Public Trustee v. Guaranty Trust

Was the Writ of Summons as issued on the 15th of May, 1975, commencing action number 3259 of 1975, wherein Guaranty Trust Company of Canada was Plaintiff and Guaranty Trust Company of Canada and Edward Thomas Berry as executors and trustees of the Estate of James Wilson Berry, deceased, and Edward Thomas Berry were Defendants, a nullity?

Was the said Writ of Summons irregular?

If the said Writ of Summons was irregular, was this irregularity cured by the Orders of Mr. Justice Maloney dated the 21st day of June, 1977 and Master Garfield dated the 14th day of February, 1978?

Does Guaranty Trust Company of Canada have the capacity, power and right to maintain this action against the Public Trustee, Trustee of the Estate of James Wilson Berry, deceased?

Does Guaranty Trust Company of Canada have the capacity, power and right to maintain this action against Edward Thomas Berry?

The answers to these questions given at trial and on appeal may be summarized as follows:

Trial Judge

Court of Appeal

1.

Yes

No

2.

No answer required

Yes

3.

No answer required

Yes

4.

No

Yes

5.

Yes

Yes

It is I think elementary to state that a writ of summons issued by a plaintiff naming himself or itself alone as defendant cannot be regarded as the commencement of a legal action. It is on its face incapable of maturing into a judgment and is consequently of no effect. The fact that the plaintiff has caused such a document to originate does not give it any legal life; it is still‑born before any consequences can flow from its existence which is and remains limited to its character as a piece of paper. In my opinion the fact that a plaintiff may

[Page 936] have a dual capacity by reason of its appointment as an executor and trustee and that its suit is instituted against itself in the latter capacity does not extend any validity to its cause of action.

In the present case Guaranty Trust shared its role as executor and trustee with the brother of the deceased, but in my view this factor cannot be taken as initiating a cause of action by the trust company against itself.

There was in the present case the added complicating factor that a valid cause of action did exist by the trust company againts its co-executor in his personal capacity and this is not questioned in the present proceedings.

It will be seen that in my view the writ of summons in the present case is a nullity in so far as it purports to commence an action by the trust company against itself, but it is contended that the form of the writ constitutes nothing more than an irregularity which can be cured and in this case was cured by an order of the Court. In my view, the proceedings adopted in this case in order to cure the defect in the writ of summons were instituted before Mr. Justice Maloney on the assumption that the defect was a mere irregularity. In this regard it appears to me to be self-evident that such a proceeding was regarded in the nature of an irregularity as contemplated by Rule 186 of the Ontario Annual Practice (which can be traced back to Order 70, Rule 1 of the Rules of Practice in the Supreme Court in England), and which reads as follows:

186. Non-compliance with the rules does not render the writ or any act or proceeding void, but the same may be set aside, either wholly or in part, as irregular, or may be amended, or otherwise dealt with, as seems just.

The history of this rule and the practice under it clearly indicate that it is designed to provide for the rectification of procedural irregularities and this is borne out by reference to what is said in Archbold’s Practice in the Queens Bench Division (14th ed.) at p. 445:

It is difficult to define the distinction between an irregularity and a nullity. Where the proceeding adopted

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is that prescribed by the practice of the Court, and the error is merely in the manner of taking it, such an error is an irregularity, and may be waived by the laches or subsequent acts of the opposite party; but where the proceeding itself is altogether unwarranted, and different from that which, if any, ought to have been taken, then the proceeding in general is a nullity, and cannot be waived by any act of the party against whom it has been taken. Thus, an affidavit sworn before a person without authority to take it, is a nullity. A judgment entered up on a feigned issue as in an ordinary action was formerly a nullity. On the other hand, a pleading, dated on a day different from that on which it was delivered, cannot be treated as a nullity. A writ of execution sued out without obtaining leave for that purpose, after six years have elapsed from the time of signing the judgment, is not a nullity, though it may be set aside as irregular. Where a judge at chambers made an order to set aside a verdict, obtained under a writ of trial, on the ground of the insufficiency of the notice of trial, it was held that the order was not a nullity.

The limitations necessarily inherent in the application of Order 70 and similarly Ontario Rule 186, are described by Upjohn L.J. in In re Pritchard, decd. Pritchard v. Deacon and Others[2] at pp. 523-4 where it is said:

The authorities do establish one or two classes of nullity such as the following. There may be others, though for my part I would be reluctant to see much extension of the classes. (i) Proceedings which ought to have been served but have never come to the notice of the defendant at all. This, of course, does not include cases of substituted service, or service by filing in default, or cases where service has properly been dispended with: see, for example, Whitehead v. Whitehead (orse. Vasbar) [1962] 3 W.L.R. 884; [1962] 3 All E.R. 800, C.A. (ii) Proceedings which have never started at all owing to some fundamental defect in issuing the proceedings. (iii) Proceedings which appear to be duly issued but fail to comply with a statutory requirement: see, for example, Finnegan v. Cementation Co. Ltd. [1953] 1 Q.B. 688.

In my view the defect occasioned by the attempt on the part of the trust company to sue itself was a fundamental one resulting in the proceeding never having been started and this result flows from the following circumstances:

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(1) The inability of a personal representative to sue the estate which he is bound to administer is well illustrated by a consideration of the common law origins of the doctrine of retainer which was long accepted as affording the executor, in the administration of the estate, the right to retain the amount of liquidated debts owing to him by the estate because he was otherwise debarred from bringing an action against himself in his capacity as executor. In this regard the following paragraph from Williams and Mortimer on Executors, Administrators and Probate, at p. 703 is self-explanatory:

The real foundation of the right to retain is the inability of the personal representative to sue himself. In cases of deaths before 1926 a judgment creditor, where the estate was being administered out of court, had priority to specialty and simple contract creditors. A creditor by suing a personal representative might get priority by jugment obtained. But a personal representative being incapable of suing himself, could not obtain priority as a judgment creditor. It was in consequence of this hardship that the right of retainer arose.

In so far as I have been able to ascertain, none of the cases cited on behalf of the trust company is authority for the proposition that an executor is capable of suing himself for an unliquidated claim and more particularly I can find no authority to support the contention that an executor can bring an action against himself or itself for “fraudulent breaches of trust” on the part of the deceased whose estate he is representing.

(2) The final circumstance which is in my opinion fatal to the validity of the writ issued in this case is that it was issued before the trust company had removed itself from the position of executor and the writ accordingly constituted a manifestation of it having adopted a position in which its duty to the estate was in conflict with its own interests and was thus a breach of trust. It is an inflexible rule of trust that a trustee cannot place itself in a position where its duty and interest conflict, as is pointed out in Bray v. Ford[3].

[Page 939]

Like my brother Estey, whose reasons I have had the advantage of reading, I agree that after the appointment of the Public Trustee had been ordered by Mr. Justice Maloney there was no impediment to that functionary being sued by Guaranty Trust Company in a new action, subject to any limitation periods that may have run. It appears that the courts below have treated the case as if question four asked if a new action could be commenced after the writ was declared a nullity, and I propose to do the same. The Public Trustee claims that upon accepting probate, any claim Guarantee Trust had against the estate was extinguished, and to support this claim it points to the concepts underlying the doctrine of retainer. However, as is made clear in Kline v. Kline[4] at p. 170, an executor’s claim was only extinguished if it were for a liquidated amount and the executor possessed sufficient assets of the debtor to satisfy the debt. Duff J., speaking for this Court, agreed with that proposition in Ryan v. Charlesworth[5] at p. 432:

First, Mr. McCarthy’s principal contention was that the respondent’s claims against the estate of Peter Ryan were extinguished by operation of law upon the grant of letters of administration followed by the acquisition of assets by her as administratix. This, I think, is completely answered by the judgment of Lindley M.R., in In re Rhoades [1899] 2 Q.B., 347, at pp. 352, 353:

The older common law authorities go far to shew that if an executor was a creditor of his deceased testator and had assets in his hands sufficient to pay his debt (and all others of a higher degree, if any) such debt was treated as extinguished. Sufficient assets to pay his own debt and properly applicable thereto being in the executor’s hands, such assets were treated without more as applied by him to such payment. Blackstone says so distinctly. His words are (Bl. Com. by Kerr, 4th ed., vol. iii, p. 18): “So much as is sufficient to answer his own demand is, by operation of law, applied to that particular purpose.”

[Page 940]

Plowden goes further, and says that the property in the assets is changed: See Woodward v. Darcy (1 Plowd. 184, at p. 186). But this can only be true if the assets spoken of can be identified and appropriated to the debt which they have satisfied, and this presupposes the exercise of the right in fact; and in the case in Plowden it had been so exercised: See ibid., p. 184. [The learned judge then referred to the facts stated in the report of Woodward v. Darcy (1 Plowd. 184), and proceeded:—]

Until the executor does some act to shew which assets he retains, it is obvious that the property in them cannot be changed. This has been noticed before: See [1898] 1 Q.B. 286, and Wentworth’s Office of Executor, cited in the margin of 1 Plowden, p. 185a. But it was settled that an executor sued by a creditor could give a retainer by himself in satisfaction of his own debt in evidence under a general plea of plene administravit, and that he need not plead a retainer specially: 1 Wm. Saunders, 333, n.6. The extent to which the doctrine that his debt was extinguished was carried is further illustrated by the cases collected in Williams on Executors, vol. ii, p. 1180, which shew that an executor, having assets sufficient and properly applicable to pay a debt due to him from his testator, could not sue the testator’s heir nor any third person who might be liable with the testator for the debt in question.

There is nothing in this case to shew the existence of assets in the respondent’s hands “sufficient and properly applicable to pay” the judgments acquired by her, and, therefore, it is quite clear that, putting the doctrine in the form most favourable to Mr. McCarthy, it has no application here.

As well, the remedy provided by retainer and subsequent extinction of the claim, which only applied in the case of a liquidated debt, is certainly not applicable here. No authority has been cited which leads to claims being extinguished outside the operation of the doctrine of retainer.

It will be seen that I am of opinion that the writ issued by Guaranty Trust Company of Canada against the Guaranty Trust Company of Canada and Edward Thomas Berry as executors and trustees of the estate of James Wilson Berry deceased was a nullity although I take the view that the

[Page 941] same considerations do not apply to the action brought against Edward Thomas Berry in his personal capacity and that accordingly I would answer the questions posed in this case as follows:

1. Yes.

2. No.

3. No answer required.

4. Yes.

5. Yes.

For all these reasons I would allow this appeal with costs to Edward Thomas Berry and the Public Trustee; the costs of the Public Trustee on a solicitor-client basis.

The judgment of Dickson, Estey, Mclntyre and Chouinard JJ. was delivered by

ESTEY J.—The proceedings in this appeal originated by an application under Rule 124 of the Rules of Practice of the Supreme Court of Ontario. The respondent trust company (hereinafter referred to as the “trust company”) made application under the rule for the advice, opinion and direction of the Court on five questions arising under the pleadings. The essential portions of the agreed statement of facts are as follows:

1. James Wilson Berry appointed Guaranty Trust Company of Canada (“Guaranty Trust”) and Edward Thomas Berry as Executors and Trustees under his last Will and Testament dated October 2, 1969.

2. James Wilson Berry died on March 30, 1970.

3. Letters Probate were granted to the said Executors and Trustees on September 8, 1970.

4. Edward Thomas Berry is the principal beneficiary under the terms of the said Will.

5. Guaranty Trust as plaintiff caused this action to be commenced against Guaranty Trust Company of Canada and Edward Thomas Berry as Executors and Trustees of the estate of James Wilson Berry, Deceased, and Edward Thomas Berry, as defendants, on May 15, 1975.

Pleadings have been delivered and are complete.

[Page 942]

On April 13, 1977, Guaranty Trust moved this Court by way of originating notice for an Order permitting Guaranty Trust to retire as an Executor and Trustee of the estate of James Wilson Berry. On June 21, 1977, the Honourable Mr. Justice Maloney ordered the removal of both of Guaranty Trust and Edward Thomas Berry as Executors and Trustees of the said Estate, and appointed the Public Trustee to act in the place and stead of the said Executors and Trustees.

On July 7, 1977, Edward Thomas Berry appealed the said order to the Court of Appeal which appeal was dismissed on January 16, 1978.