BURTON I thought that was a pure question of contract, and if I Judgment. could convince myself that this was a case of that nature, I should hold that the plaintiffs could not recover, but there is much to be said in favour of the view taken by the Divisional Court that this comes within the class of cases referred to by Lord Justice James in In re Empress Engineering Co., 16 Ch. D. 125, where he draws the distinction between a mere contract and cases of trust referring to Gregory v. Williams, 3 Mer. 582, in these terms: "There was there a transfer of property with a declaration of trust in favour of a third person, which was a totally different thing from a mere covenant to pay money to that person." How does this case differ in principle from Gregory v. Williams, 3 Mer. 582? If the transfer had gone on to say, and the company agree with Killey as trustee for and on behalf of the scheduled creditors of Killey to pay their several debts, there could be no question of the right of the plaintiff as one of those creditors to bring a suit. Is not that in substance what this deed says? The language of the deed is :-The property shall be taken subject to the deduction of all liabilities of J. H. Killey & Co., which are to be assumed by the co-partnership and charged against Killey." All these liabilities have been paid by the firm, with this sole exception. Very little will suffice to create the relationship of trustee and cestui que trust. See Tomlinson v. Gill, Amb. 330. I do not for a moment question that Killey had the entire control and right of disposal of this property, and he might have taken the notes of the partnership and disposed of them as he thought proper; he did not do so, but sold it subject to the payment of the scheduled creditors. It is difficult to see why he did not thereby constitute himself a trustee for them of so much of the purchase money as represented their debts; and if he had received payment of this particular debt why the money would not have been impressed with a trust in favour of the plaintiff and not liable to be taken for his general liabilities. Judgment. The case is complicated by reason of Killey being a member of the new partnership; but if he had transferred to a firm of which he was not a partner, and would then have occupied the position of trustee, this fact ought not to deprive the plaintiff of her rights; the complication would perhaps be an additional reason for the plaintiff suing alone. I am free to admit the case is by no means free from doubt, and if the decision in the Court below had been the other way, I should, in deference to my learned brothers' opinion, not dissent, but as I am not clear that the judgment of the Court below is wrong, I shall adopt the advice of a very eminent Judge, who, in speaking of the duty of an Appellate Court, declared that to doubt is to affirm. There is every reason in morals why these defendants, who have received the benefit of the property, should carry out their engagement. They have never paid for the stock transferred to them, and I am glad to feel that if the judgment can be sustained, no obstacle will exist in law to compelling what justice and good sense demand. I think the appeal should be dismissed. OSLER, J. A. :— I agree with the learned Chief Justice, for the reasons given by him in the judgment which has just been delivered, that no trust was created in favour of the plaintiff by the partnership deed, and that the case is not brought within the principle of Gregory v. Williams, 3 Mer. 582. The new firm were not contracting in the character of trustees for the creditors of Killey. That was not the object or intention of their agreement. What they had in view was their partnership arrangements, not the benefit of Killey's creditors. The circumstances are very similar to those in the case of Ex parte Williams, Buck, 13, and if the claim of the creditor in that case could have been maintained on the footing of a trust having been OSLER created by the partnership agreement, which would have Judgment. been quite sufficient for the purpose of admitting proof of the separate debt against the joint estate, it is singular that this should not have occurred to Lord Eldon instead of putting the petitioner, as he did, to prove an assent to the arrangement between the partners, and so to establish that the petitioner and other scheduled creditors had agreed to accept the partnership as their debtor instead of the original debtor. Gregory v. Williams, 3 Mer. 582, must be regarded as a case in which there was a trust attaching upon property, and it was so explained by the Court of Appeal in In re Empress Engineering Co., 16 Ch. D. 125, and in In re Flavell, 25 Ch. D. 89. So in Puge v. Cox, 10 Ha. 163, it was held that by the terms of the articles of partnership a trust had been created in favour of the widow in respect of the future share or interest in the partnership to which her husband might be entitled at his decease. I refer to Moorehouse v. Bostwick, 11 A. R. 76, and the observations of three of the members of this Court at pp. 78, 82, 84. If the plaintiff cannot recover on this ground, then, she is, I think, obliged to shew that there has been a novation. of the debt in order to recover upon the footing of a new agreement between herself and the firm. That involves the extinguishment of the old contract and the creation of a new one, the former being usually the consideration of the latter. The cases no doubt lay it down that very slight circumstances will prove this, and it would be easy to infer from the mere fact that a demand had been made upon the new firm, and that they had paid something on account of the debt, that a novation had taken place and that the separate creditor had consented to accept the liability of the firm in discharge of the separate liability, and that all parties had agreed to treat the debt as a joint one. An express declaration of intention would not be essential. The difficulty I am pressed with here is that the plaintiff's OSLER Judgment. conduct, and the frame of the present action, are inconsistent with such an intention. She treats the contract on the note as regards both maker and endorser as a continuing one, which, as I read the authorities, cannot be the case if she has accepted the new firm as her debtors, unless indeed there was some other consideration than the discharge of the former agreement for the creation of the new one, and we see nothing of that sort here. I rely upon Rolfe v. Flower, L. R. 1 P. C. 27; In re India and London Life Assurance Co., L, R. 7 Ch. 651; In re Whitmore, 3 DeG. & Sm. 565; Re The Commercial Bank Corporation of India and the East, 16 W. R. 958, at p. 960 per Wood,L. J.; Ex parte Lane, DeG. 300; Ex parte Freeman, Buck, 471; Ex parte Jackson, 1 Ves. Jr. 130; Lindley on Partnership, 5th ed., pp. 207, 208. I think the appeal should be allowed. MACLENNAN, J. A. :— This is an appeal from a judgment of the Divisional Court of the Queen's Bench Division, reported 14 O. R. 137, where the facts of the case are very fully set forth. The judgment is rested on the ground of trust, the learned Judge who delivered the judgment of the Court saying, (p. 150): "It may be that the plaintiff could not have maintained an action at law upon this deed, although for her benefit, because she was no party to it, but I think that this is an instance in which the plaintiff is entitled to treat Killey, who exacted the stipulation in this deed, as her trustee, and through him to enforce it," and the learned Judge cites in support of his conclusion Story's Equity, sec. 1250, and the case before Sir William Grant of Gregory v. Williams, 3 Mer. 582. On the argument before us, counsel supported the judgment on other grounds, but I shall first consider the ground on which it was rested in the Court below, namely, that of trust. For this purpose it is necessary to examine the instrument carefully to see what is its true scope and meaning, and to see whether there are to be found in it Judgment. those elements which the law recognises as a trust. The case then is, of two persons each carrying on separately the business of ironfounders and manufacturers of steam engines, boilers, and other machinery; each having a separate business establishment, with plant, machinery, tools, &c. These persons determine to unite their two businesses and to carry them on for a time as a single business in partnership, each bringing in as his contribution to the capital of the firm his stock in trade, plant, machinery, tools, &c. The partnership, however, is only intended to continue until a joint stock limited company can be formed for the purpose of taking over the business, and afterwards carrying it on as an incorporated manufacturing company. This is the purpose for which the agreement in question was formed, and by it Killey transfers to the firm, as his contribution to the capital, "all the assets, property and goodwill of his business, and all contracts and orders now on hand, or which may hereafter be received by him.” The deed further provides that "the property of Killey shall be taken by said copartnership at the valuation recently made and entered in the stock book and inventory of machinery and tools of J. H. Killey & Co., subject to the deduction of all liabilities of J. H. Killey & Co., which are to be assumed by the said copartnership and charged against Killey, and of any losses that may accrue, or expenses that may be incurred, in collecting or realizing the outstanding accounts or other debts." * * The deed goes on to provide that the parties shall be mutually interested in the business of the said copartnership in proportion to the amounts contributed by them respectively to the capital thereof. It seems there was a schedule to this deed in which were mentioned ten notes made by Killey to Muirhead on the 14th of November, 1881, including the eight now sued upon, and which were described as some of the liabilities of Killey referred to in the deed, and which were to be assumed by the partnership. MACLENNAN |