Allen v. Hanson, In re The Scottish Canadian Asbestos Co.

A.

HANSON et al. )

(LIQUIDATORS) .....................

R

In re THE SCOTTISH

CANADIAN

ASBESTOS COMPANY (LIMITED)

ON APPEAL FROM THE COURT OF QUEEN'S BENCH FOR LOWER CANADA (APPEAL SIDE).

W. J. C.J.-[After stating the facts of the case his Lordship proceeded as follows

The following cases bear on the question raised in this case :

1 .

SUPREME COURT OF CANADA. [VOL. XVIII. n re Matheson Brothers, limited (1) The head note In re

Ritchie C. J

The court has jurisdiction under section 199 of the Companies Act, 1862, to wind up an unregistered joint stock company, formed and having its principal place of business in New Zealand, but having a branch office, agents, assets and liabilities in England.

The pendency of a foreign liquidation does not affect the jurisdiction of the court to make a winding-up order in respect of the company under such liquidation although the court will, as a matter of international comity, have regard to the order of the foreign court. It being alleged that proceedings to wind up the company were pending in New Zealand the court, in order to secure the English assets until proceedings should be taken by the New Zealand liquidators to make them available for the English creditors pari passn with those in New Zealand, sanctioned the acceptance of an undertaking by the solicitor for the English agent of the company that the English assets should remain in statu quo until the further order of the court. In re Commercial Bank of India [L. R. 6 Eq. 517.] approved. Kay J.-I think that the court has jurisdiction to make a windingup order upon a petition of this kind, otherwise there might be no means by which the English creditors could obtain payment of their debts (2).

And at page 230:

Had it not been then for the fact of a winding-up order existing in New Zealand this court would in my opinion have had jurisdiction to wind up this New Zealand company having an office and carrying on part of its business here as an unregistered company within the terms of the 199th section.

This being the case, what is the effect of the winding-up order which it is said has been made in New Zealand? This court, upon principles of international comity, would no doubt have great regard to that winding-up order and would be influenced thereby, but the question of jurisdiction is a different question and the mere existence of a winding-up order made by a foreign court does not take away the right of the courts of this country to make a winding-up order here, though it would, no doubt, exercise an influence upon this court in making the order.

Ibid.

There a joint stock company formed in India, registered under Indian law, and having its principal place of business in India, with an - ~Ritchie

C.J. agent and a branch office in England, was ordered to be wound up under the Act of 1862, and Lord Romilly said (1) "I think I have jurisdiction to make the order; if the company is not wound up here, these persons will not be able to get their money."

Now that case was decided in 1889, and no authority against it has been cited.

In re Commercial Bank of South Australia (2), a bank incorporated in Australia, carrying on business there, and having a branch oflice in London with English companies and assets in England, it was held the English court had jurisdiction to make a winding-up order which would be ancillary to a winding-up in Australia. In this case the learned judge said, " if I have control of the proceedings here, I will take care there shall be no conflict between the two courts."

I think there is jurisdiction to make this winding-up order, which would be ancillary to the winding-up in

Scotland for the purpose of getting in the Canadian assets and settling a list of the Canadian creditors, as in re Corsellis (3), the winding-up in England was ancillary to winding-up in Australia for the same purpose, and there need not be. and should not be any conflict between the two courts.

In the case of the Merchants Bank v. Gillespie (4),in the view I took of this case, I considered it quite unnecessary to discuss or decide the question as to the extent

(1) L. R. 6 Eq. 519.

of the power of the Dominion Parliament to pass laws for winding-up or otherwise dealing with foreign insolvent trading companies doing business in the Dominion, because I thought the then winding-up Act 45 Vic. ch. 23, was not intended to apply to a company incorporated under the Imperial Joint Stock Comicr pany's Acts, 1862-1867, and I was confirmed in that opinion by the action of the Dominion Parliament in passing the 1st section of the 47 Vic. ch. 39, which repealed the 1st section of 45 Vic. ch. 23, and substituted the 1st section of 47 Vic. in lieu thereof, the only alteration being the addition to the enumeration of the companies to which the 45 Vic. ch. 23 is to apply of the words, " which are doing business in Canada, no matter where incorporated," and " which are insolvent," covering it appeared to me a clear intimation that the 45 Vic. ch. 23, did not so apply. The question now raised in the present case is: Was such addition within the legislative power of the Dominion Parliament, in other words was such enactment ultra vires ? If parliament has legislated respecting strictly foreign corporations, and is not to be considered to be legislating respecting colonial corporations unless they are expressly named, (see in re Oriental Inland Steam pany surely it must be said that the Dominion Parliament can in its right to legislate in reference to bankruptcy and insolvency, legislate respecting insolvent companies doing business in Canada, and with reference to property of such companies within its jurisdiction.

Inasmuch then as the Dominion statute declares that the winding-up act now applies to all companies which are doing business in Canada and no matter where incorporated, there can be no doubt of the intention of Parliament to apply the winding-up act to foreign as well as domestic incorporated-companies, and as I think such an enactment is within the legislative power of the Dominion Parliament, and it being admitted that this com- . pany was carrying on its business, and held valuable lands in Canada, and was insolvent, and as the pro- TE visions of the English Companies Act, 1862, are held to apply to foreign companies carrying on business in England and are worked out as nearly as may be, or left not worked out as the exigencies of the case dealt RitchieC.J. with require ; and inasmuch as the greater part of the assets of this company would seem to be in Canada, there is the more reason why the property within the territorial limits of the jurisdiction of the courts of Canada should be dealt with under the provisions of the Canadian act ; in fact it is difficult to see how such property could be dealt with by the English liquidators ; and inasmuch as in this case it appears the liquidators under the English Act are acting in concert with the liquidators under the Canadian act, I can see no reason for supposing that any conflict can possibly arise whereby this stockholder can be in any way damnified;

on the contrary, it appears to me that this is the most satisfactory way by which the company can be wound up and its assets realized for the benefit of the company and all the parties interested.

All the winding-up act, as I understand it, seeks to do in the case of foreign corporations is to protect and regulate the property in Canada and protect the rights of creditors of such corporation upon their property in Canada. It by no means follows that because all the provisions of the act may not be applicable to foreign cases that those portions which are should not be acted on.

The fact that liquidation proceedings have already been taken in Scotland under the Imperial Act, and that the Scotch liquidator acquiesces in the present proceedings under the Canadian act, affords a tolerably good guarantee that there will be no conflict of authority in this case, but whether he acquiesced or not it would be the duty of the courts of both countries to see no conflict should arise.

J.-In the case of The Merchants Bank Halifax v. Gillespie (1) my judgment did not proceed J. upon the ground that the legislation there invoked was unconstitutional but I stated as a reason for not adopting the construction there contended for that such an interpretation would give to the statute an effect which would be ultra vires of the Parliament of Canada. That case raised the question of the validity of winding up proceedings under our statute as the sole and principal winding-up of a company registered under the English Act of 1862.

I adhere to what I there said as applicable to the principal and original winding-up of such a company to which case my opinion was intended to apply and alone did apply.

In the present case, however, the winding-up order has been granted upon the petition of the liquidator under a liquidation previously instituted under the act of 1862, in Scotland, and as ancillary to that principal winding-up. The effect of the winding-up here can therefore only be to entitle the liquidator appointed under it to realise the assets, and after paying creditors (not merely creditors within this jurisdiction, but all creditors) to remit the balance (if any) of the assets to the liquidator in Scotland to be applied and distributed as may there be directed by the proper forum.

In other words this winding-up is subsidiary to the same proceeding which had been previously instituted in the forum of the domicile of the corpora. tion. I am of opinion that an order thus limited as this is authorized by the statute, and that it is entirely within the powers of the Dominion Parliament to confer such a .jurisdiction.

The appeal must be dismissed.

re FOURNIER J.-La seule question soulev~e par le pr6sent appel est de savoir si les cr6anciers de la compagnie insolvable, r6sidant dans le pays, peuvent de concert avec le liquidateur nomm6 par la cour en Ecosse, soumettre la dite compagnie aux dispositions du Canadian Winding up Act, pour ce qui concerne les biens qu'elle posshde dans le pays.

L'appelant pr6tend que le parlement fed6ral n'a pas le pouvoir de passer un acte qui puisse s'appliquer A une compagnie incorporde en vertu des " actes imp6riaux " Winding up Acts of 1862, 67,-et qu'en cons6quence les jugements et procd6s qui out eu lieu A cet effet dans cette cause, sont nuls et sans effet.

invoque au soutien de sa prtention la d6cision de cette cour dans la cause The Merchants Bank flalifax v. Gillespie

La question d6cid6e en cette cause 6tait bien de savoir si une compagnie incorpor&e A 1'6tranger pouvait 6tre liquid6e en vertu de notre Winding up Act et la cour a jug6e que 1'acte 45 Vic. ch. 23 n'6tait pas applicable 6, une telle compagnie,-mais sans rien d60ider au sujet de la constitutionalit6 de 1'acte. C'est le motif donn6 par Sir W. J. Ritchie 0.3. qui s'est fond sur 1'acte 47 Vic., ch.39 amendant la ler sec. de la 45 Vic.

en y ajoutant dans l'enumbration des compagnies auxquelles cet acte doit s'appliquer celles parceque, dit-il, cet amendement a 6t0 pass6 apres le commencement des proc6dds, et que rien n'indique qu'il doit avoir un effet r6troactif.

tire delA la confirmation de son opinion que l'acte 45 Vic. ch. 23, n'6tait pas applicable aux proc6d~s soumis & la cour. Maintenant, si la question pouvait faire difficult6 avant l'amendement, cet amendement a-t-il 1'effet de In la trancher en d6clarant que cet acte s'appliquerait aux compagnies faisant des affaires en Canada quelque soit le lieu de leur incorporation?

Pour moi, qui ai sontenu dans la cause de Merchants Bank of Halifax v. Fournier J. Gillespie, que la 45e Vic. ch 23 devait s'appliquer aux compagnies insolvables faisant affaires dans le pays et y poss6dant des biens, il me semble que cet amendement a eu 1'effet de faire disparaitre toute difliculte au sujet de l'application de la loi, et que l'on ne doit pas h6siter A la d6clarer applicable aux compagnies &rang~res. Dans ce cas, il ne resterait A d6cider que l'unique question soulev6e par l'appelant au sujet de la constitutionalit6 de la loi.

La compagnie dont il s'agit a d'abord t6 mise en liquidation en Ecosse, et la demande faite pour la soumettre au Winding up Act du pays a 6t6 faite avec le consentement du liquidateur nomm6 par la cour en Ecosse, et les liquidateurs nomm6s ici l'ont t6 sur la demande des cr6anciers Canadiens et du liquidateur autoris6 en Ecosse.

L'intim6 pr6tend que les proc6dds adopt6s dans cette instance sont soutenus par les autorit~s et il invoque la cause de la Commercial Bank of South Australia, (1). Cit6 comme autorit6 par Lindley on Company Law, 1889, (2) comme suit:

Australia,-North Lindley est encore cit6 (1) pour 6tablir que les cours en Angleterre peuvent mettre en liquidation en vertu de l'acte imp6rial des compagnies coloniales on 6trangbres et qu'elles peuvent agir comme auxiliaires des cours coloniales pour les biens situ6s en Angleterre; pour quelle raison les cours canadiennes ne pourraient-elles pas en faire autant pour les cours anglaises en ce qui concerne les biens situbs en Canada, et surtout comme dans le cas actuel, lorsqu'elles en seraient requises par la cour charg6e de la liquidation ? Quoique les tribunaux soient ind6pendents les uns des autres, ils n'en sont cependant pas moins tenus de pr~ter le secours de leur autorit6 pour faire ex6cuter des lois qui ont pour but de ragler des intr~ts communs aux citoyens des deux pays.

Mais ind6pendamment de ce concours pour arriver a la liquidation, je crois que l'action de nos tribunaux seule peut suffir pour arriver A ce but. J'ai d&velopp6 cette opinion dans la cause du Merchants Bank

Halifax v. Gillespie et je ne crois pas devoir revenir ici sur ce point.

Quant A la question de savoir si le parlement f~dbral avait le droit de passer les Winding up Acts, cela me semble ne faire aucune difficult6.

La liquidation des soci6t6s et compagnies insolvables, tout comme les lois de faillites sont clairement du ressort du parlement f6ddral. Notre parlement A un pouvoir complet et absolu de 16gif6rer sur ce sujet et n'est nullement dans la d6pendance du parlement imperial. Dans les limites de sa jurisdiction son pouvoir est 6gal a celui du parlement imp6rial.

Cette question a 6t6 si souvent d~cid6e qu'il est inutile d'y revenir.

O'est un point r6gk.

L'aigument que 1'acte du parlement f6d6ral est contraire A l'acte imp&rial et partant nul, est tout-afait sans fondement. 11 n'y a aucun acte du parlement imperial d6fendant A notre parlement de l6gif6rer sur cette matire; au contraire, il en existe un, l'acte de HANSON.

l'Am6rique Britannique du Nord, qui lui en donne tout In

THE specialement ce pouvoir, cet la sec. 91, s.s. 21 de cet acte. SCOTTISH

Pour annuler un acte du parlement f6d6ral il ne CANADIAN

ASBESTOS suffirait pas qu'il fut contraire , la loi anglaise,-mais il faudrait qu'il fut contraire A une loi positive Fournier J. rendue obligatoire pour le Canada par disposition expresse, ou par une cons6quence n~cessaire de cette loi et encore cette nullit6 n'aurait lieu que pour les parties seulement de cette loi qui serait en contradiction directe A celui du parlement imp&rial.

Le juge WiJles dans la cause de Philips v. Eyre (1) s'exprime ainsi sur cette question :

It was further argued that the Act in question was contrary to the principles of English Law, and therefore void. This is a vague expression, and must mean either contrary to some positive law of England, or to some principle of natural justice, the violation of which would induce the Court to decline giving effect even to the law of a foreign Sovereign state. In the former point of view, it is clear that the iepugnancy to English law which avoids a colonial act means, epugnancy to an Imperial statute or order made by authority of such statute applicable to the Colony by express words or necessary intendment; and that, so far as such repugnancy extends, and no further, the Colonial act is void.

The 28 & 29 Vict. C. 63, S. 2, enacts that, any Colonial law which is, or shall be, in any respect repugnant to the provisions of any Act of Parliament extending to the Colony to which such law may relate, or repugnant to any order or regulation made under authority of such Act of Parliament, or having in the Colony the force and effect of such Act shall be read subject to such Act, order or regulation, and shall, to the extent of such repugnancy, but not otherwise, be and remain absolutely void and inoperative.

Pour faire disparaltre tout doute la section 3 du mgme acte d6clare que:- No Colonial law shall be, or be deemed to have been, void or inoperative on the ground of repugnancy to the law of England, unless the same shall be repugnant to the provisions of some such Act of Parliament, order or regulation as aforesaid.

(1) L. R. 6 Q.

Les actes imp6riaux concernant la liquidation des compagnies ne s'appliquent pas au Canada et il est de principe que le parlement imp6rial ne 16gif6re pas sur la propri6t6 sitube en dehors du Royaume-Uni. Ainsi cette 16gislation ne pent affecter la n6tre qui est parfaitement constitutionnelle et doit avoir son application autant qu'il est possible pour atteindre la liquidation demandee.

Appel renvoy..

J.-I can add nothing to the judgment of the learned Chief Justice of the Court of Queen's

Bench, Sir A. A. Dorion. I entertain no doubt as to the correctness of that judgment, and am of the opinion that the appeal should be dismissed with costs.

J.-The Scottish Canadian Asbestos Co. (limited), was incorporated on the 31st day of July, 1886, under the Imperial Companies' Acts, 1862 to 1886.

Its registered office is in Glasgow, but its chief place of business is in the Province of Quebec where it owns real and personal property and has carried on the business of quarrying and working for asbestos.

The company being insolvent an order was made in

November, 1888, by the Court of Session in Scotland, that the company be wound up under the provisions of the Companies' Act, and appointing a liquidator. The liquidator, by authority of the Court of Session, appointed the respondents, Hanson Brothers, for the purpose, amongst other things,

The application to the court for leave to appoint the attorneys set out, and the power of attorney recited, that the company had its principal assets in Canada, and that considerable sums of money were due by the company to creditors resident in Canada. Thereupon a petition, in which the Scotch liquidator joined, was J. presented to the Superior Court in the District of Arthabaska in Quebec, Mr. Justice Billy presiding. A winding-up order was made under the Canadian Statute, (R. S. C. ch. 129), and Messrs. Hanson Brothers were appointed liquidators.

The appellant, who is a large shareholder in the company, moved against that order, and also to dissolve a meeting of creditors called under the statute. That motion was dismissed by Mr. Justice Billy, and his judgment was affirmed on appeal by the Court of Queen's Bench. The present appeal is from that decision. The grounds of appeal are that the Canadian Winding-up act does not apply to this company, and that in so far as it professes to apply to the company it is ultra vires of the Parliament of Canada.

The first point is answered by the express language of the statute which declares, in section 3, that the act applies to incorporated trading companies doing business in Canada, wheresoever incorporated ; and (a) which are insolvent ; or (b) which are in liquidation or in process of being wound up, and on petition by any of their shareholders or creditors, assignees liquidators ask to be brought under the provisions of this act.

This declaration, which was introduced into the Winding-up act after the proceedings in The Merchants' Bank of Halifax v. Gillespie had been commenced, though before the judgment of the court was pronounced, alters the law from that which was held by a majority of the court to result from a correct inv' terpretation of the act as it formerly stood, so that we can hold that foreign corporations are within the operation of the act without conflicting with the judgment which declared that they were not within its operation at the earlier date.

The question of ultra vires is, however, still undecided in this court, because, although it was advanced in

The 11erchants' Bank of Halifax v. Gillespie, (1) and opinions upon it were expressed by two of the learned judges who denied the jurisdiction and by one who affirmed it, it was not pronounced upon by the court.

Two points are made against the existence of the legislative jurisdiction.

It is argued that it is conclusively negatived by the Imperial statute, 29 & 30 Vic.

ch. 63, which declares, in section 2, that any colonial law which is or shall be in any respect repugnant to the provisions of any act of Parliament extending to the colony to which such law may relate, or repugnant to any order or regulation made under the authority of suchAct of Parliament, or having in the colony the force and effect of such act, shall be read subject to such act, order or regulation, and shall to the extent of such repugnancy, but not otherwise, be and remain absolutely void and inoperative.

To sustain this objection two things are essential.

The Imperial Act of Parliament must extend to the Dominion, and the Dominion Winding-up Act must be repugnant to the Imperial Companies' Act.

I do not think the appellant has succeeded in maintaining either of these propositions. The first section of the statuteof 29-30 Vic. ch.63, whichisthe interpretation clause, declares that an act of parliament or any provision thereof shall, in construing that act, be said to extend to any colony when it is made applicable to such colony by the express words or necessary intend- .

ment of any act of parliament.

There are certainly no express words contained in the Companies' Act of 1862, or in any of the amending acts, extending their provisions to Canada, or to any the provinces comprised in the Dominion, and it is equally difficult to trace in their provisions an intend- Patterson J.ment that they shall so apply. On the contrary we find the provisions relating to practice and procedure in winding-up proceedings framed with exclusive reference to the British Islands.

A distinct instance of this is afforded by section 122 of the act of 1862, which provides for enforcing in any one of the three divisions of the United Kingdom orders made in the courts of any other division, but makes no allusion to enforcing such orders in any colony.

The Companies' Acts, therefore, do not extend to Canada.

Nor is there any repugnancy between their provisions and the power now questioned of making a winding-up order by a Canadian court in the matter of an English or Scotch company which does business in Canada, has a place of business here, owes debts here, and has assets here. To hold such an order repugnant to the English acts would be to question the cases, of which there is a consistent series, in which the English courts have made orders to wind up colonial companies, or, as in one case, have asserted the power while refusing, as an exercise of discretion, to make the order.

See In re Union Bank of Calcutta (1); in re Commercial Bank of India (2); in re Commercial Bank of South Australia ; in re Matheson Brothers (4) ; Westlake's Private International Law (5) ; Thring on Joint Stock and other companies Lindley on Company

Law

See also the judgment of my brother Fournier in Merchants' Bank of Halifax v. Gillespie which is for the most part applicable to this case, and in which I entirely concur.

It is true that our courts cannot exercise with regard to an English company the full extent of the powers conferred by our Winding-up Act. For example, they cannot, by the effect of a winding-up order, affect the J. operations of the company in England, causing it to cease to carry on its business there, as under section 15 the company must do in this country.

But the same difficulty was presented when the English courts were asked to make orders to wind up colonial companies, and was held not to affect the jurisdiction.

See particularly the observations of Mr. Justice Kay in re

.Matheson Brothers and of Mr. Justice North in re

Commercial Bank of South Australia

The fallacy in this particular may perhaps have been contributed to by an idea that an order called a Windingup order, made in pursuance of an act called a Winding-up Act, must be inoperative if, in its potential effect, it must stop short of winding up or dissolving the company.

The expression usually employed in our statute is "winding up the business of the company," though the phrase " the winding up of the company," is sometimes used, as e g. in section 42

The terms are convertible, and the former readily adapts itself to the operation of the order now in question, which is to wind up the business carried on by the company in Canada, though our courts may be as powerless as the English court, find themselves in dealing with colonial companies, to dissolve the corporation or to administer the assets that are beyond the territorial limits of their AON. jurisdiction.

Some extracts from the company's articles of associa- THE tion have been put in evidence, and an argument against the jurisdiction of the Canadian court has been based on section 125, which reads as follows

If the directors shall pass a resolution recommending the company Patterson J. to be dissolved, and a general meeting shall in pursuance of such recommendation resolve that the company be dissolved, and a second general meeting shall confirm that resolution, then the company shall henceforth subsist and carry on business for the purpose of winding-up its affairs, and its affairs shall be wound up and it shall be dissolved in accordance with and subject to the provisions of " The Companies' Acts, 1862 to 1883," which are and may be applicable in the voluntary winding-up of a company under the same, or the occurrence of an event in which it is provided that a company under the same may be wound up voluntarily.

One has only to read this to see that it cannot affect the present contest.

It is a contract among the members of the company, and deals only with a voluntary winding-up which may be brought about in a specified manner.

There is no pretence of dictating to the creditors of the company what remedies they may employ or what forum they must resort to to enforce their remedies.

On these grounds, and without thinking it necessary to discuss the recognition of the company by the issue of letters patent in the Province of Quebec, or the effect of the Scotch liquidator being a party to the proceedings here, I am of opinion that the judgment should be affirmed and the appeal dismissed with costs. Appeal dismissed with costs.