Supreme Court of Canada
Howland, Sons & Co. v. Grant, 26 S.C.R. 372
H.S.Howland, Sons & Co. (Plaintiffs) Appellants;
Archibald Grant (Defendant) Respondent.
1896: March 11; 1896: May 18.
PRESENT:—Sir Henry Strong C.J. and Taschereau, Sedgewick, King and Girouard JJ.
ON APPEAL PROM THE SUPREME COURT OF THE NORTH-WEST TERRITORIES.
Debtor and creditor—Composition and discharge—Acquiescence in—New arrangement of terms of settlement—Waiver of time clause—Principal and agent—Deed of discharge—Notice of withdrawal from agreement—Fraudulent preferences.
Upon default to carry out the terms of a deed of composition and discharge a new arrangement was made respecting the realization of a debtor's assets and their distribution, to which all the executing creditors appeared to have assented.
Held, that a creditor who had benefited by the realization of the assets and by his action given the body of the creditors reason to believe that he had adopted the new arrangement, could not repudiate the transaction upon the ground that the new arrangement was not fully understood, without at least a surrender of the advantage he had received through it.
The debtor's assent to such repudiation and the grant of better terms to the one creditor would be a fraud upon the other creditors, and as such inoperative and of no effect.
APPEAL from a decision of the Supreme Court of the North-west Territories, dismissing the plaintiffs' appeal from the judgment in the court below whereby their action was dismissed with costs.
A statement of the case appears in the judgment of the court pronounced by his Lordship Mr. Justice King.
Kappele for the appellants. The plaintiffs did not assent to the extension of time by the new arrangement made by the debtor with other creditors.
The respondent failed to perform the conditions precedent to his release in the terms of the deed of composition. Day v. McLea (); Mason v. Johnston (). The release was in consideration of a speedy performance by the debtor; otherwise the creditor got no consideration. Exparte Vere (). Cujus cst dare ejus est disponere. See Sewell v. Musson (); Oughton v. Trotter (); Edwards v. Hancher ().
Lougheed Q.C for the respondent. There was a part performance by appellants. Rev. Ord. N. W. Ter. (1888) ch. 58, sec. 9, s.s. 7. The appellants got consideration through the other creditors signing. Good v. Cheesman (); Boyd v. Hind (); Wood v. Roberts (); Corky. Saunders (); Boothbey v. Sowden (); Butler v. Rhodes (). Appellants adopted the new agreement and may not improve their position by violating it (). Appellants cannot retain the dividend they received and deny the validity of the proceedings. Lewis v. Leonard (); Steintnan v. Magnus (); Garrard v.
Time as of the essence of the composition was waived by continuing the negotiations after the expiration of the period there limited. Webb v. Hughes (); Crawford v. Toogood (); Green v. Sevin (); Pollock on Contracts ().
The judgment of the court was delivered by:
KING J.—This is an appeal from a judgment of the Supreme Court of the North-west Territories in favour of the respondent.
The action was brought by the present appellants to recover a balance claimed to be due upon two promissory notes made by the respondent in favour of the appellants upon the 22nd of February, 1889.
The substantial defence was that the appellants had concurred with the other creditors of the respondent in a certain distribution of respondent's property by way of composition and discharge and had obtained the dividend agreed upon.
At the time of the making of the notes in suit the respondent was doing business as a trader at Calgary, and had a number of creditors at Winnipeg, Toronto and other places. The appellants did business in Toronto and had supplied respondent with goods for which the notes in question were given. The respondent became embarrassed, and by an agreement of 11th February, 1889, made between himself of the first part, the executing creditors of the second part, and one Pettigrew and two other merchants of Winnipeg of the third part, he placed the control and direction of his business in the hands of the parties of the third
part who were to act as trustees and supervise and direct the conduct and management of respondent's business, receiving weekly all the proceeds and distributing the amount pro rata amongst the creditors less the amount of any purchases of stock that they might have deemed it proper to make. The creditors on their part agreed not to enforce their demands during the continuance of the agreement which was limited to six months. The appellants were amongst the executing creditors. The six months expired on the 11th of August. The result of the arrangement was not satisfactory to the creditors, and on the 21st of August a deed of composition and discharge was entered into between the respondent and the creditors. It was recited that the creditors had agreed to accept 75 cents on the dollar payable in three equal sums in 6, 9 and 12 months from the date of the deed, without interest, by promissory notes of the debtor secured to the creditors' satisfaction. It was then covenanted that the receipt by the parties of the second part, within 60 days, of the promissory notes should operate as a payment, and satisfaction in full of their respective claims.
The composition deed was executed by 13 creditors, including the appellants, representing $17,890, of which sum the appellants' claim of $2,621 formed part.
One Ashdown had given the debtor a letter stating that as soon as satisfactory arrangements had been made he would be prepared to endorse his paper to the extent of 75 cents on the dollar provided that the same was accepted by the creditors in full of their demands against the debtor, and this letter was shown by the latter to the creditors as an inducement to execute the composition deed.
The respondent and Ashdown failed to come to terms, the notes were not given for the composition, and the deed ceased to be binding on the creditors unless they consented to go on afterwards.
This, in my opinion, is what they did.
On the 26th of October the respondent agreed to sell to Ashdown, and the terms of payment were made to agree with the terms of the composition deed as to dates, etc.
This was done with the concurrence of the creditors, for, two days afterwards, we find Pettigrew writing to the appellants stating that he had been appointed by the creditors to act as trustee for them, to receive the settlements from Ashdown and transmit the same to the several creditors, and requesting appellants to send a memorandum of their claim.
The appellants adopted what had been done and afterwards, on November 25th, we find them complaining of the delay that had taken place in completing the arrangement.
Pettigrew then wrote to Ashdown and his reply (Dec. 5) shows that he also considered that he was assisting in carrying out the composition.
The actual transfer to Ashdown had been made on the 18th November, but payment of the price was delayed on account of the stock taking.
The following power of attorney from appellants to Pettigrew under date 10th December, 1889, was produced by the respondent. It does not appear when it was received by Pettigrew and, as hereafter to be observed, it seems not to have attracted notice.
Toronto, Dec. 10, 1889.
We hereby appoint and authorize W. D. Pettigrew to receive for us from J. H. Ashdown the amounts of settlement as per arrangements of the estate of A. Grant, and all receipts given by said W. D. Pettigrew for the same shall be binding upon us as if they had been signed by us, but it is understood that nothing the said W. D. Pettigrew shall do shall discharge the said A. Grant from his debt to us unless by our further consent.
Passing over the concluding clause, it would seem that the words " the amounts of settlement as per
arrangements of the estate of A. Grant," point to the carrying out of the composition through the appropriation of the Ashdown purchase to it, or (according to the evidence of respondent) to a new arrangement whereby the proceeds of that transaction were to be accepted in satisfaction and discharge of the original liabilities. There is nothing else to which the words can be reasonably applied.
On the 18th of December, Pettigrew having the day before received from Ashdown his notes for the purchase money as in liquidation of the creditors' claims, wrote to the appellants as follows:
We sent you a few days ago through J. Robertson & Co. to obtain your signature so as to allow us to obtain your notes. If you wish me to send them please send the necessary authority, also power for me to sign discharge to A. Grant. Dividend is 64 1/2 cents in the dollar.
The terms of this letter, both in asking for authority to receive the notes, and in requesting power to sign discharge to Grant, appear to show that Pettigrew had not received the paper of December 10th before alluded to.
On December 23rd the appellant replied:
Your favour of 18th received. We did not understand that the sale of Grant's assets to Ashdown was to include the former's discharge, and it must be left with us for future consideration. If you require anything more than the inclosed please notify us.
What was inclosed was an authority to Pettigrew as follows (and it is significant that nothing is said as to a former authority having been sent):
Toronto, Dec. 23, 1889.
In the matter of the disposal of the assets of A. Grant of Calgary to J. H. Ashdown of Winnipeg, we hereby authorize W. D. Pettigrew of Winnipeg to receive our share of the consideration therefore, giving J. H. Ashdown a full receipt, and also to do such further acts as may be necessary to give the said J. H. Ashdown quiet possession so far as we are concerned of the various properties transferred.
In ordinary course this would not reach Winnipeg for a couple of days, and prior to that, viz., on the 23rd
December, a deed of release was executed releasing Grant from all claims of the executing creditors in consideration of moneys to them respectively paid by Grant. The creditors executing this release were all those who had executed the composition deed, excepting the appellants and a creditor for the amount of $350.64.
The release may, in absence of proof to the contrary, be supposed to have been executed by the Winnipeg creditors at least on the day it bears date.
The amount actually received by these creditors was the amount of the net proceeds of the Ashdown sale mentioned in Pettigrew's letter as 64 1/2 cents on the dollar.
On the 6th January, 1890, the appellants wrote to Pettigrew:
Will you be good enough to send us at once the notes for our share of the amount realized from the sale of the assets of A. Grant. There has already been as much delay in this matter as we feel we should consent to.
Pettigrew communicated with Grant as to handing over the Ashdown notes without receiving a discharge, and Grant replied by telegraph to pay over the notes and that he would write the appellants. Then the next day (14th January), Pettigrew wrote to appellants:
Yours to hand. We are in receipt of instructions from Mr. Grant to pay over the composition notes without asking you to sign discharge. In accordance with this we now inclose you the three notes.
The notes were paid at maturity, and the appellants now claim to recover the balance of the amount of the original notes.
I think the fair conclusion upon the evidence is that the whole body of creditors who had executed the composition deed waived the performance within the time limited by it, and that by arrangement with Grant they agreed to have it given effect to and carried
out through the medium of the Ashdown sale, receiving Ashdown's notes as payment of the composition.
Either this, or (as testified to by Grant) that it was agreed that the proceeds of the sale should be taken in satisfaction of the claims of the creditors.
I think that the creditors had reason to believe that all the body of executing creditors were assenting parties to the transactions that took place respecting the realization of Grant's assets and the distribution of them; and that, whatever the arrangements that were in fact made, they were adopted by the appellants who received the benefit of them. They cannot therefore be now repudiated by appellants upon the ground that they were not fully understood, without at least a surrender of the advantages that had been derived through them.
The assent of Grant makes no difference as it would be a fraud upon the other creditors if one who has concurred in recommending a distribution of the debtor's property seeks by arrangement with the debtor to make better terms for himself.
It would of course be different if the creditors had reason to know that the appellant was standing out. Clearly they did not have actual knowledge. Did they obtain notice through the knowledge of Pettigrew? I do not think it a case for constructive notice.
Then as to the knowledge Pettigrew is shown to have had. The letter of December 23rd, and the power of attorney contained in it, did not reach him (as already stated) until the transaction was completed as to some, at least, of the creditors. And as to the power of attorney of December 10th, the want of evidence respecting it, and the uncertainty as to when it came to the knowledge of Pettigrew, prevent reliance being placed upon it to affect the creditors with knowledge of its contents.
I therefore, upon the whole, think that it is not open to the appellants to get a larger proportion of their claim than they, with the other creditors, agreed by the composition deed to take.
The others were in the end content to take 64 1/2 cents in the dollar instead of 75 cents. If appellants were not disposed to adhere to the composition they ought to have plainly severed themselves from their co-creditors. In that event there might have been a larger dividend to the others out of the proceeds of the sale than the 64 1/2 per cent.
I therefore think that the appeal should be dismissed with costs.
Appeal dismissed with costs.
Solicitors for the appellants: Laidlaw, Kappele & Bicknell.
Solicitors for the respondent: Lougheed & McCarter.
 22 Q. B. D. 610.
 20 Ont. App. R. 412.
 19 Ves. 93.
 1 Vern. 210.
 2 N. & M. 71.
 1 C. P. D. 111.
 2 B. & Ad. 328.
 1 H & N. 938.
 2 Stark 417.
 1 B. & Ald. 46.
 3 Camp. 175.
 1 Esp. 236.
 Addison, Contracts 9( ed. ) PP. 83, 172.
 L. R. 5 Ex. D. 165.
 2 Camp. 124.
 8 Bing. 258.
 3 Esp. 228.
 6 Bing. 339.
 L. R. 10 Eq. 281.
 13 Ch. D. 153.
 13 Ch. D. 589.
 6 ed. P. 486.