Crighton v. Roman / Roman v. Toronto General Trusts Corp. et al.

capital which is required, which it can only do if it is obtain- B.C.

ing a fair rate of return upon its rate base. The meaning of R Anm a fair return was defined by Lamont J. in Northwestern Co.

By a fair return is meant that the company will be allowed as large a return on the capital invested in its enterprise (which will be net to B.C.

the company) as it would receive if it were investing the same amount in other securities possessing an attractiveness, stability and certainty Martland J. equal to that of the company's enterprise.

The necessity for giving a public utility fair compensation for the service which it renders appears in the definition of the words "unjust" and "unreasonable" in s. 2(1), which is as follows:

"Unjust" and "unreasonable" as applied to rates shall be construed to include respectively injustice and unreasonableness, whether arising from the fact that rates are excessive as being more than a fair and reasonable charge for service of the nature and quality furnished by the public utility, or from the fact that rates are insufficient to yield fair compensation for the service rendered, or arising in any other manner: The word "service", which appears in this definition, is defined in the Act to include:

the use and accommodation afforded consumers or patrons, and any product or commodity furnished by a public utility; and also includes, unless the context otherwise requires, the plant, equipment, apparatus, appliances, property, and facilities employed by or in connection with any public utility in performing any service or in furnishing any product or commodity and devoted to the purposes in which the public utility is engaged and to the use and accommodation of the public:

These defined words appear in two sections of the Act which relate to the rates to be charged by a public utility. Section 8, which is among a group of sections dealing with the duties and restrictions imposed on public utilities, provides:

8. (1) No public utility shall make demand or receive any unjust, unreasonable, unduly discriminatory, or unduly preferential rate for any service furnished by it within the Province, or any rate otherwise in violation of law; and no public utility shall, as to rates or service, subject any person or locality, or any particular descripiton of traffic, to any undue prejudice or disadvantage, or extend to any person any form of agreement, or any rule or regulation, or any facility or privilege, except such as are regularly and uniformly extended to all persons under substantially similar circumstances and conditions in respect of service of the same description, and the Commission may by regulations declare what constitute substantially similar circumstances and conditions. ' [19291 S.C.R. 186 at 193, 2 D.L.R. 4.

(2) It shall be a question of fact, of which the Commission shall be the sole judge, whether any rate is unjust or unreasonable, or whether B. in any case there is undue discrimination, preference, prejudice, or disadvantage in respect of any rate or service, or whether service is offered or furnished under substantially similar circumstances and conditions. Co. 8; 46, s. 5.

'Section 20, which empowers the Commission to determine rates, reads as follows:

B.C. 20. The Commission may upon its own motion or upon complaint that the existing rates in effect and collected or any rates charged or Martland J. attempted to be charged by any public utility for any service are unjust, unreasonable, insufficient, or discriminatory, or im anywise in violation of law, after a hearing, determine the just, reasonable, and sufficient rates to be thereafter observed and in force, and shall fix the same by order. The public utility affected shall thereupon amend its schedules in conformity with the order and file amended schedules with the Commission. It will be noted that this section, in addition to the use of the words "unjust" and "unreasonable", also uses the terms "insufficient" and "sufficient" in relation to rates. Both of these sections contemplate a system of rates which would be fair to the consumer on the one hand and which will yield fair compensation to the public utility on the other hand.

I Section 16, the section with which we are concerned in this appeal, also deals with this matter of fairness of rates. In addition, it spells out the method by which a public utility is to obtain fair compensation for its service; i.e., by a fair and reasonable return upon its rate base, which rate base, pursuant to s. 45, the Commission can determine by appraisal.

Section 16 deals 'with the duties of the Commission in fixing rates. Clause (a) of subs. (1) states that the Commission shall consider all matters which it deems proper as affecting the rate. It confers on the Commission a discretion to determine the matters which it deems proper for consideration and it requires the Commission to consider such matters.

Clause (b) of subs. (1) does not use the word "consider", which is used in clause (a), but directs that the Commission "shall have due regard", among other things, to two specific matters. These are:

S.C.R.

(ii) To giving to the publio utility a fair and reasonable return upon the appraised value of its property used or prudently and reasonably acquired to enable the public utility to furnish the service.

As I read them, the combined effect of the two clauses is that the Commission, when dealing with a rate case, has a.

unlimited discretion as to the matters which it may con- Martland J. sider as affecting the rate, but that it must, when actually setting the rate, meet the two requirements specifically mentioned in clause (b). It would appear, reading ss. 8, 16 and 20 together, that the Act contemplates these two matters to be of primary importance in the fixing of rates. In my opinion, therefore, these two factors should be given priority over any other matters which the Commission may consider under clause (a), or any other things to which it shall have due regard under clause (b), when it is fixing any rate.

The second portion of question (1) (a) was as to whether, in case of conflict among the matters and things referred to in clauses (a) and (b) of s. 16(1), it was the Commission's duty to act to the best of its discretion. I have already expressed my view regarding the priority as between those things specifically mentioned in clause (b) and the other matters or things referred to in clauses (a) and (b). This leaves the question as to possible conflict as between the two matters specifically mentioned in clause (b).

Clearly, as between these two matters there is no priority directed by the Act, but there is a duty imposed upon the Commission to have due regard to both of them. The rate to be imposed shall be neither excessive for the service nor insufficient to provide a fair return on the rate base. There must be a balancing of interests. In my view, however, if a public utility is providing an adequate and efficient service (as it is required to do by s. 5 of the Act), without incurring unnecessary, unreasonable or excessive costs in so doing, I cannot see how a schedule of rates, which, overall, yields less revenue than would be required to provide that rate of return on its rate base which the Commission has determined to be fair and reasonable, can be considered, overall, as being excessive. It may be that within the schedule certain rates may operate unfairly, relatively, as between different classes of service or different classes of consumers. If so, the Commission has the duty to prevent such discrimination. But this can be accomplished by adjustments of the relative impact of the various rates in the schedule without having to reduce the total revenues which the whole schedule of rates is designed to produce. Accordingly, it is my opinion that the answer to question (1)(a) should be "No". My answer to question (1)(b) Marlnd would be that the Commission, in priority to any other matters which it may deem proper to consider under clause (a) and any of the other things referred to in clause (b) of s. 16(1), should have due regard to the two matters specifically mentioned in clause (b). In the present case, having decided that certain of the rates proposed by the appellant would impose an unreasonable burden upon certain classes of consumers, the Commission should permit the Company to submit alternative schedules of rates, which, while yielding approximately the same overall revenues, would eliminate the comparatively excessive impact of those classes of rates to which the Commission objected, until a rate schedule is devised which meets the requirements of clause (b) of s. 16(1).

In my view the appeal should be allowed, but no costs should be payable.

.

Solicitors for The Public Utilities Commission of British Columbia, respondent: Clark, Wilson, Clark, White & Maguire, Vancouver.

Solicitors for The Corporation of The City of Victoria, The Corporation of The District of Oak Bay, The Corporation of The District of Saanich and Corporation of The Township of Esquimalt, respondents: Straith, O'Grady, Buchan, Smith & Whitley, Victoria.

Solicitor for City of Vancouver, respondent: R. K. Baker, Vancouver.

JOHN D. CRIGHTON (Plaintiff) .......... APPELLANT; *Mar.

24,25

AND

Oct. 4

STEPHEN

BOLESLAV

(Defendant) ...................

R

STEPHEN

BOLESLAV

(Defendant) .....................

AND

THE TORONTO

GENERAL TRUSTS

CORPORA- TION, AS EXECUTORS OF THE ESTATE OF WILLIAM RAEY FEATHERSTONE, DECEASED, (Plaintiff)

........................

RESPONDENT. ON APPEAL FROM THE APPEAL Trusts and Trustees-Mining claims-Sale of partnership asset-Failure to account for partial consideration by managing partner-Validity of release of beneficial interest.

R purchased certain mining claims. C, who accepted an offer to join in the purchase, claimed that it was agreed that R should have a 50 per cent interest and that C and an associate F should each have a 25 per cent interest.

Title was taken in the name of a trustee P, who later, upon instructions from R, sold the claims to North Denison Mines Limited for a price which was eventually set at $15,000 plus 100,000 fully paid shares of North Denison.

P, upon further instructions from R, and upon receiving a release from C, transferred the North Denison shares to another company which was controlled by R. In consideration of C signing the release, R waived payment of some money owed to him by C. The proceeds of these shares came into the hands of R in the form of 100,000 shares of New Denison Mines Limited, all of which were free from the terms of an escrow agreement to which 90,000 of the North Denison shares had been subject. The "free" shares were later exchanged for shares of Consolidated Denison Mines Limited.

The $15,000 was duly accounted for; one-half being paid to R and his nominee and one-half to C, who gave his own cheque to F for one-half the amount received by him. However, R did not account to F or his estate for any part of the shares.

In an action taken by the plaintiff trust company, on behalf of F's estate, and C, judgment was given for the trust company against R. C was unsuccessful. The Court of Appeal dismissed appeals by R and C and a cross-appeal by the trust company. R and Cappealed to this Court. Kerwin C.J. and Taschereau, Cartwright, Martland and Ritchie JJ.

Held (Kerwin C.J. dissenting as to C's appeal): R's appeal should be dismissed. C's appeal should be allowed.

Per Kerwin C.J. and Taschereau, Cartwright, Martland and Ritchie JJ.: The partnership asset or that which it had become through R's dealings was vested in R as trustee and he must account for it. Before he dealt RomsA with the shares in a manner inconsistent with the duties attaching to TO his fiduciary position he had knowledge of F's beneficial ownership. Per Taschereau, Cartwright, Martland and Ritchie JJ.: R stood in a fiduciary relationship to C as well as to F, and when he received the shares which he placed in P's name he was a constructive trustee of those shares to the extent of C's beneficial interest therein.

R did not obtain a valid release or transfer of C's beneficial interest. He was in the position of a trustee purchasing from his cestui que trust the latter's beneficial interest in the trust property. In failing to make full disclosure to C of all the material circumstances he failed to satisfy the onus, which lay upon him, of supporting the transaction. Williams v. Scott, [19001 A.C. 499, Brickenden v. London Loan and Savings Co., [19341 3 D.L.R. 465, referred to.

C was entitled to the same relief as that awarded by the courts below to F's estate, subject only to R's entitlement to the amount of which he waived payment in consideration of C signing the release.

Per Kerwin CJ. dissenting: C owed money to R and his release under seal to P, acting for R, cannot be set aside.

APPEALS from a judgment of the Court of Appeal for Ontario, affirming a judgment of Judson J. Appeal of John D. Crighton allowed, Kerwin C.J. dissenting. Appeal of Stephen Boleslav Roman dismissed.

THE CHIEF JUSTICE (dissenting as to Crighton's appeal): I have had the advantage of reading the reasons for judgment of Cartwright J. I agree that Roman's appeal fails and should be dismissed with costs. However, I am unable to concur that Crighton's appeal should succeed as I find it impossible to dissent from the views of the trial judge and the Court of Appeal that Crighton owed money to Roman and that the release under seal by Crighton to Peacock, acting for Roman, cannot be set aside. I would, therefore, dismiss Crighton's appeal with costs.

83923-3-31

J.:-These two appeals arise out of an action brought by The Toronto General Trusts Corporation as Executor of the estate of William Raey Featherstone, hereinafter referred to as "Featherstone", and John D. sa

Crighton, hereinafter referred to as "Crighton", as plaintiffs, against Stephen Boleslav Roman, hereinafter referred to as "Roman", and four other individuals as defendants. The plaintiffs asked for numerous items of relief but we are now concerned only with the first two of these which are as follows:

The action was tried before Judson J. and judgment was given in favour of the plaintiff trust company against Roman, the terms of the formal judgment being as follows:

The claims of the Trust Company against all the defendants other than Roman were dismissed.

The claims of Crighton against all the defendants were dismissed.

Roman appealed to the Court of Appeal for Ontario, asking that the claim of the plaintiff trust company be dismissed or, in the alternative, that the judgment be varied by awarding the said plaintiff damages in a sum not exceeding $2,500.

The trust company cross-appealed and Crighton appealed, asking that Roman be ordered to deliver to each of them the equivalent of 50,000 shares of North Denison Mines Limited. We are not now concerned with this increased claim. . Roman's appeal, Crighton's appeal, and the cross-appeal of the trust company were dismissed.

Roman appeals to this Court against the judgment in favour of the plaintiff trust company asking for the same relief as that for which he asked in the Court of Appeal. Crighton appeals to this Court asking for judgment directing Roman to transfer to him 25,000 fully paid shares of the capital stock of North Denison Mines Limited or the equivalent thereof being 7,143 fully paid shares of Consolidated Denison Mines Limited.

Much of the voluminous evidence introduced at the trial relates to claims with which we are no longer concerned. Some of the facts relevant to the questions which we have to decide are undisputed but as to several there is conflict between the evidence of Crighton and that of Early in the year 1953, Crighton and Featherstone had embarked on a venture described as "the Glencair Deal". They invited Roman to participate in this. He did so and in the course of a few weeks the matter was brought to a successful conclusion resulting in the distribution of a profit of some $300,000.

At or shortly after the date of the completion of "the Glencair Deal" Roman purchased from a prospector, named McCarthy, five unpatented mining claims in Northern Saskatchewan, known as the Skibbereen claims; the price was $10,000 in cash plus, at the option of the vendor, a further $10,000, or 25,000 fully paid shares of the capital stock of a company to be designated by Roman.

There is a conflict of evidence as to what happened at this point. Roman says that he talked to Crighton about the matter, that "to the best of his recollection" no one else was present, that he told Crighton about his deal with McCarthy and asked him whether he wanted any part of it and that Crighton agreed to take a 50% interest. Crighton, on the other hand, says that Featherstone also was present and that it was agreed that Roman should have a 50o interest and that Featherstone and Crighton should each have a 25% interest. It is common ground that Roman gave his cheque for $5,000 to the Royal Bank, which was to hold the $10,000 until the necessary documents were delivered, that Crighton gave two cheques drawn on his own account, each for $2,500, and that Featherstone in turn gave his cheque to Crighton for $2,500.

Title to the five claims was taken in the name of E. R. Peacock, a solicitor, who executed a declaration of trust stating that he held them in trust for Roman. It is clear that throughout its existence Roman was the manager or person in control of the venture. Roman, in cross-examination testified as follows:

On June 30, 1953, Peacock, on the instructions of Roman, entered into an agreement with North Denison Mines Limited, whereby that company purchased the five Skibbereen claims for $25,000 and the allotment of 100,000 fully paid shares of its capital stock of which 90,000 were to be deposited in escrow with a trust company. The cash consideration was to be paid $15,000 upon the recording of the transfers of the claims and the balance of $10,000 in 90 days. The $15,000 was paid and certificates for the shares were issued in the name of Peacock. The share certificates were numbered 5756 and 5757.

In July word was received from a geologist in the field that the Skibbereen claims were of a less area than had been represented. In consequence of this an action was commenced against McCarthy. This was settled by McCarthy agreeing to accept the $10,000 he had already received as payment in full for the claims and in turn the price payable by North Denison Mines Limited was reduced from $25,000 to $15,000 plus the 100,000 fully paid shares.

On September 22, 1953, Peacock, on instructions from Roman, distributed the $15,000 received from North Denison Mines Limited. One-half was paid to Roman and his nominee and one-half to Crighton. Crighton immediately gave his own cheque to Featherstone for one-half of the amount received by him. Featherstone died a few days later on September 29, 1953.

Peacock still held the 100,000 shares of North Denison Mines Limited. In November 1953 he received instructions from Roman to transfer them to a company, New Concord Development Corporation Limited, which was then controlled by Roman. Peacock, who had heard that Crighton had an interest in the 100,000 shares but had not heard of the interest of Featherstone, said he would require a release from Crighton before making the transfer. Peacock prepared a release which was later returned to him signed by Crighton and which is dated November 23, 1953. There is a conflict in the evidence as to where and under what circumstances this document was signed by Crighton. It reads as follows: Following receipt of this release Peacock transferred the 100,000 shares to New Concord. I do not find it necessary to trace the course of the dealings between Roman and New Concord in regard to these shares for I agree with the finding, made expressly or implicitly by all of the learned judges in the courts below, that their proceeds came into the hands of Roman in the form of 100,000 fully paid shares of New Denison Mines Limited all of which were free from the terms of the escrow agreement to which 90,000 of those held in the name of Peacock had been subject.

These 100,000 "free" shares were later exchanged for fully paid shares of Consolidated Denison Mines Limited on the 'basis of one share of the stock of that company for every three and a half shares of the stock of New Denison Mines Limited.

The end result of Roman's dealings with the Skibbereen claims, the asset of the joint venture of which he was the manager, was that he had received $15,000 and the 100,000 shares now represented by 28,571 fully paid shares of Consolidated Denison Mines Limited. He duly accounted for the $15,000 but at no time did he account to Featherstone or his estate for any part of the shares which at the date of the trial remained in his hands.

Dealing first with Roman's appeal against the judgment C'* in favour of Featherstone's executor, I do not find it necessary to reach a final conclusion as to whether, as Crighton says, Featherstone's interest was agreed upon by Roman at the inception of the venture on March 19, 1953, when the cheques totalling $10,000 were handed to the Royal Bank, although on a consideration of all the evidence bearing on the question I think it probable that Crighton's version is the correct one, for it is clear that before he dealt with the 100,000 shares in a manner inconsistent with the duties attaching to his fiduciary position Roman had knowledge of Featherstone's beneficial ownership.

The situation as between Roman and Featherstone's estate is accurately and succinctly stated in the following passage in the reasons of Aylesworth J.A.:

I would dismiss Roman's appeal.

Turning now to Crighton's appeal, it is obvious that Roman stood in a fiduciary relationship to Crighton as well as to Featherstone and that when Roman received the 100,000 shares which he placed in Peacock's name he was a constructive trustee of those shares to the extent of Crighton's beneficial interest therein.

The reason that the courts below, while upholding the claim of Featherstone's estate, have rejected that of Crighton is that they reached the conclusion that Crighton had released or transferred his beneficial interest to Roman for good consideration. The ascertainment of the facts as to the dealings between Roman and Crighton which involved the execution by Crighton of the release of November 23, 1953, hereinafter referred to as "the release" and the determination of the effect of those dealings and of that document appear to me to be the most difficult matters arising in these appeals.

GEN. TRUTS In the statement of claim no reference is made to the CR release but in paragraph 14 there is the following sentence: Cartwright J. Neither the Plaintiff Crighton nor the Plaintiff Executor ever received any consideration or payment for his or its interests in all or any of the said shares, nor did they ever consent to the sale or disposition of their beneficial title or interests therein, and they hold the Defendants responsible for return to each of them of 25,000 shares of North Denison.

Paragraph 8 of Roman's statement of defence reads as follows:

Owing to illness, the Defendant, Roman, was unable to complete the purchase of the control of Denison pursuant to the agreement with Richmond as planned and in or about the month of June, 1953, he arranged for the sale to New Concord Development Corporation Limited (hereinafter referred to as "New Concord") of 744,900 shares of Denison, in part free and in part escrowed, and including in such sale the 100,000 shares of Denison covered by certificates Numbers 5756 and 5757 hereinbefore mentioned as well as the shares being purchased from Richmond. The Plaintiff, Crighton, orally informed the said Roman that he was no longer interested in the transaction and therefore acquiesced in such sale and under his hand and seal executed and delivered a release to Evan R. Peacock, the Defendant Roman's Trustee, of all his interest in and to the said 100,000 shares covered by certificates Numbers 5756 and 5757. In due course the transaction with New Concord was completed and part of the consideration due from New Concord was paid dircetly to the said Richmond and/or his nominees.

It will be observed that nowhere in the statement of defence is there any allegation that Crighton received any consideration for executing the release.

No reply was delivered.

Crighton's evidence in chief as to the signing of the release may be summarized as follows. Roman told him that he had to transfer the 100,000 shares held by Peacock to New Concord as a step in clearing up an indebtedness to one Richmond, that he required Crighton to sign "a waiver or permission", that Roman wrote out a "slip" in longhand and Crighton signed it, that later Roman told him he required a more formal document, and he signed the release. The slip in longhand was not produced. In cross-examination Crighton agreed with the suggestion of Roman's counsel S.C.R.

that he understood the release was required for Peacock's protection and stated that his understanding with Roman was that "sometime later if we got a suitable property we would be able to take North Denison out of New Concord". He agreed with counsel that the alleged understanding was "nebulous".

n

Roman's evidence on the point commences at the time of the dispute with McCarthy. Roman says he wanted "to reverse the deal", that is to sue McCarthy for return of the $10,000 and to return the $15,000 and 100,000 shares to North Denison Mines Limited, that Crighton wanted the deal with North Denison Mines Limited carried through, that Crighton wanted his share of the money and "made a suggestion" that he was not interested in the 100,000 shares that all he wanted was his share of the cash. Roman's evidence as to this conversation, even if accepted, falls short of establishing any agreement by Crighton to transfer his beneficial interest in the shares to Roman or any consideration for such an agreement.

Peacock's evidence, which was accepted by the learned trial judge, makes it clear that it was Peacock and not Roman who initiated the request that Crighton sign the release. Roman's account of the signing is that he took the position with Crighton that the latter had agreed to give up his interest in the shares at the time of the discussion about "reversing the deal" and that having made an agreement he ought to stick to it, that Crighton said "Yes, I agreed but I think I should get something for it", that Crighton went on to suggest that Roman should cancel Crighton's indebtedness to him and in return for this he would sign the release. Crighton denies this and expressly denies that he owed Roman any money. According to Roman's evidence it was at this meeting that Crighton telephoned the trust company to see if it would release Featherstone's interest and in the course of the telephone conversation Crighton said to the officer of the trust company to whom he was speaking: "Well, it isn't worth very much anyway . . It's escrowed stock most of it."

Roman's evidence as to Crighton's alleged indebtedness to him is not satisfactory. I have already pointed out that it was not mentioned in the pleadings. Roman says that on