Ontario Bank v. McAllister

Ontario Bank v. McAllister
Collection
Supreme Court Judgments
Date
1910-06-15
Report
(1910) 43 SCR 338
Judges
Fitzpatrick, Charles; Davies, Louis Henry; Idington, John; Duff, Lyman Poore; Anglin, Francis Alexander
On appeal from
Ontario
Subjects
Financial institutions
Decision Content
Supreme Court of Canada
Ontario Bank v. McAllister, (1910) 43 S.C.R. 338
Date: 1910-06-15
The Ontario Bank (Plaintiff) Appellant;
and
Charles B. McAllister and Jane B. McAllister (Defendants) Respondenst.
1910: March 1; 1910: June 15.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Duff and Anglin JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Banking—Security for debt—Assignment of lease—Transfer of business—Operation of bank—R.S.C. [1906] c. 29, s. 76, s.s. 1(d) and 2(a), s. 81.
By section 76, sub-section 1(d) of “The Bank Act” (R.S.C. [1906] ch. 29), a bank may “engage in and carry on such business generally as appertains to the business of banking”; by sub-section 2(a) it shall not “either directly or indirectly * * * engage or be engaged in any trade or business whatsoever”; section 81 authorizes the purchase of land in certain cases of which a direct voluntary conveyance by the owner is not one.
Held, affirming the judgment of the Court of Appeal (17 Ont. L.R. 145), Duff and Anglin JJ. dissenting, that these provisions of the Act do not prevent a bank from agreeing to take in payment of a debt from a customer an assignment of a lease of the latter’s business premises and to carry on the business for a time with a view to disposing of it as a going concern at the earliest possible moment.
APPEAL from a decision of the Court of Appeal for Ontario[1], reversing the judgment of a Divisional Court and restoring that at the trial in favour of the respondent.
The respondents carried on business in Peterborough as millers under the name of The McAllister Milling Co., leasing their premises from the Peterborough Hydraulic Power Co. at a rental of $3,000 per annum. The McAllister Co. was heavily indebted to the Ontario Bank, and being unable to pay the following agreements were entered into.
MEMORANDUM OF AGREEMENT entered into the 19th day of September, 1905.
BETWEEN:
THE MCALLISTER MILLING COMPANY, hereinafter called the Company, of the one part, and:
THE ONTARIO BANK, hereinafter called the Bank, of the other part.
Whereas the Company are indebted to the Bank in the sum of $69,200 as part security for which sum the Bank hold a lien under section 74 of the “Bank Act” upon the goods and merchandise of the Company, and also an assignment of all the Company’s book debts and other claims, as well as an assignment of a policy on the life of Charles Balmer McAllister, and the Company are unable to pay the Bank in full;
And whereas it has been agreed that upon payment by the Company to the Bank of the sum of $10,000 and the absolute surrender of all its assets, the Bank assuming payment of certain liabilities as set out in the memorandum attached, the Bank shall release the Company and the individuals thereof from all further liability in respect of said indebtedness.
Now, therefore, it is mutually agreed between the parties hereto as follows:
1. The Company hereby surrender to the Bank all their right, title and interest in the assets of the Company as well as in the said policy on the life of Charles Balmer McAllister and agree to assign to the Bank their lease of the Otonabee Mills as well as all claims to damages which they have against The Peterborough Hydraulic Power Company and The American Cereal Company and they authorize the Bank to bring such action or actions in their names as may be necessary to recover said damages, the Bank agreeing to indemnify them in respect of all costs relating to the same.
2. The Company shall forthwith pay to the Bank the sum of $10,000, the Bank assuming the payment of certain of the Company’s liabilities as particularly set out in the memorandum hereto attached, and will honour the Company’s cheques when issued in payment of such liabilities, the intention of this arrangement being that the settlement should be so carried out as not to injure the credit of the said Company or members thereof.
3. The Company and the individual members thereof agree to execute to the Bank such further assignments and assurances as may be necessary to vest in the Bank all of the said assets and policy of assurance.
4. It is hereby expressly agreed that the interest of Jennie B. McAllister in the Lakefield Milling Company is not intended to be transferred or pass to the Bank under this agreement and is not part of the assets of the said Company.
5. In consideration whereof the Bank shall forthwith release the Company and the individual members thereof from all further liability in respect of their said indebtedness to the Bank, and in the event of the said business being hereafter carried on in the name of the said Company as provided in the agreement bearing even date herewith between the Bank and Charles Balmer McAllister or in any similar way the Bank hereby agrees to indemnify the said Company and the individual members thereof against any and all liabilities then or thereby incurred.
IN WITNESS WHEREOF the said parties have hereunto set their hands.
THE MCALLISTER MILLING Co.,
C.B. McAllister,
J.B. McAllister.
ONTARIO BANK,
John Crane, Manager.
Witness:
A.P. POUSSETTE.
MEMORANDUM OF AGREEMENT entered into the 19th day of September, 1905.
BETWEEN:
CHARLES BALMER MCALLISTER, of the McAllister Milling Company, hereinafter called the Company, of the one part, and:
THE ONTARIO BANK, hereinafter called the Bank, of the other part.
Whereas the Company are indebted to the Bank in the sum of $69,200 as part security for which sum the Bank hold a lien under section 74 of the “Bank Act” upon the goods and merchandise of the Company, and also an assignment of all the Company’s book debts and other claims, and the Company are unable to pay the Bank in full.
And whereas it has been agreed between the Company and the Bank that for the consideration of $10,000 to be paid to the Bank and the absolute assignment to the Bank of all the Company’s assets, the Bank shall release the Company and the individuals thereof from all further liability. And whereas for the more convenient liquidation of the said assets and with a view to disposing of the Company’s business as a going concern, it has been deemed advisable and has been agreed to enter into the arrangement hereinafter expressed.
Now therefore it is mutually agreed between the parties hereto as follows:
1. Mr. C.B. McAllister shall continue to carry on the said business under the name of the McAllister Milling Company and to manage the same as a going concern, curtailing expenses as far as possible, and collecting the book debts and other claims so that within a short period the amount due to the Bank may be reduced to the lowest dimensions, having in view the intention to dispose of the Company’s business as a going concern at the earliest date possible.
2. For his services in this behalf Mr. McAllister shall be allowed out of the business a salary at the rate of one thousand dollars per annum, payable weekly, and he shall not draw any larger sum out of the business.
3. The business shall be under the supervision of Mr. John Crane, manager of the Bank, who shall have constant access to the Company’s books and to whom Mr. McAllister shall be accountable for all transactions, but the said McAllister shall not be responsible for any error of judgment in the management of the said business or for any loss or losses incurred thereby.
4. And the said Bank agrees to indemnify the said Company and the members thereof against any liabilities incurred while the business is being continued in the Company’s name, as hereinbefore provided. 5. The said Charles B. McAllister agrees that at any time the Bank may desire, he will, if possible, effect an insurance or insurances upon his life in some company or companies selected by the Bank to such extent as the Bank shall name and will from time to time absolutely assign the policy or policies therefor to the Bank—the said Bank being alone responsible for all premiums in respect of same.
IN WITNESS WHEREOF the said parties hereto have hereunto set their hands.
C.B. MCALLISTER,
ONTARIO BANK,
John Crane, Mgr.
Witness:
A.P. POUSSETTE.
THIS INDENTURE. made the nineteenth day of September, in the year of our Lord one thousand nine hundred and five.
BETWEEN:
THE ONTARIO BANK, of the first part; and
CHARLES BALMER MCALLISTER and JENNIE B. MCALLISTER, trading in co-partnership under the style of the “McAllister Milling Company” as well in their individual as in their partnership capacity, of the second part.
Whereas the parties of the second part are indebted to the parties of the first part in the sum of $69,200 and being unable to pay the full amount of their indebtedness have by instrument bearing even date herewith surrendered to the parties of the first part all their firm assets and have also paid to the parties of the first part the sum of $10,000 in consideration that the parties of the first part would release them individually as well as their said firm from all liabilities.
And whereas, there have been divers accounts, dealings, and transactions between the said parties hereto respectively, all of which have now been finally adjusted, settled, and disposed of and the said parties hereto have respectively agreed to give to each other the mutual releases and discharges hereinafter contained in manner hereinafter expressed.
Now, therefore, these presents witness, that in consideration of the premises and of the sum of one dollar, of lawful money of Canada to each of them, the said parties hereto respectively paid by the other of them at or before the sealing and delivery hereof (the receipt whereof is hereby acknowledged), each of them the said parties hereto respectively, doth hereby for themselves, their successors and assigns, and for himself and herself respectively, his and her respective heirs, executors, administrators, and assigns, remise, release, and forever acquit and discharge the other of them, their successors and assigns, his and her heirs, executors, administrators and assigns, and all his her and their lands and tenements, goods, chattels, estate and effects respectively whatsoever and wheresoever, of and from all debts, sum and sums of money, accounts, reckonings, actions, suits, cause and causes of action and suit, claims and demands whatsoever, either at law or in equity, or otherwise howsoever, which either of the said parties now have, or has, or ever had, or might or could have against the other of them, on any account whatsoever, of and concerning any matter cause or thing whatsoever between them, the said parties hereto respectively, from the beginning of the world down to the day of the date of these presents. IN WITNESS WHEREOF, the said parties hereto of the first part have hereunto affixed their corporate seal as testified by the hands of their proper officers in that behalf.
Signed, Sealed and Delivered in the presence of
For the Ontario Bank,C. MCGILL,General Manager.
[Seal.]
The respondents also executed a power of attorney to the local manager of the bank to execute for them an assignment of the lease which, however, was never acted upon.
The milling business was carried on under said agreements until the bank became insolvent in 1906, when the stock in hand was sold and the premises abandoned. The lease had then over six years to run and the lessors brought action against the respondents for a gale of rent accruing due after such abandonment of possession, and the bank, which had paid it up to that time, was called in as a third party to indemnify respondents. The lessors obtained judgment and an issue was tried between respondents and the bank, the latter setting up several defences against the claim to indemnity, especially the following.
That the said agreements, except the release, not being under its corporate seal were never executed by the bank.
That if executed the indemnity by the bank only covered existing liabilities and did not extend to future rent for which the bank was not otherwise liable having never accepted an assignment of the lease. That the agreement to accept an assignment of the lease and carry on the business was contrary to the provisions of the “Bank Act” and void.
That the respondents’ claim for rent was barred by the mutual release executed by them and the bank.
The Chancellor who tried the issue gave judgment against the bank which was reversed by the Divisional Court, but restored by the Court of Appeal.
Morine K.C. and McKelcan for the appellant. The McAllister Co. agreed to assign the lease but the bank did not agree to accept an assignment, and none having been executed the bank is not bound. See Dawes v. Tredwell[2]; Ramsden v. Smith[3].
An agreement to assign is not equivalent to an assignment, nor does it necessarily mean to assign the legal title. Manchester Brewery Co. v. Coombs[4], at page 617, commenting on Walsh v. Lonsdale[5].
The effect of the judgment of the Court of Appeal is to enforce specific performance of part of a contract which is not permissible and of an unlawful contract which is still less permissible. See National Bank of Australasia v. Cherry[6]; Small v. Smith[7].
Nesbitt K.C. and D. O’Connell for the respondents. Under section 76 of the “Bank Act” the Ontario Bank had power to enter into this agreement. And see First National Bank of Charlotte v. National Exchange Bank of Baltimore[8]; Royal Bank of Indian’s Case[9]; Exchange Bank of Canada v. Fletcher[10]. As to the agreement to assign see Hanson v. Stevenson[11].
THE CHIEF JUSTICE.—I would dismiss this appeal with costs for the reasons given by Mr. Justice Osler in the Court of Appeal.
The intention of the parties as evidenced by the three agreements was to substitute an assignment of all the assets of the McAllister Co. for the lien which the bank then held. The bank undertook in consideration of this assignment and of the money payment of $10,000 to discharge the company from all liability and in addition assumed the payment of certain disclosed accounts due to third parties, which apparently included all the business liabilities of the respondents. To liquidate these assets, or to dispose of the business as a “going concern” to advantage, as the bank then contemplated doing, it was necessary to secure the use of the premises in which the milling business was being carried on; and not content with the assignment of the lease which in the circumstances should be considered as included in the assignment of the assets, it was specially stipulated that the company should surrender or assign the lease. It was further found as a fact by the trial judge that the bank entered into possession of the premises, paid the rent for the period of their occupation and obtained, through the company, the lessor’s consent for the assignment of the lease for its full term. In these circumstances, I do not understand how the bank could hope to escape liability.
With respect to the alleged violation of the section of the “Bank Act” which prohibits trafficing in or carrying on the business of buying and selling goods, wares and merchandise, this was an isolated transaction entered into to enable the bank to realize the amount of an indebtedness which had been legally contracted and anything done for that purpose cannot affect the legality of the transaction under which the bank acquired the assets of the company and assumed its obligation under the lease.
DAVIES J.—Two main questions were argued upon this appeal. One was that an agreement to assign the lease in question to the bank without any actual or legal assignment of the lease did not involve an obligation on the bank’s part to indemnify McAllister from liability for future rent. We are all of the opinion, however, concurring in that of the Appeal Court of Ontario and of the Chancellor, as stated during the argument, that considering the real nature of the transaction and the actual facts which were intended to occur and did occur, such an agreement to indemnify McAllister against any liability for future rent on the covenants of the lease would be implied.
The principal contention of Mr. Morine, however, was that the bank could not legally take or agree to take an absolute assignment of this lease of the McAllister milling property and the assets of the milling firm because the transaction as evidenced by the several agreements entered into by the parties contemplated expressly the carrying on of the milling business by the bank as a “going concern” for an undefined period, or as expressed in the documents “until the bank could sell and dispose of it as such going concern”; that any such transaction was ultra vires of the bank, and in fact a direct violation of the specific provisions of the “Bank Act.”
I confess that I have had great difficulty in making up my mind whether or no the transaction now impeached as ultra vires of the bank was so or not. I am even yet by no means free from doubt, but my conclusion is that, considering its real nature, object and purpose, the impeached transaction may be held to be one of those which may be fairly and reasonably implied as being within the general powers given to the bank by sub-section (d) of section 76 of the “Bank Act,” and as not being within the excepted prohibitions contained in sub-section 2 (a) of that section.
The section reads:
The bank may * * *
(d) engage in and carry on such business generally as appertains to the business of banking.
(2) Except as authorized by this Act the bank shall not, either directly or indirectly,—
(a) deal in the buying or selling, or bartering of goods, wares and merchandise, or engage or be engaged in any trade or business whatsoever.
I concede that in order to sustain my conclusion of law I am bound to bring the impeached transaction within the enabling clause and to exclude it from the prohibitory clause of the section.
But I am not bound to shew express words in the statute conferring upon the bank all the powers which it may lawfully use to carry out its legitimate objects or purposes. It is quite sufficient if I can shew they may be derived by fair and reasonable implication from the provisions of the Act and have not been expressly prohibited or excluded from the general powers conferred. That is the law, as I understand it, as laid down in Ashbury Railway Carriage and Iron Co. v. Riche[12]; Attorney-General v. Great Eastern Railway Co.[13], and Baroness Wenlock v. River Dee Co.[14] In agreeing to take over the lease and milling business as a “going concern” for a limited time in order to dispose of it to some advantage the bank may be said to have violated in a literal sense the prohibition in the latter part of sub-section 2 (a) against engaging in any business whatever. But if the general powers of the bank of engaging in and carrying on “such business generally as appertains to the business of banking” given by sub-section (d) are large enough and broad enough to cover such a transaction as that now under discussion, of course it would not come within the prohibitory clause even though the words of that clause literally applied might cover it.
Banks, from the very nature of the business they are expressly authorized to carry on, must necessarily loan to customers and others large amounts of money and frequently find themselves with debts owing to them by persons who are insolvent or unable to pay. The assets of such debtors may, in this country at any rate, consist in part of a “going concern,” valuable as such, but of little value if wound up by sale under execution or mortgage, or they may consist of perishable goods on the way to a market or logs cut on timber limits ready to be floated down the river to market or mill, or in process of such flotation.
Such debtors may be quite willing to hand over all their assets to the bank absolutely in compromise or settlement of their indebtedness. To compel the parties to resort in every case to the strict statutory methods permitted of taking security and afterwards realizing on it in due legal form, might in many cases cause great loss without any apparent reason. Perishable goods might not be disposable while on the way to a market except at ruinous loss, and the same may be said of logs being floated to their mill or market. If the “Bank Act” means that the bank may not take over and accept absolutely in payment of its debt the real and personal property of its debtor, but must in all cases first take security upon it and realize afterwards on such security, there is an end to the argument. No possible loss which may follow the prescribed course can avail the parties. But it does not appear to me the “Bank Act” does say so. There is nothing in the Act which says that though all parties may agree that
the simplest and least costly way of closing out a hopeless account is to give the debtor an immediate release in consideration of a direct transfer of his property,
such a settlement must necessarily be declared ultra vires.
It seems to me that in all such cases it must be a question of fact to be determined by the court on the special circumstances of each case whether there was or was not a violation of the prohibition of sub-section 2 (a) against dealing in the buying or selling, or bartering of goods or being engaged in any business whatever; or whether the substance of the transaction was not rather and really a bonâ fide compromise or settlement of a debt due the bank, although such settlement or compromise might incidentally involve, in one sense, a buying or selling or an engaging in business. But where the substance of the transaction is found to be a bonâ fide compromise or settlement of a past due debt, as under the facts and circumstances I would hold the transaction in question in this case to be, then it seems to me it might fairly be claimed as impliedly authorized by the sub-section (d) of section 76, even though solely to avoid enormous loss it may involve, as in this case it did, the running of the mill as a “going concern” for what would be deemed a reasonable time in order to dispose of it without ruinous loss.
A strong argument was made against the legality of such an absolute assignment of the milling property and assets of the McAllister Company as was taken by the bank in this case arising out of the 80th, 81st and 82nd sections of the Act, which authorize the bank to take mortgages and hypothecs of realty and personalty as additional security for past due debts, and enable it to purchase any real or immovable property offered for sale under execution, etc., or by a prior mortgagee, or by the bank itself under a power of sale, and so enable the bank to acquire an absolute title in lands mortgaged to it either by release or sale or foreclosure of the equity of redemption.
These sections are enabling ones and are intended to confer upon the bank reasonable and necessary powers to take mortgages and hypothecs from their debtors by
way of additional security for debts contracted to the bank in the course of its business,
and to realize upon such mortgages by foreclosure or sale, and acquire and hold the absolute title “either by obtaining a release of the equity of redemption” or otherwise. Their purpose and object was to enable the banks to take and realize securities for debts contracted to them. They did not relate to cases where the bank was compromising its debt and accepting something from the debtor in absolute discharge. They should not be construed as being exhaustive of the bank’s powers or methods of realizing payment or satisfaction from its debtor’s property of the debt due to the bank, or as taking away from the banks by implication any powers which they might reasonably be held to have arising out of the power to
engage in and carry on such business generally as appertains to the business of banking.
They are not prohibitive sections in any way, but enabling only, and while I recognize the strength and force of the argument as to the intention of the legislature to be derived from them, I am not, on my construction of sub-section (d) of section 76 and the powers reasonably to be implied from it, able to say that real or personal property may not be taken by the bank in absolute payment and discharge of its debt from an impecunious or defaulting debtor, notwithstanding those sections which provide for the manner in which additional security may be taken and realized upon for debts due the bank not by way of compromise and discharge. Banking business in Canada must from the very circumstances of the case, I should imagine, be conducted upon a broader and somewhat more elastic basis than in fully developed business communities such as Great Britain, and in construing the powers conferred upon banks to carry on
such business generally as appertains to the business of banking
it is fair that Canadian conditions should be fully considered and allowed for. Large advances must be made from time to time to lumbermen, fishermen and traders of different kinds to enable them to cut, catch, win and market the natural products of the country and debts and risks necessarily incurred possibly greater than the more conservative systems of Great Britain would approve. It might in many circumstances be unjust and cause unnecessary and unrea- sonable loss to confine the banks to the “additional securities” clauses as the only way or means open to them to realize their debts.
In the case at bar I am not able to agree with one at least of the reasons upon which some of the judges of the Court of Appeal support their judgment, namely, that the carrying on of the milling business by the bank after it took over the property from Mr. McAllister was severable from the rest of the transaction between the parties. I think the transaction, as a whole, must stand or fall together. It was a substantive part of the agreement from the first that it should be carried on by the bank as a “going concern” under the management of Mr. McAllister, and it was so carried on. If that part of the agreement which, in my opinion, was substantive and essential is ultra vires of the bank, then I do not see how the other part can be upheld. In my judgment, however, as I have attempted to shew, the transaction as entered into by the parties and carried out by them can reasonably be supported by the implied powers arising out of their general banking business (sub-section (d), section 76), and as these implied powers are not controlled by any prohibitive section of the Act they are to be given effect to.
I would therefore dismiss the appeal with costs.
IDINGTON J.—The many phases of this case have been so fully and carefully dealt with in the court below that I do not feel as if I could add anything to the symposium of law it has given rise to.
It seems to me to have been the undoubted purpose of the parties that all the assets of the company, of which the lease in question no doubt was at one time a highly valued part, should be transferred to the appellant, and in consideration of such transfer and an added sum of ten thousand dollars from respondents’ friends given expressly to secure the release of respondents from the embarrassments in which they had got themselves involved the appellant was to see them effectually released.
It would be a most melancholy legal result if the law by its necessary operation should defeat the plain purpose of all concerned.
I cannot agree in any interpretation of the contract that would exclude the implication which the entire scope of the whole arrangement indicates to have been part and parcel of the bargain, irrespective of some considerations of minor import and the provisions there anent relied on to exclude the implication of liability in question herein.
The judgment of Mr. Justice Osler seems to me to cover so fully the views I hold and the whole of the matters necessary to be dealt with in the case that I cannot do better than assent thereto.
Since writing the foregoing, shortly after the argument, conflicting views in the court having been presented for consideration, I have re-examined the case. In the result I still agree with Mr. Justice Osler, but to guard against misapprehension of the range of his opinion as I conceive it (though his words may bear another meaning) I may add that I desire to reserve the right to review the question of ultra vires when, if ever, presented under different conditions of pleading but similar conditions of fact. I think the ultra vires aspect is not open to our consideration here. Paragraph 6 of appellant’s defence, being the only part thereof that suggests any such questions as ultra vires or illegality, does not raise either point as distinctly as it should.
Every act or contract that is ultra vires is in a sense illegal. Every illegal act or contract is in a sense ultra vires.
Yet something done upon the faith of its being intra vires and proving ultra vires and hence failing of legal effect, merely for that reason, may be attendant with entirely different results from the same sort of thing done in violation of some legal prohibition either statutory or by virtue of the common law.
In the former case either party may, according to circumstances, have some right to relief; or to ask that conditional relief only be given to him setting up the ultra vires plea.
In the latter case neither can have relief if the defence of illegality be set up or has so developed in the trial of the case that the court must take notice of it.
Again, the wilful disregard of the limitations of the power of a corporation may render absolutely illegal that which, if entered into in good faith, might have been merely held and treated as ultra vires.
It is difficult to be quite sure what the defence as pleaded aimed at.
But the case is pre-eminently one wherein the plaintiffs were entitled if mere ultra vires is relied upon to have it so appear of record in order that they might seek such relief as the justice and facts of the case demand.
The pleading is followed in this late stage by the appellant in its counsel’s factum in effect discarding mere ultra vires by relying only upon the acquisition of the land or lease as and for the express purpose of carrying on a flour milling business.
This interpretation of the pleading I am entitled to take as covering all there is to complain of in the judgment below under the head of that plea.
Hence, I think mere ultra vires out of the case by this interpretation of the plea set up.
I think the issue as thus raised in the factum is all that is now open to the appellant and that Mr. Justice Osler’s reasoning clearly disposes thereof.
It may be that these questions are identical in this case, but I think that is not so clear.
In such a case as we have here a most valuable term might be the only asset and so subject to conditions of assignment as only to be acquired by the will of the debtor.
I doubt if the “Bank Act” stands in the way of a bank, in such dire necessity, accepting a transfer of such an asset, to save a loss arising from a past due debt.
It seems to me that position can only be tenable if at all by construing the Act as prohibitive of any absolute transfer of property in consideration of discharge from the obligation due the bank.
There is enough in the language of the sections dealing with the subject in its various phases to make a plausible argument for such a contention. But it has not been pleaded or argued and possibly is not worthy of notice.
It seems to me as possibly the case that it can only be under some such necessity as arises, in cases like that before us, calling forth what may be called the reserve powers to be implied that the acquisition of absolute ownership, in consideration of discharge, can be tolerated, if at all; except in the way and under the circumstances expressly provided for.
I do not in this case think I am under the pleading and all other things that appear, either called upon or expected to decide the point.
I still adhere to Mr. Justice Osler’s finding an implied power in a bank to grapple with such a condition of things as arose here and accept, as a solution thereof, the terms proposed, coupled with the acceptance of the transfer of a lease; and I accept his view of the severability of what was done from that which was a necessary part of the contract.
DUFF J. (dissenting).—In my view of this case the main question raised by the appeal is whether the transaction of September, 1905, was or was not ultra vires of the Ontario Bank. That bank is one of those named in Schedule A to the “Bank Act,” R.S.C. 1906, and the following provision of that Act applies to it:
4. The charters or Acts of incorporation, and any Acts in amendment thereof, of the several banks enumerated in Schedule A to this Act are continued in force until the first day of July, one thousand nine hundred and eleven, so far as regards, as to each of such banks:
(a) the incorporation and corporate name;
(b) the amount of the authorized capital stock;
(c) the amount of each share of such stock; and
(d) the chief place of business;
subject to the right of each of such banks to increase or reduce its authorized capital stock in the manner hereinafter provided.
2. As to all other particulars this Act shall form and be the charter of each of the said banks until the first day of July, one thousand nine hundred and eleven.
The principles therefore which govern the construction of the powers of statutory corporations are those which must be applied for the determination of the question at issue. These principles are stated in two judgments in passages I will quote in extenso; the first from the judgment of Bowen L.J., in Baroness Wenlock v. The River Dee Co.[15], is as follows:
At common law a corporation created by the King’s charter has primâ facie, and has been known to have ever since Sutton’s Hospital Case[16], the power to do with its property all such acts as an ordinary person can do, and to bind itself to such contracts as an ordinary person can bind himself to; and even if by the charter creating the corporation the King imposes some direction which would have the effect of limiting the natural capacity of the body of which he is speaking, the common law has always held that the direction of the King might be enforced through the Attorney-General; but although it might contain an essential part of the so-called bargain between the Crown and the corporation, that did not at law destroy the legal power of the body which the King had created. When you come to corporations created by statute, the question seems to me entirely different, and I do not think it is quite satisfactory to say that you must take the statute as if it had created a corporation at common law, and then see whether it took away any of the incidents of a corporation at common law, because that begs the question, and it not only begs the question, but it states what is an untruth, namely, that the statute does create a corporation at common law. It does nothing of the sort. It creates a statutory corporation, which may or may not be meant to possess all or more or less of the qualities with which a corporation at common law is endowed. Therefore, to say that you must assume that it has got everything which it would have at common law unless the statute takes it away is, I think, to travel on the wrong line of thought. What you have to do is to find out what this statutory creature is, and what it is meant to do, and to find out what the statutory creature is, you must look at the statute only, because there, and there alone, is found the definition of this new creature. It is no use to consider the question of whether you are going to classify under the head of common law corporations. Looking at this statutory creature one has to find out what are its powers, what is its vitality, what it can do. It is made up of persons who can act within certain limits, but in order to ascertain what are the limits, we must look to the statute. The corporation cannot go beyond the statute, for the best of all reasons, that it is a simple statutory creature, and if you look at the case in that way you will see that the legal consequences are exactly the same as if you treat it as having certain powers given to it by statute, and being prohibited from using certain other powers which it otherwise might have had. The second from the speech of Lord Macnaghten in Amalgamated Society of Railway Servants v. Osborne[17], at p. 94:
It is a broad and general principle that companies incorporated by statute for special purposes, and societies, whether incorporated or not, which owe their constitution and their status to an Act of Parliament, having their objects and powers defined thereby, cannot apply their funds to any purpose foreign to the purposes for which they were established, or embark on any undertaking in which they were not intended by Parliament to be concerned.
The principle, I think, is nowhere stated more clearly than it is by Lord Watson, in Baroness Wenlock v. River Dee Co.[18], in the following passage: “Whenever a corporation is created by Act of Parliament with reference to the purposes of the Act, and solely with a view to carrying those purposes into execution, I am of opinion not only that the objects which the corporation may legitimately pursue must be ascertained from the Act itself, but that the powers which the corporation may lawfully use in furtherance of these objects must either be expressly conferred or derived by reasonable implication from its provisions.” “That,” adds his Lordship, “appears to me to be the principle recognized by this House in Ashbury Railway Carriage and Iron Co. v. Riche[19], and in Attorney-General v. Great Eastern Railway Co.[20]”
And again at page 97:
The learned counsel for the appellants did not, as I understood their argument, venture to contend that the power which they claimed could be derived by reasonable implication from the language of the legislature. They said it was a power “incidental,” “ancillary,” or “conducive” to the purposes of trade unions. If these rather loose expressions are meant to cover something beyond what may be found in the language which the legislature has used, all I can say is that, so far as I know, there is no foundation in principle or authority for the proposition involved in their use. Lord Selborne no doubt did use the term “incidental” in a well-known passage in his judgment in Attorney-General v. Great Eastern Railway Co.20 But Lord Watson certainly understood him to use it as equivalent to what might be derived by reasonable implication from the language of the Act to which the company owed its constitution; and Lord Selborne himself, to judge from his language in Murray v. Scott[21] could have meant nothing more. The provisions by which are defined the business that a bank subject to the “Bank Act” is permitted to carry on and the powers exercisable by it in doing so, are found in the series of sections beginning with section 76 and headed “The Business and Powers of a Bank.” The principal section is 76, which I quote verbatim:
The business and powers of a bank.
76. The bank may,—
(a) Open branches, agencies and offices;
(b) Engage in and carry on business as a dealer in gold and silver coin and bullion;
(c) Deal in, discount and lend money and make advances upon the security of and take as collateral security for any loan made by it, bills of exchange, promissory notes and other negotiable securities, or the stock, bonds, debentures and obligations of municipal and other corporations, whether secured by mortgage or otherwise, or Dominion, provincial, British, foreign and other public secur