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1915 Supreme(SC) 21
Privy Council
Sir Arthur Channell, Sir George Farwell , Parmoor, Lords Atkinson , Justice Viscount Haldane, JJ.
Eastern Trust Company -Appellant
Versus
MaKenzie Mann and Co., Ld. -Resopndent
Decided On : 27-04-1915
Huxtable, Blyth , Paines, T.T. Paine, H. Mellish , P.O. Lawrence, Geoffrey Lawrence, T.S. Rogers , Brown, Addison , Linklater, R.B. Finlay
The Crown is not immune from the law despite procedural barriers to being sued. Furthermore, an injunction in personam restraining a party from receiving funds is binding on that recipient, and receipt of such funds constitutes contempt, regardless of whether the payer is the Crown.
Headnote:(A) Contract Law - Construction of terms - Government subsidies - Where a contract provides that government subsidies may be used to satisfy claims for "labour and supplies," the determination of whether a payment falls within these terms is a question of construction and therefore a question of law for the courts, not a matter of absolute executive discretion.
(B) Constitutional Law - Crown immunity - The absence of a right to sue the Crown directly does not grant the Crown immunity from the law or authorize the Executive to interfere with private rights at will. The Executive is duty-bound to ascertain and obey the law.
(C) Equity - Injunctions - Injunction in personam - An injunction restraining a party from receiving money is binding on that party regardless of whether the payer is bound by the order. Receipt of funds in defiance of such an injunction constitutes contempt of court, even if the payer acted in ignorance or disregard of the order.
Facts of the case:
A contract for the sale of railway stock and bonds stipulated that a portion of the purchase price be paid from government subsidies. A proviso allowed the government to deduct payments for claims regarding labour and supplies. During a partnership dispute, a receiver was appointed and an injunction was issued restraining a specific party from receiving these funds. The government proceeded to distribute subsidies, including payments to the restrained party and for claims not related to labour and supplies.
Findings of Court:
The government's discretion to pay claims was limited by the construction of the contract. The recipient who accepted funds in breach of the court's injunction was guilty of contempt.
Issues: Whether the government's power to satisfy claims from subsidies was an absolute discretion; whether the Crown's procedural immunity from suit equated to immunity from the law; and whether an injunction against a recipient is enforceable when the payer is the Crown.
Ratio Decidendi: The court held that the construction of contractual terms is a matter of law. The Crown must abide by the law, and the lack of a petition of right does not permit the Executive to override judicial determinations. An injunction in personam operates to compel the forbidden party to refrain from the act, regardless of the other party's rights or status.
Result: Appeal allowed.
Legal Category Hierarchy
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practice and procedure
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equity
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injunctions
- injunctions in personam
- contempt of court
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injunctions
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equity
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administrative law
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crown immunity
- duty to obey law
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crown immunity
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contract law
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interpretation
- construction of provisos
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interpretation
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partnership law
- dissolution and accounting
Sir George Farwell :-
This is an appeal from a judgment of the Supreme Court of Canada (Duff, J., dissenting), which reversed the unanimous judgment of the Supreme Court of Nova Scotia, dated the 5th July 1913, varying the report dated 15th January 1912, of the referee appointed by the Court in this action. The action is a partnership action between James Irvine, since deceased, as plaintiff, and Robert G. Hervey and others as defendants, and a decree was made therein by Graham, J., on March 13th, 1905, whereby the partnership was dissolved and certain accounts and inquiries were directed to be taken by a referee appointed by the Court. The respondents, Mackenzie and Mann and Company, Limited, were made parties to the action under the following circumstances. In June 1902 the Harvey Trust and Guarantee Company, as agents for the partners Irvine and R.G. Hervey, controlled all the capital, stock, and bonds of the Nova Scotia Southern Railway Company, which had been formed by the partners, who were unable to complete its construction, and arrangements had been made whereby the railway was to be completed by the Halifax and South-Western Railway Company, and Government subsidies were to be paid to that company in respect of the Nova Scotia line, which would form part of the said Halifax and South-Western Railway when completed; and on the 13th June 1902 an agreement was entered into between the trust company, as agents for the two partners of the one part, and the respondents Mackenzie and Mann and Company, Limited (therein and hereinafter called the contractors), of the other part, whereby the partners agreed to sell and the contractors agreed to buy all the stock and bonds of the said Nova Scotia Railway Company for 275.000 dollars, of which 75,000 dollars were to be paid in fully paid capital stock of the said Halifax Company at par on an event which has happened and the balance 200,000 dollars as follows :- 5,000 dollars on execution and the balance, 195,000 dollars, from time to time to the extent of 50 per cent. of the amounts paid by Government on account of loans or subsidies in respect of the said Nova Scotia line as and when such amounts were paid until the whole 195,000 dollars were paid.
"Provided that if the 50 per cent. be not sufficient to pay the 195,000 dollars in full, the balance shall be paid when the said loans and subsidies have been all received by the said company."
There is a further proviso which will be dealt with more conveniently later.
The sum payable by the contractors would form part of the assets of the partnership of which the Court had undertaken the administration, and would be applicable primarily in discharging the debts of the firm, including their indebtedness to the Nova Scotia Company, and inasmuch as the contractors owned all the stock and shares of that company, the discharge of the company's debts would enure for their benefit by increasing the value of the company's assets, and consequently of its stock, shares and securities. The substantial question in the case is the amount payable under the contract by the contractors.
On 29th January 1904 a Receiver was appointed of such assets, and an injunction was granted restraining the defendants Hervey and the Hervey Trust Company from receiving from the contractors or the provincial treasurer of the Province all or any part of the 195,000 dollars.
When this appeal was opened before their Lordships it was treated as common ground that by September 27th, 1907, the total subsidy then paid by Government was 397,080,90 dollars :-
"One half of this 19,854,045 dollars is a sum sufficient to pay more than the amount called for under the contract of June 13th, 1902."
This subsidy was paid on mileage. The inquiry with regard to this matter is given in the order of 24th November 1908 : "What balance remains due and owing in respect of the consideration moneys payable under the said contract dated June 13th, 1902, to the parties entitled under the said agree
