judgment debtor, which was paid to the respondents under the assignment before-mentioned on the 20th March, 1917 -

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that balance, after payment out of it of all the judgment debtor's indebtedness to the respondents, and after payment out of it also of all lawful charges upon it, having priority to the garnishee order, if any - was money attachable in garnishee proceedings, or which can in any way be reached in such proceedings, or upon this appeal. As no question of fraud is raised, nor even of insolvency, I cannot think that the money was attachable in the hands of the railway company, for under the assignment they were bound to pay it over to the respondents; the right of action to recover it was theirs, not their assignor's. And, that being so, it follows that, unless it was attachable, or can otherwise be reached in the hands of the respondents, it was not attachable and cannot be reached, at all; and, if that be so, all that a judgment debtor need do to defeat garnishee proceedings is to assign to a third person the money coming to him; then the debtor is free, and the assignee is not liable until he receives the money, nor after he pays it over; and, if that be so, it is difficult to see how garnishee proceedings can be made effectual. But, if it really be so, it is very strange that no one has before discovered, and put into effect, this simple method of defeating public policy and the enactment. It would be exceedingly regrettable if we were obliged to give it any countenance : and for two reasons, which seem to me to be very plain, I am quite sure we are not obliged to do so. At all times after the assignment was taken by the respondents, they were under a legal obligation to get in the money and pay, to the judgment debtor, the balance of it. When the garnishee orders were served, the money was payable to them, and they had already received a little more than $1,000 of it; there was no uncertainty regarding it or indeed the amount of it: it was money coming to the jugment debtor, and none the less accruing to him because it had to pass through the respondents' hands before he should receive it. I can perceive no good reason why money thus coming to a judgment debtor, and money which the garnishee is under a legal obligation to him to get in, and put into a special account subjct to his order, and to pay over to him, may not be attached in garnishee proceedings, though of course no order for payment over can be made until the money has come to the hands of the garnishee: and the cases seem to me to quite warrant that conclusion. In that of O'Driscoll v. Manchester Insurance Committee, I cannot find that the judgment of the Court of Appeal was based upon any finding of fact that the moneys were already in the hands of the garnishees when the attaching order was served : Swinfen Eady, L.J., puts it thus (p. 511): "The Insurance Committee received from time to time payments of large sums on account from the Insurance Commissioners, and when they received all the funds for the year they would be in a position to determine the amount payable to each doctor." The rule in the Courts of the United States of America is thus stated in the American and English Encyclopaedia of Law, 2nd ed., vol. 14, p. 769 : "In order to render the claim not liable to garnishment it is necessary, however, that the contingency should affect the actual liability of the garnishee and be such as may prevent the defendant from having any claim whatever against the gar• nishee or right to call him to an accounting." And need I add that this case is not one in which the garnishees were under no obligation to the judgment debtor; that, by reason of the assignment, they were not in the position of one who becomes answerable on the money count for money received for the use of another only when the money has been so received? The respondents were at all times liable to account to the judgment debtor and to pay over the surplus of the moneys received as soon as it was

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ascertained on such an accounting: and, before the order in question was made on the 2nd April, 1917 the respondents had received all the moneys due and pay~ able to them under the assignment; and there was apparently a surplus of such moneys in their hands after payment of all their claims against the judgment debtor, their customer, of over $1,300 according to the testimony of their manager at Fort Frances. If this money of the judgment debtor, so in the hands of these garnishees - subject to any prior charges upon it, if any - cannot be reached by the judgment creditors in these proceedings, garnishee proceedings, instead of being made effectual by the rulings of the Courts, will be reduced to something like a farce. · Then these moneys, over and above the amount needed to satisfy the respondents' just claims against the judgment debtor, were in truth the moneys of the judgment debtor, the respondents received and held them, in a special account, solely for him and subject to his order; it was his money, and, whether in the shape of "bank-notes," "cheques," or "moneys," was subject to the appellants' writ of execution, which was, to the knowledge of the respondents, in the hands of the sheriff in full force and virtue, binding such things, as well as all other the goods and lands of the judgment debtor in the sheriff's bailiwick: see secs. 10 and 20 of the Execution Act, R.S.O. 1914, ch. 80. And not only had the respond.;. ents knowledge of these things, but they knew that these moneys had been attached in the hands of the railway company and in their own hands and that the garnishee proceedings were in force and might be eventually decided against them when they parted with the moneys, if they have really done so. In these circumstances, if it be the law that the appellants can have no relief in this Court in these proceedings, if it be the law that a judgment debtor can defeat garnishee proceedings by merely appointing an agent to receive for him the moneys coming to him, and by making an assignment of them to such agent, some one else must say so. I can say only that, if that be the law, there is some good reason for some of the harshest things that have been said against it. One of my learned brothers seems to find the greater difficulty in the manner in which the appellants' rights should be worked out; but I cannot think it should make any great difference by which door of this Court of Justice the parties have entered, so long as all concerned are in Court and their cases can be fully heard and considered. I decline to aid in turning them out merely so that they may come in some other way. I would allow the appeal, and make the order which I have mentioned, and would give to the appellants the cost of this appeal; no costs of the proceedings heretofore in the High Court Division. Costs of the reference to abide the event. YATES v. TERRY English Court of Appeal. [1902] 1 K.B. 527.

COLLINS, M. R.: This is an appeal by the plaintiff against the result of proceedings which were commenced by him in the county court. He obtained judgment, but on appeal to the Divisional Court the decision in his favour was reversed and judgment given for the defendant. He sued as the assignee of a debt due from the defendant to one Henderson, and he gave notice of the assignment to the defendant. Prior to the giving of that notice a garnishee order had been served on the defendant attaching all debts due from him to Henderson, to answer the judgment that had been obtained in the county court against

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Henderson. After the assignment and notice a second garnishee order was served on the defendant, in respect of another judgment obtained against Henderson in the same county court. Under these circumstances, what the defendant did, with regard to the fund in his hand, was to appropriate a sufficient sum to meet the judgment on which the first garnishee order was founded, and this sum he paid into court. He appropriated the balance in his hands towards satisfaction of the judgment on which the second garnishee order was founded, and he paid it into court in the action in which that judgment was obtained. That was an appropriation which entirely ignored the intervening rights of the plaintiff as assignee. The county court judge held, on another ground than that argued before us, that the plaintiff was entitled to recover; and it certainly seems to me that he was. It was contended in answer to the plaintiff's claim that the effect of the first garnishee summons was to attach in the defendant's hands the whole of the debt due from him to Henderson, and not merely so much as was sufficient to satisfy the judgment debt, and it was said that while the attachment subsisted it would have been wrong to appropriate any part of the fund to any other purpose, and that therefore the assignment could not take effect. This argument is not applicable to the facts of this case, for the defendant freed himself, so far as the balance of the money was concerned, from liability under the first attachment by the payment into court. He was affected with notice of the assignment to the plaintiff, and held the balance of the money for the assignee, and, as that exhausted the fund in his hands, he was under no liability under the second garnishee order. He remained under liability to pay the money to the plaintiff, and cannot raise the defence that he has paid it away elsewhere, because he did not pay it under any exigency but of his own motion. I am therefore of opinion that the appeal should be allowed, and the judgment of the county court judge in favour of the plaintiff restored. ROMER, L. J.: I agree. Where a debtor has been served with a garnishee order covering an amount less than the amount in his hands, no doubt he cannot be compelled to make any payment out of the money in his hands to any one else so long as the attachment is in force. At the same time, it must be remembered that garnishee proceedings are for the purpose of enabling a judgment creditor of the person to whom the debt which is garnished is due to realize his judgment. The person in whose hands the debt is garnished holds it subject to the right of the judgment creditor, and has himself no right to the balance after satisfaction of the judgment. That right to the balance still remains in the person who originally had the right to the whole, and it is capable of assignment. Such a right was assigned in this case, and the assignment completed by notice; so that everything was done to make the assignment effective as to the debt in the hands of the defendant, subject to the right of the judgment creditor under the first garnishee order. In the result there was a balance left in the hands of the defendant bound by the assignment, and it was his duty not to let the subsequent garnishee order pass without notice that the fund was not really that of the judgment debtor, so that it could be attached, but that of an assignee. By breach of that obligation the assignee has lost his money, and according to well-known principles the defendant is liable for that loss. MATHEW, L. J. concurred. In Dommerich & Co. Inc. v. Canadian Admiral Corp. Ltd. (1962), 34 D.L.R. (2d) 530, where R Company assigned to D all its accounts receivable including one from A, it was held that, since A knew that D was the assignee of future as well as of existing debts, A was not entitled to diminish D's rights by an set-off or counterclaim in

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respect of an independent debt between A and R unconnected with the dealings giving rise to the assignment from R to D (Ontario Court of Appeal). CURRAN v. NEWPARK CINEMAS, LTD. Court of Appeal, England. [1951] 1 All E.R. 295. JENKINS, L. J., read the following judgment of the court. This is an appeal by Associated British Film Distributors, Ltd. (whom we will call "the garnishees") from a garnishee order made against them by His Honour Judge Dale in the Westminster County Court on Oct. 11, 1950, in the following circumstances. The order under appeal was made in respect of a sum of £41 7s. 2d. remaining due under a judgment for £47 7s. 6d. debt and £41 7s. 2d. costs recovered by Mr. Curran, the present respondent (whom we will call "the judgment creditor"), on Mar. 16, 1950, in an action brought by him in the Mayor's and City of London Court against Newpark Cinemas, Ltd. ( whom we will call "the judgment debtors"). On Mar. 17, 1950 (i.e., the day after the judgment had been obtained), the judgment creditor's solicitors wrote to the garnishees asking them whether they had distributed for the judgment debtors a film called "Meet the Duke," produced by the latter. On Mar. 23, 1950, the garnishees replied to the effect that they were the distributors of the film in question. On Mar. 29, 1950, the judgment creditor's solicitors wrote to the garnishees asking for details of the financial position as between the garnishees and the judgment debtors in respect of the proceeds of distributing the film, and said in the final paragraph of this letter: "You will understand that our object in raising these further points is with a view to enforcing the judgment obtained herein against Newpark Cinemas, Ltd." On Mar. 31, 19 50, the garnishees wrote in reply to the effect that, if the judgment creditor's solicitors would obtain the necessary authority from the judgment debtors, the garnishees would provide the information required to the extent so authorised by the judgment debtors. It is to be observed that this correpondence contained no suggestion by the garnishees that anything which might be payable by them in respect of the proceeds of distribution of the film was payable to anyone other than the judgment debtors. In April, 1950, the judgment debtors paid the debt of £47 7s. 6d. due under the judgment, but the £41 7s. 2d. for costs due thereunder remained unsatisfied. In these circumstances the judgment creditor, on filing an affidavit to the effect that the garnishees were indebted to the judgment debtors in an amount unspecified, procured the issue out of the Westminster County Court of a garnishee summons against the garnishees, which was duly served on them on July 27, 1950, and was in the usual form, calling on them to show cause why an order should not be made for the payment by them to the judgment creditor of the debts due and owing or accruing from them to the judgment debtors, or so much thereof as would satisfy the debt due under the judgment and the costs of the summons, and in the meantime attaching the requisite amount of the debts so owing or accruing from the garnishees to answer the judgment. In opposition to the summons Mr. L. F. Baker, a director of the garnishees, swore on their behalf an affidavit in which he summarised the terms of a licence agreement between the judgment debtors and the garnishees, dated Nov. 9,

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1948, for the exploitation by the garnishees of the film "Meet the Duke," under which the gross receipts in respect of such exploitation, less costs and expenses and the garnishees' commission, were to be paid to the judgment debtors. After exhibiting a copy of this licence agreement as "L.F.B. l," the affidavit concluded as follows: "On Mar. 20, 1950, the garnishees were served with a direction and authority now produced and shown to me marked 'L.F.B.2' given under the seal of the judgment debtors purporting to be for valuable consideration to pay to Barclays Bank, Ltd. all moneys payable by the garnishees to the judgment debtors under the said agreement of Nov. 9, 1948." The direction and authority, exhibit "L.F.B.2," is dated Mar. 20, 1950, and is in these terms: "To Associated British Film Distributors, Ltd., 161-171 Oxford Street, London, W.1. Referring to the distribution agreement dated Nov. 9, 1948, made between us (Newpark Cinemas, Ltd.) of the one part and yourselves of the other part whereby in consideration of the agreement on your part therein contained we granted to you the sole and exclusive right and licence to exploit, distribute and exhibit the film 'Meet the Duke' until Nov. 15, 19 5 3, upon the terms as to the gross receipts ( as therein defined) being applied and divided as therein mentioned, and pursuant to the arrangements for valuable consideration which we, Newpark Cinemas, Ltd., have made with Barclays Bank, Ltd., we hereby give you irrevocable directions, instructions and authority to pay to the said Barclays Bank, Ltd., at their Moorgate branch, or as they may in writing direct, all moneys payable to us under the terms of the said agreement and we confirm that the receipt of the said Barclays Bank, Ltd. shall be your full and sufficient discharge for all such payments. This authority and instructions can be varied or cancelled only by a document duly signed on behalf of Barclays Bank, Ltd. Dated Mar. 20, 1950." The common seal was affixed in the presence of a director and the secretary. It is sealed with the common seal of the judgment debtors, and countersigned by a director of the garnishees with the note: "Counterpart signed 28 /iii/ 50." A copy of Mr. Baker's affidavit and copies of the two exhibits appear to have been sent by the garnishees to the judgment creditor's solicitors with a letter dated Sept. 20, 1950, and we understand this to have been the first intimation received by the latter of any assignment, or alleged assignment, by the judgment debtors of the sums due, or accruing due, to them under the licence agreement of Nov. 9, 1948. No evidence was filed in answer, there was no cross-examination, and no oral evidence was adduced at the hearing, so that the evidence before the learned county court judge consisted of (i) the purely formal affidavit in support of the summons; (ii) Mr. Baker's affidavit, which did no more than put in evidence the licence agreement of Nov. 9, 1948, and the direction and authority of Mar. 20, 1950, to which should be added (iii) the correspondence already referred to, which, though not formally exhibited, was by consent referred to in the county court and also in the course of the present appeal. It only remains to add that, admittedly, no notice of any assignment to them of the moneys payable to the judgment debtors under the licence agreement of Nov. 9, 1948, had been given by the bank to the garnishees.

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Such being the state of the evidence, on Oct. 11, 1950, the county court judge made the garnishee order now under appeal, notwithstanding the direction and authority of Mar. 20, 1950, but included in such order a provision suspending its operation until Oct. 25, 1950, and an undertaking on the part of the judgment creditor (by his counsel) to give notice forthwith to the manager of the Moorgate branch of the bank of the terms of the order made. The learned judge's reasons for so doing appear in the note of his judgment, in the course of which he says: "There was no evidence that the bank had received or knew of this (i.e., the direction and authority of Mar. 20, 1950) or had accepted the alleged assignment, and the presumption was that they had not done so as otherwise they would have notified the garnishees of the same. It was contended by the judgment creditor that this document was not an effective or genuine assignment, but was a mere subterfuge to avoid payment under the judgment. Correspondence was admitted and apart from the other documents mentioned there was no evidence. The judgment creditor on Mar. 17 informed the garnishees in writing of the judgment he had obtained against the judgment debtors, but notwithstanding this the garnishees, without informing the judgment creditor of the same, signed the document of Mar. 20, 1950. I formed the view that this had been done in collusion with the judgment debtors with a view to defeating the judgment. This being so, I held that the assignment must be strictly proved, and, as there was no other evidence of any assignment, nor was there any evidence that this document had ever come to the knowledge of the alleged assignee to indicate that he had accepted it as an assignment, I held that an assignment had not been proved. The bank might well have refused to accept any assignment in such circumstances. I considered that an assignment could not be effective until the assignee accepted it as such. The judgment creditor himself did not in fact know of the alleged assignment until Oct. 2, 1950, more than two months after the garnishee summons had been served. I held that there had been no assignment and that the document of Mar. 20, 1950, was merely an authority given by the judgment debtors to the garnishees to pay to Barclays Bank certain moneys due to them from the garnishees and was not a valid assignment. I therefore granted an order against the garnishees in respect of the sum due, but at the invitation of counsel for the judgment creditor I directed that the order should not become effective for fourteen days on the undertaking by the judgment creditor to inform the bank forthwith of the document of Mar. 20, 1950, so that it might if so advised apply to discharge the order." The county court judge's decision was attacked by counsel for the garnishees primarily on the ground that the direction and authority, of which the garnishees undoubtedly had express notice, operated as a legal assignment of the debt in question by virtue of the Law of Property Act, 1925, s. 136(1), which imparts that operation to: "Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor ... " He relied on Standing v. Bowring [(1885), 31 Ch. D. 282] as authority for the proposition ( stated in the headnote) that: "A transfer of property to a person without his knowledge, if made in

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proper form, vests the property in him at once, subject to his right to repudiate it when informed of the transfer." He also cited, with respect to the form of the document, Brice v. Bannister [(1878), 3 Q.B.D. 569] and Harding v. Harding [(1886) 17 Q.B.D. 442] as showing that a direction in writing to a debtor by his creditor to pay a third party, handed to the third party, will suffice to effect a legal assignment on notice of such direction being given to the debtor. Counsel for the judgment creditor, on the other hand, contended that s. 136 ( 1) only applied where there was a document amounting to an absolute assignment and that the document here in question, being in form not an assignment but merely a direction to the garnishees to pay a third party (i.e., the bank), could only answer that description if and when communicated to the bank, as, until so communicated, it was revocable by the judgment debtors at any time and, therefore, not absolute. He referred in this connection to Rekstin v. Severo Sibirsko Gosudarstvennoe Akcionernoe Obschestro Komseverputj & Bank for Russian Trade, Ltd. [1933] 1 K.B. 47, which he also relied on as showing that a direction to pay which was uncommunicated to the third party and, therefore, revocable at the date of the service of a garnishee order nisi ( to which the garnishee summons in this case corresponds), is revoked by such service. We are disposed to think counsel for the judgment creditor right on this part of the argument. It is, no doubt, true that s. 136 ( 1) does not require any particular form of assignment, or that the notice given to the debtor should necessarily have been given by the assignee. The sub-section does, however, clearly postulate that, whatever its form, there should be a document amounting to an absolute assignment by writing under the hand of the assignor. Given such an assignment, and given the requisite notice to the debtor, the assignment (to put it shortly) is to operate as a legal assignment of the debt in question. Section 136 (1 ), however, does not provide that a document which would not, independently of the sub-section or its predecessor (Supreme Court of Judicature Act, 1873, s. 25 (6) ), have operated as an absolute assignment at law or in equity is to have the force of an absolute assignment for the purposes of the sub-section. The document here relied on is the direction and authority, which in point of form is not an assignment to the bank of the debt in question but merely a direction to the garnishees to pay the debt in question to the bank. On the footing that there had, in fact, been no prior agreement with the bank to give such a direction, and that the bank had not been notified of the fact that such a direction had been given, we think the result would follow that the direction and authority, though expressed to be irrevocable except with the consent of the bank, could in fact have been revoked by the judgment debtors at any time as amounting to no more than an arrangement between the judgment debtors and the garnishees in which they alone were concerned and which, in the absence of any such agreement or notification, conferred no interest in the debt on the bank. If that is right, then we think that the contention of counsel for the garnishees to the effect that the mere production by the garnishees of the direction and authority, without proof of any agreement with, or notice to, the bank, sufficed in itself to establish an absolute assignment of which express notice had been given to the garnishees, and hence a legal assignment by virtue of s. 136 ( 1), necessarily fails. This, however, by no means concludes the matter. There was no evidence that the bank had been given notice of the direction and authority, but, on the other hand, there was no evidence that the bank had not been given such notice.

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Moreover, there was some evidence, in the form of an admission by the judgment debtors in the document itself, that the directions thereby given were given pursuant to "arrangements for valuable consideration" made by them with the bank. If that statement was true and meant, as, if it meant anything, it must have meant, that the judgment debtors had agreed with the bank to give the direction and authority to the garnishees, then we think that there was, by the joint effect of the agreement with the bank and the direction and authority given in pursuance of it, a good assignment, whether legal or equitable - for the present purpose it matters not which - of the debt in question. Of course, the direction and authority might have been a mere sham and the recital of the prior arrangements with the bank a mere fiction. The learned county court judge thought this to be the case on grounds which sufficiently appear from the facts as already stated and from the notes of his judgment quoted above. We think, if anything, he overstates these grounds. He does not mention the fact, for what it is worth, that the judgment debtors had actually paid the portion of the judgment representing the debt sued on before the service of the garnishee summons. He also says that the judgment creditor was not informed of the direction and authority until Oct. 2, 1950, when, in fact, his solicitors seem to have been sent copies of the affidavit in opposition to the summons and of the exhibits thereto in a letter from the garnishees' solicitors, dated Sept. 20, 1950. Giving full weight, however, to all the equivocal circumstances referred to by the learned judge or appearing from the facts as stated above, including the reticence as to the existence of the direction and authority observable in the garnishees' letters, we find in all these circumstances grounds for suspicion and nothing more. As against this there is the direction and authority, which, in the absence of fraud - and fraud is by no means to be presumed without proof must, we think, be regarded ( in view of the recital of the prior arrangements with the bank) as affording prima facie evidence of an assignment. If that is putting it too high, at all events the direction and authority affords at least substantial grounds for supposing that there may have been an assignment. Whichever way it is looked at, we think that the learned county court judge was wrong to make the order in the face of this document. It must be remembered that a garnishee is in a difficult position. He has to obey any order made against him, yet, if he has had notice of a prior assignment, the order is no protection to him, and, if he pays in compliance with the order, he nevertheless remains liable to the assignee to pay the debt over again: see Yates v. Terry. This being so, we think it is clearly wrong, where the garnishee shows that he has notice of a prior assignment, to make an order against him unless he is able to prove strictly and conclusively that the assignment of which he has notice is a valid assignment. The proper course in such circumstances is indicated in the County Court Rules, 1936, Ord. 27, r. 11, which is in these terms: " ( 1 ) If in garnishee proceedings it is suggested that the debt belongs to or is claimed by some third person, or that any third person has or claims to have a lien or charge upon it, the judge may order the third person to appear and state the nature and particulars of his claim to the debt. (2) After hearing the third person if he appears, the judge may bar the claim of the third person or may order an issue to be tried between the third person and the judgment creditor, or make such other order ( including an order as to costs) as may be just." This rule corresponds to R.S.C., Ord. 45, r. 5 and r. 6. We cannot regard the

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service of notice of the order on the bank in the present case ( which produced no action on the bank's part, and certainly did not amount to an explicit invitation to the bank to move to discharge the order if so advised) as by any means a satisfactory substitute for the procedure thus laid down. In the result, therefore, we would allow the appeal, discharge the garnishee order of Oct. 11, 1950, and remit the case to the county court with a view to the bank being ordered to appear and state its claim in accordance with the County Court Rules, 1936, Ord. 27, r. 11. If the bank fails to appear, or fails to establish its claim as assignee, a fresh garnishee order binding the bank and protecting the garnishees in their compliance with it can be made. Appeal allowed with costs. Case remitted to county court judge. Costs of first hearing in discretion of county court judge. Cf. Holt v. Heatherfield Trust, Ltd. [1942) 1 All E .R. 404, decided by Atkinson J. The editorial note on that case from the All England Reports, p. 404, reads as follows: "A legal assignment of a chose in action is only complete upon notice being given to the debtor. It does not seem to have been decided, before the decision herein, whether in this respect the material date was the date on which the notice was despatched or that on which it was received. This point is settled in favour of the latter view. There then remained the point whether, for the purposes of deciding the question of priority, the date on which the assignment became a legal assignment was to be considered, or whether it was sufficient that an equitable assignment had been executed. Upon a review of the cases, the judge has had regard to the fact that a garnishee order can only attach debts which the debtor himself is free to deal with at the time the garnishee order nisi is served. The debtor himself is bound by an equitable assignment, which is independent of the giving of notice. The garnishor, therefore, cannot attach a debt which has been equitably assigned, or, in other words, the equitable assignee has priority over the person serving the garnishee order."

UXBRIDGE HARDWARE CO. LTD. v. MUSSELMAN Appellate Division, Supreme Court of Ontario. 1930. 66 O.L.R. 435. Appeals by the primary creditors in garnishing plaints in the 4th Division Court of the County of Ontario from the judgments of Thompson, Co. C.J., declaring that certain assignments made by the primary debtor of portions of the fund in the hands of the garnishees were valid as assignments or equitable assignments, and that the assignees, the claimants, were entitled to priority over the primary creditors, the appellants. LATCHF0RD, C. J.: There is no dispute regarding the facts involved in these appeals, which turn solely on a rather simple question of law. In this and each of three similar cases by other creditors of Mrs. Lena Musselman, a summons in garnishee proceedings under sec. 138 of the Division Courts Act, R.S.O. 1927, ch. 95, was duly issued on the 27th November, 1929. The garnishees in all the cases were the auctioneer and his clerk, who, on the same day, were conducting for the primary debtor a sale of her effects. Service was made upon Marquis and his clerk after the sale, when the proceeds were still in his hands. Previously there had been delivered to them or to one of them, the auctioneer apparently, three orders, each signed by Mrs. Musselman, directing the auctioneer and his clerk to pay out of the proceeds of the sale to the appellants certain fixed amounts which in their total exceeded the

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sum realised at the sale. Two of the orders were also express assignments. The third, while not an assignment in form, is in law an equitable assignment. It mentions the fund on which it was drawn, and thus complies with the requirement mentioned by Bacon, V.-C., in Percival v. Dunn ( 1885) , 29 Ch.D. 128. See also Kelly v. Wilson (1903), 2 O.W.R. 508, a judgment of a Divisional Court: see also the observations of Lord Macnaghten in William Brandt's Sons & Co. v. Dunlop Rubber Co., [1905) A.C. 454, at p. 462. In addition to delivering their orders and assignments, Forsythe and the other assignees gave formal notice to the auctioneer and his clerk of their claims upon the funds in hand, and then applied under sec. 149 of the Act to be allowed to shew cause "why the debt sought to be garnished should not be paid or applied in or towards satisfaction of the claim of the primary debtor ( s)." The learned County Court Judge held that the assignments were valid and a first charge upon the funds in the hands of the auctioneer, and therefore dismissed the proceedings against the garnishees. The primary creditors appeal. On a preliminary objection raised by Mr. Button, the Court dismissed the appeals in two of the cases, those of Lapp and Law, as the amount claimed in each did not exceed $100: Division Courts Act, sec. 118. Argument then proceeded on the appeals on behalf of the Uxbridge Hardware Company and W. H . Littlejohn, Mr. Greig contending that their garnishee proceedings prevailed over the orders and assignments, and Mr. Button contending that the judgment of his Honour Judge Thompson was right. The assignments, on the authorities mentioned, and on many others which might be cited, render it clear that the orders and assignments are valid and constitute a charge on the proceeds of the sale prior in time and in right to the garnishee proceedings. The appeals should therefore be dismissed with costs. RIDDELL, J. A. : ... That the plaintiffs have a clear right to judgment against the primary debtor is not disputed; but the intervenants, coming in under sec. 154 of the Division Courts Act, R.S.O. 1927, ch. 95, claim that their rights are paramount. A great deal of argument was made before us as to the efficacy, if any, of a garnishee summons, issued before but ·not served till after the debt sought to be garnished accrued. As .at present advised, I think that, just as the rights of a plaintiff are to be determined as of the teste of the writ, and not as of the date of its service, so the rights of a garnishor must be determined as of the time of the issue and not of the service of the summons - that is, these rights cannot be placed higher, although, of course, the debt is bound only from the service. So, in the Supreme Court, before an order of attachment or garnishment can . be made, the creditor must swear that "some person . . . is indebted to the judgment debtor" (Rule 590), not that "some one is going to be indebted" to him. A great deal has been said and written as to the field for equitable assignments; it seems to me to be well indicated in the judgment of Mr. Justice Osler in Brown v. Johnson (1885), 12 A.R. '190, at p. 197, that there must be a fund, either actually in being or about to arise in the ordinary course of events, · that is, either actually or potentially in the hands of the person upon whom the order is given. We need not consider whether, this coming into his hands, must necessarily be in consequence of a contract, as in the present case there was a contract between the debtor and the auctioneer which "in the ordinary course of events" would cause a fund to be in the hands of the latter to which she was entitled. Such was the case in Lett v. Morris (1831) , 4 Sim. 607,where a con-

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tractor gave an order upon the other party to be paid out of moneys to come to him under his contract. The fact that he had to do something before the fund was created was of no consequence, if, in fact, the fund was created. The present case strictly complies with the requisition laid down in Hall v. Pritlie, 17 A.R. 306, at p. 310, "a specific appropriation of .. . some part of ... a fund which is to arise out of some existing contract or agreement." The whole doctrine as to equitable assignments is discussed in the notes to Ryall v. Bowles (1747), 1 W. & T.L.C. in Eq. 90, 96 et seq., and need not be restated. The case of Gurnell v. Gardner (1863), 9 Jur. N.S. 1220, is one of a number of cases in which the money to arise from the sale of goods was considered a fund against which an equitable assignment might be made. I think the appeal should be dismissed with costs. Masten and Fisher, JJ.A., agreed with the Chief Justice and with Riddell, J.A. CANADIAN BANK OF COMMERCE v. DABROWSKI AND DABROWSKI AND HUNT Supreme Court of British Columbia. 1954. 13 W.W.R. (N.S.) 442.

COADY, J.: In this action a garnishee order was issued on March 3, 1954. Pursuant to that order the garnishee paid into court $1,261.86 on March 16, 1954, with notice that the said money was claimed by the Bank of Montreal and by one Plakoln. [Meanwhile] the Bank of Montreal had issued a writ on March 9 against the defendants herein and had also on the same date issued a garnishee order which was served on the garnishee herein before payment into court of the above moneys .. .. Counsel for the Bank of Montreal . . . submits that the plaintiff's garnishee order is invalid and should be set aside on the ground that at the time the said garnishee order was issued there were no debts, obligations or liabilities owing, payable or accruing due from the garnishee to the defendants. The auction sale was held on March 3, 1954, commencing at about 11 :30 a.m. The garnishee order was issued at or about 10 a.m. on the same day. The garnishee paid the moneys into court on the assumption that the garnishee order was a valid order. It seems clear upon the authorities that when the garnishee order was issued herein there were no debts or obligations owing, payable or accruing due from the garnishee to the defendants. It is true moneys did become due and payable at a later time on the same day after the auction sale was held and apparently prior to the service of the garnishee order, but that does not help the plaintiff since the essential time is the time when the garnishee order was issued, not the time it was served. The plaintiff's garnishee order therefore must be set aside : Vater v. Styles; Metropolitan Life Insur. Co. (Garnishee) [1930] 2 W.W.R. 241, 42 B.C.R. 463. A number of other cases are noted in Power's Index-Digest of Western Practice Cases on this point.... D. M. GORDON, NOTE ( 1954) 32 Canadian Bar Review 1141. Reprinted by permission. Canadian Bank of Commerce v. Dabrowski and Hunt (1954), 13 W.W.R.

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(N.S.) 442 (B.C.), rules on an obscure point that, one would think, should have been settled half a century ago .. .. The court thus treated the point as well settled. It is submitted however that, far from being so, there is almost an entire dearth of real authority on the subject; and that apart from the possible exception of Thoreson v. Blairmore, (1927] 2 W.W.R. 439, which will be considered later, the recent decision makes the only express ruling on the point pronounced either in England or Canada. There are indeed a number of dicta (mostly in Canadian courts) that support the decision, but an equal number against it. In England little has been said on the subject; but a number of indications practically satisfy the writer that English legal views are quite inconsistent with the ruling in the Dabrowski case. But first let us see what the Canadian decisions offer. The actual decision in Vater v. Styles, cited in the quotation just given, is not in point. The court there held against a garnishing order because at no material time was there an attachable debt, and the only utterance in point was that of one judge out of five (McPhillips, J. A.,) who said obiter that the test was whether there was a debt when the order issued. But the point did not arise, because there was no debt when the order was served. Power's Practice Digest (2nd ed.) p. 406, does state that there must be a debt owing when the order issues, citing Faas v. McManus [1929] 3 W.W.R. 598, Thoreson v. Blairmore, supra, Hart v. Edmonton , (1909), 2 Alta. L.R. 130, Vater v. Styles, supra, and Lake of the Woods Milling Co. v. Collin, (1900), 13 Man. R. 154. But Faas v. McManus and Hart v. Edmonton are cases like Vater v. Styles, in which there was no attachable debt even at the time of service, so that statements found in these cases to the effect that there must be a debt when the order issues are again purely obiter. The Collin case falls in the same class, except that the dicta to the same effect are much vaguer. Thoreson v. Blairmore goes a little farther. The garnishee in that case did not appear to have been indebted either at the date of the order or of service, though the judge (Ford, J.) thought there was slightly more doubt about the later date. He avoided resolving this doubt by saying it did not arise if the debt had to exist at the date of the order. He adopted the view that this was necessary because Harvey, C. J., had expressed that view in Hart v. Edmonton. He failed to note that Harvey, C. J.'s expressions were purely obiter, and it is hard to see how Ford, J.'s decision can have any more weight than the dicta on which it was founded. There are several other cases in the same class as Faas v. McManus and Hart v. Edmonton: that is, they contain dicta to the effect that there must be a debt when the order issues; but actually the point never arose, because there was not even a debt when the order was served. These cases include - and there are probably quite a few others - Kirkham v. Kirkham ( 1936), 50 B.C.R. 481, Scully v. Madigan (1913 ), 4 O.W.N. 1003, and Blind River v. White Falls Lumber Co. (1919), 160 W.N. 189. On the other hand, there is no lack of cases containing dicta as strongly the other way, or which show the court assuming throughout that the whole test of the effectiveness of a garnishing order is the existence of a debt when the order was served. These include : Quercetti v. Tranquili (1941), 56 B.C.R. 481, Mason v. MacLeod, (1925] 1 W.W.R. 165, McCraney v. McLeod (1885), 10 P.R. 539, Central Bank v. Ellis (1893), 20 O.A.R. 364, Power v. Jackson Mines (1907), 13 B.C.R. 202, and Black v. Hohlstens (1915), 9 O.W.N. 5. And several of these are appellate cases. Since the Canadian authorities speak with such an uncertain voice, let us turn

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to England, whence so much of our law comes. Here we find no express decisions, but yet some strong indications of legal thought. English views are expressed thus in Halsbury's Laws of England, (2nd ed.) Vol. 14, p. 108: "To be capable of attachment, there must be in existence, at the date when the attachment becomes operative, something which the law recognises as a debt .... " A note on "operative" refers us to page 113, where it is stated: "The order nisi gives no rights to the judgment creditor until it has been served on the garnishee. Until service any disposition of the debt made by the judgment debtor takes priority over the order, and payment to the judgment debtor by the garnishee will discharge him." These passages taken together seem clearly to mean that any debt existing when the order is served is attachable. The English case nearest in point is perhaps Kelly v. Rider (189 5) 11 T .L.R. 206. Here the defendant had been employed by the garnishee to furnish meals at so much a head, and on the trial of an issue as to the garnishee's indebtedness, the evidence was directed to whether the attaching order had been served on the garnishee after the meals had been served and their price earned. Charles, J., held that the order had been served afterwards, so that the price was attached. It was throughout quite clear that the order had been made before the meals were served, but everyone treated that fact as quite irrelevant, which is at least a strong indication of English legal thought on the point, and the decision itself is at variance with the ratio of the Dabrowski case. In England and in most of the Canadian provinces, if the garnishee disputes his liability to pay, the court directs the trial of an issue, and obviously the form of that issue is very important, so that an official indication of what form it should take would be of the highest significance. In England we have such an indication. There garnishing procedure is governed by rules of court, and Form 40B of Appendix K to the Rules of the Supreme Court, which may be considered statutory, prescribes a form of order for an issue between a judgment creditor and a garnishee. This directs that "the question to be tried shall be whether the said garnishee was indebted to the judgment debtor in any and what amount at the time the said order nisi was served." Moreover, by 0. 61, R. 33, of the English rules, masters may prescribe additional forms; and they have prescribed an additional form of order for an issue for official use ( see Annual Practice note to Form 40B), which can be found in Chitty's Queen's Bench Forms. This prescribes an issue in the same form as Form 40B, that is, to try the garnishee's liability at the time the order nisi was served. In the case of Power v. Jackson Mines (1907), 13 B.C.R. 202, an issue between the plaintiff and garnishee was directed, and it took the same form. If the Dabrowski decision were right, such an issue would not decide the most material point; that decision would require an issue as to whether the garnishee was both at the time the order was issued and the time when it was served indebted to the defendant. That this is the real issue has apparently gone unsuspected for a century in England, where garnishment was first authorized by the Common Law Procedure Act, 1854. Let us consider some of the anomalies that will result if the Dabrowski ruling prevails. Take the case where the garnishee is a bank and when the garnishing

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order issues the defendant has an account of $ 1.00, but when it is served has an account of $1,000. According to the Dabrowski ruling, the order is only operative as to $1.00. But how can such a result be justified? The order cannot be set aside on the basis that no money was owing at the date of the order ( even if that were a good basis) ; it cannot be set aside on the basis that the affidavit leading the order was untrue, for it was not. The only theory on which limitation of the attachment to $1.00 could be argued would be this: the registrar's order is what attaches the debt, and he must be regarded as attaching only debts that exist when he makes his order. That view however is negatived by authority. In Re Stanhope Silkstone Collieries Co. (1879), 11 Ch. D. 160, it was held that a creditor of a company, who obtained a garnishing order but did not serve it until after a winding-up order was made against the company, was not a secured creditor at the beginning of the windingup. Bramwell, L. J., said at page 163 that the order "does not purport to attach the debts, but orders 'that they be attached,' that is, upon something further being done. It is like the order for the attachment of a person for contempt. He is not attached upon the writ issuing, but he is attached under it." This seems to make sense, and rationalizes the assumption that obviously prevails in England, namely, that the date of service of a garnishing order is the sole test as to what it catches. The very term "garnishing" seems to support Bramwell, L. J.; for the literal meaning of "garnish," which has rather been forgotten, is "warn." Obviously a registrar cannot "warn" a garnishee by merely making an order; he only enables the plaintiff to warn the garnishee by service. If the plaintiff must run the risk that the obligation to the defendant may be lessened between the time of the order and the time of the service, why should the risks be all one way? Why should he not equally have the benefit of any interim increase in the garnishee's obligation? Where nothing is owing by the garnishee when the order is made but a substantial sum is owing when it is served, no doubt the order ought not to stand if the plaintiff made his affidavit of the garnishee's indebtedness knowing it to be false. But the plaintiff only swears that he is informed of the indebtedness and believes it exists, and if this is literally true, there is no deception even if the information proves untrue. In the Dabrowski case the order was set aside, not because the affidavit was proved untrue, but because there was in fact nothing owing at the date of the order. But if there had been $1.00 owing at the time, that objection would have been unfounded. It is hard to see how the order could then have been held not to operate, even to the extent of many thousand dollars, if these were due when the order was served. It is certainly hard to see why a debt of $1.00 when the order was made should make all this difference. Apparently, according to English views, it would make no difference. In Vinall v. DePass, (1892] A.C. 90, for instance, the House of Lords refused to hold a garnishing order bad because the only debt suggested in the affidavit to lead it was not really due; it was enough that the garnishee owed something. The Dabrowski ruling could create great practical difficulties, even intolerable hardship, particularly where the garnishee is a bank, as it is in perhaps most cases. Hitherto, when a garnishee disputed liability for the whole or part of the sum named in the order, the garnishee filed a dispute note stating that at the time of service of the order he was not indebted, or only indebted in a named sum, which he paid into court. The Dabrowski ruling requires him to say that neither when the order was made nor when it was served was he indebted, and

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he can safely pay in only the least sum owing by him at either of these times. But, particularly in the case of a garnishee bank, that course may be quite impossible to follow. Cheques may be paid or received by a bank at any moment during banking hours. This does not matter too much if service of the order alone counts. But if the bank can only pay into court the amount due when an order was made, which may have been days before the bank knows of it, then its position becomes hopeless. How can the bank possibly tell whether a sum received or paid out on the same day as a garnishing order was signed was received or paid before or after the moment when the order was signed? Registrars do not keep records of the moments when they sign orders, nor do banks keep records of the moments when they receive or pay cheques. These considerations alone show that the Dabrowski ruling makes the position of banks impossible. And other garnishees could be almost equally embarrassed. The hardships that such a ruling must in time produce would prove intolerable. The very fact that it would do so throws the strongest doubt on its soundness. McCREADY PRODUCTS LTD. v. UNITED BUILDING SUPPLIES LTD. AND STASIUK British Columbia Court of Appeal. 1962. 33 D.L.R. (2d) 313. The judgment of the Court was delivered by SHEPPARD, J. A. : This appeal is by the plaintiff from an order of Maclean, J., ordering the payment out to the garnishee of monies in Court. The facts are as follows : On July 4, 1961, the garnishee being indebted to the defendant gave the defendant the garnishee's cheque for $2,800 drawn on the Bank of Montreal at Cloverdale. The defendant endorsed the cheque, deposited it to his credit with the Toronto-Dominion Bank and the bank credited his account thereby discharging an overdraft, leaving a credit balance, and acknowledged in writing that credit less exchange. Later on the same day, the garnishee was served with the garnishing order and she thereupon stopped payment of her cheque. On July 28th, the garnishee paid into Court the sum of $2,468 to the credit of the action and subsequently, upon the Toronto-Dominion Bank having brought action, she applied for payment out on the ground that her payment into Court as garnishee had been made by mistake. On the garnishee's application Maclean, J., made the order for payment out and the plaintiff has now appealed. The question is whether or not the debt from the garnishee to the defendant was attached by the garnishing order. The test is that stated in Donohoe v. Hull Bros. & Co. et al. (1895) , 24 S.C.R. 683 by Sedgewick, J., at p. 688: " . .. the debtor must be in a position to maintain an action for it against the garnishee . .. "and in Quercetti v. Tranquilli, [1941) 4 D.L.R. 63, 56 B.C.R. 481 (C.A.) by McDonald, J. A., at p. 64: " . . . the test to be applied is whether or not the judgment debtor himself could have brought action against the garnishee for the money in question at the moment when the attaching order was served." We are not concerned with certain statutory exceptions arising under the phrase, "due or accruing due" (Attachment of Debts Act, R.S.B.C. 1948, c. 20, s. 2( 1) ) as explained in Garner v. Strickland & Western Forest Industries Ltd., [1955) 4 D.L.R. 329 (B.C.C.A.) and MacPherson Fruit Co. v. Hayden (1905), 2 W.L.R. 427 at p. 429, or contained in the amendment (1959, (B.C.), c. 5, s. 2), as those exceptions do not apply. Hence the question is whether this defendant

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could have brought action for the debt at the time the garnishing order was served. The garnishee contends that the defendant could not have recovered by reason that the debt had been paid by the cheque and its negotiation. The plaintiff (appellant) contends that the Toronto-Dominion Bank merely received the cheque as agent for collection and hence the stop order enabled the defendant to bring action on the original debt and thereby made the debt attachable. The plaintiff's contention overlooks material facts, namely, that the cheque was endorsed by the defendant to the Toronto-Dominion Bank, and that the proceeds were deposited by that bank to the credit of the defendant. The bank therefore became a holder for value. In Ex p. Richdale, Re Palmer (1881), 19 Ch.D. 409, Jessel, M. R., at p. 417 said: "The bankers were the holders of the cheque for value; the moment they credited the amount of it to Alfred Palmer it became their property." And that judgment was followed in Royal Bank of Scotland v. Tottenham, (1894] 2 Q.B. 715 by Lord Esher, M. R., at p. 717, and in Bank of British North America v. E. D. Warren & Co. ( 1908), 19 O.L.R. 257 (C.A.) by Maclaren, J. A., at p. 264. The bank as a holder for value also becomes a holder in due course under s. 58(2) of the Bills of Exchange Act, R.S.C. 1952, c. 15. Moreover, the defendant gave value for the cheque, namely, the debt due to the defendant from the garnishee: Currie et al. v. Misa (1875), L.R. 10 Ex. 153 at p. 162, hence the garnishee was primarily liable as drawer of the cheque and the defendant could not recover from the garnishee as drawer any monies which the defendant as endorser was obliged to pay and therefore would retain the payment that it ( the defendant) had received by negotiation. Under these circumstances the debt due by the garnishee to the defendant was paid prior to service of the garnishing order and therefore the debt was not attached. The plaintiff relied on various judgments which are distinguishable. In Cohen v. Hale (1878), 3 Q.B.D. 371, the garnishee, being indebted to the defendant, gave his cheque to the defendant and after service of the garnishing order stopped payment of the cheque: the Court held that the debt thereby became attached. There the defendant, as payee, remained the holder of the cheque, and assuming that the stop order so nullified the cheque retroactively that the defendant could have brought action on the original debt at the time the garnishing order was served, it does not follow that the stop order had the same effect in the case at bar. In the case at bar, the defendant, as payee, had negotiated the cheque to the Toronto-Dominion Bank, a holder in due course, and the stop order by the garnishee as drawer could not nullify that cheque and divest from the Toronto-Dominion Bank, as holder, its rights over against the garnishee, as drawer, so as to revest in the defendant its cause of action on the original debt. The plaintiff has contended that Cohen v. Hale is in error, but that need not be here considered and should stand until it necessarily arises. In Gaden v. Newfoundland Savings Bank, (1899] A.C. 281, the plaintiff, Gaden, drew a cheque on another bank, had it accepted and deposited to his credit in the Newfoundland Bank and the drawee bank failed before payment: the Privy Council held that the Newfoundland Bank had the ri!):ht to charge the cheque to the plaintiff depositor. That case is distinguishable in that the Newfoundland Bank was a savings bank, and as Strong, J., said at p. 286: "Is it to be inferred from this alone that the respondent, which was not a bank of discount but whose duty and business it was merely to receive

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money on deposit, so far departed from its duty as well as from its general course of business, which must be presumed to have been in accordance with its duty, as to have accepted this cheque, not by way of deposit and for the purpose of obtaining the cash for it in the usual way, as the agents of the appellant, but with the intention of acquiring title to it, and thus in effect gratuitously guaranteeing its payment?" On the other hand, the Toronto-Dominion Bank is a bank of discount (Bank Act, R.S.C. 1952, c. 12, s. 75 (1) (c) ), and did take the cheque "with the intention of acquiring title to it." In Welsh v. Trimble & Van Duesen, [1933] O.W.N . 368, the plaintiff deposited with the bank for collection an unendorsed promissory note payable to the plaintiff. Masten, J.A., at p. 369 said: "It appears plain that the bank did not discount the note but held it merely for collection." In the case at bar the cheque was "discounted" by endorsement to the Toronto-Dominion Bank. In R. E. Jones, Ltd. v. Waring & Gillow Ltd., [1926] A.C. 670, the action was to recover money paid under mistake of fact induced by the fraudulent misrepresentation of a third person. In Treuttel & Wurtz v. Barandon et al. (1817), 8 Taunt. 100, 129 E.R. 320, the action was in trover for a cheque delivered to the plaintiff's agent for the plaintiff's account and deposited by the agent with the defendant as security for advances to the agent; the issue was whether or not the defendant knew that the cheque was the plaintiff's property. These latter two judgments cannot help in determining whether this garnishing order was effective. In the result, prior to the service of the garnishing order, the defendant had been paid the amount of the debt sought to be attached, and therefore, the garnishing order was ineffective and the monies paid into Court by the garnishee were properly paid out to her. The appeal should be dismissed. In Ontario Woodsworth Memorial Foundation v. Grozbord et al. ( 1964 ), 48 D .L.R. (2d) 385, at 417-419 Grant J. dealt with the question of payment by cheque and the effect of certification as follows : "Ordinarily the giving of a cheque certified or not, is only conditional payment of the debt, and on the same being dishonoured the creditor, if in possession thereof, can sue on his original right of action: Allen v. Royal Bank of Canada (1925), 41 T .L.R. 625; Lewis v. Jay , [1933] 3 D.L.R. 763, [1933] 0.R. 682; affd [1934] 3 D.L.R. 228, [1934] 0.R. 307. "The defendant Grozbord relies upon the fact that the cheque given by Stone in payment was a certified cheque as equating payment or terminating his obligations as to payment; in making such submission, he relies upon the paragraph from the agreement above quoted, which provides that money may be tendered by negotiable cheque certified by chartered bank or trust company. "The general rule is that where a person takes a negotiable instrument, the presumption, in the absence of a clear indication of contrary intention, is that the payment is a conditional payment only, and that if the instrument is paid when it becomes due the original debt is discharged, but that if the instrument is dishonoured payment of the original debt may be enforced : Lewis v. Jay, supra. "One of the submissions of this defendant is that the fact that the cheque in this case was certified rebuts the presumption of conditional payment and discharges the purchaser at the moment the cheque was turned over to the solicitor for the vendor. The legal effect of certification of cheques is dealt with by Falconbridge in Banking and Bills of Exchange, 6th ed. (1956), at pp. 874-9. The learned

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author there draws a distinction between certification at the instance of the holder of the cheque and certification at the instance of the drawer. If a cheque is certified or marked by the drawee bank at the request of the payee or other holder, the amount of the cheque being charged by the bank to the account of the drawer, and if the holder does not then and there require payment, the drawer is discharged from all liability either on the cheque or on the original consideration for which it was given. On the other hand, in the case of a cheque which is certified by the drawer before delivery, no presentment at the time of the certification is made by the holder who alone is entitled to present the cheque for payment, and therefore he cannot be said ( as he can in the first case) to have elected to accept the bank's undertaking to pay in place of actual payment. The holder or payee is still entitled to present for payment and if he so desires to receive the money. "The reason why the drawer of the cheque is discharged in the first place but not in the second is stated to be as follows : The drawer's contract is that upon due presentment the cheque will be paid if the holder so desires. The holder's whole right is to present the cheque and to receive the money. The holder has no right as between himself and the drawer to present the cheque for any purpose except payment and if, when he presents the cheque and ascertains the bank is prepared to pay it, he elects not to draw the money at once, he thereby accepts the bank's undertaking to pay in place of payment. The drawer's whole obligation is performed and he is therefore discharged from liability on the cheque. The conditional payment by the giving and taking of the cheque becomes complete and the condition is fulfilled at that time. "The present action would clearly appear to be a case where the cheque was certified at the instance of the drawer, rather than at the instance of the payee. According to the passages cited from Falconbridge and the authorities quoted in support at pages indicated, the type of certification that was present in this case does not displace the general rule that payment by cheque is conditional only and does not discharge the payer from the moment of delivery." Grant J. was reversed on another point by the Ontario Court of Appeal but his comments above were not in issue: [1966) 2 O.R. 642.

INDUSTRIAL DEVELOPMENT BANK v. VALLEY DAIRY LTD. Supre~e Court of Ontario. [1953] 1 D.L.R. 788. Application to establish the priorities of various claimants as to funds in the hands of a Sheriff. JUDSON, J.: The Industrial Development Bank is the holder of a chattel mortgage from the defendant company. The chattel mortgage also contains a floating charge on all the assets and undertaking of the company, both present and future. The floating charge is in much the usual form and contains express power enabling the company, in the ordinary course of business, to deal with its property until the security becomes enforceable. On December 28 and 30, 1949, certain execution creditors obtained garnishee orders nisi against debtors of the defendant company. On January 7, 1950, the plaintiff issued a writ to enforce its security. The writ was served on January 9th. On January 11th and 12th the execution creditors had their garnishee orders made absolute. On January 14th the Sheriff of the County of Carleton was appointed receiver to get in and administer the assets of the defendant company. The Sheriff has in his hands three sums of money, $548.19, the proceeds of a seizure made under a writ of execution issued by one James Henry; $1,518.01 as a result of the garnishee orders; $375.70 collected by him in his capacity as receiver. The plaintiff claims the proceeds of these garnishee orders as property to which the floating charge attaches .... The execution creditors resist both these claims ....

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The next question that I have to decide is when the floating charge crystallized. There is no doubt that the appointment of a receiver crystallizes a floating charge: Re Florence Land & Public Works Co. (1878), 10 Ch.D. 530 at p. 541; Evans v. Rival Granite Quarries Ltd., [1910] 2 K.B. 979 at p. 1001. There is doubt whether the issue of a writ in a debenture-holders' action will have the same effect. In one case it was held that the issue of a writ did not crystallize the floating charge so as to prevent the company from issuing further debentures of the same series: Re Hubbard & Co. (1898), 68 L.J. Ch. 54. However, Vaughan Williams, L.J., in Evans v. Rival Granite Quarries, [1910] 2 K.B. at p. 986, thought that the bringing of an action was sufficient. This is a leading case on the nature of a floating charge. It was followed in Great Lakes Petroleum Co. v. Border Cities Oil Co., [1934] 2 D.L.R. 743, O.R. 244. The opinion of Vaughan Williams, L.J., was part of the ratio decidendi and I follow it and hold that the floating charge in question here crystallized on January 7, 1950 the date of the issue of the writ. Therefore as to the second fund of $1,518.01 held by the Sheriff by reason of the garnishee orders, the bank has priority over the execution creditors, for at the time when the floating charge crystallized the garnishee orders had not been made absolute. An execution creditor who completes his execution by obtaining a garnishee order absolute while a charge remains a floating one, obtains priority over the charge. A garnishee order nisi will not give him this priority: Norton v. Yates, [1906] 1 K.B. 112; Evans v. Rival Granite Quarries, supra. The bank has no claim against the first fund of $548.19, this execution having been completed before the issue of the writ. This fund is, however, subject to the two statutory charges. They were in existence at the time of the seizure.... As to costs, one counsel, appointed by the Court, appeared on behalf of all the execution creditors. He should have his costs out of the funds in the hands of the Sheriff. I think that this is a case where I should make the same order for all parties represented on the motion. KARE v. NORTH WEST PACKERS LTD. AND McGUCKIN Manitoba Court of Appeal. [1955] 2 D.L.R. 407. The judgment of the Court was delivered by ADAMSON, J. A.: The statement of claim was issued on March 29, 1954. On the same date the plaintiff obtained and served a garnishing order on the several garnishees. Default judgment was signed on April 19, 1954. On April 9, 1954, the debenture-holders who had a floating charge on the assets of the company appointed L. G. Stevens, who is a director and officer of the company, "Receiver and Manager" with "power to take possession of, collect and get in the property and assets charged by the Debentures, and for that purpose to take any proceedings in the name of the Company, and to carry on or concur in carrying on the business of the Company, and to sell or concur in selling any of such property or assets, and to make any arrangement or compromise which he shall think expedient in the interests of the Debenture-holders." On April 14, 1954, Stevens, the "Receiver and Manager," moved "for an order setting aside the Garnishing Order" and for an order that the monies owing by the garnishees be paid to him as "Receiver and Manager." The order was granted and this is an appeal therefrom. This question was decided by Killam, J. ( afterwards Chief Justice of Manitoba and also a Judge of the Supreme Court of Canada) in National Electric Mfg.

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Co. v. Manitoba Electric & Gas Light Co. (1893 ), 9 Man. R. 212. Unfortunately that case does not seem to have come to the attention of the learned Judge of first instance. The pertinent facts in that case are substantially the same as the facts in this case. Killam, J., was one of our most distinguished jurists and any decision of his carries great weight. There are two questions: The first is: What is the effect of the garnishing order? The second is: To what is a receiver for debenture-holders who have a floating charge on the assets of the company entitled? Queen's Bench Rules 524-533 provide for the Atttachment of Debts. If a plaintiff has judgment or has launched an action for a liquidated claim "the court may order that all debts, obligations, and liabilities owing, payable, or accruing due from such person (hereinafter called 'the garnishee') to the debtor shall be attached": Q.B. R. 526. Rule 527 provides, in part, that "A garnishing order .. . from the time of service, shall bind the debts, obligations, and liabilities attached." The effect of a garnishing order under these Rules is largely the same as a garnishing order under the practice prior to the Judicature Act. The question of a gamisher's rights is discussed in Ex p. Joselyne, Re Watt (1878), 8 Ch. D. 327. In that case James, L.J., said at pp. 330-1: "The moment the order of attachment was served upon the garnishee the property in the debt due from him was absolutely transferred from the judgment debtor to the judgment creditor. The garnishee could then only pay his debt to the judgment creditor of his original debtor. The property in the debt was transferred, and there was a complete and perfect security the moment the order of attachment was served. . . . There has been a uniform course of decision for more than twenty years, ever since Holmes v. Tutton, 5 E. & B. 65, in which, though it was not absolutely necessary so to decide, the Court was clearly of opinion that the creditor who had served a garnishee order nisi was a secured creditor of his judgment debtor. I am of opinion, therefore, that the Registrar's order was right." And Thesiger, L.J., said at p. 333: "I think that no distinction can be drawn between that case [Emanuel v. Bridger, L.R. 9 Q.B. 286) and the present on the ground that in that case the order was absolute, and in this it was nisi only." In Plunkett v. Barclays Bank Ltd. (1936), 105 L.J. K.B. 379 at p. 384, du Parcq, J., said: "The service of the order nisi [garnishing order] gives the judgment creditor, in the words of Farwell, L.J., in Galbraith v. Grimshaw [ ( 1909), 79 L.J .K.B. 369), an equitable charge upon the debt." The effect of the garnishing order is that "from the time of service" upon the garnishee it bound "the debts, obligations, and liabilities attached," and an order for payment over to the garnisher goes if, first, the plaintiff gets judgment against the defendant, if he had not already obtained it; second, that the garnishee was in fact indebted to the defendant when the order was served . .. . The question is then: Did the defendant own the monies due it by the garnishees, and were they in a position to deal with them in the ordinary course of business or had they effectively transferred such monies to the debentureholders? The security of the debenture-holders was "floating" or "dormant" or still in abeyance until the receiver was appointed. When the receiver was appointed, the plaintiff already had an effective equitable charge binding the sums owing by the various garnishees to the extent of the defendant's indebtedness to the plaintiff, and the receiver took subject to that charge: Emanuel v. Bridger (1874), L.R. 9 Q.B. 286. What the receiver seeks to do here is to have his rights made effective nunc pro tune. This is not in accordance with the mean-

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ing of a floating charge as stated in the various cases such as Evans v. Rival Granite Quarries Ltd., [ 191 O] 2 K.B. 979. The position and rights of debenture-holders who have a floating charge is stated with clarity in Governments Stock etc. Investment Co. v. Manila R . Co., [1897] A.C. 81 at p. 86, and Evans v. Rival Granite Quarries Ltd., supra, and numerous other cases. The debenture-holders cannot take the position that they will allow the company to continue to carry on business and reserve the right, while still permitting it to go on obtaining credit, of preventing anyone who deals with it from obtaining payment. Until the debenture-holders appoint a receiver or take legal proceedings to enforce their security, that security does not attach to any specific asset of the company. Vaughan Williams, L.J., in Evans v. Rival Granite Quarries Ltd., [1910] 2 K.B. at p. 988, said: "It seems to me that there is authority for saying that . . . it is impossible . . . to say that an execution may not be enforced so long as the debenture-holders have not got a receiver appointed or have not done something in regard to the licence to the company to continue carrying on its business" .... The contention of the respondent (receiver) is that, while the defendant could have assigned the monies or given a mortgage in the course of its business, those same assets are not subject to the processes of the law. It seems to me that the inevitable conclusion from the meaning and effect of a floating charge and what was said in the Rival Granite Quarries Ltd. case is that the receiver for debenture-holders takes subject to the equities which the ordinary course of business has brought about: Great Lakes Petroleum Co. v. Border Cities Oil Ltd., [1934], 2 D.L.R. 743, O.R. 244; Robson v. Smith, [1895] 2 Ch. 118. On April 9, 1954, when the receiver was appointed and the floating charge crystalized, these monies had already been taken in execution. The receiver, in equity and by authority, takes subject to the garnishing order. This point was dealt with in Re Roundwood Colliery Co., [1897] 1 Ch. 373. In that case a landlord seized goods and chattels of the company under the terms of the lease. The next day a liquidator was appointed and claimed in priority to the landlord for the debenture-holders of a floating charge. Lindley, L.J., says at p. 393 : "The distress, having been made before the commencement of the winding-up of the company, and before a receiver was effectively appointed, was, in my opinion, valid as against the debenture-holders. A. L. Smith and Rigby, L.JJ., agreed with him. The decision of Killam, J., in National Electric Mfg. Co. v. Manitoba Electric & Gas Light Co., 9 Man. R. 212 is in accordance with numerous authorities and should be followed. There are additional reasons for allowing the appeal. All the equities are with the plaintiff. The debenture-holders and the shareholders are largely the same persons. The company in effect had no capital. The capital stock which was issued was for services in organizing the company and as a bonus to those who purchased debentures. The debentures were issued when the company was organized in January, 1946. Interest was payable annually on April 1st. No interest was ever paid. The debentures have been in default for years and no action was taken by the debenture-holders until after garnishment in this action. The debenture-holders permitted the company to continue to do business and obtain credit and, when these creditors attempt to collect, the shareholders step in as debenture-holders and claim the only assets of the company. Moreover, to a large extent the difficulties of this company arose through giving credit to its own directors, officers and shareholders who are also debentureholders. If the receiver's submission is right, any profits must go to the share-

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debenture-holders; if there was a loss, the creditors who had trusted them suffered the loss. It is all very well to say that the plaintiff should have searched and informed himself of the general set-up of the company and refused to give credit: we all know that a large percentage of business is done on mutual trust; a person who gives credit is justified in proceeding on the assumption that those who get credit intend to pay their honest debts - they are not required to anticipate that there is a deliberate scheme to avoid doing so. Those debentureholders who did not join in the course which has been followed are to be commended. The words of Buckley, L.J., in Re Newdigate Colliery Ltd., [1912] 1 Ch. 468, "Ought not the Court to act as an honourable man would", deserve a much wider application than in the circumstances of that particular case. Ought not the Court to see to it that those who ask its assistance "act as an honourable man would"? "He who seeks equity must do equity." In the circumstances of this case a Court of equity should not use its powers to defeat the plaintiff's claim. I would allow the appeal with costs here and in the Queen's Bench. Factum fee $100. B.C. MILLWORK PRODUCTS LTD. v. OVERHEAD DOOR SALES (VANCOUVER) LTD. Supreme Court of British Columbia. 1961. 26 D.L.R. (2d) 753. COLLINS, J.: These matters came before me on the hearing of a Chambers summons on behalf of B.C. Millwork Products Ltd. for an order that the sum of $3,287.54 paid into Court by the Bank of Nova Scotia, garnishee, be paid out to that company and further for an order setting aside a certain charging order made ex parte December 20, 1960, in the action of Overhead Door Co. of Canada Ltd., judgment creditor, and Overhead Door Sales (Vancouver) Ltd., judgment debtor, No. 3156/60. As it will be necessary to refer to the plaintiffs in each of two actions and as the names of some of the parties are somewhat similar, I propose to refer to the plaintiff in action 3168/60 as "B.C. Mill work"; to the judgment creditor in action 315 6/ 60 as "Overhead Door Co." and to the defendant in each action as "Overhead Door Sales." On December 9, 1960, Overhead Door Co. issued a specially endorsed writ against Overhead Door Sales, claiming the sum of $18,712.14 in action No. 3156/60. B.C. Millwork issued a specially endorsed writ in action No. 3168/60 against Overhead Door Sales on December 9, 1960, claiming the sum of $6,507.24 and on the same day issued a garnishee order in which the Bank of Nova Scotia was garnishee. In compliance with that order, the bank paid the sum of $3,287.54 into Court. On December 14, 1960, a true copy of the garnishing order was served on Overhead Door Sales. On December 19, 1960, Overhead Door Co. obtained default judgment against Overhead Door Sales for the sum of $18,712.14, together with $86 costs. On December 20th upon the ex parte application by Overhead Door Co., now a judgment creditor, a Court order was made by me to the effect that the sum of $3,287.54 which had been paid into Court under the garnishee already obtained by B.C. Millwork stand charged with the payment of the amount for which judgment had been recovered by Overhead Door Co. until the judgment debtor should on Friday, December 23, 1960, show good cause to the contrary. The order was made pursuant to the provisions of ss. 14 and 15 of the Judgment Act, 1838 (Imp.), c. 110 ands. 1 of the Judgment Act, 1840 (Imp.),

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c. 82, which were in effect on November 19, 1858, and remain in effect in British Columbia insofar as they have not been repealed or modified by subsequent legislation in this Province. On December 22nd, B.C. Millwork obtained default judgment against Overhead Door Sales. For the reasons stated by counsel on the application heard on December 23rd, the matter is considered urgent and it seems advisable to arrive at a decision without taking time to make an exhaustive examination of all the authorities referred to in the helpful written arguments submitted by respective counsel during the holiday week. In considering the reasons for judgment in the English and Ontario cases, it should be borne in mind that in neither England nor Ontario were there any provisions for attachment of debts before judgment. In considering the reason for judgment delivered in the Manitoba cases and their possible application to matters in issue in British Columbia, it may be helpful to bear in mind that the Manitoba Q.B.R. 527 reads as follows: "A garnishing order from time of service shall bind the debts, obligations and liabilities attached," whereas the Attachment of Debts Act, R.S.B.C. 1948, c. 20 by s-s. ( 1 ) of s. 8 provides that service of a garnishing order on a garnishee "shall bind such debts, obligations, or liabilities in his hands from the time of such service of notice." The words "in his hands" refer to the hands of the garnishee. The English Supreme Court Order 45, Rule 2 reproduced later on in these reasons is very similar to the above provision of s. 8 ( 1 ) . Counsel for B.C. Millwork relies, inter alia, upon the reasons for judgment in the following B.C. cases: Slinger v. Davis (1914), 20 B.C.R. 447; Anderson v. Dawber (1915), 25 D.L.R. 644, 22 B.C.R. 218; Marshman v. Breadin, (1933] 3 D.L.R. 312, 46 B.C.R. 537; Re Mardee's Ready-to-Wear Ltd. (1957), 9 D.L.R. (2d) 745, 36 C.B.R. 149; Hale v. Ross, ( 1958) 26 W.W.R. 47. Counsel for B.C. Millwork submitted that the B.C. cases above referred to are authority for the proposition that the first attachment order served forms a charge in favour of the garnishing creditor upon the funds which are the subjectmatter of the attachment and that this is so even though the attachment order be made before judgment. ... Counsel for B.C. Millwork relies strongly on the reasons for judgment in Kare v. North West Packers Ltd., [1955] 2 D.L.R. 407, 63 Man. R. 16. Because of the view I take of the B.C. cases above referred to, the difference between the wording of Manitoba Queen's Bench Rule 527 and s. 8(1) of the Attachment of Debts Act of B.C. as well as the remarks of Judson, J., concerning the Kare case in Canadian Credit Men's Trust Association Ltd. v. Beaver Trucking Ltd. & California Standard Co., 17 D.L.R. (2d) 161 at pp. 167-8, [1959] S.C.R. 311 at pp. 319-20, 38 C.B.R. 1 and on principle, I have, with respect, come to the conclusion that some of the principles expressed in the reasons for judgment in the Kare case should not be followed in this Province in determining the rights of an attaching creditor under an attaching order before judgment. Having given the best consideration to the matter which has been possible in the very short time at my disposal in view of other urgent matters now in hand, I have come to the conclusion that in British Columbia an attaching order obtained after judgment forms an equitable charge on a debt owing by the garnishee to the judgment debtor from the time of the service upon him of the attachment order, but that service upon a garnishee of an attachment order obtained before judgment does not form an equitable charge on the debt until

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such time as judgment be obtained. Its effect before judgment seems limited to ordering the money to be paid into Court to await final disposition by order of the Court and to preventing the garnishee from paying the debt or the portion of it attached to the garnishee's creditor or to his order without leave of the Court. Overhead Door Co., being then a judgment creditor, obtained a charging order on December 20, 1960. In my view, the monies in Court were not previously thereto impressed by an equitable charge in favour of B.C. Millwork. It may be that upon B.C. Millwork obtaining judgment on December 22nd, a charge upon the fund in Court did arise in its favour. This, however, was subsequent to the charging order already obtained by Overhead Door Co. The general principle is that charges take priority in the order in which they become a charge. However, Overhead Door Co. does not ask for payment out to it of the whole fund but asks only to share proportionately with B.C. Millwork in the fund in Court. This would appear to be an equitable disposition of those monies, particularly in view of the fact that it was the diligence of B.C. Millwork that resulted in them being paid into Court. I do not express any view as to what the order should be if Overhead Door Co. had asked for payment out to it of the whole sum now in Court. IMPERIAL OIL LTD. v. ABILENE CONTRACTING CO. LTD. British Columbia Court of Appeal, 1966. 57 O.L.R. (2d) 572. APPEAL from a judgment of Gregory, J., 53 D.L.R. (2d) 671, dismissing appellant's motion claiming priority in respect of certain money paid into Court under a garnishing order. The judgment of the Court was delivered by DA VEY, J . A. : The appellant commenced action against Abilene Contracting Co. Ltd. to recover a debt of $18,713.89. On the same day, October 5, 1964, it obtained and served upon the garnishee a garnishee order attaching all debts owing by the garnishee to the debtor up to $18,831.89. On October 23, 1964, the appellant recovered judgment against the debtor in the sum of $18,822.10. Six days later the garnishee paid the sum of $18,831.89 into Court, with a suggestion that before service of the garnishee order it had received notice of a general assignment by the debtor of its book debts to one Reg. G. Humphreys as trustee, and that on October 21, 1964, it had received from Humphreys, as assignee, and as receiver for Coneco Acceptance Limited, holder of a debenture dated July 28, 1964, charging the assets of the debtor, a demand for payment of the money attached. Under the terms of the debenture the debtor had charged, inter alia, its accounts receivable by way of floating charge in favour of Coneco. The debenture was duly registered. On October 20, 1964, and at all material times, a sum greatly exceeding the amount attached was owing to Coneco. On that day it appointed Humphreys to be the receiver and manager of the property charged by the debenture, and thereby under the terms of the debenture crystallized the floating charge. On June 1, 1965, Coneco removed Humphreys as receiver and manager, and appointed Gardner, the respondent, in his stead. The assignment of book accounts to Humphreys was dated September 17, 1964, but was not in the form or registered as required by the Assignment of Book Accounts Act, 1961 (B.C. ), c. 4.

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On November 19, 1964, the appellant moved for payment of the money in Court to it, and served notice of its motion on Humphreys. On November 9, 1964, Humphreys moved for payment of the money in Court to him as assignee under the assignment of book accounts, and probably in the alternative as receiver under the debenture. The latter is not too clear as this notice of motion is not included in the Appeal Book, but it seems likely since his affidavit filed in support of his motion refers to the debenture, the floating charge, and his appointment as receiver thereunder. The two motions were heard together, and the learned Chamber Judge, without making any formal disposition of appellant's motion, and without completely hearing Humphreys' motion, held that the assignment of book debts, notwithstanding non-compliance with the Act, was good as against the appellant, and ordered the money to be paid out to Humphreys as assignee. The appellant appealed, and on April 13, 1965 [51 D.L.R. (2d) 768, 51 W.W.R. 572], we held that it, as an attaching creditor, was one of the class entitled under s. 12 of the Act to raise and rely upon the invalidity of the assignment; we remitted both motions to the Court below to complete the hearings and dispose of them. The matter thereupon came on for hearing below [53 D.L.R. (2d) 671]. Humphreys conceded in view of the judgment on appeal that he was not entitled to the money, but his successor, the respondent Gardner, moved for the money on the ground that he was entitled to it under the floating charge that had crystallized on October 20, 1964. The learned Judge held that the respondent was entitled to the money, because the appellant did not by the service of the garnishee order nisi secure a charge upon the money until it had reduced its claim to judgment, and before it had done so Coneco had crystallized its floating charge and secured a specific charge over the attached debt, which took priority over appellant's charge under the garnishee order when it had obtained judgment. The learned Judge adopted the reasoning of Collins, J., in B.C. Millwork Products Ltd. v. Overhead Door Sales (Vancouver) Ltd. (1961), 26 D.L.R. (2d) 753, 34 W.W.R. 86. Collins, J. , distinguished the earlier decisions of this Court in Anderson v. Dawber (1915), 25 D.L.R. 644, 9 W.W.R. 511, 22 B.C.R. 218 sub nom. Anderson & Son et al. v. Dawber, and Marshman v. Breadin et al., [1933] 3 D.L.R. 312, 46 B.C.R. 537, [1933] 1 W.W.R. 668, holding that a creditor secured an equitable charge over an attached debt by service of his garnishee order nisi; he distinguished also the decision of the Manitoba Court of Appeal in Kare v. North West Packers Ltd. and McGuckin, [1955] 2 D.L.R. 407, 63 Man. R. 16, 14 W.W.R. 251, holding that an attaching creditor by service of a garnishee order secured priority over a claim under a floating charge that had not crystallized at the time of service of the garnishee ordf'r, although it did so later before payment out of the money. While I find it unnecessary to pursue that line of reasoning, I should say that I am inclined to doubt the soundness of the distinction between the present appeal and the earlier decisions of this Court. However, in my opinion, with the greatest respect, Kare v. North West Packers, supra, was wrongly decided, and the reasoning of Freedman, J., of the first instance [D.L.R. & Man. R. Joe. cit., 12 W.W.R. (N.S.) 358] is to be preferred. The reasoning of the Court of Appeal overlooks the fact that in Evans v. Rival Granite Quarries, Ltd., [ 1910] 2 K.B. 979, it was basic to the judgment that the holder of the floating charge did not attempt to crystallize its security, or to enforce it, before opposing the garnishee order absolute. The holder sought to allow the debtor to carry on business under the floating charge, and while doing so, to prevent the creditor attaching the particular debt. It was held that the holder could not do both. But

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it seems clear that if the floating charge had crystallized after the order nisi, but before the order absolute was made, the debenture-holder would have been entitled to the attached debt. See also the judgment of Ontario Court of Appeal in Great Lakes Petroleum Co. v. Border Cities Oil Co. Ltd., [1934] 2 D.L.R. 743, [1934] O.R. 244, where the same point arose. I can see no substantial distinction for these purposes between a garnishee order nisi and the seizure of goods subject to a floating charge under a writ of fi. fa. If the floating charge crystallizes at any time after seizure, at least up to the time of sale, the resulting specific charge takes priority over the seizure: Re Standard Manufacturing Co., [1891] 1 Ch. 627, 60 L.J. Ch. 292; Re Opera, Ltd., [1891] 3 Ch. D. 260; Davey & Co. v. Williamson & Sons, Ltd., [1898] 2 Q.B. 194, a judgment of the Divisional Court that was probably rightly decided but on wrong grounds. These cases were discussed in Evans v. Rival Granite Quarries, Ltd., supra. The reasoning rests upon the principle that an execution creditor has no greater rights in the property of his debtor than the debtor himself, and that the debtor's property is subject to the debenture-holder's rights under the floating charge, which entitles him to a specific charge upon the seized property if and when the floating charge crystallizes before execution is completed. Galbraith v. Grimshaw and Baxter, [1910] 1 K.B. 339; affirmed [1910] A.C. 508, does not assist appellant on this point, because it was a case of competing claims between an execution creditor and a receiver in bankruptcy, each of whom enjoyed no greater rights in the chose in action than the debtor himself, and the receiver, owing to a peculiar hiatus in the bankruptcy laws 1 enjoyed no statutory priority over the uncompleted garnishee proceedings. In my respectful opinion the respondent was entitled to the money in Court,' if it became subject to a specific charge when the floating charge crystallized. It is at this point that respondent's case breaks down. When the floating charge crystallized on October 20, 1964, it attached to the property then owned by the debtor. But it could not attach to the book debts previously assigned to Humphreys, because they were no longer the debtor's property. The appellant could attach the money owing by the garnishee only because the assignment, as we held, was void against it. Respondent answers that argument by submitting that the assignment is void also against him because he is a receiver, and so within s. 12(a) of the Assignment of Book Accounts Act, and therefore the attached debt, so far as he is concerned, must be taken to have been still the, debtor's property when the floating charge crystallized, and to have been impressed by it. It seems doubtful whether the respondent is a receiver within the meaning of s. 12(a). However, that point was not argued and I refrain from expressing any final opinion upon it. Whether the respondent was a receiver or not within the meaning of s. 12 (a) his claim to the money must fail because the affidavit sworn on November 9, 1964, and filed by his predecessor, Humphreys, -shows that Coneco Acceptance Ltd. and other creditors requested him to secure the assignment of book accounts, to assist in the orderly collection of the debtor's receivables, and to hold the money received under it in trust for the benefit of the creditors according to their legal priority. While the defective assignment of book accounts is void against the persons named in s. 12 of the Act it is good between the parties: Evans, Coleman & Evans Ltd. v. R . A. Nelson Construction Ltd. (1958), 16 D.L.R. (2d) 123 at pp. 125-6, 27 W.W.R. 38. That having been established, the question of whether or not the assignment is binding as against the persons who were the beneficiaries of the trust of the monies to be collected

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under the assignment, is to be decided, not by reference to s. 12 of the Assignment of Book Accounts Act, but under the law of agency, Humphreys as a trustee, being the agent of Coneco and the other creditors. Such beneficiaries, as well as the respondent Gardner, Humphreys' successor, stand in the shoes of the assignee: see 1 Hals., 3rd ed., p. 208, paras. 473,474: "473. Acts within express authority. Where a principal gives an agent express authority to do a particular act or class of acts on his behalf, or leads an agent reasonably to believe that he is clothed with that authority, the principal is bound, as regards third persons, by every act done by the agent which is so authorised, or which is necessary for the proper execution of such authority, even though the existence of such authority is unknown to the third person. "474. Acts within general authority. Where a principal gives an agent general authority to conduct any business on his behalf, he is bound, as regards third persons, by every act done by the agent which is incidental to the ordinary course of such business, or which falls within the apparent scope of the agent's authority." The assignment was executed also by the Abilene Transport Company Ltd. The respondent submits that it is in law an assignment of only those debts owing jointly to the two assignors. In my opinion that submission would be sound if it were not for the direction to Humphreys contained in the assignment to pay the money received under it to creditors of the assignors, and to pay any surplus to the assignors on completion of the liquidation. While there might be debts owing by the assignors jointly, as well as money owing to them jointly, they would of necessity be comparatively few. The circumstances under which the assignment was executed, and the reference to liquidation, points to money owing by and to the assignors severally as well as jointly, and the assignment should be so construed. So the attached debt had passed out of the hands of the assignor when the charge crystallized, and was not subject to it. I would allow the appeal, set aside the order below, direct that the money be paid out to the appellant, and dismiss respondent's motion. The appellant will have the costs here and below. GANDY & ALLISON LTD. v. ERECTORS & CONSTRUCTORS LTD.: BRUNSWICK BUILDERS LTD., Garnishee County Court, New Brunswick. 1963. 43 D.L.R. (2d) 461. DETERMINATION of priorities among claimants, including the Crown in right of Canada, to garnished money. KEIRSTEAD Co. CT. J.: Gandy & Allison Ltd. obtained a jugdment in the sum of $2,281.89 against Erectors & Constructors Ltd. Brunswick Builders Ltd., the garnishee, is indebted to Erectors & Constructors Ltd. in the sum of $2,519.45. Gandy & Allison Ltd. garnisheed the sum of $2,281.89 being part of the debt owing from Brunswick Builders Ltd. to Erectors & Constructors Ltd. Shortly thereafter the Unemployment Insurance Commission of Canada served a notice of debt in the sum of $258.52 on Brunswick Builders Ltd. The Department of National Revenue, Taxation Division, served a notice of debt on Brunswick Builders Ltd. in the sum of $855.45. The Workmen's Compensation Board of Nova Scotia served a notice of debt on Brunswick Builders Ltd. in the sum of $510.18.

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Question of the right of the respective parties to the garnisheed monies arose. I therefore summoned all parties to appear before me to make submissions in respect to their claims and right of priority. Oral arguments were advanced and written briefs were filed. Following this hearing, garnishee orders were taken out by Thorne's Hardware Limited in the sum of $607.59, and Saint John Bricklayers Limited in the sum of $592.30. In argument, the first question raised was - "Does the garnishee order operate as a transfer of the property or does it just create an equitable charge or security?" [Although the Court comes to no explicit conclusion on this question, it seems to hold on the cases cited that a garnishee order does not transfer the property in the debt to the garnishing creditor but rather binds it in his favor by entitling him to enforce his claim against it.]

Is there a right of set-off? This question was raised by Mr. Hendry 0. McLellan, counsel for the Workmen's Compensation Board of Nova Scotia. On this point, counsel for the garnishor quoted the following from 21 Can. Abr., col. 15 : "Any debt that a defendant can set off at law against his creditor is capable of being attached in garnishment proceedings". He submitted that on March 29, 1963, when the attachment order was served on Brunswick Builders Ltd. the total amount of $2,281.89 was owing to Erectors & Constructors Ltd. At that date, there was no right of set-off for any claim which may have been made by the Workmen's Compensation Board of Nova Scotia. The position is that the Workmen's Compensation Board of Nova Scotia can proceed against Erectors & Constructors or it can proceed against Brunswick Builders Ltd. It has not done so and it might well not do so. See Quercetti v. Tranquilli, [1941] 4 D.L.R. 63 at p. 64, 56 B.C.R. 481 at p. 482, [ 1941] 3 W.W.R. 901 at p. 902, per McDonald, J. A. : "These words ["accruing due"] were the subject of many decisions in Ontario, the result of such decisions I think being that the test to be applied is whether or not the judgment debtor himself could have brought action against the garnishee for the money in question at the moment when the attaching order was served." And also Sweet v. Wincharuk, [1941] 3 W.W.R. 160 per Bigelow, J. [citing Barsi v. Farcas, [1924] 1 D.L.R. 1154 at p. 1158, [1924] 1 W.W.R. 707 at p. 711, 18 S.L.R. 158, where Lamont, J. A., quotes from Cababe on Attachment, 3rd ed., p. 20]: "Two tests have been proposed for deciding whether or not a debt is attachable. ( 1 ) Can the debtor maintain an action for it against the third person? (2) Would the debt vest in the debtor's trustee in bankruptcy if he became insolvent?" At the date the attachment order was served, Erectors & Constructors Ltd. could have maintained an action for the amount owed them by Brunswick Builders Ltd. The fact that Brunswick Builders Ltd. might have become liable to pay the Workmen's Compensation Board of Nova Scotia if Erectors & Constructors Ltd. did not do so, would be no defence to this action for payment. Mr. McLellan submitted that the "Court is bound to recognize any adverse claims to the attached fund thereby protecting it, the garnishee, and the third parties ( or intervenors) just as if there was a formal contest". As the garnishee has now come forward and by its affidavits has set forth all

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adverse claims to the fund, this Court should apply the following principles. 1. That it will give meaning to the words of s. 17 ( 1 ) and recognize such adverse claims made "at any time before actual payment thereof by the garnishee". 2. That it will recognize that a garnishee can set off against the fund any claim or counterclaim which the garnishee had or could have had against the judgment debtor, provided only that such alleged claim of set-off appears to be in good faith: 28 Corp. Jur., p. 279. 3. That it will not permit the judgment creditor to put itself in a position superior to that of the judgment debtor in its effort to obtain garnishment: 28 Corp. Jur., pp. 241 & 242. 4. That the garnishee should be safeguarded from the hazard of double liability, i.e. that garnishment should not issue against the fund, if the garnishee remains liable to a third party for payment of the same fund: 28 Corp. Jur., p. 324. In applying these principles to the present proceedings no objection to the claim of the Workmen's Compensation Board having been taken by any of the parties to these proceedings, there is really only one test as to right of the garnishee to set off such claim of $510.18 against the fund of $2,519.45, namely, that in any action between Erectors & Contractors Ltd. as plaintiff and against Brunswick Builders Ltd. as defendant, could such defendant have set off the Board debt of $510.18, leaving $2,009.27 as the maximum amount of the debt between these parties, being the maximum amount which could become the subject of a garnishment under s. 7. Clearly the contingent liability of Brunswick Builders Ltd. to the Board becomes an actual liability before these summary proceedings have terminated, and that such a liability is well founded and would support set-offs against the fund. To find otherwise would (a) enhance the legal position of the judgment creditor, (b) would place the judgment debtor in a position of hazard of double liability, and ( c) would nullify the words of s. 17 (1), and ( d) would fail to give recognition to the equitable principle of set-off in our Courts. For some authorities recognizing these principles see: Wilson v. Fleming (1901), 1 O.L.R. 599 atp. 603: "Again, the garnishees are entitled to a set-off of the moneys advanced by them through their officers against the salary of the judgment debtor : Nathan v. Giles (1814 ), 5 Taunt. 558. In In re General Horticultural Co. (1886), 32 Ch. D. 512, Mr. Justice Chitty in delivering judgment said at p. 515: "'The Common Law Procedure Act, 1854, is, so far as attachment of debts is concerned, in pari materia with 1 & 2 Viet. ch. 110, and as to a charging order under these latter Acts it has now been &ettled that it charges only what the judgment debtor can himself honestly deal with; that rule is now settled. I apply these principles broadly as against the judgment creditor who has obtained the garnishee order here, and say that he can only obtain what the judgment debtor could honestly give him'." East Asiatic Company (B.C.) Ltd. v. Johnson Export Ltd. (1957), 23 W.W.R. 95: In this action a bank was permitted to intervene and assert its claim to a fund which had already been attached by a judgment creditor. Bernard v. Pelissier (1912), 8 D.L.R. 545 [headnote]:

"Where a creditor seizes in the hands of solicitors moneys alleged to be

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due and owing to his debtor and the solicitors declare that such debtor is their client and owes them more than they owe him, the seizing creditor can have no more rights than his debtor." See Annual Practice, 1963, vol. 1, p. 1106: "A garnishee cannot set off against the debt attached a debt owing to him from the garnishor (Sampson v. Seaton Ry. (1875), L.R. 10 Q.B. 28); but he can avail himself of a set-off against the judgment debtor, which existed when the order nisi was made (Nathan v. Giles (1814), 5 Taunt. 558; Sampson v. Seaton Ry., supra; Tapp v. Jones (1875), L.R. 10 Q.B. at p. 593). I quote from Lush, J., in Sampson v. Seaton & Beer R. Co. (1874), L.R. 10 Q.B. 28 at p. 30: "And although we have no doubt that the state of accounts between the garnishee and the judgment debtor may and ought to be gone into, so that the garnishee may not be in a worse position than if he had been sued for his debt by the judgment debtor, the case is different as between him and the judgment creditor." In Tapp v. Jones (1875), L.R. 10 Q.B. 591, I quote the following interjections of the Court at p. 592: "[BLACKBURN, J. Is there any authority for saying that such a right of set-off could be asserted in any case on the ground of anything arising after the order for attachment? "FIELD, J. By s. 62 the attachment is to bind the debt. Is not that the governing date?]" And from the judgment of Blackburn, J., at p. 593: "I agree that no greater right is given to the creditor than the debtor had. It is obviously just that if a cross debt were due to the garnishee at the date of the attachment there should be a right of set-off in his favour, and I should strive hard to give effect to it if I could, though there would be difficulties in the way. But Mr. Williams goes further, and maintains the right to set off debts accruing after the attachment. For this I see no ground. On the attachment the thing is absolutely fixed; and there is no clause of mutual credit or set-off. What would have been wise or just I do not say; but the legislature has certainly said no such thing as that contended for." I am of the opinion there is no right of set-off in this case as contended for. The question of the Crown prerogative of priority of payment was raised. Mr. John D. MacCallum, solicitor for the Department of National Revenue, submitted that - "many of the cases dealing with the priority of Crown claims deal with bankruptcy matters where the rights of various creditors are laid down by Statute." Re General Fireproofing Co., [1937] 2 D.L.R. 30, [1937] S.C.R. 150, 18 C.B.R. 159, deals with the priorities of various creditors under the Bankruptcy Act. The Minister of National Revenue did not have a lien or charge but this claim did have a privilege by virtue of the prerogative as against ordinary creditors and took first among the ordinary creditors: see Sir Lyman P. Duff, C.J.C., at p. 34 D.L.R. , p. 157 S.C.R., p. 164 C.B.R. It was held in The Queen v. Bank of Nova Scotia (1885), 11 S.C.R. 1 that where the rights of the Crown come in contact with the rights of a subject in respect to the payment of debts of equal degree the prerogative right of the Crown must prevail and therefore the Crown was entitled to be paid in full.

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The position of the competing claims of the Crown and the subject was discussed in Crowther v. Can. Mercantile Ins. Co. and A.-G. Can. (1958), 15 D.LR. (2d) 204 which was affirmed in 17 D.L.R. (2d) 437, 42 M.P.R. 269, [1959] I.LR. 584sub nom. Crowtherv. A.-G. Can. Five principles were applied in this judgment.as follows : 1. It is an incontrovertible rule of law that where the King's title and the subject's title concur, the King's title shall be preferred: The King v. Wells (1807), 16 East 278, 104 E.R. 1094; Giles v. Grover (1832), 1 Cl. & Fin. 72, 6 E.R. 843; N.S.W . Taxation Com'rs v. Palmer, (1907) AC. 179; The Queen v. Bank of Nova Scotia, supra. 2. If the Crown's execution comes into the hands of the Sheriff whilst the goods seized remain the property of the debtor the Crown is entitled to prior execution: see The King v. Wells, supra, and Giles v. Grover, supra. 3. Where the Court is administering a fund the Crown is entitled to payment out of the fund in priority to any other creditors of equal degree: N.S.W. Taxation Com'rs v. Palmer, supra; Emerson v. Simpson (1962), 32 D.LR. (2d) 603, 38 W.W.R. 466. 4. The Crown is not bound by a statute, unless it is expressly named therein, or by necessary implications : Minister of Nat'l Revenue and A.-G. Can. v. Roxy Frocks Mfg. Co. (1936), 62 Que. K.B. 113, 18 C.B.R. 132; The Queen v. Bank of Nova Scotia, supra, and R. v. Rhodes, [1934] 1 D.L.R. 251, 61 C.C.C. 3, [1934] O.R. 44. 5. The prerogative of the Crown in the right of the Dominion cannot be affected by provincial legislation : Gauthier v. The King (1918), 40 D.L.R. 353, 56 S.C.R. 176; The King v. Star Kosher Sausage Mfg. Co., [1940] 4 D.LR. 365, 48 Man. R. 147, [1940] 3 W.W.R. 127; Re McManus, [1939] 4 D.LR. 759, [1939] 2 W.W.R. 199; The King ex rel. A .-G. Can. v. Sanford, [1939] 1 D.L.R. 374, 13 M.P.R. 469; Re Adams Shoe Co., Ex p. Town of Penetanguishene, [1923] 4 D.L.R. 927, 54 O.L.R. 625, 4 C.B.R. 375. In Crowther v. A.-G. Can., supra, at pp. 442-3 D.L.R., p. 276 M.P.R., pp. 587-8 I.LR., MacDonald, J., says: "There is, of course, difficulty in applying those parts of the common law which create or recognize prerogative powers, rights, privileges or immunities to new situations created by new types of statutory enactment. Hence I think it is desirable to point out that the prerogative claimed by the Crown Dominion is that described in the Attorney-General's factum herein as "the prerogative which provides that, whenever the right of the Crown and the right of the subject with respect to the payment of debts or claims of equal degree come into competition, the right of the Crown prevails . . . to the exclusion or postponement of other claimants of equal degree". This is well established and has been held to apply to the Crown in the right of Canada or of a Province where not excluded by competent legislation." And again at p. 444 D.L.R., p. 278 M.P.R. , p. 588 I.LR.: "In N.S.W. Taxation Com'rs v. Palmer, supra, the Privy Council (per Lord Macnaghten) in upholding the prerogative right of the Crown to priority of payment as against other creditors in bankruptcy, referred (p. 182) to the rule of law in passage 3 as "one of universal application". Later

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( p. 185) he said: "The prerogative, the benefit of which the Crown is now claiming [i.e., priority of payment between creditors], depends, as explained by Macdonald C. B. in The King v. Wells, upon a principle 'perfectly distinct . . . and far more general'," and quoted the remainder of passage (2) supra. "Accordingly it may be taken that the prerogative right of priority of payment is but an illustration of a larger principle that wherever a right of the Crown and that of a subject come into competition, the former is preferred (see 7 Hals. 3rd ed., para. 701, pp. 326-7; Broom's Legal Maxims, 9th ed., p. 48; Bell's Crown Proceedings, p. 42). "There is another instance of this generic rule, namely, where the right of the Crown and a subject under proceedings by way of distress or execution come into competition." Section 32 of the Interpretation Act, R.S.N.B. 1952, c. 114 reads as follows: "No act impairs or adversely affects the rights of the Crown unless it is expressly stated therein that the Crown is bound thereby." This is similar to s. 13 of the Interpretation Act, R.S.N.S. 1954, c. 136 which was referred to in Crowther v. A.-G. Can., supra. In view of these authorities, it is respectfully submitted that the claims of the Crown should be paid in priority to the claim of the judgment creditor and the balance, if any, be paid by the garnishee to the judgment creditor. The submission for the Unemployment Insurance Commission of Canada advanced the same contention. The question of Crown prerogative was discussed in: Stroud & Dakota Enterprises Ltd. v. Imperial Oil Ltd. (1961 ), 28 D.L.R. (2d) 366, 35 W.W.R. 4 sub nom. Cuming v. Stroud; The Queen v. Hamilton ( 1962), 37 D.L.R. (2d) 545, 39 W.W.R. 545. The question whether Crown priority applies in commercial debts was considered in The Queen v. Workmen's Compensation Board and City of Edmonton (1962); 36 D.L.R. (2d) 166, 39 W.W.R. 291. I quote Buchanan, C.J.D.C., at pp. 172-3 D.L.R., pp. 298-9 W.W.R.: "Lord Shaw [in Food Controller et al. v. Cork, [1923] A.C. 647] was still more outspoken in his strictures upon what he deemed the unjustified widening of the interpretation placed upon 'Crown debts', thus, at p. 665: 'It might be sufficient to leave the matter there : but in case the treatment of this appeal should ever be attempted as a precedent for recognition on a wide scale of what are Crown debts, I desire to make the following observations. I think, with the Master of the Rolls, that the expression 'Crown debts' and 'debts due to the Crown' are unfortunate expressions. They do suggest that, under the name of prerogative, something is being claimed higher than that justice which is distributed among subjects of the Crown, and this even under ordinary contracts, the construction of which among such subjects would not permit of the operation of preference. (Italics added)'" See also Re Workmen's Compensation Board and Western Wood Products Corp. Ltd. ( 1962), 38 W.W.R. 552. The effect of the Canadian Bill of Rights, 1960 (Can.), c. 44, in respect to the Crown's prerogative of privileges, was raised. Mr. John W. Turnbull, counsel for Gandy & Allison Ltd., contends that the· Crown statutory notices or garnishments are no longer operative since the coming into force of the Canadian Bill of Rights. He says that the effect of the statutory

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garnishment is that it does deprive the ordinary creditor of property and property rights and the Income Tax Act, R.S.C. 1952, c. 148 does not afford opportunity for the creditor to be heard either before or after the issuing of the statutory notices or garnishments. Where a creditor disputes liability to the Crown and is served with a statutory garnishee, there is no procedure for the creditor to be heard and it is this denial of due process of law which makes the statutory garnishee or notice provision of the Income Tax Act and the Unemployment Insurance Act, 1955 (Can.), c. 50, inoperative or repealed. He submits - "In support of my contention that the words 'due process of law' as used in the Canadian Bill of Rights (1960) Statutes of Canada, c. 44, should include the right for parties affected to have the opportunity to be heard, I refer to the case of Re General Accident Ass'ce Co. of Can. [1926], 2 D.L.R. 390, 58 O.L.R. 470, particularly the judgment of Riddell, J. A. At p. 397 D.L.R. pp. 478-9 O.L.R. he states: "The maxim audi alteram partem is as old as the Common Law itself and older. Quaint old Sir John Fortescue tells us in The King v. Cambridge University, Bentley's Case (1723), 1 Stra. 557, at p. 567, 93 E.R. 698, 'The laws of God and man both give the party an opportunity to make his defence, if he has any. I remember to have heard it observed by a very learned man upon such an occasion, that even God himself did not pass sentence upon Adam, before he was called upon to make his defence. Adam ( says God) where are thou? Hast thou not eaten of the tree, whereof I commanded thee thou shouldest not eat? And the same question was put to Eve also.' Cf. Abley v. Dale (1850), 10 C.B. 62, at p. 71, 138 E.R. 26; Exp. Ramshay (1852), 18 Q.B. 173, at p. 190, 118 E.R. 65, also Byles, J., in Cooper v. Wandsworth Bd. of Wks. (1863), 14 C.B. (N.S.) 180, at p. 194, 143 E.R. 414. "And custom, even immemorial custom, cannot avail against this rule: Williams v. Lord Bagot (1825), 3 B & C. 772, 107 E.R. 920. Natural justice has not been discredited in fact or in terminology - the only effect of the striking language of Lord Shaw of Dunfermline, already quoted, being to warn Judges that there are more ways than one of giving natural justice and that they have not a monopoly." I quote part of s. 1 of the Bill of Rights Act: "1. It is hereby recognized and declared that in Canada there have existed and shall continue to exist without discrimination by reason of race, national origin, colour, religion or sex, the following human rights and fundamental freedoms, namely, (a) the right of the individual to life, liberty, security of the person and enjoyment of property, and the right not to be deprived thereof except by due process of law." Due process of law is defined in Bouvier's Law Dictionary, Baldwin's Century Edition, p. 327. These definitions include: "Law, in its regular course of administration through Courts of Justice; any legal proceeding enforced by public authority, whether sanctioned by age or custom or newly devised in the discretion of the Legislative power in furtherance of the general Public good, which regards and preserves these principles of liberty and Justice. 110 U.S. 516; Due process of law has never been precisely defined; While its fundamental requirement is opportunity for

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hearing and defense, the procedure may be adapted to the case and proceedings in Court are not always essential. 204 U.S. 241." Mr. Turnbull contends that something is being claimed for the Crown higher than the justice which is distributed among subjects of the Crown, and that this is repugnant to the doctrine and principle involved in the Bill of Rights. I have been unable to find any judgment which deals with the Bill of Rights in relation with the Crown prerogative in respect to preference. Section 19 of the Garnishee Act, provides: " 19. If anyone other than the judgment creditor or judgment debtor claims to be entitled to the debt or sum of money owing from the garnishee, by assignment thereof or otherwise, the judge when adjudicating in any of the cases aforesaid, or by calling the proper parties before him by summons for the purpose, may enquire by affidavits or oral testimony into and decide upon such claim, and allow to give effect to it, or hold it void as against the judgment creditor for being a fraud upon creditors or otherwise as the justice of the case requires, and for such purpose he may require the attendance of such parties and such witnesses, their fees for attendance being first paid, as he thinks necessary." The garnishee, having filed an affidavit with me setting forth the various claims and asking for directions, I summoned all parties before me so that each might have the opportunity to adduce evidence and to advance argument setting forth their respective viewpoints. I am of the opinion that these proceedings do not come in conflict with or violate any of the terms or provisions of the Bill of Rights. I am of the opinion that the provisions of the Bill of Rights do not repeal or alter the prerogative right of the Crown to preference in payment. In respect to priorities and the Creditors' Relief Act, R.S.N.B. 1952, c. 50, I had reference to the following cases: Slinger v. Davis (1914), 20 B.C.R. 447 ; Anderson v. Dawber (1915), 25 D.L.R. 644, 22 B.C.R. 218, 9 W.W.R. 511; Marshman v. Breadin, (1933] 3 D.L.R. 312, 46 B.C.R. 537, [1933] 1 W.W.R. 668 ; Independent Order of Foresters v. Bd. Trustees of Lethbridge Nor. Irr. Dist., [1944] 1 D.L.R. 660, [1944] 1 W.W.R. 206; Industrial Development Bank v. Valley Dairy Ltd., [1953] 1 D.L.R. 788, [1953] O.R. 70, [1953] C.T.C. 132; Re Mardee's Ready-To-Wear Ltd. (1957), 9 D.L.R. (2d) 745, 36 C.B.R. 149, 22 W.W.R. 515; B.C. Mil/work Products Ltd. v. Overhead Door Sales (Vancouver) Ltd. (1961 ), 26 D.L.R. (2d) 753, 34 W.W.R. 86; Stroud & Dakota Enterprises Ltd. v. Imperial Oil Ltd. (1961), 28 D.L.R. (2d) 366, 35 W.W.R. 4 sub nom. Cuming v. Stroud, see - judgment of Procter, J. A., where he quotes the priority of payments as directed by Doiron, J., in trial judgment [pp. 367-8 D.L.R., pp. 5-6 W.W.R.]; Stulp and Degrell v. Tomash (1961 ), 35 W.W.R. 80; The Queen v. Workmen's Compensation Board and City of Edmonton (1962), 36 D.L.R. (2d) 166, 39 W.W.R. 291; The Queen v. Hamilton (1962), 37 D.L.R. (2d) 545, 39 W.W.R. 545, see - priority order of Ferguson, J., at p. 561 D.L.R., p. 565 W.W.R. I quote s-ss. (3), (4) and (5) of s. 35 of the New Brunswick Creditors' Relief Act: "35 ( 3) Any judgment creditor who attaches a debt shall be deemed to do so for the benefit of himself and all creditors entitled under this Act; payment of the debt shall be made to the sheriff, who in making distribution shall apportion to such judgment creditor a share pro rata, according to the

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amount owing upon his judgment of the whole amount to be distributed under the provisions of this Act, but such share shall not exceed the amount recovered by the garnishee proceedings, unless the judgment creditor has placed a writ in the sheriff's hands. " ( 4) Money garnished and paid to the sheriff shall be deemed to be money levied under execution within the meaning of this Act, but unless the garnishee proceedings are taken by him, the sheriff shall only be entitled to poundage on such moneys at the rate of one and one-quarter per cent. " ( 5 ) Where a garnishee under an order of the court pays to the attaching creditor, or in case a garnishee without notice that the sheriff is entitled pays the amount of his debt into court, and the same is paid out to the said creditor, the sheriff may recover from the creditor the amount so received." None of the garnishee orders were contested. I find that each was valid and that the said garnishee orders total the sum of $3,481.78. I find that at the time of the garnishment there was $2,519.45 payable to Erectors & Constructors Ltd. from Brunswick Builders Ltd. I order and direct that the said monies be paid to the Sheriff of the County of Saint John, New Brm:iswick, as provided for by the Creditors' Relief Act. I declare and order that priority of payment from the said monies shall be as follows: 1. Payment of Sheriff's fees and disbursements. 2. Payment of solicitor's costs and disbursements in respect to each garnishee order and on this hearing and the cost of the garnishee. 3. Payment of claim of Department of National Revenue Taxation Division. 4. Payment of claim of the Unemployment Insurance Commission of Canada. 5. Payment on a pro rata basis of remaining claims. RY AN v. EA TOCK Supreme Court of Ontario. [1943] O.W.N. 590.

An appeal by the defendant from an order of The Assistant Master making absolute an attaching order. The plaintiff, as a judgment creditor, examined the defendant as a judgment debtor, and ascertained that she was the sole beneficiary of the estate of her late husband, and also sole beneficiary under policies of insurance upon his life. The judgment debtor stated upon her examination that she had as yet received no money from the insurer. The judgment creditor thereupon obtained an attaching order, which was later made absolute. The appeal was upon the following grounds: ( 1 ) That no debt was owing by the garnishee to the defendant until a release of Succession Duties had been filed. ( 2) That there was no evidence that the trust created in the defendant's favour bys. 156 [now 170] of The Insurance Act, R.S.O. 1937, c. 256, had not been revoked. The appeal was heard by Barlow, J., in Chambers at Toronto. BARLOW, J.: [after setting out the facts and the grounds of appeal] No evidence is submitted by the defendant or the garnishee that the necessary succession duty release has not been filed with the garnishee, or that the trust

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has been revoked. The motion before the Assistant Master was argued on the basis that the succession duty release had not been filed, and I shall assume this to be correct for the purpose of disposing of this motion. Under The Insurance Act, R.S.O. 1937, c. 256, s. 156 [now 170] a trust is created in favour of preferred beneficiaries when the insured designates as beneficiary a person falling within the preferred class. There is no evidence before me contradicting the admission of the defendant upon her examination as a judgment debtor that she is the sole beneficiary under the trust created by The Insurance Act with respect to the policies in question, and I must so find upon the evidence. This disposes of the question raised by the appellant as to revocation. The sole question to be decided is : Were the proceeds of the insurance policies a debt due or accruing due when the garnishee order issued? The law is well settled that it is not the date of payment that governs the right to attachment. It is whether or not the debt is due or accruing due. This, it seems to me, must be determined upon the relationship between the debtor and the garnishee. Here, the garnishee is undoubtedly indebted to the defendant for the amount of the insurance money. It is a due debt. As between the garnishee and the defendant nothing more requires to be done. The defendant could sue for the debt. The Government, however, under the Succession Duty Act says to the insurance company: "You must not pay this due debt until we are satisfied that the succession duty has been paid, and until we issue a succession duty release." This defers the time of payment, but it does not affect the relationship of debtor and creditor between the garnishee and the defendant. It is not a condition which must be fulfilled or a contingency which must happen before the debt is due. It does not affect the debt except as to the time of payment. For the above reasons I am of the opinion that the garnishee order was properly made. The appeal will be dismissed with costs.

VATER v. STYLES British Columbia Court of Appeal. [1930] 3 D.L.R. 509. MACDONALD, C. J.B. C. : The garnishee was premature. The appeal should be dismissed. MARTIN, J. A., agrees in dismissing the appeal. GALLIHER, J. A. : I would dismiss the appeal. MACDON ALO, J . A.: The plaintiff recovered judgment against the defendant for $189.65, for groceries supplied and obtained from the registrar an order attaching monies alleged to be due and payable to defendant by the Metropolitan Life Ins. Co. The order was served on the garnishee on August 7, 1929, in respect to a sum of $214 which would be due and payable to the defendant under certain conditions on November 3, 1929. The garnishee waited until after November 3 and as it would then, in the ordinary course, be obliged to pay defendant $214.20, it paid into Court under the garnishee order the sum of $189.65, forwarding the balance to the defendant. The defendant applied successfully to the Judge of the County Court to vacate the attaching order on the ground that when served no monies were "owing, payable or accruing due" by the Insurance Company to him within the meaning of s. 3 of the Attachments of Debts Act, R.S.B.C. 1924, c. 17. From that order plaintiff appeals. The defendant's employer carried with the Metropolitan Life Ins. Co. a group policy of insurance for the benefit of employees, including defendant. It provided

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for total and permanent disability benefits. In 1928 the defendant became totally disabled and unfit for employment and because of this disability was entitled to receive from the Insurance Company five yearly instalments of $214 each; the instalment in question being due, as stated, on November 3, 1929. This sum would only be payable to the defendant however, if he was ( 1) still disabled, and (2) alive. If he died before that date, by the terms of the policy it would be payable to his wife as beneficiary. If his physical disability disappeared before November 3, he would not receive it. To quote from the policy, "such instalment payments will be made only during the continuance of such disability." If the Act contemplates monies that must inevitably accrue due on that date the plaintiff cannot hold this order. Appellant submitted that the possibility of future occurrence that might provide a defence against the recovery of the instalment - a condition which might not arise at all - was no ground for refusing to attach the amount, and he referred to Sparks v. Younge (1858), 8 Ir. C.L.R. 251. I do not think, however, that a sum of money, which on November 3 might be legally due and owing to defendant's wife or through recovery from disability might not be payable at all, is "owing, payable and accruing due to the defendant." True upon his disability, the obligation was created but upon his recovery if that occurred within the time referred to it would disappear. It is a conditional obligation and as such not attachable. An accruing debt is one not yet payable but still an existing obligation. That cannot be said where conditions may arise which would either prevent payment or vest the amount in another: Barsi v. Farcas, (1924) 1 D.L.R. 1154, 18 S.L.R. 158. It is dependent upon conditions which may not be fulfilled: Lake of the Woods Milling Co. v. Collin, 13 Man. L.R. 154. I would dismiss the appeal. [The concurring judgment of MCPHILLIPS, J. A. is omitted.] FOUAD BISHARA JABBOUR v. STATE OF ISRAEL Queen's Bench Division, England. [1954) 1 All E.R. 145. [The plaintiffs were the insured under a fire insurance policy and were claiming for the loss of their garage and workshops in Haifa, Israel, which were mined and blown up on January 18, 1948. The insurance company admitted liability under the policy for £5,039 4s., but contended that by the Absentee Property Law of Israel they were bound to pay it to the Custodian of Absentee's Property of the State of Israel. After the plaintiffs issued a writ against the company, it paid the sum into court. This was an interpleader issue, with the insured as plaintiffs and the Custodian of Absentee's Property of the State of Israel as defendant.] PEARSON, J.: It is established by many decided cases that such a claim as this is a claim for unliquidated damages. Such a claim is unliquidated because the plaintiff has to prove the amount, and even after an adjustment of the amount the plaintiff ( unless he chooses to sue on an account stated) must still prove the amount, using the adjustment as evidence because it involves an admission by the insurer, but such evidence might be rebutted, for instance, by proof of a mistake: Luckie v. Bushby. But the word "damages" is puzzling and seems to be used in a rather unusual sense, because the right to indemnity arises, not by reason of any wrongful act or omission on the part of the insurer ( who did not promise that the loss would not happen or that he would prevent it) but only under his promise to indemnify the insured in the event of a loss. The usual

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meaning of the word "damages" is as stated in Halsbury's Laws of England, Hailsham ed., vol. 10, p. 82, para. 100, where it is said : "Damages may be defined as the pecuniary compensation which the law awards to a person for the injury he has sustained by reason of the act or default of another, whether such act or default is a breach of contract or a tort; or, put more shortly, damages are the recompense given by process of law to a person for the wrong that another has done him." On the other hand, there is an interesting footnote on p. 1 of Mayne on Damages, 11th ed. The first sentence of the text is: "Damages are the pecuniary satisfaction obtainable by success in an action." The footnote is: "Mayne's definition was intentionally wide to bring within the scope of his work actions for the price of goods, amounts payable under policies of insurance, dividends in bankruptcy and other cases where money is recovered otherwise than as compensation for a wrong. Lawyers generally distinguish, however, between debt and damages. Where under a contract, instrument or statute a person is entitled to a sum certain, either ascertained or capable of being ascertained, the sum constitutes a debt and can be recovered as such; but failure to pay a debt when due is a wrong and an action may be framed either for the debt or for damages." The explanation of the use of the expression "unliquidated damages" to describe a claim for an indemnity under an insurance policy may be wholly or partly afforded by the old form of pleading in assumpsit, alleging a breach by non-payment as in Castelli v. Boddington. But, as the only wrong admitted by the insurer is his failure to pay a sum due under a contract the amount of which has to be ascertained, he seems to be in much the same position as the person who owes and has failed to pay a reasonable price for goods sold and delivered or a reasonable remuneration for work done or services rendered. The claim is for unliquidated damages, but the word "damages" is used in a somewhat unusual sense. The claim for indemnity under an insurance policy after a loss has occurred is not a proper subject for a garnishee order : Randall v. Lithgow; Israelson v. Dawson, where Scrutton, L. J., said ([1933] 1 K.B. 304): "I have come to the conclusion that as between assured and underwriter there is no debt. There may be a breach of contract or an obligation to indemnify, but there is nothing which can be called a debt or an indebtedness within the meaning of Ord. 45, r. 1." [The rest of the judgment is omitted.] MITCHELL v. FOURNIER Supreme Court of British Columbia. [1949] 1 W.W.R. 349.

MANSON, J.: The defendant applies for an order that the garnishing order issued in this action on December 4, 1948, be set aside and that the moneys attached and paid into Court be paid out to the defendant. The plaintiff's claim as appears from the endorsement on the writ is "for the sum of Thirty-Five Hundred Dollars ($3500.00), being the value of goods and/ or chattels owned by the plaintiff and improperly misappropriated by the defendant" . .. . The question to be determined here is: What is the true nature of the plaintiff's claim? Mathew, J. is reported to have said in Chambers on March 19, 1889 :

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"Where a writ is indorsed with a claim in the nature of damages, but in the form of a liquidated claim, without a claim for damages neither final nor interlocutory judgment can be signed upon it: The Annual Practice, 1930, at p. 150." In the case at Bar we have a claim in the nature of damages but in the form of a liquidated claim. The mere phrasing of the endorsement on the writ cannot change the true nature of the claim. This is in actuality an action in trover: 23 Halsbury, 2nd ed., p. 50, sec. 82. If the plaintiff succeeds upon his action his judgment will be, as the action is framed, for damages: 23 Halsbury, p. 69, sec. 70. As to the measure of damages, namely, the value of the goods: 10 Halsbury, p. 138. The damages are to be determined not by the "ipse dixit" of the plaintiff in the endorsement, but in one of the ways provided for in the Supreme Court Rules. · This is, in my view, an action for unliquidated damages. The facts in the MacKee and Alexander cases were not as here. The attaching order will be set aside and the money in Court will be paid out to the defendant. Costs to the defendant. In Wright and Johnson v. Galishef] [1948] 1. W .W.R. 1082, at 1083, the Court said : "The essence of a liquidated demand is that once the contract is established the ascertainment of the amount due becomes simply a matter of calculation. In the case of quantum meruit the plaintiff establishes a service for which the defendant is under· obligation to pay and then it becomes necessary for the court to determine what such services are worth. This cannot be said to be a matter of calculation only, and therefore attachment proceedings would not, in my opinion, lie in respect of such a claim."

ISRAELSON v. DAWSON (PORT OF MANCHESTER INSURANCE COMPANY LIMITED, GARNISHEES) Court of Appeal, England. [1933] 1 K.B. 301. APPEAL from an order of Charles, J. in Chambers. On March 6, 1932, the plaintiff was knocked down and injured by a motor car hired by and in the possession of the defendant. The defendant was insured under a policy, dated April 17, 1930, numbered M. C. 16582, issued by the Port of Manchester Insurance Co. The plaintiff brought an action against the defendant to recover damages for the personal injuries he had received and for damage to his clothing. The action came on for hearing on April 14, 1932, before a judge and a common jury and, the defendant not appearing, judgment was given for the plaintiff for £150. The plaintiff then issued a summons for an order that all debts due from the Port of Manchester Insurance Company to the defendant should be attached to answer the judgment obtained as aforesaid. On May 5, 1932, Master Jelf made a garnishee order nisi. On May 20, 1932, Master Ball refused to make the order absolute. On appeal from this order Charles, J., on May 27, 1932, ordered that the appeal should be allowed and that the judgment creditor and the garnishees should proceed to the trial of an issue. The garnishees appealed. GREER, L. J.: After consideration I have come to the conclusion that, whatever is due from the Insurance Company to the defendant, it is not a debt. The promise is in clause 1 of the policy. "The Company shall indemnify the insured, . . . as regards all sums for which the insured . . . shall become leg~lly liable

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to pay in respect of: (a) Accidental bodily injury to any person (including passengers in the car when being driven by the insured or by the insured's licensed driver) but excluding any person who is a member of the insured's household or in the insured's service and any person driving the car; and/or Accidental damage to property other than property actually belonging to or held in trust by or in the custody or control of the insured or being conveyed by the car in the United Kingdom and Irish Free State." Have the Insurance Company promised by this policy to pay the defendant in the action the £150, for which judgment has been given? After full consideration I have come to the conclusion that they have not so promised, but that what they have promised is to indemnify him against such payment as he may have to make, and they may do that, not by paying him anything, but by paying to some other persons the amount the insured has to pay them. That is not a promise to pay him anything; it is one of the risks they undertake - namely, to indemnify him against legal liability incurred by him when driving a motor car. [The concurring judgment of SCRUTTON, L. J. is omitted.] WEBB v. STENTON English Court of Appeal. 1883. 11 Q.B.D. 518. Special Case. In August, 1882, John Hulton, against whom the plaintiff had obtained a judgment for debt and costs, became entitled under the will of the Rev. C. Fletcher, deceased, for his life to one-fourth of one-fourth share of the income arising from the trust fund under the will, of which the defendants were trustees. The value of this interest of Hulton's was about £85 yearly, and was payable half-yearly in February and August. By indenture of mortgage of the 31st of October, 1882, Hulton assigned his interest under the will to J. R. Allen of Nottingham, for securing the repayment of £300, with interest at the rate of 5 per cent. A payment of £60 had been made to him on account of his share of the income due to him, in consequence of expenses he had been put to by the illness and death of his wife. Copies of the will and mortgage formed part of the case. The question for the Court was whether the interest to which John Hulton became entitled under the will was attachable under Order XLV, rule 2, on the 11th of November, 1882. It was argued by counsel for the judgment creditor that the fact that the deceased mortgaged his interest under the will does not prevent his equity of redemption from being the subject of an attachment. l3RETT, M. J,l.: In this case the judgment creditor sought to attach certain moneys in the hands of the trustees of the judgment debtor, alleged to be debts, or accruing debts, from the trustees to the judgment debtor. Now the relation between the trustees and the judgment debtor was this - the judgment debtor was entitled, as cestui que trust, to a share of the proceeds of certain property, which would, if it came at all into the hands of the trustees, come half yearly. It seems to me that there was nothing else which could be called a debt, and that at the time when the order was applied for there was no money, the proceeds of this property, in the hands of the trustees. It is true that if everything went on well, at the next half year there would come into the hands of the trustees money from the proceeds of this property, and a share of

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that would be payable from the trustees to the judgment debtor, the cestui que trust. The question is, whether under these circumstances the judgment creditor can obtain the garnishee order sought for. The Divisional Court refused to make the order on the ground that there was no debt due, or accruing debt, at the time when the order was applied for which could be attached under Order XLV, rule 2, of the Judicature Act, and I am of opinion that the decision of the Divisional Court was right. It is necessary to look at the words of Order XLV, rule 2. [His Lordship here read that rule.] It seems to me upon the plain reading of rule 2 of Order XLV that no order can be made unless some person at the time the order is made is indebted to the judgment debtor. If there be a person so indebted, then the order will be that all debts owing or accruing from such person to the judgment debtor shall be attached. If there is a debt due payable in presenti, of course an order may be made to attach that debt. If there is not a debt payable in presenti, but there is a debt in existence, debitum in presenti, but payable in futuro, it seems to me that such an order could be made with regard to that debt, although it be the only debt and there is no debt payable in presenti, because such third person is indebted to the judgment debtor, and that would satisfy the words of the rule. In the present case the statement of the special case shews there is no debt payable in presenti, and therefore the question comes to be whether that which is sought to be attached is an accruing debt within Order XLV, rule 2, and that casts upon us the duty of saying what is the meaning of "accruing debt" in this rule 2. Now can it mean any debt which may at any future time arise between the judgment debtor and the person sought to be made a garnishee, there being no contract at that time between the judgment debtor and such person, or anything which can make any relation of any kind, legal or equitable, between them? To state the proposition is to shew its absurdity. Then can it be this, that it may be a debt which there is some probability may in future arise? Who can say where there is nothing out of which a debt can be said in law to arise, that it is probable that a debt may arise, as for instance a probability that the parties will make a contract. If it is not a debt it will not do. It must be something which the law recognises as a debt. In the former statute, viz., the Common Law Procedure Act, 1854, as well as in this rule it is called an accruing debt, and in 1858, in the case of Jones v. Thompson [27 L.J. (Q.B.) 234], the judges of the Queen's Bench thus construed the words "a debt owing or accruing" in s. 61 of the Common Law Procedure Act, 1854 (17 & 18 Viet. c. 125), Compton, J., said : "I myself at chambers have always acted on the supposition that the garnishee clauses apply only to cases in which there is an existing debt though it may be only accruing. On that principle I have refused to make orders attaching rent before it became due, and instalments of an annuity not yet due, because they were not yet debts." Wightman, J., said "Mr. Prentice relies on the words 'or accruing,' but I think that these words are intended to apply to those cases in which there is debitum in presenti, solvendum in futuro. I think that, to bring the case within the statute, there must be a debt, though it need not be yet due." Again, Crompton, J., there said: "There must, under this Act, be a debt as much as in bankruptcy. I do not agree that the use of the word 'accruing' makes a distinction on this point; there must be a debt, though it may be not yet due. I have always acted on the principle that it is not enough to shew that it is very probable that there soon will be a debt, but that it must be shewn that

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there is a debt, though it need not be yet due." I cannot conceive anything more clear and decisive than that, and if we are to construe "accruing debt" in this case in any other sense than that, it is obvious that we must overrule that decision, and say that it was wrong. Then in the case of Tapp v. Jones [L.R. 10 Q .B. 591] there is the following opinion of Blackburn, J., now Lord Blackbum, on this 61st section of the Common Law Procedure Act, 1854. "It is evident that the legislature had in view both present debts and future debts, debita in presenti, solvenda in futuro, for it speaks in the earlier part of the section of debts owing and accruing." There again it is obvious that in 1875 that learned judge construed the words "accruing debt" to mean a debt debitum in presenti, solvendum in futuro. Now that is a debt known to the law and which the law has always recognised. The law has always recognised as a debt two kinds of debt, a debt payable at the time, and a debt payable in the future, and unless the legislature intended to invent a new kind of debt not known to the law, "accruing debt" can only be what the judges have so stated. It is impossible to conceive that the Common Law Procedure Act, 1854, or this Order XLV, rule 2, which follows it, and which was drawn after these decisions had been given, intended to invent a new kind of debt, but on the contrary it is clear to my mind that the judges who drew this rule 2, and the Parliament which afterwards sanctioned it, intended to put the same meaning on the words "debts owing or accruing" as was put on them by the judges in the well-known decisions upon s. 61 of the Common Law Procedure Act, 1854. Therefore it seems to me that the meaning of "accruing debt" in Order XLV, rule 2, is debitum in presenti, solvendum in futuro, that it goes no further, and it does not comprise anything which may be a debt however probable and however soon it may be a debt. That is the construction which I put upon this rule. Then comes the question whether there are any cases which are in contradiction to that. Now there is the case of In re Cowans' Estate [14 Ch. D. 638] before Hall, V. C. I am not at all inclined to say that the order in that case was not a right order, because it seems to me that there was a debt then due, and it is immaterial whether the debt was a legal or equitable one. If there was an existing debt the order to attach was good, and it would not be void because it went on to attach an accruing debt which did not exist and which it could not attach. But though I am not prepared to say that that order was not good, yet I cannot help seeing, as far as I can understand the case, that the learned judge considered that something might be an accruing debt within Order XLV, rule 2, which was neither a legal or equitable debt at the time, not debitum in presenti, and if he did, then to that extent I am not able to agree with him. We then had pointed out to us the form of an order in Seton, which is stated to have had the concurrence of the late Master of the Rolls. There are two forms, it appears, and I will leave what observations are to be made on them to my learned brethren here, who are more conversant with that subject than I am; but I do not see that it can be said that we differ in what we now decide from any decision of the late Master of the Rolls if he did agree with those forms, or with either of them. Therefore, for the reasons I have given, I put the interpretation I have mentioned on "accruing debt" in this rule 2, and then the only question is whether that which is attempted to be attached here is an accruing debt according to such interpretation. It is obvious it is not. There is a sum of money which is to be payable out of the proceeds of property when it comes to the hands of the trust-

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ees. Nobody can say that until then it is in any legal or equitable sense a debt which is debitum in presenti. The money may never come to these trustees without any fault of their own, for they may die or cease to be trustees before anything can become due. Therefore there are contingencies upon which no debt may ever arise, and all that can be said of it is that it is probable that at the end of half-a-year money will come into the hands of the trustees, but until it does come into their hands, there is no debt existing between them and their cestui que trust. There may probably be other remedies by which the creditor of the judgment debtor can get relief, but in my opinion he cannot, in the case now before us, get relief under Order XLV, rule 2. Therefore I am of opinion that the judgment of the Divisional Court was right, and that this appeal must be dismissed. LINDLEY, L. J.: I am of the same opinion. The question is one of very considerable importance, especially as our decision is likely, we are told, to disturb the practice, in chambers at least, of the Chancery Division, if not of the Common Law Division. The question turns upon the true construction of Order XLV, rule 2, the language of which is substantially the same as that of the corresponding section in the Common Law Procedure Act, 1854, relating to the attachment of debts. [The Lord Justice here read rule 2 of Order XLV.] The important point is that the affidavit must shew that the third person, called the garnishee, is indebted to the judgment debtor, and that the subjectmatter to be attached is a debt "owing or accruing" from the garnishee. Now, I quite agree that the word "debt" in this order includes not only what was a common law debt before the passing of the Judicature Act, but also what was a mere equitable debt, that is to say a liquidated sum of money owing in equity from one person to another. I do not doubt that the power of attachment is extended to equitable debts. But is a trustee a debtor to his cestui que trust? You cannot say he is unless he has got in his hands money which it is his duty to hand over to the cestui que trust; then of course he is a debtor and there is no difficulty in attaching such a debt under this Order. But take the case of a trustee of consols for me for my life. Is he in any proper sense my debtor so long as he has no dividends which are payable to me? Clearly not, he individually may never receive those dividends; there may be a change of trustees before the next dividend day. You cannot possibly say that a trustee is a debtor to the cestui que trust before he has, or but for some fault of his might have had, the money which it is his duty to hand over. Suppose my trustee were to become bankrupt, I could not prove against his estate for unreceived dividends accruing to me as his cestui que trust. If he has made away with my money it is another matter. So, if he has made himself my debtor, I can prove my debt: but as long as the trust fund remains intact neither the fund nor the right to receive the income of it passes to his trustees in bankruptcy . .. . The result seems to me to be this: you may attach all debts, whether equitable or legal; but only debts can be attached; and moneys which may or may not become payable from a trustee to his cestui que trust are not debts. Therefore I am of opinion that the decision of the Divisional Court was right, and this appeal must be dismissed. FRY, L. J.: I agree in the conclusion which has been arrived at by the other members of the Court.... The only inquiry now is whether in the present case it has been shewn that what is sought to be attached is a present debt, payable now or in the future. There is clearly no debt payable at the present time. Is there any debt payable in

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futuro? A trustee is not, in my opinion, an equitable debtor to the cestui que trust until there is money in his hands which he ought to pay to his cestui que trust, or until he has made himself personally liable to pay money to his cestui que trust by reason of some breach of trust or default in the performance of his duties as trustee. Now in the special case there is no suggestion of there being any money in the hands of the trustees divisible among the cestuis que trust. On the contrary, the facts stated with regard to the income of £85 a year, the times of payment, and the advance already made shew that the cestui que trust, the judgment debtor, was over paid and not under paid at the date of the order. Therefore I am of opinion that the decision of the Divisional Court was perfectly correct, and that the appeal must be dismissed. I will make one more observation only. It appears to me that in arriving at this conclusion we are not laying down any rule which will produce a defect in the administration of justice. I think the power of the judgment creditor to obtain a receiver under the practice of the Chancery Division is adequate to meet all that may be required, and will prevent any denial of justice. LINDLEY, L. J. I quite concur in the last observation Lord Justice Fry has made.

STUART v. GROUGH Ontario Court of Appeal. 1888. 15 O.A.R. 299.

This was an appeal by the plaintiffs from the judgment of Ferguson, J., pronounced on the 11th of November, 1887. The facts, shortly stated, are, that James Sault died in May, 1883, and by his will dated 21st February, 1882, devised and bequeathed his real and personal property to the defendants in trust to be sold for the benefit of his eight children, among others the defendant James Sault, and the plaintiff Samuel Sault, "the proceeds to be divided between them share and share alike, but so that the said Samuel Sault shall receive $450 less than the other children." In the event of the death of any of the children before the distribution, the share of the child so dying was to go to his or her "heirs" share and share alike. In October, 1883, one James Simpson recovered judgment against Samuel Sault for $1,645, and costs, and by way of equitable execution obtained an order for the appointment of a receiver of such part of the proceeds and profits of the estate of said James Sault as the judgment debtor Samuel Sault was entitled to, as was then in or might thereafter come to the hands of the defendants as such trustees. Pursuant to this order one J. M. Stuart was in October, 1883, appointed receiver. He soon afterwards died, and the plaintiff Alex. Stuart was appointed in his stead. It was admitted that due notice of this order and of the several appointments made thereunder had been forthwith given to the defendants. The testator's estate was sold, and the proceeds received by them in 1886, and this action was by direction of the court brought by the receiver and Samuel Sault as plaintiffs to compel defendants to pay over to the former Samuel Sault's share of the estate in order to satisfy Simpson's judgment. In answer to the action the defendants alleged that prior to the recovery of that judgment a garnishee order and summons had been granted on the application of the now defendant James Sault, whereby it was ordered that all debts owing or accruing due from the defendants, the garnishees, to the said Samuel

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Sault, the judgment debtor, should be attached to answer a judgment theretofore recovered against him by the said James Sault: and that on the 15th September, 1883, an order was made, after service upon the defendants of the attaching order and summons, and after hearing them in person, whereby it was ordered that they should pay to the judgment creditor James Sault the debt due from them to said Samuel Sault, or so much thereof as should be sufficient to satisfy the judgment, as and when the debt due by them to Samuel Sault should become due and payable, and that in default execution should issue for the same. These orders were duly served on the defendants before the recovery of Simpson's judgment, and were in full force on the 12th August, 1886, when they paid over Samuel Sault's share of the proceeds of the sale to James Sault in assumed compliance with the order of the 15th September, 1~~3. The learned Judge of the Court below considering himself bound by the decision of this court in Leeming v. Woon, 7 A.R. 42, held that Samuel Sault's interest was attachable as an accruing debt, and dismissed the action. Moss, Q.C., for the respondents. The order made in the suit of Sault v. Sault was properly made by the learned local judge at Berlin, and was warranted by the authorities. If Webb v. Stenton, 11 Q.B.D. 518, decides anything at variance with Leeming v. Woon , 7 A.R. 42, the latter being a judgment of our own Court of Appeal, should be followed in preference to that decision. OSLER, J. A.: The questions for our decision are ( 1) whether the interest of the judgment debtor in his father's estate was capable of being attached under rule 370, and following rules of the Judicature Act, as a debt accruing from the trustees to him when the attaching order and the order to pay over were made : and (2) whether payment by the trustees (garnishees) after notice of the appointment of a receiver is a defence to them in the present action. It may be conceded that if a receiver had not been appointed, payment by the garnishees under the order of a Court of competent jurisdiction would have been a complete discharge to them by force of Rule 376 [now 606]; even though the decisions under the authority of which the order was made had been afterwards overruled or disapproved of. So long as the particular order, having been regularly obtained, remained in force unreversed, the defendants, in the absence of notice of anything directly affecting it, would have been justified in obeying it, and the judgment creditor in enforcing it: Randall v. Lithgood, 12 Q.B.D. 525. It is clear, as the authorities now stand, that the interest of Samuel Sault in his father's estate was not liable to be attached under the rules of the Judicature Act relating to the attachment of debts. It certainly was not a debt legal or equitable presently payable to him by the trustees, nor was it an accruing debt; that is to say, debitum in praesenti solvendum in futuro, within the meaning of Rule 370. The case of Webb v. Stenton, 11 Q.B.D. 530, decided two months before the date of the attaching order in this case, exactly applies. There the judgment creditor sought to attach the future income of his debtor, arising out of a trust fund, as an accruing debt. The Court interpret that expression, as applied to an equitable debt, to mean just what it had always been held to mean as applied to a legal debt, viz., a debt debitum in praesenti solvendum in futuro ... . The case of Re Cowan's Estate, 14 Ch.D. 638, which was followed by this Court in Leeming v. Woon, 7 A.R. 42, so far as it decides that an order may be made to attach moneys payable to the cestui que trust in futuro as distinguished from moneys_ actually in the hands of the trustee, was disapproved of, and the Court intimated that the proper course in such a case as this was to move for the appointment of a receiver. Equitable execution may thus be obtained of

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property which is not the subject of attachment. See Fuggle v. Bland, 11 Q.B.D. 711: Anglo-Italian Bank v. Davies, 9 Ch. D. 275, 282: Westhead v. Ryley, 25 Ch. D. 413. We must now consider the effect of the appointment of the receiver in Simpson's suit upon the rights and liabilities of the defendants, under the attaching order and order to pay over. It may be assumed that these orders were obtained in good faith, in pursuit of a remedy which the judgment creditor, James Sault, conceived himself to be entitled to, notwithstanding the unusual circumstance that he was himself one of the garnishees. He had notice in both capacities of the appointment of the receiver.

There is no evidence of the way in which the money was paid to him by the garnishees, but it is "not suggested, nor is it in the least probable that it was paid under compulsion of the order to pay over and to avoid a threatened execution. In Wood v. Dunn, L.R. 2 Q.B. 72, the position of a garnishee who pays without compulsion, and in mere compliance as it were with the order to pay over, but with notice of circumstances affecting the right of the attaching creditor to enforce it, is much discussed. That was an action by the trustee for creditors of one S. under the Bankrupt Act, to recover a debt alleged to be due by the defendant to S. A judgment creditor of S. had garnished the debt and had obtained and enforced against the defendant the usual order to pay over. It was held, following Holmes v. Tutton, 5 E. & B. 65, that the attaching creditor was merely in the position of a creditor holding security for his debt, and not a creditor having a lien within the meaning of that term in the Bankruptcy Act of 1849, and so had acquired by the garnishee order no interest in the debt garnished as against the assignee in bankruptcy. But it was also held that as the debtor, though having notice of the trust deed; had paid by compulsion of the order, and to avoid execution being levied, and because he could not otherwise avoid execution, the remedy of the assignee was against the creditor who had received the debt, and not against the defendant who had thus paid it under the sanction of a court of competent jurisdiction .... Assuming in this case that the receiver stood in no higher position than the assignee in bankruptcy, yet the defendants, having paid with notice of his appointment, without threat of immediate execution, and without having given the receiver notice of the garnishee order, or an opportunity of setting it aside, would upon the principle of the decision in Wood v. Dunn, have assumed the onus of shewing that the equitable execution obtained by Simpson ought not to prevail against the attaching creditors' execution by the attaching order, and the Court would have had to determine whether the debtor's interest was one which the attachment could operate upon or charge as against the appropriate form of execution. But it appears to me that the effect of the order for a receiver was absolutely to preclude the judgment creditor from enforcing the order to pay over, and the defendants from disposing of, the money received by them ( otherwise than by paying it over to the receiver), without the leave of the Court, for the subject matter of the proceedings had by force of the order for a receiver been taken into the custody of the law, and no one else could lay hands upon or interfere with it: Ex parte Evans, 11 Ch. D. 691; 13 Ch. D. 252; AngloItalian Bank v. Davies, 11 Ch. D. 275, 290; In re Pope, 17 Q.B.D. 743. In Hawkins v. Gathercole, 1 Drew. 12, under an order of the court made in a suit in which it had been declared that a judgment was a charge upon an ecclesiastical benefice, a receiver was in possession of the funds of the benefice for the

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benefit of the plaintiff. A subsequent incumbrancer with notice of the appointment of the receiver, lodged and published a sequestration, but proceeded no further with it. This was held to be an interference with the possession of the receiver and a contempt. ... These authorities clearly define the position of the parties subsequent to the appointment of the receiver. The debtor's interest was in the hands of the officer of the Court, subject no doubt to all valid charges thereon paramount to that created by the order for the receiver in favor of the party procuring his appointment. But these charges could only be enforced against, or paid out of the fund by permission of the Court, and therefore the most favourable way of looking at the case of the defendants and the attaching creditor is as if it was an application by him for leave to enforce the prior charge alleged to have been created by his attaching order, against the receiver. All parties being before the Court, it would be unnecessary to send the receiver to another division of the High Court to move to set aside the attaching order. The question would resolve itself into a contest between two execution creditors, and the Court would necessarily have to determine whether at the date of the attaching order ( which was the execution of the judgment creditor James Sault, see Re Stanhope, 11 Ch. D. 160; Ex parte Joslyne, 8 Ch. D. 327, 330; Emanuel v. Bridger, L.R. 9 Q.B. 286, 290; 10 Q.B. 485, 490) the debtor's interest in his father's estate was in the nature of a debt, legal or equitable, upon which the order could operate. According to the authorities already cited, it was not: and therefore the only execution really affecting it was the equitable execution of the judgment creditor Simpson. By this action the same question is merely raised in another form, but the answer must be the same, viz., that the payment by the defendants was wholly unwarranted, and is no defence to the claim of the receiver. It was urged that, as the attaching creditor had maintained writs of fi. fa. for lands or goods in the sheriff's hands up to the present time, he would still be entitled to priority over Simpson's claim, who, it is said, has not done so. I do not agree in this. The interest of the debtor was not exigible under these writs, and where that is the case, it is the appropriate form of execution, viz., the appointment of a receiver, which binds it. To support that, the issue of fi. fa. is now an unmeaning and needless formality; Anglo-Italian Bank v. Davies, 9 Ch. D. 275, per Jessel, M. R.; Ex parte Evans, 13 Ch. D. (C.A.) 252. For these reasons I think the plaintiff is entitled to recover and that the appeal should be allowed. HAGGARTY, C.J.O., BURTON AND PATTERSON, JJ.A., concurred. In Brandt v. Burrows (1966), 56 D.L.R. (2d) 576 (Sask.) there was an attempt to garnish moneys in the hands of solicitors for the executor of an estate for payment to a residuary beneficiary. Tucker J. commented (at 577) : "Presumably until receiving authorization from the executor to pay money to which the defendant might have been entitled under the will in question, the garnishee could not have been sued by the defendant [execution debtor] for such money, as they would have been accountable for such money to the executor of the estate. However, when authorized by the executor to pay any money to which the defendant was entitled under the will to the defendant, the garnishee was holding money to which the defendant was entitled and she was entitled to demand and enforce by suit payment of same as against the garnishee." Held, that the execution creditor of the residuary beneficiary was entitled to a gar-

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nishee order and therefore to payment out of money paid into Court pursuant to a garnishee summons. BAGLEY v. WINSOME English Court of Appeal. [1952] 1 AllE.R. 637. SIR RAYMOND EvERSHED, M. R.: This appeal has raised a question of some difficulty and interest in regard to what are commonly known as garnishee proceedings. The proceedings in this case have taken place in the county court according to the appropriate terms of the County Court Rules, Ord. 27, but it is convenient to state that, as learned counsel have both agreed, the matter does not fall to be in any way differently decided on that account from the way in which it would be decided in a case where the proceedings occur under R.S.C. Ord. 45. The point may be formulated in very brief terms. Under the rules, whether of the Supreme Court or of the county court, the creditor who has obtained judgment has available to him, as one form of executing his judgment, what is called attachment of debts by means of garnishee procedure, the subject-matter of which is described in both R.S.C., Ord. 45, r. 1, and the County Court Rules, Ord. 27, r. 1, as debts "owing or accruing" from a third party to the judgment debtor. The question in this case is whether a sum deposited with National Provincial Bank, Ltd., on deposit account by the judgment debtor, in respect of which at the material date (i.e., the date of service of the garnishee summons) a notice of withdrawal had been given by the judgment debtor and had expired, is, within the formula, a debt "owing or accruing" from National Provincial Bank, Ltd., to the judgment debtor. The judgment creditor obtained a judgment for a sum which, with costs, amounted to £50 odd. The summons which has given rise to this problem was issued on Jan. 11, 1952, that being the date on which the notice of withdrawal given by the judgment debtor expired. It is well known ( and references to this effect may be found in the textbooks) that contracts relative to what are now called deposit accounts may vary between one banking house and another. The contract which was in operation between the National Provincial Bank, Ltd., and the judgment debtor provided, so far as material, as follows: "Sums of £ 1 and upwards paid into this account will bear interest at the current rate. The interest will be credited yearly on Dec. 31 and it is requested that this book be either brought or sent to the bank in January in order that the interest may be recorded therein." The reference to "this book" is a reference to the fact that these terms are written in the book in which the sums deposited, the interest, and other particulars, are recorded. To continue with the terms of the contract: "Personal application must be made and this book produced at the bank when any money is withdrawn. All withdrawals are subject to fourteen days' notice." It, therefore, follows, that the bargain between the bank and the customer in this case was that the bank would credit the customer with interest on the sums deposited, as stated in the terms which I have read, and would only be liable to pay the whole or any part of the sums deposited on two conditions being satisfied - (i) that fourteen days' notice should be given of any withdrawal, i.e., of

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any claim to repayment, and (ii) that when the time came for repayment the depositor should attend personally and produce the deposit book. The notice of withdrawal in the present case had been given and had expired at the relevant date, so that, beyond doubt, the first condition was satisfied. But it appears that, notwithstanding, the judgment debtor has not presented himself, armed with his deposit account book, at the relevant branch of the National Provincial Bank, Ltd., and, therefore, the sum deposited still remains with the bank. In those circumstances, is the sum standing to the credit of the judgment debtor with the bank a debt "owing or accruing" from the bank to him? Unless it is plainly it is not a proper subject of this form of execution. We have been referred to a number of cases which throw some light, on some occasions a little indirectly and on other occasions of a rather tantalising character, on the problem, but it is certain that, in any previous case, so far as the researches of counsel have been able to discover, this particular matter has never been decided. It is convenient to start with a reference to the decision of this court in Webb v. Stenton. In that case an explanation, which I am prepared to adopt and apply, was given of the meaning of the phrase, "debts owing or accruing." The creditor there claimed by this procedure of execution to get possession of the income of a trust fund, held by trustees, in which the judgment debtor had a limited interest. The facts do not matter, but the members of this court made it plain that by the formula, "debts owing or accruing," was meant debts which were then owing, debts due in praesenti, whether or not they were immediately payable. Thus, a debt which had accrued due, but was not payable for, say, a month or until some future date, was within the phrase, "debts owing or accruing." Such a construction of the phrase enables a judgment creditor in garnishee proceedings to garnishee a debt which is payable over a number of instalments. I turn to a consideration of the present case. It has for a long time been well established that this form of execution is available in the case of a current account with a banker. Until 1921 it was not apprehended that there was any problem involved, having regard to the contract between banker and customer, in such circumstances, but in that year there came to be decided, again in this court, Joachimson v. Swiss Bank Corpn. The problem of the true nature of garnishee proceedings in relation to current accounts was indirectly raised, for the question was whether the plaintiffs, Joachimson ( a firm) could say that a cause of action had accrued against the defendant bank in regard to the repayment of an account in the absence of a demand made by the customer, and the Court of Appeal held that in the case of a current account a cause of action did not arise until the demand had been made. In the course of the argument the attention of the court was drawn to the question how, if that were so were the well established garnishee proceedings in relation to current accounts to be justified, since, at any rate, in nine cases out of ten, no demand for payment would have been made at the time when the garnishee proceedings occurred. It was, I think, a serious problem, but the three members of the court (Bankes, Warrington and Atkin, L.JJ.), were undaunted by that consideration in the conclusion at which they arrived in the particular case, and said in effect: "The service of the garnishee summons should be taken as operating as a demand, and that will avoid the difficulty." Although it was not strictly necessary for them to decide the point, I think they clearly indicated that the answer to the point was as I have stated it, and, as counsel for the judgment creditor in his reply indicated, I think that the later decision of this court in Rekstin v. Severo Sibirsko &c., Co. Bank for Russian Trade shows that such a view must now be taken as

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accepted: see e.g., the judgment of Slesser, L.J., in Rekstin's case. Counsel for the judgment creditor in the present case contends that, if the service of a garnishee summons can operate as a demand by the judgment debtor, there is no logical reason why it should not be taken as operating as satisfaction of any other conditions such as those which apply in the case of a deposit account. I cannot accept that argument. It seems to me that the two conditions with which we are concerned in this contract - the notice, on the one hand, and the personal application with the production of the deposit book, on the other hand - are of a somewhat different character. The deposit book is the document of title to the deposit account. As other cases have illustrated, delivery of it to a third person may operate as an effective donatio mortis causa. At the same time I think it is an unnatural and wrong use of language to suggest that where, as here, a notice of withdrawal has been given, there remains only a contingent debt. If the service of the notice of withdrawal can be regarded as a demand for payment, still the bank is entitled to rely and insist on the contract which only obliges it to pay on satisfaction of the other condition. That condition may or may not be satisfied at some indefinite future time, and in the meantime the judgment creditor cannot, as it seems to me, be in a better position than the party to the contract with the bank, namely, the judgment debtor. I am not, therefore, satisfied that in such a case as the present, on the facts that I have stated, the deposit account can and should be treated, in consequence of the decision in Joachimson v. Swiss Bank Corpn. as debt "owing or accruing" within the meaning of the relevant rules. There have been other cases in which some oblique references have been made to the case of a deposit account. I cannot refrain from a brief reference to one of the earliest, Atkinson v. Bradford Third Equitable Benefit Building Society, for it was in that case that Lord Esher, M.R., pointed out (25 Q.B.D. 380) that the case of money paid into a deposit account would be very different from the case he was there considering, that of money lent to a building society, and he went on to whet the appetite, without satisfying it, by saying " ... we shall know how to deal with it [i.e., the case of a deposit account] when it comes before us." It did not come before the court in Lord Esher's day, but it has come before the court now. Atkinson's case was one on which it is worth pausing for a moment more. The terms of the contract with the building society to which money had been lent required that notice of a certain length of time should be given before the lender could withdraw his money, and that, when applying for the money, the lender should attend personally, or send written authority, and produce his investor's book. Notice of withdrawal was given by the lender, but he died on Jan. 14, 1879, the day on which the money became payable. On May 3, 1889, the plaintiff obtained letters of administration to the lender's estate, and on May 18, 1889, commenced an action against the society to recover the money. The building society pleaded that the claim was then barred by the Limitation Act, 1623, s. 3. The answer of the court was (inter alia) that the condition as to the production of the book by the lender or by some person with his written authority was a condition precedent to the right to receive back the money, and, as this condition had not been complied with, the statute had not begun to run at the time when the society said that it had. That case is, therefore, not entirely dissimilar from the case of a deposit account. for it showed that the special terms of the contract govern the obligation of the banker or borrower of the

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money to repay. It is possible to imagine other cases of a similar character. A man may lend to a company money on, say, an unsecured debenture, under which the company would only be liable to pay on the satisfaction of certain contractual terms or conditions. Until those terms or conditions have been satisfied, it would, I think, be very difficult to say that such a debt has arisen as in contemplated by R.S.C., Ord. 45, r. 1, and the County Court Rules, Ord. 27, r. 1. O'Driscoll v. Manchester Insurance Committee illustrates the opposite conclusion, for it was a case where a doctor under certain contractual arrangements which need not be elaborated, became entitled to a certain share of an insurance pool under the National Insurance Act, 1911, the share being calculated and made payable at certain specified intervals. At the relevant date the doctor was entitled to a certain share, though its precise amount had not fallen to be computed, and it was, therefore, a case of a debt debitum in praesenti but solvendum in futuro, and, therefore, a debt within the formula that we find in the rules. The matter was stated shortly in this language by Swinfen Eady, L.J. ([1915] 3 K.B. 512) : "It was not presently payable, the amount not being ascertained, but it was a debt to which the doctors were absolutely and not contingently entitled. The only question was as to the amount of the debt, the debt not being payable until the amount has been ascertained."

Counsel for the judgment creditor contended that, as a matter of principle, the case which is now before us should be treated as in pari materia with such a case as O'Driscoll v. Manchester Insurance Committee. The production of the book (he said) is a matter of mere formality. The judgment debtor has given notice to withdraw. The debt is now, in ordinary parlance, payable subject only to compliance on the part of the judgment debtor with conditions which the bank is entitled to enforce, but which amount to no more than a mere formality, for, if the judgment debtor had lost his deposit book, no doubt in the circumstances he would be able to recover payment in a court, notwithstanding. I concede that the distinctions between one class of case and another are apt to be somewhat narrow, but, still, reverting to O'Driscoll's case, it cannot be said in the case now before us that the only question remaining is that of amount. What is here outstanding is that the contract relating to the deposit requires certain things to be done before the bank is under an obligation to pay. I should assume from the negative results with which counsel's researches have met, as well as from reference to the text-books, that this form of execution has never been treated, during the long period when it has been available, as applicable to deposit accounts. I am much fortified in the view by the reference which counsel for the bank made to Paget's Law of Banking. In the fifth edition, which was published in 1947, after the death of Sir John Paget [which occurred in 1938], it is stated quite clearly ( ch. 6, p. 90 et seq.) that the case of a deposit account differs in this respect from the case of a current account, and that garnishee proceedings will not be available as a means of execution against a deposit account. At p. 92 it is stated : "Apart from any question of the deposit being repayable on demand, at notice, or at a fixed period, it would seem clear that if the return of the receipt is by agreement of the parties, express or implied, made a condition precedent to withdrawal or repayment, garnishee proceedings will not lie against the deposit account."

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In the corresponding passage from the first edition ( 1940) ( ch. 111, pp. 18, 19), the matter is a little more fully stated, but clearly to the same effect. That reference, I think, strongly reinforces the view that, over what is now a very long period, deposit accounts have not been regarded as liable to this type of execution. I think that counsel for the judgment creditor is entitled to say that, before the Joachimson case, the distinction for this purpose between the deposit account and the current account may not, to say the least, have been clearly apprehended, but I am still of opinion, for the reasons which I have given, that it would not be right to say that the reconciliation of the decision in the Joachimson case with the continuing practice of garnishee proceedings against current accounts involves today, for the first time, making that form of procedure available also against a deposit account. The judgment creditor is not, after all, left without remedy. There are other forms of execution, e.g., equitable execution by way of appointment of a receiver. I think that, on the whole and for the reasons which I have given, it would not now be right for this court to reverse a practice of such long standing. Moreover, I am not clear how far such a reversal would go and what other types of contract might then be held to be liable to a similar form of attachment and to what extent, as a consequence, third parties might be at serious risk. I, therefore, conclude that the decision of the learned judge was correct, and I think that this appeal should be dismissed. JENKINS, L. J.: I agree. Prima facie, it would be wrong in principle for garnishee proceedings to have the effect of putting the judgment creditor in a better position as against the garnishee than the judgment debtor himself would have been. That, so far as I can see, is exactly what we are being asked to do in the present case. The judgment debtor could not obtain payment from the bank of the money in his deposit account without making a personal application and producing his deposit book. It is now claimed that the bank, at the instance of the judgment creditor, should be compelled to make payment without compliance with those stipulations. That seems to me to be wrong in principle, and there is nothing in the authorities saying that we ought to hold otherwise. As to Joachimson v. Swiss Bank Corpn. approved in Rekstin's case, it is, to my mind, one thing to hold that a garnishee order nisi should be treated as equivalent to a simple demand by the judgment debtor in a case in which a simple demand is all that is necessary in order to make the garnishee immediately liable, and quite another thing to say that such an order is to be taken in substitution for, and as the equivalent of, such a condition or stipulation as the production of a deposit book. I agree that the appeal fails. HODSON, L. J .: One of the terms of the contract between the debtor and the bank was that personal application must be made, and the deposit book produced, at the bank when money was withdrawn. That condition of the contract was complied with. Counsel for the judgment creditor, in seeking to avail himself of garnishee proceedings in the county court, relied strongly on Joachimson v. Swiss Bank Corpn. That case dealt with the relationship between banker and customer, and decided that, where money was standing to the credit of a customer on current account with a banker, in the absence of a special agreement a demand by the customer is a necessary ingredient in the cause of action against a banker for money lent. A distinction was drawn between the position of a bank and its customers, on the one hand, and the position of other debtors and creditors, on the other, the banker not being in the position of a debtor who was bound to find out the creditor and pay him the debt when due. The decision

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in that case in itself was, therefore, against the contention of counsel for the judgment creditor. However, counsel arguing the Joachimson case pointed out that the decision at which the court arrived would, apparently, throw doubt on the validity of garnishee orders, and two members of the court (Bankes and Warrington, L. JJ. ) in clear terms ( [1921] 3 K.B. 121 and 126), and the third member (Atkin, L.J.) in less definite terms (ibid., 131), expressed the view that garnishee orders would nevertheless be good, because the service of the order nisi would operate as a demand and take the place of the demand of the customer. It could not be said that those observations were made obiter dicta, because they were affirmed by a further decision of the Court of Appeal in Rekstin's case, where the point was directly raised. Therefore, it is argued that, since garnishee proceedings are not made inapplicable where certain terms of the contract have not been complied with between the customer and the bank, there is no reason why one particular term should be preferred to another. Counsel for the judgment creditors says : "As the garnishee order nisi takes the place of the demand, why should it not also take the place of the production of the deposit book?" I agree with Sir Raymond Evershed, M. R. , and Jenkins, L. J., that it is not right to take that further step. The authorities stop short of supporting the view that the contract between the customer and the bank should be treated as performed by the issue of the garnishee order where the step required by the contract, viz., the production of the book, has not been taken. The consequences of taking the further step contended for by the judgment creditor in this case would, I think, lead to great difficulties. I agree that this appeal fails. D. Garnishment of Joint Bank Accounts EMPIRE FERTILIZERS LTD. v. CIOCI Ontario Court of Appeal. [1934] 4 D.L.R. 804. The Court without calling on counsel for respondent dismissed the appeal from the judgment of Field, Co. Ct. J., infra. FIELD Co. CT. J., stated in part : It appears that the bank was holding $134.50, being the balance in respect of what was termed "a joint account," opened with the bank in the names of B. N. Cioci and G. Cioci, husband and wife. A certified copy of the account as shown by the bank books, was by agreement of counsel filed as proof, and also a printed form of the agreement re joint account signed by the husband and wife. The agreement re the joint account contains this clause: "Each of the undersigned hereby irrevocably authorize the said Bank to accept from time to time as a sufficient discharge for any sum or sums withdrawn from the said deposit account any receipt, cheque or other similar document signed by any one or more of the undersigned without any further signature or consent of the other or others of the undersigned thereto." A nice point is raised as to the right to attach the moneys in the bank under judgment recovered. Miller v. Mynn, l El. & El. 1075, 120 E.R. 1213, is authority for the law that on a joint judgment against several, a debt due to one or more of the judgment debtors may be attached in the hands of a garnishee. On the other hand, it has been held that a debt owing to the two cannot be attached to satisfy a claim against only one of these two: Re Smart v. Miller

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(1866), 3 P.R. (Ont.) 385; Macdonald v. Tacquah Gold Mines Co. (1884), 13 Q.B.D. 535; Parkerv. Odette (1894), 16 P.R. (Ont.) 69. The attaching creditor is not a purchaser for value (Dal/ow v. Garrold, Ex. p. Adams (1884), 14 Q.B.D. 543) but merely takes what the debtor (the contractor) could himself honestly deal with: Davis v. Free thy ( 1890), 24 Q.B.D. 519; Beaty v. Hackett (1892), 14 P.R. (Ont.) 395. The debt to be garnished must be due absolutely and beyond contingency. Scully v. Madigan (1913), 4 O.W.N. 1003. If the primary debtor could, at the date the garnishee summons issued from a Division Court, have successfully maintained an action against the garnishee, the garnishment proceedings are effective. McLeod v. Clark (1906) , 8 O.W.R. 403. If the judgment debtor, B. N. Cioci, had given to the judgment creditor a cheque signed by B. N . Cioci alone on the Royal Bank, Jane and Annette Branch, Toronto, from the amount owing by Cioci on the judgment, the bank, on presentment of such cheque for payment, would have had to pay it, on the penalty of an action for damages by B. N. Cioci, against the bank if such cheque had been dishonoured. I see no reason why this judgment creditor of B. N. Cioci should not have recourse to these proceedings to compel such appropriation of these funds as was within his power, to the extent of $134.50, which by the bank manager's letter of April 13, 1934, is admittedly held by the bank pending the judgment in this action : Stadder v. Canadian Bank of Commerce, (1929] 3 D.L.R. 651, 64 O.L.R. 69. More than this sum ($134.50) is overdue on the judgment against B. N . Cioci and I therefore give judgment for the judgment creditor against the garnishee for $134.50 without costs. HIRSCHORN v. EVANS Court of Appeal, England. [ 1938] 2 K.B. 801.

The judgment debtor, Lionel C. Evans, carried on business as a builder under the name of the Hampstead Construction Company. In 1930 the judgment debtor's wife, Mrs. Elaine Evans, had a legacy of £1,000 left to her by an aunt. Mrs. Evans handed this money over to her husband to be used in the business. The wife, in giving evidence, said she was a partner. The county court judge, however, was not satisfied that there ever was any partnership between the wife and husband. On February 8, 1935, the judgment debtor, Lional Evans, and his wife, Elaine Evans, opened a joint account with Barclays Bank, Highgate Branch, in the following terms : "We request you to receive money from time to time to the credit of this account and hereby authorise you to accept the signature of either" of us "jointly severally or the signature of the survivors or survivor as a sufficient discharge for the repayment of any monies so deposited with you." That was signed by Lionel Evans and Elaine Evans, his wife. On January 17, 1936, the judgment creditor, Charles Hirschorn, who had been supplying building material to the firm which was being run by the judgment debtor, recovered judgment against the judgment debtor for £15 12s. 6d. and £ 1 18s. 6d. for costs, which judgment remained unsatisfied as to the sum of £13 lls. On January 15, 1938, a garnishee summons was served on Barclays Bank. It recited that the judgment creditor on January 17, 1936, recovered judgment against the judgment debtor for the payment of the sum of £15 12s. 6d. and

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costs. It also recited that "the judgment creditor had filed an affidavit stating that you" - the bank - "are indebted to the said judgment debtor in the sum of £21." The summons then said: "You are hereby summoned to appear at court to shew cause why an order should not be made upon you for the payment to the judgment creditor of the amount of the debt due and owing or accruing from you to the said judgment debtor" and "Take notice that from and after the service of this summons upon you so much of the debts owing or accruing from you to the judgment debtor as will satisfy the debt due under the said judgment ... are attached to answer this summons." The total amount for which the summons was issued was stated to be £15 7s., being £13 1 ls. the amount remaining due under the judgment and £ 1 16s. for costs. On January 15, 1938, Barclays Bank had no account in their books in the name of Lionel Evans, but they had an account in the names of Lionel Evans and his wife Elaine Evans. On January 15, 1938, that joint account was in credit to the amount of £114 7s. 5d. As that account was in the joint names of the husband and wife and not in the name of the judgment debtor, the bank took the view that the summons did not attach any part of their debt on the joint account, and they could not dishonour cheques drawn on the joint account. The bank accordingly honoured cheques drawn on the joint account with the result that by February 22 the account was overdrawn and there was no balance left in the joint account. Upon the hearing of the garnishee summons on February 22 the county court judge found that the money in the joint account was the sole property of the husband, and that it was a debt by the bank to the husband. At any rate there was in the account on January 15, 1938, £13 1 ls. which belonged to the husband. The county court judge said that it had been suggested that it would be a great hardship on the bank if they were liable for this garnishee. From the practical point of view, so far as the money was concerned, that was their fault because they went on honouring cheques until there was an over draft in spite of the garnishee order nisi. So far as the question of principle was concerned he saw no more difficulty in the case than in a case where the bank had an account in one name and it turned out that the money was the property of some one else. There would be judgment against the garnishees for £13 lls. with costs. The garnishees ( Barclays Bank, Ltd.) appealed. GREER, L. J.: In this case I have the misfortune to differ from my two brethren on the main question. It is a matter of no consequence, because I am satisfied that the learned judge had no evidence before him which justified him in coming to the conclusion that the debt owed by the bank was due solely to the husband, because it had originated only in money provided by the husband. The only evidence given was the evidence of the wife, and she leaves it undetermined whether or not the balance of £1,000 which had been left to her at an earlier date was or was not transferred into this account, and it is consistent with her evidence that the account was an account which consisted in part of moneys provided by her and in part of moneys provided by the husband. There was no ground on which the learned judge could find that the whole of the moneys in this account had been provided by the husband, and that therefore the account was the husband's account and not the wife's account at all. The mere fact that the learned judge did not accept the wife's account did not provide evidence to the contrary of what the wife said. The fact that you do not believe evidence given for the defendant cannot make evidence for the plaintiff in any case. It seems to me, therefore, that the learned judge was wrong in the conclusion that

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he came to on the ground that there was no evidence which justified that conclusion. If and in so far as it is necessary to decide the other point, the inclination of my mind is to think that Mr. Stable has not made out his point. The only case, I think, to which I need refer in support of the opinion I have formed is the decision of Bankes, L.J., and Atkin, L.J., in the case of Joachimson v. Swiss Bank Corporation. In that case Bankes L.J. used these words: "Applying Lord Esher's test, as laid down in Hamlyn v. Wood, to the question whether the term contended for by the appellants must be implied in the contract between banker and customer, I have no hesitation in saying that it must. It seems to me impossible to imagine the relation between banker and customer, as it exists today, without the stipulation that, if the customer seeks to withdraw his loan, he must make application to the banker for it. It has been suggested that a decision to this effect would run counter to a line of authorities which have recognised and allowed garnishee proceedings in reference to amounts standing to a customer's credit on his current account, upon the ground that such amounts were debts capable of being attached. I do not agree with this suggestion. The effect of the service of a garnishee order nisi is, according to Lord Watson in Rogers v. Whitely, to make the garnishee 'custodier for the Court of the whole funds attached.' The service of such an order is, in my opinion, a sufficient demand by operation of law, to satisfy any right a banker may have as between himself and his customer to a demand before payment of moneys standing to the credit of a current account can be enforced. As no demand for payment in the present case was made on or before August 1, 1914, it follows, in my opinion, that the plaintiffs had no accrued cause of action on that date, and the claim fails on that ground." I regard the views of Atkin, L .J., now Lord Atkin, as agreeing with what was laid down in Bankes, L.J. 's judgment. If that is so, it seems to me practically conclusive of this case, because if the garnishee summons was equivalent to a demand by the husband, the husband having the right as well as his wife to demand the payment of the sum and afterwards moneys were paid on the husband's cheque by the bank, the bank cannot rely on the payment of that which had been already demanded through the garnishee summons by the husband for the purpose of the execution creditor. I am inclined to think that that view is supported by the decision of the learned judges in Harrods, Ltd. v. Tester, though the point did not directly arise in that case. I think it is involved in the decision of the county court that the husband and the husband alone had a title to the debt which remained owing to whoever was the true owner of the debt which the Bank owed to the true owner. I am not impressed by the difficulty that a decision on those lines will put the bank in. The bank is in no better position than any other debtor. The debtor has to find his creditor and pay his creditor where he finds him, and if there is a difficulty about that, then the bank has to run the risk of making a mistake by paying somebody whom the bank ought not to pay. In the present case there is no real difficulty in the way of the bank because under the County Court Rules, Order XXVII., r. 7, the bank could at the time they were served with the garnishee proceedings have paid the money into Court and then said : "It is no concern of mine whether this ought to be paid to the garnishor of the bank's debt to the husband or whether the bank owed the money to the wife. I will let these two people fight it out amongst themselves." The bank was really put in no difficulty whatever. We have had quite a number of cases cited to us, but I do not think that any

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of them really touch the real point in the case, and I should like to say with regard to Marshal v. Crutwell that in my judgment it has nothing whatever to do with the point which we have to decide in the present case. On general principles I am against the argument which has been put forward on behalf of the bank, though I think it does not matter in the result because I agree with my brethren that this appeal must be allowed on the ground that there was no evidence on which the county court judge could find that the money in the joint account belonged solely to the husband. SLESSER, L.J.: On February 8, 1935, the judgment debtor, Lionel Evans, and his wife opened a joint account with Barclays Bank, Highgate Branch, in the following terms: "We request you to receive money from time to time to the credit of this account and hereby authorise you to accept the signature of either" - of us - "or the signature of the survivors or survivor as a sufficient discharge for the repayment of any moneys so deposited with you." That is signed by Lionel Evans and Elaine Evans his wife. On January 17, 1936, the judgment creditor, Charles Hirschorn, who had been supplying building material to the firm which was being run by the judgment debtor, called the Hampstead Construction Co., recovered judgment for £15 12s. 6d. and certain costs. On January 15, 1938, a garnishee summons was served upon the bank which recited that "the judgment creditor has filed an affidavit stating that you" - the bank - "are indebted to the said judgment debtor" - Lionel Evans - "in the sum of £20." On that, the principal question which arises, in my opinion, is this: whether it was the fact that the bank at that time were so indebted to the judgment debtor as there stated. In my view the right construction to put upon the opening of the account on February 8, 1935, notwithstanding the fact that authority was thereby given both to the judgment debtor and to his wife to sign cheques, is that that account was a joint account. I entertain no doubt that if the bank had failed to meet its obligations the rights under this account could only have been exercised by both the person, the husband and the wife, joining in whatever claim might be appropriate under the account. Now, if that view be the right one, I think that the case falls within the principle stated in Macdonald v. Tacquah Gold Mines Co. That was a case in some ways simpler than this one because there was there payable to two persons, one Horton and one Fitzgerald, a debt from a certain company in South Africa. The judgment creditor, one Macdonald, sought to garnishee this company in South Africa in respect of a debt of Fitzgerald alone, and it appears that of the total sum owing both to Horton and to Fitzgerald in equity a certain proportion would have been ultimately the property of Fitzgerald, but it is pointed out there that it could not be said that it was "either a legal debt or a liquidated sum owing in equity to Fitzgerald, for equity would never have entertained an action for it brought by Fitzgerald alone without making Horton a party." That statement of Lord Esher seems to be material here apart from the view which my Lord has expressed that there is here no evidence that the money in this account was solely the property of the husband, as the learned judge has found, in that the wife was made no party to the proceedings, and although she has given evidence, which was perhaps not accepted, she has not been heard to say whether she does nor does not make any claim to this property. I do not think in her absence that it would be possible for this Court to come to any conclusion as to whether the amount, though legally in the names of these two persons, was in equity solely the property of the husband, the wife merely being upon the account as trustee.

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However that may be, I think that the observations made by all three learned judges in Macdonald v. Tacquah Gold Mines Co. are in point. It is said in that case that the company were indebted in the liquidated sum or debt payable to Horton and Fitzgerald jointly, but not to either of them alone. There was no debt due in respect of this sum from Horton to Fitzgerald, nor could there be until the money had been paid by Horton to the Company. Bowen, L.J., observed: "Where money is due on a covenant made with two persons jointly by which it is to be paid to such two jointly, no one of those two has any right to that money without the other of them," and Fry, L.J., said: "I adhere to what was said by this Court in Webb v. Stenton as to the word 'indebted' in that rule. Then can it be said that the defendant company was indebted to the judgment debtor when they were indebted to him and another person jointly only? It seems clearly it cannot, and that the words of the rule are not applicable to such a case. If they were, the result would be to enable a judgment creditor to attach a debt due to two persons in order to answer for the debt due to him from the judgment debtor alone, which would be altogether contrary to justice." Now, what is said here is this, that in so far as each of these persons has the right to demand payment of the money in the account under the specific authorization to accept the signature of either of them, that this account is in its nature several as well as joint. I am unable to accept that view. It seems to me that it amounts to no more than this; the bank is under an obligation to meet the demand at any time of either the husband or the wife, and to that extent when that demand is dishonoured the bank would be responsible for failure to meet that payment. If the argument here for the judgment creditor be well founded, it would follow that the bank would be in this dilemma, that the whole account being sterilized owing to the operation of this Order, they would be unable to meet the demands of the wife which she is entitled under the contract with the bank to make, because that would be prevented by an order which, on the face of it, applies only to the husband. I cannot think that any such position arises merely because each party may, as regards a specific cheque, create a specific debt in relation to that matter. I think one has to look at the account as a whole, and, looking at the account as a whole, I think it is in the nature of a joint account on which the bank are jointly liable to both parties and, consequently, the garnishee summons is misconceived in stating that the bank are indebted to the said judgment debtor in the sum there stated, whereas, in reality, they are jointly indebted both to the judgment debtor and to his wife. As I have just indicated, I think that the case of Macdonald v. Tacquah Gold Mines Co. and other cases which have since approved it, determined this case, therefore, in favour of the bank. MACKINNON, L. J.: Rather more than 24 hours ago I felt satisfied that on principle and on the application of pure law the judgment appealed from in this case was wrong, and that no authorities need be cited to establish that proposition. Since then, various authorities have been cited and all of them have confirmed me in that original opinion. On January 15, 1938, this document was served on the bank; it is headed "Summons to garnishee" and it sets out "Charles Hirschorn, judgment creditor, Lionel Evans, judgment debtor, Barclays Banks Ltd., garnishees." It recites that the judgment creditors obtained a judgment for £15 odd against the judgment debtor. It recites that "The judgment creditor has filed an affidavit stating that you" - the bank - "are indebted to the judgment debtor in the sum of £20" and it then says "You are hereby summoned to appear at Court to show cause

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why an Order should not be made upon you for the payment to the judgment creditor of the amount of the debt due and owing or accruing from you to the said judgment debtor" and "Take notice that from and after the service of this summons upon you so much of the debts owing or accruing from you to the judgment debtor as will satisfy the debt due . . . are attached to answer the said judgment." Then, the amount, the total for which the summons is issued, is specified as £15 7s. If upon receiving that summons the bank had any account open in their books in the name of Lionel Evans, the judgment debtor, it would have been their duty not to allow Lionel Evans to draw cheques upon that account so as to reduce the credit balance below the sum of £15 7s. That obligation would attach as regards any account in the name of Lionel Evans, even if the bank had the strongest reason to suppose that Lionel Evans was only a trustee or that for any other reason he had not the full beneficial interest in that account. In fact, on January 15, 1938, the bank had no account in their books in the name of Lionel Evans. They had an account in the names of Lionel Evans and his wife, Elaine Evans. I am quite satisfied that that was a joint account. It is true that there was an authority on the bank to honour cheques upon that joint account if the cheques were signed by one or other of them. That simply means : "Either of us has authority on behalf of and as agent for both of us to sign cheques." It would amount to no more than an authorization to the bank: "Upon this, our joint account, you are authorized to honour cheques drawn by our clerk or agent, John Smith." But such an authorization would not make the bank the debtor of John Smith. On that account the bank were debtors for any balance to Lionel Evans and Elaine Evans jointly. They were not debtors on that account to Lionel Evans. On January 15 that joint account was in credit to the amount of £114 7s. 5d. If it had been an account in the name of Lionel Evans only, the bank would have been bound not to honour cheques drawn on it so as to reduce that credit balance below £15 7s. As the account was in the joint names and not in the name of the judgment debtor, the bank took the view that the summons did not attach any part of their debt on the joint account, and they could not dishonour cheques drawn on the joint account. I think they were right in that view. Indeed, if they had dishonoured cheques, I think they could have been sued by the joint creditors for so doing. If authority be needed, it can be supplied by part of a single sentence in the judgment of Pollock, B., in the case of Beasley v. Roney in these words: "the debt owing by a garnishee to a judgment debtor which can be attached to answer the judgment debt must be a debt due to the judgment debtor alone, and that where it is only due to him jointly with another it cannot be attached." The bank taking that view, and, as I think, rightly taking that view, in the result, cheques were drawn on the joint account and were honoured by the bank, so that by February 22 the account was overdrawn and there was no balance at all. In those circumstances, on February 22, the garnishee summons came on for hearing. The judge held that the bank must pay £13 lls. That was on the basis that on receiving the summons of January 15, the bank were bound to dishonour thenceforward any cheques on the joint account so that it should not be drawn below the amount specified in the summons, and this duty was alleged to arise because the money in the account really belonged to the husband. The learned judge's judgment ends with the words: "So far as the question of principle is concerned, I see no more difficulty in this case than in a case where they have got the account in one name and it turns out that the

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money is the property of somebody else." That seems to be couched in popular language. There is, of course, never any question of property in the credit balance of a bank account. The relation of banker and customer is simply that of debtor and creditor. But if the popular language used by the county court judge means, as it appears to do, that when a garnishee order in regard to some named judgment debtor is served on a bank, the bank must at its peril hold up any account in any one's name in which the judgment creditor can subsequently prove that the judgment debtor had an interest as principal, cestui que trust, or in any other way, I think that that proposition is utterly wrong and that its enforcement would impose an unjustified and intolerable burden on the bank. I think that the judgment for these reasons was wrong and this appeal should be allowed.

RE ADLER Supreme Court of Ontario in Bankruptcy. [1951] O.W.N. 681. A motion for a declaration that the trustee in bankruptcy has good title to $779.15 paid to him by the clerk of a Division Court. URQUHART, J.: [after stating the nature of the motion] Mr. and Mrs. Adler had a joint bank account, and on Mr. Adler paying a creditor therefrom, other creditors garnished the account, whereupon the bank ( a trust company) paid the amount into the Division Court at St. Thomas. On the debtor's going into bankruptcy, the trustee claimed from the Court and got possession of the proceeds, less some costs. Mrs. Adler says that in November, 1950, she, having sold a business and settled up, found herself with $1,320 in her hands. She opened a joint bank account, signing a very meagre form, in the name of her husband and herself. Her idea was to enable her husband, who was then a commercial traveller, to issue small cheques when he needed money for expenses on the road, he being paid on a commission basis. Only two cheques were drawn: one on the day of deposit for $373.90 to meet the wife's liabilities, and one for $105.48 to a creditor of the husband, both signed by the husband with permission of the wife. Why the husband should have signed to meet the wife's expenses is unexplained. The garnishee immediately followed the latter cheque. Breaking the case down it is apparent that: ( 1) It was all the wife's money; the debtor acquired no ownership. He could only sign by his wife's permission and for certain definite purposes. (2) The moneys were deposited "to be held on a joint tenancy." The usual long form adopted by banks was not used. The document gives the husband no property; it merely permits the trust company to honour cheques signed by him. (3) The "strings" attached were not communicated to the bank, but this does not give a creditor the right to seize moneys which belong to a third party.

The trustee relies upon the case of Empire Fertilizers Ltd. v. Cioci, [1934] O.W.N. 535, [1934] 4 D.L.R. 804, but to my mind that case does not help in that the money may have been deposited by either or both, and the wording of the direction was much more elaborate.

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I have examined the numerous cases cited by the claimant, but need not discuss them. On the evidence, the moneys were, at all times, the property of the wife, and under her direction. Creditors would have no recourse to them and therefore the trustee must return to her what he received. Judgment that the trustee pay to Mrs. Adler $779.15. Since Mrs. Adler created the situation, no costs will be awarded to her; costs of the trustee out of the estate. HARRODS, LTD. v. TESTER Court of Appeal, England. [1937] 2 All E.R. 236. LORD WRIGHT, M.R. : In this case the matter arises upon an interpleader issue in which Harrods, Ltd., judgment creditors, are defendants to the issue, and a Dr. A. A. Tester is plaintiff to the issue. What has to be determined is the position of certain moneys standing at the Westminster Bank, Ltd., at its Broadstairs branch, in the name of Mrs. Tester, a married woman, the wife of Dr. Tester. Mrs. Tester had incurred an indebtedness for various goods, principally clothing, to Harrods, Ltd., and the company had sued her. The matter had been contested; I suppose the issue was whether she was personally liable, and eventually judgment was entered in that action against Mrs. Tester. Thereupon Harrods, Ltd., served a garnishee order nisi on the account in question. The amount which the garnishee order nisi covered was £217 ls. lOd., of which £115 lls. 6d. was for the indebtedness and the balance for costs. At the material time, the judgment was unsatisfied to the extent of £197 10s. 6d. The material time, for the purposes of this issue, was the date at which the garnishee order nisi was served on the bank, which was Mar. 18, 1936. It is therefore necessary to ascertain the position of the banking account as at that date. Merely to deal with the figures, to begin with : the account had been overdrawn at the beginning of March, but various payments were made which brought the account into credit. Three cheques were paid in: one on Mar. 1, 1936, for £450, a second on Mar. 6, 1936, for £50, and a third on Mar. 18, 1936, for £55. MASTER BALL, before whom the garnishee issue came, found that all these moneys belonged to Dr. Tester and were paid by him into his wife's account, and that that account, which had been current for some time, had been throughout fed by his own money, and not by her money. He says, and she agrees, that she had no money of her own. The case of Dr. Tester is that this account was, from beginning to end, an account of his moneys, and that he paid them into his bank in his wife's name, partly for his own convenience, because he was a bankrupt who had received his discharge only on July 11 , 1933, and partly for convenience, to enable his wife, Mrs. Tester, to pay out of it the household accounts. The two affidavits put that matter quite clearly. Dr. Tester's affidavit says: "I further say that the said account at the Westminster Bank in the name of Mrs. Charlotte Tester has been opened by Mrs. Charlotte Tester for the payment of domestic accounts only, and all money paid into this account has been solely provided for by me and at no time has ever been paid into this account amounts belonging to Mrs. Charlotte Tester personally. The account was only kept for my own convenience in the name of Mrs. Charlotte Tester as I am frequently on the continent and I was desirous that accounts

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should be settled during my absence by Mrs. Charlotte Tester. The account is completely controlled by me and no cheques have been drawn by Mrs. Tester without my instructions and/ or my consent." That affidavit, as the master has pointed out, is not precisely correct. It is not correct that the account was opened for the payment of domestic accounts only, because it is clear that Dr. Tester used it for his own purposes, and the convenience which he had in mind was no doubt partly that, owing to his history and actual position when the account was opened, there were objections to his having a banking account in his own name. Accordingly, it appears from the account that in several respects, and to quite substantial amounts, he used it to discharge his own indebtedness, or to draw out money for his own purposes. Mrs. Tester had given the bank a mandate requiring them to honour Dr. Tester's signature. The wife's affidavit is to the same effect. Both husband and wife were crossexamined at considerable length by the master, who has accepted the substantial accuracy of their statements. The master decided in favour of Dr. Tester, on the ground that the moneys in question in the bank, and the moneys with which this issue is concerned, belonged to Dr. Tester. The divisional court has reversed that decision, and, as I follow what they have said, it amounts to this. They do not question the facts as found by the master, but their conclusion is based, as I read it, on the proposition that, as the sworn purpose of the account was to enable the wife to pay domestic accounts, and as this account was a domestic account, therefore the money in the bank, on that ground, and on that ground alone, would be subject to these garnishee proceedings. I find it difficult to follow that course of reasoning. It would apparently give a right to Harrods, Ltd., as creditors of the wife, to claim either a trust or some contractual right in these moneys on the ground that he had somehow appropriated them to the payment of Harrod's, Ltd.'s debt in such a way as to give Harrods, Ltd., a right to claim these moneys as against the husband. With great respect to the divisional court, I find it impossible to accept that view, and it remains to consider whether the view adopted by the master was correct or not in the result. I have throughout referred to this account as moneys. That is a time-honoured phrase, though of course there are no specific moneys in question. The position here is the ordinary position of a bankrupt customer - in other words, the customer has lent money to the bank, in so far as that money has been paid in, and the account is in credit. Nevertheless, in cases of this character the practice has always been to talk of the account as consisting of moneys, and to ask the question, to whom do these moneys belong? It is true that where, as in a case of this nature, the husband has paid moneys into an account in his wife's name, there is a prima facie presumption of a gift or provision of an advancement in favour of the wife. It is, however, equally clear that that is only a prima f acie presumption, and that the court is bound to investigate all the facts of the case in order to ascertain whether there has been such a gift, or whether in truth the case is one of a resulting trust in favour of the husband, so that money in equity is the money of the husband. I have taken the case of husband and wife, but of course the same question may arise in different relationships. In this case the money, being that of the husband, would remain his money. If he had put it in someone else's name, there would then prima facie be a resulting trust for him. Where, however, the position is, as here, between husband and wife, the presumption falls in the other direction. Then, again, the facts have to be ascertained, to see whether that presumption is

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to receive effect, or whether, notwithstanding that presumption, there is still a resulting trust in favour of the husband. On an examination of the facts of this case, I confess I feel no doubt that this is one of the cases in which there is a resulting trust in favour of the husband. As far as authority goes, I think Marshal v. Crutwell contains a very clear statement of the law. In that case, the plaintiff was the wife, and the husband, in certain circumstances which are set out, transferred his banking account from his own name into the joint names of himself and his wife, and directed the bankers to honour cheques drawn by himself or his wife, and paid considerable sums into that account. Cheques were afterwards drawn by the plaintiff at the direction of her husband, and the proceeds were applied in payment of household and other expenses. It was held that the transfer of the account was not intended to be a provision for payment, but merely a mode of conveniently managing her husband's affairs, and, consequently, that she was not entitled to claim as against the estate, on her husband's death, this money as being her own. SIR GEORGE JESSEL, M. R., states the law in this way, on p. 329: "The mere circumstance that the name of a child or a wife is inserted on the occasion of a purchase of stock is not sufficient to rebut a resulting trust in favour of the purchaser if the surrounding circumstances lead to the conclusion that a trust was intended. Although a purchase in the name of a wife or a child, if altogether unexplained, will be deemed a gift, yet you may take surrounding circumstances into consideration, so as to say that it is a trust, not a gift. So in the case of a stranger, you may take surrounding circumstances into consideration, so as to say that a purchase in his name is a gift, not a trust." Then, at the end of the judgment, on p. 331, SIR GEORGE JESSEL, M.R., says: "I must infer from the surrounding circumstances what the nature of the transaction was. I come to the conclusion that it was not intended to be a provision for the wife, but simply a mode of conveniently managing the testator's affairs, and that it leaves the money therefore still his property." He said that the judge in such a case has to review all the circumstances as a juryman. That case applied an earlier decision of Lloyd v. Pughe, where LORD SELBORNE, L. C., sitting in the Court of Appeal, said at p. 89: "There were many cases in which a husband, or a stranger, had transferred property into the name of a married woman, or had placed it in the hands of a third party, upon a contract that it was to be for the benefit of the wife." Then he goes on to say of the case before him: "This was an ordinary case of an agency account opened by a husband with bankers for the purpose of convenience, and the husband did not intend to give the wife any title at law or in equity which she had not before." I need not point out that, under Hancock v. Smith, a bank cannot be garnisheed, though the account is in the name of the judgment debtor, if it be shown that no part of the moneys in the bank was the debtor's own. In other words, regard must be had to the property in equity. Applying these authorities to this case, and looking at all the facts as a juryman, I feel no doubt that the money in the

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bank was the money of Dr. Tester, and, accordingly, that it cannot be garnisheed at the suit of Messrs. Harrods. Mr. Beecroft has rather strenuously contended that there is, at the back of all these transactions, a fraudulent scheme on the part of Dr. Tester to defeat creditors like Harrods, Ltd. He refers to Gascoigne v. Gascoigne, where, on a transfer of a building by a husband to his wife, it appeared that that transfer had been made for the sole purpose of misleading, defeating, and delaying present or future creditors, while the husband retained the beneficial interest in the property. In those circumstances, the court refused to admit any equity in favour of the husband as against the wife, who stood upon her legal title. The court quoted LORD ELDON as saying that, in a case of that sort, where the plaintiff was coming into equity to be relieved against his own act, and the defence was dishonest, between the two species of dishonesty the court would not act, but would say: Let the estate lie where it falls. But here there is no evidence at all of such a fraudulent scheme concocted between the husband and the wife, and I do not think any such question arises in this case. For these reasons, I think that the order of the divisional court should be set aside and the order of the master restored. That involves setting aside the garnishee order nisi, and the costs here and below will be paid by Harrods, Ltd. [The judgments to the same effect of ROMER and ScoTT, L. JJ. are omitted.] RE DAVIS, NASH and DA VIS v. ROY AL BANK OF CANADA Supreme Court of British Columbia. 1958. 13 D.L.R. (2d) 411. Lo RD, J.: The Royal Bank of Canada, pursuant to a garnishing order duly obtained by the plaintiff, brought into Court the sum of $1,048.28, but set out in its Answer of Garnishee that it was indebted, under obligation and liable in that amount to the defendant, C. W. Nash and his wife Aileen H. Nash in respect of a joint account with the defendant, from which account either the defendant or his said wife might withdraw all or any moneys therein, and asked that no order be made without the determination of the Court as to whether the said account and moneys therein are available in garnishee proceedings. The moneys were paid in prior to judgment and the plaintiff, having succeeded at the trial and in the Court of Appeal now applies for payment out. The printed bank form constituting this joint account, and which was signed by both Nash and his wife reads as follows: "In order effectually to constitute the account mentioned on the reverse of this card a joint account, each of the undersigned hereby assigns and transfers to all the undersigned jointly and to the survivor or survivors of them all moneys heretofore or hereafter credited to said account and all interest thereon to be the joint property of the undersigned and the property of the survivor or survivors of them. For valuable consideration received, the undersigned hereby agree jointly and each with the other(s) of them and also with The Royal Bank of Canada that all moneys heretofore or hereafter credited to said account and all interest thereon shall be and continue the joint property of the undersigned with right of survivorship and that said bank may accept as a sufficient discharge for any sums withdrawn from said account any order or receipt signed by any one or more of the. undersigned without any signature or consent of the other(s) and that the. death of one or more of the undersigned shall not affect the right of the survivors or any one of them or the sole survivor to withdraw said moneys and

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interest and to give a valid discharge therefor, subject, however, to the requirements of any Succession Duty Act in respect of such moneys and interest. "Further, said bank is hereby authorized to credit such account with all moneys and the proceeds of all promises or orders to pay money, bonds, debentures, securities and coupons signed by or the property of, or received by said bank for the credit or account of or payable to, the undersigned or any of them, and to endorse any thereof on their behalf." The garnishing order herein ordered that "all debts, obligations and liabilities owing, payable, or accruing due" from the garnishee to the defendant be attached up to the amount named therein, and paid into Court. The neat point for decision is, can this order attach moneys in a joint bank account which is to the credit of the judgment debtor and another. Counsel were able to find only one Canadian case directly in point: Empire Fertilizers Ltd. v. Cioci, [1934] 4 D.L.R. 804, O.W.N. 535 .... In England, the Court of Appeal, under very similar circumstances came to a different conclusion in Hirschorn v. Evans, [1938] 3 All E.R. 491. . . . There is no evidence before me to show whether the moneys in the account may have been contributed only by the husband or wife or both, so that no question arises in equity as to whether either of them may be considered as being on the account merely as trustee. The nature of this type of bank account is described in Niles v. Lake, [1947] 2 D.L.R. 248, S.C.R. 291, where a form similar in language to the one above set out was involved. Rand, J., said at pp. 260-1 D.L.R., pp. 307-8 S.C.R.: "A careful examination of its language makes it perfectly clear to me that what was intended by all parties was the creation of a relationship to the bank in such terms as would preclude any challenge to the irrevocable authority of either of the depositors to deal with the account in unqualified fashions . . . that an estoppel should be raised that would remove the possibility of controversy between the depositors or persons representing them involving the bank. . . . These are all constituent elements of a conclusive relation to the bank; whatever the interest in the money of the depositors inter se, these were the terms interposed between them and the bank." There can be no doubt that the bank is liable to both parties jointly. It is indebted to two persons, and as Slesser, L. J. pointed out in Hirschorn v. Evans, supra, "the garnishee order is misconceived in stating that the bank are indebted to the said judgment debtor in the sum there stated, whereas, in reality, they are indebted to the judgment debtor and to his wife jointly. The reasoning of Slesser and MacKinnon, L. JJ. in the above case and the statement of Fry, L. J. that to enable a judgment creditor to attach a debt due to two persons in order to answer for the debt due to him from the judgment debtor alone would be altogether contrary to justice, convinces me that the attachment here cannot stand, and although the decision in Empire Fertilizers Ltd. v. Cioci, supra, may not be in accord with this decision, I do not feel that I can follow it. The application, insofar as it involves a balance remaining in Court and paid in by the Imperial Bank of Canada on a different garnishing order is granted. This account was in the name of the defendant Nash alone, and this part of the application was not opposed. So far as the application concerns moneys paid in by the Royal Bank of Canada it must fail with costs against the plaintiff.

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Atkins J. followed Re Davis in Moon v. Maloff (1964), 42 D.L.R. (2d) 770 (B.C.) and held that a debt owing to a partnership is not garnishable in an action against one of the partners in a personal capacity. NOTE ( 1957), 71 Harv. L. Rev. 557. Copyright© 1957, 1958 by the Harvard Law Review Association. Reprinted by permission. A creditor instituted a garnishment action against a savings bank to satisfy a judgment from money held in joint bank account. The debtor's co-depositor intervened and moved to dismiss on the grounds that a joint account is not garnishable and that he owned the funds in the joint account. The trial court denied the co-depositor's motion to dismiss. On appeal, held, affirmed. A joint account is garnishable and the burden of proving how much of the account should be exempt from garnishment is on the non-debtor depositor. Leaf v. McGowan, 13 Ill. App. 2d 58, 141 N.E. 2d 67 (1957). Joint accounts are peculiarly difficult to categorize in common-law terminology. Although they contain a survivorship feature, making them analogous to a joint tenancy, this analogy is weakened by the "joint and several" ownership feature - the right of each depositor, as against the bank, to withdraw all the funds. It is not surprising, therefore, that the problem of the extent to which joint accounts are garnishable for the debts of one depositor has given rise to a wide variety of solutions. At one extreme, the English courts hold that a joint account is immune from garnishment because, under English law, payment under compulsion to the attaching creditor will not protect the garnishee bank in a suit by the non-debtor. At the other extreme, it has been held that the entire account is subject to garnishment on the theory the creditor is "subrogated" to the power exercisable by the debtor depositor to withdraw all the money [Empire Fertilizers Ltd. v. Cioci; Park Enterprises, Inc. v. Trach (1951), 233 Minn. 467, 47 N.W. 2d 194]. Both views can be logically supported, and they have the advantage of simplicity in that they avoid the necessity of proving the actual ownership of the deposits. However, they ignore the fact that the power of either depositor to withdraw all the funds simply protects the bank and is in no way determinative of the depositors' rights inter se. A third view is that the joint account should be garnishable only in proportion to the debtor's ownership of the funds, as to which parol evidence is admissible to show the respective contributions of each depositor, as well as any intent of one to make a gift to the other [See, e.g. R. H. White Co. v. Lees (1929), 267 Mass. 112, 116 N.E. 705; Union Properties, Inc. v. Cleveland Trust Co. (1949), 152 Ohio 430, 89 N.E. 2d 638]. This approach enables courts to distinguish between two essentially different types of accounts: ( 1) the "convenience" account, usually involving a husband and a wife, which will often "sacrifice precision to convenience and becloud the respective rights of the depositors"; and (2) the savings account used as a device for making a testamentary gift. The "convenience" account, with the exception of the case in which one depositor is merely an agent of the other to make deposits and withdrawals, may present an evidentiary problem due to the fact that the parties may not have kept careful records and may not have adverted to the issue of their rights in the joint fund. In the second type of account, although the donee has the power as against the bank to withdraw the funds, there is an informal understanding between the depositors that the gift is not to take effect until the

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donor's death. Under the view that parol evidence is admissible to show ownership in a garnishment proceeding, a joint savings account would be garnishable for the donee's debts only to the extent that a presently effective gift was intended. Once it is decided to admit parol evidence on the issue of ownership, the decision as to who is to bear the burden of proof may be conclusive since the records will often be non-existent and the parties' intent impossible to ascertain. Prior to the present case, the law of Illinois placed on the garnisher the burden of proving that the debtor owned any of the funds in the joint account. An alternative solution is to create an arbitrary presumption that each depositor owns half the funds, and to place the burden of proof on the party attempting to rebut this presumption. This is the solution normally reached in those jurisdictions [e.g., Michigan] in which there are statutes providing for joint-tenancy treatment of joint accounts which by implication adopt the common-law presumption of equal ownership in controversies between depositors. The court in the present case rejected both solutions and held that the evidence that the debtor had an interest in the joint account is prima facie proof of his ownership of the whole account; thus the burden was placed on the nondebtor to prove how much of the account should be exempted. The court reasoned that, since the depositors' use of a joint account gives them the power to obscure their respective rights in the fund, it is more equitable to place the burden of proof on the non-debtor depositor than on the garnisher. This resolution seems desirable because the facts of actual ownership are peculiarly within the knowledge of the depositors. The court also rejected the reasoning of a Minnesota court, which would punish the depositors for having chosen a "loose system of dealing with money" by holding the entire account garnishable and not permitting an inquiry into the issue of ownership. The court's approach in the present case treats each case on its merits and permits actual ownership to prevail in cases in which accurate records have been kept. It thus reaches a solution which would appear to effect the fairest compromise between the rights of creditors and those of joint-account depositors. Cf. Note (1959), 17 Fae. of Law R. 159 by Warren M. H . Grover: "Before deciding on which of the three alternatives seems best it is useful to examine the recent Edwards v. Bradley [[1957] S.C.R. 599]. A woman had transferred her personal account into a joint account in the name of her daughter and herself. The mother died and the lawsuit arose over the monies in the account. The beneficiaries under the mother's will claimed that the terms of the will could not be satisfied unless the money in the account were part of the estate. The daughter, on the other hand, asserted her right of survivorship as contained in the card filled out at the bank when the account was opened. The Supreme Court of Canada decided in favour of the beneficiaries. The court enquired into the facts underlying the account and concluded that the funds were intended to remain as part of the mother's estate. "If the court will look into the surrounding facts when a beneficiary under a will claims, surely the same investigation should be made when a creditor tries to garnish. The beneficiary under a will is really the recipient of a wind-fall whereas the creditor can at least claim an obligation owing him by one of the joint account holders."

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SECTION 3: RECEIVER BYWAY OF EQUITABLE EXECUTION JUDICATURE ACT R.S.0 . 1960, c. 197. 16. ( 1) A mandamus or an injunction may be granted or a receiver appointed by an interlocutory order of the court in all cases in which it appears to the court to be just or convenient that the order should be made, and any such order may be made either unconditionally or upon such terms and conditions as the court deems just. . .. In In Re Shephard (1889), 43 Ch.D. 131, at 135-36, Cotton L.J. said : "Confusion of ideas has arisen from the use of the term 'equitable execution.' The expression tends to error. It has often been used by judges, and occurs in some orders, as a short expression indicating that the person who obtains the order gets the same benefit as he would have got from legal execution. But what he gets by the appointment of a receiver is not execution, but equitable relief, which is granted on the ground that there is no remedy by execution at law; it is a taking out of the way a hindrance which prevents execution at common law." Meredith J . said in Re Craig and Leslie (1898), 18 P.R. 270, at 273 that equitable execution "is not execution but a substitute for execution."

MANCHESTER v. PARKINSON Court of Appeal, England. 1889. 22 Q.B.D. 173. Appeal from an order of the Queen's Bench Division (Pollock B. and Manisty J.) setting aside two orders made by judges at chambers. The facts were as follows: The plaintiffs in an action for the balance of a banking account had obtained judgment against the defendant. The defendant subsequently died, leaving a will by which she appointed an executor. The defendant was possessed at the time of her death of certain household furniture and chattels, and carried on the business of an engineer, machinist, coppersmith, and brassfounder. The will not having yet been proved, and the judgment remaining unsatisfied, the plaintiffs applied at chambers for and obtained an order appointing a certain person receiver of the household furniture and chattels which belonged to the judgment debtor's estate, situate and being on certain premises and also of the business of an engineer, machinist, coppersmith and brassfounder, lately carried on by the judgment debtor, and to collect, get in, and receive the debts due and owing to the said business, and all other the assets, property, or effects becoming payable or transferable thereto, and directing him to pay the balance which should appear due on his accounts in or towards satisfaction of the judgment. The plaintiffs subsequently applied at Chambers for and obtained an order authorizing the receiver to sell the household furniture and chattels, and the assets, property and effects of the business. Upon appeal against the before-mentioned orders to the Queen's Bench Division by the executor, who had then proved the will, the appeal was allowed, and the orders set aside. LORD EsHER, M. R. : In this case an order was made appointing a receiver, and subsequently a further order authorizing a sale. If the first order was

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wrong, the second falls with it. Therefore the question substantially is whether a receiver ought to have been appointed. The facts were these: There was a judgment recovered at law which created the relation of judgment creditor and judgment debtor. That judgment gave to the judgment creditors the right to ordinary execution at law with regard to effects of the judgment debtor liable to such execution. With respect to the tangible chattels of the debtor, such as the furniture, they would have a right to execution by writ of fi. fa. Then there were alleged to be certain debts due to the judgment debtor. These the judgment creditors would have a right to attach by way of execution. With regard to the business and future profits thereof, they would have no means of touching them. Under these circumstances, was there in this case any ground on which the Court could properly make an order for the appointment of a receiver? It was said that it could be made under the 8th sub-section of s. 25 of the Judicature Act, 1873, which provides that an order may be made for the appointment of a receiver in all cases in which it shall appear to the Court to be just or convenient that such order should be made. It is said that that section gives the Court power to do what neither a Court of Law nor a Court of Equity could have done before the Act; and the case of Smith v. Cowell seems to shew that to be so, but the condition is that it shall appear to the Court to be just or convenient that the order should be made. Then does it so appear in this case? Take the order first so far as it concerns the furniture. Is it just or convenient that such an order should be made, when there is available a clear and usual mode of realizing the judgment by a writ of fi. fa? I think that, where there is no impediment shewn in the particular case to the realization of the judgment by the ordinary mode of execution at law, it is not shewn to be just or convenient to appoint a receiver and to substitute for the ordinary known practice of execution by ti. fa . another practice, viz., the appointment of a receiver, which to be effectual must be followed by a further order for sale of the goods. Then with regard to the debts due to the judgment debtor's estate; in the absence of any special difficulty in the particular case, the judgment creditors could have recourse to the known practice by way of attachment of the debts. It is not necessary to decide whether the terms of the section might not be applicable in cases where any special difficulty existed, as for instance if it were impossible to find out what the debts due to the judgment debtor were by reason of concealment on the part of the judgment debtor or some such matter. Here, so far as I see, nothing was brought forward to shew that it would not have been perfectly easy to find out what the debts were and to attach them. Then with regard to the business, it was obviously useless to make the order for a receiver, unless it also made him manager of the business, which was not done by this order. The result is, in my opinion, that there is no part of the order for appointment of a receiver which it has been shewn to have been just or convenient to make. I do not think there would be any authority either at law or in equity to make this order if it could not be done under s. 25 of the Judicature Act, 1873. If the order for a receiver was wrong it follows that the order for sale was equally wrong. With regard to the case of Whittaker v. Whittaker, possibly there were special circumstances, which do not appear from the report, but in the absence of such, I do not think it can be regarded as an authority with regard to the appointment of a receiver. Therefore, it appears to me that the appeal fails and must be dismissed. FRY, L.J.: I am of the same opinion. It appears to me that neither of these orders can be sustained, either as being made by way of legal or of equitable execution or as coming within the terms of s. 25 of the Judicature Act, 1873. The first order appoints, in the first place, a receiver of certain furniture and

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chattels in a particular house. Then it appoints him receiver of the business lately carried on by the judgment debtor. I confess I cannot understand the meaning of that part of the order. Then in the third place it directs the receiver to get in the debts due to the business. So far as it affects the chattels, it is impossible to say that this order amounted to execution at all. Execution means some way of levying the amount of the judgment debt in money. The receiver's holding the chairs and tables would not provide any means of paying the debt. With regard to the part of the order relating to the debts and choses in action, I cannot see what right there was in this case to make such an order. The proper mode of making these available by way of execution was by the process of attachment. Then this order was followed by an order directing the sale of the goods. I have no idea and it was not explained in argument, by what authority such orders as these could be made. The plaintiffs could have issued execution in the ordinary way by fi. fa. against the goods, but I do not see what authority the Court had to make an order for the appointment of a receiver of them, and then for their sale. It is clear that these orders were not good by way of legal execution. Then is there any pretence for saying that they are good by way of equitable execution? Equity has interposed in various cases to assist execution at law, generally when there was some legal difficulty in the way of enforcing the usual legal remedy. No such case was made out here. The only authority which could be cited for the judgment creditors was the case of Whittaker v. Whittaker, which can hardly be considered an authority on this point, having regard to the fact that the point does not seem to have been argued. Undoubtedly, if any special circumstances had existed shewing it to be just or convenient to make the order for a receiver, the case might have been different, and there might possibly have been jurisdiction to make such an order under s. 25 of the Judicature Act, 1873. But the counsel for the judgment creditors were obliged to admit that they had no materials for arguing that there were any such circumstances. So that point does not arise. I do not say that there would have been no jurisdiction to appoint a receiver under that section, if then::: had been special circumstances in the case rendering it just or convenient to make such an order. It may be, for instance, that an order could be made for appointment of a receiver to hold property liable to execution, to prevent some one making away with it, or to get in debts, where under particular circumstances it was a more convenient mode of procuring satisfaction of the judgment than the usual process of attachment. No special circumstances of that sort were shewn in the present case. LOPES, L.J.: I agree. In this case the plaintiffs obtained judgment, and the judgment debtor was possessed of certain chattels and entitled to certain debts which could have been reached by the ordinary processes of execution. The plaintiffs might have had a writ of fi. fa. for the seizure and sale of the chattels and they might have attached the debts. There was nothing to prevent their obtaining the fruits of their judgment by ordinary legal process. I do not think that it was the practice of Courts of Equity to appoint a receiver in such cases, unless there was some legal impediment to execution in the ordinary way. It was urged that under s. 25 Judicature Act, 1873, an order for a receiver may be made wherever it appears to be just or convenient. I agree that special circumstances may be imagined under which a case might have been made out for the application of that section, but the counsel for the plaintiffs candidly admitted that no such circumstances were made out in this case, and, that being so, I do not think the case is one to which that section is applicable. With regard to the case of Whittaker v. Whittaker, which was referred to as the only

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case where a Court had made an order similar to this appointing a receiver of debts under s. 25, it does not appear that the point as to appointment of a receiver was argued, and I do not think that any reliance can be placed on that case as an authority that, in such a case as this, a receiver can be appointed. HOLMES v. MILLAGE Court of Appeal, England. [1893] 1 Q.B. 551. The facts were as follows: The plaintiff had obtained judgment against the defendant in an action for money lent for the sum of £500 and costs. The defendant had no assets in this country, and was residing in Paris. He acted as the correspondent there of the Daily Chronicle, and was in receipt of a salary of £8 8s. per week from the proprietors of that newspaper, which was paid him weekly through bankers at Paris. The judgment being unsatisfied, the plaintiff applied at chambers for the appointment of a receiver of the defendant's salary by way of equitable execution. The judge at chambers dismissed the application. The plaintiff appealed to the Divisional Court, who granted an order appointing a receiver "to receive the moneys receivable in respect of the following property, that is to say, all sums due and payable, or to become due and payable, to the defendant by the proprietors of the Daily Chronicle newspaper." The order provided in the usual way that the appointment of the receiver should be without prejudice to the rights of any prior incumbrancers upon the said premises who might think proper to take possession of or receive the same by virtue of their respective securities, or, if any prior incumbrancer was in possession, then without prejudice to such possession; and directed that the properietors of the Daily Chronicle should pay all sums due and payable, or to become due and payable to the defendant, to such receiver, and that the receiver should have liberty, if he should think proper, but not otherwise, to keep down the interest upon any prior incumbrances according to their priorities, and should be allowed such payments, if any, in his accounts; and it provided for the passing of accounts by the receiver and payment by him of the balances appearing due on such documents towards satisfaction of what should be from time to time due in respect of the plaintiff's judgment. The defendant stated on affidavit that the salary paid him by the proprietors of the Daily Chronicle was his sole means, and that he had a wife and family to support. The judgment of the Court (Lindley and Bowen L.JJ.) was delivered by: LINDLEY, L.J. : This is an appeal from an order appointing a receiver of moneys to become payable to the defendant by third parties in consideration of services to be performed by him for them. The action is for money lent, and on June 4, 1889, the plaintiff recovered judgment against the defendant for £500 and costs. The defendant has no assets in this country. He lives in Paris. He is the foreign correspondent of a London daily morning newspaper, and under an agreement between him and the proprietors of the newspaper he receives from them weekly a sum of £8 8s., which is paid to him through a Paris banker. The plaintiff, being unable to obtain payment of her judgment debt, first applied for a garnishee order; but, as no weekly payments were in arrears, no order could be made. It is plain that the defendant's earnings cannot be reached by that process. The plaintiff then applied by summons in chambers for the appointment of a receiver, by way of equitable execution, of all sums due and payable; or to become due and payable, to the defendant by the proprietors of

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the newspaper. The only party to whom the summons was addressed was the defendant. The proprietors of the newspaper were not parties to it. The judge at chambers dismissed the application with costs. The plaintiff appealed to the Divisional Court, and that Court reversed the order made in chambers, and appointed a receiver in the following terms. [The Lord Justice here read the order.] The present appeal is from this order. The question raised by the appeal is one of great importance, not only to the parties immediately concerned, but to every wage-earning person in the country. The question involved in the appeal is whether a judgment creditor is entitled to a receiver of the future earnings of his judgment debtor. Going back to the time before the Judicature Acts, it is clear that a judgment creditor had no such right. The common law writs of execution did not extend to future income. The garnishee process did not reach it; nor was the statutory process of charging orders applicable to wages or other remuneration for personal services. The Courts of common law had no jurisdiction to appoint a receiver. The Court of Chancery no doubt had; but the jurisdiction was confined to certain classes of cases within which such a case as the present cannot be brought. In considering the jurisdiction of the Court of Chancery to appoint a receiver, we may dismiss from our minds all cases in which the Court interfered to enforce its own decrees against property, the subject-matter of a suit in equity. We have nothing to do here with a suit to enforce a charge created by the debtor. We have simply to deal with a case in which an ordinary judgment creditor sought the aid of a Court of equity to enforce his judgment against property not capable of being reached by any common law process. The only cases of this kind in which Courts of equity ever interfered were cases in which the judgment debtor had an equitable interest in property which could have been reached at law, if he had had the legal interest in it, instead of an equitable interest only. This will be found explained by Jessel, M. R. in Salt v. Cooper (16 Ch.D. 544), and more recently by Chitty, J. in Wills v. Luff (38 Ch.D. 197), and by the Court of Appeal in In re Shephard (43 Ch.D. 131) . It is an old mistake to suppose that, because there is no effectual remedy at law, there must be one in equity. But the mistake, though old and often pointed out, is sometimes inadvertently made even now. Courts of equity proceeded upon well-known principles capable of great expansion; but the principles themselves must not be lost sight of. The principle on which alone the order in this case could be supported before the Judicature Acts is well explained by Cotton, L.J. in Anglo-Italian Bank v. Davies (9 Ch.D. 275); it is that Courts of equity gave relief where a legal right existed and there were legal difficulties which prevented the enforcement of that right at law. But the existence of a legal right is essential to the exercise of this jurisdiction. The judgment creditor here has a legal right to be paid his debt, but not out of the future earnings of his debtor; and the Court of Chancery had no jurisdiction to prevent him from earning his living or from receiving his earnings, unless he had himself assigned or charged them. The Court could not restrain him from receiving them until his creditor could attach them under the process of garnishment; nor did the Court ever presume to enlarge a judgment creditor's rights; nor, under colour of assisting him to enforce those rights, did the Court of Chancery reach by its process a kind of property which was not liable to execution. Before debts and money were made liable to an execution by statute, they could not be reached by an ordinary judgment creditor in equity any more than at law. If the earnings could have been reached under a writ of sequestration, a receiver might have been appointed, as in Willcock v. Terrell (3 Ex.D. 323), but a writ of segues-

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tration was never issued before the Judicature Acts in order to attach a man's personal earnings. If, therefore, the defendant were in this country, the plaintiff would have no right upon any principle of equity to a receiver of his earnings. The defendant's absence abroad is not a circumstance on which the plaintiff can rely for assistance. That circumstance might avail her if she had a right to the defendant's earnings, and could not get them by reason of the defendant's absence; but such absence does not create a right to the earnings; and it is the non-existence of that right which prevents the plaintiff from obtaining relief. For these reasons we are of opinion that the present case cannot be brought under any principle applicable to the appointment of receivers by the Court of Chancery before the passing of the Judicature Acts. We pass now to those Acts. The only section expressly applicable to receivers is s. 25, clause 8, of the Judicature Act, 1873, which says that a receiver may be "appointed by an interlocutory order of the Court in all cases in which it shall appear to the Court to be just or convenient that such order should be made." The order appealed from was made by the Divisional Court under the authority supposed to be conferred by this section. There is no doubt that since the Judicature Acts receivers by way of equitable execution can be appointed in proper cases by all divisions of the High Court on a motion or summons, without the necessity of a fresh action or suit on the judgment. This is plain from Salt v. Cooper; Smith v. Cowell; Anglo-Italian Bank v. Davies, and In re Peace and Waller. In Smith v. Cowell and some other cases the jurisdiction seems to have been rested on s. 25, clause 8, of the Judicature Act, 1873. In Salt v. Cooper the jurisdiction was based on those sections which abolish the old Courts and transfer their respective jurisdictions to the High Court, and empower every division of that Court to give complete relief in every case which comes before it. But accepting the construction put upon s. 25, clause 8, of the Judicature Act, 1873, in Smith v. Cowell, and later cases, according to which a receiver can be appointed in a proper case by way of equitable relief at the instance of a judgment creditor against his debtor, the question next arises whether it is "just or convenient" to appoint a receiver in a case of this description. The meaning of this phrase was considered in North London Railway Co. v. Great Northern Railway Co., and it was there decided that the phrase did not justify the granting of an injunction in a case in which no injunction could be granted by any Court before the Judicature Acts came into operation. The same reasoning obviously applies to the appointment of receivers as well as to the grant of injunctions. Although injunctions are granted and receivers are appointed more readily than they were before the passing of the Judicature Acts, and some inconvenient rules formerly observed have been very properly relaxed, yet the principles on which the jurisdiction of the Court of Chancery rested have not been changed. This has been laid down in several cases decided since those Acts came into operation, notably in Manchester and Liverpool District Banking Co. v. Parkinson. In Whittaker v. Whittaker, an order nisi was made for the appointment of a receiver to get in a debt which might be attached under the garnishee order; but this case was disapproved in Manchester and Liverpool District Banking Co. v. Parkinson, and cannot be relied on. In the last-mentioned case an order for a receiver was discharged, because there was no difficulty in enforcing payment of a judgment by the ordinary legal methods. In this case there is such a difficulty; but it does not arise from any impediment which the old Court of Chancery had jurisdiction to remove. The difficulty arises from the fact that future earnings are not by law attachable by

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any process of execution direct or indirect. In Westhead v. Riley, and in In re Coney, receivers were appointed by a debtor's interest in personal property, but the property there in question was of a kind which the execution creditor had a right to reach; and those cases fall far short of being authorities for such an order as that now before us. In the popular sense, almost any mode of making a man pay his debts may be just, and convenient at least to the creditor; and in that sense it may be just and convenient to appoint a receiver in a case like this. But even in a popular sense such an order may be anything but just or convenient to the newspaper affected by it. The appointment of a receiver is a serious interference with its business. We cannot judicially hold the appointment of a receiver in a case in which no Court could grant a receiver before the Act to be just or convenient within the true meaning of s. 25, clause 8, of the Judicature Act, 1873. We cannot come to the conclusion that this section was intended to alter the law of debtor and creditor, and the relation of employer and employed, to such a very serious extent as the order appealed from, if upheld, would alter them. We have carefully gone through the Judicature Acts and Orders, including Orders XLII. to XLVI., relating to executions and similar matters, and we have examined the cases in the Law Reports in which receivers have been appointed since those Acts came into operation, but we can find no enactment or rule or authority on which the order appealed from can be supported. Order XLII., r. 3, only enables a receiver to be appointed where one could be appointed before the Judicature Acts came into operation. The rules relating to sequestration have never been understood as extending to such a case as this. The Divisional Court did not allude to them; nor did counsel rely on them. We only mention them to shew that they have not been overlooked. Again, we have not to consider whether it would be possible to reach these earnings by proceedings in Bankruptcy or under the Judgment Debtors Act; for no such proceedings have been taken. The conclusion of the whole matter is that the order appealed from is not warranted either by the Judicature Acts, and rules, or by any principle by which Courts of law or equity were guided before those Acts were passed. It follows that there was no jurisdiction to make the order. Unless a man has assigned or charged his future earnings or has made a sum payable out of them, they cannot be prospectively impounded by any of his creditors by any ordinary process of execution, whether legal or equitable. If the law in this respect is to be altered, it must be done by the legislature. But the law ought not be altered by stretching what are called equitable executions, or, in other words, by appointing receivers in cases to which the equitable jurisdiction of the Court of Chancery had no application. Fry, L.J. was quite right when he warned the profession against supposing that the appointment of a receiver is a form of execution which can be obtained "without shewing to the Court the existence of the circumstances creating the equity on which alone the jurisdiction arises." See In re Shephard. The order appealed from must be discharged. Holmes v. Millage has been treated as a definitive authority in Canada. Thus in Stoehr et al. v. Morgan [1929] 4 D.L.R. 301 the Saskatchewan Court of Appeal refused to order equitable execution against a homestead since homesteads are legally exempt from seizure in that Province and Holmes v. Millage requires the existence of a legal right to execution as a precondition for equitable execution. Similarly in Kuss v. Kuss [1935] 2 W.W.R. 561 the Manitoba Court of Appeal held that a wife could not

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obtain the appointment of a receiver for a fixed amount of her husband's future wages even though she had obtained an order for separation and maintenance. MORGAN v. HART Court of Appeal, England. [ 1914] 2 K.B. 183. On August 28, 1913, the plaintiff, W. H. Morgan, obtained judgment against the defendant, A. A. Hart, for £55 ls. 6d. due on a bill for medical attendance on the defendant and his family for two years, and £8 1Os. costs. The plaintiff applied in chambers in the King's Bench Division for the appointment of a receiver. The application was supported by an affidavit stating that the judgment remained unsatisfied to the extent £49 7s. 6d., and that the defendant had no property which could be taken by ordinary powers of execution. It further stated that the plaintiff had consented to the payment of the debt and costs by instalments, but that the defendant had paid one instalment and then made default and removed all his furniture and effects from his residence to a very large furniture repository at Southend. The owner of the repository had been interviewed by the plaintiff's solicitor and admitted that the said furniture and effects were in the repository, but stated that the sheriff would be quite unable to seize them, as they could not be identified from other people's furniture, and that he would not give any assistance. He further informed the solicitor that he was in treaty with the defendant to buy the furniture and effects. On December 19, 1913, the Master made an order appointing the plaintiff receiver, without security or remuneration, "to receive the rents, profits and moneys receivable in respect of the defendant's interest in the following property, namely, all the furniture and effects now stored by the defendant in the furniture repository owned by George Jackaman at London Road, Southend; but he should not receive more than £49 7s. 6d. and the costs of the order." The defendant appealed to the judge, but Scrutton, J. dismissed his appeal on January 15, 1914. The defendant appealed to the Court of Appeal, and his appeal now came on before Buckley and Phillimore, L.JJ. BUCKLEY, L.J.: In this case the plaintiff sued the defendant for moneys due for medical attendance and recovered a judgment on which £49 is still due. The plaintiff agreed to accept payment by instalments, but the defendant has made default. Under those circumstances the plaintiff has obtained from the Master this order: [The Lord Justice read the order and stated the facts as to the furniture above stated, and continued.] It is an order appointing a receiver to receive the rents, profits, and moneys receivable in respect of furniture. There are no rents or profits or moneys receivable. The order has no effect except that which is equivalent to an injunction restraining the debtor from dealing with his furniture. In my opinion that is wrong. The jurisdiction is contained in the Judicature Act, 1873, s. 25, sub-s. 8, which runs: "A mandamus or an injunction may be granted, or a receiver appointed, by an interlocutory order of the Court in all cases in which it shall appear to the Court to be just or convenient that such order should be made." The question is whether the Court has jurisdiction to make the order under the words "just and convenient." The result of the authorities, to some of which I will refer, is in my opinion that the section does not give to the Courts either of Law or Equity any wider jurisdiction than existed before, but enables such orders as could be made before to be made in any proceedings, without commencing special proceedings in the Court of Chancery such as were necessary before the Act.

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In Smith v. Cowell a creditor had recovered judgment against a debtor and sued out a writ of elegit. The debtor's only interest in real estate was an equity of redemption. Before the Judicature Act the plaintiff could have obtained the appointment of a receiver, but only by filing a bill in equity. There was no doubt that he had a right to resort to the property, it was a question of procedure how he could resort to it, and the Court of Appeal decided that the Court could appoint a receiver "brevi manu" under this section, without requiring the plaintiff to file a bill in Chancery. In Manchester and Liverpool District Banking Co. v. Parkinson there are some observations which tend to support the present application, though the order was there refused. The head-note states the decision thus: "Held, that, in the absence of any legal impediment to obtaining execution of the judgment in the ordinary course of law by fieri facias, or attachment of debts, and there being no special circumstances shewing it to be just or convenient that a receiver should be appointed, the order for appointment of a receiver was wrongly made, and ought to be rescinded." The Court refused to make the order for a receiver, but said that it might be made under special circumstances. Fry, L.J. says: "Undoubtedly, if any special circumstances had existed shewing it to be just or convenient to make the order for a receiver, the case might have been different, and there might possibly have been jurisdiction to make such an order under s. 25 of the Judicature Act, 1873 . . . . I do not say that there would have been no jurisdiction to appoint a receiver under the section, if there had been special circumstances in the case rendering it just or convenient to make such an order. It may be, for instance, that an order could be made for appointment of a receiver to hold property liable to execution, to prevent someone making away with it, or to get in debts, where under particular circumstances it was a more convenient mode of procuring satisfaction of the judgment than the usual process of attachment. No special circumstances of that sort were shewn in the present case." In In re Shephard the facts were that a judgment creditor had for his debtor one who possessed a freehold estate subject to a mortgage. The debtor's interest was an equitable interest which might have been reached by proper proceedings. A summons was taken out for a receiver in the debtor's lifetime but he died before it was heard. Two days after his death a receiver was appointed in chambers without reviving the action or making the debtor's heir-at-law a party. The day before this appointment the same person had been appointed interim receiver in an action for the administration of the debtor's estate. The judgment creditor then moved before Chitty, J . for an order that the receiver should apply all the rents of the freeholds in satisfaction of his judgment debt. Chitty, J. refused the motion; the Court of Appeal affirmed the decision on the ground that the order appointing a receiver on the judgment creditor's application was wrong because it was made ex parte. But the judgments contain some valuable observations on the question before us. Cotton, L.J. says: "Confusion of ideas has arisen from the use of the term 'equitable execution.' The expression tends to error. It has often been used by judges, and occurs in some orders, as a short expression indicating that the person who obtains the order gets the same benefit as he would have got from legal execution. But what he gets by the appointment of a receiver is not execution, but equitable relief, which is granted on the ground that there is no remedy by execution at law; it is a taking out of the way a hindrance which prevents execution at common law. Until recently nobody ever thought that an order for a receiver could be obtained in aid of a legal judgment unless there was a hindrance to obtaining execution at law. If any practice has grown up of granting such an order where there is no hindrance to obtaining

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execution at law, it is a practice which has never been brought before the Court of Appeal, and which in my opinion is wrong." Perhaps the expression "hindrance" requires some explanation. The learned judge meant, I think, hindrance arising from the nature of the property. Bowen, L.J. says : "But even supposing that legal execution could be issued ex parte, it does not follow that what is called equitable execution can be so issued. Equitable execution is not like legal execution; it is equitable relief, which the Court gives because execution at law cannot be had. It is not execution, but a substitute for execution. It would in my opinion be wrong to say that an order for a receiver can be made in the Chancery Division ex parte without any notice to the person whose property is to be affected." Fry, L.J. says : "A receiver was appointed by the Court of Chancery in aid of a judgment at law when the plaintiff shewed that he had sued out the proper writ of execution, and was met by certain difficulties arising from the nature of the property which prevented his obtaining possession at law, and in these circumstances only did the Court of Chancery interfere in aid of a legal judgment for a legal debt." In Holmes v. Millage the application was for the appointment of a receiver of future earnings. The case is not strictly in point on the present question, but there is a passage in the judgment of the Court delivered by Lindley, L.J. which states the law on the point before us. He says: "We have nothing to do here with a suit to enforce a charge created by the debtor. We have simply to deal with a case in which an ordinary judgment creditor sought the aid of a Court of Equity to enforce his judgment against property not capable of being reached by any common law process. The only cases of this kind in which Courts of Equity ever interfered were cases in which the judgment debtor had an equitable interest in property which could have been reached at law, if he had had the legal interest in it, instead of an equitable interest only." The case most nearly in point is Harris v. Beauchamp Brothers. The head-note in that case states : "The Court has no jurisdiction to appoint a receiver merely because, under the circumstances of the case, it would be a more convenient mode of obtaining satisfaction of a judgment than the usual modes of execution." The facts were that the plaintiff had brought an action against two partners, one of whom was a minor, in their firm name. He recovered judgment with a proviso that execution should not issue against the infant's separate estate. The partnership premises and stock in trade had been partially destroyed by fire . The premises and stock in trade were insured by certain policies the amount payable under which was to be ascertained by arbitration, but had not yet been ascertained. The partners had issued a circular saying that they proposed to give security to their creditors by assigning the policy moneys to a trustee for payment of the creditors. The judgment creditor obtained from Wright, J. the appointment of a receiver of the policy moneys and the book debts of the firm, and the Divisional Court on appeal affirmed the appointment. The defendants appealed to the Court of Appeal, and the judgment of the Court allowing the appeal was delivered by Davey, L.J. He said : "The learned counsel for the plaintiff boldly argued that, if you have got a subject-matter which might be made available for the satisfaction of the judgment debt, you may have a receiver, if it is a better mode of getting it in than the usual mode. In our opinion, this is wrong." And a little further on he says : "The case of Manchester and Liverpool District Banking Co. v. Parkinson was referred to in the Court below as shewing that the order might be made under special circumstances. It would be rash and unwise to attempt to define the special circumstances which

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would justify the making of an order such as that which we have before us. But for reasons which will appear from what has been already said, we think they must be such circumstances as would have enabled the Court of Chancery before the Judicature Act to have interfered by way of injunction or receiver at the suit of the judgment creditor." He then goes on to consider the special circumstances of that case and continues: "We are, however, far from saying that, if a case were established to the satisfaction of the Court that the defendants threatened and intended 'fraudulently' ( we used the word advisedly) and for the purpose of delaying and defeating the creditors to make away with the property, it would not justify the interference of the Court." That is to say that if fraud is proved the Court may be entitled to intervene to stop the fraud and preserve the property. Otherwise under no circumstances can such an order be made. He then goes on to say at the end of his judgment: "We do not forget that it was stated at the Bar that the learned judge, when the matter came before him again in September, explained his previous order in a note, and directed the money to be paid into Court. His note was to the effect that he appointed the receiver, not so much by way of execution as to preserve the assets for the Court to give effect to the rights of the parties interested. We are of opinion that the learned judge had no jurisdiction to make such an order. This is not equitable execution, but administration, which the Court had no jurisdiction to order, at any rate in this action. It was in fact an irregular substitute for a receiving order in bankruptcy." Equally in the present case the order is irregular because it is made not for the purposes of execution, but in order to keep the property where it is until the plaintiff can get discovery. The case of North London Railway Co. v. Great Northern Railway Co. is a case of an injunction, and is only relevant because the power to grant an injunction is given by the same s. 25 sub-s. 8, of the Judicature Act, 1873, as gives the power to appoint a receiver, and is given in the same words. It was there held that the section gave no power to the Court to grant an injunction in a case in which no Court could have granted one before the Act. Applying these cases, the facts here are that the debtor has property which could be reached by a fi. fa., but there is a difficulty in identifying it. The object is to obtain what is equivalent to an injunction until the creditor can get discovery. The Court of Chancery would not have made such an order before the Judicature Act. We cannot do so now. The appeal must be allowed. PHILLIMORE, L.J.: I agree, and have very little to add. At most my words will only amount to an academic opinion. I do not presume to compare myself with the authorities who have decided Manchester and Liverpool District Banking Co. v. Parkinson and Harris v. Beauchamp Brothers. As I understand those cases, there may be special circumstances under which a receiver may be appointed, but they must be such circumstances as would have enabled the Court of Chancery to make an order before the Judicature Act of 1873. In this case one has considerable sympathy with a man trying to get his dues, who is defeated by an accident, but by our law he must indicate to the sheriff the chattels he wishes to have seized, and, unfortunately for him, owing to their being mixed up with the goods of others, he is unable to exercise his common law right. It is possible that he may have a remedy under Order XLII., rr. 32 and 33 [in Ontario rules 587 and 591] and I am not certain whether if he applied those two rules together he could not get relief here. But I quite agree that his present application is a mistake. The appeal must therefore be allowed.

312

CASES AND MA TE RIALS ON CREDITORS' RIGHTS RE ASSELIN Supreme Court of Ontario. 6 O.L.R. 170.

Oscar Asselin, one of the claimants in a carrier's interpleader, had recovered judgment in the interpleader against the other claimant, Thomas Henry Cleghorn, for $239.97, and had placed in the sheriff's hands a writ of fi. fa., which had been returned nulla bona. Asselin moved for an order under the Judicature Act R.S.O. 1897, ch. 51, sec. 58, sub-sec. 9, for the appointment of a receiver by way of equitable execution to receive the interest of Cleghorn in a policy of insurance on the life of Annie E. Cox, assigned to Cleghorn, and by him assigned to the Metropolitan Bank of Canada, and to receive the book debts owing to Cleghorn, and to receive and sell ten shares of stock in the A. Booth Fish and Oyster Company, owned by Cleghorn and by him assigned to the Metropolitan Bank of Canada, and all debts due or accruing due to Cleghorn from any source whatever, and all the interest that Cleghorn had in any property of whatsoever nature or wheresoever situate, all to be received subject to the claim, if any, of the Metropolitan Bank of Canada, and that the applicant, the judgment creditor, be appointed such receiver without security. The motion was heard by Meredith, J. in the Weekly Court, on the 28th May, 1903. MEREDITH, J.: The applicant's claim is by no means a modest one. It is, in effect, that he be appointed a sort of general assignee, for his own benefit only, of, substantially, all his debtor's property and earnings, and that the debtor be obliged to carry on business so that the applicant may have the earnings, until his debt is satisfied. Such a mode of enforcing execution might be convenient for a creditor, but hardly so for a debtor and his family, and it certainly would not be just, or in the public interests. It is strange that the introduction of the words "a receiver" may be "appointed . . . in all cases in which it shall appear to the Court to be just or convenient that such order should be made," should have given such exaggerated notions to some creditors of new means of enforcement of their claims as seem to have prevailed among them: means by which they might acquire not only the property of the debtor usually seized under execution, but also every sort of property, right, or interest, no matter how remote or contingent, that he might have, as well as all that he might acquire until the debt was fully paid, including all sorts of rights of action. There is no good excuse for such notions; they were but the offspring of rapacity. The law is reasonable in regard to enforcement of payment of debts; it does not permit of enslaving or casting into prison of honest debtors; it gives reasonable exemptions from seizure for the benefit of the debtor and his family, and safeguards his exigible property against needless sacrifice. On the other hand, it provides ample punishment for dishonest debtors. It is not in the public interests, nor indeed really in a creditor's interest, that the debtor should be denuded of all that he possesses; all interests require that an honest debtor should not be deprived of the means of earning a livelihood and of all means of acquiring money to pay his debts. Too great rapacity in creditors may defeat rather than further their object. It would be a reversal of the whole trend of modern legislation if the enactment before mentioned had any such widespread effect. The words quoted give no sort of real encouragement to the notion. The purpose of them was, so far as

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they apply to such a case as this, merely to expressly confer upon all the Courts that jurisdiction which, under the designation of equitable execution, had, before the fusion of law and equity been exercised by the Court of Chancery alone; see Harris v. Beauchamp, [1894] 1 Q.B. 801 ; O'Donnell v. Faulkner (1901), 1 O.L.R. 21; Central Bank v. Ellis (1896), 27 O.R. 583; In re Harrison and Bottomley, [1899] 1 Ch. 465. Of the three classes of property specially aimed at in this application, none can be reached by that mode of enforcing payment of debts. What is sought as to debts due and that may become due to the debtor, is virtually an assignment of them to the creditor for his own use until his debt shall be paid. It is plain that the enactment gives no such right. The debt sought to be reached must be a specific one, and if one which can be reached by attachment, the ordinary remedy should be adopted : see Harris v. Beauchamp, supra. Nor can the capital stock in the foreign corporation be so reached; there is no means by which a sale and transfer of it could be enforced. The stock of a company incorporated in this Province can be effectually reached by execution; "The Execution Act" provides the means. Such legislation would not be effectual in the case of foreign corporations. If there were power to reach the stock in question, much more information should be given as to it before the order sought should go. And as to the life assurance contract, the weight of argument and of judicial opinion is also against the applicant. It is not a fully paid up policy. No means of meeting the premiums is suggested. It is not shewn that the underwriters would or could be compelled to accept the premiums from the applicant, if he were willing to pay them. To give effect to the application might be but to avoid the policy. It can hardly be convenient or just that that should be done or risked: see Alleyne v. Darcy (1855), 5 Ir. Ch. 56; In re Sargent's Trusts (1879), 7 L.R. Ir. 66; Canada Mutual L. and I. Co. v. Nisbet (1900), 31 O.R. 562; Weekes v. Frawley (1893), 23 O.R. 235. The Court will not appoint a receiver where the effect may be merely the loss of the property or right; nor will a receiver be appointed unless it is reasonably clear that benefit will be derived from the appointment. The material in this case leaves the matter in altogether too much doubt : see Hamilton v. Brogden, [1891] W.N. 36, 35 Sol. J. 206; O'Donovan v. Goggin (1892) , 30 L.R. Ir. 579; /. v. K., W.N. 1884, p. 63; Manchester and Liverpool District Banking Co. v. Parkinson (1888), 22 Q.B.D. 173. The policy in question cannot be considered to come within the meaning of the words "any money or bank notes . . . and any cheques, bills of exchange, promissory notes, bonds, mortgages, specialties, or other securities for money" contained in sec. 18 of the Execution Act. It is not of the same nature as those mentioned, even if it can in any sense be deemed a security for money. The application is refused with costs, to set off pro tanto against the judgment. STRANG v. BEAL Supreme Court of Ontario. [1922] 52 O.L.R. 208. Motion by the plaintiff for a receivership order.

RosE, J .: The plaintiff has a judgment against the defendant for $3,750 dam-

ages and $539.30 taxed costs, the damages being for personal injuries sustained by the plaintiff through the negligent management by the defendant of his

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motor car. The judgment is wholly unsatisfied; the defendant swears that he is unable to satisfy it; and the plaintiff moves for an order appointing her or some other fit and proper person to receive all moneys payable to the defendant under and by virtue of a policy of insurance held by the defendant whereby the insurers agreed, as the plaintiff alleges, to indemnify the defendant against "the claim and costs for which the ... plaintiff has obtained judgment in this action." The poltcy is produced by the defendant. It is the policy of a company whose head office is in Toronto; it is in its terms an agreement, inter alia, to indemnify the defendant, to the extent of $5,000, against his legal liability "as respects bodily injuries accidentally sustained," and it contains a provision that no action shall lie against the insurers to recover for any such loss unless it shall be brought by the assured for loss actually sustained and paid by him in money in satisfaction of a judgment after trial of the issue. Prima facie, therefore, there is justification for the advice which the defendant swears that he has been given by his solicitors, to the effect that he has no cause of action against the insurers until he has acutally paid the plaintiff's claim or part of it, and then only for the amount that he has actually paid. The defendant, however, swears that the insurers, after conducting the defence of the plaintiff's action down to trial, denied liability under the policy, with the result that the defendant was compelled to retain counsel and defend the action himself; and the plaintiff has apparently been advised that, because of the action of the insurers so sworn to and because of other things not disclosed upon the argument of the motion, the defendant has now, without payment of the plaintiff's claim, a good cause of action against the insurers which the plaintiff could successfully assert if she was appointed receiver and was authorised to sue. The question, therefore, is whether it is "just or convenient" within the meaning of sec. 17 of the Judicature Act, R.S.O. 1914, ch. 56, to make an order for receivership, by way of equitable execution, for the purpose of enabling the plaintiff to make the attempt. "Equitable execution is a mode of obtaining payment of a judgment debt by the appointment of a receiver of property of a defendant which the sheriff is by reason of the imperfection of the statutes respecting execution unable to reach or deal with," and it may also be awarded where other and ordinary remedies by way of execution are open but the procedure by way of equitable execution is more convenient; per Boyd C. in Kirk v. Burgess (1888), 15 O.R. 608. It "is not a means of reaching assets which in their nature are not exigible, but is a means of freeing exigible assets from impediments in the way of execution and reaching them when such impediments prevent them from being taken in ordinary course": per Middleton, J. in Herold v. Budding (1916), 37 O.L.R. 605, 607, citing Holmes v. Millage [1893] 1 Q.B. 551. It will not be awarded "unless it is reasonably clear that benefit will be derived from the appointment": per Meredith, J. in Re Asselin and Cleghorn (1903), 6 O.L.R. 170, 173. The case of Smith v. Cowell (1880), 6 Q.B.D. 75, cited by Mr. Ferguson, is but an instance of the application of the law thus stated: equitable execution was there awarded in order to enable the judgment creditor to reach an equity of redemption, because he could not "by reason of the legal impediment of the outstanding mortgage get legal execution at the hands of the sheriff": per Cotton, L.J. at p. 78; and In re Coney (1885), 29 Ch.D. 993, also cited by Mr. Ferguson is another application : proceedings by fi. fa. would have been, as stated by Chitty, J. a more expensive mode of execution. Now, if the insurers in this case are liable to the defendant it may or may not be that proceedings by way of attachment under Rule 590 [now 597] are open

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to the plaintiff: compare Simpson v. Chase (1891 ), 14 P.R. 280, where the amount of the loss was unliquidated and the insurers' right to have the money applied in rebuilding was still open, with Jobin Marrin Co. v. Tyne (1917), 11 O.W.N. 279. (Canada Cotton Co. v. Parmalee (1889), 13 P.R. 308, appears not to be now an authority, because the decision is made to rest upon certain words which are not to be found in the present Rule). If the proceeding by way of attachment is open, it is, so far as has been made to appear, just as convenient as the proceeding by way of equitable execution, and, therefore, the latter ought not to be awarded: Manchester and Liverpool District Banking Co. v. Parkinson (1888), 22 Q.B.D. 173; and if the proceeding by way of attachment is not open, there ought not to be an order for the appointment of a receiver unless there is prima facie something to receive which, but for some defect in the procedure by way of attachment, could be made available under that procedure, or, as said in Re Asselin and Cleghorn, "unless it is reasonably clear that benefit will be derived from the appointment." It has not been made reasonably clear to me that there is an exigible asset or that benefit will result from a receivership, and I think I am bound to dismiss the motion. Mr. Ferguson says that I must not try the case against the insurers without hearing the evidence. I agree, and I do not intend to suggest that the claim may not be perfectly good; all I say is that I think I must not appoint a receiver merely because there may possibly be something for him to receive, that I must at the least have some evidence which indicates that it is probable that there is a valid claim and that it cannot conveniently be reached except in the way proposed. Moreover in Holmes v. Millage, supra, at p. 558, Lindley, L.J. intimates that the position of the person who will be affected by the order ought to be kept in mind when the Court is considering whether it would be just or convenient to make the order. In this case, as it strikes me, it would not be just to the insurers for the Court to authorise proceedings to be taken against them without having some reasonable ground for believing that they are liable. For these reasons, I think the motion must fail. I do not think it is a case for costs. GARRY FINANCE CORPORATION LIMITED (PLAINTIFF) v. HEIZMAN (DEFENDANT) RESPONDENT and SMITH (THIRD PARTY) APPELLANT Manitoba Court of Appeal. [1939] 1 W.W.R. 541.

Appeal from the following judgment. Appeal dismissed with costs. STACPOOLE, C.C.J.: This was an action commenced by the plaintiff against the defendant to which W. E. Smith, the third party, was added by order of the Court and judgment in favour of the defendant against the third party has been recovered. The facts seem to be that the defendant Dr. Heizman purchased from Smith, the third party, a second-hand automobile, trading in one of his own as part payment and paying a certain sum in cash, Smith having guaranteed that the automobile so sold to Dr. Heizman was free of encumbrance. This it appears was not the fact and the automobile was subsequently repossessed from Dr. Heizman under a lien held by another party upon the machine. The defendant Dr. Heizman issued execution against the goods of Smith

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which was returned nulla bona by the bailiff. Dr. Heizman thereupon launched a motion asking for a receiver to be appointed by way of equitable relief to assist him in recovering the amount of his judgment from Smith. The matter was argued at some length before me, Mr. McLaws opposing the motion and Mr. Sokolov supporting it. After hearing argument of counsel for both parties, it appears to me that the law is quite clear that equitable relief would only be granted in such case as the Court of Chancery would have granted it before the merging of chancery matters and common law matters in one Court. I am of the opinion that this application might well come within the reasoning of the case of Goldschmidt v. Oberrheinische Metallwerke [1906] 1 K.B. 373, 75 L.J.K.B. 300, in which an application was made to appoint a receiver by way of an equitable execution in order to realize the plaintiff's judgment, and Vaughan Williams, L.J., at p. 375, says: "I think that the special circumstances of this case are sufficient to entitle the plaintiff to the remedy for which he applies, and to entitle himself to which he must show that the circumstances are such as to render it practically very difficult, if not impossible, to obtain any fruit of his judgment, unless what has been called equitable execution be granted to him. In the case of Manchester and Liverpool District Banking Co. v. Parkinson (1889) 22 Q.B.D. 173, 58 L.J.Q.B. 262, Fry, L.J. said in giving judgment, in reference to the Judicature Act, 1873, S. 25: 'I do not say that there would have been no jurisdiction to appoint a receiver under that section, if there had been special circumstances in the case rendering it just or convenient to make such an order. It may be, for instance, that an order could be made for appointment of a receiver to hold property liable to execution, to prevent someone making away with it, or to get in debts, where under particular circumstances it was a more convenient mode of procuring satisfaction of the judgment than the usual process of attachment.' In my judgment this case falls within those words." It seems to me that in this instance, while there is a legal remedy given Heizman by way of execution against the goods and chattels of Smith, it is merely a remedy of theory and practically is of no value whatever. The facts are in this instance, as shown by the affidavit of the applicant filed in support of the motion, that there are a large number of second-hand automobiles in the possession of Smith, each of which is encumbered by a chattel mortgage registered in the Winnipeg County Court office, and if the goods were to be put up for sale under a bailiff's seizure it is quite easy to see that under the hammer they would be knocked down, if they realized anything, for so small a sum that it would be useless to pursue this remedy, but, each automobile being the subject of a chattel mortgage, it is fair to presume, and I think the Court might almost take judicial notice of it as a fact, that mortgagees do not advance the full value of the article mortgaged and there is, in the course of such dealings with a mortgage, the equity left in the mortgagor but if such equity were to be put to auction it is problematical, in fact, most unlikely, that it would produce enough to pay for the costs of sale. I am, therefore, of the opinion that this is one of those cases in which taking the ordinary legal remedy to realize would be fruitless. Heizman would recover nothing on his judgment, Smith possibly would lose any equity he had for a mere bagatelle in the way of money, and, in fact, from all points of view, it would be better to grant the order asked for, for if an auction sale took place

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Smith possibly would be ruined, and Dr. Heizman would get nothing, whereas, if a receiver is appointed, Smith's business is not interfered with. If there are moneys coming to Smith over and above the mortgages - which the affidavits would lead one to believe - then these moneys can be obtained and Dr. Heizman's judgment against Smith reduced by such sums as are obtained to the benefit of Dr. Heizman and also avoiding the detriment to Smith which might ensue from sale. The objection was raised on the application that the affidavits in support must show the affiant's source of information upon which he relied. I agree with Mr. McLaws so far as it goes, but I am of the opinion that there is sufficient sworn to definitely by the affiant to support the application without relying upon these paragraphs which are on information and belief without disclosing grounds or source of information. The order granted read as follows: Upon the application of the defendant, upon hearing read the affidavit of Edmund Campion Bridges, and upon hearing counsel for the defendant and the third party, and the defendant agreeing to be answerable for the acts and defaults of the receiver, It is ordered that Hyman Sokolov, of the city of Winnipeg in the province of Manitoba, barrister at law, be appointed without security to receive all moneys receivable in respect to the third party's interest in all used cars, second-hand automobiles, second-hand trucks, and in the documents of title thereto, now situated in, on, or about the place of business of the said third party, W. E. Smith, and elsewhere in the city of Winnipeg; but without prejudice to the rights of any person having prior claims to the said goods, chattels, and automobiles. And it is further ordered that the costs of and incidental to this order shall be paid by the third party. The third party appealed. The Court of Appeal, adopting the reasons of Stacpoole, C.C.J., dismissed the appeal with costs, without delivering written reasons. RE KARCH Supreme Court of Ontario. 1922. 53 O.L.R. 112. Motion by Magdalena Karch, a judgment creditor of her husband, Charles Frederick Karch, and appointed by the Court receiver to get in moneys of the estate of Henry William Karch, deceased, coming to Charles Frederick Karch, to the extent of her judgments, for an order declaring the true interpretation of the will of Henry William Karch, who was a brother of Charles Frederick. ORDE, J.: The applicant, Magdalena Karch, is the wife of Charles Frederick Karch. On the 19th June, 1912, Magdalena Karch recovered a judgment for alimony against her husband, under which there is now a large amount of money owing to her, and there are also certain orders in another action under which she is entitled to be paid certain moneys by her husband. Henry William Karch, a brother of Charles Frederick Karch, died on the 15th December, 1919, leaving a will containing certain provisions in favour of Charles Frederick Karch, and on the 13th March, 1920, an order was made at the instance of Magdalena Karch appointing her a receiver to get in the moneys of the estate coming to her husband to the extent of her judgments. The Canada Trust Company, which is now the trustee of the estate, takes the

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position that under the terms of the will it cannot pay over the moneys in question to the receiver, and this motion is now made by the receiver for the interpretation of the will. After the usual direction for the payment of debts, etc., the will gives the whole estate to the executors and trustees upon trust, (A) to pay a sister $1 ,000, (B) to pay to a brother and two sisters each one-fifth of the residuary estate. Then follow certain trusts as to another one-fifth, which are the subject to this motion, namely: "(C) To hold in trust for my brother Charles Frederick Karch one-fifth of my said residuary estate and to pay during the lifetime of my brother Charles Frederick Karch in the discretion however of my trustees, the income, rents and profits arising from the share of my said brother Charles Frederick Karch to my brother Charles Frederick Karch. I direct that in case the wife of my said brother Charles Frederick Karch makes any application for an increased allowance of alimony on account of this devise, that thereupon my trustees shall withhold from my brother Charles Frederick Karch any rents, profits or income arising from his share of my estate, and that such income, rents and profits shall ( in the discretion of my trustees) be withheld from my brother Charles Frederick Karch during the lifetime of my brother Charles Frederick Karch and allowed to accumulate as long as his wife survives him, but in case she predeceases him, then such income, rents and profits may thereupon be paid over to my said brother by said trustees. "(D) After the death of my brother Charles Frederick Karch I direct that his share in my estate shall be held upon the same trusts and conditions and be administered in the same manner as my brother the said Charles Frederick Karch is devising and bequeathing his property by his will and my said trustees are in every way to administer the trust hereby created after the death of my brother Charles Frederick Karch as if his share of my estate was a portion of the estate of the said Charles Frederick Karch dealt with by his will." There is here an absolute gift of the corpus of the one-fifth share to Charles Frederick Karch, followed by a direction to pay the income to him for life, with power in certain events to the trustees to withhold the income, but not so that it is given in such event to any other person; it is merely to accumulate for Karch's benefit. Then at Karch's death the share and accumulated income are to form part of his estate. There can be no question that this gift is an absolute immediate gift of the corpus of the one-fifth share to Charles Frederick Karch. He is of full age, and, there being no person interested in the trust-fund but himself, the elaborate provisions as to the payment or accumulation of interest during his lifetime are of no effect whatever and he can therefore put an end to the trust at any time and demand the payment of the corpus. This being the case, is a judgment creditor entitled by way of equitable execution, through the medium of a receivership order, to exercise the same right to compel the trustee to pay over so much of the money to which Karch is entitled as will satisfy the judgments? Where moneys are payable to a judgment debtor in the absolute discretion of some other person they cannot be reached by way of equitable execution: Regina v. Judge of the County of Lincolnshire (1887), 20 Q.B.D. 167. But here the moneys are really under Karch's control: he can assign them or incumber them. They will form part of his estate at his

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death, and would undoubtedly form a part of his estate on his bankruptcy. He cannot, by merely refraining from exercising his right to put an end to the trust, evade the payment of his judgment debts. I must hold, therefore, that the applicant as receiver is entitled to be paid forthwith by the trustee so much of the moneys payable to Karch as will satisfy the amounts due under the judgment and orders in question, for principal, interest, and costs. Her costs of this application are also to be paid out of the trust moneys. SHAFER (ADMINISTRATOR OF SHAFER ESTATE) v. JONES (No. 2) Supreme Court of Alberta. [1950] 2 W.W.R. 625. SHEPHERD, J.: The defendant moves for an order appointing the sheriff of the judicial district of Medicine Hat as receiver by way of equitable execution to receive the moneys and profits in respect of the plaintiff's personal interest in a certain beekeeping and honey business operated by the plaintiff in his personal capacity at or near Rainier, in the province of Alberta, in partnership with one William Wight to satisfy the sum of $3,019.02 owing to the defendant (judgment creditor) under a judgment of the Supreme Court of Canada in this action whereby it was adjudged that the defendant recover from the plaintiff the costs of the action both in the Trial and Appellate Divisions of the Supreme Court of Alberta and in the Supreme Court of Canada, and for an order charging the interest of the plaintiff in the partnership property and profits with payment of the said judgment. The plaintiff, as appears from the title of this action, as administrator of the estate of John Shafer, deceased, sued the defendant for damages arising out of a collision of a motor car owned and driven by the said deceased with the defendant's oil truck parked on the highway, resulting in the death of said John Shafer. In the action the plaintiff succeeded at the trial ([1947] 1 W.W.R. 375) and this verdict was upheld in the Appellate Division of the Supreme Court of Alberta ([1947] 2 W.W.R. 49). The Supreme Court of Canada, by a majority decision, allowed an appeal dismissing the action ([1948] S.C.R. 166) which resulted in the plaintiff being held liable for the defendant's costs throughout, should the defendant ask for costs. The costs have been taxed at the above mentioned sum. The principal question for decision here is: Is the plaintiff liable in his personal capacity for the costs awarded against him as administrator, he having sued as administrator of his father's estate? It appears from the examination of the plaintiff as a judgment debtor that the estate of the deceased had no assets, and the only asset owned by the plaintiff personally which might be exigible under execution is his interest as a partner in a beekeeping and honey business at Rainier, Alberta, in partnership with one Wight. With reluctance I feel bound by the authorities cited in argument to grant the order asked for, which I do. See Boynton v. Boynton (1879) 4 App. Cas. 733, 41 L.T. 450 : "In ordinary cases an executor or administrator who sues as such and fails is personally liable for the costs of the action." And Halsbury, vol. 4, p. 435. Having concluded that the plaintiff must be held personally liable for these

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costs, it follows that his interest in the partnership above referred to may be charged with payment thereof. See The Partnership Act, R.S.A., 1942, ch. 244, sec. 25. The order asked for is granted. RE PHILLIPS, supra, p. 83. KIMNIAK v. ANDERSON, supra, p. 52. WEBB v. STENTON, supra, p. 273. DOWELL v. AIKENHEAD Supreme Court of Ontario. [1961] O.W.N. 174. This was an application by the plaintiff as judgment creditor for the appointment of a receiver by way of equitable execution. The judgment debtor was a beneficiary of the estate of his father. Under his father's will the defendant was entitled to a share in the residue after the death of his mother if he should survive his mother or if he should predecease his mother leaving issue or a wife him surviving. MOORHOUSE, J.: The widow being alive at this time it appears that the judgment debtor's interest is a contingent interest only. I believe it to be the policy of the Court to refuse to appoint a receiver by way of equitable execution in respect of monies payable only on a contingency: Manufacturers Lbr. Co. v. Pigeon (1911), 24 O.L.R. 354, Strang v. Beal (1922), 52 O.L.R. 208. I believe it to be reasonably clear also that a receiver should not be appointed unless it is reasonably clear that benefit will be derived from the appointment. If the appointment of a receiver would or is intended to interfere with the action of the executors, it should not be made. If it does not interfere, it is nugatory and perhaps embarrassing: Re Mcinnes v. McGaw (1898), 30 O.R. 38. The applicant was unable to refer me to any authority where a receiver had been appointed in respect of a contingent interest, and I therefore think that the application should be dismissed. The respondent is entitled to its costs of the application but I think, in all the circumstances, it is only fair that they may be set off against the costs which the defendant is liable to pay. McCART v. McCART AND ADAMS Supreme Court of Ontario. [1947) O.W.N. 48. BARLOW, J.: An application by the defendant McCart for an order for leave to appeal from an order of Wilson J., dated the 24th June, 1946, providing "that the Sheriff of the County of York be and he is hereby appointed receiver without security to collect, get in and receive the debts due and owing to the said defendant, Howard W. D. McCart, at the date hereof, to the e~tent of the amount due to the plaintiff." By virtue of The Judicature Act, R.S.O. 1937, c. 100, s. 16, a receiver may be appointed "by an interlocutory order of the Court, in all cases in which it appears to the Court to be just or convenient that such order should be made." The plaintiff has a judgment against the defendant McCart for alimony.

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The defendant applicant is a doctor, and the intention of the order appointing the sheriff as receiver is to enable him to collect the many small accounts of the said defendant, outstanding. The examination of the defendant applicant as a judgment debtor shows some 225 or more small accounts owing to him, ranging from $3 to $158, and averaging less than $20 each. Counsel for the defendant applicant contends that a receiver should never be appointed if any other method of execution is available. He contends that since the accounts could be reached by garnishee proceedings, the receiving order ought not to have been made. If an attempt were made to realize by way of garnishee proceedings, it would result in over 200 garnishee orders being obtained from the Master in the one action, with all the attendant expense, which would exceed, in practically all the accounts, the individual amount owing to the defendant applicant. It is clear to me that garnishee proceedings would be entirely impracticable and inadequate, and would involve unnecessary expense, without, in many instances, producing any result. Counsel for the defendant applicant cites in support of his contention Re Asselin and Cleghorn (1903), 6 O.L.R. 170; Millar et al. v. Thompson (1900), 19 P.R. 294; Harris v. Beauchamp Brothers, [1894] 1 Q.B. 801 at 810, and The Manchester and Liverpool District Banking Company, Limited v. Parkinson (1888), 22 Q.B.D. 173. After a careful perusal of these cases, it is clear to me that they do not conflict with the order as made. The governing words in s. 16 of The Judicature Act, quoted above, are "just and convenient." The above-cited cases show that if special circumstances are shown so that the ordinary procedure by way of garnishment or writ of fi. fa. is practically useless by reason of being cumbersome and expensive, a receiver may be appointed. It is a matter of discretion to be exercised by the judge making the order. Unless I find that the judge has proceeded on a wrong principle, I should not grant leave to appeal. I cannot so find. For cases in point see: Smith v. The Port Dover and Lake Huron Railway Company et al. (1885), 12 O.A.R. 288; Groat v. Hydro-Electric Power Commission of Ontario (1924 ), 25 O.W.N. 485; Goldschmidt v. Oberrheinische Metallwerke, [1906] 1 K.B. 373 at 375; and Garry Finance Corporation Limited v. Heintzman and Smith, 47 Man. R. 129, [1929] 1 W.W.R. 541. After a careful perusal of the law, I cannot find that there is any conflict in the decisions. Furthermore, I am satisfied that the learned judge properly exercised his discretion in making the order on the facts disclosed, and that his order is right. The application for leave to appeal will be dismissed with costs. MANNING WANLESS BUILDING SUPPLIES LTD. v. PUSKAS AND FLEMKE Supreme Court of Alberta. 1962. 39 W.W.R. 672. FARTHING, J. : On November 9, 1961, judgment was entered in this action against the defendants Puskas and Flemke in the sum of $1,917.79, plus costs, taxed in the sum of $442.50. On examination for discovery in aid of execution, the defendant Flemke testified that he is the owner of the lands and premises located at the south west corner of 103rd St. and 82nd Ave. in Edmonton described as lots one and two in block 61, plan (I) R.L. 13. The said land is registered in the name of the said defendant. This is a good commercial property

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and the rents therefrom payable to the defendant Flemke amount to a sum in excess of $1,500 per month. It is subject to a mortgage on which the outstanding balance is approximately $95,000. The monthly payments thereon are more than $10,000 in arrears chiefly, though not altogether, due to the fact that Flemke has been paying only $1,000 each month, though the terms of the mortgage call for $1,200. In the present motion, argued in chambers on May 10, the plaintiff asks for an order appointing the sheriff or some other person as receiver by way of equitable execution, without security, to receive any moneys or other payments now or in the future payable as rent or in any way whatsoever to or for the benefit of the defendant Edward Flemke from the named tenants of the said land and premises or such other order as to the court may seem just. The said defendant opposes this motion on the ground that equitable execution should not be allowed when relief at law is obtainable. In Royal Trust Co. v. Kritzwiser [1924] 2 W.W.R. 760, Lamont, J.A. of the Saskatchewan court of appeal put it thus at p. 762: " * * * the general principle upon which the Court proceeds is that, in the absence of any special difficulty or any legal impediment to obtaining execution of the judgment in the ordinary course of law by garnishment of the debts due to the execution debtor a receiver of such debts will not be appointed." And in Kuss v. Kuss [1935] 2 W.W.R. 561 , 43 Man. R. 240, a judgment of the Manitoba court of appeal, the relevant part of the headnote reads:

" * * * equitable execution by way of the appointment of a receiver will be granted only where the subject-matter of the equitable relief applied for is a subject-matter for relief at law * * *." From the authorities to which I have been referred it seems that the most obvious and primary form of legal, as distinguished from equitable, execution against a defendant whose chief asset is revenue-producing real estate is garnishment. But in such cases it seems to be tacitly assumed that one or more garnishee summons issued on the same day would be sufficient to recover the debt. In none of them is there any indication that the creditor must resort to a monthly succession of garnishment proceedings, rather than ask for equitable execution. The facts and figures in the present case indicate that it would be impossible for the judgment creditor to recover his claim in one month and the mortgage be paid also. Second garnishment proceedings a month later against the same debtor have proven abortive in plenty of our cases, particularly when, as in this case, the debtor has apparently paid nothing on the judgment. Surely this is a "special difficulty" which, according to Lamont, J.A. in Royal Trust Co. v. Kritzwiser, supra, justified equitable execution. Of all the cases cited to me, that which, on its facts, most closely resembles that at bar is Imperial Bank v. Twyford (1905) 1 W.L.R. 157, a judgment of Harvey, J., afterward C.J.A., in the court of the North-West Territories Southern Alberta district - seven months before this province was created. It was a motion for the appointment of a receiver to receive the rents and profits of two lots in Edmonton owned by one of the defendants subject to a mortgage. The report shows that the late Mr. 0. M. Biggar, for the respondent, presented his case on the same grounds as did Mr. Main in this one. But the learned judge held that it was a proper case for the appointment of a receiver of the rents, and the order was granted subject to the rights of prior encumbrances. If I may ven-

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ture to say so, without presumption, I am of the same opinion regarding the present motion. There will be an order appointing the sheriff of Edmonton receiver, without security, of the rents now, or in the future, payable by the various tenants of the said lands and premises to or for the benefit of the defendant execution debtor Edward Flemke subject to the rights of prior encumbrancers. Costs to the applicant to be added to the amount of the judgment debt. HEROLD v. BUDDING

Supreme Court of Ontario. 1916. 37 O.L.R. 605. MIDDLETON, J.: The plaintiff has a judgment against the defendant for the recovery of a sum of money. Learning that the defendant was the beneficial owner of certain stock in the Canadian Pacific Railway Company, a company which has its head office at Montreal, which was standing in the name of certain brokers who held the stock certificate, the plaintiff made a motion for an order for a receiver, and I appointed the sheriff receiver. My intention was that the order should be merely an interim order, to be followed by another final order, on notice to the debtor, but the order was issued as though final. The present motion was made in vacation to my brother Britton, seeking to add to my order a direction to the receiver to sell. This my brother Britton has referred to me. The omission of any direction to sell was not, as is assumed, any clerical error or oversight. Stock in a company was first rendered available to a judgment creditor of the stockholder in England, by the Imperial statute 1 & 2 Viet. ch. 110, sec. 14, afterwards enacted here. This Act is now found in sec. 140 et seq. of the Judicature Act, R.S.O. 1914, ch. 56. This statute enables the stock to be charged with the payment of the judgment debt, and an order made thereunder "shall entitle the judgment creditor to all such remedies as he would have been entitled to if such charge had been made in his favour by the judgment debtor"; but no proceedings are to be taken to have the benefit of the charge until after the expiration of six months from the date of the order ( sec. 140) . The charging order is to be obtained after an order nisi has been served upon the debtor; this interim order precluding any transfer in the meantime to the prejudice of the judgment creditor [s. 140 (2) ]. The statutory provisions apply not only when the stock stands in the name of the debtor, but also when it stands "in the name of any person in trust for him" (sec. 140). Assuming that this stock is that of "a public company in Ontario" so far as to fall under the statute (sec. 140), then the judgment creditor must follow the statutory provisions and obtain first the order nisi and finally the statutory charging order. A receivership as ancillary to this is quite proper but the order issued should be regarded as an interim order and there should be a motion made, at the same time as the charging order is moved for, to continue the receivership till the charge is at an end. The receiver will be useful to obtain the income pending sale and also to obtain the documents of title to the shares. When the charging order has been obtained it cannot, under the terms of the statute, be enforced for six months, and then only in a new action : Leggott v. Western (1884), 12 Q.B.D. 287; Kolchmann v. Meurice, [1903) 1 K.B. 534.

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If this railway company is not "a company in Ontario" so as to come under this statute, the execution creditor may find himself without remedy, for reasons which I shall mention, unless the provisions of the Execution Act aid him. By that statute, R.S.O. 1914, ch. 80, sec. 12 [now s. 11 (1)], shares in an incorporated company "shall be deemed to be personal property found in the place when notice of the seizure thereof is served," and may be sold under execution in the same way as other personal property. By sec. 13 ( 2) [now s. 11 ( 3)] notice of seizure may be given when the company has in the bailiwick of the sheriff any place where service of process maybe made. By sec. 17 [now s. 13], this procedure is made to apply to any equitable right in the shares seized. The railway company has in this bailiwick a place where process can be served; and, in view of the very serious doubt as to this stock falling under the statute first mentioned, I think the execution creditor will be well advised if he makes a seizure in the mode provided by the statute. Equitable execution, it is now well settled, is not a means of reaching assets which in their nature are not exigible, but is a means of freeing exigible assets from impediments in the way of execution and reaching them when such impediments prevent them being taken in ordinary course: Holmes v. Millage, [1893] 1 Q.B. 551; and clearly cannot be made the means of reaching assets not in the Province. Moreover, a receiver by way of equitable execution cannot sell; his function is to receive and hold; and sale can not be indirectly brought about by declaring the judgment to form a charge upon the stock, unless the case can be brought within the statute first discussed: Flegg v. Prentis, [1892] 2 Ch. 428. The equitable relief is merely a mode of clearing the way for the operation of the execution. If I am right in what I have suggested above, and this stock is, under our Execution Act, liable to seizure and sale, this execution creditor will find further difficulties to face, for the sale will have to be recorded in the railway company's books at Montreal. The receivership may well be used as a means of perfecting the purchaser's title; and an order authorizing the receiver to do all things necessary to perfect the title in the purchaser ought to be made. It is clear from this that the amendment now sought to my order ought not to be made; and the execution creditor must work out the situation for himself as best he can, after notice to the debtor.

S. R. ELLIS, THE CHARGING ORDER A NEGLECTED MEANS OF ENFORCEMENT ( 1962), 20 [University of Toronto] Faculty of Law Review 35. Reprinted by permission. A charging order is a method of enforcing a judgment which does not require a writ of execution or a garnishee order and is not a form of equitable execution. It has, however, a limited scope of application, normally being applied only to a debtor's shares in a corporation. It is available in Ontario but is not often used. This is interesting since it appears to have possibilities, in suitable situations, of substantial advantages over other more commonly used

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methods. It is used extensively in England and apparently also to some extent in the Western Provinces . .. . The jurisdiction of a judge of the Supreme Court of Ontario to make a charging order is based on section 140 of The Judicature Act. The method is therefore somewhat less glamorous in Ontario than in those jurisdictions where direct reliance on the English statute of 1838 is necessary. The section authorizes a Supreme Court judge to order that any government stock, funds or annuities, or any stock or shares of a public company in Ontario standing in the name of a judgment debtor, or in the name of any person in trust for him, shall stand charged with the payment of the judgment debt. Such an order has the same effect as though the debtor himself had charged the property in favour of the creditor. The order may be made not only against funds, annuities, stocks or shares owned outright by the debtor, but also against any interest he may have in them whether in possession, remainder or reversion and whether vested or contingent. It can also be made against any dividends, interest or annual produce of such funds, annuities, stocks or shares. The order is to be made in the first instance ex parte and shall be an order to show cause only. The order nisi operates to restrain the company from transferring the stock or shares, and makes subsequent dealings by the judgment debtor invalid as against the judgment creditor. The charging order provision was originally enacted in England in the Judgments Act, 1838 and immediately extended in the Judgments Act, 1840. The purpose of the enactment was to give creditors a recourse against government stock, funds or annuities, or stocks and shares in a public company which was not available to them at common law. In England wide use has been made of the charging order and there has developed a considerable body of law concerning it. In many of the provinces of Canada the English legislation is still in force and, particularly in British Columbia and Manitoba, some use has been made of it. In Ontario the charging order provisions in the English statutes of 1838 and 1840 were consolidated with suitable changes into the Revised Statutes of 1897 and have come down unchanged except for minor improvements in style. In all that time, as far as the writer has been able to discover, there are only two reported cases in which Ontario courts have made reference to the provision [Caffrey v. Phelps (1876), 24 Gr. 344 and Herold v. Budding (1916), 37 O.L.R. 605), the most recent being in 1916. There are, of course, readily ascertained reasons for this neglect. In the first place, the section has application only to assets of a special nature. In the second place, it is not truly a method of enforcing payment of the debt; it only establishes the creditor's priority with respect to those special assets. Having obtained the charging order, the creditor must then pursue the usual methods of realizing on a charge. The final drawback is that the section prohibits the enforcement of the charge until the expiration of six months from the date of the order. Accordingly, where the more common methods of execution - the writ of execution, the garnishee order and the appointment of a receiver by way of equitable execution - are available, usually they will be seen to be more direct and satisfactory. And in Ontario, in view of the provision for seizure of stocks and shares in The Execution Act, and the provisions of The Creditors' Relief Act relating to seizure of funds in court, it will be only in exceptional circumstances that they will not be available in any situation where the charging order could be used. This explains, then, why the charging order has not proved to be a popular technique. It does not, however, justify the charging order being ignored in every case. Indeed, as the writer will attempt to show, under certain circumstances there appears to be a good possibility of gaining substantial

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advantages by the use of a charging order in preference to other methods of execution. There are also, of course, special circumstances where a charging order will be the only collection method available to the creditor. The case which prompted this article is B.C. Mil/work Products Ltd. v. Overhead Door Sales (Vancouver) Ltd. This case is a particularly fitting occasion on which to examine the application of the little-known charging order because, while the charging order in question is purported to have been made under the authority of the Imperial Statutes of 1838 and 1840, the order is, in fact, not a statutory charging order at all but rather a charging order by way of equitable execution on money in court - something quite different. The case is essentially a contest between two creditors ( call them for convenience A and B) with respect to a sum of money to which their common debtor was entitled and which was paid into court in compliance with a garnishee order obtained by Creditor A. The garnishee order was obtained prior to both his and Creditor B's judgments and Creditor A relies on it as establishing his prior right to the money. Creditor B, on the other hand, did not obtain a garnishee order, but, having succeeded in obtaining his judgment first, made a successful ex parte application for an order charging the money in court with his judgment debt. He relies on this charging order as establishing his prior right. The order was made, to quote Collins, J.: "to the effect that the sum of [$3,300] . .. stand charged with the payment of the amount for which judgment had been recovered . . . until the judgment debtor should . . . show good cause to the contrary." And, again according to Collins J., it was made "pursuant to the provisions of . .. the Judgment Act, 1838 (Imp.) and .. . the Judgment Act, 1840 (Imp.) which .. . remain in effect in British Columbia insofar as they have not been repealed or modified by subsequent legislation in this Province." When Creditor A subsequently obtained his judgment, he brought an application for an order setting aside the charging order and directing payment out of the money to him. It is this application which is disposed of by the present reported decision. The court decided that, since a garnishee order made prior to judgment does not form an equitable charge on the debt until judgment is obtained, the charging order has priority since it created a charge on the money before Creditor A obtained judgment. The application was therefore dismissed .... In Ontario, the charging order by way of equitable execution never became established. In the first instance it was forestalled by the development of what may be referred to as the stop order by way of equitable execution, an analogous concept by which the court assisted creditors in realizing on money in court, but which was based on the more common stop order rather than the charging order. This concept itself, however, was no more than established when it in turn was replaced by a section added to The Creditors' Relief Act corresponding to section 23 of the present Act. Section 23 provides that : "Where there is in any court a fund belonging to an execution debtor or to which he is entitled, the same, or a sufficient part thereof to meet the executions and certificates in the sheriff's hands may, on the application of the sheriff or any party interested, be paid over to the sheriff, and the same shall be deemed to be money levied under the execution within the meaning of this Act." This section, in combination with a stop order to hold the money in court until the necessary steps can be taken, establishes a straightforward and simple method of realizing on funds in court which is in accord with the normal methods of execution applicable to other types of assets. With this avenue open, it is not

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surprising that an Ontario practitioner faced with the problem of realizing on a fund in court would look no further, and that in Ontario, charging orders against funds in court are virtually unknown. In view of the fact that funds-incourt cases figured largely in the English development of the law of charging orders, the existence of section 23 is a significant factor in accounting for the slow development of the charging order in Ontario. It should not be forgotten, however, that the section in no way precludes the use of the statutory charging order, although, by providing a satisfactory method of reaching funds in the hands of a court, it probably does foreclose on the possibility of obtaining an order by way of equitable execution in Ontario. Before proceeding to consider other possible applications of the statutory charging order, the writer proposes first to examine what advantage, if any, the use of the charging order has over other forms of execution. If nothing practical is to be gained, any further discussion will be of academic interest only. One obvious advantage, of course, is that there are situations where the use of a charging order will be the only method of realizing on assets open to the creditor. These situations, however, will arise only rarely and will be dealt with later. It is proposed at the moment to examine the case where the lawyer has a choice, as in the case of the fund in court noted above, between the charging order on the one hand and one of the usual methods of execution on the other. Is there anything to be gained by choosing the charging order? The answer would appear to be that there probably is. There seem to be excellent grounds for believing that a charging order gives its holder priority over other execution creditors in proceedings under The Creditors' Relief Act, and in addition, there is at least a possibility that it puts him in the position of a secured creditor under the Bankruptcy Act. These are obviously substantial benefits which by the terms of The Creditors' Relief Act and the Bankruptcy Act are not normally available under the usual forms of execution, and in view of the apparently infrequent use of the charging order in Ontario, the writer puts them forward rather hesitantly. However, there does appear to be considerable support for both propositions. Assuming for the moment that what is said above with respect to The Creditors' Relief Act and the Bankruptcy Act may be true, there is a preliminary difficulty which must be met before it can be said that any practical advantage arises therefrom. The question is, will an Ontario court make a charging order in circumstances where other forms of execution are readily available? Will the courts accede to the policy of The Creditors' Relief Act or the Bankruptcy Act being circumvented by resort to a charging order, where the order is in substance merely an alternative form of execution? In the 1958 decision of Gould v. Ablitt [(1958), 26 W.W.R. 274] the British Columbia Supreme Court, in considering an application for a charging order against shares, recognized that the Judgments Act, 1838 was part of the law of British Columbia "insofar as it is applicable and insofar as it has not been altered by our Execution Act." However, it held that "in respect of shares . . . if they are not subject to execution under the Execution Act, a charging order may be made. If the shares are subject to execution under the Execution Act, there is no need for a charging order and in fact . . . the English Act is [not] applicable." Would an Ontario Court adopt the same view? There seem to be reasonable grounds for thinking that it would not. It may, first of all, be noted that in the A blitt case the British Columbia court was being asked to prefer an English-made statute over a domestic statute. In Ontario, where the charging order provisions have been incorporated into The Judicature Act, the charging order would at least initially have a standing in the eyes of the court equal to other statutory methods of

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execution. Secondly, having regard to the facts in the Ablitt case, the court's statement was obiter dictum, and standing opposed to that statement is another dictum of more persuasive authority emanating from the Manitoba Court of Appeal in Goodbun v. Mitchell [ [1930] 1 O.L.R. 580]. There, where the possibility of applying the charging order in the circumstances under consideration was examined, Trueman, J. A. made the following statement: "Section 14 and its related sections [the sections of the Manitoba Execution Act applying to execution against shares] were enacted to give to a judgment creditor a more direct and simpler method of reaching shares of a bank or company owned by the judgment debtor than that provided by the Judgments Act, 1838. The Act is not repealed or superseded in all its parts by section 14, and may be resorted to independently or in aid of the section." Finally, in The Execution Act of Ontario, immediately following the provision for execution against shares of a company, it is enacted that: "Nothing in this Act affects any remedy that the execution creditor might, without this Act, have had against any such shares or the dividends, premiums, bonuses or other pecuniary profits in respect thereof, and subsections 1 to 4 apply to such remedy insofar as they can be applied thereto." This provision would prima facie seem to preclude a court from taking the view adopted in the Ablitt case and, while there is a similar provision in the British Columbia Execution Act, from what appears in the opinion the court seems to have failed to consider it. It is, therefore, the writer's submission that an Ontario Court would have little basis for rejecting an application for a charging order on the grounds of the existence of an alternative form of execution, and that there is at least a reasonable possibility that no objection to such an application would be taken. Assuming then that a charging order can be obtained is there any substance to the above-noted suggestions that the charging order may not come within the provisions of The Creditors' Relief Act and that the holder of a charging order may possibly be a secured creditor within the provisions of the Bankruptcy Act? Considering first The Creditors' Relief Act, it may be noted at once that the words "charging order" do not appear in any of its provisions. The Act, however, speaks of "creditors by execution" [s. 3 inter alia], defining "execution" as including a writ of fieri facias [s. 1 (c)], and of "attaching" [s. 4 (6) inter alia] creditors, and contains a broad general statement of purpose [s. 3], all of which might be thought capable of a sufficiently broad interpretation as to include charging orders. The question is, will the Act be interpreted broadly so as to encompass the charging order or narrowly so as to exclude it? There seems to be considerable judicial support for the view that the latter approach will prevail. A case in point is the decision of an Ontario Court in McLean v. Allen [(1890), 14 P.R. 84]. Here the issue was whether, in view of the provisions of The Creditors' Relief Act, an appointment of a receiver by way of equitable execution ought to have been declared to be for the benefit of all the creditors of the defendant. Street, J. said: "The decisions upon this subject are conflicting and for the present I think I should follow those of the learned Chief Justices of the Queen's Bench Division and of the Common Pleas Division, in which my brother Falconbridge has concurred, and hold that the provisions of The Creditors'

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Relief Act form an exception to the general rule, and are not to be extended to cases not actually provided for in that Act." Another case to the same effect is the recent British Columbia Supreme Court decision in Hale v. Ross [(1958), 26 W.W.R. 47] . . . . Another case indicative of the narrow technical interpretation which courts are prone to apply in this area of the law and which also supports the general proposition that the due application of the charging order provisions will not be inhibited by a result contrary to a clear expression of legislative intent in a correlative statute, is Prat v. Hitchcock, [ [1925] 3 D.L.R. 1142], a decision of the British Columbia Court of Appeal. This case involved a charging order against a fund in court. The issue was whether the debtor could rely on the exemption provisions in the Execution Act to protect a portion of that fund from the effect of the charging order. The section of the Execution Act in question reads as follows: "The following personal property shall be exempt from forced seizure or sale by any process at law or in equity.... " It was conceded that, if the section applied, a portion of the fund in court would be exempt. Despite the very general nature of the words, "by any process at law or in equity," which constituted an open invitation to the court to bring to bear against the charging order the obvious legislative policy behind the section, the majority of the court held that the section did not apply. The charging order procedure could not be described as a "forced seizure or sale" within the technical meaning the law has ascribed to those words. It may be noted that the charging order here was an order by way of equitable execution only and did not have the legislative backing of a statutory order. Before leaving The Creditors' Relief Act, it might be noted that there is no reason to suppose that the holder of a charging order would not be entitled to the benefit of s. 32 ( 11) of that Act. While there is nothing in any of the above to justify a firm conclusion as to whether an Ontario court would apply the provisions of The Creditors' Relief Act to the charging order, there is sufficient evidence, it is submitted, to establish a reasonable probability that those provisions would not be applied and that the priority of a holder of a charging order over other execution creditors in proceedings under The Creditors' Relief Act would be recognized . . . . If, then, there is a reasonable probability that the provisions of The Creditors' Relief Act will not be applied to a charging order, and at least some possibility that the charging creditor will enjoy the position of a secured creditor in bankruptcy proceedings, there would seem to be reasonable incentive for using the charging order in cases where the debtor's assets consist largely of government stock, funds or annuities, or stock and shares in a public company, and, of course, where a further six-month delay in collecting the debt is acceptable .... See also C.R.B. Dunlop, "Some Aspects of the Charging Order as a Remedy for Unsecured Creditors" (1967), 3 Univ. of British Columbia Law Rev. 83.

Chapter Three: Fraudulent Conveyances and Preferences SECTION 1: THE STATUTE OF 13 ELIZABETH THE STATUTE OF FRAUDULENT CONVEYANCES 13 Eliz., c. 5, 1571.

An act against fraudulent deeds, alienations, &c. For the avoiding and abolishing of feigned, covinous and fraudulent feofjments, gifts, grants, alienations, conveyances, bonds, suits, judgments and executions, as well of lands and tenements as of goods and chattels, more commonly used and practised in these days than hath been seen or heard of heretofore: (2) which feofjments, gifts, grants, alienations, conveyances, bonds, suits, judgments and executions, have been and are devised and contrived of malice, fraud, covin, collusion or guile, to the end, purpose and intent, to delay, hinder or defraud creditors and others of their just and lawful actions, suits, debts, accounts, damages, penalties, forfeitures, heriots, mortuaries and reliefs, not only to the let or hindrance of the due course and execution of law and justice, but also to the overthrow of all true and plain dealing, bargaining and chevisance between man and man, without the which no commonwealth or civil society can be maintained or continued. II. Be it therefore declared, ordained and enacted by the authority of this present parliament, that all and every feoffment, gift, grant, alienation, bargain and conveyance of lands, tenements, hereditaments, goods and chattels, or of any of them, or of any lease, rent, common or other profit or charge out of the same lands, tenements, hereditaments, goods, and chattels, or any of them, by writing or otherwise, (2) and all and every bond, suit, judgment and execution, at any time had or made since the beginning of the Queen's majesty's reign that now is, or at any time hereafter to be had or made, ( 3) to or for any intent or purpose before declared and expressed, shall be from henceforth deemed and taken ( only as against that person or persons, his or their heirs, successors, executors, administrators and assigns, and every of them, whose actions, suits, debts, accounts, damages, penalties, forfeitures, heriots, mortuaries and reliefs, by such guileful, covinous or fraudulent devices and practices, as is aforesaid, are, shall or might be in any wise disturbed, hindered, delayed or defrauded) to be clearly and utterly void, frustrate and of no effect; any pretence, colour, feigned consideration, expressing of use, or any other matter or thing to the contrary notwithstanding. III. And be it further enacted by the authority aforesaid, that all and every the parties to such feigned, covinous or fraudulent feoffment, gift, grant,

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alienation, bargain, conveyance, bonds, suits, judgments, executions and other things before expressed, and being privy and knowing of the same, or any of them; (2) which at any time after the tenth day of June next coming shall wittingly and willingly put in ure, avow, maintain, justify or defend the same, or any of them, as true, simple, and done, had or made bona fide and upon good consideration; (3) or shall alien or assign any the lands, tenements, goods, leases or other things before-mentioned, to him or them conveyed as is aforesaid, or any part thereof; ( 4) shall incur the penalty and forfeiture of one year's value of the said lands, tenements and hereditaments, leases, rents, commons or other profits, of or out of the same; ( 5) and the whole value of the said goods and chattels; ( 6) and also so much money as are or shall be contained in any such covinous and feigned bond; (7) the one moiety whereof to be to the Queen's majesty, her heirs and successors, and the other moiety to the party or parties grieved by such feigned and fraudulent feoffment, gift, grant, alienation, bargain, conveyance, bonds, suits, judgments, executions, leases, rents, commons, profits, charges and other things aforesaid, to be recovered in any of the Queen's courts of record by action of debt, bill plaint or information, wherein no essoin, protection or wager of law shall be admitted for the defendant or defendants; ( 8) and also being thereof lawfully convicted, shall suffer imprisonment for one half year without bail or mainprise.... VI. Provided also, and be it enacted by the authority aforesaid, that this act, or any thing therein contained, shall not extend to any estate or interest in lands, tenements, hereditaments, leases, rents, commons, profits, goods or chattels, had, made, conveyed or assured, or hereafter to be had, made, conveyed or assured, which estate or interest is or shall be upon good consideration and bona fide lawfully conveyed or assured to any person or persons, or bodies politic or corporate, not having at the time of such conveyance or assurance to them made, any manner of notice or knowledge of such covin, fraud or collusion as is aforesaid; any thing before mentioned to the contrary hereof notwithstanding. TWYNE'S CASE Star Chamber, 1601. 3 Co. Rep. 806; 76 E.R. 809. In an information by Coke, the Queen's Attorney General, against Twyne of Hampshire, in the Star-Chamber, for making and publishing of a fraudulent gift of goods: the case on that stat. of 13 Eliz. cap. 5 was such; Pierce was indebted to Twyne in four houndred pounds, and was indebted also to C. in two hundred pounds. C. brought an action of debt against Pierce and pending the writ, Pierce being possessed of goods and chattels of the value of three hundred pounds, in secret made a general deed of gift of all his goods and chattels real and personal whatsoever to Twyne, in satisfaction of his debt; notwithstanding that Pierce continued in possession of the said goods, and some of them he sold; and he shore the sheep, and marked them with his own mark: and afterwards C. had judgment against Pierce, and had a fieri facias directed to the Sheriff of Southampton, who by force of the said writ came to make execution of the said goods; but divers persons, by the command of the said Twyne, did with force resist the said sheriff, claiming them to be the goods of the said Twyne by force of the said gift: and openly declared by the commandment of Twyne, that it was a good gift, and made on a good and lawful consideration. And whether this gift on the whole matter, was fraudulent and of no effect by

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the said Act of 13 Eliz. or not, was the question. And it was resolved by Sir Thomas Egerton, Lord Keeper of the Great Seal, and by the Chief Justice Popham and Anderson, and the whole Court of Star Chamber, that this gift was fraudulent, within the statute of 13 Eliz. And in this case divers points were resolved. 1st. That this gift had the signs and marks of fraud, because a gift is general without exception of his apparel, or any thing of necessity, for it is commonly said, quod dolus versatur in generalibus. 2nd. The donor continued in possession, and used them as his own; and by reason thereof he traded and trafficked with others, and defrauded and deceived them. 3rd. It was made in secret, et dona clandestina sunt semper suspiciosa. 4th. It was made pending the writ. 5th. Here was a trust between the parties, for the donor possessed all, and used them as his proper goods, and fraud is always apparelled and clad with a trust, and a trust is the cover of fraud. 6th. The deed contains, that the gift was made honestly truly, and bona fide; et clausulae inconsuet' semper inducunt suspicionem. Secondly, it was resolved, that notwithstanding here was a true debt due to Twyne, and a good consideration of the gift, yet it was not within the proviso of the said Act of 13 Eliz. by which it was provided, that the said Act shall not extend to any estate or interest in lands, &c. goods or chattels made on a good consideration and bona fide; for although it is in a true and good consideration, yet it is not bona fide, for no gift shall be deemed to be bona fide within the said proviso which is accompanied with any trust; as if a man be indebted to five several persons, in the several sums of twenty pounds, and hath goods of the value of twenty pounds, and makes a gift of all his goods to one of them in satisfaction of his debt, but there is a trust between them, that the donee shall deal favourably with him in regard of his poor estate, either to permit the donor, or some other for him, or for his benefit, to use or have possession of them, and is contented that he shall pay him his debt when he is able; this shall not be called bona fide within the said proviso; for the proviso saith on a good consideration, and bona fide; so a good consideration doth not suffice, if it be not also bona fide: and therefore, reader, when any gift shall be to you in satisfaction of a debt, by one who is indebted to others also; 1st, Let it be made in a public manner, and before the neighbours, and not in private, for secrecy is a mark of fraud. 2nd, Let the goods and chattels be appraised by good people to the very value, and take a gift in particular in satisfaction of your debt. 3rd, Immediately after the gift, take the possession of them; for continuance of the possession in the donor, is a sign of trust. And know, reader, that the said words of the proviso, on a good consideration and bona fide, do not extend to every gift made bona fide; and therefore there are two manners of gifts on a good consideration, scil. consideration of nature or blood, and a valuable consideration. As to the first, in the case before put; if he who is indebted to five several persons, to each party in twenty pounds, in consideration of natural affection, gives all his goods to his son, or cousin, in that case, forasmuch as others should lose their debts, &c., which are things of value, the intent of the Act was, that the consideration in such case should be valuable; for equity requires, that such gift, which defeats others, should be made on as high and good consideration as the things which are thereby defeated are; and it is to be presumed, that the father, if he had not been indebted to others, would not have dispossessed himself of . all of his goods, and subjected himself to his

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cradle; and therefore it shall be intended, that it was made to defeat his creditors: and if consideration of nature or blood should be a good consideration within this proviso, the statute would serve for little or nothing, and no creditor would be sure of his debt. And as to gifts made bona fide, it is to be known, that every gift made bona fide, either is on a trust between the parties, or without any trust; every gift made on a trust is out of this proviso; for that which is betwixt the donor and donee, called a trust per nomen speciosum, is in truth, as to all the creditors, a fraud, for they are thereby defeated and defrauded of their true and due debts. And every trust is either expressed, or implied: an express trust is, when in the gift, or upon the gift, the trust by word or writing is expressed: a trust implied is, when a man makes a gift without any consideration, or on a consideration of nature, or blood only: and therefore, if a man before the stat. of 27 H . 8. had bargained his land for a valuable consideration to one and his heirs, by which he was seised to the use of the bargainee; and afterwards the bargainor, without a consideration, infeoffed others, who had no notice of the said bargain; in this case the law implies a trust and confidence, and they shall be seised to the use of the bargainee : so in the same case, if the feoffees, in consideration of nature, or blood had without a valuable consideration enfeoffed their sons, or any of their blood who, had no notice of the first bargain, yet that shall not toll the use raised on a valuable consideration; for a feoffment made only on consideration of nature or blood, shall not toll an use raised on a valuable consideration but shall toll an use raised on consideration of nature, for both considerations are in aequali jure, and of one and the same nature. . . . To one who marvelled what should be the reason that Acts and statutes are continually made at every Parliament, without intermission, and without end, a wise man made a good and short answer, both which are well composed in verse. Quaeritur, ut crescunt tot magna volumina legis? In promptu causa est, crescit in orbe dolus. And because fraud and deceit abound in these days more than in former times, it was resolved in this case by the whole Court, that all statutes made against fraud should be liberally and beneficially expounded to suppress the fraud . . . . And by the judgment of the whole court Twyne was convicted of fraud, and he and all the others of a riot.

FRAUDULENT CONVEYANCES AND REFERENCES Copyright 1940 by Baker, Voorhis & Co. Reprinted by permission.

GLENN,

§ 61d. How the Statute of Fraudulent Conveyances Was Made to Serve Creditors' Rights

In Twyne's Case . . . the Crown contented itself with a criminal prosecution of the fraudulent parties. As a revenue measure, indeed, the Statute of Fraudulent Conveyances was badly drawn, because it provided that in the case of every fraudulent conveyance, the Crown should have at least half of the property, the other half going to the "persons aggrieved." As there was no "person aggrieved" except the Crown in the case of a conveyance made just prior to the commission of treason, naturally the Crown would expect to get it all. It was suggested in an early case that the intention was to reward an informer, and thus increase the number of qui tam actions which even then appeared upon the statute books,

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but the suggestion is lost in the confusion that attends the reports of that decision. As to private right, the Statute seemed inapplicable on its face . If the "party aggrieved" was the defrauded creditor, why should the Crown get half of his due? Besides, what sort of proceeding should a creditor institute? These questions troubled the court in a case where landlords had been defrauded of their heriots by a tenant who managed to dispose of his "best beasts" before he died; but if the question was hard in the case of a distraining landlord, how would it be with a judgment creditor? So vague was the statute as to this, that some people must have regarded it as wholly inapplicable to private right. . . . Bacon, who wrote of fraudulent conveyances after the enactment of the Statute, did not even mention it. But the courts of England handled the situation correctly when they held . . . that the judgment creditor could take advantage of the Statute by ignoring the fraudulent transfer and levying execution on the property involved. Here, then, and not in Twyne's Case is the beginning of a rule that has lasted . . . even unto our day. The proposition for which Twyne's Case stands is one of later development, but the earlier decision gives us the substantive law of the Statute of Elizabeth, viz: that the judgment creditor may levy execution upon property which has been fraudulently conveyed. The penal clause, and the clause giving the Government half the recovery, logically should have led to a strict construction of the statute as a penal law; but this was discarded in favour of the "common law principle" which, it was said, underlay the whole Statute of Elizabeth. For a full discussion of the historical background to the Statute of 13 Elizabeth and its early interpretation see Glenn, Fraudulent Conveyances and Preferences, Chapter V(B), "Origins and Present Status of the Law Against Fraudulent Conveyances," pp. 79-105.

MARTINDALE v. BOOTH King's Bench. 1832. 3 B.6 Ad. 498; 110 E.R. 180. [Trespass for converting plaintiff's chattels. Plea, not guilty. Verdict for the plaintiffs subject to the opinion of this Court on the following case: Priest, who kept the Peacock Tavern, was indebted to the plaintiffs, wine and spirit merchants, in £10. The plaintiffs refused to give him any further credit, or to lend him any money unless he would give them satisfactory security. In return for an additional advance, Priest delivered to the plaintiffs a bill of sale, reciting that he, Priest, was indebted to the plaintiffs in the sum of £ 100 for money advanced and goods sold and delivered, and stating that in consideration thereof, he granted, bargained, sold, and assigned unto the plaintiffs all the household goods, furniture, &c. in the Peacock Tavern, subject to the condition thereinafter contained: proviso, that if Priest should pay the said sum of £100 with interest on a fixed date, the deed should be void. Then followed a proviso, "That until default should be made in payment, it should be lawful for Priest to retain and keep quiet possession of all and singular the said household goods," &c. Before Priest commenced dealing with the plaintiffs, by way of security for his wife's debt of £1,100, he executed a warrant of attorney to Combe, Delafield, and Co. for that amount in November, 1823. In 1828 Messrs. Combe, Delafield and Co. caused judgment to be entered upon the warrant of attorney, and sued out a writ of fi. fa. directed to the defendants Booth and Copeland, then sheriff

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of Middlesex, who thereupon issued their warrant to Wilson, the other defendant, their officer, and he seized and took in execution the goods in question, being the furniture and effects in the Peacock Tavern. While the sheriff remained in possession, the plaintiffs came upon the premises, gave the defendants notice of the bill of sale, and required them to relinquish possession, which was refused, and the sheriff sold the goods.] LORD TENTERDEN, C. J.: I am of opinion that the deed of sale was not absolutely void. Much has been said as to the secrecy attending that transfer, but the observation applies with equal force to the warrant of attorney, which was unknown to the plaintiffs, and which Combe & Co. forbore to act upon for so long a time. The consideration for the bill of sale was not only an antecedent debt, but a sum of money to be advanced by the plaintiffs to enable Priest to carry on his trade. The omission of the plaintiffs to take possession of the goods was perfectly consistent with the deed; for it was stipulated that Priest should continue in possession until default made in payment of all or any of the instalments, and that on such default it should be lawful, although no advantage should have been taken of any previous default, for the plaintiffs to enter and take possession of the household goods and furniture. The possession by Priest, therefore, being consistent with the deed, and it having been given in consideration of money advanced to enable Priest to carry on his trade, I cannot say that it was absolutely void. LITTLEDALE, J.: I am of the same opinion. The cases shew that continuance in possession of goods and chattels by a vendor after the execution of a bill of sale is a badge and evidence of fraud; but I think that, under the circumstances of this case, a jury would have negatived fraud. In Jezeph v. Ingram ( 1 B. Moore, 189), Dallas J. denies that Edwards v. Harben (2 T.R. 587), lays down a general rule, that in transferring chattels the possession must accompany and follow the deed. There was in Jezeph v. Ingram a mixed possession; for the vendee superintended the management of the farm, and was occasionally present. That case, however, shews the opinion of the Court of Common Pleas to have been, that a change of possession is not in all instances necessary. PARKE, J.: I am of the same opinion. I think that the want of delivery of possession does not make a deed of sale of chattels absolutely void. The dictum of Buller, J. in Edwards v. Harben (2 T.R. 587), has not been generally considered, in subsequent cases, to have that import. The want of delivery is only evidence that the transfer was colourable. In Benton v. Thornhill (2 Marshall, 427), it was said in argument, that want of possession was not only evidence of fraud, but constituted it; but Gibbs, C. J. dissented; and although the vendor there, after executing a bill of sale, was allowed to remain in possession, Gibbs, C. J., at the trial left it to the jury to say, whether, under all the circumstances, the bill of sale were fraudulent or not. It is laid down in Sheppard's Touchstone, 224, (7th ed.) "that a bargain and sale may be made of goods and chattels without any delivery of any part of the things sold"; and, afterwards, on page 227, it is said "that the word gift is often applied to moveable things, as trees, cattle, household stuff, &c., the property whereof may be altered as well by gift and delivery as by sale and grant, and this, is or may be, either by word or writing"; and in a note to this passage by the editor it is said "that, by the civil law, a gift of goods is not good without delivery, yet in our law it is otherwise, when there is a deed: also in a donatio mortis causa, there must be a delivery." Then it is evident that the bill of sale, in this case, without delivery, conveyed the property in the household goods and chattels to the plaintiffs. It may be a question for a jury, whether, under the circumstances, a bill of sale of goods and

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chattels be fraudulent or not; and if there were any grounds for thinking that a jury would find fraud here, we might, this being a special case, infer it; but there is no ground whatever for saying that this bill of sale was fraudulent. It was given for a good consideration, for money advanced to Priest to enable him to carry on his trade, and his continuance in possession was in terms provided for. PATTESON, J.: There is no sufficient authority for saying that the want of delivery of possession absolutely makes void a bill of sale of goods and chattels. It was held in Martin v. Podger (2 Sir W.Bl. 701 ), that want of possession was a badge of fraud which ought to be left to the jury. Then, if it be a badge of fraud only, in order to ascertain whether a deed be fraudulent or not, all the circumstances must be taken into consideration. Here the possession was consistent with the deed, for the reason already given. The continuance of possession by the vendor is provided for by the deed, and the purchaser was not bound to enter for the first or the subsequent defaults in paying the instalments. That being so, the possession does not show fraud. The judgment of the Court must be for the plaintiffs. Since Martindale v. Booth the enactment of personal property perfection statutes (e.g. The Bills of Sale and Chattel Mortgages Act, R.S.O. 1960, c. 34; The Assignment of Book Debts Act, R.S.O. 1960, c. 24; The Conditional Sales Act, R.S .O. 1960, c. 61; The Bulk Sales Act, R .S.O. 1960, c. 43; the Bank Act, Can. 1953-54, c. 48, s. 88) has alleviated the problem by requiring the public recording of transfers of ownership. The multiplicity and complexity of such statutes has recently led to an attempt to devise a single personal property security act which would encompass within a single conceptual framework and a single procedure all the presently diverse requirements . Legislation to this effect was passed by the Ontario Provincial Parliament in 1967 and will be brought into effect over a three-year period.

SECTION 2: TRANSFERS WITH INADEQUATE CONSIDERATION OR WITH ACTUAL INTENT TO DEFRAUD A. Impeachment of Voluntary Transfers under the Fraudulent Conveyances Act FRAUDULENT CONVEYANCES ACT R.S.O. 1960, C. 154. 2. Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns. 3. Section 2 does not apply to an estate or interest in real property or personal property conveyed upon good consideration and bona fide to a person not having at the time of the conveyance to him notice or knowledge of the intent set forth in that section. 4. Section 2 applies to every conveyance executed with the intent set forth in that section notwithstanding that it was executed upon a valuable consideration and with the intention, as between the parties to it, of actually transferring to and for the benefit of the transferee the interest expressed to be thereby transferred, unless it is protected under section 3 by reason of bona fides and want of notice or knowledge on the part of the purchaser.

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FREEMAN v. POPE English Court of Appeal, 1870. L.R. 5 Ch. App. 538. This was an appeal by the defendant, Pope, from a decree of Vice-Chancellor James, setting aside a voluntary settlement, dated the 3rd of March, 1863, by which the Rev. J. Custance assigned to trustees for the benefit of Julia Pope (then Julia Thrift) a policy of insurance for £1000 (effected by him in 1845 on his own life), and covenanted to pay the premiums. It appeared that he had previously settled this policy upon her in 1853, reserving a power of revocation, which he exercised in 1861, in order that he might receive a bonus. At the time when the settlement now impeached was made, the settlor held two livings producing a net income of £815, and he was entitled to a Government life-annuity of a little more than £180, and to a copyhold cottage which he on the same day covenanted to surrender to Mrs. Walpole, the mother of Julia Pope, for £50. He had no other property except his furniture, and he was being pressed by his creditors. Among other debts, he owed £489 to Messrs. Gurney, his bankers at Norwich, and £7 8s. 6d. to a postmaster. On the same 3rd of March, 1863, he borrowed from Mrs. Walpole £350, for which he gave her a bill of sale of his furniture. Mrs. Walpole was privy to, and one of the trustees of, the settlement. At the same time he made an arrangement with his bankers that his solicitor, Mr. Copeman, should receive certain income from the benefices, and pay out of it £50 each half-year towards discharge of the balance. The banking account at Norwich was to remain a dead account, and to be discharged, with interest, by the above instalments. A new account was to be opened with the Aylsham branch of the same bank, and Copeman was to pay the residue of the income (after deducting the £50) to this new account, which was to be an ordinary current banking account. At the testator's death, in April, 1868, the balance of £489 due to the bankers had been reduced to £117 by means of the annual instalments of £50. The Aylsham account shewed no balance on either side. The postmaster's debt of £7 8s. 6d., and Mrs. Walpole's £350, with an arrear of interest, remained unpaid. The other debts due at the date of the settlement had been paid. The settlor, however, owed many debts subsequently contracted, and there were no assets whatever to pay them; the furniture having been sold under a subsequent bill of sale, to which Mrs. Walpole had agreed to postpone her security. The plaintiff, a tradesman who had supplied goods to the settlor after the date of the settlement, filed his bill for administration of the settlor's estate, and to set aside the settlement, to the benefit of which the defendant Pope had become entitled under an appointment by Julia Pope. Vice-Chancellor James made a decree for setting aside the settlement, from which Pope appealed .... LoRD HATHERLEY, L. C.: The principle on which the statute of 13 Eliz. C. 5 proceeds is this, that persons must be just before they are generous, and that debts must be paid before gifts can be made. The difficulty the Vice-Chancellor seems to have felt in this was, that if he, as a special juryman, had been asked whether there was actually any intention on the part of the settlor in this case to defeat, hinder, or delay his creditors, he should have come to the conclusion that he had no such intention. With great deference to the view of the Vice-Chancellor, and with all the respect which I most unfeignedly entertain for his judgment, it appears to me that this does not put the question exactly on the right ground; for it would never be left to a special jury to find, simpliciter, whether the settlor intended to defeat, hinder, or

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delay his creditors, without a direction from the Judge that if the necessary effect of the instrument was to defeat, hinder, or delay the creditors, that necessary effect was to be considered as evidencing an intention to do so. A jury would undoubtedly be so directed, lest they should fall into the error of speculating as to what was actually passing in the mind of the settlor, which can hardly ever be satisfactorily ascertained, instead of judging of his intention by the necessary consequences of his act, which consequences can always be estimated from the facts of the case. Of course there may be cases - of which Spirett v. Willows is an instance in which there is direct and positive evidence of an intention to defraud, independently of the consequences which may have followed, or which might have been expected to follow, from the act. In Spirett v. Willows the settlor, being solvent at the time, but having contracted a considerable debt, which would fall due in the course of a few weeks, made a voluntary settlement by which he withdrew a large portion of his property from the payment of debts, after which he collected the rest of his assets and ( apparently in the most reckless and profligate manner) spent them, thus depriving the expectant creditor of the means of being paid. In that case there was clear and plain evidence of an actual intention to defeat creditors. But it is established by the authorities that in the absence of any such direct proof of intention, if a person owing debts makes a settlement which subtracts from the property which is the proper fund for the payment of those debts, an amount without which the debts cannot be paid, then, since it is the necessary consequence of the settlement ( supposing it effectual) that some creditors must remain unpaid, it would be the duty of the Judge to direct the jury that they must infer the intent of the settlor to have been to defeat or delay his creditors, and that the case is within the statute. The circumstances of the present case are these: The settlor was pressed by his creditors on the 3rd of March, 1863. He was a clergyman with a very good income, but a life income only. He had a life-annuity of between £180 and £190 a year, and besides that he had an income from his benefice - his income from the two sources amounting to about £1,000 a year. But at the same time his creditors were pressing him, and he had to borrow from Mrs. Walpole, who lived with him as his housekeeper, a sum of £350 wherewith to pay the pressing creditors. That accordingly was done, and he handed over to her as security the only property he had in the world beyond his life income and the policy which is now in question, namely, his furniture, and a copy hold of trifling value. It is said, however, that the value of the furniture exceeded (and I will take it to be so) by about £200 the value of the debt which was secured to Mrs. Walpole. That debt may be put out of consideration, not only on that account, but because Mrs. Walpole, being herself a trustee of the settlement which is impeached. cannot be heard to complain of that settlement. But he also owed at the time of this pressure a debt of £339 to his bankers at Norwich and he required, for the purpose of clearing the pressing demands upon him, not only the sum which he borrowed from Mrs. Walpole, but an additional sum of £150, which sum the bankers agreed to furnish, making their debt altogether, at the date of the execution of this settlement, a debt of £489. They made with him an arrangement ( which probably was intended, in a great measure, as a friendly act towards a gentleman who was seventy-three years of age, and the duration of whose life, therefore, could not be expected to be very long), that they would for the present (for it cannot be held to be more than a present arrangement) suspend the proceedings, which, it appears, they were contemplating, upon his allowing his solicitor to receive part of his income, pay £ 100 a year towards liquidating the £489 (which was to be carried to what is called a "dead account"), and pay

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the residue into their branch bank at Aylsham, to an account upon which the settlor might draw. That arrangement was made, but there was no bargain on the part of the bankers that they would not sue at any time they thought fit; and, on the other hand, they had nothing in the shape of security for the payment of their debt, for they had not taken out sequestration, and there could be nothing in the shape of a charge upon the living except through the medium of a sequestration. When the settlor had made the voluntary assignment of the policy, he stood in this position, that he had literally nothing wherewithal to pay or to give security for the debt of £489, except the surplus value of the furniture, which must be taken to be worth about £200, and he was clearly and completely insolvent the moment he had executed the settlement, even if we assume that some portion of his tithes and of the annuity was due to him. It appears that a payment of the tithes was made in January, and we cannot suppose that there was more owing to him than the £200 which was paid in May, two months after the date of the deed; and if we add to that £200 as the surplus value of the furniture, and add something for an apportioned part of the annuity, the whole put together would not meet the £489. He, in truth, was at the time insolvent; and there I put it more favourably than I ought to put it, because he could not at once put his hands upon that sum, so as to apply it towards satisfying the debt, at any time between March and May. The case, therefore, is one of those where an intention to delay creditors is to be assumed from the act. The Vice-Chancellor seems to have felt himself very much pressed by the case of Spirett v. Willows, and the dicta of Lord Westbury in that case. The first of those dicta is: "If the debt of the creditor by whom the voluntary settlement is impeached existed at the date of the settlement, and it is shewn that the remedy of the creditor is defeated or delayed by the existence of the settlement, it is immaterial whether the debtor was or was not solvent after making the settlement." The Vice-Chancellor seems to have thought himself bound by this expression of opinion, and to have set aside the settlement upon that ground alone. It is clear, however, that this expression of opinion on the part of the Lord Chancellor was by no means necessary for the decision of the case before him, where the settlor was guilty of a plain and manifest fraud. It is expressed in very large terms, probably too large; but, at all events, it is unnecessary to resort to it in the present case. It seems to me that the difficulty felt by the ViceChancellor arose from his thinking that it was necessary to prove an actual intention to delay creditors, where the facts are such as to shew that the necessary consequence of what was done was to delay them. If we had to decide the question of actual intention, probably we might conclude that the settlor, when he made settlement, was not thinking about his creditors at all, but was only thinking of the lady whom he wished to benefit; and that his whole mind being given up to considerations of generosity and kindness towards her, he forgot that his creditors had higher claims upon him, and he provided for her without providing for them. It makes no difference that Messrs. Gurney, the bankers, seem to have been willing to forego the immediate payment of their debt; the question is, whether they could not within a month or less after the execution of the settlement, if they had been so minded, have called in the debt and overturned the settlement? Beyond all doubt they could, on the ground that it did not leave sufficient property to pay their debt; and this being so, we are not to speculate about what was actually passing in his mind. I am quite willing to believe that he had no deliberate intention of depriving his creditors of a fund to which they were entitled, but he did an act which, in point of fact, withdrew that fund from them, and dealt with it by way of bounty. That being

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so, I come to the conclusion that the decree of the learned Vice-Chancellor is right. Then as to the costs. I think that the expense of separating them would come to more than the mere costs of administration. It was urged that this is an administration suit as well as a suit to set aside the deed, and that, therefore, the respondent ought not to have all the costs; but the costs of an administration summons would be trifling, and the costs of the suit are in reality those which have been incurred by the question as to the validity of the deed. The appeal must, therefore, be dismissed with costs. SIR G. M. GIFFARD, L. J.: In this case I quite agree with the Vice-Chancellor in thinking that if the propositions laid down in Spirett v. Willows are taken as abstract propositions, they go too far and beyond what the law is; but if they are taken in connection with the facts of that case, then undoubtedly there is abundantly enough to support the decision, for there was a voluntary settlement by a man who, at its date, was solvent, but immediately afterwards realised the rest of his property and denuded himself of everything. Of course the irresistible conclusion from that was, that the voluntary settlement was intended to defeat the subsequent creditors. That being so, I do not think that the Vice-Chancellor need have felt any difficulty about the case of Spirett v. Willows, but he seems to have considered, that in order to defeat a voluntary settlement there must be proof of an actual and express intent to defeat creditors. That, however, is not so. There is one class of cases, no doubt, in which an actual and express intent is necessary to be proved- that is, in such cases as Holmes v. Penney and Lloyd v. Attwood, where the instruments sought to be set aside were founded on valuable consideration; but where the settlement is voluntary, then the intent may be inferred in a variety of ways. For instance, if after deducting the property which is the subject of the voluntary settlement, sufficient available assets are not left of the payment of the settlor's debts, then the law infers intent, and it would be the duty of a Judge, in leaving the case to the jury, to tell the jury that they must presume that that was the intent. Again, if at the date of the settlement the person making the settlement was not in a position actually to pay his creditors, the law would infer that he intended, by making the voluntary settlement, to defeat and delay them. Now in this case, at the date of the settlement, Mr. Custance was really insolvent; and if at the date of the settlement the bankers had insisted on payment, and had issued execution, they could not have got a present payment unless they had resorted to that particular policy. That being so, it seems to me that the facts of this case bring the matter entirely within all the decided cases, and it is enough to say that at the date of this settlement Mr. Custance was not in a position to make any voluntary settlement whatever. That being so, the appeal must be dismissed, and dismissed with costs, as I can see no reason for saying that the decree was not right in giving the whole costs of the suit. There was, previously to this case, a decision by Vice-Chancellor Kindersley (Jenkyns v. Vaughan), laying down the rule that where a subsequent creditor institutes a suit and proves the existence of a debt antecedent to the settlement, he can maintain a suit such as this, and therefore it is not a new case. There can be no reason for doubting the correctness of that decision, either in point of principle or justice.

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EX PARTE MERCER Divisional Court and Court of Appeal, England. 1886. 17 Q.B.D. 290 Appeal from an order of the Judge of the Croydon County Court, by which it was declared that a postnuptial settlement executed by H. J. J. Wise, a bankrupt, was fraudulent and void as against the trustee in the bankruptcy, and the trustee of the settlement was ordered to deliver it up to be cancelled. The bankrupt was a master mariner. In the year 1881 he was engaged to be married to Miss Emily Agnes Vyse, but, being at Hong Kong in the course of a voyage, he, on the 31st of May, 1881, married another lady. On the 25th of August, 1881, Miss Vyse commenced an action for breach of promise against him in the Queen's Bench Division, and on the 8th of October, 1881, he was served with the writ at Hong Kong. He was under the will of his stepfather entitled to a legacy of £500, subject to a life interest given to his mother. His mother died on the 11th of May, 1881, and thereupon the legacy vested in the bankrupt in possession. The money was in the hands of W. P. Brown, the executor of the will. On the 17th of October, 1881, the bankrupt executed at Hong Kong, where he then was, a voluntary settlement of this legacy, whereby he assigned the legacy to Brown, on trust to invest the same, and to pay the income thereof, during the joint lives of Wise and his wife, to the wife for her separate use without power of anticipation, and, after the death of such one of Wise and his wife as should first die, to pay the income to the survivor during his or her life, and after the death of the survivor, Brown was to stand possessed of the trust fund in trust for the children of the marriage as therein mentioned, and, in default of children, in trust for Wise absolutely. On the 20th of July, 1882, Miss Vyse obtained judgment in the breach of promise action for £500 damages and costs. On the 14th of November, 1884, Wise was adjudicated a bankrupt. The bankrupt made an affidavit in the county court, in which he stated that at the time of the execution of the settlement he was perfectly solvent and able to pay his debts without the aid of the property comprised in the settlement. After the order had been made by the county court judge, the bankrupt made a further affidavit, and an affidavit was made by Brown, and these affidavits were used on the hearing of the appeal by the Divisional Court. The bankrupt in his further affidavit said that he was not aware that he was entitled to the legacy until he received at Hong Kong between the 12th and 16th of October, 1881, a letter from Brown informing him of it. When he married he was not aware that he had any property to settle. Immediately he received notice of the legacy being due to him, he instructed some solicitors at Hong Kong to prepare the settlement. He said that the writ which had been served on him in the breach of promise action had no influence in inducing him to make the settlement, as he considered the writ was merely a threat, and that he should hear nothing more about the action. When he received the intimation of the legacy he told his wife that he should settle it on her, as it was the only money she would have in case of his death. She did not suggest to, or request, or influence him in any way in making the settlement, but it was made solely as a provision for his wife or any children they might have in case of his death, and, had he known before his marriage that he was entitled to the legacy, he should certainly have settled it before his marriage. He was not cross-examined on this affidavit. Mrs. Wise and Brown appealed from the order of the county court to the Divisional Court. CAVE, J. : The question we have to decide is one of fact, whether this settle-

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ment was made with intent to defeat or delay creditors. Many cases have been cited, but they are not of much assistance in deciding a question of this kind. They shew the considerations which have presented themselves to the minds of other judges under different circumstances, and, no doubt, we ought to have regard to all those considerations. But beyond that the cases do not go. There is no case which lays down that, when it is not the necessary consequence of a settlement that creditors should be defrauded, the Court is obliged to come to the conclusion that the settlor intended to defraud them where it is satisfied that he did not. Looking at the facts which are established by the affidavits, it appears to me reasonably clear that the bankrupt had no intention whatever of defrauding his creditors, and that he had not got Miss Vyse and her claim in his mind when he made the settlement. When the case was before the county court judge there was only a very short affidavit made by the bankrupt, which was directed to the question which arose under the Bankruptcy Act, and I am not surprised that upon the facts before him the learned judge came to the conclusion that the settlement was void. Upon those facts alone I should have come to the same conclusion. [His Lordship referred to the provisions of the settlement, and continued] Reading those provisions it seems impossible to come to the conclusion that the bankrupt really made the settlement for the purpose and with the intent of defeatinig or delaying his creditors. The terms of it seem to corroborate very strongly his statement that he did it honestly, without a thought of Miss Vyse and her claim, for the purpose of settling something upon his wife and family, and that, had he known of the legacy before his marriage, he would have made the settlement then. It is said, however, that, although we may be of opinion that the bankrupt was acting perfectly bona fide, and that he had not the slightest intention of defeating or delaying his creditors, yet, if it is the necessary result of what took place that his creditors will be defeated or delayed, we are bound to hold that he had that intention though, in fact, we do not believe that he had. In most of the cases which have been cited the settlor was a trader, and undoubtedly when a trader makes a settlement, more especially if he does so when he is just about to commence a course of trade which may turn out to be disastrous, it is difficult to come to any other conclusion than that he contemplates the possibility of his trade being unfortunate, and wishes to put his property out of the reach of his creditors. In the present case, however, it does not seem to be at all a necessary result of the settlement that his creditors would be defeated. It is true that during the life of the wife the money could not be got hold of by his creditors. But if she died young, there would be the income of the fund which his creditors could get hold of. If she died without children the whole property would be absolutely his, and would come to his creditors. Looking at all these circumstances, I cannot say that there was any such necessary defeating or delaying of the creditors as would justify, or rather compel, us to hold that this was a fraudulent settlement within the statute of Elizabeth. It must be remembered that the settlor had no creditor whatever at the time when the settlement was made. He had no debt. There was merely a liability which might or might not result in a debt. I do not think that the decisions which have been referred to have ever been held to apply where there is nothing more than a liability of this nature. The bankrupt was not a trader, and he was not likely therefore to incur debts in the future. I do not think it has ever been held that the Court must necessarily come to the conclusion that there was an intent to

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defeat and delay creditors in executing a settlement of property under such circumstances. There is another point which was not dealt with by the county court judge, though it was taken before him, viz., that, if the settlement is not void under the statute of Eliz., it is void under s. 47 of the Bankruptcy Act. I think, however, that the parties claiming under the settlement have proved that the settlor was at the time of making the settlement able to pay all his debts without the aid of the property comprised in it. The bankrupt himself in terms swears that he had no debts then, and this is confirmed by the statement of his debts and liabilities which he has made in the bankruptcy. His bona fides is also shewn by his conduct after the execution of the settlement. He sailed for England immediately afterwards, and arrived there in November. He did not keep the settlement secret, to be sprung upon his creditors only in case of an unfavourable verdict against him in the action; but, on the 29th of November, without anything having taken place in consequence of the service of the writ, he told Brown of the settlement. To my mind this is a proof of his bona fides, and that his real intention was to make the settlement for the benefit of his wife and children, and not for the purpose of defeating or delaying his creditors. All the other circumstances seem to point in the same direction. The person chosen as trustee of the settlement was the executor of his stepfather's will. The trustee was allowed, if he thought fit, to keep the property in its then existing state of investment; there was no attempt to secret it, and there was nothing to prevent any one who was aware of the existence of the will from at once discovering where the property was and how it was invested. For these reasons I think that the trustee in the bankruptcy ought not to succeed in his application, and consequently, the motion must be dismissed, although had the evidence stood as it was before the county court judge I should certainly have come to the opposite conclusion. [The concurring judgment of GRANTHAM J. is omitted]. The trustee in the bankruptcy appealed. LORD EsHER, M. R.: I think the decision of the Divisional Court was right. The argument was first put in this way - it is necessary to prove that the bankrupt, at the date of the voluntary settlement, intended to defeat and delay a creditor or his creditors generally; the necessary consequence of what he did was to defeat and delay his creditors; and, therefore, as a proposition of law, the tribunal which had to consider whether he did intend to defeat and delay his creditors was bound to find that he did. In support of that proposition dicta of great and eminent judges were cited. I will venture to say as strongly as I can that to my mind that proposition is monstrous. It is said that it is a necessary inference that a man intends the natural and necessary result of his acts. If you want to find out the intention in a man's mind, of course you cannot look into his mind, but, if circumstances are proved from which you believe that he had a particular intention, you infer as a matter of fact that he had that intention. No doubt, in coming to a particular conclusion as to the intention in a man's mind, you should take into account the necessary result of the acts which he has done. I do not use the words "necessary result" metaphysically, but in their ordinary business sense, and of course, if there was nothing to the contrary, you would come to the conclusion that the man did intend the necessary result of his acts. But, if other circumstances make you believe that the man did not intend to do that which you are asked to find that he did intend, to say that, because that was

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the necessary result of what he did, you must find, contrary to the other evidence, that he did actually intend to do it, is to ask one to find that to be a fact which one really believes to be untrue in fact. Whether the fact that the necessary effect of a voluntary deed is to defeat or delay the creditors of the grantor will make the deed void under the statute of Elizabeth, although there was no such intent in his mind at the time when he executed it, is a question which we are not now called upon to decide. But that is a question wholly independent of the question of intention. That may be the law; the Courts may have put that construction on the statute. But that is a different proposition from that which was put forward in argument, and I will not undertake to decide it now. It must be recollected that the statute of Elizabeth applies, and may make a deed void even though the grantor never becomes a bankrupt. But this case was at first argued, not upon the footing but upon the assumption that, if the natural or necessary effect of what the settlor did was to defeat or delay his creditors, the Court must find that he actually had that intent. That proposition or doctrine I entirely abjure. We must look at all the facts of this case. The bankrupt was a captain of a merchant ship, and there is no evidence whether his employment ceased at the end of every voyage or whether it was a constant employment. He had promised to marry Miss Vyse. Then he went to Hong Kong, and there married another lady, and so laid himself open to an action for breach of promise of marriage by Miss Vyse. That action having been brought, might, so far as any one could foretell, have resulted in a verdict either for ls. or for £500 damages; no one could tell what the result would be. Well, he married the lady in Hong Kong in May, and in October there came out to him, by the same post from England, the information that he had become entitled to a legacy of £500, and also the information that Miss Vyse had brought an action against him for breach of promise of marriage. This was the first time that he had had any intimation of the fact that he had any realized fortune, and he immediately settled the £500 upon his wife and children. Now, what was his position at that time? According to his evidence, which is not disputed, (for he has not been cross-examined on his affidavit), he did not owe a shilling in the world. There is no evidence that he had no money owing to him for wages, and in all probability he had, because, if his voyage did not terminate at Hong Kong ( and there is no evidence that it did), if he had got to take his ship home to England, in all probability his wages were not payable until the end of the voyage. If so, he would have means to that extent, and he did not owe a shilling. Now with regard to the action, how could any one - how could his legal adviser - have told him what the amount of the verdict was likely to be? If the verdict had been for £50, and he had had £50 coming to him at the end of his voyage, he would have been able to pay it, and on another occasion he would have been able to pay costs. It was entirely a matter of speculation what the amount of the verdict would be. Therefore he was not insolvent; it was not the necessary consequence of what he did to defeat or delay the plaintiff in the action, for, if the verdict had been for a small amount, she would not necessarily have been delayed for a week. In order to make this deed void under the Statute of Elizabeth (however far that statute may be stretched), we are bound in the present case to find that there was an actual intent in the bankrupt's mind to defeat or delay his creditors, and there is no evidence of such an intent. He has sworn that he was not thinking of his creditors. The only creditor, that it is suggested he had to think about,

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was Miss Vyse, and no one could tell what the verdict in her action would be. But what happened afterwards? It is obvious that, when the action came on for trial, evidence must have been given about this £500 legacy to which the defendant was entitled, and the jury took the vindictive view of the plaintiff, and gave her as damages the whole of the defendant's realized property. It was a startling verdict, which I certainly should not have anticipated, and I do not see why he was bound to anticipate it. When you have got those facts, and you are asked to conclude that the bankrupt actually intended to defeat Miss Vyse's claim, it seems to me that the Divisional Court were perfectly justified in declining to find that he had any such intent. Upon the facts, I cannot find that there was such an intent. The appeal must be dismissed. LINDLEY, L. J.: The evidence before the county court judge differed materially from that which was before the Divisional Court, and I am not surprised at the view which he took of the case. Unexplained, the circumstances had a very suspicious appearance. But the affidavits which have been filed since the hearing in the county court give a totally different complexion to the transaction, and it was upon those affidavits that the Divisional Court took the view contrary to that which had been taken by the county court judge. Now we have all the facts before us, and we must apply the law to those facts. There is a voluntary settlement made by a man who had not a farthing of debts, but against whom an action had been commenced for breach of promise of marriage. At the time when he made the settlement a sum of £500 had just accrued to him, and he settled it upon his wife and children. He tells us, and the Divisional Court believed him, and I also believe that he was speaking the truth, that he thought the action for breach of promise would come to nothing. At all events, the result of it was in the highest degree speculative; he was not then indebted to the plaintiff but she had made a claim against him which might or might not result in damages. We have, therefore, to deal with the case of an honest man, not in fact indebted at all, and the question is, whether we are driven ( not by the statute of Elizabeth, but by a series of decisions upon it) to say that the settlement cannot stand. I do not think we are. It is true that voluntary settlements have been set aside under the statute, as it has been construed for a great number of years, in cases in which there was no actual intention to defraud. It has been held to be sufficient if, when the settlement is executed, the circumstances are such that it must have that effect. But the language which has been used in a great many cases, that a man must in point of law be held to have intended the necessary consequences of his own acts, is apt to mislead, by confusing the boundary between law and fact, and by consequences which can be foreseen with those which cannot. But although I am not prepared to say that a voluntary settlement can never be set aside under the statute of Elizabeth, as it has been construed, unless there has been in fact an intention to defraud, I am not aware of any decision which goes the length of upsetting the present deed under the circumstance with which we have to deal. In this case there was no intention to defeat the plaintiff, and, when the settlement was executed, the probability of the plaintiff obtaining substantial damages was very slight. The case is certainly not within the language of the statute. I have no doubt that the view taken by the Divisional Court was right. I should add that I have looked at s. 47 of the Bankruptcy Act, 1883, and it is quite clear that it does not apply. LOPES, L. J.: We need not consider the law so far as it applies to the facts of the present case. It has been argued that, if the necessary effect of a voluntary settlement is to defeat or hinder creditors, the Court is bound to infer such an

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intent, whether it did or did not in fact exist. I will express no opinion upon that matter, because it is not necessary for the purpose of deciding the present case. It cannot, according to my view, be said that it was the necessary consequence of this voluntary settlement to defeat or hinder the settlor's creditors. The only suggested creditor is Miss Vyse. There are many reasons why it was not a necessary consequence of the settlement that her claim should be defeated. The action might have failed for various reasons; the plaintiff might not have been willing to pursue it; it might have resulted in a verdict for the defendant, or in a verdict for the plaintiff with very small damages. There are many other ways in which the action might have terminated, without its resulting in a verdict for £500. It seems to me, therefore, that it cannot be said that the necessary effect of the settlement was to defeat or hinder Miss Vyse. What, then, is the question in this case? The question which I should have left to the jury is this - Whether, having regard to all the circumstances, the settlor intended to defeat or hinder his creditors? That is a question of fact which can only be determined by the evidence. Before the county court judge there was only one affidavit, and he came to a conclusion at which I am not at all surprised. Before the Divisional Court there were several other affidavits, and they arrived at a different conclusion, with which I entirely agree. I adopt the words of Cave, J., when he says, "Looking at the facts which are established by the affidavits, it appears to me reasonably clear that the settlor had no intention whatever of defrauding his creditors, and that he had not got Miss Vyse and her claim in his mind when he made the settlement." I entirely agree with that conclusion, and I think the decision of the Divisional Court was right. ATLANTIC ACCEPTANCE CORPORATION LTD. v. DISTRIBUTORS ACCEPTANCE CORPORATION LTD. Ontario High Court, 1963. 38 D.L.R. (2d) 307. AcnoN by a creditor of a bankrupt to recover money paid by cheques to another as being fraudulent conveyances. PARKER, J. : This is an action brought by a creditor, the assignee from the Trustee in Bankruptcy of the bankrupt estate of Sigma Acceptance Limited to set aside a conveyance under the Fraudulent Conveyances Act, R.S.O. 1960, c. 154. The plaintiff and the defendant are finance companies carrying on business in the City of Toronto. The plaintiff financed instalment contracts entered into by Sigma Acceptance Ltd. and was, as of the date of bankruptcy of Sigma Acceptance Ltd. on January 7, 1961, the major creditor of the bankrupt. When the receiving order was made no assets were found and the Trustee was unable to locate the officers of the company. The plaintiff commenced dealing with Sigma Acceptance Ltd. on November 9, 1959, when it purchased conditional sale agreements and notes of Ford Home Improvements (Eastern) Limited and Mercury Aluminum. These two companies were controlled by Harold Sapers and Mitchell Sapers, the same persons who controlled Sigma Acceptance Ltd. Promissory notes would be signed by the customers of Ford Home Improvements (Eastern) Ltd. or by the customers of Mercury Aluminum which companies were usually the payees of the notes. These notes were then endorsed by the payee to Sigma Acceptance Ltd. Notes payable to Ford Home Improvements (Eastern) Ltd. were guaranteed by Mercury Aluminum and notes payable to Mercury Aluminum were guaranteed

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by Ford Home Improvements (Eastern) Ltd. Sigma Acceptance Ltd. then endorsed the notes to the plaintiff under what is known as "block plan transaction". In all the plaintiff brought fifteen blocks of notes from Sigma Acceptance Ltd. and gave fifteen cheques in payment. Customers made payment on the notes to Sigma Acceptance Ltd. which, in turn, paid the plaintiff on a monthly basis. When payments due to the plaintiff fell into arrears, and the plaintiff was unable to effect collection a claim was filed in bankruptcy. The plaintiff then made an investigation into Sigma Acceptance Ltd. 's affairs and found a series of cheques totalling $16,219.36, which had been paid to the defendant, although Sigma Acceptance Ltd. at no time had ever been indebted to the defendant. This action was then commenced by the plaintiff on behalf of itself and other creditors as assignee from the Trustee in Bankruptcy. The plaintiff alleges that the cheques issued by Sigma Acceptance Ltd. to the defendant were issued at a time when Sigma Acceptance Ltd. was in insolvent circumstances and was substantially indebted to the plaintiff; that the cheques were issued and paid to the defendant without consideration and constituted a conveyance of personal property made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions and as such were void as against the plaintiff as creditor. The defendant admits that it received the cheques in question from Sigma Acceptance Ltd. in payment of certain indebtedness of Ford Home Improvements (Eastern) Ltd. to the defendant and admits that at no time was it a creditor of Sigma Acceptance Ltd. The defendant denies that at the time of making these payments Sigma Acceptance Ltd. was in insolvent circumstances, but says that if it was, such facts were not known to the defendant at the time of the making of such payments. The defendant company had entered into an agreement with Ford Home Improvements (Eastern) Ltd. to purchase conditional sale agreements and notes. Payment of the Ford Home Improvements (Eastern) Ltd. notes was guaranteed by Mercury Aluminum, Harold Sapers and Mitchell Sapers and payment was to be direct from the customers to the defendant. Notification was given by the defendant in each case to the customers to make payment to the defendant. By the end of September, 1960 the Ford account was falling into arrears. By November the defendant learned that Ford was collecting direct from the customers. On December 5, 1960 a letter was sent by the defendant to Mr. Harold Sapers demanding that he stop collecting on accounts which had been assigned to the defendant. Mrs. Jackson, manager of the defendant company, stated that following this she telephoned Mr. Sapers and advised him that he had to make good on the money he had improperly collected. She further told him that unless payment was made at once she would contact his customers. As a result of this conversation he gave her a series of cheques from Sigma Acceptance Ltd. The defendant had had no previous dealings with this company. The total cheques received amounted to $16,219.36. This money was applied generally on the arrears of Ford Home Improvements (Eastern) Ltd. At the time the cheques were paid Mr. Sapers advised Mrs. Jackson that the Mercantile Bank was putting pressure on him and would not clear his cheques so it would be necessary for him to give her cheques from another bank. It would therefore appear that at the time she received the cheques she knew that Ford Home Improvements (Eastern) Ltd. was not in good financial condition. She also knew that Mr. Sapers was selling notes of Ford Home Improvements (Eastern) Ltd. in blocks to Atlantic Acceptance Corp. Evidence was given that other creditors were unpaid and were pressing Sigma Acceptance Ltd. for payment. I therefore find that the time the cheques were given to the defendant, Sigma

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Acceptance Ltd. was in insolvent circumstances, unable to pay its creditors and substantially indebted to the plaintiff. The Fraudulent Conveyances Act, s. 2 provides as follows: "2. Every conveyance of real property or personal property and every bond, suit, judgment and execution heretofore or hereafter made with intent to defeat, hinder, delay or defraud creditors or others of their just and lawful actions, suits, debts, accounts, damages, penalties or forfeitures are void as against such persons and their assigns." It is agreed by the parties that the payment by cheques, as herein, was a conveyance within the meaning of the Fraudulent Conveyances Act, I find as a fact that the transfer of the cheques was not pursuant to any arrangement but was because of pressure for payment applied on Mr. Sapers. The transfer was therefore a voluntary conveyance without consideration. That being so, I am only concerned with the intent of the grantor: Oliver v. McLaughlin et ux. (1893 ), 24 O.R. 41. Where there is a voluntary conveyance, if the result of the transaction is to defeat the rights of the creditor, then there is an assumption that it was a conveyance to defeat the creditors. In Freeman v. Pope (1870) , LR. 5 Ch. 538, Lord Chancellor Hatherley said at p. 540 : ". . . if the necessary effect of the instrument was to defeat, hinder, or delay the creditors, that necessary effect was to be considered as evidencing an intention to do so." This principle was followed and approved in the Supreme Court of Canada in Sun Life Ass'ce Co. of Can. v. Elliott (1900), 31 S.C.R. 91. Mr. Justice Sedgewick said at pp. 94-5: " ... where at any time a person is solvent and then makes a voluntary conveyance the effect of which is to make him insolvent, the settlement is void, and that too, no matter what the intent of the settlor was." At the time the cheques were given by Mr. Sapers to the defendant, Sigma Acceptance Ltd. was indebted to the plaintiff in an amount over $5,000. The whole of the indebtedness to the plaintiff was something over $146,000. The officers of Sigma Acceptance Ltd. must have been aware of this obligation. From the evidence it is apparent that the transfer of $16,000 had the effect of defeating and delaying creditors to that extent. If the immediate effect of the transaction is to withdraw assets that are immediately available so that they are placed beyond the reach of creditors, this is a delaying within the meaning of the statute. The only implication from the facts in this case is that the settlor intended to defeat, hinder, delay or defraud creditors. There will be judgment declaring that the transfer of $16,219.36 from Sigma Acceptance Ltd. to the defendant is null and void as against the plaintiff and other creditors of Sigma Acceptance Ltd. Such transfer is as against such creditors set aside. There will be a further declaration that the said sum of $16,219.36 is the property of Sigma Acceptance Ltd. and is held by the defendant as a Trustee for the creditors of Sigma Acceptance Ltd. There will be a direction that the defendant pay the sum of $16,219.36 into Court within one month, and that in default of such payment into Court, the plaintiff will be at liberty to issue execution to enforce payment of the said amount and the costs incidental to such execution. The plaintiff will have costs of the action against the defendant. The moneys, if and when paid into Court, will be subject to such application as the plaintiff may find necessary for the purpose of having it paid out for the plaintiff's costs and for distribution amongst the creditors of Sigma Acceptance Ltd. There will be a reference to the Master to find, determine and report who are

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the creditors of Sigma Acceptance Ltd. and the amount of their respective claims. Costs of the reference and further directions are reserved. IN RE LANE-FOX Queen's Bench Division, England. 1900. 2 Q.B. 508. This was an application by the trustee in bankruptcy and raised the question whether a voluntary settlement, executed by the bankrupt in the year 1891, was fraudulent and void under the statute 13 Eliz. c. 5, under these circumstances. Miss Lane-Fox was left an orphan in 1870, and was brought up by her guardian, the Rev. R. W. Cracroft. She attained her majority on January 25, 1891, and thereupon became absolutely entitled under certain settlements to about £15,000. Five days afterwards, under the advice of her guardian, she executed a voluntary settlement of all her property. The deed was dated January 30, 1891, and was made between Miss L. E. Lane-Fox of the one part, and the Rev. R. W. Cracroft and the Rev. C. H. Fairfax of the other part, and thereby, after reciting that Miss Lane-Fox was desirous of settling her property in the manner thereinafter expressed, and that Cracroft and Fairfax had at her request agreed to be the trustees of the intended settlement, it was witnessed that Miss Lane-Fox as beneficial owner conveyed to Cracroft and Fairfax all her property in the manner thereinafter expressed, and that Cracroft and Fairfax had at her request agreed to be the trustees of the intended settlement, it was witnessed that Miss Lane-Fox as beneficial owner conveyed to Cracroft and Fairfax all her property as scheduled, upon trust to invest; and in the first place, out of any moneys whether by way of capital or income coming to their hands, to pay to Miss Lane-Fox the sum of £500, and also out of such moneys whether capital or income to pay such of the debts, if any, of Miss Lane-Fox as were then or might at any time thereafter be due by her as they in their absolute discretion might think fit; and, further, during the life of Miss Lane-Fox, in their or his absolute and irresponsible discretion, to pay and apply the whole or any part or parts of the income of the trust premises and of the investments representing the same as and when the same income should be received, and without anticipation, to or for the benefit of Miss Lane-Fox for her life, or for the benefit of Miss Lane-Fox or any husband or children as forming part of the capital moneys thereby settled, but with power nevertheless at any time or times, at the discretion of the trustees or trustee, to resort to any such investments as last aforesaid, and apply the same or any part thereof to or towards any of the objects and purposes of the last preceding trust; and from and after the death of Miss Lane-Fox to stand possessed of the trust premises and of the income thereof in trust for her children as she should by deed or will appoint; and in default of such appointment upon usual trusts for her children at twenty-one or marriage; and in default of children upon trust for such person or persons as she should by deed or will appoint; and in default of such appointment upon trust for her statutory next of kin; and it was thereby provided that it should be lawful for Miss Lane-Fox at any time or times thereafter with the consent of the trustees or trustee for the time being to revoke all or any of the trusts declared by the settlement of and concerning the trust funds, or any part thereof, and to declare any new or other trusts of or concerning the same, and that the trustees

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might give or withhold their or his consent to any such revocation and new appointment as aforesaid at their absolute discretion, and without being answerable for the exercise of such discretion. In 1892 and in 1897 Miss Lane-Fox with the consent of her trustees executed partial revocations of the settlement, and trust funds to about £7,000 were sold out by the trustees and applied in payment of debts. In 1899 Miss Lane-Fox was again in debt to the amount of about £730, but the trustees refused to concur in any further revocation of the settlement, or to apply any portion of the income in payment of these debts. Thereupon, in February, 1900, Miss Lane-Fox was adjudicated bankrupt on her own petition, having no assets whatever other than the property comprised in the settlement. A Mr. Gimblett became the trustee in her bankruptcy, and now moved the Court for a declaration that the settlement was void under s. 4 7 of the Bankruptcy Act, 1883. It appeared, however, from the evidence, that the few debts the bankrupt had at the date of the settlement were paid at the time out of cash retained for the purpose and not included in the settlement, and thereupon the motion was by leave of the Court treated as an application under the statute 13 Eliz. c. 5 . .. . WRIGHT, J.: This is a somewhat remarkable case. The trustee in the bankruptcy of Miss Lane-Fox seeks to have it declared that as against him a settlement which she made upon trusts for her own benefit in 1891 is to be treated as void. One of the curious circumstances of the case is that the bankruptcy is a bankruptcy upon the petition of the lady herself, and her object in making herself bankrupt was to get rid of this settlement, for what reason I need not inquire, whether it is her dislike to her trustees, or her desire to pay her debts, or to get control of her money; but the question is, whether this settlement ought to be treated as void or voidable against the trustee. He based his case in the first instance on s. 47 of the Bankruptcy Act, 1883, which, however, turned out to have no application whatever, because at the time the settlement was made the lady had in point of fact enough money to pay her debts without the aid of the property comprised in the settlement, and the settlement was more than two years old. Then by leave of the Court the application has been turned into one that the settlement is to be treated as void under the statute of Elizabeth, or the common law which that statute re-stated. I seems to me that the law on the subject is this - that in a case like the present one, where there are no existing creditors at the date of the settlement for whom sufficient provision did not remain outside the settlement, it is necessary in order to avoid the settlement to shew that there was an actual intention to defeat, delay, or hinder future creditors. I think that the law is, perhaps, best laid down in the judgment of Lord Westbury, a great authority in these matters, in the case of Spirett v. Willows, where he lays down two propositions, the first of which has been questioned by Lord Hatherley in Freeman v. Pope as being too wide, but the other has not been questioned, so far as I am aware. The first proposition, which has been deemed to be too wide, is this - I am reading from the Law Journal: "If the debt of the creditor by whom the voluntary settlement is impeached existed at the date of the settlement, and it is shewn that the remedy of the creditors is defeated or delayed by the existence of the settlement, it is immaterial whether the debtor was or was not solvent after making the settlement." That has been thought too wide. It does not apply here, because the creditors here were not creditors at the date of the settlement. But then comes this passage : "But if a voluntary settlement or deed of gift is impeached by subsequent creditors whose debts had not been contracted at the date of the settlement, then it is necessary to shew either that the settlor made the settlement with the

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express intent 'to delay, hinder, or defraud' creditors, or that after the settlement the settlor had no sufficient means or reasonable expectation of being able to pay his then existing debts, that is to say, was reduced to a state of insolvency, in which case the law infers that the settlement was made with the intent 'to delay, hinder, or defraud' creditors, and is therefore fraudulent and void." I think no decision can be found anywhere inconsistent with the proposition that an honest settlement, affirmatively proved to be honest, ought not to be set aside merely because some years afterwards it is proved to have the effect of defeating and delaying subsequent creditors. Here the case was one of an inexperienced and probably impulsive young woman, just come to age, possessed of considerable means- some £15,000, I think-which through one accident or another had come into her control without being under the protection of any settlement or of any trustee. Under those circumstances her friends and relations most properly, most wisely, and most prudently consented, that the money should be put into a kind of settlement. Everything was open, everything was in the ordinary form, and in perfect good faith, and to my mind it is affirmatively proved that this was a perfectly honest arrangement, and it is proved before me that there were no debts at the time beyond the amount of the moneys which were in hand to meet them. I think it would be outrageous if a settlement of such a description were to be set aside because afterwards the lady turns out to have become more extravagant than was supposed. Not merely were there no existing debts unprovided for at the time, but there was no reason to apprehend any future embarrassment. The income which she would derive under the settlement would be sufficient for all the probable expenses of a young girl of that class, and who might be supposed to be unlikely to want - only throw away her means. She had no intention of trading, nor is there any circumstance to shew that she is within one or other of the very few exceptions which have been established under the general rule as laid down in such cases as Spirett v. Willows and Freeman v. Pope. I think all the cases that have been cited are consistent with what I have said, but perhaps the language of the Court of Appeal in the case of In re Wise is as strong as any. To the same effect was Kindersley, V.-C.'s judgment as far back as the case of Jenkyn v. Vaughan, and I think there are many other similar cases. To my mind the application of the trustee in bankruptcy fails, but it is a case in which I cannot say that he was wrong to investigate the matter. If he had made his application in proper form I do not think he ought to have been made to pay any costs; but here he based his application upon s. 47 of the Act of 1883, and he has no evidence to sustain his case under that section, and I think, as he obtained leave to amend only on terms as to costs remaining in my discretion, he ought to pay the costs of this application; but nothing that I have said will affect any question being raised hereafter as to the £500. MACKAY v. DOUGLAS Court of Chancery, England. 1872. L.R. 14 Eq. 106.

SIR R. MALINS, V.C. : This case raises as important a question, probably, on this branch of the law as has ever been brought before the Court. The circumstances are very simple. Mr. Douglas had been for some years a clerk in various mercantile houses, and in the autumn of 1863 was a clerk to a firm carrying on business in London, Liverpool, and Calcutta, under the names of William Grant & Co. , James Smith & Co., and Grant, Smith, & Co. His salary,

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which was for some time £200 a year, had latterly been raised to £500. In the latter part of the year 1863 his employers were engaged on a very large scale in speculations in jute, which is an article subject to very considerable variations in price. These speculations, which I think were of a reckless and unjustifiable character, were to some extent carried on by the aid of Mr. Douglas, and it is not attempted to be denied that he was to some extent interested in the result of them. The Plaintiffs say that he was interested jointly as a partner, and certainly there is a passage in Mr. Smith's evidence which seems to sustain that view. But, though I do not intend to rest my conclusion on any such grounds, it is not unimportant to observe that for several months before the settlement in question was made he was certainly, either on his own account or on account of the firm whose servant he was, engaged in these reckless speculations in jute .. . [w]hile he was carrying on the negotiation for the partnership, on the 19th of January, he saw his solicitor, and talked of making, but did not give him positive instructions to make, a settlement of the leasehold house, which was worth from £1500 to £1800. On the 12th of February, 1864, he gave final instructions to his solicitor to prepare a voluntary settlement of that property, and in pursuance of the instructions the settlement was prepared and duly executed on the 24th of February, 1864. Now the trusts of that settlement were for Mrs. Douglas for her life to her separate use in the usual way, with remainder to himself if he should survive her for life, or until he should become bankrupt or insolvent. Then there were the usual trusts for children, and in default of children, to himself absolutely. . . . Can a man who contemplates trade, or who, in point of fact, whether he contemplates it at the time or very shortly afterwards, enters into trade, and thereby incurs liabilities which end in a disastrous state of affairs, make a voluntary settlement which shall be good against the creditors who become so in the course of his trade? I am not aware of any case upon the exact point, and none was cited, although almost all the cases which have occurred upon the subject were mentioned. But is the Statute of Elizabeth so very short in its effect that it will not cover a case where a man on the very eve of entering into trade takes the bulk of his property and puts it into a voluntary settlement and becomes insolvent a few months afterwards? Is it to be said that such a settlement cannot be reached by any principle of law? I think not. . . . Many cases have been cited. It is not at all necessary to shew that a man had any fraudulent intent in making a settlement as the law is now settled. It is very true that some of the old authorities cited by Mr. Fischer, particularly Stileman v. Ashdown, and many of the decisions long after that, proceeded upon the assumption that the settlement could not be set aside unless there was an intention to defraud, because the words of the statute are, "with intent to defraud, defeat, or delay creditors." But that has been long got rid of, and it is not necessary now to shew that. The statute speaks of cases where the creditors "are, shall, or might be in any wise disturbed, hindered, delayed, or defrauded," and it is not necessary to shew an intention to do that, because if the settlement must have that effect the Court presumes the intention and will attribute it to the settlor. That is distinctly laid down by the present Lord Chancellor, on appeal from Vice-Chancellor James, in Freeman v. Pope. I acted upon that principle in Crossley v. Elworthy, where I expressly gave Mr. Elworthy the benefit of my opinion, that he did not intend to commit a fraud, but as the settlement had the effect of defeating or delaying his creditors I attributed the fraudulent intention to him within the meaning of the statute, and set the settlement aside. So I

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dare say that Mr. Douglas had no fraudulent intention, according to his view, in making the settlement, and that he thought it a prudent thing to protect his wife and children. But in doing that he has, within the meaning of this statute, committed a fraudulent act, because, going into trade, he was taking away the only property which would be available for his creditors.... I therefore hold that the settlement of the 24th of February, 1864, was absolutely null and void against the creditors within the meaning of the Statute of Elizabeth, and consequently that when Mr. Douglas executed the deed by which he vested all his property either at law or in equity in the inspectors or trustees, this property vested in them as being his, just as much as if the settlement of the 24th of February had never been executed. McGUIRE v. OTTAWA WINE VAULTS Supreme Court of Canada. 1913. 27 O.L.R. 319; 48 S.C.R. 44. In August, 1908, M. and his brother bought a hotel business in Ottawa for $8,000, paying $6,000 down and securing the balance by notes which were afterwards retired. In November 1908, M. conveyed a hotel property in Madoc to his wife subject to a mortgage which she assumed. M. and his brother carried on the Ottawa business until March, 1910, when they assigned for benefit of creditors who brought suit to set aside the conveyance to M.'s wife. On the trial it was shewn that for some time before November, 1908, M.'s wife had been urging him to transfer to her the Madoc property, which she had helped him to acquire, as a provision for herself and their children; that she had joined in a conveyance of a property in Toronto in which they both believed she had a right of dower, and the proceeds of the sale of which were applied in the purchase of the Ottawa business; and that all of M.'s liabilities at the time of said conveyance had been discharged. M. ascribed his failure in Ottawa to the action of the License Commissioners in compelling him to move his bar to the rear of the premises whereby his receipts fell off and he lost rents that he had theretofore received, and had to make expensive alterations; and to a fire on the premises early in 1910. The trial judge set aside the conveyance to M.'s wife; his judgment was reversed by a Divisional Court (24 Ont. L.R. 591), but restored by the Court of Appeal. FITZPATRICK, C. J. C.: I am of opinion that this appeal should be dismissed with costs. DAVIES, J. (dissenting): This is an appeal from a judgment of the Court of Appeal for Ontario reversing the judgment of the Divisional Court (Chief Justice Falconbridge dissenting), and restoring the judgment of the trial judge, Chief Justice Mulock, setting aside a conveyance made by the appellant, John L. McGuire, to his wife of the former's equity in a hotel property in the Village of Madoc, on the ground that such conveyance was fraudulent and void as against the grantor's creditors under the statute 13 Elizabeth. The debts due the creditors of McGuire at the time of the execution of the impeached conveyance, outside of the mortgage debt secured upon the property conveyed, were contracted some time subsequent to the conveyance. Only two creditors gave evidence respecting the debts due them and it shewed that their debts were contracted long after the impeached settlement was made. There was no evidence that any of McGuire's debts which were due at the date of the settlement remained unpaid at the date of the insolvent's assignment. The mortgage debt was one secured upon property much more than sufficient

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to pay it and may, therefore, for the purposes of this action, be disregarded. Jenkyn v. Vaughan, in 1856. It may be conceded as established by the cases that the statute extends to subsequent creditors. They have the same right to set aside an alienation made with intent to delay, hinder or defraud them, as creditors whose debts were due at the date of the alienation, but they have a more difficult task in proving a fraudulent intent on the part of the grantor in the case of a voluntary settlement. In such case they must prove either an express intent to delay, hinder or defraud creditors or that after the settlement the grantor had not sufficient means or reasonable expectation of being able to pay his then existing debts. 15 Halsbury's Laws of England, page 88 para. 180. The cases there cited I think support that proposition. The courts below have all found that the impeached settlement was a voluntary one and I shall deal with the case on that finding, though I am bound to say I should have some difficulty in reaching it on the evidence. There is no pretence for saying that any fraudulent intent under the statute was proved and the single question left was whether the grantor after the settlement was left without sufficient means or reasonable expectations of being able to pay his then existing debts and so that a fraudulent intent might be inferred. As to the financial condition of McGuire at the time he made the settlement, I think the statement embodied by Riddell, J., in his judgment a fair and proper one. It omits the Madoc property, the settlement of which is in question, and the mortgage upon it, and subject to which the property was conveyed to Mrs. McGuire, and aside from that shews McGuire to have been left with assets of the value of $14,180 and liabilities amounting to $3,947. Amongst the assets was included $8,500 which he had paid for the Ottawa business and chattels, including the "good will." I agree that looking at McGuire's financial position from a business standpoint there is no reason in the world why its value should not be taken into consideration. But when you are considering that financial position with respect to a settlement made by the man upon his wife of part of his property, and determining the "intent" with which it was made, to omit the value of such good will from your consideration would be, to my mind, most unfair. The learned trial judge in his statement of McGuire's financial condition at the time of the making of the settlement, including the Madoc property in the assets and the mortgage secured upon it in the liabilities, shewed the latter to have been $14,711, while the assets he estimated at $26,754. Deducting from these assets the $15,000 estimated value of the Madoc property, he reduced them to $11,754. But the learned Chief Justice, while deducting the whole value of the Madoc property from the assets, omitted at the same time to deduct the amount of the mortgage upon that property from the liabilities. This, I think, was a manifest mistake on his part as the mortgage debt of $3,250 being secured upon a property of the agreed value of $15,000, should in such a statement as was being prepared have been omitted from the liabilities. But in addition to that the learned judge omits any allowance for the good will of the Ottawa business and only allowed $1,134.23 for the chattel property in that business which was valued at $3,500. The reason assigned for this large reduction was that the $1,134.23 represented the actual cash, $571.23, which McGuire's estate received at a much later date when the insolvency took place as the result of a forced sale by the landlord of the chattels. The landlord when

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McGuire assigned had distrained under the terms of the lease upon the goods and chattels for three months' advance rent, and these $571.23 were the net proceeds of the sale. The balance of the $1,134 consisted of $563 received from the insurance company for a part of the property burnt in a fire which occurred before McGuire's assignment. But even with these reductions which I cannot accept as fair, there was added to the above assets of $11,754 (without the Madoc property), $4,634.23, namely, cash in bank, $1,500, stock on hand $2,000, and chattels property $1,134.23. Thus an apparent surplus of only $1,134.23 of assets over liabilities was shewn which, if the error I have pointed out of counting the mortgage debt as part of the liabilities while excluding the property on which it was secured from the assets, was corrected, would leave a surplus of $4,877.23. No allowance was made for the hotel license or the lease, or the good will of the business. The hotel license was valued in the consideration McGuire had paid at from $3,000 to $5,000. On the facts as he found them and formulated in this statement the learned Chief Justice drew the inference that the settlement was fraudulent and void under the statute. I have already stated why I accept Mr. Justice Riddell's statement of McGuire's financial position at the time he made the settlement as correct. It shewed McGuire to have had a very handsome surplus of assets over debts and quite justified the settlement he made upon his wife. His business in Ottawa had continued prosperous from the time he bought it and remained so for six or eight months afterwards. The firm's obligations seem to have been met with reasonable promptness as they matured and to McGuire the outlook was promising. There was no indication or anticipation by either defendant that the venture was likely to prove a failure. My conclusion is that McGuire was clearly solvent when he made the settlement. He made that settlement in consequence of a promise given by him to his wife when at his solicitation she joined with him in the conveyance of some property he owned in Toronto. He and she both thought she had a dower interest in that property. They may have been wrong in their belief, but from their evidence, both husband and wife believed she had. She thought she had a moral claim at any rate to the Madoc property as she had done as much if not more to build it up and make it what it was as her husband had done. He admitted that to be so. She was apparently living in Toronto with her two invalid daughters and the settlement seems to have been made when their home there was broken up and a very short time after she signed away whatever rights she had in the Toronto property. It was made at a time when, if the statement of his financial condition I accept is correct, he was undoubtedly entitled to make it. Even if the onus of proving that is cast upon him on the assumption of the settlement being a voluntary one, I think he has discharged it. What, then, if this story is true, brought about the insolvency? A perusal of the evidence satisfies me that it was brought about by causes which could not have been foreseen or anticipated when he made the impeached settlement. In the summer of 1909, McGuire Bros. were compelled by the License Commissioners to move their bar from the corner of Bank and Sparks Streets, a great thoroughfare, to the upper side of Bank Street. This change necessitated extensive alterations being made, claimed to have cost about $4,000. This, of course, was not and could not have been, anticipated in November, 1908. To make these necessary changes good paying tenants of theirs were dispossessed and their rentals lost. In the early part of 1910 the fire took place, causing further damage to their business and much Joss. McGuire states in his evidence that the

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direct loss in the receipts of the bar from the change compelled by the License Commissioners was 25 % . The rentals of the tenants they had to dispossess so as to make room for the new bar amounted to $110 per month, and McGuire says they were not able to get a tenant for the corner they vacated. Then the municipality brought into effect a by-law to reduce the number of licenses in the city and that made it impossible for them to sell out. Reverses began about June, 1909. They struggled from that date under the adverse circumstances I have above stated from the evidence, to meet their obligations until December. Then followed the plaintiff's suit and the assignment followed by the landlord's distress for three months' advance rent and the sale under the distress with its usual pitiful returns. In all of these facts as stated in evidence, I see nothing to justify the conclusion that the insolvency could have possibly been foreseen in November, 1908. The proper inference is that it was brought about by causes which could not have been reasonably foreseen at that time or for many months afterwards, and so forms an exception to the general rule respecting voluntary conveyances preceding insolvency. It was said that this case was governed by that of Mackay v. Douglas. I do not think so. The broad ground upon which that case was decided is stated by the Vice-Chancellor at page 122 to be that a man who contemplates going into trade can not on the eve of doing so take the bulk of his property out of the reach of those who may become his creditors in his trading operations. The facts of the two cases are not analogous. McGuire was not like a man "going into trade" for the first time when or immediately after he made the settlement. He appears to have been for the greater part of his life in the hotel business, and he did not, as I have shewn, take the bulk of his property out of the reach of his creditors. I think it is a case forming an exception to the principle laid down in Mackay v. Douglas, an exception explicitly stated by the same learned Justice Malins, V.-C., in Crossley v. Elworthy; at page 167. In the case of Re Butterworth, ex parte Russell in 1882, Jessel, M.R., says at page 598: "The principle of Mackay v. Douglas, and that line of cases, is this, that a man is not entitled to go into a hazardous business, and immediately before doing so settle all his property voluntarily, the object being this: "If I succeed in business I make a fortune for myself. If I fail, I leave my creditors unpaid. They will bear the loss." I think if that expresses the true principle it would be impossible to bring this case within it. The business he was entering into in Ottawa was the one he had been engaged in all his life. It was not a new business nor was it a hazardous one in the sense in which that word is used by Malins, V.-C., in Mackay v. Douglas, and by Jessel, M. R., in Re Butterworth. The settlement impeached did not embrace "all of his property" or indeed the larger part of it. It embraced practically that part of the property which the wife had herself in great part built up. It was made by a man who was not insolvent at the time he made it, but became so afterwards from accidents and causes which he neither did nor could have anticipated. It does seem to me to be rather the refinement of irony when the two chief creditors, the Wine Vault Company and the Capital Brewing Company, in order to defeat the claim of the wife and children to a portion of the property which the life's labours of the former largely created, unite to proclaim a business a "hazardous" one which they themselves exist upon and supply with the "sinews of war" to keep alive and on a commercial basis.

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I am of opinion that the appeal should be allowed and the judgment of the Divisional Court restored. IDINGTON, J.: I think this appeal should be dismissed with costs for the reasons assigned by the judgment of the learned trial judge, the dissenting judgment in the Divisional Court and the judgment in the Court of Appeal. Counsel for appellant quite properly points out that there is an oversight in the first of these in one set of figures necessarily taking into account the Madoc mortgage, and in the next set of calculations not making allowance therefor, but I apprehend the results of these figures did not affect the learned judge's conclusions at all. The broad features of the case he presents are a voluntary conveyance by a man three months after he had made a fatal mistake in a business venture and had some reason to see it was such as evidenced by his increasing liabilities, and his inability to explain better than he did how he became fifteen months later hopelessly insolvent. Making every allowance for his misfortunes hardly accounts for what happened, save that he had made such a mistake in so venturing. Licenses, good will and other such non-exigible assets must be put aside by any man hoping to shew solvency in cases of this kind. DUFF, J.: I think there is not sufficient ground for impeaching the finding of the learned trial judge that the conveyance was voluntary; but I do not agree that the circumstances justify the conclusion that the necessary effect of the conveyance was to defeat or delay existing creditors. The burden was consequently upon the plaintiffs at the outset to shew that the conveyance was made by the debtor with a view to protecting himself or his family against the consequences of failure in the business into which he had a short time before entered. I think the fact that a collapse did come within a few months after the execution of the conveyance was sufficient to shift the burden to the appellants of shewing that such was not the intent of the transaction. I do not think that burden has been discharged. ANGLIN, J.: It is clearly established, and has been found in the courts below, that the conveyance by the male defendant to his wife was voluntary. The considerations now suggested to support it are afterthoughts and purely illusory. I am not satisfied that it is an unfair inference from the judgment of the learned trial judge that he reached the conclusion ascribed to him by the dissenting Chief Justice in the Divisional Court and by the unanimous Court of Appeal - in which they expressly concur - that this conveyance was made with the intent of protecting the property transferred from the claims of possible, if not probable, future creditors of the hazardous business in which the defendant John L. McGuire had shortly before embarked. Neither am I convinced that this conclusion is not warranted by the evidence. The appellants have, in my opinion, failed to make a case for disturbing it. Other reasons for the transfer put forward by them do not account for its having been made when and as it was. I agree with the Court of Appeal that this case is governed by the principles on which Mackay v. Douglas, approved by the Court of Appeal in Ex parte Russell, was decided. The defendants are, however, entitled to a formal rectification of the judgment pronounced by the trial court. The defendant Hattie McGuire had an inchoate dower right in the Madoc property. A conveyance of that property by her to the assignee, as directed in the second paragraph of the judgment, might deprive her of that right. Of course this was not intended and, had attention

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been drawn on the settlement of the minutes to this possible effect of the conveyance directed by the judgment, provision excepting from its operation Mrs. McGuire's dower right would certainly have been made. In actions such as this, the relief granted is properly confined to setting aside the impeached conveyance, thus removing it as an obstacle to the creditor's recovery under executions against their debtor. The first paragraph of the judgment accomplishes this. Moreover, it is inconsistent to declare a conveyance void and to set it aside and then to direct that the grantee under that conveyance shall convey to the assignee for the benefit of the creditors the property of which she has thus been already deprived. The judgment of the trial court should be amended by striking out the second paragraph. With this variation this appeal should be dismissed with costs. BRODEUR, J.: I concur with Mr. Justice Anglin. GAUTHIER v. WOOLLATT Supreme Court of Ontario. [1940] 1 D.L.R. 275 . ROACH, J. : In an action in this Court in 1934 the late C. Harold Gauthier obtained judgment against the defendant William R. Woollatt, his father, and two brothers for $25 ,000 and interest and costs upon a promissory note made by them in his favour dated January 22, 1926, and which became due on January 25, 1929. There remains unpaid on the judgment approximately $23,000. The said note was collaterally secured by: First- an assignment by way of mortgage from William R. Woollatt to Gauthier of the former's two-fifths interest in certain lands in the City of Windsor referred to during the trial as the Zakoor property. Second -A first mortgage from Woollatt's father covering the latter's home in the Town of Walkerville. Third - an assignment of the father's interest in certain lands in the Town of Amherstburg. In 1927 the defendant William R. Woollatt had purchased or agreed to purchase certain farm lands in the Township of Anderdon in the County of Essex. Those lands consisted of two parcels. The vendor of one was a man named Janisse and the purchase-price was $6,850. The vendor of the other was a man named Scarfe and the purchase-price was $13 ,000. By December, 1928, the purchase-price of both parcels had been paid in full and by deed dated December 10, 1928, Janisse, on the instructions of Woollatt, conveyed the one parcel to the latter's wife, the defendant Mabel Alice Woollatt, and by deed dated December 21, 1928, Scarfe on similar instructions conveyed the other parcel to the defendant Mabel Alice Woollatt. In this action the plaintiff asks a declaration that the defendant Mabel Alice Woollatt held the said lands in trust for her husband on the ground that he caused the title thereof to be placed in her name to defeat, hinder or delay his creditors. In 1924 the Molsons Banks recovered judgment in an action in this Court against the defendant W. R. Woollatt and others in the sum of $46,193.63 . A writ of fieri facias was filed with the Sheriff of the County of Essex against all the judgment debtors on January 16, 1924, was withdrawn on December 31 , 1925, was refiled on the same day, was subsequently renewed and was finally withdrawn on February 18, 1929.

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The defendants deny the allegation of fraud and plead that the said lands were conveyed to the wife as a gift from her husband. The defendant wife had no funds of her own and the full purchase-price of these lands were paid by the husband. The husband was examined as a judgment debtor on January 13, 1936, and the following are some of the questions and answers from that examination. "Q. You have given us all the real estate? A. I can't remember anything else at all. The farm out here is Mrs. Woollatt's because it was bought while that judgment was on. Q. Where is that farm? A. Out on the Huron line ... Q. How many acres in the farm? A. One hundred. That is the farm I bought in '27. Q. You paid the purchase-price for it, did you? A. Yes. Q. How much? A. $20,000. Q. You took it in Mrs. Woollatt's name? A. Yes." The plaintiff did not call any witnesses to prove the amount, if any, remaining unpaid on the judgment in favour of the Molsons Bank at the date of the conveyances in question. Counsel for the defendants cited Dancey v. Brown (1914), 19 D.L.R. 862, 31 O.L.R. 152. At p. 866 Mulock, C.J. Ex. (as he then was) states: "The recovery of judgment, and the evidence of the Clerk of the Divisional Court that a writ of execution had been placed in the bailiff's hands, does not, as against a person not a party to that action, prove that the debt is still unpaid." That was a case in which the plaintiff was a creditor whose claim arose subsequent to the making of a voluntary conveyance and he was relying upon prior claims alleged still to be in existence and unpaid. I suppose, in so far as proving any balance owing, there is no distinction between the probative value of an execution in the hands of a bailiff and one in the sheriff's hands. It is the amount due on the execution in the sheriff's hands which is a lien on the lands of the execution debtor. Paraphrased, Woollatt's answer on his examination was: "I put that property in my wife's name to prevent the execution in favour of the Molsons Bank attaching to it." That statement would be evidence against the husband only; but where the conveyance is voluntary it is only necessary to show fraudulent intent on the part of the donor. Oliver v. McLaughlin (1893), 24 O.R. 41. The defendants called one Loveridge as a witness. He and Woollatt owned as tenants in common a real estate subdivision near the City of Windsor. They were selling lots in this sub-division. He says: "The bank ( i.e. the Molsons Bank) held us up in giving deeds in our sub-division. In January, 192 7, I took over Woollatt's one-third interest by paying approximately $20,000." From other evidence it is clear that this money came from the sale in January, 1929, of the assets and undertaking of a company in which Woollatt was a substantial shareholder. This explains the withdrawal of the execution on February 18, 1929. In my view, the proof which was lacking in Dancey v. Brown, supra, exists in the case at bar. Counsel for the defendants next argued that the plaintiff is not a creditor entitled to avail himself of the statute (the Fraudulent Conveyances Act, R.S.O. 1937, c. 149) because at the times of the settlement he held security. In my opinion much depends on the selling value of the security at the date of the settlement. I find as a fact on the evidence that as of the dates of the conveyances in question the then selling value of the security was greater than the debt. Due to shrinkage in values of real estate this is no longer the case. In fact the debtor subsequently released to the creditor all his interest in one of the securities, viz.,

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the Zakoor property, on account of the debt, and the selling value of the remaining security is only about one-third of the balance owing on the debt. In Sun Life Assurance Co. v. Elliott (1900), 31 S.C.R. 91 at pp. 95-6 Sedgewick, J., says: "But it is said that inasmuch as the plaintiffs are mortgage creditors, they are not creditors within the statute of Elizabeth, and cannot bring this action. I do not think that the mere fact of a creditor having something in pawn, or pledge, or hypothec or mortgage, destroys his character as creditor, or deprives him of the right which the statute gives a creditor. If, however, he is a secured creditor, if he has sufficient of the assets of the debtor in his hands to fully cover the indebtedness, then undoubtedly the statute was not intended for him, but for the general and unsecured creditors. The cases, at all events those by which we are bound, assume when dealing with the question of secured creditors that the security is ample for its purpose." Masuret v. Mitchell (1879), 26 Gr. 435 was cited by defendant's counsel. In that case the owner of Blackacre and Whiteacre created a mortgage on Blackacre in favour of a loan society. The mortgagor, subsequently, not being otherwise indebted, made a voluntary settlement of Whiteacre on his wife. The plaintiff who was a subsequent creditor obtained judgment in the action setting aside the settlement as fraudulent against creditors on the ground that the selling value of Blackacre at the date of the settlement was not sufficient to pay the mortgage. In his judgment Chancellor Spragge, at p. 440, says: "But the point to be got at is its selling value at the date of the settlement." At p. 441 the Chancellor continues: "If the mortgagees had realized by sale, and their debt had fallen short of being satisfied in full they would have been entitled to resort to this other property if not in settlement; and being in settlement it follows that land to which they were entitled to resort had been withdrawn, and that the settlement would have been impeachable by them." From that it might be concluded that a mortgage creditor must first realize on his security before impeaching any conveyance as a fraud on creditors. However, in the Sun Life case, supra, Sedgewick, J., at p. 96, says: "No authority was cited to us to show that before a creditor, having admittedly insufficient security, can bring suit under the statute of Elizabeth he must first realize his security. That question may properly be raised in an administration suit, but the mere fact of such non-realization is not, in my view, a defence." See also Smith v. Robertson, [1936] 1 D.L.R. 505, O.R. 134. There is no evidence that as of the date of the institution of this action there remained unpaid any debts which were owing at the date of the last conveyance in question, except the debt owing to Gauthier. That debt was not then due and at that time was amply secured. Because of the sufficiency of his security this plaintiff at that time could not have impeached the conveyances in question because he was not then damnified. In this respect the present case differs from the case of Sun Life Assurance Co. v. Elliott, supra, and Smith v. Robertson, supra. The plaintiff was not then such a creditor as the statute was designed to protect. By reason of shrinkage in value of real estate he has since become a creditor within the meaning and purpose of the statute. In this respect he is a subsequent creditor.

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As I read the cases a subsequent creditor may in certain circumstances successfully impeach a fraudulent conveyance. Those cases, speaking generally, fall into two classes: ( 1) First - Those in which a subsequent creditor impeaches the creditor while there still remains unpaid a creditor whose claim existed at the date of the conveyance in question. (2) Second-Those in which purpose of the settlor was, by such conveyances, to put his assets beyond the chances and uncertainties of the business in which he was then engaged or into which he then contemplated venturing, that is the settlor's purpose was to defraud or hinder creditors generally. In these cases it is not necessary that, at the date of the commencement of the action, there should remain unpaid a debt which was owing at the date of the impeached conveyance. Cases falling within the second class include Mackay v. Douglas (1872) L.R. 14 Eq. 106, and in our own Courts Ferguson v. Kenny (1889), 16 O.A.R. 276, and Ottawa Wine Vaults Co. v. McGuire (1912), 8 D.L.R. 229, 27 O.L.R. 319 (aff'd 13 D.L.R. 81). The present case does not come within either of the foregoing classes. May on Fraudulent and Voluntary Conveyances, 3rd ed., p. 43, speaks of a third class as follows: "If the conveyance has been made with the actual intention of delaying, hindering or defrauding the grantor's existing creditors and although subsequent creditors do not appear to have been in his contemplation at the time it seems that the conveyance will be void as against subsequent creditors who are delayed, hindered or defrauded as a necessary result of the conveyance even though, in the meantime, the claims of existing creditors have been satisfied." I have not found any reported case the decision in which rested on this proposition. In Jenkyn v. Vaughan, 3 Drew. 419, 61 E.R. 963, Kindersley, V.-C., dealing with the rights of subsequent creditors, says (p. 425): "In cases where a subsequent creditor files a bill, it occurs to me that much may depend on this (supposing there is no evidence of anything to shew the fraudulent intention but the fact of the settlor being indebted to some extent), whether, at the time of filing the bill, any of the debts remain due which were due when the deed was executed. In such a case, as any of the prior creditors might file a bill, it appears to me that a subsequent creditor might do so too; but if at the time of filing the bill no debt due at the execution of the deed remains due, the distinction may be that then a subsequent creditor could not file a bill unless there were some other ground than the settlor being indebted at the date of the deed to infer an intention to defraud creditors. However, I do not find any such rule laid down, and I shall not take upon myself to lay it down positively." In the present case it is not necessary to look for some circumstance or condition from which to infer that the settlor's intention was to hinder, delay or defraud creditors. Such an intention is proved out of his own mouth. Those creditors, however, have been paid and this is not a case where new creditor& have been substituted for old ones. The strongest judicial statement which I have found supporting the statement

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contained in May and quoted above is the dictum of Vice-Chancellor Blake in Reid v. Kennedy (1874 ), 21 Gr. 86 at p. 91: "The admission made by the parties shew the object they had in view was covinous, collusive and guileful, and the result that should flow from this must be to find such conveyance 'void, frustrate, and of none effect,' as against a person whose action is thereby hindered, delayed, or defrauded. The words in the Act are 'creditors and others,' and proving that the conveyance was tainted with fraud once, I do not think it loses this stain, but remains a conveyance with this infirmity which prevents it being set up as against a creditor whose debt arises years after the instrument was executed. The words 'and others' extend the operation of the Act if the word creditors confined it to those existing when the deed was made." The last sentence of that statement and the cases to which he later refers would indicate that the Vice-Chancellor was probably there referring to conveyances which were intended to be a fraud on creditors generally, both present and future. This conclusion is justified by his statement on p. 93 where he refers to "the proposition with which I started, that a subsequent creditor can attack a settlement made with express intent to defraud creditors generally, although there be no debt due at the time of the conveyance remaining unpaid." It is also noteworthy that the learned Vice-Chancellor based his judgment at p. 94 on a finding that there was a debt unpaid at the commencement of the proceedings which had existed at the time of the execution of the impeached conveyance. In Ferguson v. Kenny, 16 O.A.R. 276, Maclennan, J. A., at p. 292, says: "The rule deducible from the oldest as well as the latest authorities seems to be that stated in May, 2nd ed., p. 63, as follows: 'If such settlement was made by a person at that time really insolvent; that is to say, not in a position to make any settlement whatever, that settlement may be impeached by a creditor, though subsequent - though no debt is proved to exist which was contracted at the date of the settlement.' Citing Crossley v. Elworthy, L.R. 12 Eq. 158, and Taylor v. Coenen, 1 Ch. D. 636." That was a case of a continuous dealing and account between the plaintiff and defendant and the judgment is based on a finding that the settlement impeached was made with the intention of defrauding the creditors connected with the business; that the settlor's purpose had been to put the property in question beyond the risks of the business in which he was engaged. In Crossley v. Elworthy, it was found as a fact that there were some debts due at the time of the settlement and unpaid at the date of the commencement of the action. In Taylor v. Coenen the settlor made two settlements. A creditor, whose debt was contracted after the first settlement but before the second settlement, brought action to set aside both deeds. No debt was proved to exist which had been contracted prior to the first settlement. It was held that the settlor was insolvent when he made both settlements and both deeds were declared fraudulent and void as against the plaintiff and his other creditors. It distinguishes that case from the case at bar because there the settlor, in addition to being insolvent at the dates of the settlements remained insolvent until the date of his death. In the absence of decided authority to the contrary it would seem to me that a settlor who, in embarrassed financial circumstances, makes a settlement admittedly for the purpose of protecting the property thereby settled against the

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claims of existing creditors, purges his fraud by paying those creditors, provided, of course, that, in paying them, he does not substitute new creditors for the old ones. Even though his earlier generosity had been at the expense of his justice toward his creditors, having paid those creditors and thereby discharged his legal and moral obligation to them and having none others in contemplation, is the conveyance to be forever regarded as contaminated? In my opinion this is not so. By a turn of the wheel of fortune the settlor, instead of wincing under the pinch of financial distress, may become fabulously wealthy. He still desires that the beneficiary of his earlier generosity should enjoy the gift. If it is tainted what could or should the settlor do to purify it? Is he to cause it to be reconveyed to himself and then, simply because he is now in a position to make the gift without any suggestion of fraudulent intent being imputed to him, make a new conveyance thereof to the beneficiary? These would be idle motions and, because they are lacking, is the gift in the hands of the beneficiary to be subject to attack by a subsequent creditor in the event that evil days again overtake the settlor? I do not think that was the purpose or intent of the statute. In my view of the evidence those are the circumstances in this case. The settlor acquired a large amount of cash shortly after the date of the impeached conveyances and paid off the Molsons Bank debt and there is no suggestion that there were any other debts. From January 10, 1929, to May 10, 1929, Woollatt received over $100,000 in cash out of the realization of other assets. The note held by Gauthier matured on January 25, 1929, Gauthier did not demand payment. Instead he and Woollatt together on February 13, 1929, embarked on a new venture, the purchase of what was referred to in evidence as the Thompson property, involving a very substantial cash investment by each of them. I do not attribute any bad faith to Mrs. Woollatt. I think she understood her husband was making a gift of this property to her and she accepted it as such. For the reasons stated the plaintiff's action fails and is dismissed with costs. GLENN, FRAUDULENT CONVEYANCES AND PREFERENCES Copyright 1940 by Baker, Voorhis & Co. Reprinted by permission. § 56. Attack under the Statute as Distinct from an Action for Damages Our second preliminary observation is pictured in the caption of this section. As we shall see, the statute allows recapture of the property from the fraudulent grantee or from a subgrantee who took gratuitously or paid value with notice. Again, the property may be incapable of capture or surrender intact, because it has been consumed or badly used, or sold to an innocent purchaser. In such cases the value of the property may be recovered from any guilty person through whose hands the asset may have passed . . . . § 74. Action for Damages, as Distinct from Accountability of Grantee . . . The grantee's ordinary liability is for a return of the property or an accounting, in money terms, for its value, which shows that the equitable jurisdiction can be invoked although the subject matter of the fraudulent transfer may happen to be chattels. If the judgment creditor can lay hold of them with his execution, he needs no equitable aid; but when they are not on hand, and consequently he requires an accounting and a money decree, the jurisdiction is essentially equitable. But that is quite different from the question whether the debtor's fraudulent alienation will confer upon his creditor a right of action for damages against

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debtor or fraudulent grantee, or both. This proposition we must now face. The Statute of Elizabeth, it will be recalled, gave a queer sort of qui tam action in which recovery went, one half to the Crown and the other half to the party aggrieved. But those aspects of the Act simply sloughed off as time went along, although there were strange survivals in one or more of our States. Apart from that, however, the notion that an action lies in tort is so dicredited, that one may venture upon a generality. It may safely be said, then, that there is no tort cause of action, when a transfer is made before the creditor obtains judgment; and it only remains to notice the exceptions, actual or apparent. To understand these exceptions, let us return to the elementary principle outlined at the beginning of this work. The reason why there is no tort cause of action for a fraudulent transfer that takes place before the creditor obtains judgment or attaches is that a general creditor has no property interest in his debtor's assets, and so the result of the transfer is the loss of a mere possibility of realization, which is too speculative to be measured in damages .. ..

§239. Accountability of Grantee and Subgrantees, for Proceeds of Property Fraudulently Conveyed The primary right of the single creditor is to apply the property which has been fraudulently conveyed, to the realization of his debt; and the liquidator's right is to bring this property back into the estate for purposes of distribution. This principle we have discussed, and a number of earlier chapters were devoted to the various methods applicable. Besides, there is a possible action for damages, and that, too, we presented. The case now before us will round out the proposition. Here the grantee, or subgrantee, no longer has the property on hand, nor has he surrendered it to the debtor, as he might properly have done prior to the creditor's attack. What, then, are creditors' rights? The answer is quite clear if the defendant has on hand the proceeds of the original property, or any part of them. Thus, if he has mortgaged it to secure a loan made by an innocent third party, the equity of redemption is available to creditors. A similar case occurs when the defendant has transferred the property to a corporation in exchange for its bonds or shares, or both. In that event these securities are at the disposition of the attacking creditors; and so it is with all other cases where the proceeds can be found in the shape of property on hand. This is not a case of "following trust funds" in the sense of there having been an actual trust in the case, as is sometimes suggested. It is only too clear, as this chapter insists, that a debtor does not hold his estate in trust for his creditors, and so the fraudulent grantee does not receive a trust res. If we are to fit the case within any box, one might say that there is a constructive trust of the proceeds, but to the writer this box does not fit. On the contrary, the constructive trust idea can hardly be applied to our case, because action is at the option of the creditor, and meanwhile he has no specific equity at all. In these cases the court, whether of law or equity, is fulfilling the demands of a positive statute ; and that idea, as we have seen all along, is a material factor in the law of fraudulent conveyances. With that in mind, we can find a better box in the rule, applicable both at common law and in equity, that relates to confusion of goods. This doctrine governs the case where a debtor's property is indistinguishably mingled with that of a third person. In such a case the creditor can realize upon the mass unless the claimant points out the portion which belongs to him, and shows title to it. The point of our whole discussion being that the statute invalidates the transfer, the grantee is left in the situation of a third person who has intermingled his

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own property with that of a debtor. Equitable considerations may help him on an accounting at the foot of a decree setting aside the transfer - of that we will treat later - but there should be no doubt about the main point. If the property cannot be identified in any form, what are the creditor's rights against the grantee? The answer seems clear. The grantee should respond personally for the value of the property which he has put it out of his power to apply properly. If he had returned it to the debtor before the creditor's attack, that would have been a complete defense, as we have seen. Not having done this, the grantee is placed, by virtue of the creditor's proceeding, in the position of one holding for account of the debtor, because, the creditor having taken action under the statute, the grantee's title is avoided. Not being able to produce the property, he must surrender the substitute to the creditor. The same reasoning makes the grantee personally liable, on his account, for the value of the original property in case he cannot produce it or a substitute. Receiving the property fraudulently, as against a creditor who takes steps, the grantee is liable to the extent of its value. § 239a. Measure of Liability of Grantee Who Has Sold the Property The theory above stated is certainly in accord with the English rule as applicable to the case of a fraudulent grantee who has parted with the property prior to the creditor's atttack. When the property consisted of goods or negotiables, the trustee in bankruptcy was allowed to sue in trover for the value, as we have previously seen. But the measure of recovery was fixed as the value of the property at the date of the trustee's demand, and not earlier. The reason was that until the creditor acted through the trustee, the defendant was under no obligation. Hence his duty to pay value arose, not on the day of the fraudulent conveyance, but on the day of the trustee's demand, and it is this day, accordingly, that the English courts mark as determining a market price for the measure of damages. Our rule remained in doubt until recently. This was due to the fact that if the grantee still had the goods on hand, they could be specifically recaptured by replevin, a remedy unknown in England, where trover was the only recourse. Our trustee, on the other hand, had the option of trover or replevin, even when the grantee still had the property on hand. But the temper of the times toward such an option is shown with regard to preferences. The new Bankruptcy Act deprives the trustee of the option of going for the property "or its value", if the preferee has never parted with the property. In that case the trustee must content himself with a recapture of the property itself. No such provision is made with respect to the fraudulent conveyance, but it seems certain that a trustee who sues in equity must be content to take the property itself, if the grantee has not meanwhile disposed of it. Of course a grantee who has sold the property cannot evade his liability for its value by repurchasing the article and offering it to the trustee, although, if he had kept it all the time, he would discharge his liability by surrendering it, together with such net income as he might have gained from its use. If the trustee sues at law, however, and, indeed, that is his only remedy in the ordinary case, he has still the option of replevin for capture or trover for value. Now, when the trustee thus goes for the value of the property, the standard we have adopted is different from that used in England. Instead of fixing the value by the date of the trustee's demand, our courts appoint the value day as the time when the grantee sold the property. This is far away from the English theory, and yet the two ideas are consistent.

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There is no question of "trust" about it, however. The grantee is a wrongdoer because the statute says so. If he still has the property, the trustee's recovery in trover should be as of the day of demand and refusal, as the English courts hold. But if the grantee cannot respond to the demand because he had previously converted the property, it is not unjust to hold him to damages as of the day when he incapacitated himself to respond in specie. B. Impeachment of Transfers for Consideration under the Fraudulent Conveyances Act JAEGER v. KELLY New York Court of Appeals. 1873. 52 N.Y. 274. [An action for the conversion of 1364 gallons of wine. Plaintiff purchased the wine from one Lingenfelder at 92½c a gallon. As part of the purchase price he paid a $250 debt of the seller, and also customs duties and warehouse charges, paying the balance of the price in cash. Defendant sheriff levied on the wine on an execution against the seller. Defendant's counsel requested the court to submit to the jury the question of fraud on creditors, but the court refused to do so, directing a verdict for the plaintiff and submitting to the jury simply the question of the value of the property converted. A motion for a new trial was denied.] CHURCH, C. J.: The only question in the case is whether the trial judge erred in refusing to submit to the jury the question whether the sale of the wine to the plaintiff was fraudulent as against creditors. With the exception of the fact that the plaintiff purchased the wine at a little less than one-half its actual value, as found by the jury, there is no substantial evidence tending to impeach his title, and it is well settled that mere inadequacy of price is not sufficient. The plaintiff was engaged in the business; he paid in cash the agreed price and took immediate possession of the property. There is no evidence that he had any knowledge of the pecuniary circumstances of Lingenfelder, or that the latter owed any other than the debt which the plaintiff paid as a part consideration for the wine. Nor is the vendor's fraudulent intent sufficient. The vendee must be also implicated, and I can find no fact proved in the case, aside from inadequacy of price, which tends to impeach his good faith. It is urged that he prevaricated in his testimony. This cannot be affirmed as to the substantial facts, the purchase, payment of the consideration and taking possession; and the discrepancies as to minor details are not important. It is said that Eistel, the broker, who negotiated the sale, was a suspicious character, because the evidence tends to show that his real name was Isaacs; but what influence this should have upon the purchase I am unable to see. It is also said that Eistel acted in the transaction both for vendor and vendee, and that each is chargeable with his knowledge. If this were so, there is not the slightest evidence that Eistel knew any facts which would impeach the sale; but the evidence is that the plaintiff made the bargain for himself. Eistel solicited the plaintiff to buy, and if he was an agent at all, it was for the vendor; and the assistance he rendered the plaintiff in procuring a cellar in which to store the wine does not change it. To invalidate a sale, tangible facts must be proved, from which a legitimate inference of a fraudulent intent can be drawn. It is not enough to create a suspicion of wrong, nor should a jury be permitted to guess at the truth. If the transaction was different from what the plaintiff proved, it was incumbent on defendant to show it. Giving every circumstance urged by

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defendant's counsel its utmost significance, the most that can be said is, that there was slight evidence justifying a suspicion that the plaintiff was not a bona fide purchaser, but this would not justify this court in reversing the judgment. The value of the wine may have been exaggerated at the trial, but the defendant offered no evidence upon the subject, and he must, therefore, take the consequences of the plaintiff's estimate. He may have supposed that if the value was reduced, the force of the circumstances of the inadequacy of price would be lessened, and, with that out of the case, he would have no foothold. The wine was sold by the sheriff at public auction at a less price than the plaintiff paid, and there is more reason to doubt whether the price paid was in fact inadequate than that it was purchased in bad faith; but the jury have settled that question, and the defendant cannot now complain. The deduction made at the General Term was for the benefit of the defendant, and was based upon the idea that the jury had made a mistake in estimating the whole value at two dollars a gallon, the price proved. The cases cited are not analogous. The judgment must be affirmed. ALLEN, GROVER and FOLGER, JJ., concur. PECKHAM, ANDRES and RAPALLO, JJ., dissent. TRUSTEE OF DENNY v. DENNY AND WARR King's Bench Division, England. 1919. 1 K.B. 583. Assigned action tried before Sankey, J., without a jury. The action was brought by the plaintiff the trustee in bankruptcy of the estate of Gerald Denny, for (inter alia) a declaration that a deed dated April 12, 1916, made between Gerald Denny of the first part, the defendants Charles Edward Denny his father and George Warr of the second part and the defendant Charles Edward Denny of the third part was void and of no effect against him (the plaintiff) as being against public policy, and also as contravening the statute 13 Eliz. c. 5. Alternatively, he asked as against the defendant Charles Edward Denny, for a declaration that an annuity of £800 a year payable under the deed by the defendant Charles Edward Denny to Gerald Denny was now payable to the plaintiff. The following statement of the facts is taken from the judgment of the learned judge. "In this case the trustee in bankruptcy of Gerald Denny seeks to set aside a deed dated April 12, 1916, and made between the said Gerald Denny of the first part and Charles Edward Denny, his father, and George Warr of the second part, upon the ground that it is void either as being against public policy, or contravening the statute of Elizabeth. Alternatively, he asks for a declaration that an annuity of £800 a year payable under the deed to Gerald Denny is now payable to the trustee, and there is a subsidiary claim in respect of certain furniture referred to in the deed. The following are the facts. The father, Charles Edward Denny, is a wealthy gentleman residing in Ireland. He sent his son Gerald (hereinafter called the bankrupt) to the university; but unfortunately the boy was of a weak and idle character, and easily led, and fell into bad company. He married in 1910, and his father provided for him liberally by a settlement dated May 30 of that year, but the bankrupt went from bad to worse, and his subsequent history is one of drink, debt and divorce. His wife divorced him in 1915, and certain securities comprised in the settlement were allotted to her; but there was considerable property still left for him, to which his father added other stocks and shares, so that the bankrupt remained

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very well off. His extravagant and dissolute habits, however, did not cease, and he came to London, where he got into the hands of moneylenders. In 1915 his father paid over £14,000 worth of debts for him, but the bankrupt still continued his reckless career and again large sums became due to moneylenders; almost every article of any value was pawned, and it was obvious that unless something was done he would reach the goal of the road to ruin. Under these circumstances the father saw him, ascertained what his debts were and to whom they were owing, and it is necessary, for the purposes of my judgment, to consider the position of the moneylenders, who were the chief creditors. Their names are set out in a paper writing attached to the deed. I wish to make it perfectly plain that in the following remarks I am not saying a word about moneylenders generally, nor am I mentioning the names of the moneylenders in question. They are not here to defend themselves and their names were not made public; but between the parties to the case I am bound to give effect to the evidence which was called before me and which I accept. These moneylenders actually went to Ireland to see the bankrupt, then a boy, and persuaded him to come over to London; they there induced him to start a betting business in order to get possession of his money. The bankrupt was constantly drunk, he was living with a woman who was not his wife, and they got thousands of pounds out of him. Their debts were paid off by the father, but they again induced the bankrupt to borrow money and again took advantage of his condition and character, so that he became involved in their toils. These particular moneylenders were a gang of swindlers; and having regard to one of the covenants contained in the deed which is sought to be set aside, I feel it my duty to find that every honourable and honest man would have scorned to be associated and would have refused to have any relations with them. The father, being anxious to save his son from moral and financial ruin, took excellent advice, and in April, 1916, the bankrupt entered into the deed which is sought to be set aside. Under that deed he transferred (I use a neutral word) such property as he had to the father and the father agreed to pay all his debts, amounting to over £4,000, to redeem and hand over to him all the articles pawned, of the value of over £500, and to pay the bankrupt an annuity of £800 a year, by monthly instalments, upon certain conditions which are contained in clause 5 of the deed, and are as follows: " (a) That the beneficiary does not become bankrupt or do or suffer any act or thing whereby the said annuity if belonging absolutely to him would become vested in or charged in favour of, some other person or persons or a corporation and that he will not make any composition or arrangement with his creditors. "(b) That the beneficiary amends and reforms his mode of life and ways of living and consistently continues in such amendment and reform. " ( c) That the beneficiary gives up his present associates to whom the said Charles Edward Denny objects and whose names are set out in a paper writing which for the purposes of identity has been signed by the beneficiary and the said Charles Edward Denny. " ( d) That the beneficiary does not reside in London or within a radius of eighty miles of Piccadilly Circus therein and further that he will not come to or visit London or come within the said radius at all unless with the previous consent of the said Charles Edward Denny. " ( e) That he does not drink alcoholic liquors to excess. "(f) That he will not borrow money or bet or directly have any business

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or personal relations with any moneylenders, bookmakers or turf accountants or their servants." Clause 6 is: "In the event of the breach or non-observance of any of the conditions contained in the last precluding clause the said annuity or annual sum shall be absolutely forfeited and cease to be payable." The object of the deed was to save the bankrupt, who was an only son, and to pay all the creditors. The latter object was achieved; so much so that the father actually paid more creditors than appeared in the deed when he heard of their existence. For a time it had an excellent effect, but subsequently the son borrowed money again at Bournemouth, and was made a bankrupt on the petition of a moneylender, who was the chief creditor.... SANKEY, J., who, having stated the facts, continued: The plaintiff asks to set aside the deed upon the ground above stated, namely, that it is void as being against public policy, or as contravening the statute of Elizabeth .... The trustee then asks for a declaration that the deed is void under the statute of Elizabeth. Under that statute conveyances made with intent to hinder, delay or defraud creditors are rendered void against all creditors hindered, delayed or defrauded by their operation. There is, however, a proviso for the protection of a purchaser for good consideration without notice of the illegal intention. The illegal intent under the operative part is a question of fact for the jury or judge sitting as a jury: Glegg v. Bromley, per Parker, J., as he then was. In my judgment, the trustee's contention entirely fails. The deed was made bona fide and for good consideration. It neither hindered, delayed nor defrauded creditors, nor was it intended to hinder, delay or defraud them. Its object was to pay all the creditors, and this object was achieved; so much so that the father actually paid more creditors than appeared in the deed, when he heard of their existence. There is no ground in fact or law for saying this deed is void under the statute. The trustee next contended that covenant (a) of clause 5 is invalid and that the £800 payable to the bankrupt under the deed became, under the provisions of the Bankruptcy laws, payable in future to the creditors. It is beyond controversy that a man cannot by contract or otherwise qualify his own interest by a condition determining or controlling it in the event of his bankruptcy, to the prejudice of his creditors. The law is accurately so stated and the cases conveniently collected in Williams on Bankruptcy, 11th ed., p. 236; but the question here is what is the proper view to take of this transaction. I listened with care to the evidence and have had my attention directed to the documents. In my view, this deed is not a settlement at all. It is a deed of sale and purchase whereby the father purchases the son's property for a covenant to pay to the son a conditional annuity and to discharge the son's debts. The bankrupt sells the property, the price being. - Payment of his debts, and Payment of a conditional annuity. A somewhat similar point was decided in Ex parte Eyre. The learned counsel aked me not to follow that case, and contended that it was bad law. It has, however, stood the test of nearly forty years. It is cited with approval in In re Tetley, and is found in all the text-books. I am of opinion that it is good law, and that finding, as I do, the present case to be one of sale and purchase for a good and proper consideration, the trustee's contention fails. The subsidiary claim is in regard to certain furniture which the bankrupt had under a hiring agreement from Messrs. Maples. The father covenanted to pay, and did in fact

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pay, the total amount of hire due under the hiring agreement, and it is said that the property therefore became the son's, and that when the father sold it, as in fact he subsequently did, he was guilty of a conversion of it and the trustee is entitled to its value. [The learned judge then dealt with the evidence bearing upon this claim, and held that upon the facts the deed did not contain the whole of the transaction and that it was agreed between the son's solicitors and Sir George Lewis who represented the father that in addition to the covenants the father should pay the hiring debt, that he should be entitled to have the furniture and sell it and keep the proceeds and that the son should have no claim to the proceeds, or any sort or kind. The learned judge concluded:] This agreement was carried out some two years ago and the father became entitled to the furniture which passed to him and was his to do what he liked with, and he has been guilty of no conversion of this property. In the result, the trustee's action fails on all points. FERGUSON v. LASTEWKA Supreme Court of Ontario. [1946) 4 D.L.R. 531. LEBEL, J .: The plaintiff is an execution creditor of the defendant Michael Lastewka for $12,075 and costs. She seeks to set aside, as fraudulent and void against her and other creditors, a conveyance dated July 3, 1944, made by the said defendant to his daughter and her husband, the other defendants. The plaintiff's judgment, on which execution remained wholly unsatisfied at the time of the trial, was recovered in an action instituted on November 21, 1944, for damages sustained in a motor car accident as a result of which the plaintiff was seriously injured and her husband was killed. The motor accident occurred on April 3, 1944. The circumstances under which the defendant Lastewka acquired the lands described in the impeached conveyance, and later conveyed them to his codefendants, are these: In the early summer of 1943, all the defendants resided in Montreal. With a view of purchasing a farm in the Niagara district, Lastewka sold his home in Montreal. He was then indebted to the defendant Andrew Ewaschuk in the sum of $1,500 but he arranged with Ewaschuk that the latter should accept his promissory note for the amount of the debt, without interest, maturing July 1, 1944. On August 14, 1943, Lastewka purchased 15 acres in Lincoln County, being part of a fruit farm owned by one James A. Johnson. He paid $2,000 in cash and gave Mr. Johnson a mortgage for $2,200, the balance of the purchase price. In erecting a house and barn on the property, and in commencing his farm operations, he said, he used up all his available cash. In November, 1943, he borrowed $500 from a bank, and he swore that he secured loans from a sister amounting in all to $300 and incurred other debts. On July 3, 1944, the date of the disputed conveyance, besides the mortgage indebtedness and the Ewaschuk note, he said on his examination for discovery, which was read in as part of the plaintiff's case, that he owed in the neighbourhood of $1,350 to the bank and the others. Soon after Lastewka's purchase of the fruit farm the Ewaschuks visited him there and they became interested in acquiring property in the vicinity for themselves. That such might be their decision was suggested in a letter the defendant Milly Ewaschuk wrote to her mother as early as August 1, 1943. In

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another letter, dated February 8, 1944, Milly Ewaschuk told her mother that she and her husband had a prospective buyer for their Montreal house, and that they were interested in the farm adjoining the Lastewkas', i.e., Mr. Johnson's. She also said they would like to obtain payment of the promissory note or at least $1,000 on account. The Ewaschuks completed the sale of their Montreal house, Milly Ewaschuk swore, a few days before they heard of the motor car accident. On May 1 and 2, 1944, their furniture was moved from Montreal to the Lastewka farm. The Ewaschuks followed in the same month. Andrew Ewaschuk interviewed Mr. Johnson with a view to buying his farm but the price was apparently too high. Ewaschuk also looked at some other farms in the vicinity before returning to Montreal to secure a National Selection Service release from his employment in a war plant there. He testified that up to the time that he returned to Montreal for this purpose he had no intention of purchasing his father-in-law's farm. After securing the release mentioned, Ewaschuk returned to the Lastewkas' farm, but in the meantime, on June 21, 1944, Lastewka had been convicted of an offence related to the operation of his motor vehicle involved in the accident, and he was now serving a three months' sentence in the Ontario Reformatory at Guelph. Ewaschuk swore that his mother-in-law then informed him that her husband had decided to sell the farm and would give him the first chance to buy. On his examination for discovery ( Question 166, also read in as part of the plaintiff's case) Ewaschuk swore that his mother-in-law had said that the price was $5,400. Ewaschuk then sought the advice of Thomas R. BeGora, a solicitor of this Court in St. Catharines, and a few days later instructed him to draw a deed from Lastewka to himself and his wife as joint tenants, in consideration of the amount mentioned. Mr. BeGora prepared the deed but did not fill out the land transfer tax affidavit because he did not know all necessary details. The deed as drawn, however, included a covenant for the assumption of the Johnson mortgage. On July 3, 1944, Mr. BeGora, Andrew Ewaschuk, and a man named Baraniuk, drove to Guelph and interviewed Lastewka in the reformatory. Lastewka testified that at this interview he told Ewaschuk that if he paid him $2,000, the equivalent of the amount he himself had paid down on the purchase of the farm, assumed the balance owing on the Johnson mortgage, viz., $1,900, and returned his promissory note for $1,500, that he could have the farm. These amounts total the consideration said to have been mentioned by Mrs. Lastewka. Mr. BeGora then filled in the land transfer tax affidavit and Lastewka executed the deed and handed it back to Mr. BeGora. The document was signed later by the Ewaschuks and by Mrs. Lastewka. Ewaschuk returned the promissory note to Mrs. Lastewka, and, as directed by her husband, gave her his cheque for $2,000 some days later. Out of the proceeds of this cheque, it was said, the bank and all Lastewka's existing creditors were paid off, and Lastewka's wife swore that she afterwards deposited the balance in her own bank account. The plaintiff alleges that the impeached conveyance was executed and delivered in pursuance of a fraudulent scheme "for the purpose of defeating, defrauding and delaying the plaintiff and other creditors," and Mr. Lancaster argued that the Court should find that the consideration set up by the defendants in support of the transaction was illusory and inadequate, and in any event that there was an intention on the part of the defendants to defraud the plaintiff and Lastewka's other creditors. Mr. Schreiber contended that the sale to the Ewaschuks was for valuable consideration, and argued that these defendants were as much entitled to take advantage of Lastewka's financial embarrassment, and the predicament

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he found himself in, as a result of the accident, as a stranger would be entitled to do; in effect, that the purchase of the farm by the Ewaschuks was for valuable consideration and was bona fide. I am unable to accede to the plaintiff's contention that the consideration paid by the Ewaschuks was illusory or inadequate. I find as a fact that Lastewka owed Andrew Ewaschuk the sum of $1,500, that Ewaschuk assumed the balance owing on the Johnson mortgage, and that he paid Mrs. Lastewka on her husband's instructions the balance of the purchase-price, viz., $2,000. As a result, I find that the impeached conveyance was given for valuable and adequate consideration, and I conclude, as counsel for the plaintiff conceded at the close of his argument, that to succeed the plaintiff must establish an actual and express intent to defraud creditors on the part of Lastewka, and that the Ewaschuks were privy to such intent : see Hickerson v. Parrington (1891) , 18 O .A.R. 635 at pp. 640-41 ; May on Fraudulent and Voluntary Conveyances, 3rd ed., p. 62; and Cadogan v. Kennett (1776), 2 Cowp. 432 at p. 434, 98 E.R. 1171. It is stated by Sir G. J. Turner, V.C. in Harman v. Richards (1852), 10 Hare 81 at p. 89, 68 E.R. 847, that "those who undertake to impeach for mala fides a deed which has been executed for valuable consideration have, . . . a task of great difficulty to discharge"; but it has been said that a fraudulent intention to which the purchaser is a party will override all inquiry into the consideration : see May on Fraudulent and Voluntary Conveyances, 3rd ed., p. 63 and the cases cited in footnote (t); see also McMullen v. Dr. Barnardo's Homes (1924), 26 O.W.N.168. The question of intent to defraud creditors is one of fact which the Court has to decide on the merits of each particular case, after taking into account all the circumstances surrounding the making of the conveyance. See Hawley v. Hand ( 1921 ), 64 D.L.R. 504, 50 O.L.R. 444; 15 Hals., 2nd ed., pp. 250-1 ; Ex parte Mercer, Re Wise (1886), 17 Q.B.D. 290; May on Fraudulent and Voluntary Conveyances, 3rd ed., p. 70; and Hale v. Metropolitan Saloon Omnibus Co. (1859), 28 L.J. Ch. 777. Mere suspicious circumstances are not sufficient to establish actual fraud : see Hickerson v. Parrington, 18 O .A.R. at p. 643 and Shephard v. Shephard, [1925) 2 D.L.R. 897, 56 O.L.R. 555. The circumstances so far related show that it was within the knowledge of all the defendants that while the damage action was not commenced for some seven months following the date of the impeached conveyance - due to the nature of the plaintiff's injuries and her long hospitalization - the accident occurred four months earlier; also, that just prior to the date of the disputed instrument, Lastewka was convicted of an offence in connection with the accident, and was in custody as a result. The plaintiff's counsel relied upon these factors, as well as on others to be mentioned, as proof of actual fraud and urged that the conveyance was delivered pendente lite, in effect, if not in fact, as a mere scheme or trick to defeat creditors and the plaintiff in particular. In Cadogan v. Kennett, 2 Cowp, at p. 434, Lord Mansfield, C. J., said : "So, if a man knows of a judgment and execution, and, with a view to defeat it, purchases the debtor's goods, it is void: because, the purpose is iniquitous. It is assisting one man to cheat another, which the law will never allow." I am satisfied that the principle enunciated by Lord Mansfield is equally applicable in cases where a creditor has not recovered judgment at the date of

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the impeached conveyance, but the purchaser, knowing of the creditor's pending or likely action, purchases the debtor's property with a view to defeating the expected execution: see Gurofski v. Harris (1896), 27 O.R. 201; Hopkinson v. Westerman (1919), 48 D.L.R. 597, 45 O.L.R. 208; May on Fraudulent and Voluntary Conveyances, 3rd ed., p. 102; McMullen v. Dr. Barnardo's Homes, 26 O.W.N. 168; Goyan v. Kinash, [1945] 2 D.L.R. 749; Barling v. Bishopp (1860), 29 Beav. 417, 54 E.R. 689; and Edmunds v. Edmunds, [1904] P. 362. A careful consideration of the evidence and the exhibits, in the light of the principles mentioned, has satisfied me that Lastewka conveyed his farm intending to defraud his creditors, and the plaintiff in particular, and that Andrew Ewaschuk and Milly Ewaschuk, on a lesser scale, were parties to the fraud. I am satisfied that the plaintiff has discharged the onus upon her in this regard. While it is a fact that the Ewaschuks decided to sell their Montreal home and purchase a fruit farm in the Niagara District, in the vicinity of the Lastewka place, and that they actually sold the house to implement this intention, before hearing of the accident, it is equally clear, from Andrew Ewaschuk's admission that they had no intention of purchasing the Lastewka farm until after Ewaschuk returned from Montreal, late in June, 1944, by which time Lastewka had been convicted and was in the reformatory. The conviction and sentence must have made a deep impression upon the Ewaschuks, because there was the matter of the promissory note, now almost due, and Andrew Ewaschuk admitted in cross-examination that he knew Lastewka was then "flat broke." I am satisfied that as a result of the police court proceedings Andrew Ewaschuk realized the likelihood of an action for damages succeeding against Lastewka. I do not accept his statement that he did not know that such an action lay. The outlook for Lastewka, and as well for himself, must have looked black indeed, so he consulted Mr. BeGora. The latter thought that he was first shown the writ of summons in the plaintiff's damage action before there was any discussion with respect to the transfer of the farm, but he was undoubtedly mistaken, because the writ in that action was not issued for many months following the date of the impeached conveyance. Mr. BeGora swore that he advised Ewaschuk, before he drew the deed to him and his wife, that to uphold a sale it would be necessary to establish a bona fide sale. At that time Lastewka was in the reformatory, he said, and his two attendances upon Ewaschuk were only a few days apart. Andrew Ewaschuk himself set at rest any doubt that might exist as to the time of his first discussion with Mr. BeGora. On cross-examination he said that Mr. BeGora had told him that if a civil suit were brought there would have to be proof that he had bought the farm from Lastewka, and he said that he had replied, "I am buying it." This makes it perfectly clear that the prospective damage action was very much in Ewaschuk's mind at the time he first consulted Mr. BeGora. As another indication of what was in his mind, Mr. Graves, Sheriff of the County of Lincoln, testified that when he served the writ in the present action, Ewaschuk told him that he and his wife had bought the farm in March, 1944, that is, before the date of the accident, which was, of course, untrue. And why was Ewaschuk in such a hurry to complete the transaction on July 3, when Lastewka was in the reformatory? Mr. BeGora was not even asked to search the title to the property. No creditor was pressing. Why also was Lastewka in such haste to sell, when one considers that he had not yet owned the property a year, had erected buildings on it, and, so far as the evidence goes, had still to take in his first dollar from his crop? I do not accept the explanation that

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Lastewka was worried about the crop because of his incarceration. The Ewaschuks were then on the farm and could have done any work required during the period of his three months' sentence. Mere knowledge of an intended action, and unusual haste on the part of the defendants, viewed as a desire on Lastewka's part to give, and a desire on Ewaschuk's part to secure, a preference over the plaintiff and/ or other creditors, may not be sufficient to justify me in concluding that the defendants intended to defeat, hinder, delay or defraud creditors. The statute, 13 Eliz., c. 5 and the Fraudulent Conveyances Act, R.S.O. 1937, c. 149, which is the same in substance, have no regard whatever to the question of preference or priority among creditors. It is unnecessary, also on the facts of this case, and in view of the pleadings, to consider what effect, if any, the Assignments and Preferences Act, R.S.O. 1937, c. 179 has upon the transaction. But the two factors mentioned may be considered in looking at all the circumstances upon the question of intent, and there are other badges of fraud readily discernible in the evidence. Baraniuk, to whom I have referred, and who was called by the defendants, testified that when Lastewka and Ewaschuk were talking together at the reformatory, the former said in reply to some explanations made by the latter "If it is that way, I'll have to sell it." Baraniuk afterwards said Lastewka's reply was in answer to a demand made by Ewaschuk for payment of his note, but I was convinced that this explanation was an after thought. It was made hesitatingly and in an unsatisfactory manner, and I do not accept it. I am satisfied on the evidence that Lastewka had no thought of selling his farm until Ewaschuk pointed out to him the likelihood of a forthcoming damage action and that the real explanation Ewaschuk gave him was to the effect that a transfer would have to be made for consideration if the property was to be saved. It was that, in my opinion, that brought forth the reply from Lastewka that Baraniuk overheard. And why did Lastewka direct Ewaschuk to give the cheque for $2,000 to Mrs. Lastewka? The latter said she cashed it, and that she and her husband, after his release from the reformatory, paid all his creditors, and that she then deposited the balance in her own bank account. Nothing was produced to corroborate the existence of the alleged creditors except Lastewka's cancelled bank promissory note and I doubt very much whether Lastewka owed the amount he professed to owe. In any event, why was Lastewka's wife entrusted with the only money involved in the transaction, unless it was part of a scheme to defeat such creditors as were then in existence or in prospect? Lastewka's conduct prior to the trial of the plaintiff's damage action, viewed with the other circumstances, is also significant upon the question of his intention at the time of the transaction. Despite Mr. BeGora's offer to act in his defence at the trial for nothing, Lastewka told him that he had no money and added: "They can't get anything from me anyway." Perhaps most important of all was the fact that there was no immediate or early change of possession following delivery of the conveyance. After serving his three months' sentence, Lastewka returned to the farm and continued to live there with his wife and the Ewaschuks, for many months. It was said that there was no place else to go, but that, in my opinion, also militates against the bona tides of the sale. It will be remembered that the Ewaschuks moved their furniture to the farm and came to reside with the Lastewkas, even though they had not yet purchased a place for themselves. After the alleged sale, there was no change in this arrangement. Joint possession raises a presumption of fraud: See 15 Hals., 2nd ed., p. 253. Very significant on this point too, was the evidence of Mr. Preston, a real estate agent, who visited the farm as late as November, 1944, to

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ascertain if the property was for sale. Mr. Preston swore that Lastewka, who was then working on the farm, told him that he was the owner of the farm and that it was not for sale. I prefer his evidence to the denials of this incident made by Lastewka and Milly Ewaschuk. Mr. Schreiber argued that an intention to defeat an expected execution by a particular judgment creditor does not necessarily constitute a fraud, and he relied upon the decision in Wood v. Dixie (1845), 7 Q.B. 892, 115 E.R. 724, but it is stated in 15 Hals., 2nd ed., p. 251 : "To be valid an alienation made with such intent must be for full value and, as between the debtor and the grantee, a bona fide transaction." The cases cited in the footnote ( e) amply bear out this proposition: see also Edmunds v. Edmunds, [1904] P. 362, and McKinnon v. Gillard (1907), 9 0 .W.R. 77 at p. 84. In any event, I find that at the time of the impeached conveyance there was at least one other creditor, namely the bank, and perhaps others, and the fact that Lastewka afterwards purged the fraud, in so far as the bank and others are concerned, is immaterial. Mr. Schreiber also argued that the Court should not consider the relationship between the parties where valuable consideration is proved, and I agree with him, generally speaking, but the case at bar is in my opinion, very different on the facts from the case of a stranger who buys property with knowledge of other existing and prospective creditors. In the present case it is, in my opinion, permissible to consider the question of relationship in the light of all the other circumstances of the case. Mr. Schreiber relied strongly upon the decision in Gurofski v. Harris, 27 O.R. 201, but in that case the facts were very different. There was there no finding that the purchaser was aware of the vendor's fraudulent intent, and the pending action for damages was said in that case to be frivolous (per McMahon, J ., at p. 207) . There was furthermore no finding impeaching the credibility of witnesses. As may be gathered from what I have already said, I think I can place no reliance here upon the alleged honest intentions of the defendants. I do not accept their protestations of honesty, and my conclusions are based upon that fact as much as, if not more than, any other. The circumstances of this case, and the demeanour of the defendants in the witness-box, are consistent in my view with but one conclusion, namely, that the transaction between the defendants was part of a scheme to retain a benefit for Lastewka, and was not a bona fide sale. I should not conclude my reasons without adding that I am satisfied that Mr. BeGora was in no way privy to the fraud of the defendants. The advice he gave Ewaschuk was sound, and he was not present during the conversation between Lastewka and Ewaschuk which preceded execution of the conveyance by the former, and which Baraniuk overheard in part at least. The whole incident, however, is illustrative of the fact that solicitors, in circumstances suggestive of possible fraud must be extremely watchful of their own position in the matter. It should be mentioned, too, that the solicitor for the Ewaschuks waived any question of privilege in so far as Mr. BeGora's evidence was concerned, and none was claimed by Lastewka. The plaintiff's action succeeds and there will be judgment declaring that the conveyance from the defendant Michael Lastewka to his co-defendants (20535 for the Township of Grantham) is null and void against the plaintiff and other creditors of Michael Lastewka. The plaintiff is entitled to her costs. In Martens v. Peters and Peters (1963) 38 D .L.R. (2d) 581 (Man.) where during the pendency of a lawsuit a father transferred all his assets, including principally the land on which he lived, to his son under an alleged oral agreement with the son to

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assume his father's debts and to provide a home for him on the land Ferguson v. Lastewka was cited and a similar result reached. In Owen Sound General and Marine Hospital v. Mann, [1953) 3 D .L.R. 417, 421, Anger J . said: "Adequacy of consideration is not necessary to uphold a transaction under the Fraudulent Conveyances Act : Reaume v. Guichard (1856), 6 U .C.C.P. 170; Carradice v. Currie (1872), 19 Gr. 108; although in some cases the inadequacy may be some evidence of guilty knowledge; Carradice v. Currie, supra; Buckland v. Rose (1859), 7 Gr. 440 at pp. 447-8; Black v. Fountain (1876), 23 Gr. 174. Also the fact that the result of a conveyance is to defeat creditors is not necessarily proof that the intent of the grantor was fraudulent: Godfrey v. Poole (1888), 13 App. Cas. 497; Carrv. Corfield (1890), 20 O.R. 218; Oliverv. McLaughlin (1893), 24 O.R. 41; Crombie v. Young (1894) , 26 0 .R . 194; Montgomery v. Corbit (1895), 24 O.A.R. 311 ; Elgin Loan & Savings Co. v. Orchard (1904), 7 0 .L.R. 695. Where a deed is not voluntary but is for value, there is no presumption of fraudulent intent from the fact that creditors are defeated by it, the intent must be deduced from the whole evidence as a fact and, although the fact that creditors have been defeated may be considered as an aid, that fact has not the conclusive effect which the Courts have attached to the fact in the case of voluntary settlements: Beavis v. Maguire (1882) , 7 O.A.R. 704 at p. 707. The burden of proving fraudulent intent by the parties to a conveyance is ordinarily upon the plaintiff, but nevertheless where there is a conveyance between near relatives which has the effect of defeating or delaying creditors, although there is no absolute rule that the burden of proof is upon the defendants, the principle of res ipsa loquitur may properly be applied to a transaction between near relatives in suspicious circumstances, so as to place upon the defendants the burden of establishing by corroborative evidence, other than the testimony of interested parties, the bona /ides of the transaction : see the comment of Duff J. as he then was, in Koop v. Smith, 25 D.L.R. at p. 359, 51 S.C.R. at p. 559, followed in Kemp v. Reaume (1931), 40 O.W.N. 482. Undue haste by the parties to a conveyance to assure a priority over creditors of the vendor, the fact that there is no immediate or early change of possession following the conveyance, and the relationship between the parties, are all factors relevant to show an intent to defeat or defraud creditors. Ferguson v. Lastewka . . . " Where a husband transferred land and motor trucks to his wife without valuable consideration in contemplation of a tort action against him arising out of a highway accident involving one of his trucks it was held by the Appellate Division of the New Brunswick Supreme Court that he could not subsequently compel his wife to reconvey the land to him: McGillan v. McGillan (1947), 20 M.P.R. 203. Harrison J. added (at 212) : "Even if the defendant was acting in concert with her husband, she would still be allowed to retain the property since in pari delicto, potior est conditio possidentis." In this case, the trial Judge had found that although the wife was a consenting party, the whole transaction was instigated and carried out by the husband. It was held by the Supreme Court of Canada in Ryan v. Charlesworth [1930) 3 D.L.R. 431 that the administrator of an estate of a fraudulent transferor stands in no better position than would the transferor himself in attempting subsequently to set aside the fraudulent transaction.

SHELLEY v. BOOTHE Supreme Court of Missouri. 1880. 73 Mo. 74. NORTON, J. : This is an action for the recovery of the possession of a stock of goods, at the trial of which defendant obtained judgment, from which the plaintiffs have appealed. The stock of goods in question had been seized by defendant, Boothe, as sheriff of Jackson county, by the levy of a writ of attachment sued out at the instance of J. W . Wood & Co., creditors of the firm of Woy & Smith as the property of said Woy & Smith. Plaintiffs, after the goods were thus seized, brought this suit and replevied the goods so levied upon. Plaintiffs base their claim to the goods on the ground that Woy & Smith before the levy

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of the attachment sued out by Wood & Co., had transferred the goods in payment of the debts of certain of their creditors, of whom plaintiffs were one, and that under this transfer the goods had been sold and bought by plaintiffs and the proceeds applied to the payment of the debts of Woy & Smith. The defendant, on the other hand, claims that said transfer was made by said Woy & Smith with the intent and for the purpose of hindering, delaying and defrauding said Wood & Co. in the collection of their debt against said Woy & Smith, for the collection of which they had a suit pending at the time of said transfer, and that plaintiffs accepted the goods with knowledge of these facts. The contest is virtually between two creditors of Woy & Smith, and the evidence adduced on the trial tended to establish each one of the above theories, and the only question presented for our determination is, whether the court in giving instructions properly declared the law. . . . A debtor may give a preference to a particular creditor or set of creditors by a direct payment or assignment, if he does so in payment of his or their just demands, and not as a mere screen to secure the property to himself. The pendency of another creditor's suit is immaterial, and the transaction is valid though done to defeat that creditor's claim. Kuykendall v. McDonald, 15 Mo. 416; Murray v. Cason, 15 Mo. 415; State v. Benoist, 37 Mo. 500; Bump on Fraud. Conv. 350, 351; Potter v. McDowell, 31 Mo. 74. The right of a debtor to prefer one creditor over another necessarily implies the right of such creditor to accept such preference. While the effect of such preference must, to the extent that it is made, necessarily be to defer or to hinder or delay other creditors, the mere knowledge of the preferred creditor that such will be its effect, and the debtor intended it should have that effect, will not be sufficient to avoid the transaction as to a creditor not preferred. But if in such it further appears from the circumstances attending the transaction that the preferred creditor was not acting from an honest purpose to secure the payment of his own debt, but from a desire to aid the debtor in defeating other creditors, or in covering up his property, or in giving him a secret interest therein, or in locking it up in any way for the debtor's own use and benefit, he will not be protected, and the sale would be fraudulent as to other creditors, because in such cases the fraud of the debtor becomes the fraud of the preferred creditor because of his participancy therein. Judgment reversed and cause remanded in which all concur. MULCAHY v. ARCHIB~LD Supreme Court of Canada. 1898. 28 S.C.R. 523. Appeal from a decision of the Supreme Court of Nova Scotia, reversing the judgment of the trial in favour of the plaintiffs. This is an action brought by Addra Jane Mulcahy, a married woman, and Patrick J. Mulcahy, her husband, against the defendant Donald Archibald, high sheriff of the county of Halifax, on the 2nd day of March, 1896, to recover 550 barrels of frozen herring, in bulk, which were seized by the said defendant on board the schooner "Ocean Belle" which said vessel was owned by the said Addra Jane Mulcahy, and for damages for detaining same and for refusing to deliver up the same to the said plaintiffs on demand. On the 3rd day of March, 1896, an order to replevy the said goods was issued under order XLV, of the rules of the Supreme Court, 1884. The defendant levied upon the said 550 barrels of frozen herring, on the 2nd day of March, 1897, under an execution issued on a judgment recovered by

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Narcisse Blais, as plaintiff, against Michael B. Wrayton, as defendant, on the 19th day of December, A.O. 1896; and the defendant claims that at the date of the said levy the said herring were the property of the said Wrayton. The said schooner "Ocean Belle" was conveyed to the female plaintiff in 1891, by George E. Forsyth, for the sum of $800, of which $400 was paid by her in cash on July 11th, 1891, and the balance of $400 was secured by a mortgage of the said schooner for that amount, made by the female plaintiff to the said Forsyth, and a promissory note for $400 made by the female plaintiff and the said Wrayton in favour of the said Forsyth, dated July 7th, 1891, which was subsequently paid and satisfied by the female plaintiff. The schooner "Foaming Billow" was purchased by the said plaintiff under similar circumstances in 1892. The said Wrayton was master of the schooner "Ocean Belle" and managed both vessels on his own account with the assistance of advances made by said plaintiff until December, 1895, at which date the said Wrayton owed the said plaintiff upwards of $4,000 for advances, etc. The schooner "Ocean Belle" arrived in Halifax from a trading voyage on or about November 12th, 1895, with a cargo of fish consigned by said Wrayton to Billman, Chisholm & Co., which cargo was sold to Eisenhaur & Co., for $2,804.19. About one-third of this cargo had been purchased by said Wrayton, from said Blais, to whom Wrayton gave in payment for the same a bill of exchange drawn by him upon Billman, Chisholm & Co., for $925 .50, dated October 19th, 1895, payable ten days after sight. At that time (November, 1895), the said Wrayton owed the firm of Billman, Chisholm & Co., for goods, supplied for these trading voyages, the sum of $2,357.57; of which $1,260.32 was secured by promissory notes made by Wrayton and indorsed by the said plaintiff to the said firm. Billman, Chisholm & Co., as consignees of the cargo, demanded the proceeds of the sale of the cargo from Eisenhaur & Co., in settlement of their account and a dispute arising they refused to accept Wrayton's said draft on them in favour of Blais for $925 .50. Pending the adjustment of this dispute Eisenhaur & Co. paid the proceeds of the sale of the cargo to the Halifax Banking Company. The dispute between Wrayton & Billman, Chisholm & Co. in which the female plaintiff was interested as an indorser of Wrayton's notes and as a creditor of Wrayton's, was settled by an agreement signed by the parties and by which Billman, Chisholm & Co. received payment of their claims in full, leaving a balance of $416.62 which was ultimately paid over to Wrayton and out of which he paid $275 for wages due to seamen. At the time of the above settlement it was agreed between the plaintiff and Captain Wrayton that she was to take over, on account of what Wrayton owed her, the trading stores remaining on board the two schooners, and also the trading stores then in possession of Billman, Chisholm & Co., referred to in this agreement, and thereupon she fitted out the schooner "Ocean Belle" by her agents, Thomas Forhan & Co., for a trading voyage to Newfoundland in December, 1895, for which purchases to the amount of $610.23 were made and paid for by her. She subsequently employed Wrayton as master for said voyage on wages at the rate of $50 per month. Wrayton proceeded on the said voyage, and purchased with these goods 550 barrels of frozen herring in bulk, for which a bill of lading was made to the said plaintiff or her assigns, dated at Burin, Newfoundland, February 19th, 1896, and forwarded by mail to her at Halifax. In the meantime the said bill of exchange in favour of the said Blais, dated

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October 19th, 1895, having been protested by reason of the refusal of Billman, Chisholm & Co. to accept it, Blais recovered judgment on December 19th, 1895, against Wrayton, in the Supreme Court, for the amount due thereon and costs at that suit, which was not defended. On the arrival of the schooner "Ocean Belle" at Halifax, on March 2nd, 1896, the said herring were seized by the defendant under execution issued on the said judgment, and the same day the plaintiff commenced this action. This action was tried without a jury before Mr. Justice Meagher, who on January 2nd, 1897, delivered judgment, in favour of the plaintiff and decided that "the sole question is whether the goods levied upon were the property of Wrayton or of the plaintiff," and that the said goods were the property of the plaintiff, inasmuch as "the voyages (i.e. the December voyages) were undertaken by Wrayton as plaintiff's agent," and that "he (Wrayton) ceased to act as principal and undertook to hold the goods (i.e. the goods on board the 'Ocean Belle,' prior to the commencement of the voyage) as her agent,'' that is, as agent of the female plaintiff. On appeal to the Supreme Court of Nova Scotia, judgment was delivered by Graham, J. and Townshend, J. reversing the judgment of the trial judge, on the ground that the transfer from Wrayton to the female plaintiff of the goods on board the schooner "Ocean Belle" in November, 1895, was void under the statute of 13 Elizabeth, ch. 5; and that therefore the herring purchased in Newfoundland in February, 1895, with the proceeds of those goods and of the other goods purchased by the female plaintiff and placed on board the schooner "Ocean Belle" at the commencement of the December voyage, were the property of Wrayton, and not the property of female plaintiff. From this judgment the plaintiff asserts this appeal. The judgment of the court was delivered by: SEDGWICK, J.: On the 19th of December, 1895, one Narcisse Blais obtained judgment in the Supreme Court of Nova Scotia against one Michael B. Wrayton, a brother of the present appellant, and under an execution issued upon that judgment the defendant as such sheriff levied upon 550 barrels of frozen herring which were then on board the schooner "Ocean Belle," the property of the appellant, whereupon she claiming the herring, brought this action to recover the goods so levied upon, the question to be determined being whether they at the time of the levy were the property of Wrayton or the property of the present appellant. The learned trial judge, Mr. Justice Meagher, gave judgment in favour of the plaintiff, holding that there was a real transaction between Wrayton and his sister, and that no matter what the motive of Wrayton himself was in reference to one or more of certain other creditors the transfer to his sister having been in security for or in payment of a bona fide antecedent debt the transaction was not within the statute 13 Eliz. ch. 5. Upon appeal to the Supreme Court of Nova Scotia the judgment of the trial judge was reversed and it was held that the transaction in question was void as a fraud by Wrayton against his creditors. We are of opinion that the judgment of Mr. Justice Meagher should be restored. There is little question as to the salient features of this case. At the time of the transaction impeached Wrayton owed the plaintiff upwards of $4,000. The goods which were transferred to her by Wrayton from the proceeds of which the goods levied upon were bought were transferred to her on account of this indebtedness. No doubt it was the intention on the part of Wrayton to prevent this seizure under the judgment which he expected Blais would very soon recover against him and for the very purpose of securing his sister at the expense of Blais and with intent either to delay him in his remedies or to defeat them altogether.

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The statute of Elizabeth, while making void transfers the object of which is to defeat or delay creditors, does not make void but expressly protects them in the interest of transferees who have given valuable consideration therefor, and it has been decided over and over ·again that knowledge on the part of such a transferee of the motive or design of the transferor is not conclusive of bad faith or will not preclude him from obtaining the benefit of his security. So long as there is an existing debt and the transfer to him is made for the purpose of securing that debt and he does not either directly or indirectly make himself an instrument for the purpose of subsequently benefiting the transferor, he is protected and the transaction cannot be held void. As Jessel, M. R. said in Middleton v. Pollock at page 108: "It has been decided, if decision were wanted, that a payment is bona fide within the meaning of the statute of Elizabeth, although the man who made the payment was insolvent at the time to his own knowledge, and even although the creditors who accepted the money knew it. . . . The meaning of the statute is that the debtor must not retain a benefit for himself." And that proposition was a mere re-affirmance of such previous decisions as Ho/bird v. Anderson et al; Pickstock v. Lyster; Wood v. Dixie. Reference was made in Mr. Justice Townshend's opinion in the Court of Appeal to the case of Thompson v. Webster but I am unable to see the applicability of that case to the present one. The transaction impeached in that case was held to be valid, but it seems to me clear that the learned Vice-Chancellor Kindersley in the observations which he made to which reference is had was referring, not to transfers for valuable consideration but to voluntary debts. On the whole we are of opinion that the appeal should be allowed, the usual rule as to costs prevailing. C. Impeachment of Fraudulent Preferences The Assignments and Preferences Act first appeared in Ontario as ss. 17 and 18 of C.S. U .C., c. 26 ( 22 Viet., 1859). In 10 Edw. VII, c. 64 (1910), it was enacted in substantially its present form.

ASSIGNMENTS AND PREFERENCES ACT R.S.0. 1960, c. 25. 4. ( 1) Subject to section 5, every gift, conveyance, assignment or transfer, delivery over or payment of goods, chattels or effects, or of bills, bonds, notes or securities, or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made by a person at a time when he is in insolvent circumstances or is unable to pay his debts in full, or knows that he is on the eve of insolvency, with intent to defeat, hinder, delay or prejudice his creditors, or any one or more of them, is void as against the creditor or creditors injured, delayed or prejudiced. (2) Subject to section 5, every such gift, conveyance, assignment or transfer, delivery over or payment made by a person being at the time in insolvent circumstances, or unable to pay his debts in full, or knowing himself to be on the eve of insolvency, to or for a creditor with the intent to give such creditor an unjust preference over his other creditors or over any one or more of them is void as against the creditor or creditors injured, delayed, prejudiced or postponed.

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(3) Subject to section 5, if such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, it shall, in and with respect to any action or proceeding that, within sixty days thereafter, is brought, had or taken to impeach or set aside such transaction, be presumed prima f acie to have been made with the intent mentioned in sub-section 2, and to be an unjust preference within the meaning of this Act whether it be made voluntarily or under pressure. ( 4) Subject to section 5, if such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, it shall, if the debtor within sixty days after the transaction makes an assignment for the benefit of his creditors, be presumed prima facie to have been made with the intent mentioned in subsection 2, and to be an unjust preference within the meaning of this Act whether it be made voluntarily or under pressure. 5. (1) Nothing in section 4 applies to an assignment made to the sheriff of the county or district in which the debtor resides or carries on business or, with the consent of a majority of his creditors having claims of $100 and upwards computed according to section 24, to another assignee resident in Ontario, for the purpose of paying rateably and proportionately and without preference or priority all the creditors of the debtor their just debts, nor to any bona fi,de sale or payment made in the ordinary course of trade or calling to an innocent purchaser or person, nor to any payment of money to a creditor, nor to any bona fi,de conveyance, assignment, transfer or delivery over of any goods or property of any kind, that is made in consideration of a present actual bona fi,de payment in money, or by way of security for a present actual bona fi,de advance of money, or which is made in consideration of a present actual bona fi,de sale or delivery of goods or other property where the money paid or the goods or other property sold or delivered bear a fair and reasonable relative value to the consideration therefor.

IN RE POMMIER, BROCKELSBY v. FREEDMAN-ELLIS LIMITED Supreme Court of Ontario in Bankruptcy and Court of Appeal. 1931 . 13 C.B.R. 77: on appeal, 426. RANEY, J. : The plaintiff is trustee in the bankruptcy of Adrian T. Pommier, who, until his assignment for the benefit of creditors on March 14, 1928, was a retail jeweller at Timmins; and the defendant company is a wholesale dealer in Toronto, and was a creditor of Pommier. The issue directed by Mr. Justice Fisher on May 3, 1928, is whether the return of a quantity of diamonds by Pommier to the defendant company, some months prior to his assignment for the benefit of creditors, was a fraudulent preference as against the trustee in bankruptcy. In February and March, 1927, Pommier purchased from the defendant company unmounted diamonds to the invoice value of $4,206.40. In June following he had a fire in his store. The damages from the fire were mostly to his showcases which had been purchased a few months earlier from the National Showcase Company under a lien contract which required him to keep them insured for its benefit. The insurance on the showcases was $4,000, and that was all the insurance carried by Pommier at the time of the fire . .. . On the happening of the fire, Pommier notified the defendant company and some of his other principal creditors by wire, and within two or three days, Mr.

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Ellis of the defendant company went to Timmins, and for the two following months the defendant company was active in assisting Pommier in the adjustment of his affairs, which were not in good order before the fire, and were further complicated by that event. ... In one of Ellis' interviews with Pommier's banker whilst Ellis was in Timmins, the return of some of the unmounted diamonds was suggested in order to relieve Pommier to that extent of his liabilities. This suggestion was also discussed at that time between Ellis and Pommier. Before Ellis left Timmins he collaborated with Pommier in drafting a re-assuring letter to Pommier's creditors. After Ellis' return to Toronto, he wrote to Pommier on June 23, advising him with reference to a claim of about $500 which was being pressed by one of his creditors, and asking Pommier to let him have as quickly as possible the entire list of his creditors, so that he might get in touch with them. Then on July 7, Ellis wrote again to Pommier.. . . Two days later, on July 9, Ellis wrote to Pommier again. After mentioning another matter he proceeded: "I did mention to Mr. Grasett that we would be willing to take back some of the goods we sold you in order to assist you," and he proceeded to indicate by numbers the stones which he was willing to take back. The total amounted to $1,935 .65 . On July 15, Pommier sent back stones to the invoice value of $2,712.35 .... It is not against the law for a creditor to seek payment of his debt from an insolvent debtor, and there is no prohibition in the law against a preference by the debtor of one of his creditors, except as found in The Bankruptcy Act, sec. 64, and in The Assignments and Preferences Act, R.S.O., 1927, ch. 162, sec. 5 [now sec. 4]. Clearly, The Bankruptcy Act has no application to cases where, as here, the act of preference was not within the three months' limitation. For a similar reason, subsecs. 3 and 4 of sec. 5 [now sec. 4] of The Assignments and Preferences Act, have no application. To succeed in this action the plaintiff must bring himself within subsec. 2 of sec. 4 of that Act which provides that every transfer of goods "made by a person being at the time in insolvent circumstances, or unable to pay his debts in full, or knowing himself to be on the eve of insolvency," to a creditor "with the intent to give such a creditor an unjust preference over his other creditors" shall be null and void. On the language of this subsection, and without the assistance of judicial interpretation, it is clear that three conditions must concur to enable the plaintiff, in such an action as this, to succeed : ( 1 ) the debtor must have been in insolvent circumstances, or unable to pay his debts in full, or must have known himself to be on the eve of insolvency; and (2) the intention of the debtor must have been to give to the favoured creditor an unjust preference; and (3) the effect of the transaction must have been to give a favoured creditor such a preference. But in the course of the years the judicial glosses have added to the plaintiff's burden, and in the present state of the authorities he must also prove; ( 4) that the creditor knew that the debtor's financial situation was that described in the section: ( 5) that there was an intention on the part of the favoured creditor to give a preference; and ( 6) that the preference was not only an unjust but a fraudulent preference. And then, if a plaintiff succeeds in proving all these things, he is still liable to be met with the defence that the transaction was not the voluntary act of the debtor, but the result of pressure from the creditor, or of some other extraneous influence. First, then, was Pommier in insolvent circumstances, or unable to pay his debts in full, or did he know himself to be on the eve of insolvency, when he returned the diamonds? A debtor is legally insolvent when he has not sufficient

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property to pay all his debts, and he is commercially insolvent when he is unable to meet his obligations as they become due in the ordinary course of business (Rae v. Macdonald (1886), 13 O.R. 353, per Rose, J. at pp. 357, 360). My conclusion is that Pommier was insolvent in both senses when he purchased the diamonds from the defendant company in February, 1927, and that this was so at all times between that time and the time of his assignment in March, 1928. Secondly, what was Pommier's intention when he returned the stones? The suggestion of a return of some of the diamonds undoubtedly came from the defendant company. Pommier was, I judge from the evidence, more or less passive in the matter. Without the assistance of the defendant company he saw bankruptcy immediately in front of him, and he was willing to adopt whatever course the company might suggest, that seemed to give a promise of postponing the evil day. Thirdly, the effect of the transaction was undoubtedly to give the defendant company a preference over the other creditors. Fourthly, was the defendant company aware when the stones were returned, that Pommier was in insolvent circumstances, or unable to pay his debts in full, or that he was on the eve of insolvency? There is no doubt that at the time of the preparation of the extension agreement early in August, the defendant company knew that Pommier was insolvent. But did the defendant company know this at the time it received the diamonds back from Pommier? This question can be conveniently considered along with the fifth and sixth questions, - Was it the intention of the defendant company, in accepting the return of the diamonds, to get a preference over the other creditors? and was the preference which the defendant company secured not only an unjust preference, but a fraudulent preference? (Davidson v. Ross (1876), 24 Gr. 22, per Moss, J. A., at p. 81). These questions are not easily answered, and I have reached a conclusion as to them with a good deal of difficulty. Mr. Ellis was an experienced jeweller and I judge from his appearance and evidence, a shrewd and capable business man. He went to Timmins to protect his company's interest. It was important to that interest that he should know just what Pommier's financial position was. He saw Pommier's stock-in-trade, and conferred with Pommier's banker, and assisted Pommier in drafting a reassuring letter to creditors whose paper had matured or was maturing. Then after his return to Toronto, and within a week, he was urging Pommier to hasten to let him have an entire list of creditors with the amounts owing, - because "I want to get in touch with them from this end." and he added "If there are any who have placed their accounts for collection, please let me know." When Ellis returned from Timmins he was, I have no doubt, thoroughly well satisfied of the instability of Pommier's financial position. He knew that Pommier was not then paying his commercial obligations as they became due in the ordinary course of business. In coming to a decision on the evidence as to the knowledge to be imputed to the defendant company of Pommier's insolvency when they accepted the return of the diamonds, and of the intention of Pommier to give and of the defendant company to get a preference over the other creditors, I am not unmindful of what was so well expressed by Mr. Justice Moss in Davidson v. Ross, supra, at pp. 89-90, where the learned Judge emphasizes the onus that is cast upon the plaintiff of proving with satisfactory clearness every essential constituent of a charge of fraud: "He has to meet the general presumption of the law in favour of innocence

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and honesty. It is a matter of every-day experience that Courts declare an impeached transaction to be surrounded with circumstances of grave suspicion; but that the evidence not having carried the case beyond the region of suspicion, and fraud being a thing to be distinctly proved and not to be presumed, the transaction cannot be set aside. Facts must be proved which can lead the judicial mind to no other conclusion than that of fraud. If the evidence in such a case leaves the matter in doubt, the complainant must fail. If the case proved is consistent with honesty, the defendant must succeed." If the evidence in this case had stopped with the return of the diamonds, I think probably I should have come to a conclusion similar to that reached by Mr. Justice Orde in In re Webb (1921), 2 C.B.R. 16, 51 O.L.R. 5,-that the evidence, whilst establishing knowledge on the part of the defendant company of Pommier's financial embarrassment in June, 1927, fell short of establishing its knowledge at that time that he was in insolvent circumstances or unable to pay his debts in full, or knew himself to be on the eve of insolvency. But the evidence did not stop there. When it came to the extension agreement, if the defendant had declined to assist Pommier until the other creditors had been told the facts about the return of the diamonds, it would have been doing what it ought to have done. Some of the creditors, if they had known the facts, would have refused to sign. Insolvency would then, no doubt, have immediately supervened, and the assignee would, in all likelihood have attacked the transaction, as he does now, but with the difference that the presumption would then have been in his favour. The failure of the defendant company and of Pommier to disclose to the creditors generally whom they were asking to sign the extension agreement the fact of the subtraction from Pommier's assets of so large a proportion of his stock-in-trade, - and of that part of his stock-in-trade which was at once the most stable and most liquid, - for the benefit of the defendant company, was not fair dealing with the creditors who were not informed. But it was more than that. It was evidence that both Pommier and the defendant company knew at that time, and were concealing the fact, that there had been an unjust preference, in other words a voluntary, and therefore a fraudulent, preference of the defendant company. Secrecy is one of the badges of fraud. Finally, the case is not within the doctrine of pressure. On the 15th July, 1928, when the stones were returned, Pommier owed the defendant company $3,646.40, but no part of the indebtedness was then presently demandable. The last $100 note which had fallen due on July 4 had been paid, and the $300 note would not mature until August 4. The defendant company was not, therefore, in a position to issue a writ, and the return of the stones was a purely voluntary and friendly act on the part of Pommier. In this respect the case is within the law as stated in Strachan v. Barton (1856), 11 Ex. 647, and Meriden Silver Co. v. Lee & Chi/las ( 1882), 2 O.R. 451. There will be a declaration that the transaction was an unjust preference within subsec. 2 of sec. 5 [now s. 4] of The Assignments and Preferences Act and a reference to the Master to ascertain the value of the returned diamonds as of the date of their return, and judgment for the amount found by the Master, with interest from July 15, 1927, and the costs of the issue and the action, including the reference. On appeal, the judgment of the court was delivered by RIDDELL, J .A.: I have read and reread the evidence and have had the advantage of a full and

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careful argument on both sides; and I am unable to see in the transaction complained of anything but the honest desire of an honest trader to assist an embarrassed customer to avoid bankruptcy by reducing his liability to the former, taking back goods which the debtor found himself unable to dispose of. This is not an unusual practice, and if followed with an honest intention, not the intention thereby to obtain a preference over the other creditors, it is not objectionable or to be avoided as fraudulent against the other creditors or the assignee, who represents them. It is unnecessary to go through the transaction; it is sufficiently described in the reasons for the judgment complained of. No doubt, the dealings of the defendant with the debtor will bear the construction put upon them by the plaintiff, which has been accepted by the learned trial Judge; but everything is equally consistent with honesty of intention and purpose; and the usual presumptions of honesty should prevail. I would allow the appeal with costs, here and below. In Canadian Credit Men's Association Ltd. v. Jenkins, [1928] 3 D .L.R. 139, at p. 146, Orde, J.A. said of the clause "Nothing in section 4 applies ... to any payment of money to a creditor" in s. 5 ( 1) of the Assignments and Preferences Act: "It is noteworthy that, while as to most of the other exceptions provided for by this section there must be bona fides, no such condition is applied to payments made to creditors. If in fact the person paid is a creditor, it is immaterial, under the Ontario Act, whether the payment is intended to prefer the creditor so paid and to defeat other creditors or not, the payment is protected".

CAULFIELD, BURNS & GIBSON LTD. v. KITCHEN AND BROOKS Supreme Court of Ontario. 1956. 5 D.L.R. (2d) 669. LEBEL, J.: This is an attack upon a chattel mortgage dated July 26, 1955, given by the defendant Kitchen to the defendant Leta M. Brooks. The transaction was disputed within 60 days of the date mentioned and counsel for the plaintiffs relies on the prima facie presumption of an unjust preference contained in s. 4(3) of the Assignments and Preferences Act, R.S.O. 1950, c. 26. He also contends that the transaction is void under the Fraudulent Conveyances Act, R.S.O. 1950, C. 148. On November 29, 1952, the defendant Brooks sold her haberdashery business in the Town of Delhi to Kitchen for $20,000 under an agreement. By its terms Kitchen agreed to pay the balance of the purchase-price, namely, $14,900 (with interest at 4% from January 1, 1953, payable yearly on January 1st in each year) in monthly instalments of $150 each, commencing on August 15, 1953. Kitchen did not make his interest payments in 1954 and 1955 but he made his principal payments fairly promptly. The haberdashery business, though owned by the defendant Leta M. Brooks, was managed by her husband. She was inactive in the business and in the events leading up to this suit. Therefore, where I use the name "Brooks" I shall be understood to refer to the husband. Mr. John C. Hanselman, a solicitor practising in Delhi, drew both documents but he said he was not acting for Kitchen at the time of the disputed chattel mortgage. This latter document was given to secure the sum of $12,560, being the balance owing under the agreement, including the interest in arrear. The monthly

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principal payments and the rate of interest remained the same except that the principal payments were made payable on the 1st of the month instead of the 15th as formerly. Kitchen made default under the chattel mortgage and on August 13, 1955, Brooks forced an entry to the store premises, seized the cash receipts and started selling merchandise. He was stopped by an injunction and the parties settled their differences shortly afterwards. Kitchen received his costs and $710, said to have been the value of merchandise sold by Brooks. The present action was commenced on September 23, 1955. The claims of the plaintiffs and those they represent against Kitchen amount to $6,874.15. By agreement the merchandise in the store has been sold and the proceeds amounting to $5,547.37 are held in trust awaiting the outcome of this suit. Before the plaintiffs can succeed under s-s. ( 1 ) or s-s ( 2) of s. 4 of the Assignments and Preferences Act they must show that Kitchen was "in insolvent circumstances or [was] unable to pay his debts in full, or [knew] that he [was] on the eve of insolvency", and even where the transaction is attacked within 60 days they must prove this state of affairs before they can rely on the prima facie presumption of an unjust preference under s-s. (3) . Furthermore, on the authority of Benallack v. Bank of B.N.A. (1905), 36 S.C.R. 120 : "In order to render such an assignment void there must be knowledge of the insolvency on the part of both parties and concurrence of intention to obtain an unlawful preference over the other creditors. Mo/sons Bank v. Halter (18 Can. S.C.R. 88); Stephens v. McArthur (19 Can. S.C.R. 446) ; and Gibbons v. McDonald (20 Can. S.C.R. 587) referred to." (The above excerpt is from the headnote, which is borne out by the text.) The question that first arises, therefore, is : Was Kitchen insolvent or on the eve of insolvency on July 26, 1955, and if he was, did Brooks know that he was in that condition? While the circumstances are suspicious, I am unable to give an affirmative answer to this question upon the evidence. Brooks must have known that Kitchen lacked sufficient working capital from the beginning, because while a chattel mortgage had been discussed at the time he sold the business, he said the idea had been dismissed for the reason that he wanted Kitchen "to get on his feet" before he considered a chattel mortgage, and he must have known that to get on his feet Kitchen would have to be able to buy merchandise on terms that would not be available to him if the business was subject to a chattel mortgage. Brooks said that he heard rumours about Kitchen "not being in very good shape", but only after the delivery of the chattel mortgage. One wonders why in this small town of some 3,000 population he had not heard these rumours before. Brooks knew that Kitchen was not paying the interest under his agreement and knew, as early as August, 1954, that he was giving post-dated cheques in payment of certain past-due accounts for merchandise, and he also knew then, if not earlier, that Kitchen lacked industry and was careless to the point of slovenliness about his accounts generally - all real harbingers of financial trouble. He also must be held to know, because his solicitor Mr. Hanselman knew, that Kitchen had been sued in May or June, 1955 by one Duval. But whether he knew that Kitchen had to refinance his car to settle that debt is not clear. Mr. Livermore for Brooks argues that proof of financial embarrassment is not proof of insolvency, on the authority of Re Webb (1921), 64 D.L.R. 633, 51 O.L.R. 5, and I agree, but embarrassment is a factor to be considered- an important factor. One hears of financially embarrassed persons who were not insolvent but rarely, if ever, of persons in business who were insolvent and were

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not embarrassed financially. However, at the trial Kitchen was a witness for the plaintiffs and he appeared unfriendly to Brooks, no doubt because of the trouble commencing on August 13th, but even so he did not say that he was insolvent or on the eve of insolvency on July 26, 1955. From what he said his indebtedness amounted to about $20,000, that is, the equivalent, approximately, of the consideration he had agreed to pay Brooks for the business, but what the physical assets were worth then, and whether goodwill was included in the purchase-price, he did not say. He did not state the value of his assets at the time he gave the chattel mortgage, or what amount he might have expected to realize from their fair liquidation. No statement of his affairs at any time was put in in evidence. In these circumstances, including the circumstance that there is now only $5,547.37 held in trust awaiting the outcome of this suit, it is impossible to find that Kitchen was insolvent or on the eve of insolvency at the material time. And while I have real suspicion about Kitchen's solvency, as I have said, it follows that Brooks did not know that Kitchen was in the financial condition mentioned in s. 4 of the Act. The argument based upon the Fraudulent Conveyances Act can be dealt with very briefly. The plaintiffs do not have to establish insolvency on this branch of the case, but in commercial cases the attack is made, almost universally, from that point of vantage. Here there is no ground on which it could be held that this conveyance was "made with intent to defeat, hinder, delay or defraud creditors or others" within the meaning of section 2 of this statute. Unlike the Assignments and Preferences Act, it, like the statute, 13 Eliz. c. 5, does not prohibit preferring one creditor to another: McMaster v. Clare (1859), 7 Gr. 550; Ashley v. Brown (1890), 17 O.A.R. 500 at p. 503; Perkins Elect. Co. v. Orpen (1921), 70 D.L.R. at p. 398, 21 O.W.N. 135, following Hopkinson v. Westerman (1919), 48 D.L.R. 597, 45 O.L.R. 208. The question of a preference does not arise under this branch of the case. The action is accordingly dismissed, but, in view of the suspicious circumstances, without costs. LEIGHTON v. MUIR AND WINDSOR SUPPLY CO. LTD. Nova Scotia Supreme Court, 1962. 34 D.L.R. (2d) 332. ACTION by debtor against judgment creditor for injunction against sale of property under execution. COFFIN, J.: This is an action against J. Grant Muir, Sheriff of the County of Hants, and the Windsor Supply Company Limited, a judgment creditor, claiming an injunction restraining J . Grant Muir from selling certain lands and premises in Windsor and claiming a declaration that the judgment does not bind the lands as they were not owned by the judgment debtor Kenneth Leighton. Among other things the plaintiff alleged that the conveyance to herself from Kenneth Leighton was in consideration of her assuming a mortgage to the Eastern Canada Savings & Loan Company. The defendant Windsor Supply Company Limited denied that there was any consideration in the deeds from Kenneth Leighton to the plaintiff and alleged that the conveyance was fraudulent and that Kenneth Leighton was insolvent at the time of the conveyance. The defendant counterclaimed that the deeds be set aside as void against all creditors. The facts as to the conveyances are briefly these : Kenneth Leighton obtained title to the properties in dispute by two deeds, the

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first dated September 28, 1949, and recorded October 12, 1949, in Book 184, p. 584 from Allison Bacon and his wife. This deed conveyed the main property having a frontage of 50 ft. on the eastern side of O'Brien St. in the Town of Windsor in the County of Rants. On August 27, 1953, the adjacent 25 ft. was conveyed to Kenneth Leighton by Walter Cochrane and his wife and this deed was recorded on April 30, 1954, in Book 206, p. 111. The first lot, that is, the 50 ft. lot, was mortgaged on March 15, 1954, to the Eastern Canada Savings & Loan Co. This mortgage was recorded three days later on March 18, 1954, in Book 194, p. 494. The sum secured was $5,000. At this point then the title to both lots was vested in Kenneth Leighton but the main 50 ft. property was encumbered by a mortgage of $5,000. On October 25, 1957, by deed recorded on November 23, 1957, in Book 216, p. 375, the 25 ft. lot was conveyed to the plaintiff Maxine Leighton. The same day and also recorded on November 23, 1957, in Book 217, p. 127, Kenneth Leighton conveyed to the plaintiff the main lot but this conveyance was made subject to the mortgage to the Eastern Canada Savings & Loan Co. On November 13, 1957, the defendant Windsor Supply Co. entered judgment against Kenneth Leighton for $2,738.68 and $47.75 costs. This judgment was recorded on November 13, 1957. It should be noticed here that although the judgment was recorded before the deeds to the plaintiff were actually placed on record, the judgment was taken after the date of either of these deeds. Windsor Supply Co. endeavoured to sell the lots under execution whereupon this action was launched. There was a certain amount of evidence produced at the trial and by commission that Miss Leighton had assisted her family, that is, her mother before her death and also her brother Kenneth by helping out with the household expenses and by advancing funds from time to time. The difficulty with this evidence is that it is very vague and no amounts are actually mentioned. There was an effort made on behalf of the defendant to show that there was fraud on the part of the plaintiff in that she took the deeds on the eve of her brother's departure to the West Coast. Miss Leighton, on the other hand, says that she had discusssed the question of his leaving with her brother over a period because she felt that her brother would be more successful if he went away. A very important point in issue is whether the assumption of the Eastern Canada mortgage by Miss Leighton is adequate consideration for the conveyance of the main property, bearing in mind the fact that the evidence of Mr. Crossley at p. 43 was that the property was worth between $8,500 and $9,000 and the amount due on the mortgage was something over $3,000. The defendant pleads the Assignments and Preferences Act, R.S.N.S. 1954, c. 17 and also the Statute of Elizabeth, 13 Eliz., c. 5. The operative section of the Assignments and Preferences Act is s. 3 which makes void every transfer of property by an insolvent person with intent to defeat, hinder, delay or prejudice his creditors, or any one or more of them. This is modified by s. 4 ( 1 ) ( d) : "4( 1) Nothing in Section 3 shall apply, ( d) to any bona fide gift, conveyance, assignment, transfer or delivery over of any property which is made in consideration of any present actual bona fide payment in money, or by way of security for any present actual bona fide advance of money, or which is made in consideration of any present actual bona fide sale or delivery of property; provided that the money paid, or the

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property sold or delivered, bears a fair and reasonable relative value to the consideration therefor." The Statute of Elizabeth, after making certain transfers void, then provides bys. VI: "VI. Provided also, and be it enacted by the Authority aforesaid That this Act or any Thing therein contained, shall not extend to any Estate or Interest in Lands, Tenements, Hereditaments, Leases, Rents, Commons, Profits, Goods or Chattels, had, made, conveyed or assured, or hereafter to be had made, conveyed or assured, which Estate or Interest is or shall be upon good Consideration and bona fide lawfully conveyed or assured to any Person or Persons, or Bodies Politick or Corporate, not having at the Time of such Conveyance or Assurance to them made, any Manner of Notice or Knowledge of such Covin, Fraud or Collusion as is aforesaid; any Thing before mentioned to the contrary hereof notwithstanding." It is in the interpretation of these statutes that the question of whether or not there was consideration for the transfer of the main 50 ft. lot from Kenneth Leighton to his sister is extremely vital. Kerr on Fraud & Mistake, 7th ed., pp. 335-6 states that:

"In cases of voluntary gifts, it matters not whether or not the volunteers had notice of the fraud; but where there has been a conveyance for value, not only must fraud be shown, but, in order to avoid the transaction as against the purchaser it must be shown that he was privy to the fraud against creditors. Unless this position can be established, the purchaser who has paid his money or other consideration has a right paramount to that of creditors. The question, where the conveyance is for value, is, whether there was an intent to defraud creditors in the parties to the transaction. Whatever fraudulent intent there may have been in the mind of the vendor, it would not avoid the conveyance, unless it was shown to have been concurred in by the purchaser. It could not be contended that the mere fraudulent intent of the vendor could avoid the conveyance, if the purchaser were free from that fraud .... Mere notice of indebtedness or failing circumstances of the vendor, or even that the result of the sale may be to defeat or delay his creditors, or any of them, will not avoid a bona fide purchase, if the purchaser does nothing more in furtherance of any intent the vendor may have of defeating, hindering, or defrauding his creditors by means of the sale." I am satisfied from the evidence of Kenneth Leighton that he was denuding himself of his property at a time when he knew he was seriously indebted to the plaintiff, and if there is no consideration for the transfer to Maxine Elizabeth Leighton, the conveyance must fail. It was contended on behalf of the defendant that on her admission that she was not present when the deed was signed (p. 18) and that she did not know that the clause concerning the Eastern Canada mortgage was in the deed until after she had received it (p. 22), it followed that the assumption of the mortgage could, under no circumstances, be deemed consideration. I cannot agree with that argument. The deed of October 25, 1957 (W/1) covering the main 50 ft. lot, and recorded on November 23, 1957 in Book 217, p. 127, has this clause following the description:

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"The said lands and premises are subject to a mortgage bearing date the 15th day of March, A.D. 1954 which is recorded in the Office of the Registrar of Deeds at Windsor to secure the sum of Five Thousand Dollars which said mortgage forms a part of the consideration for this deed and which the said grantee hereby agrees to assume and pay." The statement from Eastern Canada Savings & Loan Co., (W/3), indicates that the amount due on the mortgage on November 1, 1957, was $3,587.47 and interest of $10.32. The grantee, the plaintiff, did not sign this deed. It has been held that in the absence of an express stipulation the general rule is that, if land is transferred subject to a mortgage, the transferee is under an implied obligation to indemnify the transferor against the latter's liability in respect of the mortgage: Falconbridge's Law of Mortgages, 3rd ed., p. 269. Miss Leighton did say at p. 33 that she knew there was a mortgage on the property and she was prepared to pay it, and at p. 6 she states that the instalments have been paid regularly. I find that under the terms of the document the plaintiff did assume the mortgage and has made the payments therein stipulated. The problem is whether the consideration was adequate in view of the evidence of Mr. Gordon B. Crossley that in 1957 the property was worth between $8,000 and $8,500 and whether adequacy of consideration is a relevant question in any event. The American authorities take a very definite and practical attitude to the problem. Corpus Juris, vol. 27, p. 484, for example, says: "While there are some decisions apparently to the contrary, it is very generally held that inadequacy of consideration is a fact calling for explanation, and, therefore, a badge of fraud, especially when such inadequacy is gross." And at p. 534: "A conveyance in consideration of the assumption of a mortgage or other encumbrance on the property conveyed is based upon a valid consideration, provided the encumbrance equals the value of the property. If the value of the property conveyed exceeds the amount of encumbrance thereon, an agreement by the grantee to pay off the encumbrance is not a valuable consideration as against the grantor's creditors." These principles are supported to some extent by such cases as Crawford v. Meldrum (1866), 3 Gr. E. & A. (U.C.) 101; Strong v. Strong (1854 ), 18 Beav. 409, 52 E.R. 161, where a property having a surplus income of £178 was purchased for an annuity of £60. But it should be noted that in one of the cases cited by Corpus Juris, Carradice v. Currie ( 1872), 19 Gr. 108, Mowat, V.-C. said at p. 111: "Adequacy of consideration is not necessary to maintain a transaction under the 13 Elizabeth (a) ; though in some cases the inadequacy may afford some evidence of guilty knowledge ( b). But a conveyance by a father to his son in consideration of an annuity of less value than the property conveyed does not suggest guilty knowledge of a fraud by the grantor, in the same way that a conveyance for an inadequate price to a stranger sometimes does."

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The same thinking appears in Black v. Fountain (1875) , 23 Gr. 174, where Spragge, C., said at p. 175: "Mrs. Fountain was dowable inchoately, therefore, of property worth say $1,300 - that she gave up, and what she received was an absolute title to the property, the net value of which was $1,700. It is palpable that what she gave bore a very small proportion to what she received. If her dower had accrued, her right would have been a tenancy for life of one-third of a property worth $1,300, and she receives a property in fee worth $1,700. The two things are out of all proportion. It is something beyond mere inadequacy." But there have been definite Canadian decisions indicating that consideration, although inadequate, is sufficient to place the burden of proving the fraud on the party endeavouring to set aside the deed. Owen Sound General & Marine Hospital v. Mann et al., [1953] 3 D.L.R. 417 , [1953] O.R. 643, is one of the most generally quoted cases supporting this view, and I quote Anger, J., at p. 420 D.L.R., p. 646 O.R.: "The conveyance in this action was not voluntary but was based upon good and valuable consideration, apart from the monetary consideration of one dollar. The conveyance was made subject to the existing mortgage of $1,000 . . ." After quoting Falconbridge's Law of Mortgages, 3rd ed., p. 269, referring to the implied obligation of the transferee to indemnify the transferor, he went on - "In the conveyance before me the grantees have that obligation, so the conveyance was based upon valuable consideration." And, at p. 421 D.L.R., p. 646 O.R.: "Adequacy of consideration is not necessary to uphold a transaction under the Fraudulent Conveyances Act . .. " Reutcke v. Reutcke et al. (1958), 66 Man. R. 134 appears to support this

view, but Monnin, J., at p. 139 pointed out that here the defendant "did not put all of his assets out of reach of plaintiff but only changed the nature of his interests in two parcels of real property into shares." In Hickerson v. Parrington (1891 ), 18 O.A.R. 635, at p. 637, Burton, J. A. , in dealing with consideration by way of assumption of mortgage, went so far as to state "that although a deed, even if made for valuable consideration, may be affected by mala {ides, those who undertake to impeach such a transaction on that ground, have a task of great difficulty to discharge." "Inadequacy as between husband and wife or members of a family does not suggest knowledge of a fraud in the same way that a conveyance for inadequate price to a stranger sometimes does: Parker on Frauds on Creditors & Assignments, 1903, p. 87; Banque d'Hochelaga v. Potvin, [1924] 1 D.L.R. 678, 20 A.L.R. 12." In Reaume v. Guichard (1855), 6 U.C.C.P. 170, at p. 172, the trial Judge directed the jury that "as to mere inadequacy of consideration it must be so gross as to startle", and in Bank of Montreal v. Vandine et al. , [1953] 1 D.L.R. 456, at p. 468, it was suggested by Harrison, J., that inadequacy must be such that "shocks the conscience". In Carradice v. Currie (1872), 19 Gr. 108, dealing with 13 Elizabeth, Mowat, V.-C., said at p. 111 :

"The consideration which John contracted to give in lieu of the $1,000, was an annuity of $80 a year as long as either Duncan or his wife should live, with firewood and the use of the orchard. Most of the other things

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agreed to in December, Duncan was by the previous agreement entitled to in addition to the $1,000. These new obligations of John's were an inadequate consideration for the $1,000; but no authority was cited, and no principle was suggested, which would justify us in holding that the inadequacy of the consideration made the transaction void as against a creditor." It is true that the authorities support the view that in transactions between near relatives which have the effect of defeating the claims of creditors, the testimony of the parties must be scrutinized with care, and that where corroborative evidence is available it should be given: Koop v. Smith (1915) 25 D.L.R. 355, 51 S.C.R. 554; Lambert v. De Fore, [1936] 2 D.L.R. 302, 44 Man. R. 110; Union Bank v. Murdock (1917), 37 D.L.R. 522, 28 Man. R. 229; Stewart v. Zacharuk, [1949] 1 W.W.R. 213. The question of corroboration of the consideration is no problem here, however, because we have the terms of the document itself. In my opinion the whole problem is the question of adequacy. The question was considered by the New Brunswick Supreme Court, Appeal Division, in Bank of Montreal v. Vandine et al., [1953] 1 D.L.R. 456. On the trial Harrison, J., at p. 460 summarized the questions to be determined under the Statute of Elizabeth: " ( 1 ) Whether the conveyance in question was made by the debtor with the intent 'to delay, hinder or defraud' his creditors; and- (2) If there was such intent, whether the party buying such property participated in such fraudulent intent. The burden of proof as to fraud by the debtor in making the conveyances is upon the party seeking to set aside such conveyances where, as in this case, the conveyances in question were made for valuable consideration. Parker in his Frauds on Creditors, 1903, says at p. 43: 'But whether a conveyance be fraudulent or not depends upon its being made upon good consideration and bona fide. When the transaction is voluntary the fact that creditors are defeated gives rise to a presumption of fraudulent intent, but where there has been a valuable consideration the presumption does not arise." He then at p. 464 emphasized the principle that in order to succeed in setting aside a conveyance under the Statute of Elizabeth, it is necessary to show that the grantee is party to the fraud and he cited- 15 Hals, 2nd ed., p. 252; Re Johnson (1881), 20 Ch. D. 389; Re Reis, [1904] 2 K.B. 769 at p. 776. The effect of consideration was considered in Mulcahy v. Archibald (1898), 28 S.C.R. 523 and I quote from Sedgewick, J., at p. 529 : "At the time of the transaction impeached Wrayton owed the plaintiff upwards of $4,000. The goods which were transferred to her by Wrayton from the proceeds of which the goods levied upon were bought were transferred to her on account of this indebtedness. No doubt it was the intention on the part of Wrayton to prevent this seizure under the judgment which he expected Blais would very soon recover against him and for the very purpose of securing his sister at the expense of Blais and with intent either to delay him in his remedies or to defeat them altogether. The statute of Elizabeth, while making void transfers, the object of which is to defeat or delay creditors, does not make void but expressly protects them in the interest of transferees who have given valuable consideration therefor, and it has been decided over and over again that knowledge on the part of such a transferee

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of the motive or design of the transferor is not conclusive of bad faith or will not preclude him from obtaining the benefit of his security. So long as there is an existing debt and the transfer to him is made for the purpose of securing that debt and he does not either directly or indirectly make himself an instrument for the purpose of subsequently benefiting the transferor, he is protected and the transaction cannot be held void." Defendant's counsel in the present case made reference to the badges of fraud. Parker's Frauds on Creditors & Assignments at p. 68 lists the principal badges of fraud: ( 1) Generality of conveyance; (2) Continuance in possession by the debtor; (3) A voluntary conveyance pendente lite to defeat an execution; ( 4) Engagement in trade soon after a settlement; ( 5) Some benefit retained under the settlement to the settlor;

And at p. 69 he refers to the badge of secrecy.

Badges (1), ( 2), ( 4) and ( 5) do not apply to the Leighton transfer. ( 3) does not apply if the consideration be considered valuable. Secrecy was argued because the deed was not recorded for a month after the conveyance. Miss Leighton did give some explanation for this. On crossexamination at p. 24 she answered Mr. Kimball: "Q. Why did you wait three weeks to record the deeds? A. Well, in between that time there were other things I still had to get straightened around. The deeds were here. I had my work to do through the week." And at p. 25: "A. Well, between that time and the time I had them recorded, I know there were one or two week-ends I went up home and I had forgotten to take them." The badges of fraud against Kenneth Leighton are many, and if this transfer were voluntary I would have no hesitation in setting it aside. He knew he owed money, which he could not repay without recourse to his property. He left the Province when a writ had just been served on him. Mr. Day, solicitor for the major creditor, had discussed the account in detail with him before the conveyances, and this Kenneth Leighton denied. None the less, in view of the authorities which I have quoted, I do not think the conveyance of the main property can be set aside under the Statute of Elizabeth. The case, however, does not end there. The defendants plead the Assignments and Preferences Act. If they can bring themselves within that statute, their position will be stronger because s. 4 (1 ) ( d) contains the words: "provided that the money paid, or the property sold or delivered, bears a fair and reasonable relative value to the consideration therefor". Parker's Frauds on Creditors & Assignments at p. 87 points out in his Chapter discussing Consideration that the effect of the provincial enactments in this regard should not be overlooked. Section 3 of our Assignments and Preferences Act deals with transfers of property made by an "insolvent person". By s. 1(a): " 'insolvent person' means any person who is in insolvent circumstances, or is unable to pay his debts in full, or knows himself to be about to become insolvent"; Parker, supra, at p. 107 said: "Under the Provincial Acts it is necessary in attacking a transaction as a

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preference to show that it was made when the debtor was in insolvent circumstances or unable to pay his debts in full or knew he was on the eve of insolvency. "This fact of insolvency must in all cases be proved by the attacking creditor, and even in those cases where there is a statutory presumption of invalidity the attacking creditor has none the less to assume the onus of proving insolvency.. . . "A man may be deemed insolvent in the sense of the Acts if he does not pay his way and is unable to meet the current demands of creditors, and if he has not the means of paying them in full as their claims mature, out of his assets realized upon a sale for cash or its equivalent." At p. 108: "Equities of redemption are assets realizable under execution, and must be taken into account." It is quite clear that a voluntary settlement which results in insolvency would be an infraction of the Statute of Elizabeth, and clear evidence of the settlor's intent to defeat and delay his creditors : Sun Life Ass'ce Co. v. Elliott (1900), 31 S.C.R. 91 at p. 94. It is quite another thing to say that it is a breach of the Assignments and Preferences Act. The question of insolvency was considered in Davidson v. Douglas ( 1868) , 15 Gr. 347 at p. 351, where Spragge, V.-C., said : ". . . but, in considering the question of the solvency or insolvency of a debtor, I do not think that we can properly look upon his position from a more favourable point of view than this, to see and examine whether all his property, real and personal, be sufficient if presently realized for the payment of his debts, and in this view we must estimate his land, as well as his chattel property, not at what his neighbours or others may consider to be its value, but at what it will bring in the market at a forced sale; or at a sale when the seller cannot await his opportunities, but must sell; . .. " These principles were accepted in Robinson v. McCauley (1913), 13 D.L.R. 437, 23 Man. R. 781, and I quote Curran, J., at p. 443: "Although clearly he had not the money in hand to discharge his liabilities owing at this time I could not hold that he had not the adequate means in other species of property at his disposal to do so." I refer also to Richards & Brown v. Leonoff (1915) , 24 D.L.R. 180, 25 Man. R. 548. We are still faced with the practical result that Kenneth Leighton was in fact insolvent after making the conveyances. Of that there can be no doubt. He had nothing after the deeds to the plaintiff. He has on his own admission made no effort to pay his bills. In Doucet v. Side Sode et al. (1916), 27 D.L.R. 732, 49 N.S.R. 485 at p. 487 Harris, J., took this position : "Holding as I do that the transfer of the real estate was part of a scheme to defraud creditors, the burden is cast upon those supporting the conveyance to prove that he was able to satisfy his creditors after taking into consideration his subsequent illegal and fraudulent transactions. This they have failed to do. That the property subsequently disposed of in a fraudulent way is to be deducted from his remaining assets in deciding upon his solvency is clearly pointed out in Hunt on Fraudulent Conveyances. He states a number

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of cases in which the debtor is to be considered as insolvent and this is his third proposition: 'Where the settlor was, after the execution of the instrument, in perfectly solvent circumstances, but has since divested himself of so much of the property which was reserved out of the settlement that there is not enough left to pay the debts which he owed at the time the settlement was made.' The Doucet case found the conveyance bad both under the Statute of Elizabeth and the Assignments Act, and the decision was upheld on appeal. This case then appeals to bring the plaintiff Maxine Elizabeth Leighton within the Assignments and Preferences Act. The property sold, on the evidence, was worth at least $8,500. The consideration was the mortgage, on which there was due $3,587.47 plus $10.32. I cannot see that the property sold bears "a fair and reasonable relative value to the consideration therefor." In my view, under this decision, the conveyance fails under the provisions of the Assignments and Preferences Act. The hardship on the plaintiff should not be insurmountable because there should be ample equity in the property to secure a loan sufficient to pay the creditors. In any event under the authorities I cannot see how the creditors can be deprived of all their rights against the property in question by these conveyances from Kenneth Leighton to his sister, particularly in view of the Nova Scotia decision in Doucet v. Side Sode et al., supra. The conveyances to the plaintiff as described in the statement of claim will therefore be set aside as against the second defendant and other creditors of Kenneth Leighton and the first defendant, J. Grant Muir, High Sheriff for the County of Hants, is authorized to proceed to sell the lots therein described, pursuant to the execution referred to in the counterclaim. The plaintiff's claim is dismissed with costs and the counterclaim allowed with costs.

KOOP v. SMITH Supreme Court of Canada. 1915. 25 D.L.R. 355. Appeal from the judgment of the Court of Appeal for British Columbia, 20 D .L.R. 440, 20 B.C.R. 372, reversing the judgment of Hunter, C. J. at the trial, and dismissing the plaintiff's action with costs. The action was brought to set aside a bill of sale executed in favour of the defendant by her brother, at a time when the latter was financially embarrassed, and to have the bill of sale declared void as a preferential assignment in fraud of the rights of the other creditors of the assignor. DUFF, J.: I think this appeal should be allowed and the judgment of the Chief Justice, who tried the action, restored. The majority of the Court of Appeal appear, if I may say so with respect, to have fallen into the error of treating the relationship of the parties to the impeached transaction as possessing no very material significance. The trial Judge, on the other hand, treated the relationship as decisive in this sense that it determined the point of view from which the evidence was to be considered and the all important question of the onus of proof. The trial Judge indeed appears to have laid it down as a proposition of law that a transaction of this kind between two near relatives, carried out in circumstances in themesleves sufficient to excite suspicion, can only be supported (in an action brought to impeach it by creditors) if the reality or the bona

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fides of it are established by evidence other than the testimony of the interested parties; and there is a series of authorities in the Ontario Courts which has been supposed to decide that, and it may be that it is the settled law of Ontario today. I do not think the proposition put thus absolutely is part of the English law or of the law of British Columbia; but I think it is a maxim of prudence based upon experience that in such cases a tribunal of fact may properly act upon that when suspicion touching the reality or the bona fides of a transaction between near relatives arises from the circumstances in which the transaction took place then the fact of relationship itself is sufficient to put the burden of explanation upon the parties interested and that, in such a case, the testimony of the parties must be scrutinized with care and suspicion; and it is very seldom that such evidence can safely be acted upon as in itself sufficient. In other words, I think the weight of the fact of relationship and the question of necessity of corroboration are primarily questions for the discretion of the trial Judge subject, of course, to review; and that any trial Judge will in such cases have regard to the course of common experience as indicated by the pronouncements and practice of very able and experienced judges such as Armour, C. J., and Mowat, V. C. and will depart from the practice only in very exceptional circumstances. I may add that I think it doubtful whether the Ontario decisions when properly read really do lay it down as a rule of law that the fact of relationship is sufficient in itself to shift the burden of establishing the burden of proof in the strict sense. It may be that the proper construction of these cases is that the burden of giving evidence and not the burden of the issue is shifted. (As to this distinction see the admirable chapter IX in Professor Thayer's "Law of Evidence.") In my own view as indicated above, even this would be putting the matter just a little too high; I think the true rule is that suspicious circumstances coupled with relationship make a case of res ipsa loquitur which the tribunal of fact may and will generally treat as a sufficient prima facie case, but that it is not strictly in law bound to do so; and that the question of the necessity of corroboration is strictly a question of fact. Having examined the evidence carefully, I am satisfied that the trial Judge was entitled to take the course he did take and not only that the evidence, as I read it in the record, casts the burden of explanation upon the respondent, but that the testimony given by her brother ought not in the circumstances to be accepted as establishing either the actual existence of the debt or of the bona {ides of the transaction. BRODEUR, J.: The plaintiff's action was for a declaration that the sale of the horses made by T. J. Smith to his sister, the defendant respondent, was null and void under the provisions of the Fraudulent Preference and the Fraudulent Conveyances Acts of British Columbia (R.S.B.C., ch. 93, secs. 2 and 4, and ch. 94, sec. 3). The trial Judge maintained the action on the ground that the conveyance was fraudulent. The Court of Appeal, by a judgment of three to two, reversed the finding of the trial Judge. The debtor, T. J. Smith, was very largely indebted and had given a confession of judgment in favour of the plaintiff, Koop, on February 13, 1912, for the sum of $63,000, and, on May 15 following he sold the larger part of his assets to his sister. He claimed, when under oath at the trial, that the consideration of that sale was the salary he owed to his sister. He said that she had been living with him for eight years and that he had always paid her a salary of $1,500 a year. That evidence was not corroborated and was not accepted by the trial Judge.

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It would have been very easy for Smith to shew by his books or by his cheques that the alleged salary had been paid; but he did not do so. The sister could have given evidence to corroborate her brother; but she would not do so, claiming she was too nervous to appear in public. It is in evidence, however, that she had been able to attend horse shows and to ride horses. The decision of the trial Judge in these circumstances should not have been disturbed. I am of opinion that his judgment should be restored and that the appeal should be allowed with costs of this Court and of the Court of Appeal. [The concurring judgments of DAVIES, IDINGTON, and ANGLIN, JJ. are omitted.] It is obvious from Re Canadian Imperial Bank of Commerce and Ash (1964), 47

D.L.R. (2d) 620 (B.C.) that the Courts will draw the inference of impropriety from

dealings between relatives in impeachment proceedings under fraudulent conveyances legislation as well as in those under fraudulent preferences legislation.

ROYAL BANK OF CANADA v. SULLIVAN AND HERR Supreme Court of Ontario. 1956. 6 D.L.R. (2d) 559. THOMPSON, J.: This is an action brought by the plaintiff bank, a judgment creditor of the defendant Sullivan, on behalf of itself and all others of his creditors, to set aside a certain mortgage dated March 2, 19 54 ( ex. 8), made by the defendant Sullivan (his wife Annabel joining to bar her dower) in favour of the defendant Herr, for securing repayment of the sum of $4,690.72 and interest upon the security of certain lands in the Village of Hastings, Ontario, referred to in the evidence as "the garage property." The plaintiff seeks to avoid the impeached instrument as a fraudulent conveyance under the provisions of the Fraudulent Conveyances Act, R.S.O. 1950, c. 148, and also as constituting a fraudulent or unjust preference within the meaning of the Assignments and Preferences Act, R.S.O. 1950, c. 26. The defendant Sullivan purchased the garage property in the year 1946 and thereupon erected a building and established himself a general garage business. For some few years he enjoyed an apparent measure of business success. By the year 1951 he had established a line of credit with the plaintiff bank and from then on and from time to time it made him advances, until in the month of November, 1953, we find him indebted to the bank in the sum of approximately $19,000. For this the plaintiff held three demand promissory notes and the personal guarantee of his wife, but little or no other security. After urging reduction or liquidation of the loan without success, the bank finally on November 27, 1953, instituted action against Sullivan and his wife to recover the monies owing. He was served with the writ of summons on December 4th, 1953. These proceedings culminated in a judgment against him, upon an opposed motion for judgment under R. 57, on March 2nd, 1954, (ex. 5). A writ of fieri facias (ex. 7) issued to the Sheriff of the United Counties of Northumberland and Durham and was filed with him on March 29, 1954. Some abortive attempt was made by the Sheriff to execute the writ; nothing was realized; and the whole of the judgment and costs remains unpaid. Although no return of the writ was made, it appears apparent that Sullivan had not then nor has he now any exigible assets. At the time the bank commenced action to recover its loans Sullivan was still the owner of the garage business and property and in addition held and owned several parcels of real property. His equity in these assets, he himself values at

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$15,000. At the same time, upon his own admission, his liabilities then overdue, and which he says he was unable to meet, amounted to approximately $30,600. He was hopelessly insolvent and remains so. As he himself puts it upon his examination for discovery, which was read into the evidence at trial, he was "bankrupt." He was admittedly angry at the bank's action, and after having avowedly expressed his intention of hindering and defeating the bank's recovery, he on November 12, 1953, commenced a process of denudation and proceeded to strip himself of his assets. Between that date and the date the bank recovered its judgment, he had transferred, handed over or conveyed, including the garage undertaking, all of his assets, with the exception of the garage real property, to his employee son Bernard Joseph Sullivan, who in tum mortgaged a substantial portion of them to some of his father's creditors and to secure his father's obligations. On the date the bank recovered judgment he mortgaged his only remaining asset, the garage real property, to his co-defendant in this action, by way of the instrument which is now under attack. The defendant Herr is a drover and rancher with some 25 years' experience as such. He resides at the Township of Percy, some four miles from Sullivan's place of business. He is a man of reputed financial substance and an experienced lender of money. He has known Sullivan for some 15 years and of late years has been a frequent visitor at his garage in Hastings, a village of some 950 inhabitants. He posed in the witness-box as an ignorant, illiterate and inexperienced man of business. I am not at all convinced that that is his true role. He impressed me as a man of inherent and native shrewdness and while perhaps uneducated, in the academic sense of the word, as one who, through the hard school of experience, had gleaned a reasonably acute knowledge of business affairs. Nor am I satisfied that his relationship and association with Sullivan has been of that casual nature in which they would both have me believe. The mortgage in question was admittedly given to secure an antecedent or preexisting debt owing by Sullivan to Herr. It is said that Herr advanced or loaned to Sullivan in January of 1950 the sum of $1,000, in February of 1950 the sum of $1,135 and in December of 1951 the sum of $2,000. On March 2, 1954, the amount owing on these loans together with interest was stated to be $4,135.72, the expressed consideration for the mortgage. None of these monies have been repaid. The son Bernard Joseph, as the voluntary transferee of his father's business and business personal assets is still carrying on business in the mortgaged premises, with no overt change of name or ostensible change of business conditions. There can be no question that the result of this conveyance by way of mortgage has been in fact to hinder, delay and defeat the plaintiff and others of Sullivan's creditors in the recovery of their just claims as against him. This result, however, is not in itself sufficient to establish fraudulent intent in such a case as this. Once good or valuable consideration to support the transaction has been shown, proof of an actual intention to defraud creditors of the grantor must exist and there must be a concurrence of such intention on the part of the grantor and the grantee before the conveyance can be avoided under the Fraudulent Conveyances Act: Hickerson v. Parrington (1891), 18 O.A.R. 635; Ferguson v. Lastewka, [1946] 4 D.L.R. 531, O.R. 577. An existing debt is sufficient consideration to support the transfer, in the absence of actual fraud on the part of the grantee: Mulcahy v. Archibald (1898), 28 S.C.R. 523. Under the Assignments and Preferences Act, in the absence of attack upon

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the transaction within 60 days after its consummation, the presumptions provided for by s. 4 thereof do not arise, and the plaintiff is driven to establish a concurrence of fraudulent intent upon the part of the debtor and the creditor to create an unjust preference: Connerty v. Cross (1922), 22 O.W.N. 467; Johnson v. Hope (1890), 17 O.A.R. 10; Ashley v. Brown (1890), 17 O.A.R. 500. But where the natural consequence of the alienation is to delay, hinder or defraud creditors, or the circumstances under which the alienation is made, bear one or more of the badges or indicia of fraud, the onus of upholding the alienation is imposed upon the defendants, even in cases where there has been an actual, present advance of money: Struthers v. Chamandy (1917), 42 O.L.R. 508 at p. 520. In all cases, a dominating fraudulent intention on the part of the transferor to which the transferee is privy will override all enquiry into the consideration: McMullen v. Dr. Barnardo's Homes Nat'[ Inc. Association (1924), 26 O.W.N. 168; Ferguson v. Lastewka, supra; Munro v. Standard Bank (1913), 16 D.L.R. 293, 30 O.L.R. 12. As in many cases of this nature, where avertments and denials of fraud and unjust dealing pertain, the evidence here is in large measure conflicting and highly controversial. I am completely unimpressed with the veracity of the defendant Sullivan and the witnesses Bernard Joseph Sullivan and John S. Black and where their evidence comes into conflict in material matters with that of the witnesses Young and Faulkner called by the plaintiff, I prefer to and do accept the testimony of the latter. The evidence of the defendant Sullivan was ripe with inconsistencies and much of his testimony at trial was flagrantly opposed to that upon his examination for discovery and upon his examination as a judgment debtor in the previous proceedings. In the light of his expressed intention on December 4, 1953, in conversation with Young, the local manager of the plaintiff bank, wherein he stated he would do everything he could to prevent the bank receiving a five cent piece, his story now is in most instances wholly incredible. That he immediately set out to carry out his avowed intention is perfectly patent. The evidence of the son, Bernard Joseph, I consider as untrustworthy. Obviously he has been and continues to be a fraudulent instrument for his father's protection in carrying out an intended scheme of unjust transactions. Concurrently in another action and at the current Sittings, he has admittedly been, and in effect, has been judicially declared to be, a privy to his parent's fraud. The witness Black, a public accountant, charged for some years with the , supervision of the accounts of the defendant Herr, appeared wholly partisan. Not only am I convinced that at all material times was he fixed with knowledge of the insolvency of the defendant Sullivan, but that the transaction in question was in the final analysis brought about by his manipulation. It appeared to me that he was not determined to vindicate his complicity at all costs. His interest throughout has been much more intense than one would expect from the mere keeper of his customer's books. The defendants have pleaded and attempted to prove an antecedent oral agreement inter se to give security in the form and of the nature in which it was ultimately given, in an effort to negative fraudulent intent. While such an agreement, if definite and clearly proved may often rebut a presumption of such intent, I apprehend that it becomes the duty of the Court in cases where such is raised, to scrutinize the evidence relating to such agreement with jealous suspicion. See Montgomery v. Corbit (1896), 24 O.A.R. 311 at pp. 315-6; Kerry v. James (1894 ), 21 O.A.R. 338 at pp. 340-1.

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After giving the evidence bearing upon such alleged agreement, that close scrutiny which it deserves, I conclude that no such contract was made or was in existence, at least until a week or two before the mortgage to Herr was actually given; and then only for the purpose of carrying out the concurrent intention of the parties concerned to create in Herr a preference over the plaintiff. Sullivan, upon his examination as a judgment debtor on June 4, 1954, stated that the mortgage to Herr was first mentioned only a day or so before March 1, 1954. While that statement in itself, made upon such occasion, is not evidence against the defendant Herr and should not be treated as such, it is to be observed that it, together with other admissions made by Sullivan upon the same occasion and upon his examination for discovery, is adopted and admitted by him as being true and correct in his cross-examination at trial. Both defendants appear and plead as of record by a common solicitor and are not at issue. Herr's ostensible title is derived from Sullivan and he claims through or under him. In any event, the evidence apart from this, . as a whole, leads me to believe that the agreement to give security was not made, if made at all, until the defendants were fully aware of the plaintiff's impending judgment and with a view to defeating it. Upon the evidence which I accept, I find that Herr on at least one occasion accompanied by Black, attended at the plaintiff's offices at Hastings on December 28, 1953, early in January of 1954 and again at the end of the month of February, 1954, or on March 1, 1954, both aware that the bank had commenced action against Sullivan and with a view to obtaining such information as they could with respect to the progress and status of such action. Sullivan states that at the time it had become common knowledge in the small Village of Hastings that the bank was closing down upon him. On the occasion of his last visit Herr told the manager, Young, that he was going to see that he got his money ahead of the bank. He immediately proceeded to take steps to carry out his intention through the offices of his agent Black, who took him accompanied by Sullivan on March 1, 1954, to the office of one P. D. Scollard, a solicitor in Peterborough, and a stranger to both Sullivan and Herr. On that occasion instructions for the mortgage were given by Black. It is significant that Black instructed Mr. Scollard to register the mortgage at once. Owing to the absence of Sullivan's wife, the mortgage documents were not completed until the following day, March 2nd, when Mr. Scollard drove from Hastings to Colborne to register them. Black admits that in November of 1953 he gained some knowledge of Sullivan's business affairs and that he advised Herr to get matters in shape insofar as Sullivan was concerned. His subsequent conduct leaves no manner of doubt in my mind that he was fully or substantially aware of Sullivan's insolvency. His knowledge throughout, in his capability as Herr's agent is attributable to his principal : Burns & Lewis v. Wilson (1897), 28 S.C.R. 207; Kvasnedsky v. Birnbaum (1923) , 25 O.W.N. 29. Upon his examination as a judgment debtor, already referred to, the defendant Sullivan stated that he had told Herr prior to the taking of the mortgage that he was indebted to the plaintiff bank and that it was closing down on him and also that he was indebted to others. Again, he admits and adopts those statements, upon cross-examination at trial, as being true and correct. The following are some of the questions and answers so read into the evidence at trial : "Q. 144. Did you discuss with Herr - how did you come to give a mortgage to Herr? A. Herr wanted his money. He heard that the Royal

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Bank were talcing action against me, they were suing or something to the effect. It went all over like wild fire. "Q. 145. Did he have a conversation with you? A. He asked me "Q. 146. What did he say to you? A. He wanted some money or security and the only thing I had at the time was the garage that I could give him for security. "Q. 147. Did he hear of the Royal Bank? A. He heard of the Royal Bank. In fact took his account out of the Royal Bank on account of it. "Q. 148. Did he hear the Royal Bank was suing you? A. That they were closing down on me. "Q. 149. What did you tell him? A. I told him definitely they were, I couldn't give him his money, so all I could offer was a mortgage on the garage.... "Q. 160. Was that the first time that the mortgage was mentioned, on the first of March '54? A. It might have been mentioned a day before, but we decided that was the only thing I could give him. I had no money and could only give him a mortgage for security for what I owed him .... "Q. 770. And that was in your mind you were going to give the other creditors preference over the bank? A. Yes, because they weren't bothering me. They were giving me a chance. "Q. 771. You were angry at the bank for suing you. A. I wasn't in very good humour about it. "Q. 772. You were going to give the other creditors preference over the bank? A. I had nothing to give the bank only what I offered them." I can place no reliance upon the alleged honest intentions of the defendant Herr. I do not accept his protestations of honesty for reasons already stated. The question of intent to defraud creditors is one of fact which the Court must determine on the merits of each particular case, after taking into account all the circumstances surrounding the making of the conveyance: Ferguson v. Lastewka, [1946] 4 D.L.R. at p. 535. The circumstances in this case are, to my mind, consistent with but one conclusion, namely; that the transaction between the defendants was a fraudulent scheme upon the part of both parties to defeat, hinder and delay the plaintiff and other creditors of Sullivan and made with the predominant intention on the one hand to give and on the other to receive an unjust preference. The defendants resort to the doctrine of pressure in an effort to uphold the impeached transaction. I am not convinced that there was in fact pressure in the sense that the term is employed in s. 4 of the Assignments and Preferences Act. Moreover, as the dominating intention of both defendants was to secure an unjust preference over the plaintiff bank, and avowedly so, the evidence tendered as to pressure, even if accepted, would not be sufficient to protect the transaction: See Clemmow v. Converse (1869), 16 Gr. 547 at p. 549; Munro v. Standard Bank, 16 D.L.R. 293; Exp. Hall, Re Cooper (1882), L.R. 19 Ch. 580 at p. 585. As bearing upon the question of intent, there are readily discernible in the evidence, badges of fraud other than those already specifically dealt with; for example, the secrecy of the transfer of Sullivan's business undertaking to his son and the feverish haste to complete and register the mortgage instrument on the eve of the bank's judgment. In the result the plaintiff's action succeeds and there will be judgment declar-

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ing that the mortgage from the defendant John Alphonsus Sullivan (his wife Annabel joining to bar her dower) to his co-defendant James Patrick Herr, bearing date March 2, 1954, and registered as No. 2836 for the Village of Hastings is null and void as against the plaintiff and other creditors of John Alphonsus Sullivan. The mortgage as against such creditors will be set aside. The plaintiff will have its costs of action against both defendants. ASHLEY v. BROWN Ontario Court of Appeal. 1890. 17 O.A.R. 500.

This was an appeal by the plaintiff from the judgment of the County Court of Hastings in an interpleader issue. The plaintiff in the issue was an execution creditor of one Brenton, and asserted his right to seize certain chattels which the defendant claimed as having been purchased by him from Brenton on the 21st of March previously. The action in which the execution was issued was for crim. con., and was commenced on the 25th of March, and tried on the 30th of April. Judgment was granted for $5,000, the defendant Brenton not having appeared at the trial, having absconded two days previously. Execution was issued on the 4th of May, and the seizure was made on the 10th of May. The case made by the plaintiff at the trial of the issue was that at the time of the purchase by the defendant on the 21st of March, the defendant was a creditor of Brenton, that the latter was insolvent, and that the transaction was invalid as a fraudulent preference under R.S.O. ( 1887), ch. 124 .. .. OSLER, J. A. : But on another ground it is evident that the plaintiff fails. His action was commenced on the 25th of March, 1889. He was not a creditor, but he had a cause of action for crim. con. The transaction now impeached took place on the 21st of March, 1889, and though the plaintiff was at liberty to attack it under the Statute of Elizabeth, it is difficult to see that it is open to him to do so under the Assignments and Preferences Act, R.S.O. (1887) , ch. 124, which in terms avoids certain transactions by way of preference as to creditors only. If the defendant was not a creditor he must, in order to avoid the transaction, rely upon the Statute of Elizabeth and prove that it was devised and contrived to delay, hinder, and defraud him. It is clear, however, that at the most, it was a preference only, which is not avoided by that statute. The appeal must be dismissed. MACLENNAN, J. A. : . .. The present plaintiff was not a creditor at the time of the sale to the defendant and did not become a creditor until about six weeks afterwards when he obtained his judgment against Brenton. He had not even commenced his action when the defendant bought the goods. It is clear, therefore, that the part of the section 2 of the Act which relates to preferences is quite inapplicable to this case. The statute of Elizabeth speaks of creditors and others. The Ontario statute speaks only of creditors. It has been held that the former statute annuls sales and conveyances made with intent to delay, hinder, or defraud future creditors, as well as persons who were creditors at the time of the transactions, for it is evident that a man intending to go into business may put his property out of his hands in order to put it beyond the risks and chances of trade. But I am at a loss to see how there can be a preference in respect of a person who is no creditor at all at the time and who does not become a creditor until long after the act complained of. I, therefore, think

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that even if the defendant knew of the insolvency of the debtor, the plaintiff could not attack his purchase on the ground of preference. HAGARTY, C. J. 0. and BURTON, J. A. concurred. RE SKINNER Supreme Court of British Columbia. 1960. 27 D.L.R. (2d) 74. WILSON, J.: In this application to set aside a conveyance by the judgment debtor to his wife as a fraud upon creditors these facts and dates are plain: October, 1953. The judgment debtor had a heart attack and decided to try to protect his wife and daughter against succession duties. Thereafter in each of the years 1953, 1954, and 1955 he gave his wife $1,000 and gave his daughter $500. December, 1956. On the advice of his solicitor and his accountant, again relating to succession duty, he transferred to Skinner Investments Ltd., a company incorporated for the purpose, all his shares in Skinner Atkins Ltd., his principal asset and source of income. The shares in the new company were of two classes, redeemable preferred shares and voting shares. The debtor gave to members of his family all the redeemable preferred shares and retained the voting shares. Since the object of this transaction, as stated by him, was to divest himself of dutiable assets I must assume that it had this effect and that he deprived himself of all exigible interest in Skinner Atkins Ltd. About March, 1959. The debtor instructed his solicitor to prepare a conveyance from himself to his wife of his one-half interest in the matrimonial home, the wife already owning the other half. This was done as a result of earlier advice given to the debtor by his solicitor and by his accountant to the effect that he should in view of his health and for succession duty purposes, take advantage of new legislation which allowed him to make a gift up to $10,000 in any one year. This instruction was not, as will later appear, immediately carried out. October 25, 1959. The debtor guaranteed the indebtedness of Skinner Atkins Ltd. to the creditor. October 29, 1959. The debtor conveyed to his wife his one-half interest in the matrimonial home. At that time the only remaining asset of the debtor was $4,500 in bonds, subsequently sold by him in early 1960 in order, as he says, to enable him to live. At that time Skinner Atkins Ltd., although showing a balance sheet with a surplus of $60,000 was not, as a matter of fact, meeting its obligations in the ordinary course of business but was paying its creditors from time to time such sums as it could afford on account of, not in full of, its indebtedness, and this under pressure. January 29, 1960. Skinner Atkins Ltd., went into bankruptcy. August 17, 1960. The creditor secured judgment by default against the debtor on his guarantee for $18,104.53. There is no proof that the intention of the debtor when he instructed his lawyer in March, 1959 to arrange to convey the property to his wife was a guilty or

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fraudulent one. Through delay on the part of his solicitor, no fault of his, the instruction was not carried out until a few days after he had signed the guarantee on which he has been found liable. Now at the time his assets were $4,500 in bonds, since disposed of, and his interest in the house. If there were no evidence on his previous instructions to convey the one-half interest in the house to his wife it seems to me I must find clear evidence of a fraudulent conveyance. The debtor knew that the primary debtor, Skinner Atkins Ltd., was in shaky financial condition, he knew that he was giving away to his wife his last asset of any magnitude, and he knew, having been advised by his lawyer, of his possible liability under the guarantee for a large amount. It seems to me that Koop v. Smith (1915), 25 D.L.R. 355, 51 S.C.R. 554 would clearly be applicable and that I must find an intent to defraud. But the debtor relies strongly on Henn v. Foreman, [1940] 1 D.L.R. 714, 54 B.C.R. 471. In that case a debtor after judgment against him, transferred to his wife, a one-half interest in certain property. I cite from the judgment of Macdonald, J. A. at p. 715: "Respondent to succeed must establish an intention to delay, hinder or defraud creditors. One must look at all the circumstances surrounding the transfer and determine whether or not it was executed with the intent aforesaid. The evidence was very scanty. A few admitted facts only were proven by respondent, viz., the judgment: failure to pay although no execution was issued: the transfer to the wife and the execution of mortgages. "In Koop v. Smith (1915), 25 D.L.R. 355, 51 S.C.R. 554 a bill of sale of chattels was given by a brother financially embarrassed to his sister. It was held that where there were suspicious circumstances in respect to a transaction between relatives the fact of relationship put the burden of explanation upon the parties thereto; also that the evidence of relatives should be scrutinized with care and suspicion (p. 358). Accepting this statement as binding, I am clearly of the opinion that appellants fully discharged this burden. A declaration was produced, executed four years prior to the impugned transaction, signed by the husband and reading as follows: 'Haney, B.C., Dec. 23, 1934. "In the event of anything happening to me before the matter can be cleared up by proper transfer I wish to acknowledge that all of the moneys used in construction of our home at Haney, B.C., (the lot referred to) come from my wife's estate and that I hold a one-half interest in the property in trust for her and will as soon as convenient give her a deed for the same. 'Signed Ralph P. Foreman.' "There is no evidence ( nor is it a fair inference to suggest) that this is not a genuine document. While objection was taken to its admission no attempt was made by cross-examination or otherwise to impugn it. Credible evidence too was given by independent witnesses showing that prior to the purchase of the lot the wife obtained a substantial sum of money from her father's estate. Both parties testified it was purchased with her money, placed in a joint account. A real estate agent who attended to the transfer testified that title was placed in the husband's name to enable him to exercise the franchise." It is clear that the debtor in that case satisfied the Court not just that he had formed a previous intention to give the property to his wife but that she was legally entitled to have the property conveyed to her. If such entitlement existed, there was no reason why he should not, despite his own debts, effectuate it.

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But that is not the case here. The wife had no legal rights, prior to the date of the conveyance, to the property conveyed. It was not deeded to her as of right but as a gift. Therefore, I think, the debtor was, on August 29, 1959, dealing not with his wife's property, as in Henn v. Foreman, but with his own property, which he was giving away, and it must not be forgotten that, since he occupied the home with his wife, he could derive benefit from having the property execution-proof. Therefore I think that his earlier honest decision is irrelevant; the things that matter are the things that were or should have been, in his mind at the date the deed was signed (not, as suggested by counsel, the date of registration, because registration was a matter over which he had no control) . Those things, as I have already said were such as to raise a presumption of fraud and that presumption has not been rebutted. Further, I am satisfied that the judgment creditor's security is deficient; that the book accounts assigned to it are not adequate security. Therefore the judgment creditor has discharged the burden cast upon him by such decisions as McLean v. Ratekin, [1926) 4 D.L.R. 174. Next I must deal with the judgment debtor's argument that the judgment creditor has no status to take these proceedings under s. 7 of the Fraudulent Preferences Act, R.S.B.C. 1960, c. 156. I refer to Ashley v. Brown (1890), 17 O.A.R. 500. There action was brought to set aside an allegedly fraudulent preference of one creditor by transfer to him of certain property. Maclennan, J. A. says this, at pp. 503-4: "The present plaintiff was not a creditor at the time of the sale to the defendant, and did not become a creditor until about six weeks afterwards when he obtained his judgment against Brenton. He had not even commenced his action when the defendant bought the goods. It is clear, therefore, that the part of the section 2 of the Act which relates to preferences is quite inapplicable to this case. The statute of Elizabeth speaks of creditors and others. The Ontario Statute speaks only of creditors. It has been held that the former statute annuls sales and conveyances made with intent to delay, hinder, or defraud future creditors, as well as persons who were creditors at the time of the transaction, for it is evident that a man intending to go into business may put his property out of his hands in order to put it beyond the risks and chances of trade. But I am at a loss to see how there can be a preference in respect of a person who is no creditor at all at the time, and who does not become a creditor until long after the act complained of. I, therefore, think that even if the defendant knew of the insolvency of the debtor, the plaintiff could not attack his purchase on the ground of preference." This decision has been cited and approved in Gurofski v. Harris (1896), 27 O.R. 201. In Innes et al. v. Cameron Valley Land Co., [1919) 1 W.W.R. 751 Macdonald, J. appears at p. 760 to have reached, without reference to Ashley v. Brown, the same conclusion. In Hopkinson v. Westerman ( 1919), 48 D.L.R. 597 at p. 601 , 45 O.L.R. 208 at p. 214, Middleton, J. approves of Ashley v. Brown. It is to be noted that all these cases deal with transactions of the nature of fraudulent preferences. They are essentially contests between creditors, one of whom is alleged to have been unfairly preferred by a transfer of property to him by the debtor. Thus it is clear that both litigants, the preferred and the unpreferred creditor,

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must, at the time of the allegedly fraudulent transfer, according to these decisions, have had the status of creditors. Has this ruling any relevance here? This is not an attempt by one creditor to set aside a preferential transfer to another creditor. It is a bid by a judgment creditor to set aside a conveyance as being, in the words of s. 7 "made to defeat, hinder, delay, prejudice, or defraud creditors." I can see that in the preference cases it is only logical that if one creditor is to attack a payment to another as preferential when made then he, the attacking creditor, must also have had the status of creditor at that time. If he had not, there could be no preference, because the debt to the attacking creditor did not exist at the time. Therefore it could not be said that another creditor was preferred over him. It will further be noted that the wording of s. 7 of our Act is not the same as that of s. 5 of the Ontario Act referred to in the Ontario judgments. I think that my decision must be entirely governed by that of the B.C. Court of Appeal in New/ands Sawmills Co. v. Bateman (1922), 70 D.L.R. 165, 31 B.C.R. 351. The application there, as here, was under the summary procedure set up by s. 7 of the Fraudulent Preferences Act. No fraudulent preference was involved, but a fraudulent voluntary conveyance by the debtor to his wife. The plaintiff was not a creditor at the time of the conveyance but was probably, on the contrary, in debt to the defendant. It subsequently became a judgment creditor and made its application, alleging that there was fraud because before making the voluntary conveyance the defendant had entered into a hazardous contract. Martin, J. A. as he then was, says at p. 171 D.L.R., p. 359 B.C.R.: " It thus becomes apparent that the principle is based upon the contemplated entry into a trading or other [my italics] venture which 'might' lead to indebtedness merely, and it is not necessary that the business should be of a hazardous nature."

Surely if this is correct then it must follow, a fortiori, that a defendant who has just entered into a contract which, as his solicitor has told him, could involve very large and undefined liabilities is in an even worse position. And surely there is implied in this ruling the right of such a creditor as the applicant here to make this application. I think that the applicant must succeed and that the conveyance must be declared void. Costs, except those previously awarded to the judgment debtor, will go to the judgment creditor. D. The Constitutionality of Provincial Fraudulent Preference Legislation THE VOLUNTARY ASSIGNMENTS CASE Privy Council. [1894] A.C. 189. LORD HERSCHELL, L. C. : Their Lordships proceed now to consider the nature of the enactment said to be ultra vires. [what is now s. 13 of the Ontario Assignments and Preferences Act] It postpones judgments and executions not completely executed by payments to an assignment for the benefit of creditors under the Act. Now there can be no doubt that the effect to be given to judgments and executions and the manner and extent to which they may be made available for the recovery of debts are prima facie within the legislative

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powers of the provincial parliament. Executions are a part of the machinery by which debts are recovered, and are subject to regulation by that parliament. A creditor has no inherent right to have his debt satisfied by means of a levy by the sheriff, or to any priority in respect of such levy. The execution is a mere creature of the law which may determine and regulate the rights to which it gives rise. The Act of 1887 which abolished priority as amongst execution creditors provided a simple means by which every creditor might obtain a share in the distribution of moneys levied under an execution by any particular creditor. The other Act of the same year, containing the section which is impeached, goes a step further, and gives to all creditors under an assignment for their general benefit a right to a rateable share of the assets of the debtor, including those which have been seized in execution. But it is argued that inasmuch as this assignment contemplates the insolvency of the debtor, and would only be made if he were insolvent, such a provision purports to deal with insolvency, and therefore is a matter exclusively within the jurisdiction of the Dominion Parliament. Now it is to be observed that an assignment for the general benefit of creditors has long been known to the jurisprudence of this country and also of Canada, and has its force and effect at common law quite independently of any system of bankruptcy or insolvency, or any legislation relating thereto. So far from being regarded as an essential part of the bankruptcy law, such an assignment was made an act of bankruptcy on which an adjudication might be founded, and by the law of the Province of Canada which prevailed at the time when the Dominion Act was passed, it was one of the grounds for an adjudication of insolvency. It is to be observed that the word "bankruptcy" was apparently not used in Canadian legislation, but the insolvency law of the Province of Canada was precisely analogous to what was known in England as the bankruptcy law. Moreover, the operation of an assignment for the benefit of creditors was precisely the same, whether the assignor was or was not in fact insolvent. It was open to any debtor who might deem his solvency doubtful, and who desired in that case that his creditors should be equitably dealt with, to make an assignment for their benefit. The validity of the assignment and its effect would in no way depend on the insolvency of the assignor, and their Lordships think it clear that the 9th section would equally apply whether the assignor was or was not insolvent. Stress was laid on the fact that the enactment relates only to an assignment under the Act containing the section and that the Act prescribes that the sheriff of the county is to be the assignee unless a majority of the creditors consent to some other assignee being named. This does not appear to their Lordships to be material. If the enactment would have been intra vires, supposing sect. 9 had applied to all assignments without these restrictions, it seems difficult to contend that it became ultra vires by reason of them. Moreover, it is to be observed that by sub-sect. 2 of sect. 3, assignments for the benefit of creditors not made to the sheriff or to other persons with the prescribed consent, although they are rendered void as against assignments so made, are nevertheless, unless and until so avoided, to be "subject in other respects to the provisions" of the Act. At the time when the British North America Act was passed bankruptcy and insolvency legislation existed, and was based on very similar provisions both in Great Britain and the Province of Canada. Attention has already been drawn to the Canadian Act. The English Act then in force was that of 1861. That Act applied to traders and non-traders alike. Prior to that date the operation of the Bankruptcy Acts

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had been confined to traders. The statutes relating to insolvent debtors, other than traders, had been designed to provide for their release from custody on their making an assignment of the whole of their estate for the benefit of their creditors. It is not necessary to refer in detail to the provisions of the Act of 1861. It is enough to say that it provided for a legal adjudication in bankruptcy with the consequence that the bankrupt was divested of all his property and its distribution amongst his creditors was provided for. It is not necessary in their Lordships' opinion, nor would it be expedient to attempt to define, what is covered by the words "bankruptcy" and "insolvency" in sect. 91 of the British North America Act. But it will be seen that it is a feature common to all the systems of bankruptcy and insolvency to which reference has been made, that the enactments are designed to secure that in the case of an insolvent person his assets shall be rateably distributed amongst his creditors whether he is willing that they shall be so distributed or not. Although provisions may be made for a voluntary assignment as an alternative, it is only as an alternative. In reply to a question put by their Lordships the learned counsel for the respondent were unable to point to any scheme of bankruptcy or insolvency legislation which did not involve some power of compulsion by process of law to secure to the creditors the distribution amongst them of the insolvent debtor's estate. In their Lordships' opinion these considerations must be borne in mind when interpreting the words "bankruptcy" and "insolvency" in the British North America Act. It appears to their Lordships that such provisions as are found in the enactment in question, relating as they do to assignments purely voluntary, do not infringe on the exclusive legislative power conferred upon the Dominon Parliament. They would observe that a system of bankruptcy legislation may frequently require various ancillary provisions for the purpose of preventing the scheme of the Act from being defeated. It may be necessary for this purpose to deal with the effect of executions and other matters which would otherwise be within the legislative competence of the provincial legislature. Their Lordships do not doubt that it would be open to the Dominion Parliament to deal with such matters as part of a bankruptcy law, and the provincial legislature would doubtless be then precluded from interfering with this legislation inasmuch as such interference would affect the bankruptcy law of the Dominion Parliament. But it does not follow that such subjects, as might properly be treated as ancillary to such a law and therefore with the powers of the Dominion Parliament, are excluded from the legislative authority of the provincial legislature when there is no bankruptcy or insolvency legislation of the Dominion Parliament in existence. Their Lordships will therefore humbly advise Her Majesty that the decision of the Court of Appeal ought to be reversed, and that the question ought to be answered in the affirmative. The parties will bear their own costs of this appeal. A.-G. QUE. ET AL. v. LARUE ET AL. Judicial Committee of the Privy Council. [1928] 1 D.L.R. 945 . V1scoUNT CAVE, L.C.: The questions at issue between the parties are two in number, namely ( 1) whether on the true construction of the Bankruptcy Acts of the Dominion a judicial hypothec upon real estate of a debtor resulting from the registration of a notice under art. 2121 C.C. (Que.) is intended to be

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postponed to a subsequent authorized assignment by the debtor for the benefit of his creditors, and (2) if on the true construction of the Bankruptcy Acts such a hypothec is intended to be so postponed, whether the Acts are in that respect within the legislative authority of the Dominion Parliament under the B.N.A. Act of 1867.... [Having answered the first question in the affirmative, His Lordship continued:] 2. Their Lordships now turn to the second question arising on this appeal, namely whether the enactment of s. 11(10) of the Bankruptcy Act of 1919, as above construed, was within the powers conferred upon the Dominion Parliament by s. 91 of the B.N.A. Act, 1867, which entrusts to that Parliament exclusive legislative authority over all matters coming within certain classes of subject there enumerated, including "bankruptcy and insolvency," or whether it infringes upon the exclusive power given by s. 92 of the same Act to a Provincial Legislature to make laws in respect of "property and civil rights" in the Province. The expression "bankruptcy and insolvency" in s. 91 (21) of the B.N.A. Act was referred to by Lord Selborne in L'Union St Jacques de Montreal v. Belisle (1874), L.R. 6 P.C. 31, at p. 36, as : - "Describing in their known legal sense provisions made by law for the administration of the estates of persons who may become bankrupt or insolvent, according to the rules and definitions prescribed by law, including of course the conditions in which that law is to be brought into operation, the manner in which it is to be brought into operation and the effect of its operation." In A.-G. Ont. v. A.-G. Can., [1894) A.C. 189, Lord Herschell, L. C., observed that a system of bankruptcy legislation might frequently require various ancillary provisions for the purpose of preventing the scheme of the Act from being defeated, and added at p. 200 : - "It might be necessary for this purpose to deal with the effect of executions and other matters which would otherwise be within the legislative competence of the provincial legislature. Their Lordships do not doubt that it would be open to the Dominion Parliament to deal with such matters as part of a bankruptcy law, and the provincial legislature would doubtless be then precluded from interfering with this legislation inasmuch as such interference would affect the bankruptcy law of the Dominion Parliament." Taking these observations as affording assistance in the construction of s. 91(21) of the Act of 1867, their Lordships are of opinion that the exclusive authority thereby given to the Dominion Parliament to deal with all matters arising within the domain of bankruptcy and insolvency enables that Parliament to determine by legislation the relative priorities of creditors under a bankruptcy or an authorized assignment. A creditor who has obtained judgment for his debt and has issued execution upon the debtor's lands or goods remains a creditor; and it is entirely within the authority of the Dominion Parliament to declare that such a creditor, although (as Newcombe, J., expressed it) he has been "first in the race for execution" but has not yet proceeded upon his execution and become satisfied by payment, shall on the occurrence of bankruptcy or a cessio bonorum be reduced to an equality with the general body of creditors. Then is there anything in the nature of a judicial hypothec in the Province of Quebec which exempts it from the possibility of being affected in like manner by the bankruptcy law of the Dominion? In their Lordships' opinion there is nothing in the Quebec law which can have that effect. It is true that judicial hypothec is classed in the Civil Code with legal and conventional hypothecs and is there said to establish a real right; but notwithstanding these provisions the hypothecary creditor remains a judgment creditor,

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and his hypothec, whether it may or may not be properly called a mode of execution, is at all events closely analogous to that process. Indeed their Lordships were informed that art. 614 C.C.P. has been held to require such a creditor to cause the movable goods of the debtor to be realized under the judgment before he can enforce his hypothec against the land. There is nothing therefore in the nature of a judicial hypothec which for the purpose now in question distinguishes it from an execution levied upon land, and Lord Herschell's judgment above cited shows clearly that such an execution may lawfully be postponed by Dominion Act. The contention that the enactment of s. 11 ( 10) of the Bankruptcy Act infringes the authority of the Provincial Legislature to deal with property and civil rights is effectively dealt with by Newcombe, J. No doubt it was within the competence of the Provincial Legislature to give to a judicial hypothec the quality of a real right; but if and so soon as that enactment comes into conflict with a Dominion statute duly passed under the authority of s. 91 of the Act of 1867, then the Dominion statute prevails over the provincial legislation and takes effect according to its tenor. The decisions of this Board relating to what is sometimes called the "unoccupied field" are referred to in the judgment of Newcombe, J., and conclusively establish this point. The thesis that a postponement or annulment of the rights of creditors who under a provincial law have obtained preferential rights is within the domain of bankruptcy legislation receives support by reference to a series of provincial statutes to which Mr. St. Laurent in an able argument called their Lordships' attention. The Assignments and Preferences Act of Ontario, R.S.O. 1914, c. 134, enacted by s. 14, that an assignment for the general benefit of creditors under that Act should take precedence of attachments, garnishee orders, judgments, executions not completely executed by payment and orders appointing receivers by way of equitable execution, subject to a lien for the execution creditor's costs. Similar provisions were contained in the Assignments Act of Manitoba, R.S.M. 1913, c. 12, s. 8, the Assignments Act of Saskatchewan, R.S.S. 1909, c. 142, s. 9, the Creditors' Trust Deeds Act of British Columbia, R.S.B.C. 1911, c. 13, s. 14, the Act of New Brunswick respecting Assignments and Preferences by Insolvent Persons, R.S.N.B. 1903, c. 141, s. 9, and (except as to lands) the Assignments Act of Nova Scotia, R.S.N.S. 1923, c. 200, s. 46. In all these cases the provincial Legislatures, when dealing with assignments by insolvents, included in their legislation provisions postponing an execution to the general right of an assignee for the benefit of creditors; and it would be difficult to reconcile the course so taken by those Legislatures with the contention that such a postponement is not within the domain of bankruptcy law. It may be added that since the "unoccupied field" where such priorities are regulated has been occupied by the bankruptcy Acts of the Dominion, most of these provincial enactments have been repealed. RE POMMIER Supreme Court of Ontario in Bankruptcy. [1930) 4 D.L.R. 113.

Hearing of two questions of law ordered to be heard before the trial of an issue upon the facts arising in bankruptcy proceedings as to the validity of a transfer of goods by the debtor. FISHER, J. A.: [sitting alone] Pommier carried on a jewellery business in Timmins, Ontario and made an authorized assignment in March, 1928.

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On June 20, 1927, the trustee alleges, Pommier unjustly preferred Freedman

& Elliott Ltd. to his other creditors by giving or transferring to them, out of

his stock-in-trade, diamonds to the value of $2,712.35, and has attacked the transaction. An order was made on May 3, 1928, directing the trial of an issue to determine whether or not the transaction was void. Because of the fact that the alleged gift or transfer took place more than 3 months before the authorised assignment, and might have to be attacked under the Assignments and Preferences Act, R.S.O. 1927, c. 162, and counsel for Freedman & Elliott Ltd. having raised the question of the right of a trustee in bankruptcy to any relief under that Act, it was agreed between counsel that, before a trial should take place on the merits of the transaction, the opinion of the Court should be obtained on two questions: ( 1) In a proceeding in bankruptcy, can the trustee in bankruptcy invoke the aid of the Court to set aside as preferential a transaction between a bankrupt and a creditor which took place more than 3 months before the assignment in bankruptcy, upon the ground that the transaction was preferential under the Assignments and Preferences Act? (2) Is the trustee in bankruptcy a person entitled to set up the provisions of the said Assignments and Preferences Act, and attack such a transaction? The question raised for determination are of great importance and were ably argued by both counsel. Mr. Hellmuth's contentions are: ( 1) that, there being conflict between s. 64 of the Bankruptcy Act, R.S.C. 1927, c. 11, ands. 4 of the Ontario Assignments and Preferences Act, the Bankruptcy Act governs, and proceedings under the Assignments and Preferences Act are not available to a trustee to attack fraudulent preferences in bankruptcy; (2) that, apart altogether from this conflict, the Dominion Parliament having passed the Bankruptcy Act with its ancillary provisions to carry it out, the field is occupied by that Act, and the Assignments and Preferences Act is shut out in its entirety; and ( 3) that, under s. [20 (2)] of the Bankruptcy Act, no assignment under the Assignments and Preferences Act can now be made, and therefore a trustee in bankruptcy is not a person entitled to invoke the aid of the Assignments and Preferences Act to set aside fraudulent preferences. It will at once be observed that, if Mr. Hellmuth's contention that an insolvent debtor's transactions involving fraudulent preferences, if made more than 3 months before an authorised assignment, or the making of a receiving order, can not be attacked under s. 64 of the Bankruptcy Act, and no relief can be obtained under the Assignments and Preferences Act, or the Fraudulent Conveyances Act, R.S.O. 1927, c. 134, because of their conflict with the Bankruptcy Act, and also that, even if that Act could be resorted to, a trustee in bankruptcy has no status to make an attack, because he is not a proper person, are wellfounded, the way would be wide open for the grossest frauds to be committed by persons disposing of all or nearly all their property to some creditor, or to a person who is not a creditor, and, after a period of three months from the disposal, making an authorised assignment or permitting a receiving order to be made; and also that, even if made to a creditor - judgment or otherwise - where no assignment is made by the debtor ( the provincial statutes being wiped out by the Bankruptcy Act), no relief can be obtained in the Courts. Under s. 64 of the Bankruptcy Act, every conveyance, security or payment, when given or made with a view to prefer, within three months prior to the filing of the petition on which a receiving order is made, or prior to an authorised assignment, is void; and the section also declares that the intent to prefer

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is prima facie presumed if the effect of the transfer or payment is in fact to prefer. · Under s. 4 of the Assignments and Preferences Act, all gifts, conveyances, assignments, or transfers, etc., if made with intent to defeat, hinder, delay, or prejudice creditors, are void. Under the Assignments and Preferences Act, if the transaction is attacked by a creditor within 60 days, or if an assignment is made within 60 days, then the transaction is presumed prima facie to have been made with the intent to prefer, to the prejudice of the creditors; that presumption may be rebutted, the onus being on the attacking party, as it is under s. 64 of the Bankruptcy Act; but, if there be no action or assignment within 60 days, the onus rests on the creditor or the assignee attacking to rebut the presumption. See Tlwmpson v. Morrison (1907), 9 O.W.R. 179; D'Avignon v. Bomerito (1911), 3 O.W.N. 158; Clifton v. Towers (1907) , 35 D.L.R. 623, 39 O.L.R. 292. Under the provincial British Columbia Fraudulent Preferences Act, R.S.B.C. 1924, c. 97, the transaction is utterly void and the presumption is irrebuttable. The Bankruptcy Act makes fraudulent preferences and fraudulent conveyances acts of bankruptcy. Sees. [20(1)] (a), (b), and (c). These clauses read: "(a) If in Canada or elsewhere he (the debtor) makes an assignment of his property to a trustee for the benefit of his creditors generally, whether it is an assignment authorised by this Act or not; (b) If in Canada or elsewhere he makes a fraudulent conveyance, gift, delivery, or transfer of his property, or of any part thereof; ( c) If in Canada or elsewhere he makes any conveyance or transfer of his property or any part thereof, or creates any charge thereon, which would under this Act be void as a fraudulent preference if he were adjudged a bankrupt." Clause (b) refers to transactions beyond the Bankruptcy Act, such as a fraudulent conveyance under the Fraudulent Conveyances Act, and clause ( c) to preferences within the Act. Part of Bankruptcy Rule [86] reads as follows: "Applications by a trustee, or any person, to set aside or avoid under the Act, or any other Act or law, any settlement, conveyance, transfer, security or payment, or to declare for or against the title of the trustee to any property adversely claimed ... shall be to a Judge in Chambers." I note here that this s. [20 ( 1 ) ] of the Act recognizes that there may be fraudulent transactions outside of those mentioned in the Bankruptcy Act, and, if they are read in connection with R. [86], it would appear that such transactions may be attacked by a trustee. Mr. Hellmuth strenuously argued that the whole of the Assignments and Preferences Act has been abrogated, and that a trustee in bankruptcy cannot now invoke the aid of that Act to void fraudulent preferences, because of the fact that, since the passing of the Bankruptcy Act with its ancillary provisions, provincial legislation cannot be resorted to. Mr. Hellmuth supports his contentions by reference to s. [20(2)] of the Bankruptcy Act, which voids all assignments for the benefit of creditors unless made under that Act, and therefore it is a trustee under the Bankruptcy Act only who can take proceedings, and to the fact that, there being direct conflict, as found in s. 64 of the Bankruptcy Act and s. 4 (1) and (2) of the Assignments and Preferences Act as to the time fraudulent preferences must be attacked, the Bankruptcy Act, being Dominion

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legislation, prevails; to A.-G. Ont. v. A .-G. Can., (1894] A.C. 189, and particularly to what was there said by Lord Herschell; to A.-G. Can. v. A .-G. Ont., Que. & N.S., [1898] A.C. 700; to a recent decision of the Court of Appeal of British Columbia, Hof]ar Ltd. v. Canadian Credit Men's Trust Association, (1929] 2 D.L.R. 73, 40 B.C.R. 454, and to the judgment of Mignault, J. in the same case, [1929] 2 D.L.R. 106, upon an application to him for special leave to appeal. After careful consideration of the provisions of the Bankruptcy Act, the Assignments and Preferences Act and the decisions to which I shall make reference, I am unable to give effect to Mr. Hellmuth's contentions. I frankly admit that conflict is to be found when s. 64 is read in connection with s. 5 of the Assignments and Preferences Act and the following sections, except possibly s. 12, and that, the Bankruptcy Act, being Dominion legislation, as to this conflict the Dominion Act prevails; but, in my opinion, s. 64 does not attempt to interfere directly with provincial legislation dealing with the same subject-matter, becase it is quite clear that s-ss. (3) and ( 4) of s. 4 of the Assignments and Preferences Act cover transactions not covered by the Bankruptcy Act, and in those respects are not in conflict with the Bankruptcy Act, and that these subsections are still operative; but, even if it could be said that these subsections do deal with the same subject-matter, it is not one of conflict but of "overlapping," See G.T.R. Co. v. A.-G. Can., [1907] A.C. 65 . In that case it is said, at p. 68 : "There can be a domain in which provincial and Dominion legislation may overlap, in which case neither legislation will be ultra vires, if the field is clear; and secondly, that if the field is not clear, and in such a domain the two legislations meet, then the Dominion legislation must prevail." It is a well known doctrine that while a Province may legislate on things which from one aspect and for one legislative purpose may fall within the power of the Province, the Dominion may also deal with the same matter from the Dominion aspect, and both enactments will be held to be valid. See Hodge v. The Queen (1883), 9 App. Cas. 117. In other words, though the Dominion, as ancillary to its bankruptcy legislation, may trench upon the Province's undoubted right to legislate with regard to contracts, that does not usurp the whole of the Province's power to regulate the law of contract, but where the Dominion's legislation does trench upon the Province's power, if that legislation can be validly supported as ancillary to one of the enumerated powers of the Dominion, then the Dominion legislation overrides the provincial in so far as they are in conflict. SeeA.-G. Que. v. LaRue, [1928] 1 D.L.R. 945, 47 Que. K.B. 291. There is no suggestion in the judgment of either the Court of Appeal in the Hof]ar case, or what was said by Mignault, J. that the whole of the Assignments and Preferences Act of that Province (British Columbia) was bad and that a fraudulent transaction could not be attacked by a bankruptcy trustee under that Act; all that was decided in that case, as I understand it, is that as s. 64 of the Bankruptcy Act provides that the presumption as to transactions is as to those occurring within a three months' period, and is a rebuttable one, and the Assignments and Preferences Act provides that it is not rebuttable, there being thus conflict between the two Acts, the Dominion Act prevails. Macdonald, J. A. in the Hof]ar case, [1929] 2 D.L.R. at pp. 75-6, carefully analysed the conflict between the Acts in question, and reached the result that on the same state of facts under Dominion legislation a rebuttable presumption

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is raised and under the Provincial Act a conclusive presumption is raised, and there being direct conflict, the Dominion Act prevails. At p. 77, Macdonald, J. A. used this language: "This is not to say that the trustee cannot resort to a provincial act to impeach a transaction. Provincial legislation respecting fraudulent conveyances may be resorted to. The Bankruptcy Act does not abrogate provincial acts simply because they deal with preferential transactions .... " In answer to the contention that a trustee in bankruptcy is not a person entitled to invoke the aid of the Assignments and Preferences Act to set aside fraudulent preferences, I am of opinion that the Bankruptcy Act was never intended to provide a complete and exclusive code in regard to setting aside transactions. If the Act had so provided, chattel mortgages void under a Provincial Act could never be avoided, because the Bankruptcy Act failed specifically to provide a remedy. See Re Gibbons, [1924] 3 D.L.R. 619. In that case a chattel mortgage was declared void under a provincial law as against a trustee in bankruptcy, and see also Re Cohen & Sweigman, Ex p. Rosenberg, [1925] 1 D.L.R. 248. In that case a transaction not contrary to the Bankruptcy Act was by the Court declared void as against the trustee. There are also several decisions in our own Courts which, while not precisely in point, so far as they go indicate that the Bankruptcy Act was not intended to cut down the rights of creditors as against the debtor or any other creditor in transactions falling within the scope of s. 4 of the Assignments and Preferences Act. See Re Longmore (1922), 52 O.L.R. 570; Re Berman & Chapman (1923), 24 O.W.N. 404; and Re Davison, [1923] 4 D.L.R. 1049, 52 O.L.R. 244. See also s. 12(3) of the Assignments and Preferences Act, which provides that: "Where there is no assignment for the benefit of creditors, and whether the proceeds are or are not of such character as to be seizable under execution, an action may be brought therefor by a creditor, whether an execution creditor or not, on behalf of himself and all other creditors, or such other proceedings may be taken as may be necessary to render the proceeds available for the general benefit of creditors."

Whilst s. 11 of the Assignments and Preferences Act gives the exclusive right of action to an assignee under the Act, I think nevertheless we must look to the Bankruptcy Act instead to ascertain who has now the right of action, and there you find it is the trustee in bankruptcy, but this change does not affect the validity of s. 12 (3) and (4). These subsections provide the remedy; s. 11 provides only the mode of exercising the remedy, and that is now provided by the Bankruptcy Act. There are many cases under the English Act which decide that a trustee or assignee is the proper person to bring an action to impeach transactions under the Statute of Elizabeth. See Doe d. Grimsby v. Ball (1843), 11 M. & W. 531, 152 E.R. 916; Ware v. Gardner (1869), L.R. 7 Eq. 317; Kent v. Riley (1872), L.R. 14 Eq. 190; Re Fasey, [1923] 2 Ch. 1; and Davis v. Snell (1860), 28 Beav. 321, 54 E.R. 389. Mr. Hellmuth's argument in effect is that in every case which does not fall within s. 64, and no matter if the transaction is contrary to the policy of the Bankruptcy Act, a trustee in bankruptcy has no remedy and the Courts are powerless to grant relief. I do not agree. In my opinion, the Court is bound to give the benefit of any statute that may be in force and passed for the protection

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of creditors to their trustee, as it is his duty to administer the whole of the debtor's property and for that purpose a trustee has a right to proceed and follow property preferentially given or conveyed, even if the transfer, gift, or conveyance took place more than three months prior to the authorized assignment or the making of a receiving order. It appears to me, and I am of opinion, that the combined effect of Rule [86], s. 64, and the other sections of the Acts to which I have referred, is to give to a trustee in bankruptcy, without special enabling words, power to impeach all fraudulent or preferential transactions which may by the Bankruptcy Act or provincial law be avoided; that neither the Assignments and Preferences Act nor the Fraudulent Conveyances Act has been abrogated, and that these Acts, apart from the conflicting sections mentioned, are still running concurrently with the provisions of the Bankruptcy Act and may be resorted to by a trustee under that Act, if it is found that relief cannot be obtained thereunder, or, to adopt the words of Macdonald, J. A. in the Hofjar case, unless on the same state of facts we find a different result arising, resort may be had to the provisions of whichever legislation fits the case. The answer to both questions will be in the affirmative. The costs of this application will be costs in the issue and be disposed of by the Judge who tries the issue.

RE TRENWITH Ontario Court of Appeal. [1934] O.R. 326. MASTEN, J. A. : This is an appeal by the defendant, Margaret Trenwith, from the judgment of Kerwin, J. dated the 27th of November, 1933, on an issue which had been referred to him for trial, in favour of the trustee Glatt, setting aside as against the said trustee a certain mortgage dated the 4th of January, 1933, made by W. D. Trenwith to the appellant Margaret Trenwith, and determining in consequence that the lands and premises in the said mortgage vested in the trustee in bankruptcy as assets of the debtor available for distribution among the creditors free from the mortgage in question. The trial Judge bases his conclusion in setting aside the mortgage on the applicability of The Assignments and Preferences Act, R.S.O. 1927, ch. 162, and begins his reasons for judgment in the words following: "Notwithstanding Mr. Heighington's argument, I feel that I am bound by the decisions in Re Pommier (1930), 65 O.L.R. 415, and Blocklesby v. Freedman-Ellis Co. , [1932] O.R. 439; and therefore, although the petition in bankruptcy was filed more than the specified time after the mortgage in question was given, I think the Ontario Acts apply in accordance with those decisions, that is, that they may be looked at." ... It seems to me desirable in the present case to state the law which is to be applied to the question here presented. In the Court below the judgment has proceeded on the footing that The Assignments and Preferences Act, R.S.O. 1927, ch. 162, applies and that the mortgage is invalid having been given and taken with the purpose of giving to Mrs. Trenwith a preference over other creditors. In so doing the learned trial Judge quite properly followed a prior decision of Fisher, J. in Re Pommier (1930), 65 O.L.R. 415, 11 C.B.R. 449, where it was held that The Assignments and Preferences Act was in force and available to the trustee in supplement of the provisions of The Bankruptcy Act, and it was in the opening of his argument suggested by counsel for the respond-

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ent that this decision had been affirmed by our Court of Appeal in a case reported in [1932] Ontario Reports, p. 439, under the name of Brocklesby v. Freedman-Ellis Co. It appeared, however on further consideration, and was ultimately admitted during the course of argument by counsel for the respondent, that Re Pommier and Brocklesby v. Freedman-Ellis were the same proceeding under different names but between the same parties and in respect to the same question. It is pointed out at p. 440 of [1932] Ontario Reports as follows : "The opinion of the Court being taken on two points of law, it was declared [Re Pommier (1930), 65 O.L.R. 415], that the plaintiff was entitled to invoke the provisions of the Assignments and Preferences Act, R.S.O. 1927, ch. 164; and, also, that the said Act is not abrogated by the Bankruptcy Act, and any provision thereof, not in conflict with the Bankruptcy Act, is valid, and the trustee can invoke the aid of the Court to set aside as preferential, a transaction between a bankrupt and a creditor which took place more than three months before the assignment. We, of course, accept the law, as so laid down." The acceptance of the law "so laid down" was consequent upon its being res judicata - no appeal having been taken from the earlier judgment of Fisher, J. The question is therefore open for adjudication by this Court, and on a consideration of the cases of Attorney-General of Ontario v. Attorney-General for Canada, [1894] A.C. 189, at p. 200; Royal Bank of Canada v. Larue, [1928] A.C. 187, 8 C.B.R. 579, and Canadian Credit Men's Trust Association Ltd. v. Hoffa, Ltd., [1929] S.C.R. 180, 10 C.B.R. 374, it seems clear to me that the common field of legislation respecting the distribution of the estates of insolvents having now become occupied by the Dominion Bankruptcy Act, the provisions of The Assignments and Preferences Act respecting the preference of one creditor over another have been thereby superseded and have ceased to have any operation. If I am right in this conclusion, the effect is to overrule the view expressed by Fisher, J. in Re Pommier (1930), 65 O.L.R. 415, 11 C.B.R. 449. I am, however, of the opinion that the provisions of The Bankruptcy Act apply to the mortgage here in question . ... In Re Bozanich, (1942] 2 D.L.R. 145, at p. 149, Duff, C.J.C. delivering the majority judgment said in obiter dicta: "I may add that in my opinion the provisions of R .S.O. 1927, c. 162, in relation to preferences are superseded bys. 64 of The Bankruptcy Act, and that the authority of the Ontario Legislature to enact such legislation is, in consequence of the enactment of s. 64, suspended in virtue of the concluding paragraph of s. 91 [of the B.N.A. Act]."

TOTEM RADIO SUPPLY COMPANY LIMITED v. STONE Supreme Court of British Columbia. 1959. 38 C.B.R. 112. WHITTAKER, J.: This action was originally commenced by Totem Radio Supply Co. on its own behalf and on behalf of all other creditors of Leonard F . Stone, carrying on business as a retailer of television and other appliances, for a declaration that a certain chattel mortgage given by Stone to defendant on December 23, 1955, and registered on December 28, 1955, is void as against Stone's creditors. At the time of the giving of the chattel mortgage, Stone was indebted to the defendant in the sum of $3,341.35 for which the defendant held no security. The mortgage was given for a substantial part of this sum, namely, $2,931.78. It covered only goods originally supplied by the defendant. On Feb. 9, 1956,

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before any payment had fallen due, the defendant, apparently feeling insecure, made a seizure under the chattel mortgage. A question was raised as to whether it was a seizure or a voluntary handing back of goods by the debtor to the defendant but the evidence satisfies me that the debtor had no choice in the matter and that the defendant took possession pursuant to the mortgage. The action was commenced on February 27, 1956. On April 5, 1956, the debtor made an assignment in bankruptcy. The present plaintiff was appointed trustee and by order was substituted for the original plaintiff in the action. The plaintiff claims that the mortgage was given when the debtor was in insolvent circumstances, or was unable to pay his debts in full with intent to give the defendant a preference over other creditors, and so was void as against such creditors, as provided by s. 3 ( 1) (b) of The Fraudulent Preferences Act, R.S.B.C. 1948, c. 132. Alternatively the plaintiff claims that, regardless of intent, the mortgage was void under subs. (2) (a) of said s. 3, the said mortgage having the effect of giving the defendant a preference over other creditors, and this action having been commenced within 60 days after the date of registration of the mortgage. The defences are that, as to said s. 3 ( 1) (b) there was no intent to prefer the defendant over other creditors; as to said s. 3 (2) (a) that this action was not commenced within 60 days after registration of the mortgage, and generally that the said provisions of The Fraudulent Preferences Act are in conflict with s. 64 of The Bankruptcy Act which must prevail. I find no conflict between said s. 64 and the provincial statute. The former applies only to preferences given within three months prior to the date of bankruptcy. Where there is no conflict the provincial Act is not superseded. Prior to 1949 there were conflicting decisions as to whether or not the Dominion legislation entirely superseded provincial Acts dealing with preferences, but this matter is now resolved by s. 41 (6) of The Bankruptcy Act: " ( 6) The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights which are not in conflict with the provisions of this Act, and the trustee shall be entitled to avail himself of all rights and remedies provided by such law or statute as supplementary to and in addition to the rights and remedies provided by this Act." I have no difficulty in finding that the debtor was in insolvent circumstances and unable to pay his debts in full and that this mortgage had the effect of giving the defendant a preference over other creditors. If this action was commenced within 60 days after the date of registration the transaction must be set aside regardless of whether or not there was an intent to prefer. The date of registration was December 28, 1955. The 60th day thereafter fell on a Sunday, February 26. The writ was issued on Monday, the 27th. The plaintiff relies on s. 44 of The Interpretation Act, R.S.B.C. 1948, c. 1, which reads: "If the time limited by an Act for any proceeding or for the doing of anything under its provisions expires or falls upon a holiday, the time so limited shall extend to, and such thing may be done on, the day next following which is not a holiday."

I think this section applies and the action was commenced in time. See also Milch v. Frankun & Co., [1909] 2 K.B. 100; Rex v. Christian Community of Universal Brotherhood Ltd., [1931] 1 W.W.R. 255.

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The question of intent need not, therefore, be considered. The plaintiff is entitled to succeed. There will be a declaration that the mortgage was void as against creditors. The defendant must account for the total sum realized from the sale of the mortgaged chattels, $2,676.44. Costs will follow the event. REFERENCE RE VALIDITY OF THE ORDERLY PAYMENT OF DEBTS ACT 1959 (ALTA.), c. 61. Supreme Court of Canada. 1960. 23 D.L.R. 449. Appeal from a judgment of the Alberta Supreme Court, Appellate Division, 20 D.L.R. (2d) 503 invalidating the Orderly Payment of Debts Act (Alta.). Affirmed. KERWIN, C. J. C.: Under the provisions of the Constitutional Questions Act, R.S.A. 1955, c. 55, the Lieutenant-Governor in Council of the Province of Alberta referred to the Appellate Division of the Supreme Court of the Province the following question for hearing and consideration: "Is The Orderly Payment of Debts Act, being Chapter 61 of the Statutes of Alberta, 1959, intra vires the Legislature of Alberta, either in whole or in part, and if so, in what part or parts, and to what extent? . . ." I agree with the Appellate Division that the Act is ultra vires on the ground that in pith and substance it is bankruptcy and insolvency legislation and that it is therefore unnecessary to consider the other grounds of attack. Section 3 of the Orderly Payment of Debts Act, 1959 (Alta.) c. 61 provides : "3. ( 1) This Act applies only (a) to a judgment for the payment of money where the amount of the judgment does not exceed one thousand dollars, (b) to a judgment for the payment of money in excess of one thousand dollars if the creditor consents to come under this Act, and (c) to a claim for money, demand for debt, account, covenant or otherwise, not in excess of one thousand dollars. "3. (2) This Act does not apply to a debt due, owing or payable to the Crown or a municipality or relating to the public revenue or one that may be levied and collected in the form of taxes or, unless the creditor consents to come under this Act. (a) to a claim for wages that may be heard before, or a judgment therefor by, a magistrate under The Masters and Servants Act. (b) to a claim for a lien or a judgment thereon under The Mechanics Lien Act, or "3. (3) This Act does not apply to debts incurred by a trader or merchant in the usual course of his business." Provision is then made whereby a debtor may apply to the Clerk of the District Court of the judicial district in which he resides for a consolidation order, showing by affidavit all his creditors together with the amount he owes to each one, his income from all sources and, if he is married, the amount of the income of his wife, the number of persons dependent upon him, the amount payable for board or lodging or rent or as payment on home property and whether any of his creditors' claims are secured, and if so, the nature and particulars of the security held by each. The Clerk is to settle the amount proposed to be paid by the debtor into Court periodically or otherwise on

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account of the claims of his creditors and provide for hearing objections by the latter. After such a hearing, if necessary, a consolidation order is to be made, which order is a judgment of the Court in favour of each creditor, and provision is made for a review by the Court of any such order. Sections 12, 13 and 14 are important and read as follows: "12. The court may, in deciding any matter brought before it, impose such terms on a debtor with respect to the custody of his property or any disposition thereof or of the proceeds thereof as it deems proper to protect the registered creditors and may give such directions for the purpose as the circumstances require. "13. Upon the making of a consolidation order no process shall be issued in any court against the debtor at the instance of a registered creditor or a creditor to whom this Act applies. (a) except as permitted by this Act or the regulations, or (b) except by leave of the court. "14. (1) The clerk may at any time require of, and take from, the debtor an assignment to himself as clerk of the court of any moneys due, owing or payable or to become due, owing or payable to the debtor or earned or to be earned by the debtor. (2) Unless otherwise agreed upon the clerk shall forthwith notify the person owing or about to owe the moneys of the assignment and all moneys collected thereon shall be applied to the credit of the claims against the debtor under the consolidation order. ( 3) The clerk may issue a writ of execution in respect of a consolidation order and cause it to be filed with the sheriff of a judicial district and at any land titles office." While the Act applies only to claims or judgments which do not exceed $1,000, unless in the case of a judgment for the payment of money in excess of $1,000 the creditor consents to come under the Act, I can read these provisions in no other way than showing that they refer to a debtor who is unable to pay his debts as they mature. Why else is authority given the Court to impose terms with respect to the custody of his property or any disposition thereof or of the proceeds thereof as it deems proper to protect the registered creditors ( s. 12)? And why else may no process be issued in any Court against the debtor at the instance of a registered creditor or a creditor to whom the Act applies, except as stated (s. 13 )? Section 14 authorizing the Clerk to require an assignment to him by the debtor of any moneys due, owing or payable or to become due, owing or payable to the debtor, or earned or to be earned by the debtor is surely consonant only with the position of an insolvent debtor. In fact a debtor under the Act is ceasing to meet his liabilities generally as they become due and therefore falls within s. 20 (1) (j) of the Bankruptcy Act, R.S.C. 1952, c. 14. In A.-G. B .C. v. A .-G. Can. et al., Reference re Farmers' Creditors Arrangement Act, 1934, [1937] 1 D.L.R. 695 at p. 700, A.C. 391 at p. 402, 18 C.B.R. 217, Lord Thankerton speaking for the Judicial Committee states: "In a general sense, insolvency means inability to meet one's debts or obligations; in a technical sense, it means the condition or standard of inability to meet debts or obligations, upon the occurrence of which the statutory law enables a creditor to intervene, with the assistance of a Court, to stop individual action by creditors and to secure administration of the debtor's assets in the general interest of creditors; the law also generally

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allows the debtor to apply for the same administration. The justification for such proceedings by a creditor generally consists in an act of bankruptcy by the debtor, the conditions of which are defined and prescribed by the statute law." This was said in an appeal affirming the decision of the majority of this Court in Reference Re Farmers' Creditors Arrangement Act, (1936] 3 D.L.R. 610, S.C.R. 384, 17 C.B.R. 359. In Canadian Bankers' Association & Dominion Mortgage & Investments Association v. A .-G. Sask., [1955] 5 D.L.R. 736, [1956] S.C.R. 31, 35 C.B.R 135 this Court held that the Moratorium Act of Saskatchewan was ultra vires as being in relation to insolvency. There the decision of the Judicial Committee in Abitibi Power & Paper Co. v. Montreal Trust Co. & A .-G. Ont., [1943] 4 D.L.R. 1, A.C. 536, 25 C.B.R. 6 was relied upon, but, for the reasons given by Mr. Justice Locke, it was held that it had no application. As was pointed out, the Judicial Committee in the 1943 case held that the purpose of the impugned legislation was to stay proceedings in the action brought under the mortgage granted by the Abitibi company until the interested parties should have an opportunity of considering such plan for the re-organization of the company as might be submitted by a Royal Commission appointed for that purpose. For the same reason that decision is inapplicable here. The older decision of the Privy Council in A .-G. Ont. v. A.-G. Can., [1894] A.C. 189, dealing with the Ontario Assignments and Preferences Act, is quite distinguishable, although in my view it is doubtful whether in view of later pronouncements of the Judicial Committee it would at this date be decided in the same sense, even in the absence of Dominion legislation upon the subject of bankruptcy and insolvency. The Act in question is not legislation for the recovery of debts. It has no analogy to provincial bulk sales legislation because there the object is to make sure that when a person sells his stock of goods, wares, merchandise and chattels, ordinarily the subject of trade and commerce, the creditors will not be placed in any difficulty because of the disappearance of the proceeds of the sale. It is unnecessary to express any opinion as to the validity of s. 156 of the Division Courts Act, R.S.O. 1950, c. 106, apparently introduced for the first time in 1950 by c. 16 of the statutes of that year, which provides for a consolidation order. The debtor under the Orderly Payment of Debts Act is not in the same position as the appellant in L'Union St. Jacques de Montreal v. Belisle (1874) , L.R. 6 P.C. 31, and the appellant can gain no comfort from Ladore et al. v. Bennett, [1939] 3 D.L.R. 1, A.C. 468, 21 C.B.R. 1, because there it was held that the City of Windsor (Amalgamation) Act, 1935 and amendment were in pith and substance Acts passed in relation to "municipal institutions in the Province" and did not encroach upon the exclusive legislative power of the Dominion Parliament in relation to bankruptcy and insolvency, interest, or private rights outside the Province. This was a decision of the Judicial Committee affirming that of the Court of Appeal for Ontario, [1938] 3 D.L.R. 212, O.R. 324, which latter, in the meantime, had been applied by the Court of Appeal for British Columbia in Day v. City of Victoria, [1938] 4 D.L.R. 345, 53 B.C.R. 140. The legislation in question in each of these cases . was quite different from the effort by Alberta in Board of Trustees of Lethbridge Northern Irrigation District etal. v. 1.O.F., [1940] 2D.L.R. 273, A.C. 513.

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The appeal should be dismissed. TASCHEREAU, FAUTEUX, ABBOTT, JUDSON and RITCHIE, JJ. concur with KERWIN, C. J. C. The concurring judgments of LocKE, CARTWRIGHT and MARTLAND, J J. are omitted. Part X of the newly enacted Bankruptcy Amendment Act, 1966, (Can., c. 32), is devoted to the orderly payment of debts and thus for the first time establishes a federal scheme for the small debtor; the Senate had passed such legislation in 1962 and 1963, but it had never reached the floor of the House of Commons until 1966. Part X adds to the Bankruptcy Act new sections 173 through 198. S. 175 (1) provides that "a debtor who resides in a province in which this Part is in force may apply to the clerk of the court having jurisdiction where he resides for a consolidation order." Such a consolidation order shall state the times of payment and the amounts to be paid into court by the debtor ( where the debtor's present circumstances enable him to pay something) (s. 181 ( 1)) and upon its coming into effect no legal process shall be issued out of any court of the province in which the debtor resides ( s. 185) . Part X does not apply to any judgment or claim for more than $ 1000 except with the consent of the creditor (s. 174(1) ) . The purpose of this Part is to replace the provincial acts for the orderly payment of debts which had been declared ultra vires, and s. 198 provides that it "shall come into force in any province only upon the issue, at the request of the Lieutenant Governor in Council of that province, of a proclamation by the Governor in Council declaring it to be in force in that province."

RE McINTOSH-MARSHALL EQUIPMENT LTD. NASH v. GUELPH ENGINEERING CO., ATTORNEY-GENERAL OF ALBERTA, INTERVENANT Alberta Supreme Court, Appellate Division. 1964. 48 D.L.R. (2d) 619. APPEAL from a judgment of Milvain, J., 48 W.W.R. 420, holding ultra vires the Fraudulent Preferences Act (Alta.) . The judgment of the Court was delivered by JOHNSON, J. A. : This is an appeal from the judgment of Milvain, J. [48 W.W.R. 420], in which he held that the Fraudulent Preferences Act, R.S.A. 1955, c. 120, was ultra vires of the Legislature of this Province. The matter arose in this way: The trustee in bankruptcy of McIntosh-Marshall Equipment Ltd. is seeking to set aside payments made by the bankrupt company to its creditors within one year prior to the date of its bankruptcy. Among these payments are six totalling $35,062.39 made to the respondent. All these payments except the last, for $2,354 were made outside the three-month period mentioned ins. 64 of the Bankruptcy Act, R.S.C. 1952, c. 14, and the trustee relies upon s. 4 of the Fraudulent Preferences Act in order to nave these payments declared "utterly null and void". That section reads: "4. Subject to sections 7, 8, 9 and 10, every gift, conveyance, assignment, transfer, delivery over or payment of goods, chattels or effects or of bills, bonds, notes or securities or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made (a) by a person at a time when he is in insolvent circumstances or is unable to pay his debts in full or knows that he is on the eve of insolvency, and

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(b) to or for a creditor and having the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, is, in and with respect to any action that within one year thereafter is brought, had or taken to impeach or set aside the transaction, utterly void as against the creditor or creditors injured, delayed, prejudiced or postponed." Of the sections to which this section is made subject, only s. 7 need be quoted: "7. Nothing in sections 2 to 6 applies to (a) a bona fide sale or payment made in the ordinary course of trade or calling to innocent purchasers or parties, or (b) a payment of money to a creditor, or a bona fide conveyance, assignment, transfer or delivery over of any goods, securities or property, of any kind as above mentioned, that is made in consideration of a present actual bona fide sale or delivery of goods or other property or of a present actual bona fide payment in money, or by way of security for a present actual bona fide advance of money, if the money paid or the goods or other property sold or delivered bear a fair and reasonable relative value to the consideration therefor." The Act, substantially in its present form, was passed in 1922 (1922 (Alta.), c. 48). Section 4 of that Act required that action or proceedings be taken within "60 days" but was changed to the present "one year" by 1931 (Alta.), c. 31, s. 2. These proceedings were commenced by notice of motion under the Bankruptcy Act and on the return of the motion, McLaurin, C. J., directed that pleadings be filed. This was done and thereafter certain preliminary questions of law were set for decision. Milvain, J., who heard the argument on these points, held that the Fraudulent Preferences Act was and always had been ultra vires of the Legislature of this Province as being in pith and substance insolvency legislation and coming within head 21 of s. 91 of the B.N.A. Act, and thus exclusively within the legislative ambit of the Parliament of Canada. In this appeal we are concerned with only two questions, viz., the correctness of the decision of the trial Judge, and secondly, and only if we conclude that the learned trial Judge was wrong, the meaning to be given to the words "payment of money to the creditors" ins. 7(b) of the Act. There are two grounds upon which s. 4 of the Fraudulent Preferences Act may be declared inoperative: ( 1 ) if it was ultra vires of the Legislature which enacted it, and (2) assuming that it concerned an area in which the Legislature could, under its power to legislate respecting "property and civil rights in the province", if it conflicts with legislation passed by Parliament under its power to deal with bankruptcy and insolvency either directly or as properly ancillary to any such legislation. As I have said, the learned trial Judge held that the Fraudulent Preferences Act was ultra vires from its enactment and much of the argument on this appeal was directed to the correctness of this finding. Whether or not this section is ultra vires will depend on two considerations, ( 1 ) the limits to be prescribed to the words "bankruptcy" and "insolvency" in s. 91 (21), and, (2) the determination of what is the true nature and purpose of ss. 4 and 7 of the Fraudulent Preferences Act - to use an expression frequently found in cases of this kind, the "pith and substance" of the sections.

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Lord Selborne in the early case of L'Union St. Jacques de Montreal v. Belisle (187 4), L.R. 6 P .C. 31, stated what he understood the words "bankruptcy" and "insolvency" to describe. This case concerned legislation by the Province of Quebec which sought to give relief to a benevolent society that was, to quote the headnote, "in a state of extreme financial embarrassment". The Judicial Committee allowed the appeal holding that the legislation was "a matter merely of a local or private nature in the province", s. 92(16). Discussing the words "bankruptcy" and "insolvency", he said (p. 36) : "The words describe in their known legal sense provisions made by law for the administration of the estates of persons who may become bankrupt or insolvent, according to rules and definitions prescribed by law, including of course the conditions in which that law is to be brought into operation, the manner in which it is to be brought into operation, the manner in which it is to be brought into operation, and the effect of its operation." Somewhat similar language was used by Lord Herschell, L. C., in A .-G. Ont. v. A.-G. Can., [1894] AC. 189. In that case a section of the Ontario Assignments and Preferences by Insolvent Persons Act, which gave priority to an assignment for the general benefit of creditors over judgments and executions, was held to be intra vires of the Ontario Legislature. At p. 200 Lord Herschell, L. C., said: "It is not necessary in their Lordships' opinion, nor would it be expedient to attempt to define, what is covered by the words "bankruptcy" and "insolvency" in sect. 91 of the British North America Act. But it will be seen that it is a feature common to all the systems of bankruptcy and insolvency to which reference has been made, that the enactments are designed to secure that in the case of an insolvent person his assets shall be rateably distributed amongst his creditors whether he is willing that they shall be so distributed or not. Although provision may be made for a voluntary assignment as an alternative, it is only as an alternative. In reply to a question put by their Lordships the learned counsel for the respondent were unable to point to any scheme of bankruptcy or insolvency legislation which did not involve some power of compulsion by process of law to secure to the creditors the distribution amongst them of the insolvent debtor's estate."

In both of these cases it was made clear that under a Bankruptcy Act which conformed to the descriptions contained in these passages, Parliament might deal with these subjects which were considered in these cases. In Royal Bank of Canada v. Larue, [1928] 1 D.L.R. 945, [1928] 1 W.W.R. 534, [1928] AC. 187, 8 C.B.R. 579, 46 Que. K.B. 291, a case which dealt with the priorities of creditors created by the Bankruptcy Act, Viscount Cave, L.C., quoted the passage in Lord Selborne's judgment in L'Vnion St. Jacques de Montreal v. Belisle case which I have quoted. If this can be taken as adopting what Lord Selborne said as being the legislative limits of Parliament under s. 91 (21), it appears that notwithstanding the injunction of Lord Herschell, L. C., against attempting to define bankruptcy and insolvency, the Judicial Committee had, up to 1928, the date of the Larue case, accepted and adopted a restricted and legalistic interpretation of bankruptcy and insolvency. Under that interpretation, s. 4 of the Fraudulent Preferences Act would have been permitted legislation had it been passed before the Bankruptcy Act was passed. That Act was passed in 1919 and what is now

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s. 64 was passed the following year. The Fraudulent Preferences Act, having been passed after s. 64 of the Bankruptcy Act had become operative, it becomes necessary to see whether the two sections can stand together. If they conflict, there is no question of s. 64 of the Bankruptcy Act "superseding" the other section. That term can only be used where the statute when passed was intra vires of the Provincial Legislature; s. 4 of the Fraudulent Preferences Act, as well as the preceding sections, would be ultra vires from the date that the Act was passed. I have quoted the interpretation given to insolvency as used in s. 91 ( 21) of the B.N.A. Act up to 1928. In 1937 in A.-G. B.C. v. A.-G. Can. et al., Reference re Farmers' Creditors Arrangement Act, 1934, [1937) 1 D.L.R. 695, [1937) 1 W.W.R. 320, [1937] A.C. 391, 18 C.B.R. 217, Lord Thankerton adopted a wider definition. At p. 700 D.L.R., p. 326 W.W.R., p. 402 A.C., he said: "In a general sense, insolvency means inability to meet one's debts or obligations; in a technical sense, it means the condition or standard of inability to meet debts or obligations, upon the occurrence of which the statutory law enables a creditor to intervene, with the assistance of a Court, to stop individual action by creditors and to secure administration of the debtor's assets in the general interest of creditors; the law also generally allows the debtor to apply for the same administration. The justification for such proceeding by a creditor generally consists in an act of bankruptcy by the debtor, the conditions of which are defined and prescribed by the statute law." Later in the same paragraph, he said : "Their Lordships are unable to hold that the statutory conditions of insolvency which enabled a creditor or the debtor to invoke the aid of the bankruptcy laws, or the classes to which these laws applied, were intended to be stereotyped under head s. 91 (21) of the B.N.A. Act so as to confine the jurisdiction of the Parliament of Canada to the legislative provisions then existing as regards these matters." A similar definition is given by Rand, J., in Canadian Bankers' Ass'n and Dom. Mortgage and Investments Ass'n v. A.G. Sask. (Re Moratorium Act, Sask.), [1955) 5 D.L.R. 736, [1956) S.C.R. 31, 35 C.B.R. 135. What he said is, I think, worth quoting [p. 740 D.L.R., p. 46 S.C.R., p. 149 C.B.R.J : "Each of the two words, Bankruptcy and Insolvency, must be given its full force. Bankruptcy is a well understood procedure by which an insolvent debtor's property is coercively brought under a judicial administration in the interests primarily of the creditors. To this proceeding not only a personal stigma may attach but restrictions on freedom in future business activity may result. ·The relief to the debtor consists in the cancellation of debts which, otherwise, might effectually prevent him from rehabilitating himself economically and socially. "Insolvency, on the other hand, seems to be a broader term that contemplates measures of dealing with the property of debtors unable to pay their debts in other modes or arrangements as well. There is the composition and the voluntary assignment, devices which, in appropriate circumstances, may avoid technical bankruptcy without too great prejudice to creditors and hardship to debtors. These means of salvage from the ravages of misfortune are of the essence of insolvency legislation, and they are incorporated in the Bankruptcy Act."

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Possibly these quotations do not represent any real change in the view of the Court as to the area of the legislative power of Parliament under the word "insolvency". Having regard to the nature of the legislation that was being considered in the earlier cases, it may be that the language used was not intended to be as restrictive as it seems to be. The difference that it makes in this case is that if the wider interpretation of Lord Thankerton in the Farmers' Creditors Arrangement Act case is taken, this provision of the Fraudulent Preferences Act would probably be ultra vires even if no Bankruptcy Act had been passed; if the more restricted definition of the earlier cases is adopted, this section of the Fraudulent Preferences Act is ultra vires because s. 64 of the Bankruptcy Act, as legislation which is ancillary to bankruptcy and insolvency, has occupied the field these sections purport to deal with. There can, I think, be no doubt that the impugned Act was ultra vires of the Legislature when it was passed. Whatever can be said for similar legislation that was passed before the Bankruptcy Act became operative, this legislation, viewed in the light of s. 64, becomes an attempt to cover the same ground that section covers. The enlargement of the time from sixty days to one year must be viewed as an attempt to strengthen the remedy which s. 64 gives to creditors. Section 4 cannot be looked upon as legislation which was intended to deal with contracts and which only incidentally and as part of a larger scheme, dealt with matters which were within the scope of one or more of the subjects mentioned in s. 91. This section is what it purports to be: legislation intended to prevent a person "at a time when he is in insolvent circumstances or is unable to pay his debts in full or knows that he is on the eve of insolvency" (s. 4(a) ), from disposing of his property in such a manner as to prefer one creditor over another. It is exactly what s. 64 of the Bankruptcy Act was passed to prevent. If it is not in pith and substance insolvency legislation under the earlier cases, it has become so under the enlarged definition and also by virtue of s. 64 of the Bankruptcy Act. Viewing s. 64 as being ancillary to bankruptcy and insolvency legislation, there can be no doubt of the conflict between that section and this section of the Fraudulent Preferences Act. Section 64 fixes three months as the time within which proceedings must be taken to avoid preferential dealings. Transactions beyond that period cannot be attacked under that section and are therefore legal. To enlarge that period to one year is to render void payments and transfers of property which were valid under s. 64. The exclusions from the operation of the two sections, while similar, exhibit a differing approach and there can be little doubt that s. 64 gives a wider exemption than s. 7 of the Fraudulent Preferences Act. There are many cases on the subject which tend to support the view that has been expressed. In Ontario there have been several decisions on sections of its Assignments and Preferences Act, R.S.O. 1960, c. 25, which corresponds closely to the Act we are considering. In 1930, Fisher, J. A., sitting in Bankruptcy, in Re Pommier, [1930] 4 D.L.R. 113, 65 O.L.R. 415, 11 C.B.R. 449, held that the Assignments and Preferences Act appearing in the then current Revised Statutes of Ontario had not been abrogated by the passage of the Bankruptcy Act. He was dealing with an alleged preferential transaction which was more than three months from the date of bankruptcy. This decision was overruled by the Court of Appeal (Davis, J . A., dissented but not on this point), four years later in Re Trenwith, [1934] 3 D.L.R. 195, [1934] O.R. 326, 15 C.B.R. 372. In Can. Credit Men's Trust Ass'n Ltd. v. Hoflar Ltd., [1929] 2 D.L.R. 106, [1929] S.C.R. 180, 10 C.B.R. 374, Mignault, J., refused leave to

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appeal from a judgment of the Court of Appeal of British Columbia [[1929] 2 D.L.R. 73, [1929] 1 W.W.R. 557, 40 B.C.R. 454, 10 C.B.R. 369] which held that s. 3(2) of the Fraudulent Preferences Act of that Province (similar to the section we are here considering), was in conflict with s. 64(2) of the Bankruptcy Act. In concluding his reasons for refusing leave, he said (pp. 108-9 D.L.R., p. 185 S.C.R., p. 376 C.B.R.): "The advisability of granting special leave to appeal to this Court from a judgment of a Court of Appeal, which is final and conclusive unless such special leave to appeal be obtained, is left to the discretion of the Judge of this Court to whom the application for special leave is made ( s. 174, of the Bankruptcy Act). I think that were leave to appeal granted in this case to the petitioner, the latter would not have a fairly arguable case to submit to this Court. Under these circumstances I would not be justified in retarding the liquidation of the insolvent estate by allowing a further appeal on this question of conflict between Dominion and provincial legislation, which I must regard as settled beyond peradventure." A passage from the judgment of Sir Lyman P. Duff, C. J. C., in Re Bozanich, A.H. Boulton Co. v. Trusts & Guar. Co., [1942] 2 D.L.R. 145, [1942] S.C.R. 130, 23 C.B.R. 234, which, while it may be obiter dicta because the case concerned whether a chattel mortgage was a "settlement" within s. 60 of the Bankruptcy Act, is of great importance, coming as it does from so eminent a jurist. He said (p. 149 D.L.R., p. 136 S.C.R., p. 238 C.B.R.): "I may add that in my opinion the provisions of R.S.O. 1927, c. 162, in relation to preferences are superseded by s. 64 of the Bankruptcy Act, and that the authority of the Ontario Legislature to enact such legislation is, in consequence of the enactment of s. 64, suspended in virtue of the concluding paragraph of s. 91 [of the B.N.A. Act]." This was the situation of the law when Parliament amended the Bankruptcy Act in 1949 [c. 7] by adding s-s. (6) to s. 41: " ( 6) The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights which are not in conflict with the provisions of this Act, and the trustee shall be entitled to avail himself of all rights and remedies provided by such law or statute as supplementary to and in addition to the rights and remedies provided by this Act." Whittaker, J., of the British Columbia Supreme Court considered this amendment in Totem Radio Supply Co. v. Stone et al., Can. Credit Men's Trust Ass'n v. Can. Fairbanks-Morse Co. (1959), 29 W.W.R. 552, 38 C.B.R. 112, and as he could find no conflict between s. 64 of the Bankruptcy Act and the section of the British Columbia Fraudulent Preferences Act, R.S.B.C. 1948, c. 132 ( similar to our Act), set aside a mortgage which had been given more than three months before the company became bankrupt. With respect, I must disagree with his conclusion. Having concluded, as previously stated, that there is a conflict between the two sections, it would follow that the section in the provincial Act is unaffected by the amendment. The Court of Appeal of Ontario again considered the Assignments and Preferences Act of that Province in Re Shelly Films Ltd., Clarkson Co. Ltd. v. Overland Finance Corp. Ltd. (1963), 37 D.L.R. (2d) 469, [1963] 1 O.R.

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431, 4 C.B.R. (N .S.) 186, and held that s. 12 ( 1) of that Act was abrogated by s. 64 of the Bankruptcy Act. Because no mention was made of the amendment to the Bankruptcy Act in that case, we are asked to assume that it had been overlooked and was not considered by that Court. Judicial comity would make one hesitate to impute to the Court of another Province such an oversight. The case does point out the conflicts in the two Acts and it is much more reasonable to assume that the amendment was in fact considered by the Court. It may be that certain sections of the Fraudulent Preferences Act are continued effective by the amendment to s. 41 of the Bankruptcy Act, but because of the conflict between the section we are considering and s. 64, s. 4 is not one of them. As we are holding that the section is ultra vires, it is not necessary to consider the other question which was argued. The appeal is dismissed with costs in double col. 5 of Schedule C.

PART II: BANKRUPTCY

Chapter Four: History and Jurisdiction SECTION 1: HISTORY OF BANKRUPTCY IN CANADA BANKRUPTCY IN CANADA (3rd ed., 1961) 1-27. Reprinted by permission.

DUNCAN AND HONSBERGER,

Section 91(21) of The British North America Act, 1867, gives the Parliament of Canada exclusive legislative authority over all matters coming within the class of legislative subject matter of "Bankruptcy and Insolvency." [Murray in the New English Dictionary (Oxford, Clarendon Press, 1883 ), derives the word bankrupt from the Italian banca rota (Florio) which is literally "bank broken" or "Bench broken." The allusion is said to be the custom of breaking the table of a defaulting tradesman.] By virtue of this authority the federal parliament in enacting The Bankruptcy Act has laid out a complete scheme for the distribution of the property of a bankrupt and in respect of matters relating thereto. The word "bankrupt" was originally applied in England only to fraudulent persons. Thus (1542) , 34 & 35 Hy. VIII., c. 4, the first English Bankruptcy Statute, was directed against such "persons as do make bankrupt," that is to say persons "who craftily obtaining into their hands great substance of other men's goods, do suddenly flee to parts unknown, or keep their houses, not minding to pay or restore to any of their creditors their debts and duties." The word has undergone various transfers of sense, and now in a popular sense means an insolvent debtor, or one who is unable to meet his liabilities, whether he has been declared a bankrupt or not, irrespective of the nature of the transactions in which he has indulged. The derivative "bankruptcy" now means either the state of being bankrupt or the fact of becoming bankrupt. "Insolvency," in essence, means the state or condition of being unable to pay one's debts or discharge one's liabilities. The Supreme Court of Canada in considering the meaning of the words "bankruptcy and insolvency" [Canadian Bankers Association et al. v. AttorneyGeneral of Saskatchewan, [1956) S.C.R. 31; [1954) 4 D.L.R. 599; (1955), 35 C.B.R. 135 (Can.) .] defined bankruptcy as a procedure by which an insolvent debtor's property is coercively brought under a judicial administration in the interests primarily of the creditors. Insolvency is defined as a broader term that contemplates measures of dealing with the property of debtors unable to pay their debts in other modes or arrangements as well. For example, composition

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and voluntary assignment are devices which in appropriate circumstances, may avoid technical bankruptcy without too great prejudice to creditors and hardship to debtors. These means of salvage from the ravages of misfortune are of the essence of insolvency legislation and they are incorporated in The Bankruptcy Act. The usual mark of insolvency is the inability to meet obligations as they mature; it constitutes an act of bankruptcy, and furnishes ground for proceeding against the debtor under The Bankruptcy Act. Provincial voluntary assignment legislation consisting of procedure enabling a debtor to deal with his creditors in the distribution of his assets, is, in the absence of Dominion legislation, unobjectionable. Apart from these questions of definition, historical reasons exist for the use of the words in section 91 (21) of The British North America Act. There have been both bankruptcy and insolvency statutes in England since ( 1729), 2 Geo. II, c. 22. The distinction between bankruptcy and insolvency legislation was also recognized in nearly all the colonies which now are provinces of Canada. Bankruptcy legislation as so understood, applied only to traders, and provided for the, discharge of the trader from his debts. The insolvency statutes were for the relief of insolvent non-traders imprisoned, at the instance of their creditors, for non-payment of their debts. These statutes provided for the release from imprisonment of the debtor, but the debtor was not freed from his liability. In addition to this historical distinction between Bankruptcy and Insolvency legislation, the article in the Constitution of the United States, which corresponds with section 91 ( 21 ) of the B.N .A. Act, was no doubt before the drafters of the B.N .A. Act. By Article 1, section 8 of that Constitution, Congress was given power to "establish uniform laws on the subject of bankruptcies throughout the United States." It had been contended that under this Article Congress had no jurisdiction on the subject of insolvency; but although there had been some decisions, it could not be said that the point had been determined. All these considerations, no doubt, had their influence in determining the wording of section 91 ( 21 ) . The expression "bankruptcy and insolvency" in paragraph 21 of section 91 of The British North America Act was referred to by Lord Selborne in L'Union St. Jacques de Montreal v. Belisle [ (1874), L.R. 6 P.C. 31; L.T. 111] as "describing in their known legal sense provisions made by law for the administration of the estates of persons who may become bankrupt or insolvent according to the rules and definitions prescribed by law, including of course the conditions in which that law is to be brought into operation, the manner in which it is to be brought into operation and the effect of its operation." The purpose of a bankruptcy act has been defined as providing for the orderly distribution of the property of a bankrupt among his creditors on a pari passu basis subject to privileged claims and to permit a bankrupt to receive eventually a complete discharge of his debts in order that he may be able to integrate himself into the business life of the country as a useful citizen free from the crushing burden of debt. The United States Supreme Court using similar language defined the broad purpose of a bankruptcy act as being the bringing about of an equitable distribution of a bankrupt's estate among creditors holding just demands based upon adequate consideration .... For a period of forty years following the repeal of The Insolvent Act of 1875 no general Bankruptcy Law was in force in Canada, unless legislation providing for the winding-up of insolvent companies can be so characterized. The legislative hiatus was filled by the enactment in 1919 of The Bankruptcy Act, a

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statute modelled on the English Bankruptcy Act of 1914. Numerous amendments were made to The Bankruptcy Act the most important of which were designed to rectify weaknesses which practice had demonstrated were due to departure from the English model. ... In 1949 all existing bankruptcy legislation was repealed . . . and a new bankruptcy act was enacted. The former act partly by reason of its frequent amendment had become confused and complicated and much substantive law had been inserted in the rules. The new act was based on the study of bankruptcy legislation of other countries, particularly that of England, Australia and United States. The act was completely recast resulting in a more logical sequence of sections. Many changes were also made in the act. Some of the more important changes provided for a procedure for the summary administration of small estates, provision for a proposal to be made prior to bankruptcy by a person other than a corporation, the abolition of the office of the custodian and a new scheme of distribution which greatly reduced the rights of the Crown. The 1949 statute is to be found inc. 14 of the Revised Statutes of Canada, 1952. On the abandonment by the Dominion Parliament of its legislative function on the subject of Bankruptcy and Insolvency the provincial legislatures were compelled in the interest of commercial discipline to exercise their much less extensive powers, and to endeavour to bring about results somewhat similar to those which might have been accomplished under a comprehensive insolvency law.... The Bankruptcy Act, 1919, applied as does the present Act only to individuals and partnerships and also to certain classes of companies. In this respect it followed The Insolvent Act of (1875) and the present United States statute. The Winding-up Act, does not provide for a discharge from contracts, but it provides for the distribution of the assets of insolvent companies, and so is valid insolvency legislation. The Dominion Parliament has power to pass a special Act to incorporate the assignees of an insolvent bank and give them authority to carry on the business of the bank as far as it is necessary for the winding-up of the same. On the other hand, provided the Act is not winding-up legislation, a province may, as a matter merely of a local or private nature within section 92 (16) of the B.N.A. Act, pass an Act for the relief of a particular association which is in a state of extreme financial embarrassment. It has also been held that in the absence of Dominion legislation, a provincial legislature may as a matter of civil procedure, pass an Act with respect to the sequestration of the property of a provincially incorporated insolvent railway company which has been declared to be a work for the general advantage of Canada. While a Dominion Winding-up Act cannot be invoked for the purpose of the original winding-up of the entire business of a foreign company which is doing business in Canada, it is applicable to insolvent foreign companies doing business in Canada, and may, as ancillary to winding-up proceedings in the foreign court, be invoked to wind up the business being conducted in Canada. Such legislation is intra vires the Dominion parliament. While the provisions of the Dominion Act with respect to the winding-up of insolvent provincially incorporated companies are intra vires, that Act does not apply to provincially incorporated companies which are not insolvent. In the interpretation of a Federal Act, it is at times important to determine the legal principles which should apply. [Cf. Dominion of Canada v. Province of Ontario [1910] A.C. 637, 645; 80 L.J.P.C. 32. As to whether there is a common law of the Dominion, quaere. If there is no common law of the

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Dominion, The Bankruptcy Act is not a codifying statute, as is the English Act. As to codifying statutes, see Bank of England v. Vagliano Bros., [1891] A.C. 107; 60 L.J.Q.B. 145; Robinson v. C.P.R. Co., [1892] A.C. 481, 487; 61 L.J.P.C. 79; Despatie v. Tremblay (1921 ), 37 T.L.R. 395, 396.] The applicable principle in the provinces in which the principles of English bankruptcy law are not in force has yet to be determined. In any event, as it is desirable that the practice under a Dominion statute be uniform in all provinces a literal or slavish following of the letter of the Act should be avoided if it will cause the practice not to be uniform in all provinces, when the intention of the act is clearly shown. In some respects The Bankruptcy Act is superimposed on provincial law. Thus, where no provision is made in The Bankruptcy Act, reference must be made to provincial laws to determine such questions as what constitutes the property of the debtor, who are creditors, and who are secured creditors. There are two other federal Acts besides the Bankruptcy Act which deal with insolvency: the Companies' Creditors Arrangement Act, R.S.C. 1952, c. 54, and the Winding-up Act, R.S.C. 1952, c. 296. The purpose of the Companies' Creditors Arrangement Act is to make possible the continuing of business operations and s. 10 of that Act provides that "whenever an application has been made under this Act . .. the court . . . may . . . make an order staying until such time as the court may prescribe or until further order all proceedings taken or that might be taken in respect of such company under the Bankruptcy Act and the Winding-up Act or either of them ... " However in In re A very ( 1942), 24 C.B.R. 17 (Ont.) the Court refused to grant an application under the Companies' Creditors Arrangement Act since it was really for the purpose of liquidating the company's affairs and liquidation should be carried out under the Bankruptcy Act. S. 38 (2) of the Bankruptcy Act guarantees that "nothing in that Act shall be deemed to affect the operation of the Companies' Creditors Arrangement Act, and the court may order that a proposal made by a corporation pursuant to section 27 be taken up and continued under the Companies' Creditors Arrangement Act. However, where a proposal made under the Companies' Creditors Arrangement Act is not carried out, a Court will then grant a receiving order : In re D . W . McIntosh Ltd. (1939), 20 C.B.R. 234 (Ont.); In re George Coles Ltd. (1945), 26 C.B.R. 154 (Ont.) . The Winding-up Act sets forth in s. 6 the two classes of corporations to which it applies: ( 1) most of the corporations which are excluded bys. 2(f) of the Bankruptcy Act from the purview of that Act - incorporated banks, savings, incorporated insurance companies, loan companies having borrowing powers, building societies having a capital stock, and incorporated trading companies doing business in Canada; (2) all corporations "whose incorporation and the affairs whereof are subject to the legislative authority of the Parliament of Canada." Each of these classes of corporations comes under the Act either in the case of insolvency or in the case of liquidation apart from insolvency. Provincially incorporated companies which are not insolvent may be wound up under provincial winding-up legislation.

SECTION 2 : JURISDICTION A. Constitutional Jurisdiction BANKRUPTCY IN CANADA ( 1961) 795-796. Reprinted by permission.

DUNCAN AND HONSBERGER,

Three sections of The British North America Act must be mentioned when considering the manner in which the Parliament of Canada has dealt with the

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questions of the administration of The Bankruptcy Act. Section 91 declares that "the exclusive Legislative Authority of the Parliament of Canada extends to all matters coming with the classes of subjects next hereinafter enumerated, that is to say: "(21). Bankruptcy and Insolvency." Section 92 provides that "In each Province the Legislature may exclusively make Laws in relation to Matters coming within the classes of subjects next hereinafter enumerated, that is to say: "(14) . The Administration of Justice in the Province, including the Constitution, Maintenance, and Organization of Provincial Courts, both of Civil and Criminal Jurisdiction, and including Procedure in Civil Matters in those Courts." Section 101 provides: "101. The Parliament of Canada may, notwithstanding anything in this Act, from Time to Time, provide for the Constitution, Maintenance, and Organization of a General Court of Appeal for Canada, and for the Establishment of any additional Courts for the better Administration of the Laws of Canada." Under these provisions the Dominion Parliament may impose new duties upon the existing provincial courts, or give them new powers as to matters which do not come within the classes of subjects assigned exclusively to the legislature of the provinces. 2. "Courts of Bankruptcy." The administrative plan of the Bankruptcy Act of 1919, as expressed in section 63 of that Act, conferred on the principal provincial Courts jurisdiction in bankruptcy, and constituted them "Courts of Bankruptcy." This plan was animadverted upon, whereupon the Act was changed by the deletion of the clause which purported to constitute the provincial courts "Courts of Bankruptcy." This left the section, so far as this aspect of the matter is concerned, in its present form, under which jurisdiction in Bankruptcy is conferred on existing provincial Courts, and not on any Bankruptcy Court. 3. Dominion courts ad hoc. The result appears to be that the administration of The Bankruptcy Act is confined to the provincial Courts in much the same way as was the administration of The Winding-up Act and as was the administration of the various Insolvent Acts. It has been held in cases under The Winding-up Act that a provincial Court charged with the administration of The Winding-up Act is a Dominion Court ad hoc.... What is the procedure in these hybrid "Dominion courts ad hoc"? And in whom is the rule-making power vested? It might be expected that since the courts are really provincial courts the procedure would be controlled by the ordinary provincial rules committee. And in fact section 140 provides that, when bankruptcy appeals are taken, the several provincial courts of appeal and the Supreme Court of Canada which hear such appeals shall operate according to their ordinary procedure. However in the bankruptcy courts of original jurisdiction the procedure is not necessarily the same as the ordinary civil procedure. It is true that Rule 16 ( of the general rules under the Bankruptcy Act) provides that "the practice of the court in civil actions or matters, including the practice in chambers, shall in cases not provided

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for by the Act or these Rules, and so far as the same are applicable and not inconsistent with the Act or these Rules, apply to all proceedings under the Act." Yet the general rule-making power including the power to make rules of procedure, remains in the Governor in Council: section 166. And in fact the Bankruptcy Rules contain a great many provisions dealing with the procedure of the courts. This is perhaps both necessary and wise in view of the special nature of bankruptcy proceedings, the fact that many of them are non-litigious, and the need for economy. Query the competency of Parliament to enact rules of procedure for provincial courts? In In re Dominion Shipbuilding & Repair Co. Limited (1926), 7 C.B.R. 349, where an order had been made by a judge of the Supreme Court of Ontario at a time (August, 1920, one month after the Bankruptcy Act had first come into force) when no S.C.0. judge had yet been designated as a Bankruptcy Judge, Fisher, J . said (at pp. 351-352) : "When The Bankruptcy Act came into force on July 1, 1920, I think it was at first thought that the effect of the Act was to create a new Court the jurisdiction of which could only be exercised in the first instance by some particular Judge to be designated by the Minister of Justice. Any doubt, however, was removed by the amendment to the Act in 1922, when it was made clear that the Act created no new Court but conferred on a pre-existing Court a jurisdiction in bankruptcy, with the power, in the first place to the Minister of Justice and afterwards (by amendment) to the Chief Justice, to designate some Judge to exercise bankruptcy jurisdiction of the Court. This power to designate a Judge to discharge and exercise jurisdiction in bankruptcy has not the effect of depriving any other Judge of that jurisdiction, which every Judge of the Supreme Court inherently has as a member of the Court, of exercising, as far as any individual Judge may do, all and every jurisdiction belonging to the Supreme Court of Ontario, and that this is the true construction of the Act is manifested by the concluding words of sec. 64 (3) [now s. 142 (2)) where it is said: 'Nothing in this subsection shall diminish or affect the powers or jurisdiction of the court or of any of the judges thereof not so specially nominated or assigned.' "In my opinion when The Bankruptcy Act, sec. 63 [nows. 140 (1)), conferred bankruptcy jurisdiction on the Supreme Court of Ontario, then every Judge of that Court had, ipso facto, the right and duty to exercise the jurisdiction so conferred upon the Court which by the statute or Rules of Court was exercisable by a single Judge, and the power conferred upon the Minister of Justice or Chief Justice to designate a particular Judge to discharge bankruptcy business can only be regarded as a matter relating to the convenient administration of the Act and not in any way as depriving any other judge of jurisdiction." N.B. The cases in the preceding section "The Constitutionality of Provincial Fraudulent Preference Legislation," supra pp. 406-427, should be considered again here.

RE SOCIETY SHIRT CO. Ontario Court of Appeal. [1932] O.R. 104; 13 C.B.R. 216. LATCHFORD, C. J.: This appeal is founded on certain provisions of the Extra Provincial Corporations Act, R.S.O. 1927, c. 219. The petitioning creditor is an English corporation, unlicensed under the Act, which has an agent in this city who takes orders for its wares, or, as is contended, actually sells them here. The agent, with express authority from his principals, filed a petition in bankruptcy against the appellant who contends that such a proceeding is prohibited in the circumstances by s. 15 ( 1 ) of the Act mentioned. I think that contention untenable. The proceedings are under a statute of the Dominion regarding a matter - bankruptcy - expressly declared to be within the powers of the parliament of Canada, and no right exists in the legislature of

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Ontario to interfere with the manner in which proceedings in bankruptcy matters are to be carried on. Nothing of the kind is, in my opinion, intended by the statute relied on by the appellant. My brother Magee doubts, but the other members of the Court agree. MAGEE, J. A. : Without further consideration as to the existence in Ontario of any legal debt within the meaning of the Bankruptcy Act from the appellant company to an unlicensed foreign company in respect of a transaction expressly forbidden by s. 6 of the Extra Provincial Corporations Act, I do not feel justified in expressing an opinion. If instead of bringing an action the foreign company can force payment by filing a petition in bankruptcy the Ontario Act would be rendered nugatory. This question is apart from the other whether a petition in bankruptcy is prohibited by s. 15 of the Ontario Act, or could be prohibited by the provincial legislature if a debt existed. I had better therefore take no part in the judgment. RE REYNOLDS Supreme Court of Ontario. [1928] 2 D.L.R. 520. FISHER, J. : The motion raises an important point in regard to the jurisdiction of the Bankruptcy Court to try a case in which a trustee claims a declaration against a third party. Roy Reynolds, described as a merchant, at Stratford, made an authorized assignment on August 15, 1927. On November 14, 1927, the trustee moved for a judgment declaring one Thistle, of the City of Stratford, a general partner of the debtor, or in the alternative for an order declaring that the said Thistle wrongfully obtained from the debtor's partnership the sum of $3,100. On that motion it was ordered that the trustee proceed to the trial of an issue in which he is to be the plaintiff and Thistle the defendant, with liberty to the parties to deliver pleadings .. . . There is no doubt that this Court has jurisdiction to make declaratory judgments in respect of the matters covered by s. [60] relating to settlements, and under s. [64] relating to fraudulent preferences, and to certain claims arising under R. 120, but I do not find in the present Act any provision giving the Bankruptcy Court general jurisdiction to make declaratory judgments similar to s. 16 of the Judicature Act, R.S.O. 1914, c. 56, (now R.S.O. 1927, c; 88) , that seems to have been left to the Provincial Court. Section [140] of the Bankruptcy Act invests the Bankruptcy Court with jurisdiction at law and in equity, as will enable it to exercise original auxiliary and ancillary jurisdiction in bankruptcy and in all other proceedings authorized by the Act, but in my opinion, this jurisdiction is confined to the administration by a trustee of an insolvent's estate that is, as stated, brought into the Bankruptcy Court for administration and not to persons or matters outside of that Act. If a trustee should desire to attack settlements or fraudulent preferences under ss. [60] and [64], or if a trustee is attacked by a third party, the Bankruptcy Court is available and these are the very things intended to be dealt with by that Court, but it is quite another matter to say that a trustee is entitled to bring strangers or third parties into and compel them to submit their rights to be determined by a Bankruptcy Court. If a trustee is authorized by the inspectors to take action against third parties, he can always, upon application to the Court, obtain an order to do so, and if in the present case it should be deter-

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mined in another Court that Thistle was a partner or had received monies to which he was not entitled from the debtor, then any property recovered by the trustee would belong to him as representing the insolvent estate and subject to the jurisdiction of the Bankruptcy Court. When the Bankruptcy Act was passed, the Bankruptcy Court was established with a separate jurisdiction for the administration of all insolvent estates brought within the Act, either by voluntary assignment by a debtor or by a petition for a receiving order presented to the Court on behalf of creditors, and also for an equitable distribution of the assets of the insolvent by a trustee appointed by creditors pursuant to the Act. In Re Sternberg, Ex p. Triefus & Stripp Ltd., [1924] 2 D.L.R. 492; varied [1925] 2 D.L.R. 203, it was held that where a trustee is moving to set aside a transfer of personal property as preferential and void, there is no jurisdiction in the Bankruptcy Court to add as a party to an issue a third party who is claiming the property as owner, and not claiming against the estate. In Re Whistle Co., [1925] 1 D.L.R. 1110, I held that where a petition is founded upon an alleged debt, as to the existence of which there is a bona fide dispute, the hearing of the petition should be adjourned to permit of the dispute being determined in another Court. In Re Ellis & Silber (1872), L.R. 8 Ch. 83, it was held that when a trustee in bankruptcy has in respect of the bankrupt estate a claim against a third person, that claim may be prosecuted at law or in equity, and is not subject to the jurisdiction of the Court of Bankruptcy. At p. 86, Lord Selborne, L. C. said: "That which is to be done in bankruptcy is the administration in bankruptcy. The debtor and the creditors, as the parties to the administration in bankruptcy, are subject to that jurisdiction. The trustees or assignees, as the persons entrusted with that administration, are subject to that jurisdiction. The assets which come to their hands and the mode of administering them are subject to that jurisdiction; and there may be, and I believe are, some special classes of transactions which, under special clauses of the Acts of Parliament, may be specially dealt with as regards third parties, but the general proposition, that whenever the assignees or trustees in bankruptcy or the trustees under such deeds as these have a demand at law or in equity, as against a stranger to the bankruptcy, then that demand is to be prosecuted in the Court of Bankruptcy, appears to me to be a proposition entirely without the warrant of anything in the Acts of Parliament, and wholly unsupported by any trace or vestige whatever of authority."

In L'Union St. Jacques v. Belisle (1874 ), L.R. 6 P.C. 31, is an authority that all that the Bankruptcy Court has is jurisdiction in the administration of the assets of an insolvent and not in bringing people in or making declarations against third parties. See also Re Maule v. Davis (1873), L.R. 9 Ch. 192, and Ex p. Dickin, Re Pollard (1878), 8 Ch.D. 377, and Re Yates, Ex p. Brown (1879), 11 Ch.D. 148. In the cases of Re Pollard, [1925] 4 D.L.R. 370, and Re Cluff Bros., [1925] 4 D.L.R. 721, 57 O.L.R. 662, referred to by counsel for the trustee, the question of jurisdiction was not raised and therefore they are not an answer to the question of the Court's jurisdiction raised on this motion. I think it is quite clear on the material filed by the trustee that Thistle is a stranger to the estate that is now being administered in bankruptcy and that there is no jurisdiction to bring him in and compel him to submit his rights whatever they may be, to be determined by the Bankruptcy Court.

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There will be judgment rescinding the order directing the trial of an issue, without prejudice to the trustee, if instructed by the inspectors, to proceed against Thistle in the Court of ordinary jurisdiction. Thistle is entitled to his costs of this motion, to be paid by the trustee, and the trustee will be entitled to his costs payable out of the estate.

RE WIGGINS LTD. Appellate Division of the Supreme Court of Ontario. [1931] O.R. 573. MIDDLETON, J. A.: At the time of the bankruptcy Wiggins Ltd. owed Moysey & Company a large sum secured by the transfer to that company of shares of stock controlled by the bankrupt. This stock, it is said, was not actually owned by the bankrupt, but in truth belonged to various customers. The bankrupt also owed a large sum to West & Company and this was similarly secured by other stock hypothecated to West & Company by the bankrupt. This stock, it is also said, did not in truth belong to the bankrupt, but had been purchased by it for its customers. Moysey & Company and West & Company each sold all the stock they held, and, after paying themselves all that was due to them, a surplus remained with each of them. These surpluses were paid by them to the trustee in bankruptcy. Certain customers of the bankrupt, Spratt and the three Traverses, made claim to part of this surplus, their contention being that they could identify as theirs part of the stock that had been sold and that upon principle the money due by the bankrupt to Moysey and to West must be deemed to have been taken by them from that portion of the stock sold which was owned by the bankrupt, and that the surplus, which exceeded the value of the claims put forward, must now be deemed to represent that portion of the proceeds of the stock which was not actually owned by the bankrupt. This claim has been given effect to, and the trustee has been ordered to pay over to these particular customers the amount realised with respect to the stock which they claim to own. From this order the present appeal is had . ... The law is simple in its principle but difficult in its practical application. Where the insolvent hypothecates stock which is not his own and stock which is his own for his own purposes and without the authority of the client, the proceeds of the stock which he owns or has a right to discount must be applied first in the discharge of the debt, and those who have been wronged by the tortious act of the insolvent are entitled to claim that that which remains, after satisfying the claim against all the stock, must be in the first place regarded as the proceeds of the stock wrongfully converted. If the claims based upon wrongful conversion exceed the balance available, all such claims will rank pro rata upon the surplus available. The Court will not attempt to discriminate as between these preferred claimants and accord to one priority over the others. In order to invoke this principle, ownership of the stock sold must be satisfactorily proved by the claimants as well as the fact of its wrongful conversion. Here the claimants fail, in my opinion, because they have failed to prove ownership, and the surplus fund remains in the hands of the assignee to be distributed as part of the general estate of the bankrupt unless some other claimant can successfully establish a claim thereto. If this is correct, it follows that the matter must be dealt with in Bankruptcy and not otherwise. So far as these cases are concerned, the fund is distributable

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as part of the bankrupt's assets in the bankruptcy proceedings. The trustee in bankruptcy holds it as an asset in the bankruptcy, subject only to any equitable right that any claimant may succeed in proving. I would allow the appeal but under the circumstances I would not give any costs either here or below. There is another way in which the case of Spratt might have been presented. He may be able to shew that the 100 shares bought for him were converted on the 6th November, and if it can be shewn that the proceeds of this conversion went in reduction of a balance charged upon other stocks which, upon the principle indicated, should have been first resorted to, and that these stocks were when the final sale took place benefited by this, then, subject to the right of others to share, Spratt would have the right to a preference. Upon the reference Spratt should have the right notwithstanding this judgment to make any such claim if so advised. In the proceedings it is suggested that the trustee in bankruptcy when he received this fund was not content with retaining it for distribution but invested it in stocks which have depreciated. If this is so, the matter should be inquired into in the bankruptcy proceedings. MULOCK, C. J. 0. and MAGEE and GRANT, JJ. A. agreed with with MIDDLETON, J.A. HODGINS, J. A.: .. . I do not think that, under the Bankruptcy Act, these competing claims to such a fund can be adjusted in bankruptcy or on the application of the trustee. The latter's rights and duties depend wholly on the terms of that Act and these may be summed up, roughly, as confined to ascertaining, acquiring, and distributing the debtor's assets. Such a situation as this is not covered by those duties. In the first place the bankrupt company was not the owner of the stocks and collaterals deposited with it. It was a pledgee only, and it, in some cases wrongly and perhaps in others rightly, repledged them with the stockbrokers with whom the company dealt. Their sale could in no way alter the ownership of those securities. . . . The relation of the broker and his customer is that of principal and agent, and the broker's purchase was made as agent for the customer; and pledging, rightly or wrongly, the property of the customer, his principal, did not alter that relationship. When the sale of all the pledged property, including that of Spratt, took place, the resulting proceeds were the salvage out of a large number of transactions which dealt with the property, not of the bankrupt, but of the customers, and the amount so salvaged does not therefore appear to me to be the property of the debtor or to be distributable as such by his trustee. In the second place, while the creditors who are setting up claims to this fund clearly have each an action against the bankrupt company, for damages for conversion, or on the case, and a right now to prove against the bankrupt estate, this application is designed, in effect, to ascertain what equities exist in favour of each creditor in the salvaged sum referred to, moneys which belong to them as being derived from the sale of their securities. These are matters in which the trustee for the bankrupt company has neither the right to concern himself at the expense of the estate, nor any interest to intervene or to argue for or against any claimant. The rights of the parties are derived from the original transactions coupled with the subsequent actions of both the bankrupt and the customers who are now creditors ( such as tender, etc.) These rights are not

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easy of solution and must be fully considered, in connection with the special circumstances that stocks identical with those of the customers are and were purchasable in the open market in each case. . . . I have come to the conclusion that, as the fund on which the applicant Spratt is making a claim is not part of the property of the debtor, and as it is clear that the applicant's money and securities have been dealt with or sold and disposed of in such a way as to give him a right to be heard in a forum where his rights can be properly determined and equity done between himself and other claimants, it is the duty of the trustee and he should be so ordered, to pay this money into the Supreme Court, to be there distributed. It may be that that Court can appoint representatives of classes of creditors whose rights arise out of similar facts. But I do not see any power in this Court so to do, nor in the Registrar of the Bankruptcy Court (see sec. 159). There is another reason that occurs to me as having great weight. In the case of Biddle v. Bond (1865), 6 B. & S. 225, it was established that a bailee is estopped from disputing his bailor's title, unless he claims to defend under the party in whom he alleges the title to be. In this case the trustee cannot set up against Spratt the title of any other claimant, as he professes to dispute them all, nor does he claim to do so, but merely to stand by, so as to fall heir to any unclaimed sum of money for the general creditors, whose right to it he cannot even plausibly assert. I do not think that the Dominion Parliament has the power to deal, to the prejudice of provincial law, with the property and civil rights of the applicant and others to a fund such as this. To construe the words "auxiliary or ancillary" so as to embrace such an application as this would be to add something not in any sense auxiliary or ancillary to bankruptcy legislation, for confessedly it would be dealing with a fund not the property of the debtor but of the principals for whom the debtor acted as agent. I see nothing in the Bankruptcy Act which in any way aids such a construction, and I do not believe the Bankruptcy legislation was ever intended to cover a case like this. The order in appeal should be set aside and the trustee directed to pay the money in his hands into the Supreme Court, the costs heretofore incurred to be in the discretion of the Judge of that Court who distributes the fund. I have had, since writing the above, the advantage of reading my brother Middleton's opinion. Apart from my view that the stocks sold were those bought by the bankrupt as agent for his clients and that the small residue or salvage can only belong to them and not to his estate, I would be inclined to agree that, if all are simple creditors of the bankrupt, the distribution must necessarily be pari passu. But no satisfactory opportunity has been given in this or the Travers case to establish the ownership of each block of stock purchased, pledged, and sold. The appearance of several counsel to represent the various points of view of certain claimants against the fund in no way helps the Court to decide what those rights are or may be or whether they have any legal existence. That can only be decided on the facts of each particular claim. I, therefore, do not think it wise to lay down as the law that all those who lost money through Wiggins Ltd., no matter under what circumstances, and without going into their relative claims carefully, are only simple contract creditors on the bankrupt estate. For these reasons I am not able to concur in the allowance of these appeals in the way suggested by my learned brother. The Travers case, while differing slightly in the facts, seems to me to raise the same initial question discussed in the Spratt case. The three claimants, F. J. Travers, Hubert Travers, and Blanche D. Travers, bought through Wiggins Ltd.,

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on margin, Falconbridge Mines stock, 25, 100, and 75 shares respectively. At the date of the assignment in bankruptcy they owed Wiggins Ltd., the following, F. J. Travers $75, H. R. Travers $379.98, and Blanche D. Travers $287.66. The stocks so bought were pledged with West & Co., stockbrokers, and were, with others, sold by the trustee, and he has now the proceeds of sale in his hands, some $18,700.96, in which other parties similarly placed are claiming a share. In my view the only order this Court can make in this case is one similar to that proposed in the Spratt case. It is obvious that if the contentions put forward before us as to the distribution of this fund, and that in the Spratt case, are to be really considered and dealt with, the convenient course is to have the rights of the parties settled on a reference where the complicated facts and the rights arising out of them can be considered in detail. This is not a function of the Bankruptcy Court, but it can readily be done on an application for payment out of court of the fund when a Judge of the Supreme Court can make the appropriate order. RELOFSKY Ontario Court of Appeal. [1947] 4 D.L.R. 374. ROACH, J.A.: On February 11, 1947, a receiving order was made against Morris Lofsky. The Canadian Credit Men's Trust Association Ltd. was appointed trustee of his estate. The appellant Ethel Lofsky is the wife of the bankrupt. On or about May 14, 1947, the trustee served upon the appellant and the bankrupt a notice of motion returnable on June 2, 1947, before the presiding Judge in Bankruptcy for an order (a) declaring fraudulent and void as against the trustee a certain transfer of a 1946 Pontiac sedan made by the bankrupt to the appellant on or about March 31, 1947; (b) declaring that the said automobile, on the date the receiving order was made, was the property of the bankrupt and that the trustee was entitled to the possession thereof; ( c) restraining the bankrupt and the appellant or either of them, their attorneys and agents from selling or disposing of the automobile or otherwise dealing with it in any manner prejudicial to the claim of the trustee. . . . It is not suggested that the alleged transfer of ownership and possession is void as a fraudulent preference on the wife as a creditor of her husband. What is alleged by the trustee is that, pending the bankruptcy, the debtor purported to transfer to the appellant an asset of his estate which was vested in the trustee, and which should be, and except for the transfer would be available to his creditors. What is said by both the debtor and the appellant is that in fact the automobile was never the property of the debtor; that the appellant paid for it; that although it was registered under the Highway Traffic Act, R.S.O. 1937, c. 288, in the name of the debtor as the owner thereof, and the motor vehicle permit was issued in his name, that circumstance had resulted from the fact that at the time of the purchase and the registration the appellant was ill and as a matter of expediency and convenience it was registered in his name; that when the motor vehicle permit was about to expire, in March, 1947, the debtor who was then in bankruptcy, complied with the requirements of the Highway Traffic Act which were necessary in order to have the new permit issued to the appellant as the true owner.

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The question for determination on this appeal is : Can the issues thus arising be tried in bankruptcy or must the trustee seek the relief which it now claims by an ordinary action in a provincial Court administering, not the laws of bankruptcy by delegation of Parliament, but the laws of property and civil rights, over which the Province has exclusive jurisdiction? If the controversy between the trustee and the appellant is one in bankruptcy, then the trustee has adopted the proper procedure. On the other hand, if that controversy is purely a question of property and civil rights, then the relief which the trustee is seeking can be granted only in an ordinary action. The English decisions must be considered in the light of the fact that there, constitutional questions of governmental jurisdiction do not arise, as they do in Canada.. . . The Court in Bankruptcy frequently interferes with civil rights, but in those instances such interference flows from the determination of matters that come squarely within the subject of bankruptcy and insolvency. They come within the scope of what was said by the Privy Council in Cushing v. Dupuy (1880), 5 App. Cas. 409 at pp. 415-6 : " It would be impossible to advance a step in the construction of a scheme for the administration of insolvent estates without interfering with and modifying some of the ordinary rights of property, and other civil rights, nor without providing some mode of special procedure for the vesting, realisation, and distribution of the estate, and the settlement of the liabilities of the insolvent. Procedure must necessarily form an essential part of any law dealing with insolvency. It is therefore to be presumed, indeed it is a necessary implication, that the Imperial Statute, in assigning to the Dominion Parliament the subjects of bankruptcy and insolvency, intended to confer on it legislative power to interfere with property, civil rights, and procedure within the Provinces, so far as a general law relating to those subjects might affect them." See also A .-G. Ont. v. A.-G. Can., [1894] A.C. 189. In my opinion, it must be concluded that the issue between the trustee and the appellant is not a matter in bankruptcy and that it is purely a matter of property and civil rights. It has none of the elements that would bring it within the former. No question as between debtor and creditor here arises in the distribution of a bankrupt estate. The appellant does not claim title to the automobile through the bankrupt. Indeed, she says that the bankrupt never had title and that she was always the owner. I cannot think of any aspect of the issue that gives it the complexion of a matter in bankruptcy unless perhaps this, that the bankrupt pending the bankruptcy caused the new motor vehicle permit to be issued in her name. That does not make the issue one in bankruptcy when the sole question is who, as between the bankrupt and the appellant, was always the true owner. Since the argument, the decision of this Court in Re Wiggins Ltd., [1931] 4 D.L.R. 338, O.R. 573, has come to my attention. It was not referred to in argument by either counsel. I have anxiously considered the effect of that decision, and have concluded that it can be distinguished from the case at bar. There the issue was as to the right of the applicants to the surplus proceeds from the sale by pledges of certain shares which had been pledged by the bankrupt broker and which the applicants claimed on the basis that the shares thus pledged were owned by them. Middleton, J. A., in delivering the judgment of the majority of the Court, says at p. 347, D.L.R., p. 581 O.R., that "the claim-

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ants fail, in my opinion, because they have failed to prove ownership, and the surplus fund remains in the hands of the assignee to be distributed as part of the general estate of the bankrupt unless some other claimant can successfully establish a claim thereto." Hodgins, J. A. , who wrote a dissenting judgment, said ( at p. 344 D.L.R.) that he did not think that "the Dominion Parliament (had) the power to deal, to the prejudice of provincial law, with the property and civil rights of the applicant and others to a fund such as this" which as he put it, was "not the property of the debtor but of the principals for whom the debtor acted as agent." Frankly, I am impressed with that dissenting judgment, but I would nevertheless follow the majority judgment if I thought it decisive of the case at bar. The case at bar, in my opinion, is distinguishable in that what was there involved was not a question of ownership as between the applicants and the bankrupt estate, but a question of possible discrimination in distribution by the trustee between the applicants and others whose shares had also been pledged by the broker. For the trustee, there, it had been argued that the applicants were merely creditors of the bankrupt estate. For the applicants it was argued that they could identify as theirs certain of the shares which the pledgee had sold. When Middleton, J.A., says that the applicants failed to prove ownership, I think it is clear from other parts of his judgment that what he thereby meant was that they failed to identify as theirs any of the stock that was sold and that it was because of that failure that the matter had to be dealt with in bankruptcy. In think it must be said that actually the Court was deciding a question of ownership as between the applicants and others whose shares were pledged. Notwithstanding that fact, I am not prepared to extend the procedure there approved to a straight question of title as between the appellant and the trustee in the circumstances of this case. The judgment of Fisher, J., in Re Reynolds, [1928] 2 D.L.R. 520, 62 O.L.R. 271, affirmed on appeal [1928] 3 D.L.R. 562, 62 O.L.R. 360 supports the view which I have taken. The trustee is at liberty of course, if it so chooses, to seek the relief which it here claims in another Court. . . . RE MAPLE LEAF FRUIT CO. Supreme Court of Nova Scotia. [1949] 3 D.L.R. 426. DouLL, J. : This is an appeal from an order of the Chief Justice in a bankruptcy proceeding. In the winding-up of the bankrupt estate, the trustee was ready to pay all persons whose claims were approved a dividend of 20% . Among others the two appellants North and Porter had substantial claims on which 20% was about to be paid. The Bank of Nova Scotia, however, notified the trustee that any amount payable to these creditors ( and a number of others) was payable to that bank under the terms of an agreement by which these creditors guaranteed a large loan made by the bank to the bankrupt company. The trustee made out cheques payable to the individual creditors and the bank jointly. This, however, did not improve the situation for neither party would endorse the cheque to the other. The bank thereupon appealed from the decision of the trustee that he would pay the cheques to both, and moved before the Chief Justice to reverse that decision and to order payment to the bank alone. As the proceeding before the Chief Justice became somewhat entangled with

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another motion in the same matter, it appears necessary to note that at or about the same time the trustee took out a summons for directions as to the payment of the moneys. Both applications were heard by the Chief Justice at the same time and on April 7, 1948, he filed two decisions. In the present case he filed a memorandum deciding that the trustee should be directed to pay the dividends to the appellants North and Porter, and in the application of the trustee he filed a similar memorandum deciding that the dividends should be paid to the present appellants. It is quite clear that the application of the bank was simply for a reversal of the trustee's decision and for an order that the money be paid to the bank, but there can be no doubt that counsel for the Bank of Nova Scotia submitted two orders, one ordering the trustee to pay the money to the bank and another alternative order allowing the trustee to accept the proof of the Bank of Nova Scotia in respect of the claims of the appellants, they being guarantors and assignors to the bank of any claims which they had against the bankrupt, this assignment being part of the instrument of guarantee. These blank orders are in the file. After the filing of the memorandum in each case by the Chief Justice, counsel for the bank called the attention of the Chief Justice to the fact that he had asked for an alternative order giving leave to submit proof by the bank. The parties again attended before the Chief Justice and on May 25, 1948, he made an order giving the bank leave to file proof of these claims and to pay the money to the bank upon the filing of such proof. From this order the appellants have appealed. The grounds of the appeal are: ( 1 ) The Court had no jurisdiction to decide matters outside the administration of the bankrupt estate; ( 2) The Court does not recognize assignments or decide rights between a creditor and an assignee; ( 3 ) The Chief Justice erred in deciding the sufficiency of the proof of claim; that was for the trustee; ( 4) There is no proof that the guarantee is valid. The matter of jurisdiction should not be difficult. What the Bankruptcy Act did was to confer upon several Courts, including the Supreme Court of Nova Scotia, "such jurisdiction . . . as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act." [s. 152 ( 1)] There is no question arising between subject and subject which the Court may not properly decide unless it be something which is by statute reserved to the exclusive jurisdiction of some other tribunal. The only question is whether the particular matter before the Chief Justice was properly brought before him in bankruptcy proceedings, or whether it should have been decided in a more formal manner by the issue of a writ or in some such manner. I agree that if a question arises which is outside the administration of a bankrupt estate and which only affects third parties, the usual procedure of the Courts should be followed. Such is, I think, the effect of the various cases which have been cited in regard to jurisdiction: Re Frost, Ex p. Official Receiver, [1899] 2 Q.B. 50. But in the present case two applications were before the Chief Justice: First: An appeal by a creditor from a decision to make certain cheques

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payable to H. I. North and the Bank of Nova Scotia, and W. E. Porter and the Bank of Nova Scotia, respectively. Second: An application by the trustee for directions as to the proper party to whom he should make payment. In each case the result would have been binding upon the trustee and his action in following the decision would have been justified and protected. As to the first application, s. [15] of the Act provides: "If the debtor or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court and the court may confirm, reverse or modify the act or decision complained of and make such order in the premises as it thinks just." I think that the Chief Justice had ample jurisdiction under this section to confirm the action of the trustee or to make a proper order. I leave for the moment the question as to whether he made the proper order. As to the second application - that of the trustee - s. 42 [now s. 12( 1)] provides: " ( 1 ) A trustee may at any time apply to the court for directions in relation to any matter affecting the administration of the estate. ( 2) The Court shall give in writing such directions, if any, as may be proper according to the circumstances and not inconsistent with this Act, which directions shall bind as well as justify the subsequent consonant action of, the trustee." The question which the trustee submitted was certainly a "matter affecting the administration of the estate." The Chief Justice might have directed an issue or he might have dealt with it in several ways. He heard argument and gave the trustee the necessary advice. An examination of the cases in Duncan & Reilly, Bankruptcy in Canada, 2nd ed., p. 332 indicate that the section has been held to cover cases of this kind if all the parties affected are brought before the Court. The second objection is that the Court does not decide rights as between creditors and their assigns. There have been cases where the Courts have held that it is inconvenient to decide such matters in bankruptcy proceedings, but if the facts are simple, I see no reason why the Judge should not deal with them. I am far from saying that the same procedure should be followed in every case but as the Court must in the case of rival claimants decide which party is entitled to the money, there must be a decision by some tribunal .... MACQUARRIE and PARKER JJ. concur. RE M. B. GREER & COMPANY Supreme Court of Ontario in Bankruptcy. 1953. 33 C.B.R. 69.

SMILY, J.: This is an application on behalf of the trustee for an order setting aside as against the trustee a mortgage made by the above-named debtor, dated August 30, 1951, for the sum of $6,054.90, and registered in the Registry Office for the Registry Division of the City of London on September 7, 19 51, as No. 56558, on the ground that the mortgage is null and void under the provisions of The Fraudulent Conveyances Act, R.S.O. 1950, c. 148, The Assignments and Preferences Act, R.S.O. 1950, c. 26, and s. 60 of The Bankruptcy Act, 1949, 2nd Sess. (Can. ), c. 7. It is alleged that at the time the mortgage was granted by the debtor to Webster Industries Limited the debtor had approximately 25 creditors to whom he owed approximately $16,500, including the amount of $6,504.90 owing to Webster Industries Limited, the exact amount of the mortgage; that no merchandise had been supplied to the debtor by Webster Industries Limited

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after December, 1950; and that no present or future consideration was given by Webster Industries Limited either in cash or in goods supplied in return for the granting of the mortgage, and that the mortgage secured only the past indebtedness of the debtor to Webster Industries Limited .... The main question probably is as to the procedure to be followed where the trustee attacks a mortgage given to a creditor of the debtor, and whether he may proceed in the Bankruptcy Court in the bankruptcy proceedings, or whether he must proceed by action. Mr. Justice Middleton, in Bartley's Trustee v. Hill (1921) , 1 C.B.R. 477, 50 O.L.R. 321, 61 D.L.R. 473, 3 Can. Ahr. 563, pointed out in effect that The Bankruptcy Act was framed for the purpose and with the intention of avoiding large incidental expense in the administration of the estates of insolvents. I think that it is the purport of his statement. In that case an action was instituted by an authorized assignee under an assignment from an insolvent debtor to set aside a previous assignment by the debtor for the benefit of his creditors, adopting the form of assignment authorized under the Ontario statute. Middleton, J., said, at p. 479 : ". . . assuming that the authorized trustee is really convinced of the necessity of removing this filmy cloud from his title, his proper remedy is found in an application under Rule 120 [now Rule 86], which provides for a summary application by the trustee to set aside any conveyance which is void under the Act as against his title. It is clear that the plaintiff has mistaken his remedy, and the action is entirely misconceived; and I, therefore, dismiss it, with costs to be paid by the trustee to the defendant."

It has been my understanding, generally speaking, that all matters relating to the bankruptcy or connected with the bankrupt's property may be dealt with in the bankruptcy proceedings in the Bankruptcy Court, unless proceedings are taken against a stranger to the bankruptcy, as in the case of In Re Lofsky, 28 C.B.R. 164, [1947] O.R. 782, [1947] 4 D.L.R. 374, 1947 Can. Ahr. 29. I do not think that a creditor of the bankrupt, who has taken a mortgage from the debtor as security for his claim, could be considered a stranger to the bankruptcy. I am referred to the case of In Re Rousseau; Ontario Equitable Life and Accident Insurance Co. v. Lamarre et al. (1932), 14 C.B.R. 182, 53 Que. K.B. 65, 3 Can. Ahr. 518, which is a judgment of the Court of Appeal in Quebec, and which seems to indicate that a proceeding to set aside a conveyance given to a creditor more than three months before the bankruptcy was not intended to be covered by The Bankruptcy Act, and could not properly be taken in the Bankruptcy Court as part of the bankruptcy proceedings. The view is there expressed that s. 64, which provides that such a transfer within three months of the bankruptcy shall be deemed to be fraudulent and void, indicates that such a conveyance before the three month period would not be covered by the Act. However, in the Rousseau case the formal judgment of the Court contains the following, at p. 185: " .. . in view of the express limitation in that regard imposed by sec. 161 [now 166] of the Act upon the Governor-in-Council, who is charged with making them [General Rules] . . . it follows that Rule 142 [now 101] although it states that a trustee in bankruptcy or any other person may adopt the procedure therein provided 'to set aside or avoid under the Act,

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or any other Act or law, any settlement, conveyance, transfer . . .' is subject as to its scope to the other provisions of The Bankruptcy Act and does not of itself give the Bankruptcy Court jurisdiction nor make available the special procedure provided by the Act to a trustee or other person who seeks to have a transaction declared invalid under a provision of law other than that of The Bankruptcy Act or its amendments, unless that jurisdiction is expressly conferred by some provision of the Act; in other words, the reference in said Rule 142 to any other Act or law must be construed as meaning other law or enactment of the Dominion that deals with the subject matters of the substantive provisions of The Bankruptcy Act." Section 161 at that time read as follows: "The Governor in Council make make, alter or revoke and may delegate to the judges of the several courts exercising bankruptcy jurisdiction under this Act the power to make, alter or revoke, General Rules not inconsistent with the terms of this Act for carrying into effect the objects thereof. "2. Such rules shall not extend the jurisdiction of the court, save and except that, for the purpose of enabling the provision of rules having application to corporations, but for such purpose only the Winding-up Act shall be deemed part of this Act. "3. All General Rules, as from time to time made, shall be laid before Parliament within three weeks after made, or, if Parliament is not then sitting, within three weeks after the beginning of the next session. Such rules shall be judicially noticed, and shall have effect as if enacted by this Act.'' The corresponding section of the present Act is s. 166 which reads as follows: " ( 1 ) The Governor in Council may make, alter or revoke, and may delegate to the judges of the several courts exercising bankruptcy jurisdiction under this Act the power to make, alter or revoke, General Rules not inconsistent with the terms of this Act for carrying into effect the object thereof. "(2) All General Rules, as from time to time made, shall be laid before Parliament within three weeks after being made, or, if Parliament is not then sitting, within three weeks after the beginning of the next session. " ( 3) General Rules include forms. " ( 4) General Rules shall have effect as if enacted by this Act and shall be judicially noticed." It will be noted that the provisions of subs. 2 of the former s. 161 are now entirely omitted. Also the following provisions, not then in The Bankruptcy Act, are now included in the Act as s. 41 ( 6) : "The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights which are not in conflict with the provisions of this Act, and the trustee shall be entitled to avail himself of all rights and remedies provided by such law or statute as supplementary to and in addition to the rights and remedies provided by this Act.'' These changes and additions may have been made to cover the point raised in In Re Rousseau, supra, and to make the Act more in keeping with the view expressed by Mr. Justice Middleton in Bartley's Trustee v. Hill, supra, and also

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having regard to what was said in In Re Dominion Utilities Corporation et al. (1940), 21 C.B.R. 430, Ahr. Con. 296. That is also a judgment of the Court of Appeal in Quebec, somewhat differently constituted from the Court in the Rousseau case. In the Dominion Utilities judgment it was pointed out at pp. 432-3, that somewhat different views appeared to have been taken in some other cases, including one in the Court of Appeal for British Columbia. It was also said at p. 433, "La loi de faillite a pour but la realisation et distribution des biens d'un insolvable d'une maniere expeditive et moins couteuse," which is in line with the opinion of Middleton, J. above referred to. . . . At all events, having regard to the provisions of the present Act as mentioned above, and Rule [86), I am of opinion that the transfer of property by way of mortgage, such as is here attacked, may be dealt with in the Bankruptcy Court in bankruptcy proceedings, that is, by summary application under Rule 101. I think, therefore, that there should be an issue directed to try the question whether this mortgage was a fraudulent conveyance as against the creditors, and should be set aside. The trustee will be the plaintiff, and there will be pleadings and the rights of production and discovery. B. Statutory Jurisdiction RE SOLLOWAY Ontario Court of Appeal. 1939. 20 C.B.R. 309. FISHER, J. A.: One McLaughlin presented a petition in bankruptcy for a receiving order declaring Isaac W. C. Solloway a bankrupt. Solloway disputed the right to such an order, and Urquhart, J., before whom the petition was heard, dismissed it without costs, and without prejudice to the right of the petitioner to file a petition against the debtor in another jurisdiction other than the Province of Ontario. The appeal followed and was ably argued by counsel representing both parties. As the relevant facts have been stated with perfect precision by Urquhart, J., and are to be found in 19 C.B.R. 350, [1938) O.W.N. 373, their repetition is needless. We agree with the findings of the trial Judge that the debtor has not resided in Ontario since 1930, and also that he did not carry on actively any business in Ontario during one year previously to the presentation of the petition. The real and difficult question is whether Solloway carried on business in a constructive sense during that period. For the appellant his counsel contended that until a debtor's debts are paid he is deemed to be constructively carrying on business within the meaning of sec. [2 (k)