International Casualty Co. v. Thomson

International Casualty Co. v. Thomson
Collection
Supreme Court Judgments
Date
1913-02-18
Report
(1913) 48 SCR 167
Judges
Fitzpatrick, Charles; Davies, Louis Henry; Idington, John; Duff, Lyman Poore; Anglin, Francis Alexander
On appeal from
British Columbia
Subjects
Commercial law
Decision Content
Supreme Court of Canada
International Casualty Co. v. Thomson, (1913) 48 S.C.R. 167
Date: 1913-02-18
The International Casualty Company and Henry VanHummell (Defendants) Appellants;
and
J.W. Thomson (Plaintiff) Respondent.
1912: November 18; 1913: February 18.
Present: Sir Charles Fitzpatrick C.J. and Davies, Idington, Duff and Anglin JJ.
On Appeal from the Court of Appeal for British Columbia.
Company—Subscription for treasury stock—Contract—Principal and agent—Misrepresentation—Fraud—Transfer of shares—Rescission—Return of payments—Want of consideration.
V. entered into an agreement to purchase for re—sale the unsold treasury stock of a foreign joint stock company "subscriptions to be made from time to time as sales were made;" it was therein provided that the company should fill all orders for stock received through V. at $15 for each share; that V. should sell the stock for $20 per share; that V. should "pay for the stock so ordered with the proceeds of sales made by him or through his agency," and that the contract should continue in force so long as the company had unsold treasury stock with which to fill such orders. The company also gave V. authority to establish agencies in Canada in connection with its casualty insurance business and to appoint medical examiners there. At the time the company had no licence to carry on the business of insurance in Canada, nor any immediate intention of making arrangements to do so, and V. was an official of the company and was aware of these facts. V. appointed T. the sole medical examiner of the company for Vancouver, B.C., assuring him that the company would commence to carry on its casualty insurance business there within a couple of months, and then obtained from him a subscription for a number of shares of the company's treasury stock which were paid for partly by T.'s cheques, payable to the company, and the balance by a series of promissory notes falling due from month to month following the date of the subscription and made payable to V. A number of shares equal to those so subscribed for by T. were then transferred to him by V. out of the allotment made to him by the above mentioned agreement, the certificates therefor being obtained by V. in the name of T. from the company, but the company did not formally accept T.'s subscription nor issue any treasury stock to him thereunder. The company did not commence business in Vancouver within the time specified by V. nor did it obtain a licence to carry on the business of insurance in Canada until many months later. In an action by T. against the company and V. to recover back the money he had paid and for the cancellation and return of the notes.
Held, affirming the judgment appealed from (7 D.L.R. 944; 2 West. W.R. 658), Davies and Anglin JJ. dissenting. that, in the transaction which took place, V. was the company's agent; that the company was, consequently, responsible for the deceit practised in procuring the subscription from /T.; that there had been no contract for the purchase of treasury stock completed between the company and T.; that the object of T.'s subscription was not satisfied by the transfer of V.'s shares to him, and that he was entitled to recover back the money he had paid and to have the notes returned for cancellation as having been paid over and delivered without consideration and in consequence of the fraudulent, representations made by V.
APPEAL from the judgment of the Court of Appeal for British Columbia[1], setting aside the judgment of Murphy J. at the trial, and maintaining the plaintiff's action with costs.
By his action, the plaintiff asked rescission of a contract, made by him, for the purchase of 250 shares of the treasury stock of the company, on the ground of misrepresentations made by the defendant VanHummell, as agent of the company, for the return of moneys paid by him on account of the price of the shares so subscribed for and for the return of certain promissory notes made by him for the amount of the balance of the price of the shares, at $20 each, in order that the said notes might be cancelled as having been fraudulently obtained from him and for want of consideration. The action was tried by Mr. Justice Murphy without a jury and, as against the company it was dismissed with costs, judgment was given in favour of the plaintiff as against VanHummell for the return of the moneys paid on account and for the return of the promissory notes and the plaintiff was given costs of his action against VanHummell. By the judgment appealed from, an appeal by VanHummell from the judgment of the trial judge was allowed, without costs, and a cross-appeal by the plaintiff was also allowed and judgment directed to be entered for rescission of the contract and for the return by the company of the moneys paid and for delivery up of the promissory notes with costs of the action and of the cross-appeal.
The circumstances of the case are stated in the head-note and the matters in issue of this appeal are discussed in the judgments now reported.
Anglin K.G. for the appellant company.
D.J. McDougal for the appellant, VanHummell.
Hellmuth K.C. for the respondent.
THE CHIEF JUSTICE.—In this case the plaintiff, now respondent, asks for the rescission of a contract to purchase shares of stock in the appellant company on the ground of misrepresentation.
It was argued that the contract between the respondent and the company was never executed inasmuch as his offer to subscribe for shares in the capital stock of the company was not acted upon. Undoubtedly, Thomson's application purports on its face to be for treasury stock, the property of the company, and not for shares which were already allocated to VanHummell. It is equally certain, if we believe the evidence of the president, Ritter, and of VanHummell, that the certificate issued to Thomson was for 250 shares of the stock previously purchased by VanHummell and held by the company subject to his order, and counsel, at the oral argument here, pressed upon us this consideration: that, not having got the shares he applied for, Thomson is now entitled to recover his money back. That however, is not the case made upon the pleadings and, although there is some evidence to support it, the course of the trial was not directed towards that issue, nor is it discussed in the factum here. I also doubt very much whether Thomson would have refused to accept the shares if he had known of their previous allotment to VanHummell if all the- other conditions of the transaction had been faithfully fulfilled.
Dealing with the issues presented to the courts below, I am satisfied that the plaintiff has made out a case which entitled him to succeed.
On the pleadings and evidence two questions fell to be considered and decided. First: Who were the parties to the contract? Secondly: The character of the representations made on behalf of the company and their effect upon the transaction.
Both courts found that VanHummell acted throughout merely as the agent of the company and that the contract respecting the purchase of the shares was made by him for the company and not for himself. This concurrent finding of the two lower courts is supported by the documentary evidence, and VanHummell, when examined as a witness on discovery, admits that the contract was between the company and Thomson and that he was merely the agent "in the sale of the shares." The application for the stock is addressed to the company and the two cheques given in part payment are made to its order. The notes for the balance of the purchase price are made payable to the order of VanHummell— why, I do not pause to inquire—they were, apparently, signed after the transaction had been submitted to the head-office. The receipt for the money and notes is also signed in the name of the company.
As to the second question, I have read the evidence over very carefully and, if we believe Thomson, as the trial judge evidently did, I fail to see how we can refuse to grant rescission. Entering into the contract for the purchase of the shares meant the assumption of an obligation to pay $4,250 in monthly instalments, and having, as the trial judge says, been relieved of all his ready cash nothing could be more natural than that Thomson should be concerned about the payment of his notes at maturity. Dependent, apparently, upon his professional income, he relied upon the increase resulting from the new business to meet these notes. In such circumstances he naturally made inquiries as to the probabilities and says that he received from the authorized agent of the company positive assurance that it would be in business by the 1st of November, and in this he is corroborated by Wilmot. On the faith of this assurance he signed the notes and parted with his money. Time and again he repeats that he relied upon the business of the company to increase his revenue so that he might be in a position to meet his notes and he most emphatically states that the agent affirmed the intention of the company to begin business on the first of November. The exist- ence or non-existence of that intention is a fact, and, if he signed the application and parted with his cheques and notes on the faith of the statements made with respect to it, his position is the same as if he acted on a representation of the existence of any other fact. See 20 Halsbury, Laws of England, No. 1617.
Both courts below are agreed that VanHummell, to induce the subscription for the stock, made certain statements with respect to the time at which the company would be prepared to start business in Vancouver. The point of difference between them is just this: the trial judge found that the words used amounted merely to a qualified promise, and no more, that the company would be so far organized by the time fixed as to be then in a position to start business, that with this assurance the respondent was content, and that he was not induced to enter into the contract on the faith of what was said about the business beginning in November. The Court of Appeal came to the conclusion that the words manifested and expressed and were intended to manifest and express a then "fixed intention, readiness or capacity on the part of the company" to commence operations on that date, and that the respondent was induced to apply for the shares on the faith of that representation. There is certainly room for much difference of opinion in the appreciation of the language used by the agent, but, on the whole, after giving the evidence the most careful consideration, I have come to the conclusion that VanHummell did not give the respondent a mere promise or undertaking which was not fulfilled, but, being in the position of one who had special knowledge, he deliberately used language calculated to convey the impression that, at the time, there was an existing fixed intention on the part of the company to begin business on the first of November, and that the respondent was induced to subscribe for the shares on the faith of the representation made with respect to that intention. I am also satisfied on the evidence that such a representation made by one who had intimate knowledge of the then state of the company's affairs was false. The application for the Dominion licence, without which it was impossible to begin business, was not made for a month after the transaction was closed, and the licence did not in fact issue until this suit was brought and more than half the notes had matured. The strongest evidence in support of my conclusion I find in the terms of the bargain, as given by the trial judge, who says, page 120:—
Evidence is before me, uncontradicted, and I think very probable—that the agent of those shares endeavoured to ascertain how much ready money the doctor had, and then gave him such terms as would induce him to make this purchase; that he pointed out to him that doctors in other places made $1,500 to $2,500 from their connection with this company, and thereby led him to infer that he could expect something, at any rate, for acting in connection with this company enabling him in part at any rate, to meet those notes.
All the probabilities support this view. As I have already said, the immediate benefit Thomson expected to derive from his connection with the company was to earn money with which to pay his notes as they matured and this he could not do if the company was not in business during their currency. Can it be said, therefore, that the date at which the company would be a source of revenue was not a determining factor or an inducing cause. The appointment as medical examiner was valuable only in so far as it placed him in funds to meet the liability he was induced to assume. Further, although it is exceedingly difficult to prove the presence or absence of an expressed intention, on all the facts it appears to me impossible that VanHummell could, in August, have been at all certain if he had taken reasonable care or made reasonable inquiries that the company would have been in possession of the necessary Dominion and provincial licenses to do business in November. If this is merely a case of error it is an error which should have been avoided. The company was then only in the preliminary stages of its organization in so far as the Canadian branch was concerned. The necessary deposit to satisfy the requirements of the "Insurance Act" had to be found out of the sales of stock in Canada and there remained the formalities with respect to the obtaining of the provincial license to be fulfilled. In fact, the licences did not issue until May of the next year. On the whole, I am of opinion that the consent of the respondent was given on the condition that the company would be in business on the first of November, 1910, and the appeal of the company should be dismissed with costs.
On the issue with VanHummell, I agree that this appeal also should be dismissed with costs.
DAVIES J. (dissenting).—I am to deliver the judgment of myself and Mr. Justice Anglin in this case.
In his pleading the plaintiff seeks rescission of a contract for the purchase of 250 shares of the capital stock of the defendant company, on the ground that two definite misrepresentations were made to him by the defendant VanHummell when selling these shares as agent of the company. No other cause of action against the company was disclosed in the pleadings, or suggested at the trial, or on appeal to the Court of Appeal for British Columbia, or in the appellant's factum on his appeal to this court. The two misrepresentations relied upon were that the plaintiff would be appointed the company's sole resident physician for the City of Vancouver, and that the company would commence and actively carry on business in Vancouver on or before the first day of November, 1910.
As to the former it was established that the plaintiff was appointed the company's physician for Vancouver as had been undertaken; and the claim for rescission, so far as it was based upon that alleged misrepresentation, was abandoned.
The trial proceeded wholly upon the other ground of misrepresentation. The evidence in respect of it was somewhat conflicting. But at the close of the case the trial judge reached the conclusion that it had not been established that the alleged misrepresentation "was unqualifiedly made" and added that he could "not hold that it essentially entered into the inducement" or "was made so clear as to operate on the doctor's mind to induce him to purchase in the sense set out above."
The learned judge, therefore, dismissed the plaintiff's action as against the company.
On appeal the learned Chief Justice, delivering the judgment of the Court of Appeal, said that:—
In obtaining subscription for stock from the plaintiff it was made part of the arrangement that the plaintiff should be physician of the company and it was represented that the company should commence business at a date set out as the first of November, which representation was not made good. Then we have the evidence of the plaintiff himself that that representation was material to him; that it was of the essence of the contract. The plaintiff is entitled to the rescission.
In both the trial court and the Court of Appeal it was held that, as put by the learned trial judge:— The relation that existed between the International Casualty Company and VanHummell was that of principal and agent for the sale of stock. I can put no other interpretation on the documents that were placed before me, and on the history of what happened between them. * * * VanHummell was the agent of the company and if there had been misrepresentation here which would entitle Dr. Thomson to rescission of this contract the company would be bound.
And, as put by the learned Chief Justice on appeal:—
I think it is manifest that the arrangement between the company and VanHummell was only a contrivance between themselves to constitute him agent of the company; and that as such agent any representations made by him were within the apparent scope of that arrangement. He had authority as agent to sell stock.
Neither in the trial court nor in the Court of Appeal was it found that the alleged representation as to the time when the company would commence business was fraudulently made.
On a careful perusal of the evidence the conclusion of the trial judge upon the question of fact as to the character of the statements made in this connection to the plaintiff appears to be correct. It is not possible, in our opinion, to contend successfully that it was made a term or condition of the plaintiff's contract that it should become void if the company did not commence business on or before the 1st of November, 1910. The application for stock is in writing. It contains no provision of this kind. At the time of his application the plaintiff stipulated for his appointment as physician and had this term of his bargain put in writing, with the following provision:—
This agreement to be ratified by the president of the company and if not so ratified, application for stock together with cheques and notes to be returned.
It would be contrary to the elementary rule of evidence which excludes parol testimony of a term varying or altering a written contract to permit the plain- tiff to prove that the commencement of business by the company on or before the 1st of November was also a condition subsequent, the non-performance of which would avoid his obligation, to take the stock for which he subscribed.
Regarded as a misrepresentation the alleged statements made by VanHummell as to the commencement of business by the company, in view of the fact that they, relate to matters of mere intention, would require to be very clear and positive in order to support the claim for rescission. I agree with the learned trial judge that the onus upon the plaintiff in this connection was very heavy. The mere fact that the stipulation as to his appointment as resident physician and for the cancellation of his subscription, should that appointment not be made, was so carefully reduced to writing, gives rise to serious doubt as to whether there was any definite or unqualified representation as to the time when the company would begin business, and casts still greater doubt upon the position taken by the plaintiff that the representation, if made, was a material inducement for his subscription. The plaintiff admits that he was told, the commencement of business would be contingent upon the company's obtaining necessary licences, and he must have known that the issue of these could not be absolutely controlled by it. Taking all the circumstances of the case into account and allowing for the advantage which the learned trial judge had in observing the plaintiff's demeanour when giving his evidence, my conclusion would be that his findings of fact that no unqualified misrepresentation was made and that whatever was said in this connection did not essen- tially enter into the inducement for the contract should not have been disturbed.
Assuming, however, for the moment that there was an unqualified misrepresentation by the company's agent and that it did materially induce the contract, inasmuch as it related to a matter of intention and expectation on the part of the company it would not afford a ground for relief by way of rescission, unless it had been clearly established that it was falsely and fraudulently made. Clydesdale Bank v. Paton[2]; Kerr on Fraud (4 ed.), pp. 53-5. This has not been found either by the trial judge or by the Court of Appeal, and I have discovered nothing in the evidence which would justify such a finding, especially at this stage of the proceedings.
We are, therefore, of opinion that the judgment of the Court of Appeal reversing the trial judge on the question of fact and awarding judgment against the defendant company is not sustainable either in fact or in law.
In the course of his argument in this court, however, counsel for the respondent put forward an entirely new ground of claim not disclosed in the pleadings, not taken at the trial or in the Court of Appeal, and not mentioned in his factum on the appeal to this court. He claims judgment for return of the moneys paid by the plaintiff to the company on the ground that while his application was for unallotted treasury stock of the company he was given not such stock, but stock which had been already allotted to the defendant VanHummell and was transferred by him. In the first place, I do not think the plaintiff should be allowed now to set up this new ground of claim. Had it been raised in the pleadings or even at the trial there might have been more satisfactory evidence than is now before us as to the real nature of the arrangement between VanHummell and the company and as to the character in which he held the 30,000 shares of stock which stood in his name. Notwithstanding the evidence given by the company's president, Ritter, in support of its defence that the plaintiff's contract was with VanHummell and not with the company, to the effect that VanHummell was in fact as well as in name the holder of 30,000 shares, I am by no means satisfied that, had the issue now presented been before the court, other evidence might not have been forthcoming which would have made it clear why VanHummell became the nominal holder of all the company's treasury stock and what were precisely his rights and obligations under his arrangement with the company. The circumstances of this case and particularly the documentary evidence seem to indicate that all the facts are not before us. Moreover, from the examinations for discovery, of VanHummell and of Ritter, the plaintiff was made fully aware of all that he now knows concerning the alleged allotment of the 30,000 shares to VanHummell and of the means taken to satisfy his own application for stock. With that knowledge he deliberately elected to proceed with the branch of his action in which he sought to hold VanHummell liable to him on an alleged agreement to take the stock off his hands and dispose of it. He could only make and enforce such an agreement with VanHummell on the basis that the stock was his to dispose of. At the trial he succeeded in convincing the learned judge who presided that he had made such a bargain with VanHum- mell, and obtained a judgment against him for damages for breach of it. Having elected, with full knowledge of the circumstances upon which he now relies in order to recover back his moneys from the company, to proceed with a claim based upon his ownership of the shares which he obtained, he should not, in my opinion, be now allowed to take the stand that he never became owner of these shares and is entitled to a rescission of his contract because they were not what he had bargained for.
But if, notwithstanding these objections, the plaintiff should be allowed now to set up this new ground of claim, in my opinion he cannot succeed upon it. As pointed out by the learned trial judge, the documentary evidence makes it reasonably clear that VanHummell had no beneficial interest in or ownership of the 30,000 shares which stood in his name. He held them merely as agent of and trustee for the company. Concurrently with his subscription, an agreement was made between him and the company which recites that
the said Casualty Company is desirous of disposing of its unsold treasury stock within the shortest possible time,
and that VanHummell had agreed to subscribe for and purchase the unsold stock of the company for the purpose of resale, said subscriptions to be made from time to time as sales are made. The agreement then provides:—
(1) That the said Casualty Company so long as it has unsold treasury stock shall fill all orders for stock received by or through said VanHummell at the agreed price of $15 per share, said stock to be sold at $20 per share;
(2) That the said VanHummell is to pay for the stock so ordered with the proceeds of sales made by him or by his agency * * *
(3) That this contract is to continue in full force and effect so long as the said company has unsold treasury stock with which to fill the orders presented by the said second party (VanHummell) or his agents.
The certificate issued to VanHummell was in a special form and certified him to be the owner of 30,000 shares "subject to payment in cash." As pointed out by the learned trial judge there is no covenant by VanHummell to pay for the shares. The agreement is made upon the basis that, although the 30,000 shares put in VanHummell's name constituted its entire unsold stock, the company would still have unsold stock. It provides that out of its unsold stock the company will fill orders for stock received by or through VanHummell and it is only for such stock as he sells for the company that he agrees to pay anything to it. The price at which he is to dispose of the stock is fixed. The certificate issued makes his ownership conditional on payment. The obvious purpose of the transaction was, for some undisclosed reason, to place the company's treasury stock in the name of VanHummell, and to have him dispose of so much of it as he could as the company's agent. The company undertook to honour his orders for shares out of those so held by him and it was understood that it would take off his hands whatever might not be sold, under the provision enabling it to forfeit for non-payment at the end of a year. This was in fact done. Upon the incomplete evidence before us it is sufficiently clear that this was the substance of the arrangement between the company and VanHummell. However irregular the transaction may have been, and although, as between himself and the company's creditors on liquidation, VanHummell might be held to be a contributory in respect of the entire 30,000 shares, as between him and the company, it seems impossible to escape the conclusion that he had no beneficial interest in the stock, that he could neither be compelled to pay for, nor could he insist on holding as his own, any of the shares which he had not sold. Under these circumstances, while the shares which the plaintiff received may have been nominally VanHummell's, they were in reality and in substance the company's treasury stock. If, therefore, the plaintiff should be allowed now to put forward the new ground of claim devised by the ingenuity of counsel representing him in this court, possibly because he regarded the grounds on which the action was launched as of very doubtful value, he should not, in my opinion, succeed upon it. He has got in substance that which he contracted for and he should not be allowed to recover back what he paid for it.
I would for these reasons allow this appeal with costs in this court and in the Court of Appeal and would restore the judgment of the learned trial judge in so far as it dismissed this action as against the defendant company with costs.
IDINGTON J.—Notwithstanding the many legal questions argued, I think if we can find, as the Court of Appeal did, that in fact there was a representation made to respondent at or before the time of his making the application for stock, to which I will presently refer at length, that the appellant company would by first of November following have begun business in Vancouver, the problems involved are not difficult of solution.
The company was incorporated in 1909 in the State of Washington for the purpose, as its name indi- cates, of engaging in the business of casualty insurance.
On the solicitation of appellant, VanHummell, whose relations to the company will presently appear, the respondent made in writing on the 26th of August, 1910, an application to the company for two hundred and fifty shares of its capital stock.
The making of this application appears in said writing as follows:—
Said stock being of the par value of ten dollars ($10.00) per share. I agree to pay the sum of twenty dollars ($20.00) per share for said stock, it being understood and agreed that the excess amount over and above the par value thereof is to be used for the purpose of securing subscriptions and perfecting the organization of said company, and for the creation of a surplus. Payable on demand.
All amounts must be paid by check, draft or money order made payable to the company.
At the same time he got a letter addressed to him as follows:—
Dear Sir,
The International Casualty Company of Spokane, in consideration of your subscription for $5,000.00 of the Capital Stock of said Company, does hereby appoint you (said Dr. J. W. Thomson) the company's sole resident physician for the City of Vancouver.
This agreement to be ratified by the President of the Company, and if not so ratified your application for stock, together with checks and notes to be returned to you.
H. VANHUMMELL,
For International Casualty Co.
He gave them, at same meeting as he thinks (but later according to VanHummell), two cheques together amounting to $750 payable to the company and twenty notes, each, except the last, for two hundred dollars, and the last for two hundred and fifty dollars, made payable in twenty successive monthly payments to VanHummell or order. He got therefor the following receipt:— INTERNATIONAL CASUALTY COMPANY,
Spokane, Washington.
Capital Stock, $1,000,000.00.
RECEIVED of J. W. Thomson Five thousand cash, and notes * * * Dollars in full payment for 250 shares of the Capital Stock of the International Casualty Company of Spokane, Washington.
INTERNATIONAL CASUALTY CO.,
Per H. VanHummell.
$5,000.00.
In evidence he speaks as follows:—
Mr. Deacon: Q. Whose shares were you buying?
A.—I understood it was treasury stock of the International Casualty Company, the receipt was signed——
Q.—On what ground did you understand that?
A.—I understood from VanHummell he was the agent selling stock for the company, and I asked him what authority he had to sell stock for the company, and he told me he was vice-president of the company, and, as near as I can remember, he showed me a letter authorizing him to sell stock for the company.
Court: Did he tell you he was selling stock for the company?
A.—Yes, sir, and the receipt I received was a printed form, signed by the International Casualty Company, per VanHummell.
*****
Mr. Deacon: Q.—You didn't know that they were VanHummell's shares?
A.—I heard nothing to that effect whatever.
The argument is put forward, notwithstanding said documents, that the transaction was one between VanHummell and the respondent in respect of shares which had been allotted by the company to VanHummell by what he calls an underwriting agreement.
He, however, with commendable frankness, in his examination for discovery, states the matter thus:—
Q.—Now you see this receipt is signed by the International Casualty Company. Did you tell Dr. Thomson that they were your own shares that you were selling him?
A.—No.
*****
Q.—What did you tell him about the shares?
A.—Nothing at all, as to whose or what shares they were.
Q.—You gave him a receipt signed by the International Casualty Company per H. VanHummell? A.—As agent.
Q.—There is no mention of agent on this receipt?
A.—That was what he understood and what I understood.
Q. That you were signing as agent for the company?
A.—Yes.
Q.—Was anything said in the course of the conversation which would lead him to believe that the shares which you were selling him were your own?
A.—No; nothing at all.
Q.—So he had no reason whatever to believe that the shares were not the treasury shares of the company?
A.—I cannot say what he thought or understood about the matter because there was no discussion regarding that point.
Q.—Had he any reason that you know of to suspect that these shares were not the treasury shares of the company?
A.—None that I know of.
He repeats this in substance in his examination taken under commission.
The above nomination of respondent by VanHummell was sent to the head—office of the company in Spokane and returned with the written approval of the president of the company signed by him at the foot thereof.
Curiously enough neither VanHummell nor respondent are very positive as to when or how it was returned. The former seems to think it came back to him before he got the cheques or notes above referred to. The latter thinks it came to him by mail.
If, as seems quite probable from the care respondent took to make sure of his appointment as the basis of his whole dealing, VanHummell is right, then the circumstance of the notes being made payable to him is easily explained, if, indeed, needing any explanation.
The company set up in its defence that it had, in short, nothing to do with the transactions beyond appointing respondent as its local physician; that the stock was VanHummell's and the transaction his own. This has been in fact its attitude throughout, though not distinctly pleaded affirmatively. Its denial of plaintiff's (now respondent's) statement of claim enabled it to make such contention. The effort to make the transaction wear that appearance and to carry it out in ways inconsistent with the documents, do not agree very well with what straightforward dealing required.
The truth seems accurately stated in the above evidence of both those who ought to know; the written parts of the agreement in question here bear that out; the cheques of respondent pursuant thereto were made payable to the company and received by it; and the agreement between the company and VanHummell, relied upon to displace all that, was hidden from the respondent and was nothing more or less than a round-about method of constituting him the agent of the company and giving him such terms of commission as it could not well do to a mere purchaser.
The power thus given was capable of great abuse and if the company adopted that method of creating agents so that it might be in a position to repudiate them and their acts, when leading to inconvenient results, it may as well understand such notions cannot avail anything herein.
The notes given in this case by respondent to VanHummell ought, in light of the foregoing, to have gone directly to the company as, no doubt, was intended by respondent, though a different purpose may have been in the minds of the company's officers.
VanHummell explains that in some other cases this was in truth what was done with such notes. I infer it was well understood between him and the company that either of them might use them and discount them as occasion and opportunity might best promote the interests of the company, so long as it got three—fourths and VanHummell one-fourth of the proceeds.
I, however, suspect there was another purpose possibly arising from a necessity to show cash subscriptions instead of notes as a payment for shares.
An improper use of the company's shares was thus possible and in this case was the direct result of the methods of doing business which the company thus adopted.
The respondent's notes were used by VanHummell at the bank to obtain the money wherewith to pay the company for its shares taken out of VanHummell's allotment instead of from the treasury and issued as if for the respondent and then put up as collateral security at the bank along with the same notes that represented their purchase from the company.
These were acts which the company could not, I imagine, do directly, and unless duly provided for by its charter powers, which is improbable, were improper methods.
All these contrivances for whatever purpose were, if not ultra vires the company, at least beyond the scope and purpose of the plain contract entered into between the company and respondent, which was clearly intended to have been the foundation for a purchase from it of its treasury stock and to have remained executory instead of being apparently executed in ignorance of respondent and to his detriment in the way it was.
The company must herein be treated as owner of these notes and in all else as if the agreement had proceeded in the regular way it manifestly was intended should have been done.
I have no difficulty, therefore, in holding, as did the Court of Appeal, that the transaction was between the company and respondent, and I have no further difficulty in holding that the company, under the circumstances, is bound by any material representations or misrepresentations made by VanHummell in the course of the negotiations inducing respondent to enter into the contract, and it must answer for the legal consequences thereof.
Any difficulty in the case seems to have arisen from the gravity in form of the charges of misrepresentation, so called, inducing the contract.
It seems to me as if the learned trial judge was so oppressed by the nature of the charges that he shrank from believing and finding as fact that the representations had been made as sworn to by the respondent and another witness, yet seems to have no hesitation in believing the same two witnesses as against VanHummell regarding the agreement for cancellation or the taking back by VanHummell of the shares.
In this latter instance he finds corroboration in the circumstances.
With great respect it seems to me that those same circumstances he relies upon reflect as strong light upon and give as much strength to the first contention set up by the respondent as to this found in his favour by the learned judge. And added thereto in support of said first contention, which is the real matter in dispute herein, are the peculiar circumstances I am about to advert to.
The respondent says, and is corroborated by Mr. Wilmot, his witness (and both are reported by the learned trial judge as appearing credible) that, at the bargain which the above—mentioned documents set forth, it was distinctly stated that the company would likely be ready for business in Vancouver by the first of October, but absolutely sure to begin by the first of November, 1910.
I see nothing improbable in supposing such a statement might be made by VanHummell. And if made I see no reason why the company should not be bound by it when a determination has to be reached relative to the said contract and the inducements leading thereto and the bearing of statement thereon, either as representation or as misrepresentation, has to be considered.
On the contrary, it seems, from the nature of the business in hand, the terms made relative to the payments, and the facts (which all agree were mentioned), as to some doctors elsewhere earning $1,500 to $2,500 a year from such positions as the respondent was bargaining for, to be inherently a thing one should expect to be discussed, just as respondent and Wilmot say it was discussed.
I agree, therefore, with the Court of Appeal in acc