Bank of Canada v. Bank of Montreal

Bank of Canada v. Bank of Montreal
Collection
Supreme Court Judgments
Date
1977-06-14
Report
[1978] 1 SCR 1148
Judges
Laskin, Bora; Martland, Ronald; Judson, Wilfred; Ritchie, Roland Almon; Pigeon, Louis-Philippe; Dickson, Robert George Brian; Beetz, Jean; de Grandpré, Louis-Philippe
On appeal from
Ontario
Subjects
Bills of exchange
Decision Content
Supreme Court of Canada
Bank of Canada v. Bank of Montreal, [1978] 1 S.C.R. 1148
Date: 1977-06-14
The Bank of Canada (Plaintiff) Appellant;
and
The Bank of Montreal (Defendant) Respondent;
and
Bay Bus Terminal (North Bay) Limited and Bay Bus Terminal (North Bay) Limited name changed to John Palangio Enterprises Limited operating as Deluxe Coach Lines and John Devost Respondents.
1977: January 27; 1977: June 14.
Present: Laskin C.J. and Martland, Judson, Ritchie, Pigeon, Dickson, Beetz and de Grandpré JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.
Bills and notes—Currency and legal tender—Bank of Canada bank-notes (pre-1967 form)—Whether promissory notes—Obligation of Bank of Canada to replace destroyed bank-note—Bills of Exchange Act, R.S.C. 1970, c. B-5, ss. 10, 156, 157, 176.
In 1959 the Bank of Montreal arranged with the Post Office to have delivered from the Bank’s chief office in Montreal to its branch office in Temiskaming a package containing Bank of Canada bank-notes. While in transit in a bus owned by Bay Bus Terminal (North Bay) Limited most of the mail including the bank-notes was destroyed by a fire in the bus. The Bank of Montreal sued Bay Bus for $23,307.50, the value of the destroyed bank-notes less an amount of $2,692.50 received from the Bank of Canada in exchange for partially burned notes. The trial judge took the view that any action which Bay Bus contended the Bank of Montreal should have taken against the Bank of Canada for replacement of the destroyed notes was unlikely to succeed and found in favour of the Bank of Montreal. On appeal by Bay Bus the Court of Appeal ordered that the Bank of Canada be added and joined as a party defendant to the action and that the writ of summons be amended accordingly; and further ordered that there be added to the endorsement of the writ the Bank of Montreal’s claims against the Bank of Canada. The Bank of Canada entered an appearance and the Court of Appeal directed a new trial on all issues. While the Statement of Claim as amended alleged that the bank-notes were destroyed or lost the parties chose to submit a statement
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of facts for the determination of a point of law pursuant to Rule 124 of the Ontario Rules of Practice. This statement of facts recited that “at least one bank-note…bearing a face value of $5.00 was destroyed by the fire” and that that bank-note was one issued by the Bank of Canada. The bank-note in question was issued pursuant to the Bank of Canada Act, R.S.C. 1952., c. 13 as amended by 1953-54 (Can.), c. 33, the text of the note was under the signature of the then Governor and Deputy Governor of the Bank of Canada and contained the statement “Bank of Canada will pay to the bearer on demand”. On the motion under Rule 124 the judge found that the Bank of Montreal was entitled to the relief sought against the Bank of Canada and this judgment was affirmed in the Court of Appeal.
Held on equal division (Laskin C.J. and Martland, Judson and Dickson JJ. dissenting): The appeal should be dismissed.
Per Ritchie, Pigeon, Beetz and de Grandpré JJ.: The $5 bank-note in question was a promissory note within the meaning of s. 176(1) of the Bills of Exchange Act. That, as a bank‑note, it had characteristics which made it something more than an ordinary promissory note could not affect its status as a promissory note. Its quality of being itself legal tender was not incompatible with it being a promissory note. The bank-note in question having been destroyed the Bank of Montreal was entitled to the remedy at law sought by it, that is judgment against the Bank of Canada to the amount of the destroyed note under s. 10 of the Bills of Exchange Act.
A destroyed note should not be treated as a lost one. The resolution of the quite different problems which might arise in relation to lost bank-notes must remain for consideration in a future case.
Per Laskin C.J. and Martland, Judson and Dickson JJ. dissenting: The issue depended on whether the Bank of Canada note involved in the litigation was a promissory note, within s. 176(1) of the Bills of Exchange Act. As a result of an amendment to the Bank of Canada Act, R.S.C. 1952, c. 13, and to the Currency, Mint and Exchange Fund Act, R.S.C. 1952, c. 315, by 1966-67 (Can.), c. 88, ss. 12 and 20, the words “will pay to bearer on demand” no longer appear on Bank of Canada notes and the issue arising in this case could presumably not arise under bank notes issued since the amendment. The entire support of the judgments in appeal rested on the fact that these words appeared on the destroyed five dollar note which is the subject of the present proceed-
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ings. Having regard to the position of the Bank of Canada as sole issuer of notes with the character of legal tender a bank-note should not be regarded as a promissory note under s. 176(1). The central Bank was not a mere debtor giving security to a creditor and the words “will pay to the bearer on demand” could not turn what was itself money into a different document calling for the payment of money.
[Banco de Portugal v. Waterlow and Sons, Limited, [1932] A.C. 452, followed; Suffell v. The Bank of England (1881-82), 9 Q.B.D. 555; Gillet v. The Bank of England (1889-90), 6 T.L.R. 9; R. v. Brown (1854-57), 8 N.B.R. 13; Raphael v. The Governor and Company of the Bank of England (1855-56), 17 Commons Bench Reports 161; McDonnell v. Murray (1858‑59), 9 Irish L. Rep. 495; The Australian Joint Stock Bank v. The Oriental Bank (1866), 5 New South Wales Sup. Crt. Rep. 129; Jefferson v. The Ulster Bank (1900), 34 Irish Law Time Rep. 58; Hong Kong and Shanghai Banking Corporation v. Lo Lee Shi, [1928] A.C. 181; Re Toronto Beaches Election; Ferguson v. Murphy, [1943] O.R. 787; Pillow v. L’Espérance (1902), 22 Que. S.C. 213; Hansard v. Robinson (1827), 108 E.R. 659; Pierson v. Hutchinson (1809), 170 E.R. 1132; Woodford v. Whitely (1830), 173 E.R. 1243; Clarke v. Quince (1834), 3 Dowl, 26; Blackie v. Pinding (1848), 136 E.R. 1225; Crowe v. Clay (1854), 9 Ex. Rep. 604; Wright v. Lord Maidstone, (1854-55) 1 K. & J.R. 701; Banque d’Algérie c. Casteras 1867, Dalloz 1.289, referred to.]
APPEAL from a judgment of the Court of Appeal for Ontario[1] dismissing an appeal from a judgment of Addy J.[2] on a motion under Rule 124 of the Ontario Rules of Practice. Appeal dismissed on equal division, Laskin C.J. and Martland, Judson and Dickson JJ. dissenting.
J.J. Robinette, Q.C., for the appellant.
Brendon O’Brien, Q.C., for the respondent Bank of Montreal.
George Wallace, Q.C., for the respondents Bay Bus Terminal (North Bay) Limited et al.
The judgment of Laskin C.J. and Martland, Judson and Dickson JJ. was delivered by
THE CHIEF JUSTICE (dissenting)—I have had the advantage of seeing the reasons prepared by
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my brother Beetz, under which he would dismiss the Bank of Canada’s appeal. Although Beetz J. left open the question of the Bank’s liability to replace a lost bank note, I cannot see how any different conclusion could be reached in that respect if the obligation to replace or to suffer judgment for the face amount exists in respect of a bank note that has been destroyed. True, the success will be pyrrhic in the case of a lost bank note since the claimant against the Bank must give security to it under s. 156(1) of the Bills of Exchange Act, R.S.C. 1970, c. B-5. Although an action in such a situation is unlikely, the principle must be the same, depending in both cases on finding that the Bank of Canada note involved in the present litigation is a promissory note, within s. 176(1) of the Act.
As a result of an amendment to the Bank of Canada Act, R.S.C. 1952, c. 13, and to the Currency, Mint and Exchange Fund Act, R.S.C. 1952, c. 315 by 1966-67 (Can.), c. 88, ss. 12 and 20, the words “will pay to bearer on demand” no longer appear on Bank of Canada notes, and I take it that the issue that arises in this case under a note that contains those words could not arise under bank notes issued since the 1967 amendment. In short, the entire support for the judgments in appeal lies in the fact that the words “will pay to bearer on demand” appeared on the destroyed five dollar note which is the subject of the present proceedings.
The liability of the carrier to answer for the value of the destroyed notes does not arise in the issue raised between the appellant Bank and the respondent Bank of Montreal. Moreover, there could be no subrogation of the appellant to any claim of the respondent Bank against the carrier if the respondent Bank is entitled to succeed against the appellant under the Bills of Exchange Act; that would be independent of any liability of the carrier to the Bank of Montreal. Nonetheless, it seems to me that the issue now before us could have been raised by the carrier claiming as bailee of the notes, destroyed during carriage, to have them replaced by the appellant Bank. I see no difference between a claim by the bailee (although it would have to account to the Bank of Montreal)
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and a claim by the respondent Bank, so far as the liability of the Bank of Canada is concerned.
I go further. If the position taken by the respondent Bank of Montreal and in the Courts below is correct, then any person accidentally or carelessly destroying a Bank of Canada note of the type involved in this case (for example, destruction by fire when sitting in front of one’s fireplace) would be entitled to have the appellant Bank replace the note. Such a person would not be regarded as having destroyed his own property—and thus have no claim against anyone else for its value—but as having destroyed a promissory note under which he had a claim against the maker and, hence, would be entitled to have it replaced as a matter of the law merchant, preserved in that respect by s. 10 of the Bills of Exchange Act.
It would have been a simple matter, of course, for the Bank of Canada legislation or for the Bills of Exchange Act to have said that the latter Act does not apply to notes issued by the Bank, as being legal tender recognized in our law, in short our paper money. This was not done, and we are faced with a contention of literal interpretation and application of s. 176(1) of the Bills of Exchange Act, despite the fact that a separate code governing the establishment and operation of the Bank of Canada in relation to the Canadian monetary system has been promulgated from the point of view of the public character of the system as contrasted with the essentially private relationships which engage the Bills of Exchange Act.
Under its constituent Act, as it stood at the time the present litigation was instituted (see R.S.C. 1952, c. 13, am. 1953-54, c. 33), the Bank of Canada is the fiscal agent of the Government. Its dealings are with governments and with chartered banks, as by the purchase of securities, making of loans and acceptance of deposits from them against which, of course, they will draw as the occasion requires. The preamble to the Bank of Canada Act is an indicator of the nature and range of functions to be discharged by the appellant. It reads as follows:
WHEREAS it is desirable to establish a central bank in Canada to regulate credit and currency in the best
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interests of the economic life of the nation, to control and protect the external value of the national monetary unit and to mitigate by its influence fluctuations in the general level of production, trade, prices and employment, so far as may be possible within the scope of monetary action, and generally to promote the economic and financial welfare of the Dominion:…
In addition to the foregoing features of the position of the Bank of Canada, it is the sole issuer of notes that have the character of legal tender. The notes are non-convertible into gold, and that has been the case from the very beginning of the Bank of Canada’s operations. If a person were to offer a pre-1967 note to a chartered bank to enforce the Bank of Canada’s promise to pay to the bearer on demand the face value of the note, he would get another, perhaps a less worn one, of the same face value. Nothing is accomplished in any legal sense by such an exchange. It is to engage in a charade to contend or suggest that the words “will pay to the bearer on demand”, fastening on them alone, give a pre-1967 note the character of a promissory note under the Bills of Exchange Act. I do not accept the submission that the pre-1967 notes of the Bank of Canada fall within the definition of a promissory note under s. 176(1) of the Bills of Exchange Act. I reject it for two reasons.
First, the submission gives no force to the position of the Bank of Canada under its constituent Act, pays no regard to the relationship between the Bank of Canada and the chartered banks through whom the Bank of Canada’s notes reach the public, and treats the Bank of Canada as if it were a private debtor giving security in the form of a promissory note to a creditor. The Bank of Canada does not have that character in respect of its note issuing authority, a matter that goes to the money supply and the monetary policy. Second, it is wrong to characterize the Bank of Canada note involved in this case as a promissory note under the definition in s. 176(1) of the Bills of Exchange Act. The definition is in these words:
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176. (1) A promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to, or to the order of, a specified person, or to bearer.
What is said to be an unconditional promise to pay a sum certain in money is itself money. The words on the face of the paper money, “will pay to the bearer on demand”, cannot alter its character as money and turn it into a different document which calls for the payment of money.
Moreover, I find it impossible to isolate the Bank of Canada’s note issuing authority from its host of operations as a public institution and then, by such segregation, to adapt the Bills of Exchange Act to the characterization of its notes. Indeed, reliance on cases dealing with commercial banks can only be misleading if used to establish a parallel with a central bank like the Bank of Canada. I refer in this connection to a standard Canadian book on central banking, Plumptre, Central Banking in the British Dominions (1940), where the author says this (at p. 29):
…A central bank looks rather like a commercial bank. Each usually has a capital, a reserve fund accumulated from profits, cash reserves, liquid investments, and deposits of various sorts. A casual observer could no doubt detect certain differences in their balance sheets, for instance almost all the liabilities of a central bank are usually payable on demand, while the commercial banks are entitled to require so many days’ or months’ notice before meeting many of their liabilities. On the other side of the balance, the assets of a central bank appear more liquid, more easily convertible into cash; for the assets of a commercial bank, in addition to marketable securities, include loans to farmers pending the sale of their crops, loans to businesses pending the disposal of stocks, goods and so forth. The observer is easily led to believe that the chief differences between commercial and central banking lie in such matters.
But the truth is otherwise. The divergence runs deeper. It is so deep that one can scarcely avoid miscon-
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ception in using the language, the terminology, of commercial banking to describe central banking; and yet it is the only language that has been devised for the purpose. The only protection against misapprehension arising from incongruous language is to grasp the point of view of a central bank; and this involves shedding, for the time, the point of view of a commercial bank, and, indeed, of ordinary business. If one asks why, despite its incongruities, the same language is used for both, the answer must be sought in the past. It is because the leading central banks emerged only recently as a species distinct from commercial banks.
In dealing with a central bank’s note-issuing authority and its relation to required reserves, Plumptre, op. cit., at p. 33, explains the situation as follows:
… The regulation of reserves is usually connected with the regulation of the note issue from which it should nowadays be largely or entirely separate. This connection is the result of the historical evolution of central banking in England and elsewhere. As matters stand today in the Dominion and most other countries there is no clear reason why the volume of note issue should be ultimately limited by the foreign assets held by the central bank; for the volume of note Issue changes chiefly in response to the public’s need for hand-to-hand currency. This volume may be related to the state of the country’s international payments and thus to requirements for reserves of foreign assets; but the relationship is exceedingly distant and complex.
In a sense the note issue is fundamentally important to a central bank; and in another sense it is quite unimportant. It is important because, since central bank notes are legal tender and often, in these days, practically the only important form of legal tender money available, control of the note issue gives the bank control over what, in the last resort, is legally the basis of the whole financial system. The note issue is unimportant because in fact, either by law or by custom, the commercial banks keep their reserves chiefly in the form of deposits in the central bank rather than its notes. In practice it is the banks’ reserves that lie at the basis of a country’s credit structure and financial system. Thus, ultimately under the law, control of the note issue is fundamental; in fact, under prevailing customs, control of the banks’ reserves is fundamental. No doubt the banks would be unwilling to keep reserves in the central bank if they were not assured that, if requested, legal tender notes
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would be forthcoming. A central bank’s active efforts to control credit, however, and through credit control to influence the economic condition of the country, are nowadays directed towards varying the banks’ reserves; and the note issue, serving the same lowly role as subsidiary coin, changes passively up and down in response to the country’s requirements for that particular form of monetary medium.
Even looking at the notes in isolation, I hold the view that the statutory declaration that the notes are legal tender, added to the fact that they have no convertibility into gold or anything else, is a more persuasive indication of their character than the inscription on them that they are payable to bearer on demand. As I have already noted, a promissory note, by definition, involves an unconditional promise to pay a sum certain in money, but it is not itself money. True, the obligation of a promissory note may be carried forward by a renewal note, but no matter how many renewals there be, or how many replacements under different terms, there is no liquidation of the debt until it is discharged, and this may be by money or money’s worth or the debt may be forgiven. To say that a bank note of the kind involved here imports similar legal consequences, that a non-convertible bank note is paid off by the giving of a bank note of similar face value is to go around in a circle: legal tender is exchanged for legal tender; a different piece of paper, true, but indistinguishable in legal effect from the one surrendered for it.
Prior to the establishment of the Bank of Canada with sole note-issuing authority, notes could be issued by the chartered banks as provided by s. 61 of the Bank Act, R.S.C. 1927, c. 12, and these notes contained payment promises, that is, they were payable to the bearer on demand. At the same time the Dominion Notes Act, R.S.C. 1927, c. 41 provided for the issue by the Government of Dominion notes which were legal tender and were redeemable in gold. The Currency Act, R.S.C. 1927, c. 40 made gold coins legal tender for any amount, silver coins legal tender for amounts not
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exceeding ten dollars and nickel coins legal tender for amounts not exceeding five dollars. The notes of the chartered banks were not legal tender but, of course, they were redeemable in legal tender, whether in Dominion notes or in gold, silver or nickel coins. The payment promise in the notes issued by the chartered banks thus had substance. The same can be said of the Dominion notes, which also carried a payment promise. Since they were redeemable in gold, the payment promise on them also had substance.
The situation changed completely when the chartered banks were shorn of their note-issuing authority and the Bank of Canada became the only such issuer. Although the Bank of Canada Act, until the 1967 amendment, carried into its terms the payment promise which had been characteristic of the notes of the chartered banks (I refer again to what Plumptre, op. cit., supra said about the continued use of the terminology of commercial banking), the framework in which Bank of Canada notes were issued and circulated—notes which were legal tender and non-convertible—made the payment promise sterile from the very beginning.
Great reliance is placed by the respondent bank on the Bank of Portugal case, Banco de Portugal v. Waterlow and Sons Ltd.[3] I find it completely unpersuasive on the point in issue here, a point which did not arise in that case. It was concerned only with the measure of damages payable by the respondent printers for breach of contract upon the unauthorized printing of bank notes of the appellant bank. The printing was done from the original plates used by the printers to produce notes for the bank, but they were victims of a fraudulent scheme and delivered the notes to the criminals who carried out the scheme. The bank called in the entire issue of the notes produced from the plates and paid off holders of the unauthorized notes by a new issue of notes. The sole question before the House of Lords was whether the printers should be liable only for the cost of
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printing the unauthorized notes or for their face value as well. A majority held that they must pay their face value as well. I need not dwell on the correctness of this decision for present purposes. It has not stood without criticism: see Nussbaum, Money in the Law (1939), at pp. 93 ff. There is nothing in the case that, in my view, turned on the character of lawfully issued notes of the Bank of Portugal as promissory notes. However, some of the Law Lords proceeded to consider their character and regarded them as promissory notes even though they did not contain any promise to pay on their face.
I confess my inability to appreciate how there can be any substance in the assertion that an inconvertible note issued by a bank and being legal tender involves the same liability of a bank as is incurred by a merchant who makes and gives a promissory note. Yet so Lord Atkin said, and he is quoted extensively in the reasons for judgment of my brother Beetz. We are told that the Bank of Portugal may be sued on its bank note if it does not pay its face value on demand, but it will satisfy the demand if it offers another of its notes of the same face value. I find this unreal; any holder who would sue in such a situation must surely have his claim rejected by the Court and be required to pay costs, if not also to be told that he is engaged in a vexatious proceeding.
It may be said that litigation on this basis would never happen, and that only where notes were destroyed or lost would there be any likelihood of suit, the present case being illustrative. This seems to me to be an argument from the base of a desired result rather than from principle. The position must surely be viewed in the same way as it would be with respect to an ordinary promissory note made by a private person in favour of another. There is a further oddity, to me at least, in the Bank of Portugal case when the notes of that bank are characterized as promissory notes although there is no promise to pay on their face. As I understood the submissions here, it was accepted
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that post-1967 amendment Bank of Canada notes could not be regarded as promissory notes under the Bills of Exchange Act. What all of this conveys to me is that if there is to be some remedy against the Bank of Canada in respect of a claim to have destroyed notes replaced, it should be given under appropriate legislation and not by forcing that result through the Bills of Exchange Act.
One redeems or pays off a true promissory note, and the note is surrendered when the debt for which it was given is paid. Again, the ordinary promissory note carries interest or is for a principal sum which includes the cost of borrowing. There is no parallel with paper money which is legal tender and which, as here, is inconvertible and bears no interest. Nussbaum in his text Money in the Law, at pp. 83-84, asserts that the payment promise is meaningless in such a situation and although Mann, The Legal Aspect of Money (3rd ed. 1971), takes issue with this view and asserts at p. 12 that the payment promise makes a bank note a promissory note within the meaning of the Bills of Exchange Act, he qualifies this position considerably and even contradicts it by noting that a bill of exchange is not money but on the contrary the drawee is required to pay a sum certain in money.
Reliance is also placed by the respondent Bank on s. 21(1) of the Bank of Canada’s constituent Act which provides that its notes “shall be a first charge upon the assets of the Bank”. I do not see how this assists the contention of the respondent Bank. Rather, in my opinion, it contradicts it because a promissory note is not in any sense a charge upon the assets of the maker. Indeed, s. 21(1) fortifies my view that the Bank of Canada note in this case is sui generis, as was argued by counsel for the appellant.
There is, moreover, another consideration which lends emphasis to the unreality of regarding the Bank of Canada note as falling within s. 176(1) of the Bills of Exchange Act. It is pointed out by Nussbaum, op. cit., at p. 84, as follows:
Despite the fact that paper money has become practically inconvertible and no longer evidences a debt, such notes must, for reasons of accounting, appear on the
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liability side of the balance sheet of the bank or other institution of issue. There should be no misapprehension, however, of the legal nature of the notes. The “debtor” has disappeared.
The reason for this assertion is plain enough. There is no redemption of an inconvertible note, and it is only if the Bank of Canada was to be wound up that the question of meeting the claims of holders of the notes would arise; and, as the author points out, this would probably be done through another issue of notes. He adds in this connection that “realization of the assets of the [central] bank would be impossible, such assets, in the situation supposed, usually consisting mostly of government debts”. This view is consistent with s. 36 of the Bank of Canada Act which reads as follows:
36. No statute relating to the insolvency or winding-up of any corporation applies to the Bank and in no case shall the affairs of the Bank be wound up unless Parliament so provides, but if provision is made for winding-up the Bank the notes of the Bank outstanding shall be the first charge upon the assets.
I am aware of an answering argument that the accounting requirement that puts notes on the liability side of the ledger is indicative of a dichotomy between book money or money of account and physical money, the actual notes. Involved in this monetary theory, which proceeds from a historical base, is the assertion that bank notes are merely representative of monetary value and are not themselves money; that they are issued against assets shown on the Bank of Canada’s books, assets such as government securities in the main, but also consisting of other securities and private financial paper. Hence, so the argument would run, there is significance in the payment promise because there is the asset backing on the books of the Bank of Canada, and the “real” money is the book money.
The assessment, in my opinion, bears out the view expressed by Plumptre, supra, on the misleading assimilation of central banking to private commercial banking; it isolates the central bank’s accounting obligations from their relation to government purposes and the bank’s own duties in the field of monetary policy and treats them as if they
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merely represented private debtor-creditor transactions. Moreover, it is an economic argument which ignores the legal attribution of money character to bank notes, and it does not advance the case for classifying a bank note as a promissory note, I repeat what I said earlier, namely, that if there is a case for obligating the Bank of Canada to replace destroyed notes (as contrasted with replacing worn out or mutilated or torn notes by way of substitution and not redemption), it cannot be made by transforming a Bank of Canada note, even one with a payment promise, into a promissory note.
Apart from the main grounds upon which I would reject the claim of the Bank of Montreal against the Bank of Canada, there is another aspect of this case which is worth mentioning, having regard to the Bank of Montreal’s reliance on s. 156 of the Bills of Exchange Act as applicable to destroyed notes no less than to lost notes. That provision is complemented by s. 157, and they read as follows:
156. (1) Where a bill has been lost before it is overdue, the person who was the holder of it may apply to the drawer to give him another bill of the same tenor, giving security to the drawer, if required, to indemnify him against all persons whatever, in case the bill alleged to have been lost is found again.
(2) Where the drawer, on request as aforesaid, refuses to give such duplicate bill, he may be compelled to do so.
157. In any action or proceeding upon a bill, the court or a judge may order that the loss of the instrument shall not be set up, if an indemnity is given to the satisfaction of the court or judge against the claims of any other person upon the instrument in question.
Two questions arise in connection with the Bank of Montreal’s invocation of s. 156. The first is whether that provision applies to promissory notes. It is said that s. 186 of the Bills of Exchange Act makes it applicable but, as was strongly contended by counsel for the Bank of Canada, there is difficulty in making the application because s. 186 provides that the maker of a promissory note shall be deemed to correspond with the acceptor of a bill, and the first endorser is deemed to correspond
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with the drawer of an accepted bill. Since s. 156 relates only to the obligation of the drawer of a bill to duplicate it, there can be no adaptation of the section to impose the obligation upon the maker of a promissory note when he does not correspond to the drawer of a bill.
The second hurdle to any reliance on s. 156 lies in that part of s. 156 which describes the obligation thereunder as one “to give another bill of the same tenor”. Even assuming that it is proper in this case to substitute the word “note” for “bill”, the sequence of events resulting in the claim against the Bank of Canada reveal its disablement to satisfy s. 156. It is the fact that the Bank of Canada was made a party to the Bank of Montreal’s action against the carrier and others when an appeal was taken to the Ontario Court of Appeal from a judgment adverse to the carrier. The Court of Appeal, in the circumstances, by a judgment of June 18, 1964 ordered a new trial on fresh pleadings to take account of the claim against the Bank of Canada. The fresh amended statement of claim of the Bank of Montreal was not delivered until December 21, 1967. Prior to that date, an amendment to the Bank of Canada Act by 1966-67 (Can.), c. 88 s. 12, effective March 23, 1967, substituted a new s. 21(1), the note‑issuing authority of the Bank of Canada. It replaced the provision for the issue of notes payable to bearer on demand and provided for notes without that prescription. In short, the effect of the amendment was to make it impossible for the Bank of Canada to issue a new five dollar note of the same tenor as the one destroyed.
Again, if s. 156(1) be inapplicable to destroyed notes, the Bank of Montreal is in no more favourable position under the law. What it would have to seek at common law would be redemption upon offering secondary evidence of the contents of the destroyed note; and I have already made clear my opinion that since the destroyed note was itself money and was non-convertible it is illusory to speak of redemption. If then there is nothing to
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redeem there is no basis for giving judgment against the Bank of Canada for the face amount of the destroyed note.
I would allow the appeal, set aside the judgments below and declare that the point of law set down for determination, upon the consent of all parties, as between the Bank of Montreal and the Bank of Canada should be determined in favour of the latter and that the claim of the Bank of Montreal against the Bank of Canada should, accordingly, be dismissed with costs to the Bank of Canada against the Bank of Montreal throughout. I think this is a case where a form of Bullock order should be made so as to entitle the Bank of Montreal to recover the costs aforesaid from the other respondents if it should succeed on the claim made against them which has been held in abeyance pending the determination of the point of law in the present proceedings.
The judgment of Ritchie, Pigeon, Beetz and de Grandpré JJ. was delivered by
BEETZ J.—Is a $5 note issued by the Bank of Canada and intended for circulation a promissory note within the meaning of s. 176(1) of the Bills of Exchange Act, R.S.C. 1952, c. 15? If so, and in the event of that note being accidentally destroyed, is the holder entitled to claim a duplicate note under s. 156 of this Act, or to obtain judgment in the amount of $5 against the Bank of Canada? Those are the questions in this case.
I
They arose out of circumstances which date back to 1959. In August of that year, the Bank of Montreal arranged with the Post Office to have delivered from the Bank’s chief office in Montreal to its branch office in Temiskaming a package containing bank-notes issued by the Bank of Canada. While in transit in a bus owned by Bay Bus Terminal (North Bay) Limited (“Bay Bus”), most of the mail including the contents of the package was destroyed by reason of a fire which occurred within the bus.
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The Bank of Montreal sued Bay Bus for recovery of the sum of $23,307.50 representing the value of the destroyed bank-notes less an amount of $2,692.50 received from the Bank of Canada in exchange for partially burned notes. The case was tried by Spence J. then a member of the Supreme Court of Ontario, who decided in favour of the Bank of Montreal. Spence J. took the view that any action which Bay Bus contended should have been brought by the Bank of Montreal against the Bank of Canada for replacement of the destroyed notes “would be dubious in its success”. Bank of Montreal v. Bay Bus Terminal (North Bay) Limited[4], at p. 570.
Bay Bus appealed to the Court of Appeal. On February 10, 1964, the Court of Appeal ordered that the Bank of Canada be added and joined as a party defendant to the action and that the writ of summons be amended accordingly; the Court of Appeal further ordered that the endorsement of the writ be amended by adding, in terms specified in the order, the Bank of Montreal’s claims against the Bank of Canada. The Bank of Canada entered an appearance as defendant on February 20, 1964. On June 18, 1964, the Court of Appeal set aside the judgment of Spence J. and directed a new trial on all issues: Bank of Montreal v. Bay Bus Terminal (North Bay) Ltd. et al.[5]
The Fresh as Amended Statement of Claim, dated December 21, 1967, alleges that the banknotes were destroyed or lost. However, the parties chose to submit a statement of facts for the determination of a point of law pursuant to Rule 124 of the Ontario Rules of Practice. The relevant paragraphs of the agreed statement of facts read as follows:
7. Between North Bay and Temiskaming a fire occurred within the vehicle while it was travelling; and, as a result, most of the mail was destroyed, including the contents of the said letter or package. At least one bank note within this letter or package bearing a face value of $5.00 was destroyed by the fire. The Bank note was one issued by the Defendant, the Bank of Canada, in the form hereto annexed.
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8. The point for determination by the court is whether in the circumstances the Plaintiff is entitled to the relief asked for in the Fresh as Amended Statement of Claim as against the Defendant Bank of Canada with respect to the $5.00 bank note leaving the other issues in the action for determination afterwards by trial or otherwise as the parties may agree.
The relief asked for as against the Bank of Canada in the Fresh as Amended Statement of Claims conforms to the order made by the Court of Appeal on February 10, 1964. It reads:
(a) The Plaintiff claims against the Bank of Canada, pursuant to Sections 156 and 157 of the Bills of Exchange Act., R.S.C. 1952, Chapter 15 for the issue and delivery to the Plaintiff of duplicate bills of The Bank of Canada in the aforesaid amount of $23,307.50 and of the same tenor as those bills lost or destroyed, subject to the security being given to the Bank of Canada, if required by the Bank of Canada, and to the satisfaction of this Court, to indemnify The Bank of Canada against all persons whatsoever, in case any bill or bills of the Canadian currency so lost or destroyed shall be found again.
(b) And in the alternative, the Plaintiff claims Judgment against The Bank of Canada to the amount of the said bills so lost or destroyed.
The photocopy annexed to the agreed statement of facts represents a $5 note issued by the Bank of Canada pursuant to the Bank of Canada Act, R.S.C. 1952, c. 13, as amended by 1953-54 (Can.), c. 33, (“the Act”). The text of the note is under the signature of the then Governor and the then Deputy Governor of the Bank of Canada. It reads in part as follows:
Bank of Canada will pay to the bearer on demand.
The sum of five dollars is printed many times in letters and figures on the face as well as on the back of the note.
The motion under Rule 124 was heard by Addy J. who found for the Bank of Montreal. Addy J. dismissed a preliminary argument to the effect that, in issuing notes, the Bank of Canada is acting on behalf of Her Majesty and that, by reason of s. 16 of the Interpretation Act, R.S.C. 1952, c. 158, the Bills of Exchange Act is not applicable; he held: (1) that the $5 bank-note is a promissory note within the meaning of s. 176(1) of the Bills of
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Exchange Act, (2) that the word “lost” in s. 156 must be taken to include a bill that has been accidentally destroyed and (3) that s. 186 does not operate so as to prevent the application of s. 156 to the maker of a note. The formal judgment of the Supreme Court of Ontario reads as follows:
1. THIS COURT DOTH ORDER that the Plaintiff is, as against the Defendant The Bank of Canada, entitled to the relief asked for in the Fres