(Ontario) An assignee for the benefit of creditors conveyed mortgaged property to the mortgagee in satisfaction of part of the debt due to him. The mortgagee was also one of the inspectors required by the Canadian legislation to supervise the conduct of assignments for the benefit of creditors. Twelve years after the conveyance creditors commenced proceedings to set it aside. The mortgagee relied on the statute of limitations.
Held: He was entitled to do so. The Board rejected the argument that the mortgagee was an express trustee.
Viscount Cave said: ‘The expressions ‘trust property’ and ‘retained by the trustee’ properly apply, not to a case where a person having taken possession of the property on his own behalf is liable to be declared a trustee by the Court; but rather to a case where he originally took possession upon trust or on behalf of others. In other words they refer to cases where a trust arose before the occurrence of the transaction impeached and not to cases where it arises only by reason of that transaction. The exception no doubt applies, not only to an express trustee named in the instrument of trust, but also to those persons who under the rules explained in Soar v Ashwell and other cases are to be treated as being in a like position; but in their Lordships’ opinion it does not apply to a mere constructive trustee of the character described in the judgment of Sir William Grant.’
Viscount Cave said: ‘The possession of an express trustee was treated by the Courts as the possession of his cestuis que trustent, and accordingly time did not run in his favour against them. This disability applied, not only to a trustee named as such in the instrument of trust, but to a person who, though not so named, had assumed the position of a trustee for others or had taken possession or control of the property on their behalf such (for instance) as the persons enumerated in the judgment of Bowen L.J. in Soar v Ashwell or those whose position was in question in Burdick v Garrick, In re Sharpe, Rochefoucauld v Boustead, and Reid-Newfoundland Co v Anglo-American Telegraph Co. These persons, though not originally trustees, had taken upon themselves the custody and administration of property on behalf of others; and though sometimes referred to as constructive trustees, they were, in fact, actual trustees, though not so named. It followed that their possession also was treated as the possession of the persons for whom they acted, and they, like express trustees, were disabled from taking advantage of the time bar. But the position in this respect of a constructive trustee in the usual sense of the words – that is to say, of a person who, though he had taken possession in his own right, was liable to be declared a trustee in a Court of equity – was widely different, and it had long been settled that time ran in his favour from the moment of his so taking possession. This rule is illustrated by the well-known judgment of Sir William Grant MR in Beckford v Wade.”
(Supreme Court of Calcutta) Recognizance entered into to abide the determination of an appeal vacated upon petition of the Appellant, upon the abandonment of the appeal.
Judges:
Viscount Cave, Viscount Cave, Sumner, Parmoor LL
Citations:
[1920] AC 636, [1919] UKPC 136
Links:
Jurisdiction:
Canada
Cited by:
Cited – Clarkson v Davies PC 1923
In a case involving fraud, referring to Taylor v Davies, Lord Justice Clerk said that: ‘it was there laid down that there is a distinction between a trust which arises before the occurrence of the transaction impeached and cases which arises only by . .
Cited – DEG-Deutsche Investitions und Entwicklungsgesellschaft mbH v Koshy and Other (No 3); Gwembe Valley Development Co Ltd (in receivership) v Same (No 3) CA 28-Jul-2003
The company sought to recover damages from a director who had acted dishonestly, by concealing a financial interest in a different company which had made loans to the claimant company. He replied that the claim was out of time. At first instance the . .
Cited – Dubai Aluminium Company Limited v Salaam and Others HL 5-Dec-2002
Partners Liable for Dishonest Act of Solicitor
A solicitor had been alleged to have acted dishonestly, having assisted in a fraudulent breach of trust by drafting certain documents. Contributions to the damages were sought from his partners.
Held: The acts complained of were so close to . .
Cited – Williams v Central Bank of Nigeria SC 19-Feb-2014
Bank not liable for fraud of customer
The appellant sought to make the bank liable for a fraud committed by the Bank’s customer, the appellant saying that the Bank knew or ought to have known of the fraud. The court was asked whether a party liable only as a dishonest assistant was a . .
Cited – Halton International Inc Another v Guernroy Ltd CA 27-Jun-2006
The parties had been involved in investing in an airline to secure its future, but it was now said that one party had broken the shareholders’ or voting agreement in not allowing further investments on a pari passu basis. The defendants argued that . .
Cited – Clarkson and Another v Davies and Others PC 23-Oct-1922
Ontario – Discussing the Taylor case, the Board said: ‘ . . it was there laid down that there is a distinction between a trust which arises before the occurrence of the transaction impeached and cases which arise only by reason of that transaction.’ . .
Lists of cited by and citing cases may be incomplete.
Limitation, Equity, Litigation Practice
Updated: 24 October 2022; Ref: scu.187432