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Tous les autres exemplaires originaux sont filmto en commenpant par la premiAre page qui comporte une empreinte d'impression ou d'illustration et en terminant par la dernlAre page qui comporte une telle empreinte. Un des symboles suivants apparaitra sur la dernlAre image de cheque microfiche, seion Ie cas: Ie symboie — ► signifie "A SUIVRE", Ie symbols V signifie "FIN". Les cartes, planches, tableaux, etc., peuvent dtre filmAs d des taux de reduction diffArents. Lorsque Ie document est trop grand pour dtre reproduit en un seul clichA. ii est fiim6 d partir de Tangle supArieur gauche, de gauche d droite, et de haut en bas, en prenant Ie nombre d'images nAcessaire. Les diagrammes suivants illustrent la mAthode. 1 2 3 1 2 3 4 5 6 E No M %• ..0^ Banks and Banking. THE BANK ACT, CANADA: WITH Notes, Authorities and Decisions, and The law Relating to Warehouse Receipts, Bills of Lading, Etc. ALSO THE SAVINGS DANK ACT, THE WISDINO VP ACT, AND EXTRACTS FROM THE CHIMIN AL CODE, 1892. BY J. J. MACLAREN, Q.C., D.C.L., L.L.D. Member of the Bar of Ontario and of Quehcc ; Solicitor to the Molsans Dank at Toronto; Autltor oj '* Bills, Notes and Cheques," Etc., Etc, WITH AN INTRODUCTION ON BANKING IN CANADA. B. E. WALKER, Esq., General Manager of the Canadian Bank of Commerce. TOKONTO : The CARSWELL Co. Ltd., LAW PUBLISHERS, Etc. 1896. w.sfe Entered according to Act of the Parliament of Canada, in the year one thousand oight hundred and ninety-six, by The CABSWBi>ii Co. (Limited), in tb« ofUce of tlie Minister of Agriculture. PRIMTBD BT The OARR'WKriij Co. Ltd. 23, «> Adelaide St. R. Toronto. PREFACE. OUR Canadian Statutes on general subjects are largely a reproduction of legislation previously enacted elsewhere, generally in Great Britain. The Bank Act is however an exception to this rule. Our financial condi- tions are very different from those of the mother country, and our whole banking policy has been widely divergent from that of the United States. It is more than seventy years since charters were granted to banks in each of the old provinces tliat an* now known as Ontario, Quebec, Nova Scotia and New Brunswick, and which comprised the whole Dominion as it was formed in 1867, and with a single exception these are all in successful operation to-day. The organ- ization of other banks, and the periodical renewal of all bank charters, as well as the discussions incident to the frequent amendment and revision of our general banking laws, have in the course of time evolved a system that appears to be admirably adapted to the circumstances of a young and growing country like Canada. On this account many of the rules and principles laid down in the general works on banking by writers in Great Britain and the United States are inapplicable here, and they are apt to prove misleading. The same is also true to a certain extent of the decisions of the Courts in these and other countries. In the selection of cases as authorities and illustra- tions the writer has sought to include all those in our Canadian reports which appear to embody or settle a principle, and which have not been overridden by subse- quent legislation, or overruled by later decisions. iv PREFACE. The leading cases in tlie higher Courts in England and in the United States, which seem to be in harmony with our law, have also been given. Of the cases cited three hundred and fifty are Canadian, and the references to Canadian Statutes number nearly throe hundred. The addition of the Savings Bank Act and the Winding-up Act, together with the Amending Acts and notes of decisions thereon, will, it is hoped, be found ta be of value and interest. The sections from the Criminal Code are those that are most likely to be referred to in connection with bank- ing operations. The Introduction, on ** Banking in Canada," by Mr. Walker will be found to be a very interesting and valu- able contribution from one who is an acknowledged authority on the subject. J. J. M. Toronto, April, 1896. CONTENTS. PAOK. <3a8R8 Cited xiii Addenda et Cobrioenda xxvi Statutes Cited xxvii AbRRB VIATI0N8 XXix iNTRODncTioN— Banking in Canada xxxi THE BANK ACT. SECTION. 1. Short Title—" The Bank Act." 1 2. Interpretation — Terms used in the Act 5 8. Application of the Act 9 4. Charters continued to 1901 10 5. Sections applicable to La Banque da Peuple II a. Bank of B. N. A. and Bank of B. C 12 7. Head Officesot Bank B. N. A. and B. C 12 8. Merchants' Bank of P. E. 1 13 Incorporation and Oroanization of Banks. 9. Future Acts of incorporation 13 10. Capital stock and shares 14 11. Provisional directors 14 12. Opening of stock books 14 13. Firnt meeting of subscribers 15 14. Banks commencing business 17 15. Certificate of Treasury Board 18 16. Certificate to issue within a year 18 17. Issue of certificate, return of deposit 18 Internal RBoniiATioNS. 18. Shareholders may make by-laws 19 Annual meeting 20 Proxies — directors 21 Guarantee and pension funds 22 i VI CONTENTS. ■RCTION. PAO«. 19. Board of direotors aft Qualification of direotors 2(} Election of " 27 Vacancies on the board 29' 20. Failure to elect directors SO 21. President — his voting; 80 22. Directors may make by-laws 81 23. Directors nnay appoint officers 82 Duties and powers of officers 83 Officers to furnish bonds 87 24. Special meetings of shareholders 41 Removal of president or directors 43- 26. Votes of shareholders 43- Capital Stock. 26. Increase of capital stock 45 27. Allotment of new stock 46- 28. Reduction of capital stock 47 Shares and Calls. 29. Shares and their transfer— Subscription books 48 80. Payment of shares — Cancellation 60- Double liability— Interest on calls 51 31. Calls— Interval— Notice 51 32. Racovery of calls — Forfeiture 54 33. Sale and transfer of forfeited shares 64 34. Recovery of calls by suit 56 Transfer and Transmission of Shares. 35. Conditions of transfer of shares 56 36. List of daily transfers 59' 37. Transferrer to be registered owner 50 Shares to be numbered ..rr. r. 60 3d. Sale of shares under execution 60- 39. Transmission otherwise than by transfer Gl 40. Transmission by marriage 62 41. Transmission by decease 68 42. Declaration of transmission — Probate ■ ■ 64 43. Shares held in trust 66 44. Executors and trustees holding shares 67 Annual Statement and Inspection. 45. Annual statement, and its contents 68- 46. Inspection of bank by directors 70 CONTINTa Vll DiTIDINDS. MOTION. PAOI. 47. Quarterly or half-yearly dividends 70 48. Not to impair oapital 71 49. Dividends depend upon rest 73 Rehbrvis. 50. Part in Dominion notes 73 Note Issdi. fil. Notes, Ave dollars and multiples 78 AftKregate amount of issue allowed 74 53. Pledging of notes prohibited 7ff Penalties for pled(ration 101 KciiKDCi.K C. — Form of security under sec. 74 101 SciiKDOLR D.—Fonn of return to government 102 CHEQUES ON A BANK. Bills or Exchanor Act, Paht III 197 72. Definition of a Cheque 108 What provisions as to bills are applicable 200 Illustrations as to law of cheques 201 73. Effect of non-presentation in a reasonable time 205 What is a reasonable time 20t) 74. How authority to pay cheques is terminated 208 Crosskd Chequer. 76. General and special crossing defined 211 76. Varying crossing, reorossing and uncrossing 212 77. Crossing, a material part of cheque 218 78. Duties of bank as to crossed cheques 213 Liability for improper payment 214 70. Protection to bank and drawer 214 80. Effect of crossing on holder 215 81. Protection to collecting bank 216 SAVINGS BANK ACT. Introductory remarli 217 1. Interpretation—" The bank " 218 2. Charters continued to 1901 218 CONTENTS. Internal BEauLiTiOMS. SRCTION. PAOE- 3. Public notice of anneal meeting 218 4. Qualification and election of directors 218 Voting by shareholders— Proxies 218 5. Failure to elect directors at annual meeting 219 Calls. 6. Calls on stock— Intervals— Amount 219 7. Recovery of calls by action — Proof 219 Liability of Shareholders. 8. Double liability— Calls and enforcement 220 9. Liability after transfer for two months 221 Dividends. 10. Dividends and notice thereof 221 Transfer of Shares and Deposits. 11. Transfer of shares — Joint holders 221 12. Transmission otherwise than by transfer 221 Declaration of transmission — Contents 222 13. Transmission by marriage or death 222 Deposits and Loans. 11. Bank may receive deposits ani pay interest 22 :i 15. Depositor to give name and address 223 IG. Deposits by minors, married women, etc 223 17. Certain payments in good faith valid 221 18. Dominion securities and bank deposits 22 1 19. Investment of deposits 22 ^ 20. Securities on which loans may be made 224 21. Loans not to be made on real estate 225 22. Halo of collateral securities 225 23. Purchase of real estate brought to sale 22() 24. Absolute title may be acquired 227 25. Holding lands and power of sale 227 2t3. Deposits in chartered banks 227 General Provisions. 27. Distribution to charitable institutions 227 28. Guarantee and pension funds 228 29. Bank notes not to be issued 228 30. Not bound to see to trusts 228 81 The The The 1 CONTENTS. xi BECTION. PAGE. 31. Monthly retarns to government 229 32. Annual list of shareholders 229 33. Unclaimed dividends and balances 229 Offences and Penalties. 84. Punishment of officers for crimes 2.31 85. False pretences as to deposits 231 86. False statements in returns 232 Commencement of Act. 37. Act to take effect. July Ist, 1891 232 Schedule — Return to government 233 THE WINDING UP ACT. Short title 235 Interpretation 235 Application of Act 237 When company deemed insolvent 238 Proceedings for winding up order 239 Proceedings after winding up order is made 2 U Liquidators — Proceedings in liquidation 243 Contributories 249 Cred itors' claims '2')2 Fraudulent preferences 2r)7 Appeals 2,58 Procedure 2<)0 Unclaimed dividends 2(i4 Offences 2(15 Provisions applicable to banks 2(55 Provisions applicable to life insurance companies 2(l7 Provisions applicable to other insurance companies 27l The Winpino-up Amendment Act, 1889 275 The Windinq-op Amendment Act, 1892 280 The Windino-up Amendment Act, 1895 281 Xll CONTENTS. EXTRACTS FROM THE CRIMINAL CODE, 1892. PAQB. Interpretation of terms used 283 Nuisances 285 Ddfamatory libel 286 Theft defined 286 Punishment of theft and offences resembling theft 288 Obtaining property by false pretences 289 Fraud 290 Forgery 293 Preparation for forgery and offences resembling forgery 297 Personation 299 Procedure in particular cases 300 Index 301 ; i '. PAQS. 283 . 285 286 . 286 . 288 . 289 , 290 . 293 ,. 297 .. 299 . 300 .. 301 CASES CITED. A. Acraman v. Morrice, C. Adams, American Bank v. 41. Adamson's Case, 53. Agra & Masterman's Bank, 110. Agricultural S. & L. Association v. Federal Bank, 202. #*5 Albrecht, Duncuft v. (5. Alexander v. Burchfield, 207. Alger & Sarnia Oil Co., Rr. 248. Allen V. Bank of New Brunswick, 11"- Allen V. Clarkson, 15G. Allen V. Hanson, 237. Alma Spinning Co., Rr, 50. Alpha Oil Co., Rr, 243, 2(50. American Bank v. Adams, 41. Amy, Pendleton County v. 100. Anglin v. Kingston, 101. Appleyard, Freeman v. G. Armour v. Imperial Bank, 9!). Armstrong v. Hemstreet, 202. Arnold v. Caldwell, 204. Asiatic Banking Corporation, AV, 32, 110. Aspinwall, Board of Knox Co. v. 100. Assiniboine Valley Co. Rr, 243, 244, 245. Aston, Sanderson v. 41. Athill V. Athill. 95. Atkinson v. Bell, 5. Attenborough, Clutton v. 20."'.. Atty. Gen. v. Bouwens, 100. Atty.-Gen. v. Monteflore, 49. Austin V. Barrick, ,".(!. Axford, Stobart v. 174. Ayers & South Au-*. Banking Co., Rr, 111, 134. B I?ackh)j3e v. Charlton, 209. Bailey, Clode v. 89. Bailey v. Jellett, 172. Bailey v. Morrison, 199. Bain v. Torrance, 90. Bainbridge v. Smith, 26, Baines' Case, 51, 184. Baird v. Bank of Washington, 24. Baker, Glyn v. 106. Bank of Australasia v. Breillat, 108. Bank of British North America v. Clarkson, 141, 151, l.">. Bank of British North America, Lee, V. 99, 1(59. Bank of British North America, Tor- rance V. 108. Bank of British North America, Wis- consin Bank v. 109. Bank of Columbus, U. S. v. .36. Bank of Commerce v. Jenkins, 34. Bank of Commerce v. Stevenson, 140. Bank of Commerce v. Woodward, 90. Bank of England, Vagliano v. 208. Bank of England, Willis v. 90. Bank of Hamilton, Henderson v. 208. Bank of Hamilton v. Noye Mfg Co. 8, 141. 1.52, 1.54. Bank of Hamilton v. Shepherd, 149, 151, 1.54. Bank of laverpool, Rr, 24:'.. 2()6, Bank of Liverpool v. Bigelow, 30, 52, 5S. Bank of London, Foster v. 70. Bank of Montreal v. Geddes, 104. Bank of Montreal, Heneker v. 64. Bank of Montreal, Irwin v. 90. Bank of Montreal, Jones v. 208. Bank of Montreal v. Little, 99, 169. Bank of Montreal v. McWhirter, 131. Bank of Montreal v. Rankin, 29. Bank of Montreal, Rose-Belford Co. v. 201. Bank of Montreal v. Simpson, 49. Bank of Montreal v. Sweeny, 118, 124. Bank of Montreal v. Thomas, 109. Bank of New Brunswick, Allen v. 117. Bank of New Brunswick, Boyd v. 04. m XIV CASKS CITED. Bank of New Brunswick, Scott v. 171. Bank of New South Wales v. Camp- bell, 130, Bank of New South Wales v. Mil- vain, 208. Bank of Nova Scotia, Barss v, 59. Bank of Nova Scotia v. Forbes, 52. Bank of Nova Scotia, Forsyth v. 243, 260. Bank of Nova Scotia, Landry v. 93. Bank of Nova Scotia, The Queen v. 77. Bank of Nova Scotia v. Smith, 58, 59. Bank of Nova Scotia, Thompson v. 36. Bank of Ontario, Re, 49, 61. Bank of Passamaquoddy, Wild v. 36. Bank of St. Hyacinthe v. Sarrazin, 11, 115, 130, 160. Bank of Toronto v. Cobourg P. & M. Ry. Co., 104. Bank of Toronto, Drake v. 186. Bank of Toronto v. European Assur ance Society, 39. Bank of Toronto v. Lambe, 4. Bank of Toronto v. Perkins, 114, 129, 133. Bank of Toronto v. Wilmot, 38. Bank of Upper Canada v. Bradshaw, 34. Bank of Upper Canada, Brooke v. 182 Bank of Upper Canada, Commercial Bank v. 128, 131. Bank of Upper Canada v. Covert, 38. Bank of Upper Canada v. Killaly, 131. Bank of Upper Canada, Lyman v. 131. Bank of Upper Canada, McDonell v. 131. Bank of Upper Canada, Reg. v. 44. Bank of Upper Canada v. Scott, 130. Bank of Upper Canada v. Widmer, 24. Bank of U. S., Fleckner v. 93. Bank of Washington, Baird v. 24. Bank of Washington, Barrington v. 41. Banque d'Hochelaga's Case, 204. Bangue d'Hochelaga v. Merchants' Bank, 152. Banque d'Hochelaga, Robertson v. 52, 54, 56. Banque Jacques Cartier v. C. & D. Savings Bank, 35. Banque Jac. Car. v. Reg. xxvi. Banque Nationale v. City Bank, 34, 203, I Banque Nationale, Grant v. 132. j Banque Nationale v. Lesperance, 39. Banque Nationale v. Merchant's Bank, 121. I Banque du Peuple, Exchange Bank I V. 203. I Banque du Peuple, McCaffrey v. V.iS. j Banque du Peuple v. Pacaud, 97, I Banque de St. Hyacinthe v. Sarrazin, I 11, 11."», VW, 100. Banque Ville Marie, Wilson v, 203. Barber, Knight v. 49. I Barber, Latham v. 0. i Baring, Vcnablea v. 100. i Barker v. Mackrell, 158. j Barneds Banking Co., Kr, 102. j Barnes, Exchange Bank v. 70. I Barnett, Brandao v. 115. I Barnhart v. Robertson, 165. I Barrick v. Austin, 30. I Barrington v. Bank of Washington, 41. ! Barrow, City Bank v. 147. Barrow's Case, 53. I Barrow-in-Furness Co., Re, 53, I Barss v. Bank of Nova Scotia, 59. I Bartlett, Gompertz v. 91. Bates, Carstairs v. 93. Bathgate v. Merchants' Bank, 1.33. Baxter & Central Bank, Re, 242. Beak V, Beak, 209. Beatty, N. W. Transportation Co. v. 44, Beaudoin, Thlbaudeau v, 112, Bell, Atkinsan v, 5. Bell, Bowlby v. 6, Bellamy v. Marjoribanks, 210, Benas, Ogden v. 215. Bennett v. London & County Bank, 210. Bentham M. S. Co., Re, 04, 123. Bigelow, Bank of Liverpool v. 30, 52, 58. Biss«l V. Fox, 216. Black V. Homsrsham, 71. Black V. Ottoman Bank, 40, Blackley v. McCabe, 110, 207. Blake, Toronto Brewing Co. v. 21. Blakely Ordnance Co., Re, 105. Board of Knox Co. v. Aspinwall, 100. Bobbett V, Pinkett, 211. Boddingtcn v, Schlenker, 210, Bonar v, Macdonald, 40. Bottomley's Case, 56, «. CASES CITED. XV vl. ink, 34, 132. ince, 30. rchant's 5e Bank y V, !:«. A, 1)7. Jarrazln, 1 V. 202. 102. 70. shlngton. , 53. otla, 59. Boulanger v. Dion, 203, 207. Bouwens, Atty. Gen. v. 106. Bowen V. Newell, lUO. Bower v. Foreign Gas Co., 08. Bowes, Foster v. 154. Bowlby V. Bell, 6. Bowmanville Machine Co., Smart v. 53. Bowsher, Davis v. 117. Boyd V. Bank of New Brunswick, CA. Boyd V. Nasmith, 110, 202, 207. Bradshaw, Bank of U. C. v. 34. Braintree, Carver v. 131. Brandao v. Barnett, 115. Brandon v. Scott, 172. Bread Suppiy Association, Jic, 170. Breillat, Bank of Australasia v. lOS. British Linen Co. v. Caledonian Ins. Co. 107. Brooke v. Bank of U, C. 182. Brooks, Firth v. 207. Brown, /.v, 100. Brown, City Bank v. 30. Brown v. Commercial Bank, or>. Brown v. Quebec Bank, 100. Brown, Teal .. v. 00, 118. Brownrigg, Navulshaw v. 14r>. Bruce, Napier v. 40. Brush V. Molson's Bank, 0.'>. Bryant, Quebec Bank v. 237. Bunny, Shaw v. I.*i5. Buntin, Reg. v. 185. Burchtleld, Alexander v. 207. Burdick, Hewell v. 0. Burkinshaw v. Nicolls, 47, 53. Bush V. Fry, 140. Calsse d'Economle, Petry v, 110. Calsse d'Economle, Holland v. 115. 225. Caldwell, Arnold v. 204. Caldwell v. National Bank, .37. Caledonian Ins. Co., British Linen Co. V. 107. Cameron v. Kerr, 132. Campbell, Bank of N. S. Wales v. 136. Campbell, Exchange Bank v. 52, 243, 244. 245. Campbell v. Maund, 43. Campbell v. Riendeau, 207. Canada Permanent L. &. S. Co., Hughes V. 201. Canadian Bank of Commerce. Ste- venson V. 146. Canadian Bank of Commerce t. Woodward, 0(5. Carlon v. Ireland, 210. Carpenter v. Street, 100. Carruthers, Royal Can. Bank v. 141. Carscaden, Molson's Bank v. 100. Carstairs v. Bates, 03. Carter, Holmes v. 07, 110. Carter, Muir v. 07, 110. Carver v. Braintree, 131. Cawley & Co., lir, 52. Central Bank, Re, 51 , .57. 58. 0!), 103, 1(!0, 170, 184, 242, 243, 245, 206. Central Bank v. Garland, 00. Central Bank v. Schroeder, 205. Champion v. Gordon, 100. Chaplin, .Tohanson v. 100. Chaplin, Ontario Bank v. 181. Charlton, Backhouse v. 20S>. Chatham Nat. Bank v. McKeen, 247. Cheeseman, Clement v. 200. Cherry, National Bank v. 114, 134. Chinic, /.V. 58. 121. Chinic & Union Bank. 124. Chunder Sein v. Ryan. 1-15. Citizens Ins. Co. v. G. T. Ry. Co.. :50. Citizens Ins. Co.. Wilson v. 144. City Bank. Banque Nationale v. 34, 203. City Bank v. Barrow, 147. City Bank v. Brown, .30. City Bank Goodenough v. 100. City & County Bank, Stone v. 111. City & District Savings Bank, Ban- que Jacques Cartier v. 35. City & District Savings Bank, Ex- change Bank v. 34, 103, 117, 170, 225. Clark. France v. 103. Clark, Jarvis v. 105. Clarke. Hart v. .54. Clarke, Shoolbred v. 2.35, 237, 244, 245. Clarke v. Union Fire Insurance Co.. 242. 200. Clarkson, Allen v. 1.50. Clarkson. Bank B. N. A. v. 141, 151. 15.5. Clarkson v. Sterling, 1,50. Clement v. Cheeseman. 200. Clench v. Consolidated Bank. 173. Clode V. Bailey. 80. Cloyes V. Darling. 183, 243, 244. Glutton V. Attenborough, 205. Clydesdale Bank, McLean v. 200. Coates' Case, 53. Cobourg, Crawford v. 101. XVI CASKS CITED. !l Cobourg P. & M. Ry. Co., Bank of Toronto v. 104. Cockburn v. Sylvester, H2, 155. Coffey V. Quebec Bank, 8, 141. Cohen v. Hale, 20!). Cole V. North Western Bank, 147. Cole, Young v. 100. Coleman, lii-, 142. Collins V. Collins, 49. Colonial Bank v. Whlnney, 49. Colonial Bank v. Willan, 25. Colonial Bank, Williams v. 10«. Colville V. Flanagan, 209. Commercial Bank, lie, 204, 243, 244, 24.'), 2.-.;?, 2(i(!. Commercial Bank v. Bank of U. C. 12S, T51. Commercial Bank, Brown v. 9.'). Commercial Bank v. Cotton, l(i4. Commercial Bank v. Fleming, 204. Commercial Bank v. G. W. Ry. Co., 2.-). Commercial Bank, Gillies v. IM. Commercial Bank, Mackay v. .%. Commercial Bank v. Rhind, 209. Commercial Bank, Windsor v. 73. Commercial Nat. Bank v. Corcoran, 14.-!. Commissioners of Heme Bay, Webb V. ino. 105. Comparnie de Moulin, Dupont v. 2;!(;. Compapnie de Navigation v. Chris- tin, .").'?. Compagnie de Villas, Hughes v. 51. Comptoir National v. Kleinwort, 21."). Compton, E. T. Bank v. 101. Confederation Life v. Howard, 100. Corn V. Merchant's Bank, 1S2. Consolidated Bank, Clench v. 17.3. ConFolidated Bank, Prentice v. 97. Cook V. Royal Can. Bank, .59. Cooper V. Griffin, 27. Cooper, Tassell v. 70. Corcoran. Com. Nat. Bank v. 143. Cotte, The Queen v. 1S7. Cotton, Commercial Bank v. 104. Counsell, Exchange Bank v. 258. County Life Assurance Co., 7iV., 24. County of Gloucester Bank v. Rudry Merthyr Co., 25. Couper's Trustees v. National Bank of Scotland, 20J). Court, Gilman v. 52. Court V. Waddell, 179. Covert, Bank of U. C. v. 38. ! Crawford v. Cobourg, 101. ! Crawford, Shaw v. 94. Credit Fonder, Crouch v. 97, 105. Credit Lyonnais, Johnson v. 147. Crlddle, Prldeaux v. 207, 242. Cromwell v. Sac Co., 101. Crouch v. Credit Fonder, 97, 105. Cubley, Plgot v. 12(5, 102. Culverwell, Morley v. 93. Cummer, Royal C. Bank v. 110, 1.32. Currle, Misa v. 107. Gushing V. Dupuy, 3. D. Dansereati, Massue v. 105. D'Arcy v. Tamar, etc., Ry. Co., 15, 24. Darling, Cloves v. 18.3, 243, 244. Darling, Exchange Bank v. 52. Daveluy, Freygarg v. 245. Davidson, Dominion Bank v. 143. Davis v. Bowsher, 117. Davis, Husband v. 172. Dawes, Sharp v. 17. De Gendre v. Kent, 71. Denham & Co., He, >:A), 70, 187. Desrosiers v. Montreal P. & B. Ry. Co., 104. Detroit Savings Bank v. Ziegler, 41. Dion V. Boulanger, 203, 237. Dobell V. Ontario Bank, 33. Dominion Bank v. Davidson, 143. Dominion Bank v. Knowlton, .33. Dominion Bank v. Oliver, 132, 151, 1.54. Donogh V. Gillespie, 109. Dorion v. Dorion, 20;>. Dorion, Kierzkowski v. 105. Dorrien, Lucas v. 117. Drake v. Bank of Toronio, ISO. Dufresne v. St. Louis, 201. Duggan, London & Can. L. & A. Co., V. 120. Duncuft V. Albrecht, 6. Dunspaugh v. Molsons Bank, 108. Dupont V. Compagnie de Moulin, 236. Dupuy, Gushing v. 3. E. East Holyford Mining Co., Mahony v. 24. Eastern Townships Bank v. Comp- ton, 101. Eastern Townships Bank, Roxton v. 101. 0A8E8 CITKD. XV 11 105. 147. 105. 10, 132. J.. 15, 24. . '^44. 52. V. 143. , 187. & B. Ry- ileRler, 41. on. 143. , :v?. i:v2. 151, jn, ). ISO. & A. Co., ^mk. 108. louUn. 236. o., Mahony \i V. Coinp- Roxton V. Edwards, Hitchcock v. lUii. lOlwood, Rochester City Bank v. 41. Embury v. West, 15G. Empire Brewing Co., lie, 255. English & Irish Rolling Stock Co., Uc, 21. Essex Land Co., lie, 131', 248. European Assurance Society, Bank of Toronto v. 30. Ewer, Lockwood v. 120, 102. Exchange Bank v. Banque du Peuplo. 2o;i. Exchange Bank v. Barnes. 70. Exchange Bank v. Campbell. 52. 24:?. 244, 245. Exchange Bank v. C. & D. Savings Bank. 34. 103. 117. 17i». 225. Exchange Bank v. Counsell, 258. Exchange Bank v. Darling, 52. Exchange Bank v. Fletcher, 35, 112. Exchange Bank v. Gault, 30. Exchange Bank v. Hall, isi. Exchange Bank v. Montreal Coffee House, 181. Exchange Bank v. Nowell, 95. Exchange Bank v. People's Bank, '15. Exchange Bank v. Quebec Bank, 203. Exchange Bank v. The Queen, 77. Exchange Bank, Senecal v. 181. Exchange Bank, Springer v. ;<8. Exchange Bank v. Stinson, 258. F. Fear, Woodland v. 80. m, 208. Fearson, Nichols v. 1)1. [Federal Bank, Agricultural S. & L. Association v. 202. 'Federal Bank, Hutton v. 105. |Fine Art Society v. Union Bank, 107. i'irth V. Brooks, 207. i'irst National Bank v. Leach, 202. fisher v. Roberts. 210. i'lanagan, Colville v. 2(K>. i'leckner v. Bank of U. S., 'Ki. Fleming Commercial Bank v. 201. Fletcher, Exchange JJank v. ;C», 112. ^lewkor. Hcyman v. 1(7. i'oley V. Hill, 208. Forbes, Bank of N. S. v. 52. •'oreign Gas Co.. Bower v. l>;{. ^orstJ". Hopklnson v. 205. i'oster V. Mackreth, 100, 204. •"oster, Mitchell v. .".'i. ■"orsyth v. Bank of N. S. 24.'^, 206. ''oster V. Bank of London, 70. a Fostar v. Bowes, 154. Foster v. Eraser, 201. FothergiUs Case, 52. Fournier v. Union Bank, 202. Fox, Blssel V. 21(i. Foxall, Phillips V. 41. France v. Clark, lOJS. Franck, Hall v. 171. Eraser, Foster v. 201. Freeman v. AppleyanI, (5. Freygang v. Daveluy, 24.5. Fry, Bush v. 146. Fuches V. Hamilton Tribune Co. 242. Fuller, Hall v. 2(>4. Fulton Co., Marsh v. 100. Gait V. Saskatchewan Coal Co., 245. Garden Gully Co. v. McLlster, .58. Garland, Central Bank v. 0(i, 209. Garnett v. McKewan. 00. Gaskell, Lee v. 0. Gault, Exchange Bank v. .'!'.>. Geddes. Bank of Montreal v. 104. Geddes. C. & D. Savings Bank v. 104. General Estates Co.. /.'(, U»5. Gibb V. Boston, 28. .55. Gillespie. Donogh v. loO. Gillies V. Commercial Rank, i:!4. Gllman v. Court. 52. Glyn V. Baker, 106. Gomersall. Re, OIJ. Gompertz v. Bartlett, 01. Goodenough v. City Bank, 100. Goodfallow. lit; KiO. Goodwin v. Robarts, 07, ln5. Gordon, Champion v. 100. Gordon. Quinlan v. 165. Gore Insurance Co., McBride v. 142. Gorgier v. Mievllle. luo. Gouldsbury, Huddle.ston v. 40. Grand Trunk Ry. Co., Citizens Ins. Co. V. .SO. Grand Trunk Ry. Co.. Royal Can. Bank v. 0, 1 (2. Grant v. Banque Nationalc, 1:12. Gray v. Johnston. 172. Great Western Ry. Co Bank v. 25. Great Western Ry. Co. 152. Great Western Ry. Co. 141. 160. Grieve v, Molson's Bank, ;{4 Griffin. Cooper v. 27. Griffin, Lee v. 5. Commercial V. Hodgson, Mason v. 8, xviu CABR8 CITED. Grote, Young v. 2M. Gunn, Pawle v. 6. Gurney v. Womersley, 1)1, 92. H. Hale. Cohen v. '2(YX Hall, Exchange Bank v. 181. Hall V. Franck, 171. Hall V. Fuller. 201. Hallen v. Runder, 6. Hallmark's Case, 70. Hamilton, Trust & Loan Co. v, 101. Hamilton Tribune Co., Fuches v. 242. Hamilton Whip Co., Wakefield Rat- tan Co. V. 210. Hancock, Merchants' Bank v. ■• '" Hancock v. Smith, 174. Hanson, Allen v. 2J?7. Harben v. Phillips, 21. Hardy v. Veasey, 70. Hare v. Henty, 207. Harren v. Yemen, 135. Harrison v. Nicollet Bank, 190. Hart V. Clarke. 54. Harte & Ontario Express Co., Rf, 2rv2. Hatton, National Ins. Co. v. 5.3. Hazelton, Reg. v. 200. Heilbut V. Nevill, 172. Heilig, Molson's Bank v. IS.'?. Hemstreet. Armstrong v. 202. Henderson's Case, 112, 184 . Henderson v. Bank of Hamilton, 208. Heneker v. Bank of Montreal, 04. Henry v. Simard, 28. Henty, Hare v. 207. Heseltine v. Siggers, 6, 106. Hess Manufacturing Co., Re, 249. Hewitt V. Kaye. 209. Heyman v. Flewker, 147. Heywood v. Pickering, 110, 207. Hlggon, Young v. 53. Hill, Foley v. 208. Hincks, Reg. v. 174, 187. Hitchcock V. Edwards, 199. Hochelaga Bank, London Guarantee Co. V. 40. Hodgkin. Ex parte, 1.56. Hodgson, G. W. Ry. Co. v. 152. Hogg's Case, .57, 184. Holmes v. Carter, 67. 119. Home Savings & Loan Co.'s. Case, 58, 103. 179. Homersham, Black v. 71, Hopkinson v, Forster, 205. Hornblower, Randolph Bank v. 205. Hcrsey's Claim, 127. Hovey, Mill Dam Foundry v. 131. Howard, Confederation Life v. 100. Howard v. Sadler, 20. llowboach Coal Co. v, Teague. 14, 21. Huddleston v. Gouldsbury. 49. Hudon V. Trudelle, 61. Hughes V. Canada Permanent L. & S. S., 201. Hughes V. Compagnle de Villas, 51. Hughes, McDiarmid v. 130. Humble v. Mitchell, 6, 49. Humby's Case, 1H4. Hunter, Lord v. 203. Husband v. Davis, 172. Hutton V. Federal Bank, 165. Imperial Ba /k. Armour v. 99. Imperial Bank, Jones v. 92. Imperial Land Co., Re, 105. Ingham, Simson v. 90. Innes v. Stephenson, 172. International Contract Co., Re, 60. Ireland, Carlon v. 210. Ireland, Ont. Marine Ins. Co. v. 52. Irwin V. Bank of Montreal. 90. Jacques Cartier Bank. City & District Savings Bank v. i,T>. Jackson. Reg. v. 200. Jarvis v. Clark, 165. Jeffrey, Lewis v. 91. Jellett, Bailey v. 172. Jenkins, Bank of Commerce v. 34. Jewan v. Whitworth. 145. Johanson v. Chaplin, 109. Johnson v. Credit Lyonnais, 147. Johnson v. Lytle's Iron Agency. .54, 56. Johnston, Gray v. 172. Jones V. Bank of Montreal, 20S. Jones V. Imperial Bank, 92. Jones V. Poppercorne, 117. Jones V. Ryde, 91. Jonmenjoy Coondoo v. Watson, 95, 154. Joseph Hall Mfg. Co., Re, 24(), 260. K. Kalnes v. Stacey, 165. Kaye, Hewitt v, 209. ^ Ladbl Lajoil Lake! Lakef Lam I Lam I Lanaij Landi Lang] Laths CASES CITKD. XIX J. 14. 21. „ Re, 60. Co. V. al, 90. Co. V. W. f & District rce V. o4- als. 147. Agency. ••4. ■al. 20S. 92. Watson, 9'), le, 24»'., 260. Keane v. Robarts, 173. Kelsall, Wallace v. 172, Kemp V. Westerbrook, 102. Kennedy, Molson's bank v. lOS. Kent, De Gendre v. 71. Kerr, Cameron v. y6'^. Kerr, Milloy v. 7. Kierzowskl v. Dorlon, lOS. Killaly, Bank ot U. C. v. 131. Kilsby V. Williams, 208. Kingston, /-.'.r ixiiiv, 173. Kingston. Anglin v. 101. Kirkwood v. Thompson, 135. Klolnwort v. Comptolr National, 215. Knight V. Barber, 4"J. Knipe, Ogle v. 4S). Knowlton, Dominion Bank v. ;»^. Koltage. Hedpath v. 110, 201, 207. Kymer v. Lawrie, '/OH. L. La Banque d' Hochelaga v. Mer- chant's Bank, 152. La Banque d' Hochelaga, Robertson V. 52, 54, 50. La Banque Jacques Cartier v. C. & D. Savings Bank, 35. La Banque Nationale v. City Bank, ;{4, 203. La Banque Nationale, Grant v. 132. La Banque Nationale v. Lesperance, 30. La Banque Nationale v. Merchants' Bank, 121. La Banque du Peuple, Exchange Bank v. 203. La Banque du Peuple, McCaffrey v. 133. La Banque de St. Hyacinthe v. Sar- razin, 100. La Banque Ville Marie, Wilson v. 202. La Cassle d'Economle, Petry v. 119. La Caisse d'Economle, Rolland v. 115, 225. Ladbroke, Rogerson v. 209. Lajole, Robertson v. 140, 151, 155. Lake Superior Co., Re, 242. Lake Winnipeg Transportation Co., 238, 230, 242, 253. Lambe, Bank of Toronto v. 4. Lambeth, Reg. v. 43. Lanaud, Molsons Bank v. 8. Landry v. Bank of N. S., 93. Lang V. Smyth, 106. Latham t. Barber, 6. Lawrie, Kymer v. 208. Lawson v. McGeoch, 150, 1.57. Leach, First Nat. Bank v. 202. Lee V. Bank B. N. A. UO, 109, Lee V. (Jaskell, 0. I.,ee V. Grimn, 5. Lee V. Sankey, 171. Lee, Stewart v. 210. Leduc V. Ward, 0. l^eese v. Martin, 118. liCsperance, Banque Nationale v. 39, Lewis V. Jeffrey, 01. Little, Bank of Montreal v. 99, 109. Liverpool Ins. Co., Todd v. 142. Llado V. Morgan, 8, 142. Lockwood V. Ewer, 120, 102. London, Birmingham, &c.. Banking Co., Rr, 123. London & Canadian L. & A. Co. v. Duggan, 120. London Chartered Bank v. White, 110. London & County Bank, Picker v. 100. London & County Bank, Bennett v. 210. London & County Bank, Mathlessen V. 21(). London County Bank v. River Plate Bank, 103. London Guarantee Co. v. Hochelaga Bank. 40. London .Joint Stock Bank, Sheffield V. 103, 10.5. 110. London Joint Stock Bank v. Sim- mma, 07, 10,5, 110. London, &c.. Land Co., Rv, 21. London & N. W. Ry. Co. v. Whin- ray, 40. London & Southern Cos. F. T. Co., Re, 14. Londonderry Ry. Co., Reg. v. 52. Lord V. Hunter, 203. Loupret, Molleur v. 187, Lucas V. Dorrien, 117. Lye's Claim, 245. Lyman v. Bank of U. C, 131. Lyons' Case, 21. Lyster's Case, 21. Lytle's Iron Agency, Johnson v. 54, 50. M. Macdonald, Bonar v. 40. Macfarlane v. St, Cesaire, 101, Mackay v. Commercial Bank, 36, XX CASES CITED. ' i ■ I'M Mackrell, Barker v. IfiM. Mackreth. Foster v. VM, 204. Macnlder v. Young, 1()r». Mahony v. Bast Holford Mining Co., •J I. Maitland, Wilmot v. 8, 141, KiO. Malo V. Nye, Km. Mandcr v. Royal Canadian Bank, 00, 1(«>. Marchant, Parker v. l(;j». Maritime Bank v. The Queen, 77. Maritime Bank v. Kcceiver Ueneral, Maritime Bank v. Robinson, 2.~:s. Maritime Bank v. Troop, '2'>',i. Maritime Bank v. Union Bank, '2m. Marjorlbanks, Bellamy v. 210. Marler v. Molson's Bank, 2(H), 20S. Marler v. Stewart. 110, 207. Mar3h V. Fulton County, 100. Martin, Leese v. U.S. Marzettl v. VViliiama, 20S. Mason v. G. W. Ry. Co., 8, 141, 100. Massey Manufacturing Co., He, 4(5. Mass. National Bank, Morse v. ',iCt. Massue v. Dansereau, 1(55. Mathiessen v. London & County Bank. 216. Maund, Campbell v. 43. Maytleld v. Wadsley, (5. Mechanics' Bank, Minor v. 41. Mechanics' Bank v. St. Jean, 181. Mederve, Re. 117. Merchants' Bank, Banque d'Hoche- laga V. l.VJ. Merchants' Bank, Bathgate v. 133. Merchants' Bank, Banque Nationale V. 121. Merchants' Bank, Conn v. 182. Merchants' Bank v. Hancock, 143. Merchants' Bank, Radford v. 111. Merchants' Bank, v. Smith, 3, 139. Merchants' Bank v. State Bank, 36, 202. Merchants' Bank. Steinhoff v. 89, 108. Merchants' Bnnk, Suter v. l.">0. Metropolitan Bank, Rumble v. 118. Mieville, Gorgier v. lOO. Mill Dam Foundry, v. Hovey, 131. Miller, Royal Can. Bank v. 141. Milloy V. Kerr, 7. Milvain, Bank of N. S. W. v. 208. Minor v. Mechanics' Bank, 41. Mlsa V. Currie, 107. Mitchell V. Forster, 53. Mitchell, Humble v. 6, 49. Molleur v. T.oupret, 187. Molleur v. Pulp & Paper Co., 242. Molsons Bank Claim, Itr, 2r.o. Molsons Bank, Brush v. }>."i. Molsons Bank v. Carscaden, 109. Molsons Bank, Uunspaugh v. 108. Molsons Bank, Grieve v. 34. Molsons Bank v. Heilip, i;t;!. Molsons Bank v. Kennedy, 107. Molsons Bank v. Lanaud, 8. Molsons Bnnk, Morlt-r v. 2(». Molsons Bank, Railway Advg. Co. V. 103. Molsons Bank, Ross v. l.'.l, 1."). Molsons Bank, Simpson v. (!S. Molsons Bank, Thompson v. 117, 143. Monteflore, Atty.-Gen. v. 49. Montelth, f{<; 7. M. O. & W. Ry. Co.. Ottawa v. 101. Montreal C. & D. Savings Bank v. Geddes, 104. Montreal Coffee House, Exchange Bank v. 181. Montreal P. & B. Ry. Co., Desrosiers V. 104. Morgan, Llado v. 8, 142. Morley v. Culverwell, 9.1. Morrlce, Acraman v. 0. Morrison v. Bailey, 199. Morse v. Mass. National Bank, .36. Muir v. Carter, 07, 119. Murray v. Pinkett, 124. Murray, Wills v. 42. McBride v. Gore Insurance Co., 142. McCabe, Blaokley v. 110, 207. McCaffrey v. Banque du Peuple, 1,33. McCallum, Sceally v. 101. McConnell, Ryan v. 9.'». McCrae v. Molsons Bank, l.")(!. McCraken v. Mclntyre, 47, 53. McDiarmId v. Hughes, 1.36. McDonell v. Bank of II. C, 131. McDonald v. Rankin, .3."., 09, 111, 187. McFarlane, Raphael v. 119. MoGjoch, Lawson v. 156, 157. Mclntyre, McCraken v. 47, 53. McKeen, Chatham Nat. Bank v. 247. McKewan, Garnett v. 90, 209. McT^ean v. Clydesdale Bank, 209. McLIster, Garden Gully Co., v. ,55. McQuesten, Parker v. 69, 187. McRoberts v. Stelnoff, 1.56. McWhirter, Bank of Montreal v. 131. CAhES CITKI). Xli 242. (►9. . lOS. 107. 0. 208. (I. vg. Co. r.r». ;s. V. 117, L V. nn. Bank v. Hxchange Desrosiers ank. S«5. Co., 142. 53. ., i:5i. \ 111, 187. I. ir>7. ink V. 247. 09. nk, 209. o., V. 55. 187. <\. real v. 131. N. Napier v. Bnioe, 40. Nasmlth. Boyd v. 110, 202. 207. Nasmith'a Case, :«». .T), r.l, r.8. 111. Natal InvoHtnient Co., !{(', 10.'>. National Bank, Caldwell v. :{7. National Bank v. Cherry, 114. V.\4, National Bank v. Sllke, 212, 210. National Bank of Scotland, Coijper's Trustees v. 209. National Insurance Co. v. Hatton, Navulshaw v. Brownrlgg, 145. Neelon, Thorold v. r);{. Nevlll, Hellbut v. 172. NfcW Chile Gold Mining Co.. Itr, 54. Newell. Bowen v. 11>9. Newhaven Loral Board v. Newhaven School Board, no. Nichols V. Fearson. 91. Nichols V. Ryan. 201. Nicollet Bank. Harrison v. 199. Ntcolls. Burklnshaw v. 47, 53. N. B. Australian Co., Swan v. 10.3. N. W. Transportation Co., v. Beatty, 44. North Western Bank, Cole v. 147. Nowell, Exchange Bank v. 95. Noye Mfg. Co., Bank of Hamilton v. 8, 141, 152, 154, 184. Nye V. Malo, 165. O. O'Gara v. Union Bank, 93. Ogden V. Benas, 215. Ogle V. Knipe, 49. Oliver. Dominion Bank v. 132. 151, 154. I Ontario Bank, Rr, 49, (51. lOntarlo Bank v. Chaplin, 181. ] Ontario Bank, Dobell v. 33. [Ontario Bank, Saderquist v. 170. 'Ontario Bank, Union Bank v. 90. [Ontario Bolt & Forge Co., ffr, 237, 275. Ontario Express Co., Re, 53, 249, 252, 258, 2G0. I Ontario Marine Ins. Co. v. Ireland, 52. |Ooregum Gold Mining Co. v. Roper, 47, 50. Oriental Bank, Prince v. 89, 90, 209. Orr V. Union Bank, 106. Purcell, Peacock v. 95. Ottawa V. M. O. & W. Ry. Co.. KM. Ottoman Bank, Black v. 40. Oulton, Rt\ 200. I Overmann, Roquette v. 93. Owen Sound Dry Dock Co., /i'<. 219. Owen? V. Quebec Bank, 110, 201, 2i>7. P Pacaud, Banque du Peuple v. 97. Pagin & Giirs Case. .■.3. Parker v. McQuesten. 09. 1S7. Parker v. Marchant. 1(>9. Parker v. Stanlland. <>. Parsons v. Queen Ins. Co., 1 12. Patent Safety Gun Cotton Co.. v. Wilson, 21.5. Paulson's Claim. 242. Pawle V. Gunn, (!. Peacock v. Purcell. 95. Pearce. Rolls v. 2(«). Pendleton County v. Amy. I00. People's Bank, Exchange Bank v. .35. Peppercorne, Jones v. 117. Perkins, Bank of Toronto v. 114. 1'29, 133. Perkins v. Ross. 151, 1.5.5. Perras, Ross v. 245. Petry ■• La Calsse d'Economie, 119. Phillips V. Foxall. 41. Phillips. Harben v. 21. Picker v. London County Bank. 106. Pickering. Heywood v. 110, 207. Pigot V. Cubley, 120, 162. Plnkett, Bobbett v. 211. Pinkett, Murray v. 124. Pontiac v. Ross, 101. Portalis v. Tetley, 145, 148. Poston, Gibb v. 28, .55. Prentice v. Consolidated Bank, 97. Prideaux v. Crlddle, 207. Prince v. Oriental Bank, 89, 90, 209. Provincial Building Society, /.'/ , 250. Pulbrook V. Richmond Mining Co., 26.. Pulp & Paper Co., Molleur v. 242. Q. Qu'Appelle Valley Co., Re, 238. Quebec Bank, Brown v. 169. Quebec Bank v. Bryant, 2.'{7. Quebec Bank, Coffey v. 8. 141. Quebec Bank, Exchange Bank v. 203. Quebec Bank, Owens v. 110, 201, 207. Quebec Bank. Ward v. 04. i XXII CABBB CITED. Queen, The v. Bank of Nova Scotia, 77. Queen, The v. Cotte. 1N7. Queen, The, Exchange Bank v. 77. Queen, The, Maritime Bank v. 77. Queen, The v. Quirt, 4. Queen City Refining Co., I{r, '2(M). Queen Ins. Co., Parsons v. 142. Qulnlan v. Gordon, KT). Quirt V. Th^ Queen, 4. B. Radford v. Merchants' Bank, 111. Railway Advertising Co v. Molsons Bank, la^ Randolph Bank v. Hornblower, 205. Rankin, Bank of Montreal v. 25). Rankin, McDonald v. rin, 00, 111, 1S7. Raphael v. McFarlane, 110. Rapid City Farmprs" Elevator Co., He, '2'AH, 2;{!), 240. Rastall, Straton v. 100. Receiver-General, Maritime Bank v. 78. Redpath v. Kolfage. 110, 201, 207. Reg. v. Bank of Upper Canada. 44. Reg. v. Buntln, 18."). Reg. v. Hazelton, 2(M). Reg. V. Hlncks, 174. 187. Reg. V. Jackson, 200. Reg. V. Lambeth. 41?. Reg. v. Londonderry Ry. Co., !'»2. Reg. V. Salop, T).*?. Reg. V. St. Pan eras, 43. Reg. v. Wilson, 204. Reg. v. Wimbledon, 43. Rhlnd, Commercial Bank v. 200. Rhind, Williamson v. 7. Richer, Voyer v. 00, KiO. Richmond Mining Co., Pnlbrook v. 20. Ridden, Small v. S.*?. Rlendeau, Campbell v. 207. River Plate Bank, London & County Bank v. 103. Robarts, Goodwin v. 07, 105. Robarts, Keane v. 173. Robarts v. Tucker, 208. Roberts, Fisher v. 21. Saskatrhewnn Coal Co., Gait v. 245. Sawyor v. ThomnH, 110. 207. Sceally v. MrCalluni. lol. Srhenck. SupprvlBors v. KM). Schlenkor, HoddinKton v. 210. Schofipld. /;./• imrlf, 107. Schrcedcr, Contnil Bank v. 205. ticott V. Bank of New Brunswick, 171. Scott, Bank of Upper Canada v. i;i«5. Scott, Brandon v. 172. Scottish Petroloum Co.. /^. 20. Senecnl v. K.xchange Bank, 181. Sewell V, Burdlck, '.►. Sharp V. Dawes, 17. Shaw V. Bunny, 1.'15. Shaw V. Crawford, 04. Shaw V. Spencer, 110. Sheffield v. London Joint Stock Bank, 10.'{, 105, 110. Shepherd, Bank of Hamilton v. 140, 151, 1.54. Sheppard v. Union Bank, 145. Shoolbred v. Clarke, 2.'i5, 2.'?7, 244. Shoolbred v. Union Fire Ins. Co., 24.3. Slggers, Heseltine v. 0, iiH5. Sllke, National Bank v. 212, 210. Simard, Henry v. 28. Simmons v. London Joint Stock Bank, 07, 10.5, 110. Simmons v. Taylor, 210. Simpson, Bank of Montreal v. 49, 118, 124. Simpson V. Molsons Bank, 08. Simson V. Ingham, 00. Small V. Ridden. :VA. Smart v. Bowmanaville Machine Co., 5:5. Smith, Bainbridge v. 20. Smith V. Bank of Nova Scotia, .58, .50. Smith, Hancock v. 174. Smith, Lang v. 100. Smith V. Merchants' Bank, 3, 139. Smith V. Surman^ 0. Smith V. Union Bank of London, 210. Smith, Wentworth v. 90. Smith V. Wilson, 33. SoclCtC Generale v. Tramways Union Co., 00. South Australia Banking Co., Ayers V. Ill, 134. Spargo's Case, 52. Spencer, Shaw v. 110. Spratley, Watson v. 0. Springer v. Exchange Dank, .'18. St. Cesalre v. Macfarlane, 101. St. Jean, Mechanics' Bank v. 181. St. John Bridge Co. v. Woodward, .52. St. liouis. Dufresne v. 201. St. Pnncras, Reg. v. 43. Stacey, Katnea v. 10,5. Stanllnnd v. Parker, 0. State Bank, Merchants' Bank v. 30, 202. Steel Co., Iff. 2.30. Stelnhoff v. Merchants' Bank, 89, 108. Steinoff, McRoberts v. 1.50. I Stenning, Wood v. 172. : Stephenson, Innes v. 172. i Stephenson. Wood v. 100. 201. ' Sterling, Clarkson v. 1.50. Stevenson, Bonk of Commerce v. 140. Steward, Rolln v. 208. Stewart v. Lee, 210. Stewart, Marler v. 110, 207. Stewart v. ITnion Bank, 132. Stlnson, Exchange Bank v. 258. Stobart v. Axford, 174. Stone v. City & County Bank, 111. Straton v. Rastall, 100. Street, Carpenter v. 109. Stringer. i:.r imrlr, 123. Sun Lithographing Co., Re, 254, 258, 200. Supervisors v. Schenck, 100. Surman, Smith v. 0. Surrey, Wiltshire v. 100. Suter V. Merchants' Bank, 1.50. Swan V. N. B. Australian Co., 103. Sweeny. Bank of Montreal v. 118, 124. Sylvester, Cockburn v. 142, 15.5. Symonds, Walker v. 171. T. Tahiti Cotton Co., /?*•, 58. Tamar, D'Arcy v. 15, 24. Tassell v. Cooper, 70. Taurine Co., Uc, 20. Taylor, Simmons v. 210. Teague, Howbeach Coal Co. v. 14, 21. Teale v. Brown, 00, 118. Tennant v. Union Bank, 3, 7, 139, 140, 143, 150, 102. XXIV CASES CITED. Tetley, Portalis v 145, 148. Thibaudeau v. Beaudoin, 111*. Thomas, Bank of Montreal v. 1(»!t. Thomas, Sawyer v. 110, 201. Thompson v. Bank of Nova Scotia, an. Thompson, Klrkwood v. V,\'t. Thompson v. Molsons Bank, 117, 143. Thorold v. Neelon, 5.^. Todd V. Li~ ^rpool Insurance Co., 142. Todd V. Union Bank, 208. Toronto Brewing Co. v. Blake, 21. Toronto v. Perkins, 114. Torrance, Bain v. ito. Torrance v. Bank B. N. A., 108. Tottenham, Royal Bank v. 2or». Towle, Way v. ll»J). Tramways Union Co., Soci6tC Gen- erale v. «>(). Treacher v. Treacher, 148. Troop, Maritime Bank v. 253. Trout's Case, i;}2. Trudelle, Hudon v. (!1. Trust & Loan Co. v. Hamilton, 101. Tucker, Robarts v. 208. Tucker v. Wilson, 12(5, 1(52. Tuckett, Wright v. 71. Turquand, Royal British Bank v. 24, Tyson, Ross v. 94. U. Union Bank & Chinic, 124. Union Bank, Fine Art Society, v. 107. j Union Bank, Fournier v. 202. ! Union Bank, Maritime Bank v. 203. ' Union Bank, Smith v. 210. Union Bank, O'Gara v. S»3. Union Bank v. Ontario Bank, itO. Union Bank, Orr v. I(»t5. Union Bank, Sheppard v. 145. j Union Bank, Stewart v. 132. | Union Bank, Tennant v. 3, 7, 139, | 140, 143, 156, 1(52. j Union Bank, Todd v. 208. I Union Bank, Walsh v. 57. ' Union Fire Insurance Co., lie, 2', 9, 2(50. I Union Fire Insurance Co., Clarke v. ! 242, 2(50. Union Fire Insurance Co., Shoolbred V. 243. i Union Ranch Co., He, 239. United States v. Bank of Columbus, 36. Vagliano v. Bank of England, 208. Veasey, Hardy v. 70. Venables v. Baring, lou. Vayer v. Richer, 99, 1(59. W. Waddell, Court v. 179. Wadsley, Mayfleld v. (5. Wakefleld Rattan Co. v. Hamilton Whip Co., 24(K Walker v. Symonds, 171. Wallace v. Kelsall, 172. Walsh V. Union Bank, 57. Wandsworth Co. v. Wright, 17, 43. Ward, Leduc v. 9. War J V. Quebec Bank, 94. Watson, Jonmenjoy Coondoo v. 95, 154. Watson V. Spratley, G. Watts V. Wells, 109. Way V. Towle, 199. Webb V. Commissioners of Heme Bay, 100, 105. Wells, Watts v. lOJ). Welton, E.r pnrtr, 47. Wentworth v. Smith, 90. West, Embury v. 156. Westerbrook, Kemp v. 1(52. Westminster Bank v. Wheaton, 199. Wheaton, Westminster Bank v. 199. Whinney, Colonial Bank v. 49. Whinray, London & N. W. Ry. Co. V. 40. White's Case, 53. White, London Chartered Bank v. 11(5. Whiteley, Rogers v. 209. Whitworth, Jewan v. 145. Widmer, Bank of U. C. v. 24. Wild V. Bank of Passamaquoddy, 36. Willan, Colonial Bank v. 25. Williams v. Colonial Bank, 10.3. Williams, Kilsby v. 208. Williams, Marzetti v. 208. Williamson v. Rhind, 7. Willis V. Bank of England, 90. Wills V. Murray, 42. Wilmot, Bank of Toronto v. 38. Wilmot V. Maitland, 8, 141, 1(50. ri CASKS CITKI). XXV !olumbus, tid, 208. amilton Wilson V. Banque Ville Marie, L'02 Wilson V. Citizens Insurance Co 344. Wilson, Reg. v. 2(>4. Wilson, Smith, v. lili. Wilsoa, Tucker v. 126, 1G2. Wiltshire v. Surrey, 100, 202. Wimbledon, Reg. v. 4,'!. Windsor v. Commercial Bank, 7;{. Wisconsin Bank v. Bank B N A io:t. ■ ■ ■• Womersley, Gurney v. 91, 92. Wood V. Stenning, 172. Wood V. Stephenson, 199, 201. Woodland v. Pear, 89, 9;{, 208 Woodward, Bank of Commerce v. 90 Woodward, St. John Bridge Co v '52. Wright's Case, 42. Wright V. Tuckett, 71. Wright, Wandsworth Co. v. 17 43 Yates, Royal Can. Bank v. 38 Yerner, Harren v. 135. Young V. Cole, 100. Young V. Grote, 204. Young V. Higgon, 53. Young, Macnider v. 105. Z. Ziegler, Detroit Savings Bank v. 41. t, 17, 43. loo V. 95, of Heme ;aton, 199. nk V. 199. V. 49. 7. Ry. Co. I Bank v. 24. luoddy, 36. k, 103. d, 90. V. 38. I, 1150. \' \ ADDENDA ET CORRIGENDA. ■ Page 52, line 9, for " N.B." read " N.S." Page 107. line 2, after (1861) add: "The Provincial Secretary of Quebec wrote a letter to a Government contractor that »--y J^^^ be voted at the en.uing session on his contract, which would be paid to any person to whom he might indorse the letter Je indorsed he LtL to a bank for advances on his contract, and the money was voted bVthe Legislature. It was held by the Supreme Court of Canada thut this ..lettr of credit" was not a negotiable instrument under the Bills o Exchange Act. 1890, or the Bank Act. and that the bank cou d n t recover upon it from the Government: Banque Jacques Cartier ^. Reginam, 10 C. L. T. 28 (1895)." Page 127, line IG, for " immovable " read " movable." Statu I Cross 'Forg( Comi B. N. (Cross Bank STATUTES CITED. Imperial. [statute of Frauds, pp. n, ',\1. ICrossed Cheques Act, 1S.-.S, p. 210 fForgery Act, 18G1, p. 2T2. Companies Act, 18G2, pp. HO, 52. B. N. A. Act, 1867, pp. 2, 3, 138, 139. grossed Cheques Act, 1876, p. 211. Factors Act, 1877, p. 8. Bills of Exchange Act, 1882, pp. 197. 21R), 210. Factors Act, 1889, p. 145. Merchant Shipping Act, ?894, p. 130 3cretaiy of 3ney would I be paid to dorsed the r was voted janada tliat er the Bills i could not Cartier v. Canada. iBank Act, 1842, p. 131. f 1S43, pp. 44, 165. ? 1850, p. 127. i 1859, p. 8. f C. S. C. c. 54, pp. 1, 8, 139, 141. c. 55, p. 1. l«(n, pp. 1, 8, 141. 186(!, p. 1. 1807, pp. 2. 142, 164, 165. 1869, p. 2. 1870, pp. 2, 189. 1871, pp. 2, 14, 17, 20, 58, 61, 74. 91, 104, 112, 129, i:{9, 155, 217, 22S xll. 1872, pp. 1.17, 16<>. 1879, pp. 104, 112. 1880, pp. 2, 7, 77, 187, 217, xli. 1883, p. ISS. R. S. C. c. 120, pp. 3, 6, 7. 23, 60, 91, 140, 149. 155, 159. References under sections of the Bank Act. passim. ,.„ - „ '^^^' PP- ''• "120, 189. Jills of Exchange Act. 1890, pp 85 91 94, 98. 99, 101, 110, 120, 121 ' 154, 169, 170. 189, 197, xli. ' 3. S. C. c. 58, p. 164. c. 59, p. 145. R. S. C. c. 1, pp. 44, 188. 19, p. 52. ai, pp. 72, 130. 72, pp. 130, 137. 118, pp. 26, 27, 51, .52. 119, pp. 26, 27, 50, 51. 52, 54, 104. 124, p. 224. 127, p. 167. 129, p. 181. 16.5, pp. 211, 213. Forgery Act, 18(^9, p. 211. Criminal Code, 1892, Sec. i;{8, p. 213. 305, p. 231. 359, p. 200. 366, pp. 231, 265. 376, p. 158. 378, p. 1.59. 423, pp. 211, 231. 442, p. 87. 981. p. 87. 1069, p. 102. 1077. p. 102. Winding-up Act, pp. 9, ISl. 183. 18 V. c. 80, p. 100. 3(i V. c. 72, p. 228. 50-51 V. c. 47, p. 189. 5.3 V. c. 34, p. 167. 56 V. c. 30, p. 120. 57-58 V. c. 21, p. 72. 57-58 V. c. 55, p. 120. ' XXVIU STATUTES CITED. Ontario. R S O c. 44, p. 102. 122, pp. 3. 85. 90. 104, i:i9, 170. 124. p. 202. 128, pp. 144, 140. 147. R. S. O. c. 157. p. 46. 180, p. 100. Municipal Act. 1892. p. 100. .S3 V. c. 19. pp. 9, 142. Quebec. Civil Code. Art. 14. p. 103. 249, p. 0.^). 328. p. 00. 338, p. 00. 347. p. 00. 387, p. 49. 429-42, p. 100. Or»Ofl, p. 05. 1092, p. 252. 1100-1, p. 172. 12.33, p. 37. 1487-90, p. 105. 1488-9, p. 148. 1570-1, pp. 85, 170. 1740, pp. 145, 140, 147. 1892, p. 209. 1897, p. 209. New Brunsivick. R. S. N. B. c. 120, p. 189. ly V. c. 47, p. 189. North- West Terr i tories. Rev. Ord. c. 51, p. 85. c. 50, p. 170. Civil Code. Art. 1950, p. 96. 1959, pp. 95, 124. 1971, pp. 120, 102. 1975, p. 110. i078, p. lie. 1994, p. 101. 1998, p. 101. 2208, p. 148, 234J. p. 199. 2352. p. 200. Code of Civil Procedure. Art. 5(50. p. 01. Municipal Code. Arts. 981-7. p. 100. Bank Tax Act, 1882, p. 4. R. S. Q. Arts. 4029-30, p. 100. 5043-50, p. 13J). Manitoba. R. S. Man. c. 1, pp. 85, 170. c. 100, pp. 101. British Columbia. Cons. Acts, c. 19, pp. 85, 170. ABBREVIATIONS. A. & E Adolphus & Ellis' Report'*, Kiiip's Bench. A. C Api)eal Ca.se.>!, Law Keport.s, ],S7r)-!)(;. B. & Ad Baruewall & Aflolphii.s' Report.s, King's Bench. B. &Akl " Al(ier.son'.s B. & C " Cres-swell's " " " B. AS Best & Smith's B- C. R British ( 'ohunbia Reports. B. N. A. Act 15ritish North America Act, 18G7. Beav lieavan's Rolls' Reports. Bin«. N. C Bingham's New Cases, Common Pleas. C. & K Carringtoii & Kirwan's Reports, .\ (,s/ Priiis. C B Comuiou Bi'iich Re|)ort.s. C. B. N. S " " " (Xew Series). G. C Civil Code, Quebec. G. h. .J .Canada Law .Journal, Toronto. C- I-"- T Canadian Law Times, Occasional Note.s. *^' A'- 1-* Liiw Ke|)orts, 1S(J5-^ " Norman's H. L. G House of Lords Cases, Chirk. 1 '^'"■- >«■• « Jurist, English, New Series. 1 ''^- * II lohn.scm & Henimiiigs' Report.s, Chancery. X L. C. .J Lower Canada .Furist. v L. C. R Lower Canada Reports. J *■'• 'I Law .Fournal, English. ■-' ^'- ^ Legal News, Montreal. ^'■^- G.G Law Reports, 181)5-75, Crown'Cases Reserved. 4 ,. !! S'' " " " Chancery Appeal Cases. # . .. f:^ " " " Equity Cases. E,\ " " " Ti' 1 /-I , ,, -t^.xchequer Cases. . .. p^ " " " House of Lords Case.s. . .. J^- J; " " " Privy Council Case.s. ^- ^ Queen's Bench Cases. XXX ABHUEVIATIONS. L. T. N. S Law Times Reports, New Series. M. & Gr Manning & (Jranger's Ri-ports, Common Pleas. M. & M Moody & M.ilkin's Reports, A' ('.si I'rius, M. & Rob " Robinson '• " " " M. & W Meeson & Welsby's Reports, Exclu-quer. M. L. R.— Q. B Montreal Law Reports, t^xt^en's Bench. *• " " — S. C " " " Superior Court. Maoq MaeqiiecMi's House of Lords R(?ports, Scotch. Man. R ALiiiitoba Law Reports. Mass Massachusetts " Minn Minnesota " Mod Modern Reports, l(l(i!)-17i>o. Moore .M jore's Privy Council Reports. N. 1$ Xow Brunswick Reports. N. S Nova Scotia " N. Y New York O. R Ontario Reports. Ont. A. R " Ai)i)eal Reports. " P. R " Practice " P. & B I'ugsley's & Burbidge's Reports, New Brunswick. P. R Practice Re|)orts, Upper Canada . Q. B (iieen's Beucii Reports, Adoli^hus & E:ilis, N. S. Q. B. D Law Reports, lS7o-00, t^'ieen's Bench Division- Q. L R (Quebec Law Rejwrts. Q 1, Q r> /(.Quebec Official Reports (Rapports Judiciaires Officiels) ' ■ ' (, C^ueen's Bench. Q. R. — S.C Ihid — Superior Court. R The Reports, Phiglish. R. I . . Rhode Island Re|)orts. R. L Revue Leg.ale, Montreal. R. S. C Revised Statues of Canada,'1886, R. S. Man " " Manitoba, 1891. R. S.O " " Ontario, 1887. R. S. Q " " Quebec, 1888. Rev. Ord., N. \V. T. . .Revised Ordinances, North-West Territories. S. C. Can Siiprenie Court of Canada Reports. Sess. Cas Sessions Cases, Scotland. T. L. R London Times Law Reports. T. R Term Reports, King's Bench, Dnrnford & East. Taunt Taunton's Rejwrts, Common Pleas. U. C. C. P lTpi)er Canada Common Pleas Reports. U. C. O. S " " Reports, Old Serie.s. U. C. Q. B " " Queen's Bench Reports. U. S United States Supreme Court Reports. v. L. R Victoria Law Reports. W.N Weekly Notes, English. W. R Weekly Reporter, English. I at of INTRODUCrrON. HANKING IN CANADA. awick. ^. S. lion- res OfBciels) IN common with othor liocial dovelopmonts, modern banking is mainly the result of heredity and environ- ment, and not of arbitrary legislation or the general ad- mission in any wide degree of settled principles in the practice of banking. The student endeavouring to under- stand the science of banking, seeking to discover some body of principles underlying the practice of banking throughout the world, is confused by the radical differences between the systems of the various nations and the complicated nature of tlie con- ditions surrounding each of these sj'stems. The most cherished dogma of one country is rank heresy in another. The principles suitable to an old country, with a compact population, a highly developed railroad and telegraph organization for the distribution of com- modities and information, and wealth enough to be lend- ers to other nations, are not applicable to a new country witli a scattered population, imperfect means of distri- bution, and little wealth apart from fixed property — a country, indeed, requiring to borrow largely from older and wealthier communities. Again, if in any country banking has been left to develop itself in accordance alone with the require- ments of trade, or nearly so, that country has been for- tunate in this respect as compared with others, where the national debt, caused by war or extravagances in public works, has been made the basis of the currency. Sometimes, however, the condition of the present en- vironment in two countries may be in many •Paper read before the World's Conj^reas of Bankers and Financiers at Chicago, by B. E. Walker, General Manager of The Canadian Bank of Commerce, Toronto. XXXll INTIIODUCTIOJJ. respects similar, and yet a practice in banlcing whicli has worked out desirable results in one of these countries cannot be attempted in the other. The body of banking principles in the other country may be so dif- ferent, because of hereditary inlluences, as to make it impassible by any kind of evolution to add tlie practice which has proved so serviceable cls(?wherc. I am aware that there is nothing new in this point of view, but in attempting to treat of the subject of banking in Canada, I cannot avoid comparison with Uiia great country where banking systems are being keenly discussed, and where it is admitted that changes, per- haps of a radical nature, are necessary. In contending for the comparative perfection of the Canadian system I do not wish to be understood as asserting that the points of superiority in our sj'stem could be adopted here. For over half a century banking in the United States has been following lines of development opposed in many respects to the Canadian system, and it may well be that no matter how desirable, it is too late to adopt our practices. My main object, however, is to describe the banking of Canada, and to demonstrate, if I can, its suitability to the recjuirements of trade in that country and not its suitability elsewhere. [bank CHARTEllS'. It has been occasionally urged by writers in flnan- cial journals published in the United States, that banking in Ciuiada is a monopol}', and therefore unsuited to the democratic principles of this country. These writers have overlooked the fact that tlie Province of Ontario, the centre of thought and progress in the Dominion, is the most democratic community in the British Empire, and that the legislation of Canada, whetlier in foinu or not, is in reality as liberal as it can well be. Banking in Canada is not in any sense a monopoly. Whether it can be said to be "free banking," as understood in the United ■Hjw^t-:..4i^i¥' -^ ry-. VSiatC^a BANKING IN CANADA. xxxiii [iking these body JO dif- ike it actioe point eet of th tliia keenly '8, per- endini? system lat the idopted United )ppo«ed lay well o adopt )anking )ility to not it» [n tinau- )anking to the writers )utario, linion, is I Empire, IfoiTU or Inking in iv it can United ■js Rt.'ilcs. dopciuls on what is meant by that term. Tji the United States a certfiin number of indivlrivi- lege to carry on the business of banking is attached th(- privilege to open branches and to issue a bank note cur- rency not secured by special pledge with the Govern- ment. In the opinion of many Canadians the minimum is too small. So much for the statement that banking is less " free " in Canada than in the United States. I think the very term " free banking," abont which so much was written in the antebellum days, is a misnomer; b I m XXXIV INTRODUCTION. and I hope there are many here wlio aproe wilh me tliat a little loss of freedom in the ability to create a bank, and a little more knowledge on the ])art of the peo])le repirdinp; the true function of bankinjj, and its high place in the world of commerce, would be for the public j^ood. What we want is the most absolute evi- dence, when a bank is created, that its projectors are embarking? In a bona fide venture and have put at risk a sum considerable enou}j;h to ensure that fact. In Canada, as in the United Rtates, shareholders in banks are subject to what is known as *' double liability," I can remember when the practical value of this i)ower to call on the shareholders in the eve.it of the failure of a bank for a se(;ond payment to the extent of the sub- scribed amount of the shares was doubted by many. Shares were transferred just before failure to men un- able to meet such calls and willing to be used in this manner, or shares were found to be held by men of straw who owed a corresponding amount to the bank. Or, again, many of the shareholders were borrowers for amounts far in excess of their holdings in shares, and the failure of the bank precipitated their failure as well, and they were thus unable to pay. Of course there were always some real investors among the shareholders, but the value of the double liability was a very variable and doubtful quantity. These features have not, as we know, all passed away, but we have done as much as we could to guarantee an honest share list and to prevent the shareliolder from escaping his liability. Banks are not allowed to lend money on their own or the stock of any •other Canadian bank, and as the minimum paid-up capi- tal of $250,000 must be deposited with the Finance De- partment before a bank commences business, this should ensure a bona fide capital at the start. All transfers of shares must be accepted by the transferee. No trans- fers within 60 days before failure avoid the double lia- bility of the transferrer unless the transferee is able to pay. A list of the shareholders in all banks is pub- HANKIXfJ IN CANADA. XXXV I me ite a d its r the i ovi- 8 ave I'isk a ors in. >ility." power lure of u' sub- mauy. len un- in this f straw U. Or, era for es, and as well, re were ers, but ble and e know, ^e could ent the are not of any up capi- Liice De- should sfers of trans- uble lia- able to is pub- 1 llHhcd annually by the riovernnicnt, and this bo(»k is eaj^crly oxaiiiined by investors to ascertain clu\nj;es in tlie share list of banks which niinht indicate distrust. As the capital of each bank is lai"<,M' and the nuniluT of banks small rclalivi'ly to the Tnilcd States, (here is, refjardinf; everything; ioniiected with the credit of a Canadian bank, an amount of public scrutiny wiiich leads to circ)imsj)ection in llie conduct of bank authorities. Ajjain, the very fact that the capital is lar^e and that the banks liave many brandies iuid a more or less na- tional chanicter, causes the stock to be widely lield. In the hn'f^est banks I lie sliare list numbers fi-om 1,S()0 to 2,0(10 names. We still, doubtless, have ]>lenty of bad banking and will always have it. No lejiislative checks will prevent that, and even a severe puhlic scrutiny will not altogether prevent It; but our banking history since the confederation of the old j)rovinces into the Domin ion in 18C7, shows that the double liability has been a most substantial asset, and has done much towards enabling liquidated banks to pay in full. In my own Province of Ontario we have the fine record of no in- stance, save oue, since Confederation in 1SG7, in which all creditors have not been i)aid iu full. In the case of this one blemish the dividends amounted to 99% cents to depositors, only the unwar- rantably high fees paid to the liquidators causing the dividend to fall below 100 cents. In the short life of this institution almost every sin in the calendar of bank- ing had been committed. TERM OF THE CHAllTER. Under the United States National banking system the life of a bank is limited to twenty years from the date of the execution of the particular bank's certifi- cate of organization, but at the expiration of the first, or any succeeding period, the bank, if it elects to do so may have its corporate existence renewed for the same number of years Under the Canadian system the char- XXXVl INTllODUCTlON. ter of every bank expires at the Hjinie time, and the re- newal period is only ten years. I (h> not intend to dis- cuss the k-nf^lh of tlu' period — most of us think it quite too short. It is the ell'ett of all charters expiring at the same time to wiiieh 1 desire to draw your attention. This conditioji of things* doubtless arose merely from the confederation in 1H(;7 of the provinces which had granted the then existing charters, but which thereupon surrendered their autliority over banking institutions to the Federal (Joveniment. Ah the charters granted by the old ])r()vince8 expired, the banks working under them became institutions subject to the new Federal or Do- minion Banking Act, and by its conditions every charter expires at the same time. Tliis ensures a complete dis- cussion of the principles underlying the Act, and of the details connected with the working of it, once in ten years. In the interval we are almost free from attempts by demagogues op ambitious but ill-informed legislators to interfere with the details of our system, but during the session of Parliament preceding the date of the ex- piry of the charters we have to defend our system from the demagogue, the bank-hater, the honest but inexperi- enced citizen who writes letters to the press, sometimes the press itself — indeed from all the sources of attack which institutions possessing a franchise granted by the people experience when they come before the public to answer for their stewardship. But while resisting the attacks of ignorance, we are, of course, called upon to answer such just criticism as may arise from the exist- ence of defects in our system developed by the experi- ence of time. Or perhaps, as when the Act was under discussion in 18fl0, w^e may see the defects even more clearly than the public, and may ourselves suggest the remedies. Whatever may be said for or against these decennial battles, the product of the discussion is a Banking Act, improved in many respects by the ex- change of opinion between the bankers .and the public. The banking system having been subjected to unsparing IIANKIN'Ci 1\ CANADA. XXXVll unalyHis l).v an unusually cnli^'lilcnctl im'()J)1(' — perhaps loo (Icniocratii; in tcndcnt'.v and loo jcalouM of overy privilrf,^' },M'ante(l, but anxious to build ratluT than to destroy— ix broii^jht at eaeh period of renewal to a lii^her de^i'i't' of perfection. HAN'KIXCJ I'lUNCU'LKS. • Wliat is necessary In a banldn}; system in order that It may answer the reciuirenients of a rapidly growing country mid yet be safe and prohtable? 1. It should create a currency free from doubt as to value, nadily convertible into specie, and answeriiiji: in V(dume 10 the requiienients of trade, [n saying this 1 do not wish to be understood as asserting tliat banks should necessarily enjoy tin' right to issue notes. Whether they should or should not issue notes must al- ways, I presume, end in a discussion as to expediency In the particular countrj . banking system. 2. It should possess the machinery necessary to dis- tribute money over the whole area of the country, so that the smallest possible inequalities in the rate of interest will rei-'ilt. 3. It should supply the legitimate wants of the bor- rower, not merely under ordinary circumstances, but in times of financial stress, at least without that curtail- ment which leads to abnormal rates of interest and to failures. 4. It should afford the greatest possible measure of safety to the depositor. We think in Canada that our system possesses all these qualities, and we are confident that we have a <'urrency perfectly suited to our trade and other require- ments. We have not, however, arrived at our present reasonably comfortable condition by any other process than the usual slow development from a past full enough of error and bitter experience. ;i; I, ,| if'; ;' xxxvin INTUODUCTTON. HISTORICAL SKETCH. It is perhaps not generally known that we were- among the first in modern times to issue flat paper- money for general circulation. In 1685, in the time of the French regime in Canada, the Intendant could not pay his soldiers. The little struggling colony, after the manner of all new countries, was an absorbent of money, and France was nearly bankrupt and could afford no aid. So the Intendant, left to his wits alone and having a helpless people to deal with, cut playing cards into small pieces, wrote thereon his promises to pay, ac- companied by the seal of France, and thus led the way in North America in this seductive method of paying debts. For the next thirty years this was the monej' of Canada. Although alwaj's written, because the people would not have accepted printed promises to pay, the volume rose to about $20 per head, when the usual results of flat money followed. It was couiijroinised, and the Government promised never to repeat the experiment. The poor colony, left with no regular currency, struggled for a time, but in 1721), at the request of the people, card money Avas issued again. Tliey had now some experi- ence, but did not understand how to draw lessons from it, and the amount issued was so excessive that when the British took Quebec, and assumed the government of Canada, one of tlie most troublesome features in the settlement with France was the arrangement for the retirement of this currency. It would have been Avell if this complete exposition, althougli on such a small scale, of the unsoundness of fiat money, had served for all North America. ^Mr. Summer says there was a bank in Massachusetts as early as KJXd wlii'.li may have issued notes, but there is a story in this connection so pictur- esque that I hope it is true. A couple of Massachusetts fur traders are supposed to have visited Canada a few years after the card money first appeared, and to have reported at home the prosperity resulting from the ex- I BANKINfJ IN CANADA. XXXIX were )aper- me of d not sv the loney, 10 aid. s^ing a s into ly, ac- le way paying mey of people ay, the results md the riment. •uggled e, card experi- as froiu t when nment in the for the en well a small I'ved for a, a bank e Issued :) pictur- chusetts la a few to have 1 the ex- periment, and so when the military expedition against Canada was organized in 1000, what more natural than that Massachusetts should have paid the cost in the first of that currency, which in its final stages of col- lapse has given our language that expressive phrase, "not worth a continental"? We were even smaller, relatively, in poi)ulation then than we are now, yet apparently you did not hesitate to adopt a very bad fea- ture in our development, If we have anything to-day in our financial conditions Avorth your attention, I hope it will not the less merit your approval because the development is on such a small scale. Sound or unsound principles are perhai»s more ea8il3' detected wlien a sys- tem has not become complicated beyond the capacity for aualysis of the ordinary individual. I will now, in as few words as possible, finish the historical sketch which is necessary to the clear under- standing of our currency and banking as it exists at pre- sent. Shortly after a bank was organized in Philadel- phia in 1781 and another in New York in 1784, the mer- chants of Quebec and Montreal began to agitate for c. bank of issue. In those days a bank without tlie power to issue notes was of little use; but the people of Can- ada having very strong opinions on this subject, the attempt was a failure, although in 1792 a private bank of deposit resulted. The merchants tried again with the same result in 1807-8. But during the war of 1812 tlie Government found it necessary to issue some kind of pape" money, and an Army lUll Ottice was crealed. These were the first paper notes put in circulation in Canada under British authority, and as they were paid in full, the people must have been at last convinced that all paper money was not bad. In the I*rovinct> of Nova Scotia, not then joined with us in the Dominion of Canada as it is now. Treasury notes were also issued in 1812. At the same time banking was growing rai»idly in Great Britain and the United States, and in 1817 our first joint stock bank was created— that great institution INTRODUCTION' of which we are all so proud, and wliich I am sure has done its* share in inakinj^ Chicago what it is to-day — the Bank of Montreal. From 1817 to lS2i'), two banks were established in Lower Canada (Quebec), and one each in Upper Canada (Ontario), New Brunswick, and Nova Scotia, all now doing business except one. I will not attempt to follow the course of banking in the old provinces, but it is necessary to indicate the conditifui of banking and currency at the time of the Confederation of the provinces into the Dominion of Canada in 1SG7. There were thirty-nine charters, but only twenty seven banks doing business. The charters expired at various dates from 1870 to 18!»2, and varied in accordance with the views regarding banking in the differ- ent provinces. In Upper and Lower Canada (Old Canada), shareholders were liable for double the amount of their stock, except that there was one bank en commandite, the " principal partners " having unlimited personal lia- bility. In most cases notes could be issued equal to the paid-up capital plus specie and Government securities held. In New Brunswick charters had been granted without the double liability, but the principle was being insisted! on in renewals, while in Nova Scotia in the opinicm of some there was no double liability'. In Old ('anada and Nova Scotia, as a rule, total liabilities were restricted to three times, and in New Brunswick to twice the amount of (•a])ital. There was also one bank with a, royal charter, heatl ofiice in England, and shareholders not under double liability. The situation was further complicated bj' the " Free Banking Act," under which notes could be issued secured by deposit of Government debentures, and l\v the legal tender issues of the Governments of Old Canada Jind Nova Scotia. In 18G6-(I7 two of the largest banks in Upper Canada failed, resulting in a very severe financial crisis. Under these conditions, and after tentative legisla- tion in 18G7 and 1870, the first general Bank Act of the m I s HANKING IN CANADA. xli Domiuion was passed in 1871 (34 Vict. chap. 5). It con- firmed the special features in tlie bank working under a royal charter, and that with "principal partners" per- sonally liable, and it will be understood in any state- ments hereafter regarding banks as a whole that these institutions are not referred to. As the cha^-ters of other banks expired they were renewed under the Do- minion Act. The first Act extended all charters for ten years, which practice has been followed thus far. There were various amendments during the first few years, but since then changes have been infrequent, except at the regular revisions in ISSO and 1890. The Act here- after referred to is that assented to ^lay. 1800, and which came into force July, 1891. (53 Vict. chap. 31). NOTE ISSUE. 1 issues ia. In |f ailed, »gi sla- in the successive Banking Acts of the Dominion Parliament baoks have been empowered to issue circu- lating notes to the extent of the unimpaired paid-up capi- tal. By the first Act the note-holders had no greater security than the depositors and other creditors. At the renewal of charters in 1880, the circulating note was made a prior lien upon all assets; and at the last re- newal in 1890 the banks, at their own suggestion, were in addition required to create in two years a guarantee fund of 5 per cent, upon their circulation, to be kept unimpaired, the annual contribution, however, if the fund is depleted, to be limited to 1 per cent. The fund is to be used whenever the liquidator of a failed bank is unable to redeem note issues in full after a lapse of sixty days. Xjtes of insolvent banks are to bear G per cent, interest from the date of suspension, until the liqui- dator announces his ability to redeem. Banks are also required to make arrangements for the redenix)tion at par of their notes in the chief commercial cities in each of the provinces of the Domiuion. The change in 1880 was caused by the failure of a small bank with a cir culation of about $125,000, paying all creditors, note- xlii INTRODUCTION. lit holders included, only 57^ per cent. The change in the Act now in force was due to the demand for a currency which would pass over the entire Dominion without dis- count under any circumstances. The history of banking in Canada since Confederation shows no instance in which a depletion of such a guarantee fund would have occurred. Fines from $1,000 to 11^100,000 may be im- posed for the over-issue of notes. Tlio pledging of notes as security for a debt, or the fraudulent issue of notes in any shape, renders all parties participating liable to fine and imprisonment. As the crown prerogative to payment in priority to other creditors had been set up on behalf of both Dominion and Provincial Governments, the Act places the claims of the Dominion second to the note issues, and those of the provinces third. Notes of a lesser denomination than $5 may not be issued, and all notes must be multiples of |5. Notes smaller than $5 are issued by the Dominion Government. The distinctive features, therefore, of our bank note issues are: — (a) They are not secured by the pledge or special deposit with the Government of bonds or other securi- ties, but are simply credit instruments based upon the general assets of the bank issuing them. (b) But in order that they may be not less secure than notes issued rujinst bonds deposited with the Gov- ernment, they are made a first charge upon the assets. (c) To avoid discount for geographical reasons each bank is obliged to arrange for the redemption of its notes in the commercial centres throughout the Dominion. ((/) And, finally, to avoid discount at the moment of the suspensiou of a bar;k, either because of delay in pay- ment of note issues by the liquidator or of doubt as to ultimate payment, each bank is obliged to keep in the hands of the Government a deposit equal to five per cent, on its average circulation, the average being taken from the maximum circulation of each bank in each •51 EANKINO IN CANADA. xliii je in the currency hout dis- banking tance in uldi have ^ be im- of notes of notes liable to Tjative to m set up imments, nd to the [otes of a 1, and all • than $5 >ank note )r special er securi- upon the ^ss secure I the Gov- i assets. sons each f its notes (minion. Qoment of ay in pay- )ubt as to ?ep in the five per jing taken k in each month of the year. This is called the Bank Circulation Redemption Fund, and should any liquidator fail to redeem the note of a fniled bank, recourse may be had to the entire fund if necessary. As a matter of fact, liquidators almost invariably are able to redeem the note issues as they are presented, but in order that all solvent banks may accept without loss the notes of an insolvent bank, these notes bear six per cent, interest from the date of suspension to the date of the liquidator's an- nouncement that he is ready to redeem. I have already stated, in attempting to outline what is necessary in a banking system in order that it may answer the requirements of a rapidly growing country, that " it should create a currency free from doubt as to value, readily convertible into specie and answering in volume to the requirements of trade." In an admirable paper on " The Note Circulation " read in December, 1889, before the Institute of Bankers, in London, Eng- land, by Mr. Inglis Palgrave, only two requisites in a note circulation are directly stated as essential: '-First, that it should be completely secured. Second, that it should be readily convertible into metallic money." But the discussion which follows bears directly ui)on a third requisite, that it should answer in volume to the fluctuating requirements of trade, in a word that it should be elastic. This last is a much less important point, however, in England than in North America. In discussing bank issues I will reverse the order in which the three requirements are placed in Mr. Pal- grave's paper and the ensuing discussion, and take up the question of elasticity first. I shall not attempt to discuss tlie many and conflicting views held regarding paper money, its use and abuse, and whether there is any scientific basis for its issue; but I shall endeavor to show to Mhat extent it seems possible for note issues in North America to have a scientific basis with regard to elasticity. In Canada, as in the United States," the difference in business transactions, after resulting xH IV INTRODUCTION. cheques and all other modern instruments of credit have been used, Is almost entirely paid in paper money. It is therefore of the greatest importance that the amount of this paper money existing at any one time, shall be as nearly as possible just sufficient for the purpose. That is, that there shall be a power to issue such money , ^en it is required, and also a power which forces it back for rerleniption when it is not required. I may, therefore, I think, safely lay it down as a principle that: (1) There should be as complete a rela- tion "^s possible between the currency requirements of .au. ind whatever are the causes which bring about thf- *' . >f i)aper money; (2) and, as it is quite as noces- fciaiy tuai u » overissue should be possible, as that the s pp'y of .^^v. r^'^vcy should be adequate, there should be a siiailj. vp^?'i. . 'MJtween the requirements of trade and tlie causes wliic DYe notes back for redemption. Now, certainly, one of the causes of the issue of bank notes is the profit to be derived therefrom, and it is clear that an amount sufficient for the needs of trade will not be issued unless it is profitable to issue. Like- wise it is clear that it should not be possible to keep notes out for the sake of the profit if they are not needed. In Canada, bank notes, as we have seen, are secured by a first lien upon the entire assets of the bank, includ- ing the double liability, the security being general and not special — not by the deposit of Government bonds, for instance. Therefore it is clear that it will always pay Canadian banks to issue currency when trade demands it. Because bank notes in Canada are issued against the general estate of the bank, they are subject to daily actual redemption; and no bank dares to issue notes without reference to its power to redeem, any more than a solvent merchant dares to give promissory notes with- out reference to his ability to pay. The presentation for actual redemption of every note not required for purposes of trade, is assured by the fact that every bank seeks by the activity of its own business to keep out its the HANKING IN CANADA. xlv >f credit I' money. i amount ae, shall purpose. ;h money forces it >wn as a te a rela- ments of ng about as neces- 1 that the lould be a trade and tion. » issue of I, and it is of trade ue. Like- to keep ot needed. re secured ik, includ- neral and nt bonds, ways pay demands d against t to daily isue notes more than otes with- esentation quired for —very bank ^ep out its own notes, and therefore sends back daily for redemp- tion the notes of all other banks. This great feature in our system as compared with the National Banking Sys- tem, is generally overlooked, but it is because of this daily actual redemption that we have never had any seri- ous intlation of our currency, if indeed there has ever been nny inflation at all. Trade, of course, becomes inc tlated. and the currency will follow trade, but that is a very different thing from the existence in a country of a great volume of paper money not required by trade. I will not discuss at lengtli this quality of elasticity in our system, because it is generally ad- mitted. l>ut some critic may endeavor to show that a similar quality might be given to a currency secured by Government bonds, and I desire to make it clear that «uch elasticity as is required in North America is im- possible with a currency secured by Government bonds. ti the older countries of the world it may be sutlicient if the volume of currency rises and falls with the general course of trade over a series of years, and without refer- ence to the fluctuations within the twelve months of the year. In North America it is not enough that the vol- ume of currency' shoula rise and fall from year to year. In Canada we find that between the low average of the circulation during about eight months of each year and the maximum attained at the busiest period of the au- tumn and winter, there is a difference of twenty- per cent, the movement upward in the autumn and downward in the spring being so sudden that without the power in the banks to issue, in the autumn serious stringency must result, and without the force which brings about re- demption in the spring there must be plethora. As a matter of fact it works automatically, and there is al- ways enough and never too much. If our currency were secured by Government bonds the volume in existence at any onetime would be deter- mined by the profit to be gained by the issue of such bond- secured currency. It would, therefore, be necessary to m 1 xlvi INTUODUCTION. ; fix a maximum beyond which no currency could be is- sued, but as such an arbitrary limit would be mere lo}j;islative guess work, it would be productive of the evils incident to all efforts to curb natural laws by legis- lation. As we all know, wlien the National Bank char- ters were offered by the Federal Government to the State Banks, the bonds of the United States bore 5 to 6 per cent, interest, and the business of issuing currency against such bonds was so profitable that a maximum such as I have referred to was fixed, with an elaborate l)rovision stating how the banking charters were to be distributed as to area, in order that each State or section of country might have a fair share. This was followed by several adjustments, the last limit being $354,000,000, no one being satisfied with the interference with free banking, and the cry of monopoly being frequently heard. Subsequently the maximum was abandoned; in- deed the business of issuing notes against Government bonds had become unprofitable, and there was no longer any fear of inflation. The condition in the United States under which the issue of currency was unduly profitable, and the fear of inflation was present, aid not actually last many years, but it lasted long enough to create in the people a hatred of banks which does not seem yet to have quite passed away. The condition which followed showed, it seems to me, conclusively the unsoundness of the system in the matter of providing an elastic currency, a currency at all times adequate in volume. The currency wants of the country increased with the great increase in popula tion, but the volume of National Bank currency de- creased because by the repayment of the national debt and the improvement in the national credit the bonds which remained outstanding yielded so low a rate of interest as to make the issue of National Bank notes unprofitable. The Comptroller's statement shows that the volume of circulation secured by United States bonds, which ranged from 1866 to about 1880 at from Il.WKINO IM CANADA. xlvi lid be is- be mere e of the by legis- tink cbar- it to the ore 5 to C currency maximum elaborate /ere to be or section 3 followed 54,000,000, with free frequently doned; in- overnment i no longer which the the fear of any years, e a hatred lite passed 1, it seems system in a currency ;y wants of in popula rrency de- tional debt the bonds a rate of Bank notes shows that ted States 80 at from m about |!:500,000,000 to 1350,000,000, has declined until the amount subject to redemption by the banks is now only about $130,000,000, The moral of this is plain. If the (jovernment bond yields such a low rate of interest as to make it unprofitable to issue currency, banks will not provide sufficient currency for the wants of the country. I need not remind an American audience that it was this unfortunate contraction which to a great degree made it possible for the Bland Act silver issues, from 1878 to 1890, to create so little financial disturbance. I hope I have made it clear that If the business of issuing currency against Goveniment bonds were pro- fitable, too much currency would be the result; and if it were uni»rofitable, too little would be issued. We would re(]uire to have a condition of things under which the profit of issuing notes would at all times bear an exact relation to the amount of currency required by the country, the profit therefore changing not only as the currency' rises and falls over a series of years, but at the time of the sharp fluctuations within each year, already referred to. No such relation, however, could very well exist with an issue based upon Government bonds. The next quality in a currency to be considered is, "That it should be readily convertible into metallic money." I do not propose to discuss this at length. As 1 have pointed out, our safety lies in the actual daily redemption which arises out of our circulation being generally instead of specially secured. This is the best possible safeguard against suspension of specie pay- ments. The United States National Banking System was created during a suspension of specie payments, and doubtless would never have been heard of but for that fact My last point is that placed first by Mr. Palgrave in his discussion with the English bankers: "That the currency should be completely secured." I do not know whether we are to understand also that a note must pass xlviii lNTHOI)i;CTI(^N. !l throuj^liout the eutire country without discount for any reason, but I Include that in the point to be discussed. Now, 1 contend tliat it is better lor the i'eas(jns given, that banlc issues should be based for securily ou the general assets of the bank, with a prior lien to other creditors; and also, that taking the world as a whole, such notes will be actually safer because the effect of a system of notes secured by Government bonds — a loan forced by the Oovernment, practically — must sometimes be to produie national bankruptcy, as in the case of the Argeutine Republic. Still, I cheerfully aduiit that the United States National Jianking System has taught us that a currency issued by banks may be made to ])ass over the entire area of a great nation without discount. This is a great (piality in currency. To the ordinary individual, who knows and cares little about banking except as it affects the bank note he hai>pens to carry in his pocket, it appears to be the one quality necessary. In Canada, experience has shown that as long as the notes are a prior lien on the assets of the bank, in- cluding the double liability, ultimate loss is scarcely possible, — has not at all events occurred as yet. To secure a circulation — at the close of December, 1892, of $3(;,in4,02.'?— the banks had assets of $:?0r),7:i0,910, to which the double liability of 103,109,043 is to be added, making a total of 1308,900,553 or $10.19 of assets against every dollar of currency. It has been pointed out, how- ever, that the assets are not thus aggregated against the circulation, and that all banks are not as secure as these figures seem to show. But the security in this respect, in regard to each bank, varies little from the general average, the lowest percentage being 0.18 as against the general average or 10.19. The lowest per- centage applies to but two or three small banks, none others falling below about $8 for every dollar of cir- culation. To this we have added the five per cent, guarantee fund applicable in its entirety to meet the notes of any individual bank. €* ? % for any iscussed. IS giveu, ■ on the to other a whole, effect af 5 — a loan )metimes He of the that the aught us ' to ])as8 (liseount. ordinary banking to carry lecessary. s long as bank, in- scarcely yet. To ,1892, of 50,910, to be added, s against out, how- d against secure as y in this from the g 0.18 as west per- nks, none ar of cir- per cent. meet the BANK1N(J IN CANADA. XllX TIIH noUllOWEK AND THE HHANCH SYSTEM. In discussing the banking systems in older coun- tries, the borrower is not often considered. M<'n must borrow where and how they can, and pay as much or as little for the money as circumstances require. I believe too strongly in the necessity for an absolute perform- ance of engagements, to think that it is a requirement in any banking system that it shall make the j)ath of the debtor easy. Every banker should discourage debt, and keep before the borrower the fact that he who bor- rows must i>ay or go to the wall. Kut in America the debtor class is apt to make itself heard, and I wish to show what our branch system does for the worthy bor- rower as compared with the I'nited States National Banking System. In a country Avhere the money accumulated each year by the people's savings does not exceed the money required for new business ventures, it is i)lain that the system of banking which most comi)letely gathers up these savings and places them at the disposal of the bor- rowers, is the best. It is to be remembered that this involves the savings of one slow-going community being applied to another community where tlu! enterprise is out of i)ro{>ortion to the money at command in that lo- cality. Now, in Canada, with its banks with forty and fifty branches, we see the deposits of the saving com- munities applied directly to th(^ country's new enter- prises in a manner nearly perfect. Th(> I'ank of Montreal borrows money from depositors at Ilalirax and many points in the ^laritime Provinces, where the savings largely exceed the new enterprises, and it lends money in Vancouver or in the Xorth-west, where the new enteri)rises far exce<'d the peojile's savings. My own bank in the same manner gathers deposits in the quiet, unentf rprising parts of Ontario, and h^nds the money in the enterprising localities, the whole result being that forty or fifty business centres, in no case having an c I'l ? |:i INTIIODUCTION. exact equilibniiin of drpoHits and loans, are able to bal- ance tb(? exceHH or deficiency of capital, e(;onomizin^ every dollar, the depoHJlor obtaininjf a fair rate of in- terest, and the borrower obtainin;^ money at a lower rate than borrowers in any of the colonies of Great Britain, and a lower rate than in the United States, ei cept in the very }j;reat cities in the East. So j)erfeet!y is this distribution of capital made, that as between the hlffhest-class borrower in Montreal or Toronto, and the ordinary merchant in the North-west, the difference In interest paid is not more than one to two per cent. In the United Statew, as we know, banks liave no branches. There are banks in New York and the East seeking investment for their money, and refusing to allow any interest because there are not suflflcient borrow- ers to take up their deposits; and there are banks in the West and South which cannot begin to supply their bor- rowing customers, because they have only the money o' the immediate locality at their command, and have i direct access to the money in the East, which is bo eagerly seeking investment. To avoid a difficulty which would otherwise be unbearable, the western and south- ern banks sometimes re-discount their customers' notes with banks in the East, while many of their customers, not being able to rely on them for assistance, are forced to float paper through eastern note-brokers. But, of course, the western and southern banks wanting money, and the eastern banks having it, cannot come together l)y chiince, and there is no machinery for bringing them together. So it follows that a Boston bank may be anxiously looking for investments at four or five per •cent., while in some rich western state ten and even twelve per cent, is being paid. These are extreme cases, but I have quoted an extreme case in Canada, where the capital marches automatically across the continent to find the borrower, and the extra interest obtained scarcely pays the loss of time it w^ould take to send it so far, were the machinery not so perfect. BANKINO IS CANAOA. li ? to bal- e of in- a lower f Great ates, ej ■fectly is k^een the and the rence in i3nt. have no the East using to t borrow- ks in the their bor- money o* have 1 ich is BO ^ty which d south- rs' notes istomers, re forced But, of fr money, together ing them may be five per ind even me cases, vhere the inent to obtained aend it so '1 As I have indicatod, it shouhi be the object of every country to economize credit, to economize llie money of I lie country ho that every borrower with adeqimte se- curity can !)(' '•eaclied by some (Uie able to lend, and the machinery for doinjj; tliis Iuih always been recognized in our bnuUs. That is surely not a |»crf<'ct system of bank- ing under which the surplus money in every unenter- prising comtuunity has a tendency to stay there, while the tuiT>lus money reipiired by an enterprising com- i| munity has to be sought at a «listance. IJut if by paying - a higher rate of interest, and seeiiing diligently, it could always be found, the position would not be so bad. The fact is that when it' is most wanted, distrust is at its height, and the cautious eastern banker buttons up his pocket. When there is no inducement to avert trouble to a community by supplying its wants in time of finan- cial distress, there is no inclination to do so. The indivi- dual banks, East or West, are not ai)t^ to have a very large sense of responsibility for the welfare of the coun- try as a whole, or for any considerabl' portion of it. But the banks in Canada, with thirty, forty or fifty branches, with interests which it is no exaggeration to describe as national, cannot be Idle or indifferent in time of trouble, cannot turn a deaf ear to the legitinuite wants of the fanner in the prairie i>rovinces. any more than to the wealthy merchant or manufacturer in the East. ■Their business is to gather up the wealth of a nation, not a town or city, and to supply the borrowing wants of a nation. There was a time in Canada, about twenty years ago, Vhen some people thought that in every town, a bank. BO matter how small, provided it had no branches, and had its owners resident in the neighborhood, was a greater help to the town than the branch of a large and ■: powerful bank. In those days, perhaps, the great banks ■were too autocratic, had not been taught by competi- ;|tian to respect fully the wants of each community. If tthis feeling ever existed to any extent, it has passed li u INTRODUCTION. away. We are, iu fact, in danger of the results of over- competition. I do not know any country in the world 80 well supplied with bankinj:? facilities as Canada. Tlie branch system not only enables every town of 1,000 or ],2()0 people to have a joint stock bank, but to have a bank with a power behind it generally twenty to fifty times greater Ihan such a bank as is found in towns of similar size in the United States would have. liut one of the main features of the branch sv&.teni is connected intimately with our pov/er to issue notes based upon the general assets of the bank. When the statement of a large Canadian bank is examined by an American banker, the comparatively small amount of actual cash must be noticeable. He will notice that the bank is careful to have large assets in the United States which may be taken back to Canada in times of financial strain there, and large assets in convertible shape at home, but having regard to actual cash as the machinery for carrying on the business at the counter, how can a bank for forty or fifty branches get along with so little cash? The simple answer is that the tills of our branches are filled with notes which are not money until they are issued, and which, therefore, save just that much idle capital and just that much loss of interest. THE DEPOSITOR. The legal position of the Depositor is about the same in both countries. The note-holder's claim is pre- ferred to his. We must not, however, expect that any Government Avill relieve a depositor from the necessity of using discretion as to where he places his money. Governments never have done and never can do that. Men must look arouiid, and after measuring the security otTered, judge where they should entrust their money. It is perhaps easier for a man, with limited intelligence to make a selection if the banks have large capital and are of semi national importance, pro\ided, of course, the basis of the system is not unsound, as iu Italy and Au- BANKING IN CANADA. liii of over- world la. Tlie 1,000 or 1 have a to fifty towns of [i sy&toiu lue notes Vheu the ed by an mount of ; that the od States [ financial shape at machinery low can a h so little V branches il they are much idle about the dm is pre t that any p necessity lis money, u do that, le security oir money, intelligence capital and course, the ily and Au- stralia. In Canada, we do not borrow from abroad, al- though we would not object to do so if money could be obtained at low enough rates of interest; our banks have large c^ipital and small deposits relatively, and we do not lend on real estate. The Government statement at aist December, 181>2, t^hows that before depositors having claims amounting to $180,000,000 can suffer, shareholders must lose in i)aid-up s^itock and double lia- bility as much as $12(5,000,000, and $2r..000.000 of sur- plus funds, in all $151,000,000. There is probably no coun- try in the world where greater security is offered to dei)ositors. When our charters were under discussion two or three years ago, 1 had occasion to defend our system, and I have copied freely from a pamphlet written by me at that time, I must not, therefore, omit to repeat a statement nmde then, which might excite criticism more readily, now that the banking system of Australia hasi collapsed. In making a comparison between indi- vidual banks with small capital, and banks with branches and large capital, I urged that: — " The probability of loss to the depositors in one " bank with several millions of capital, is less than the " probability of loss to some of the depositors in ten or " twenty small banks, having in the aggregate the same " capital and deposits as the large bank." The retort will be quickly made: — ''But if the large bank fails, the ruin will be just so much the more wide- spread." This is quite true, but while it appears to be an answer to the point it is not. If the conditions of two countries are about the same and Hie ability of the bankers and the princijjles of the banking system, are in other respects equally excellent, it must still remain true that the probability of loss to the depositors in one or more of the ten or twenty small banks is greater than the probability of loss to any of the depositors in the one large bank. in rr' ! ;' liv INTRODUCTION. There are seme features in our deposit business which may be interesting to American bankers. There are perhaps not half a dozen savings banks, as the terra is understood in North America, in the whole of Canada, and those only in the largest cities, and there is really little need for tlie existence of any. The Gov- ernment carries on the Post Office Savings Bank system, copied in some respects from Great Britain. It is un- necessary and unsuited to our country, but it perhaps affords the very ignorant a refuge from the dread of bank failures. The safeguards always necessary when a government undertakes to carry on a regular business are so many and so tedious that the leading banks do not find it necessary to allow as high a rate of interest as the Government. In addition to the Government we have as competi- tors for deposits the companies authorized to lend on real estate. ^lost of those companies, however, now borrow only on debentures, at fixed periods. Some of this money is borrowed in Great Britain, but much of it is obtaiuti'i at home. I may say here that while, as with you, bani H have fortunately no power to lend on real estate, the- '-eKtriction is perhaps no longer necessary, as land banki i r ;md mercantile banking are clearlj' separated in tlic linds of every intelligent man of busi- ness in Canada. And as the banks do not buy paper made for the purjiose of obtiining money, as you do in ilic TTnited States, but loan only to their own customers, supplying their entire wants, and seeing that the money is to make or move some product about to be sold, we do not so often discover that we have unwittingly been boom- ing a corner lot. building a mill, or helping to float a company. Retuniing from this digression to the subject of deposits, I have to deal with the objection, present I am sure in the minds of many of my hearers, that we pay interest on deposits. I am aw.are that many eminent bankers in the United States have expressed the opinion BANKING IN CANADA. Iv isiness There as the lole of I there le Gov- ^ystem, is un- yerhaps [•ead of y when lusiness inks do interest jompeti- to lend er, now e of this of it is as with on real cessary, clearly of busi- ly paper u do in tomers, money , we do n boom- iloat a )ject of |nt I am we pay eminent I opinion very decidedly that it is inconsist^^nt with sound banking to pay interest on deposits. On the other hand, bankers in (h'oat Britain and in Canada would say that any system of banking which will not afford interest on certain classes of deposits is unsound. I must hold with this latter opinion. It is entirely a question of the character of the deposit. Well managed Canadian banks do not give interest on active current accounts. But all Canadian banks issue interest-bearing receipts, and, as you will have gathered, all, or almost all have Savings Dei)artments. These deposits, great or small, are in the nature of investments by the depositor, and are not like the temporary balances of a merchant. They are en- titled to interest. It is of vital importance to every nation that its people should have the saving habit. It is also of vital importance that all the money disbursed for labor, or to the farmer or otherwise, should find its way back as early as possible into the channels of com- merce. Will it find its way back unless interest is of- fered for it? It will be said that the ordinary savings bank is the proper organization to take care of such deposits. So far as the very large cities are concerned this may be quite true. The mercantile banks of Chicago would not like to have been the creditors of the excited savings bank depositors w' o clamored for their deposits a few weeks ago. But is the ordinary savings bank an eflfective instrument for collecting the miscellaneous savings of the smaller communities? I think not. Be this as it may, we by our branch system, with the savings department added, provide in small towns where the ordinary savings bank is impossible, a secure place of deposit, and the quite large deposits of our leading banks are certainly the accumulation of tens of thousands of such depositors. Banks are required once a year to make a return to the Government, which is published as a blue-book, of all unclaimed dividends, deposits or other balances of live years' standing. 1 w Ivi INTllODUCTION. BANK INSPECTION. We have in Canada no public bank examiner as in the United States, nor are our annual statements au- dited as in Australia. When the audit system was pro- posed, we resisted because we felt that it pretended to protect the shareholders and creditors, but did not really do so, and if the audit did not really protect it seemed better that shareholders and creditors should not be lulled by imaginary safeguards, but be kept alert by the constant exercise of their own judgment. So far as we have ever discussed with the Government the question of public bank examiners, apart of course from denying the necessity for anything of the kind, we have con- fined our arguments to pointing out the impracticability when banks have many branches. This may in the minds of some constitute an argument against branch banking. I simply state the facts. But we say that, while it may be very well — if it really docs lessen bank failures — to have public examiners for the protection of the people, it is much more necessary with branch banking to have bank examiners, or as we call them, inspectors, on behalf of the executive of the bank. And I am aware that the practice is growing in the United States, where every- thing is under one roof. When it comes to the quality of the work done by our inspectors, I would not .admit that anything could well be better. In my own bank it takes a staff of five trained men an entire year to make the round of all the branches. Some of these officers devote themselves to the routine of the branches, veri- fying all cash, securities, bills, accounts, etc., testing the compliance of officers with every regulation of the bank, reporting on the skill and character of officers, etc., while the chiefs devote themselves to the higher matters, such as the quality of the bills under discount, loans against securities, indeed the quality and value of every asset found at the branch. They also deal with the growth and profitableness of the branch, its prospect^. i ■ilk m f is BANKING IN CANADA. Ivii er as in ents au- was pro- euded to ot really t seemed 1 not be rt by the ar as we question I denying lave con- ;ticability the minds L banking, ile it may ilnres — to ho people, g to have on behalf e that the ere every- lie quality not .admit own bank ir to make se officers dies, veri- estlng the f the bank, icers, etc., pr matters, unit, lonns le of every 1 with the prospecl ^. etc. Now all these matters have already passed the judgment of the branch manager, and the more impor- tant have been referred to and approved by the execu- tive, so that it may be said that three different judg- ments are passed upon the business of the branch. But it will be paid that the chief inspector may be under the sway of the executive and his reports a mere echo of I the opinion of the latter. This is quite true — the reports t- may be dishonest. We do not tell the public that the ; Inspector is specially employed for its protection. He, like the general manager, is merely a part of the bank's machinery for conducting business, and the public is left to judge of the bank by its chief officers, its record in the i)ast, its entourage. Our banks make a very full return to the Government . at the close of each month. These are published during the month and are keenly discussed by the public. The Deputy Minister of Finance has the ])0wer to call for statements of any character at an^ time. In the larger banks the officers insure their fidelity by funds established within the bank. Many of the banks also have funds for the superannuation of their officers. RESERVES. If this paper were not already too lengthy I would like to have discussed the question of reserves. We hold with the majority of the banking worhl outside of the United States against fixed reserves. With us no re- serves aix- a; ^ ^^lly required by law. The caj h reserve in gold and leg.il tenders has averaged for some years about ten per cent, but you will remember that our till money is almost entirely supplied by the bank note cir- culation. The smaller bnnks keep their available re- sources in securities, call loans at home and balances with their bankers in Montreal and New York. The .^ I'ii'{?e banks, as you know, in addition to their securities d ■*fl 21 i'VJ Iviii INTRODUCTION and call loans in Canada, lend largely on easily liqui dated securities in the United States. The change raaldng notes, those of denominations less than ?5, are issued by the Dominion Government. The settlements at the clearing houses are made in legal tenders, notes of large denominations being issued by the Government for the purpose. Forty per cent, of whatever cash reserves a bank may keep must be in Do- minion legal tenders, a provision entirely in the interest of the Government, and so unworthy of our otherwise creditable system that we must hope our Govenimpnt win some day relieve us of such an unscientific arrange- ment ^^1 y liqui inations irnment. in legal isued by cent, of >e in Do- • interest thei'wise irenimpnt arrange- The Bank Act, Canada. 18C>o. 53 TTictorla, Cliapter 31. H An Act llESPECTiNa Banks and Banking. [Assented to 16tli May, 1890.] ER MAJESTY, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows: — SHOUT TITLE. I. Thif Act may bo cited as " The Bank Act." Ik'foic Confedeiutiou the Banks doiny business in the old Province of Canada were governed by their special charters and by the provisions of chapters 54 and 55 of the Consolidated Statutes of Canada, intituled respectively " An Act respecting Incorporated Banks," and " An Act respecting Banks and Freedom of Banking," and by amending Acts passed in 1861 and 18GG. These charters were granted usually for a term of ten years at a time, most of them expiring at the end of the session of Parliament after the first of June, 1870. The provisions of these special charters were not always uniform. In the old Province of Nova Scotia there was no general banking Act, special provisions being embodied in the respective charters, which were, as a rule, granted for fifteen years at a time, terminating at different periods. U. A.~l '"T THE BANK ACT. [8.1 New Brunswick, the remainin}» province which made up the original Dominion in 1807, like Nova Scotia, had no general Act, but had granted charters for terms vary- ing from twenty to twenty-six years. Wlien British Columbia joined the Dominion in 1871, it had the Bank of British Columbia, which was organized under an Imperial charter, with its head office in London, England. Prince Edward Island became a province of the Dominion in 1873, and had then three banks with special charters, which had been extended to 1890, 1892, and 1900, respectively'. B3' the British North America Act, sec. 91, sub.-sec. 15, the right to legislate respecting " Banking, Incorpora- tion of Banks, and the Issue of Paper Money " was assigned exclusively to the Dominion Parliament. At its first session in 18(57, it passed the Act 31 Vict. chap. 11, which gave the banks of Upper and Lower Canada, Nova Scotia and New Brunswick the right to do business throughout the Dominion until 1870, under certain regu- lations and restrictions. In 1809, by the Act 32-33 Vict, chap. 49, these provisions were still further extended, and certain expiring bank charters continued tempo- rarily. In 1870 the Act of 1807 was extended until 1872 hy the Act 33 Vict. chap. 11, which introduced certain new provisions for the protection of the interests of shareholders and of the public. In 1871 the first com- prehensive Dominion Banking Act, 34 Vict. chap, o, was passed. It was made applicable to ten banks 'laving their head office in Quebec, six in Ontario, and three in Nova Scotia, and continued their charters until July 1st, 1881. It also applied in part to the Bank of British North America, which had an Imperial charter, and to La Banque du Peuple, which was organized as a limited partnership or partnership en commandite. In 1880, by 43 Vict. chap. 22, the Act of 1871, with certain amend- ments, was continued until July 1st, 1891, and was w [S.1 z\i made tia, had ns vary- inion in licli was ?ad ofiBcc e of the h special .892, and , sub.-sec. ncorpora- tey " was nent. At ^ict. chap, r Canada, :) business tain regu- ;2-33 Vict, extended, 3d tempo- until 1872 d certain Iterests of first conv |ap. o, was ks .'lavins d three in until July of British |er, and to a limited 1880, by jn amend- and was S.1] FORMER LKOISLATION. 3 declared to be applicable to thirty-six banks named, of which sixteen had their head olTice in Quebec, nine in Onliirio, niii<' in Xova Scotia, and two in New Brunswick. AVhen Ili<' Dominion statutes were consolidated in 188G, tile laws then in force on the subject became chapter 120 of the Bevised Statutes of Canada, intituled "An Act respectinjjf Banks and Banking?." On the 1st of July, ]8!)1, This was superseded by the present Act, which came into force on that day by virtue of section 104. The li^ht of the Dominion Parliament to pass these Acts has been challenj^ed as an interference with the powers conferred on the provincial legislatures by sec. !»2 of the British North America Act, especially as an invasion of the domain of " Property and Civil Rights," Tlic i)rovisions relating to warehouse receipts were clainied to be invalid as being in conflict with the Mer- cantile Amendment Act, chap. 122, of the Revised Sta- Intcs of Ontario on the same subject. The SupiH-'me Court in The Merchants' Bank v. Smith, 8 S. C. Can. 512 (1884), iij)lic'ld these provisions of the Dominion Act. The Privy Council subsequently gave a decision to the same efTect in Tennant v. The Union Bank, L. R., [1894] A. C. 31. In this case the doctrine was clearly laid down, as had been previously done in Cushing v. Dupuj', L. R. 5, A. C. 409 (1S80), that inasmuch as sec. 91 of the B. N. A. Act expressly declares that, " notwithstaDding anything in this Act," the exclusive legislative authority of the Par- liament of Canada shall extend to all matters coming within the enumerated classes, tliis is a plain indication lliat the legislation of that Parliament, so long as it stiictly relates to these matters, is to be of paramount authority, even though it trenches upon matters assigned to the local legislatures by section 92. They further lay down the doctrine that the legislative authority con- ferred by the words " Banking, Incorporation of Banks, and the Issue of Paper Money" is not confined to the mere constitution of corporate bodies with the privilege of carrying on the business of bankers; that it extends VI? 'Ml THE HANK ACT. [8.1 to the issue of paper currency, which necessarily means the creation of a species of personal property carrying with it rights and privileges which the law of the pro- vince does not, and cannot, attach to it; and that it also comprehends " banking," an expression wide enough to embrace every transaction coming within the legitimate business of a banker. They also say that the power to legislate on the subject of banking conferred upon the Dominion Tarliament by section 01 may be fully exer- cised, (nen though it may have the effect of modifying civil rights in the province. The Supreme Court also in Quirt v. The Queen, 10 S. 0. Can. 510 (1801), upheld the validity of the Dominion Acts which authorized the trustees of the Bank of Upper Canada to carry on the business of the bank, so far as was necessary to wind it up, and which finally transferred to the Dominion Government all the pro- perty of the bank and the powers of the trustees. The majority of the Court did. so, however, on the ground that it came under the head of " bankrui)tc3' and insol vency," and not under the head of " banking.'' The doc- trine was also laid down that the Dominion Parliament had not the power to deal with either real estate or per sonal property simply on the ground that a bank was interested in the transaction, when it did not uomc within the scope of the ordinary business of bankinj;. On the other hand, the right of the Quebec Legisla ture to pass the Act of 1882, imposing a special tax on banks and other commercial coi-porations, was claimed to be an interference with the exclusssive rights of the Do- minion Parliament as to Banking, the Regulation of Trade and Commerce, and as being indirect taxation. The Privy Council, however, in The Bank of Toronto v. Lambe, L. R. 12 A. C. 575 (1887), upheld the validity of the tax. It was held that it was not a fatal objection that the tax was on the whole paid-up capital of tlio bank, while only a portion of it was employed in the Province of Quebec; nor that the legislature might lav M |tei [8.1 Iv means carrying the pro- at it also 'nougli to legitimate power to upon the uUy exer- modifying Queen, 10 ! Dominion i Banlc of le bank, so lich finally ,11 the pro- istees. The the ground Y and insol The doc- rarliament itate or pev- X banlc was not come of banking. bee Legisla- ecial tax on svas elainu'd s of the Do- gulation of ■ct taxation, f Toronto v. e validity of tal objection ipital of tlio loyed in the re might lay 2] INTERPRETATION. on taxes so heavy as to crush a bank out of existence,^ and so to nullify the power of Parliament to create banks. INTERPRETATION. 2. In this Act, unless the context otherwise requires, — (a) Tlie expression " the bank " means any bank to which this Act applies; R. S. C. c. 120, s. 2, s.-s. v. By section 3 the provisions of the Act apply to the thirty-six banks named in Schedule A, and to every bank incorporated after the first of January, 1890. Section G 5 provides that certain sections there enumerated, and no '; others, shall apply to the Bank of British North America and the Bsink of British Columbia. By section 8 provi- sion is made for the Merchants' Bank of Prince Ed- ward Island coming under the Act. (b) The expression " Treasury Board " means the bwird provided for by section nine of chapter twenty-eight of the Revised Statutes of Canada, or any ^Vct in amendment thereof or substitution thei'efor; The section above mentioned was amended by chap- ter 1.'5 of the Statutes of 1887, and the Treasury Board is now composed of the Minister of Finance and Receiver- (.leneral, and any five of the Ministers belonging to the •|Queen s Privy Council for Canada, to be nominated from time to time by the Governor in Council. ^ (c) The expression " goods, wares and merchandise " includes, in addition to the things usually under- stood thereby, timber, deals, boards, staves, saw- logs and other lumber, petroleum, crude oil, and all agricultural produce and other articles of commerce; R. S. C. c. 120, s. 2, s.-s. a. This expression has been frequently the subject latter of judicial decision, especially in connection with ^ts use in the 17th section of the Statute of Frauds. See p-tkinson v. Bell, 8 B. & C. 277 (1828); also Lee v. Griffin, () TIIK IJANK ACT. [« 1 a & 8. 272 (isni). It dooH not include (Ixturos: Hallcn V. Kundci', 1 O. M. & U. 2VA> (is:}4); Lee v. (Jaskoll. :U L. T. 75!) (l.S7(i). It ddCH include liniluT and ^rowiu^ ci'ojjs, because Iho clear intentien beinj^ (hat they shall be severed, the^.v are taken as by a liction of law as beiii;; actually severed: Hmith v. Surnian, !) ]l. & C. 5(11 (1820); Tarker v. Stjiniland, 11 East, :J(;2 (1801)); Maytl(dd v. Wadsley, .'{ IJ. & C. ;{57 (1824). A fortiori, trees felled, are within the phrase: Acranian v. ^lorrice, 8 C. IJ. 440 (1840). ('hoses in action are not within Ihe expression: Humble v. Mitchell, 11 A. & E. 205 (18:]0); nor shares in a company: Latham v. Ilarber, G T. R 07 (1794); liowlby V. ]{ell, ;{ (). IJ. 284 (184(5); Watson v. Spratley, 10 Ex. 222 (1854); Duncuft v. Albrecht, 12 Sim. 189 (1841); nor are bonds or certificates of stock: Ileseltine v. Signers, 1 Ex. 85(1 (1848); Freeman v. Ajjpleyard, ',i'2 L. J. Ex. 175 (180a); Pawle v. Gunn, 4 IJing. N. O. 445 (1838). ,-(-VV. {(1) The ex])ressiou '' warehouse receipt " means any receii)t given by any person for any goods, wares, or merchandise, in his actual, visible and con- . tinned possession, as bailee thereof, in good faith, and not as of his own jiroperty, and includes re- I ceipts given by any person who is the owner or keeper of a harbor, cove, pond, Avharf, yard, ware- house, shed, storehouse or other place for the 1 storage of goods, wai'es or merchandise, for goods, wares find merchandise deliv(?red to him as bailee and actually in the place, or in one or more of the places owned or kejvt by him, whether such per- son is engaged in other business or not; K. S. C. c. 120, s. 2, 8.-S. h. This definition is taken, as above indicated fr- chapter 120 of the Revised Statutes of Canadi' some modifications. The word " owner " is new, . re alh the words " for the storage of goods, wares or merchari dise." Tlie words "tannery" and "mill" there folh the word " storel'.oase," and " specifications of timber were included. ■it # f •.■■*; a? The definition was originally introduced in the Bank ■•\ [a. 2 r. Halh'n skell, 34 lu»y hIuiII iiH boinjj; IJl (1.S2U); »vU('Ul V. e» felled, C. B. 44«.< pression : Hliaros in ; liowlby -v, 10 Ex. 1841); nor . diggers, J. Ex. 175 leans any (Is, wares, and con 00(1 faith, eludes re- owner or \rd, Avare- for the or goods, as bailee ore of the such per- K. S. C. ted fr- L-e a Is ,1'rclum re folh ^ E timber the Bank «. 21 WA HE HOUSE UECEIPTS. I Act of ISHO, apparently to overcome Iho decisions of the Ontario Courts, to the etl'ect that u warehouse receipt could lie given only by one who followcnl the business of ai warehouseman. In re .Monteilh, 10 O. R. 520 (ISSO), Chancellor Boyd expressed the opinion that the detiniliou comprised two classes of persons who were authorized to issue Kuch recei|>ts: (1) Any bona tide bailee of goods which are in his actual, visible and continued ])ossession; (2) Any person who is the keeper of a warehouse or other place for goods in respect of goods being in that warehouse or ])lace. In the s(Hond case the validity of the receii)t would not depeml op juoving that he was actually, visibly and conlinuoasly in the ])ossessi()n of the goods from tlrst to las<^. On the other hand, I'roudfoot, J., was of opinion that the bailee named in the first clause was a warehouseman, and that the second class was n^ally compi'ised in the first, and Avas subject to the provision as to possession. In Williamson v. Rhind, 22 L. (J.J. 100 (1S77), it Avas decided that a warehouse receipt given by a warehouseman for goods not in his possession was null and void. Also in ^lilloy v. Kerr, 8 S. C. Can. 474 (1880). In Tennant v. Union Bank, 19 Ont. A. R. 1 (18!)2), it was held that a warehouse receipt for logs lying in certain lakes on the way from the woods to the mill was not valid as not being in a i)hice kept by the signers of the recei])t. See to the same effect, Ross v. Molsons Bank, 2 Dorion, S2 (1881). By section 54 of R. S. C. c. 120, as amended by the I ol 1888, 51 V. e. 27, receipts given by certain manu- 'turers, dealers, etc., for goods their own pro- rty, were recognized as warehouse receipts. Under ( he present Act such receipts do not come under section 73, which relates to warehouse receipts, but under nec- tion 74, where such an instrument is called a " security," and is re icted to certain classes of persons and cer- tain class of goods therein named. The omission of 8 THE BANK ACT. [s. 2 the words " tannery " and " mill " from the definition in the present Act is in harmony with this change. The first statutory recognition of warehouse receipts in Canada in connection with banking is found in the Act of 1850, which became section 8 of chapter 54 of the Consolidated Statutes of Canada. In 18(51 warehouse receipts given by warehousemen, millers and wharfingers, for cereal grains, goods, wares, or merchandise, their own property, were placed as to banks on the same footing as those given for the pro- perty of others. See Molsons IJank v. Lanaud, 2 Dorion, 182 (1881). In England, warehouse receipts were not fully re- cognized as negotiable instruments, like bills of lading and other documents of title, until the Factors' Act, 1877. In a warehouse receipt the goods should be de- scribed with reasonable certainty, and where practicable by distinguishing marks. Ordinarily it does not cover substituted or subsequently received goods: Llado v. Morgan, 23 U. O. C. P. 517 (1874). Where, however, as in the grain trade, there is a usage of trade that different lots of the same quality are stored together and mixed, the receipt is satisfied by the delivery of the specified quantity and quality: Coffey v. Quebec Bank, 20 U. 0. C. 1*. 555 (1870); Hank of Hamilton v. Noye Manufac- turing Co., 9 O. R. 638 (1885). So also in the case of wheat to be made into flour: Wilmot v. Maitland, 3 Grant, 107 (1851); Mason v. G. W. ^l. Co., 31 U. C. Q. B. 73 (1871); Bank of Hamilton v. Noye Mfg. Co., supra. (<■) The expression " bill of lading " includes all re- ceipts for goods, wares or merchandise, acconi panied by an undertaking to transport the same from the place where they were received to some other place, whether by land or water, or partly by land and pai'tly by water, and by any mode of carriage whatever; B. S. C. c. 120, s. 2, s.-s. c. we [s. 2 nition in i receipts 1(1 in the 54 of the lousemen, Is, wares, ced as to p the pro- 2 Dor ion, t fully re- of lading Act, 1877. lid be de- iracticable not cover Llado V. i^ever, as in t different md mixed, e specified 20 U. 0. Manufac- he case of laltland, 3 U. C. Q. B. )., supra. des all re- ise. acconi t the same ed to some , or partly QV mode of 2, s.-s. c- .3] BILL OF LADING. 9 The bill of Lidingr is a very ancient document, and hy the custom of merchants is negotiable, when made to bearer or order or to assigns. It is in general use iimong all commercial nations, and is much the same in iis form arid provisions. It was originally used only for !i-aJisj)ortation of goods by water. By legislation and usage it has come to be applied to ti'ansportation by land. A *' shipping note " given by the G. T. R. Co. was held to be a '' bill of lading " within the Ontario Statute, :\:i Vict. chap. 19, sec. 3; Koyal Canadian Bank v. G. T. I{. Co., ::;{ U. C. C. p. 225 (1873). It is not the contract, lor that has been made before the bill of lading was signed and delivcicd, bnt it is excellent evidence of the icnas of the conlnict: Sewell v. Burdick, 10 A. C. at p. 105 (18,S1). When the goods have b(K»n received and ihe bill of lading signed, it is in general the evidence of I he contract, and cannot be varied by i>arol evidence: Leduc V. Ward, 20 Q. B. D. 475 (1888). (/) The word "manufacturer" includes maltsters, dis- tillers, brewers, refiners and producers of petro- leum, tanners, curers, packers, cannera of meat, pork, fish, fruit or vegetables, and any person who produces by hand, art, process or mechanical means any goods, wares or merchandise. APPLICATION OF ACT. 3> The provisions of this Act apply to the several banks enumerated in Schedule A to this Act, and . to evei'y bank incorporated after the tirst day of January, in the year one thousand eight hundred and ninety, whether this Act is s[)ecially men- tioned in its Act of incorporation or not, but not to any other bank, except as hereinafter sjiecially provided. The thirty-six banks named in Schedule A are all in operation, except the Commercial Bank of Manitoba, which suspended payment on the 3rd of July, 1803, and went into liquidation under the Winding-Up Act. The Act also applies in i)art to the Bank of British North 10 THE BANK ACT. [8.4 America and to the Bank of British Columbia: sec. 6. For the purposes of the Act these banks have tlieir chief office for the Dominion at Montreal and Victoria re- spectively: sec. 7. It has also been extended to the Mer- chants' Bank of Trince Edward Island: sec. 8. There are consequently now thirty-eight banks doing business in Canada, ten having their head office in Ontario, fourteen in Quebec, eight in Nova Scotia, three in New Brunsr wick, one in British Columbia, and two in Brince Ed- ward Island. 4. The charters or Acts of incorporation, and any Acts in amendment thereof, of the several banks enu- merated in Schedule A to this Act are continued in force, so far as regards the incorporation and corporiite name, the amount of capital stock, the amount of each share of such stock and the chief l)lace of business of each bank, until the 1st day of July, in the year one thousand nine hundred and one, subject to the right of each bank to in- crease or reduce its capital stock in the manner liereinafter provided; and as to all other particu- lars this Act shall form and be the charter of each of the said banks until the said first day of July, i , in the year one thousand nine hundred and one, — subject in the case of La Banque du Peuple to the provisions hereinafter made in respect to that bank: Provided always, that the said charters or Acts of incorporation are hereby continued in force only in so far as they, or any of them, are not forfeited or rendered void under the terms thereof, or of this Act, or of any other Act passed or to be passed, by reason of the non-performance of the conditions thereof, or by insolvency, or otherwise. It will be seen from this section that all the special powers in the respective charters of these banks, ex- ce^pt La Banque du Pimple, have been taken away, so that they are all practically in the same position as if they had received new charters in the form of Schedule B to this Act. I [s. 4 i: sec. 6. leir chief toria re- the Mer- D'here are siness in fourteen w Brunsr I'ince Ed- any Acts inks enu- .»ontinued ition and Htock, the the chief e 1st day hundiod ink to in- e manner r particu- er of each y of July, nd one, — pie to the to that larters or tinued in them, are he terms .ct passed formance vency, or le special tanks, ex away, so tion as if Schedule LA 15AXQUE DU I'EUPLE. 11 Tlie (jnestion as to whether the charter of a bajik mifjlit b<.' annulled by a writ of scire facias in the Ex- iluMliicr Court at the instance of the Minister of Justice was considerod by the latter in a matter of Sarazin v. Bank of St. Uyacinthe, 28 L. C. J. 270 (1881). The ap- ]>li(atien was refused on the merits, and doubts ex- jtressed as to the regularity' of such a proceeding. S. Al! the provisions of this Act, except those con- tained in sections three, six tO' seventeen (both inclusive), nineteen to twenty-seven (both inclu- sive), tliirty-tiiree, forty-live, and cigthy-nine to ninety-six (botli inclusive), ai)ply to La Banque du Peuplc: I'rovidcd, that wherever the word "di- rectors " is used in any of the sections which apply to the said bank, it shall be read and con- strued as meaning the principal partners or mem- bers of the cori'oration of the s"id bank; and so much of the Act incorporating the said bank, or of any Act amending or continuing it, as is in- consisti'iit with any section of this Act applying to Die said bank, or which makes any ju'o vision in any matter jtrovided for by such sections other than such as is hereby made, is hereby repealed; otherwise the said Acts are continued in force, subject to the proviso contained in section four of this Act. La Banijue du Peujtle was organized as a i>rivate banking house in 1S55, under the name of Viger, I)(nvitt & Co, It was a limited partnership, or a partnership en commandite, as it is called in French law; the principal or general ])artners being jointly and severally liable for the whole of the debts of the ])artnership, and t^ie special jtartners incurring no liability beyond the amount of their resj)ective shares. In 1844 it was incorjtorated as a iMiblic bank under its present name; but has ever since retained its original constitution, the general part- ners being the directors, and the special partners cor- responding in some respects to the shareholders in other banks. The directors are still responsible for all the liabilities of the bank, and are not elected by the special 12 THE BANK ACT. [s. 7 partners or shareholders, but themselves fill vacancies in their number; while the special partners have no double liabilitj', and do not control or interfere with the action of the directors. The bank suspended payment on the 16th of July^ 1S95, and resumed on the 4th of November, 1895. Sec- tion 91 of the Act is not applicable to it, so that its charter was not forfeited, and it was able to reopen^ althouj?li the suspension had continued more than ninety days. It is announced that at the next session of Par- liament it will ask for legislation to reduce its capital, and to i)lace it on the same footing as other banks. 5*i G. The provisions contained in sections two, seven, thirty-seven, forty-seven, to eighty-eight (both in- clusive), and ninety-seven to one hundred and four (both inclusive), apply to the Bank of British North America and the Bank of British Columbia respectively; and the provisions contained in the other sections of this Act do not apply to the said banks. These two banks wore established under Imperial charters, the former in 183(5 and the latter in 1862. Both have their head office in London, England. It will be seen that the provisions of the present Act that do not apply to these two banks are those that have reference especially to the operations at the head office, such as the incorporation, organization, shares, calls, double liability and insolvency. Those portions of the Act which are made applicable to them are those relating to their operations in this coue -y, and are specially intended for the protection of the public. 7. For the purposes of the several sections of this Act made applicable to the Bank of British North America and the Bank of British Columbia, the chief office of the Bank of British North America shall be the office of the bank at Montreal, in the I Province of Quebec, and the chief office of the 1',- [8.7 ncies in I double ? action of July, 15. Sec- tbat its reopen, n ninety I of Par- 1 capital, inks. 0, seven, (both in- red and )f British Columbia ed in the ) the said Imperial G2. Both t will be at do not reference such as double Vet which to their intended f this Act sh North rabia, the I America al, in the ce of the a 9] INCORPORATION OF HANKS. 13 r.ank of British Columbia shall be the office of the bank at Victoria, in the Province of British Columbia. «. Tlio provisions of this Act may be extended to the Morchants' Bank of Prince Edward Island by the Treasury Board, upon the application of the di- rectors of the said bank, before the expiration of the present charter of the said bank; and upon publication in the Canada Gazette of the resolu- tion of the directors applying hereunder, and of the minute of the Treasury Board thereon allow- iii{? such application, the provisions of this Act shall, from the time named in such minute, or if tliere is no time named therein, from the date of the publication thereof in the Canada Gazette, apply to the said bank; and its charter and Act of incorporation, and any Acts in amendment thereof, shall thereupon be extended for the same time and to the extent as if the name of tlie said bank had been included in Schedule A to this Act. Tlie board of directors of this bank, at a meetinjjj held on the 14th of December, 1891, passed a resolution to make the application in question. It was approved by the Treasury Board on the 24th of December, and the provisions of the Act were extended to the bank from the 1st of March, 1892. (Canada Gazette, 20th Feb., 1892). INCOUrORATION AND ORGANIZATION OF JUNKS. 1>. The capital stock of every bank hereafter incoi-po- rated, the name of the bank, the place where its chief office is to be situate, and the name of the provisional directors shall be declared in the Act of incorporation of every such bank: 2. An Act of incorporation of a bank in the fonii set forth in Schedule B to this Act shall be construed to confer upon the bank thereby incorporated all the powers, pri\ileges and immunities, and to sub- ject it to all the liabilities and provisions set forth in this Act . R. S. C. c. 120, s. 5, in part. Xo new bank has been incorporated since the com- inp: into force of the present Act. 14 THE BANK ACT. [s. 12 10. The atpital stock of any bank hereafter incorpo- rated shall be not less than five hundred thousand dollars, and shall be divided into shares of one hundred dollars each. K. S. C. c. 120, s. G, part. Of the thirty-eij»ht banks now doinj? business under the Act, six of them have a capital under $500,000. The miniinuni amount of subscribed capital has been re- quired for new banks since 1871. The rule as to shares beinjj; |100 each is new. Formerly the amount was named in each charter. In about one-half the banks under the Act the shares are |100 each; those of the Bank of British North America £50 stg., of the Bank of British Columbia £20 stf?., of the Bank of Montreal $200, while the others are |75, |50, |40, |25 and $20 each. 11. The number of provisional directors shall be not less tlian live nor more tlum ten, and they shall liold office until directors are elected by the sub- scribers to the stock, as hereinafter provided. This provision was not in former Banlc Acts, but the provisional directors were named in the several special Acts. The election of directors is provided for in sec- tion 13. 12. For the purpose of orji;anizinjT; the bank, the pro- visional directors may cause stock books to be 0])ened, after giving^ public notice thereof, — upon which stock books shall be recorded the subscrip tions of such persons as desire to become share- holders in the bank; and such books shall be opened at the place where the chief office of the bank is to be situate, and elsewhere, in the dis- cretion of the provisional directors, and may be kept open for such time as they deem necessary. The provisional directors should meet and organize by the election of a provisional president or chairman. A majority of the directors would form a quorum: How- beach Coal Co. V. Tea{;ue, 5 H. & N. 151 (18G0) ; Re Lon- don & Southern Cos. F. L. Co., 31 Ch. D. 223 (1885); C. S. C. c. 1, s. 7 (42). The business specified should be ,^ [s. 12 8. 13] OIIGAXIZATION OF 15ANKS, 15 'tor incorpo- •ed thoiisaiid lares of one s. G, part. sinoss under 100,000. The las been re- as to shares iuuount was f the banks those of the tlie Bank of mtroal $200, $20 each. shall be not d they shall by the sub- irovided. Vets, but the oral special I for in sec- nk, the pro- books to be H'eof, — upon he subscrip- corae share- ks shall be )fflce of the in the dis- md may be 1 necessary. Qd organize V chairman, rum: How- 0); Re Lon- 223 (1885); i should be ' done at regularly called and organized meetings: D'Arcy ; V. Taniar, etc., Ry. Co., L. R. 2 Ex. 158 (1807). Notice of the opening ol the stock books should be given in one or more newspapers i)ublished at the place c where the head office of the bank is situate, and in the CaiuuLi (Jazette: sec. 102. This s( ction was not in any of the previous Bank /Acts, but similar provisions were contained in the Acts ineori)orating the respective banks. As [lointed out in the note under the next section, there does not api)ear to be any provision in the Act for eiifoi'cing payment of these subscriptions by the pro- visional directors, or even any express provision for excluding subscribers in default from taking part in the organization of the bank. Until this is remedied by legis- lation, it would be well to provide for it in the terms of .subscription in the stock books. lit. So soon as a sum not less than Ave hundred thou- sand dollars of the capital stock of the bank has been bona tide subscribed, and a sum not less than two hundred and fifty thousand dollars thereof , has been paid to the Minister of Finance and Receiver General, the provisional directoi's may, by ])ublic notice, published, for at least four weeks, call a. meeting of the subscribers to the said stock, 1(> be held in the place named in the act of incor- • piM-ation as the chief place of business of the bank, at such time and at such place therein as set forth in the said notice; at which meeting the *' subscribers shall determine the day ui)on which ! the annual general meeting of the bank is to be held, and sliall elect such number of directors, duly (pialitied under this Act, not less than five I nor more than ten, as they think necessary, who shall hold otlice until the annual general nu'etiug in the year next succeeding their election; and upon the election of directors as aforesaid the functions of the provisional directors shall cease. R. S. O. c. 120, s. 6, in part. li m k 4 10 THE BANK ACT. [S. U It would appear that it is expected tliat the $250,000 shall be paid voluntarily. No power is given to the pro- visional directors to sue. It is only to the directors elected by the shareholders that the Act gives power to make calls and to enforce payment by suit or forfeiture. Even the power of cancelling subscriptions for non-pay- ment of ten per cent, within thirty days after subscribing is given to the directors only: sec. 30. The provisional directors should embody the terms in the heading of the stock books and prospectus. The notice calling the meeting of subscribers should be inserted for at least four weeks in one or more news- papers published at the place where the head office of the bank is situate, and in the Canada Gazette: sec. 102. The Act appears to be silent as to whether all sub scribers, even those who may not have paid even the first ten per cent., are entitled to vote. They are not called shareholders, and it is not stated that the subs(> quent provisions as to shareliolders voting are applicable to this meeting. As suggested under the preceding sec tion, it would be well to make it a condition of the sub- scription, that only those subscribers who pay the re quired portion of their stock shall be qualified to take part in this meeting, and that the provisions of section 25 shall apply. Sufficient care does not appear to have been taken to adapt the present and other new sections of the Act to section 18 and others taken from the former Bank Acts. For instance, the subscribers, at the meet- ing for organization provided for in this section, are to fix the day on which future annual meetings are to be held, and are to determine the number of directors, not less than five nor more than ten; while section 18 pro vides that these matters are to be regulated by by-laws to be passed by the shareholders. Nothing is said as to proxies for this first meeting, nor is any authority giveu [3. 13 "*?!': 11] TKEASUllY UOAUD. 17 $250,000 tlie pro- airectors power to >rfeiture. non-pay- bscribins •ovisional tng of the ^rs sliould lore news- 1 office of ette: sec. er all sub I even the ey are not the subsc I applifabh' ceding sec of the sub- )ay the re- ^ed to take of section ar to have sections of the former |t the meet- ion, are to Is are to bo >ectors, not ion 18 pro by by-law;^ said as to .ority giveu to provide for them. Do any of the provisions of section 2") as to I lie nuinner of voting and the counting of votes apply'.' And if so, which of them? Can the subscribers al this lii.'^t luwting pass the by-laws mentioned in section l,s as to I lie remuneration of the president or other direc- tors, or as to tlie ajuount of discounts, etc.? Until these mat (CIS are settled by legislation it would be well to a|>ply I lie rules laid down in section 25 so far as prao- tiiabie. Since the Act of 1871 the minimum amount of sub- scrihed cajiital to enable a bank to commence business has h(M II .'i?,"(»0,000. When the sura of $100,000 was paid np it iiiiglit obtain a certificate from the Ti-easury Board to enable it to issue notes and commence business. It was neressary that the amount paid up should be f200,- (Hiii wiihiii two years thereafter. Now it is necessary t lia t .'ii'i'.'iO.OOO be not only paid in, but actually paid over to lii( Minister of Finance, before the holding of the meet- in;; to elect directors. Xo special number is required to form a quorum, hi!t thei-e must be at least two to fonn a "meeting*': Sharp V. Dawes, L. R. 2 Q. B. D. 26 (187G). All hough nothing is said in the Act about the ajt- lH>in(nienl of scrutineers, the meeting may appoint scru- jtiueeis io iake the votes and n^port to the chairman if it sees lit: Wandsworth Co. v. Wright, 22 L. T. N. S. [404 (1S70). . The bank shall not issue notes nor commence the business of bankin'i^ until it has obtained from the Treasury Board a certificate permitting it to do so. and no application for such certificate shall be made until directors have been elected by the sub- scribers to the stock in the manner hereinbefore jirovided; and every director, provisional director or other person, issuing or authorizing the issue of the notes of such bank or transacting or au- thorizing the transaction of any business in con- M"l.. ■: rm 18 THE HANK ACT. [8. 17 nection with Hueh bank, cxt'i'jtt such as is herein- before provided, before the obtalninfjf of the cep- tittcate from the Treasury Hoard, nhali be guilty of an offence against this Act. R. S. O. c. 120, s. G, in part. Any person convicted of a violation of this section is liable to a line not exceeding $1,000, or to imprison- ment for a term not exceeding five years, or to both, in the discretion of the Court before which the conviction is had: sec. 101. 15. No certificate shall be given by the Treasury Board until it has been shown to the satisfaction of the Board, by affidavit or otherwise, that all the requirements of this Act and of the special Act of incorporation of the bank, as to the pay ment required to be made to the Minister of Fi- nance and Receiver General, the election of direr tors, deposit for security for note issue, or other wise, have been complied with, and that the sum so paid was then held by the Minister of Finance and Receiver (ieneral; and no certificate as afore- said shall be given except within one year from the passing of the Act of incorporation of the bank applying for the said certificate. I I lO. In the event of the bank not obtaining a certificate from the Treasury Board within one year from the time of the passing of its Act of incorporation, all the rights, powers and privileges conferred on such bank by its Act of incorporation shall there upon cease and determine and be of no force and effect whatever. This limit of one year for organization was not in previous Bank Acts. It is no doubt intended to prevent the taking out of charters for speculative purposes. IT. Upon the issue of the certificate in manner herein before provided, the Minister of Finance and Receiver General shall forthwith pay to the bank the amount of money so deposited with him :is aforesaid, without interest, after deducting there [8. 17 J herein- the cer )e guilty c. 120, 8. » section imprison- ) both, In onviction Treasury itisfaction ;, that all lie special J the pay iter of Fi- ll of direc .^ or other it the sum of Finance e as aforp- year from ion of the certificate ir from the oi-poration, mforred on shall there force and was not in to prevent poses. ner herein- inance and to the bank (ith him as Icting there 1^] INTEl VAL HEUULATIONS. 19 from the amount required to be deposited under wcttion fifty-four of this Av\; and in case no cer- titicate is issued by the Treasury Hoard within the tiiuc limited for the issue thereof, the amount so deposited shall be retucned to the person depoflit- infj; the same; but in no case shall the Minister of Fiiianee and Receiver (leneral be under any obli- gation to see to the proper application of the same in any way. The Minister of Finance is to retain the sum of $.'),()()(l until the annual adjustment takes place in the following year: sec, 54, sub.-sec. 55. INTEKNAL UKdl'I.ATK )NS. IS. The shareholders of the bank (or, in the case of La r.anque du Peuple, the principal partners or mem- bers of the corporation thereof,) may regulate, by bylaw, the following matters incident to the management and administration of the affairs of the bank, that is to say: The day upon which the annual general meeting of the shareholders for the election of directors shall be held; the record to be kept of proxies, and the time, not exceeding thirty days, within which proxies must be pro- duced and recorded prior to a meeting in order to entitle the holder to vote thereon; the number of the directors, which shall not be less than five and not more than ten, and the quorum thereof, which shall not be less than three; their qualifica- tion, subject to the provisions hereinafter made; the method of filling vacancies in the board of directors whenever the same occur during each year, and the time and proceedings for the elec- tion of directors, in case of a failure of any elec- tion on the day appointed for it; the remuneration of the president, vice-president and other directors; and the amount of discounts or loans which may be made to directors, either jointly or severally, or to any one firm or person, or to any shareholder, or to corporations: R. S. C. c. 120, ss. 9, 14 and 16. The shareholders may pass general by-laws or regu- lations for the internal government of the bank on the 18 TIIK HANK ACT. [8. 18 Bubjeets mentioned in this seetion. The details of the management and the (sinking out of theses regulations are entrusted to the Hoard of Directors. In the ease of lia IJanque du Peuple, which is a partnership en commandite, the gtmeral or principal partntjrs make the by-laws on the subjects above named, except as to the directors. As will be seen from sub- sectiim 4 of this section, it is in that respect governed by the provisions of its special charter. These bylaws may be passed at the annual general meeting or at a special meeting called for the purpose. When the shareholders meet they should organi/.e by electing one of their number as chairman, and by ap- pointing a secretary, who need not be a shareholder. Proper minutes of all these meetings should be taken and recorded. Several of the matters named in this section, which may now be regulated by by-law, were formerly em- bodied in the respective charters of the banks. Annual Meeting. — Until 1871 the general Bank Acts did not authorize the shareholders to fix the date of the annual meeting. The day was formerly named in the sev- eral Acts of incorporation. In the case of a new bank, the day should be fixed at the first meeting of subscrib- ers: sec. 13. The place of meeting is the head oflSce; the directors fix the hour. Public notice should be given for at least four weeks in a newspaper published at the place where the head oflQce is situate: sec. 19, sub.-sec. 4. The by-laws should provide for the case of failure to hold the annual meeting on the day appointed, or fjiilure to elect directors at it. Otherwise a special general meeting might be called in accordance with section 24. At this annual meeting the directors are elected: sees. 19 and 20; and a detailed annual statement of the affairs of the bank laid before the shareholders: sec. 45. [s. 1& H. IHl IXTEKKAL ItKdULATIONS. 21 \ of the alationa ich is a )rincipal ? named, om sub- ;overned I }j;('nrral IHirpose. aui/e by (1 by ap- i('h(>l of a by law Ihey might be produced up to the time of th" inceliug. or up to the time even of voting. Only pntxies that comidy with all the jn'oviwicms of the Act mIkmiIcI be recorded. Thus the proxy nmst not be two yf.irs old; both the sharehohler giving (lie proxy and the (tnc to whom it Ih given must have held their stock for at h'^ast thirty days; neither of them cjin be a man- ager, cashier, clerk or other 8ubordinat(> ollicer of the bank; and neither must be in arrear for any call on the stock being voted on or (pialifying: sec. 25. When a regulation was passed reipiiring pioxy papers to be at- tested, this was held to be imi>erative, and proxy papers noi so attested were rejected: llarben v. Phillips, 2ii Ch. I). 14 iiss;}). Iiinrlor-f. — Tile !>iitH|ue dn I'euple cannot pass a by- law on the subject; it is governed by its charter: sub-seo. 4. The provision t hat the number should not be less than five nor more than ten. and as to the quorum is new. If the number of directors is reduc<'d below five from any cause, the remaining directors cannot do businc^ss until tliere are at least that niiiuber: Toronto lirewing Co. v. Blake, 2 O. R. 175 (1882). in tile absejice of a bylaw a Tuajority would he a (|uoruni: Ilowl)each Coal Co, v. Teague, 5 H. & N. 151 (l><»iO.: Ho London, etc.. Land Co., L. R. .*?! Ch. D. 22.3 (l^S5j; K. 8. C. c 1, s. 7 (42^^. If, however, without any by-law on the subject, any three or more directors have usually conduct<'d business at meetings of the board, such number would be held to be a qnonim: English and Irish Rolling Stock Co., Lyon's Case. :'.,"; lieav. 040 (1866); Lyster's Case, L. R. 4 Eq. 233 (1867). The stock qualilication in section 19 may be increased but cannot be diminished. The president, vice president, or a direc- tor may be removed by the shareholders for just cause: sec. 24. sub-sec. 2. :IH ' I'' 22 THE HANK ACT. [s. 18 i RcmiDii ration. — No president, vic€-president, Oi other director can receive any sura for his services ex- cept under a by law passed by the shareholders. Discounts. — The shareholders lUity passs a by-law fixing the maximum amount that may be lent to direc- tors, or .o any one finn or person, or to any sh.areholder, or to corporations. The aggregate amount of loans to directors, and firms of which they are partners, must be given in each monthly statement sent to the Minister of Finance: sec. 85, and Schedule D. By-htu'x. — Xo ]»artirular formality is reqnirtd for by- laws; but as they are usually intended for a permanency, and not for a temporary use, they should be drawn up witi- care in statutory form. A by-law should be con- sistent with the statute under which it is framed aud with the general law. It should also be ce?'tain and free from ambiguity, general in its application, reason able and positive in its terms. The shareholders may ])ass these l)y-laws at an annual meeting, or at a special meeting called f(U' the purpose. A simple majority of the shares present and voting is suflQcient. By-law 3 should be attested by the ])residing officer and by the seal of the bank. If the nuH'ting is not unanimous, the voting on a l)y law must be by ballot, and in accordance with the otlu'r i»ro visions of section 25. The by-laws are binding upon the shareholders, otVi- cers and employees. .-Ntrangers dealing with the baJik are justified in assuming that the by laAvs were regularly passed: Koviil Hank of India's Case, L. K. 4 Ch. 2.")2 (1869). 2. The shareholders may authorize the directors to establish guarantee and jjension funds for the officers and employees of the bank and their families, and to contribute thereto out of the funds of the bank: 1 [s. 18 nt, or ices ex- by-law direc- eholder, loans to ■s, must Minister i for by nanency, rawn up [ be oon- nied aud tain and I, reason ^vs at an 1 for the present attested lank. If a bylaw tlier pro ders. ofli- the bank regularly C\\. 2r)2 ■octors to I for tbe and their It of the H. 1!)] IXTEUX A L HEGULATIONS. '23 This provision is new. The old Act, section 17, validated by-laws for establishing a guarantee fund for (lie employees of the bank, but did not in express terms authorize the voting of money of the bank to the fund. This is n'lK^ited in section 22 of the present Act. :;. In til it is otherwise pr<'scribed by by-law under this section, the by-laws of the bauk on any raattci- which may be regulated by by-law under this sec- tion shall remain in force, except as to any pro- vision lixing the (nialification of directors at an amount less than that ]»rcscribed by this Act; and no person shall be elected oi* continue to be a director unless he holds slock paid up to the amount required by this Act, or such greater amount as is required by any by-law in that behalf: R. S. 0. c. 120, s. 9, 8.-S. 4. ' The minimum (lualitication of directors is fixed by s( ction 1:». sub-section 2. The shareholders may raise til!' (lualilication, but they cannot lower it. When a director ceases to have the necessary (pialiticiv;iv,.; his p!:ice at once thereby beconu's vacant. The other (iii-ectors, on becoming aware of the fact, should pass a resolution declaring the place vacant. 4. Tlie foregoing ])rovisioriS of this section, touching directors, shall not apply to La Banque du Peuple, which shall in these matters be governed by the pr(>visioiis of its charter. S!>.Tne stock. projieHy, alfairs and concei-ns of the itaiik shall be managed by a, board of directors, who shall be elected annually in manner herein- jiftci- >rovided, and shall be eligibh^ for re-elec tioii; I{. S. C. c. 120, s. t), S.-S. 2, jtart; ibid. s. 12. part. The boai'd is to be composed of sucii number of directors, not less than five nor more than ten, as the J sliarclialders may have deterir.ined: sees. i:'. and IS. K"r tile manner in which the shareholders may control ^ till' (lir<'ctors. see sees. IS, 20. and 24. Amiuig the speci- m 24 THE BANK ACT. [s. ly fled duties and powers of directors are the followin},': To make by-laws: sec. 22; to appoint officers, clerks, etc., Jind to require them to j^ive bonds: sec. 23; to call special meetings of the shareholders: sec. 24; to allot stock: sec. 27; to regulate transfers: sec. 29; to make calls: sec, .*J1; to make annual statements: sec. 45; to declare dividends: sec. 47; to issue notes: sec. 51; to open branches of the bank: sec. 04; to make monthly retunis to the Minister of Finance: sec. 85. Such matters as the Act does not require to be done by by-laws may be done by resolution. By-laws should have the coi-jwrate seal affixed; as also such deeds and documents as require a seal by the law of the Dominion or of the Trovince when they are executed, or of the place where they ai-e to be used. Si'e Bank of Upper Canada v. Widmer, 2 U. C. O. S. 222 (1832). No director should vote on the question of a loan to himself, or on any other matter in which he has a po cuniary interest. When acting as a director he is in the position of a quasi-trustee for the shareholders, and should not have any adverse personal interest. The buJness should be done by the directors ai r('i,'ularly called meetings of the board, attended by ;it least a quorum, as fixed by by-law. The assent ev<'n of a majority of the directors not given at such a uieK^inj; will not bind the bank: D'Arcy v. Tamar By. Co.. L. K. 2 Kx. 158 (18(17). The acts of de faclo direct ois in dealing with third persons within the powers conferred on them by the Act are valid, and will bind the bank, even though they may have been illegally oi- irregularly elected: In le Cotmty Life Assurar^cc Co., L. R. 5 (Mi. 288 (1870); Royal British Bank v. Turquand, (> E. & B. 327 (1856); Mahony V. Kast Holyford Mining (^o.. L. R. 7 H. L. 8G<) (1875i: Baird v. Bank of Washington. H Seargeant & Rawle (Pa.), 411 (1824). m [s. 19 folio win J,': lerks, etc., all fepocial lot stock: lake calls: to declare ; to open ily retuiTis to be doue iws should deeds and ? Dominion or of the c of Upper if a loan to B has a pe- ar he is in tolders, find t irectors at Qdod by !it ( I'inission to do so on the authonly of a resolution rovision were observed: Conimei-cial Bank v. Great Wt'stern Railway Ckmipany. 3 Moore N, S. 295 (t8rated by special Act, a majority of the directors must be not only British sub- jects, but must also be resident in Canada: R. S. O. chap, lis, sec. !t. In the case of joint stock companies incor- porated by letters patent a majority of the directors must be residents of Canada, but there is no require- ment as to their nationality: R. S. C. chap. 119, sec 30. i. The directors shall be elected by the shareholders on such day in ea<*h year as is api)ointed by the charter or by any by-law of the bank, and such election shall take place at the head office of the bank at such time of tlu- day as the directors ai)point; and i)ublic notice thereof shall be given by the directors, by ])ublishing the same for at least four weeks previous to the time (►f holding such election, in a newspaper i)ublished at the place where the said head office is situate: R. S. 0. c. 120, s. 12. part. The notice of the annual meeting should be pub- llished in the Canada (lazette as well as in a local news- |l>aper: sec. lOi*. The sharehokh'rs may fix the day by by- -law. the (lire( Kirs name the hour. The shareholders [elect one of theii- number as chairman an«l appoint a secretary. As a rule the president is elected chaii'inan of the meeting and moves the adoi)ti(ni of tlie annual ;rej)ort. The sli,ii'elH•• directors depends (»n sucli ('(juali^y, then tlic (urcctors who liave a greater number, or the majority of them, shall delennini- wliich of the said persons so having jmi equal nuTiber of votes shall be the director or directors, st> as to complete the full number; and the said directors, as soon as may be, after the said elec tion, sliall i)roceed to elect, by ballot, tT»vu of thcii number to l)e j)resident and vice-i»ret*ident respec tively : Tlie chairman of the shareholders' mtM-ring lias no casting vote in case of a tie in the election of diiectors: sec. 2"*, sub.-sec. 2. It is decided by those directors wlio ail' clearly elected. The pH'sident of a bank occupies a very im])ortani and responsible position, and yet it is surprising how lilt U is said about him or his oiBce in the Act. The onlv [8. ISI l!)J INTERNAL REGULATIONS. '![) id to be of votes 0. c. 12\), il have a SIS ftxed lore thiin \n]i (liiMM tes in his unless it aore ley;al nation has ctiou of a lOD : Heuiy • moi"e pel" d the eler such per Is on sucli a jiireaU'v (lelenninc jMi equal dii-eetors, a the said said eh'f su of tluii cnt respec |nj4 ha« DO dirertoi> lectors w'Iki important Irising ho^^ The onlv duties specially assigned to him are: (1) presiding at meetings of the board: see. 21; (2) executing transfers of forfeited shares: sec. 33; and (3) signing n'turas to the Government: sees. 85, 80 and 88. The onlv privilege given him beyond his fellow directors is that of giving a second or casting vote at board meet- lings in ciise of a tie: see. 21. In case of his absence Itlie vice-president takes his place. In practice, the pre- ■sident is usually expected to give more time and atteu- v^tinii to the bank than other directors and usually re- •Iceivcs additional remuneration therefor; but his powers iiii(1 i' 'ties, other than those above sp (ill vacancies, and the number of directors falls be- 80 THE HANK ACT, [h. 21 low tlif quorum, n. special uieeting of sliarcholdera would be necessarv to All the vacancies: Newhaven Local Board v. Neuhaven tScliool lioard, 30 Ch. D. 350 (1885). Where no by-law on the subject had been passed the directors undei-took to fill a vacancy. The quorum of the board was three, A resolution, seconded by the new- director at a meetiu}; at which three others, were pre sent was upheld, althoujjrh his appointment was a nullity: Bank of Liverpool v. Bigelow, 12 N. S. (3 R & C.) 236 (1878). M 20. If an election of directors is not made on the daj appointed for that purpose, such election of direc tors may take place on any other day according to the bylaws made by the shareholders in that behalf; and the directors then in office shall re- main in oflBce until a new election is made. R S. C. e. 120, s. 15. If no such by-law has been made, it would be neces- sary to call Ji special meeting of the shareholders for the election of directors. UI.At all meetings of the directors, the president or in his absence the vice-president, or in the absence of both of them, one of the directors pre- sent, chosen to act pro tempore, shall preside ; and the pres dent, vice-president or president pro tempore so presiding shall vote as a director, and if there is an equal division on any question shall also have a casting vote. R S. C. c. 120, s. 16. While the president of a bank usually takes aji active part in the management of its affairs, the special powers given to him and the duties specially assigned] to him by the Act, beyond those assigned to the direc tors generally, are very few. Besides the duty of pre siding at the meetings of the board, he is one of the I officers named to execute the transfer of forfeited shares which have been sold: see. 33; he should sign the [h. 21 •221 IN'IEHNAL lUXJULATIONH. 31 loldera vluiven D. 350 tscd the »rum of the new ere pre was H (3 B. & president, or in the ^ jctors pre 1 preside ; sident pro ^ectar, and stion shall 10, s. 16. Ill nllilv reliirns to the Government: sec. 85; special ictiiriis when jisked for : see. S(; ; and the annual retunis of sums lying more than five years unclaimed: SOI'. ss. Tlif by-laws contemplated by the next section will ainiosi hi variably assign to him important duties, especi- nlly iiK to his becoming a party to important contracts on tlie ])art of the bank, which may not come within the scope of the duties assigned fo the cashier or mannger. Tlie directors may frame by liiws or rules regulat- ing flie transaction of business at meetings of the board; in default of these, the president or presiding direetor would be governed by the usage of the board, or the well-established rules common to such deliberative hodies. They may make any regulations they choose, except that they cannot override any pronsion of the Act, or any by law passed by the shareholders under section IS. All the business of the board should be transacted at a regularly called meeting attended by a quorum of tlio directors. The assent of the directors individually elsewhere than at such a meeting will not bind the bank. Full and correct minutes of each meeting should he kept and recorded. Such minutes are usually read and confirmed at the beginning of the next succeeding regular meeting. 32.-The directors may make by-laws and regulations (not repugnant to the provisions of this Act or the laws of Canada) touching the management and disposition of the stock, property, affairs and con- cerns of the bank, and touching the duties and con- duct of the officers, clerks and servants employed therein, and all such other matters as appertain to the business of a bank: Provided always, that all by-laws of the bank heretofore lawfully made and now in force, in regard to any matter ! !i.-r 1 82 THE HANK ACT. [h. L';i s. respcctinj; which the dinM-lors nia.v niukc by lawn under thin scciiou jindudinj; any bylaws lor estJJiblishinj? jjiiaiantcH* and pension funds for thr employees of the bank), shall remain in force until they an? repealed or altered bv others made und< r tliis Act. It. S, O. c. 120, s. 17'. Under the hwid of "officers" in this section woul.l be comprised not only tliose usually desi}i;natcd l)y tli;,i name, but also the jiresident, vice-president, and a man aj,Mnj,' director, if the bank should have such an officer. Tliese by-laws do not rccpiin; to be approved by tlic sha;reholders. Such by-laws, wliile bindinj^ upon the shareholders and officers of the bank, are not bindin^j; upon third l>arties unless they are aware of them: In re Asiatic liankins Cori)oration, L. K. 4 Ch. 1*52 (18r»1)). 2iS. The directors may appoint as many officers, clerks and servants for carrying!; on the business of tln' bank, and with such sjilaries and allowances, as they consider necessary, and they may also ap point a director or directors for anv branch of the bank: R. S. C. c. 120, s. 18, s.-s, 'l. The director or directors appointed for any branch of the bank would be included in the ntimbcr fixed by by-law passed by the shareholders, and with the other directors should not exceed the maximum of ten. The object would usually be to assign a director, who may not reside where the head office of the bank is situate, to the branch in his own locality to exercise special supervision over it. Officers and clerks have power to bind the bank in so far as any act done by them is within the scope of the usual duties of sueh an officer. Parties dealiu}; with them in good faith are not affected by any irregu- larity in their appointment, or bound by any private directions given to them or special limitations imposed upon them by by-law or otherwise. ■■M s. -2:]] \ST\MS.\l. IlKOULATIONS — II.LL'STUA'i'IONS. :i3 The term '' otticcrs " in this section would not in- rln«ii' lilt' pn'sidrnt or vicc^iH'csidont, whoso election is provided for in section 1!). II would 1n(dude the nian- ji<'ei'. liishier. and suhoi-dinate oHicers of the bank. The duties of the nianafjer oi' cashier and other oHicers should he deliued by a by-law jtassed under section L*L'. .\s to some of them the name will indicate the duties iind s('(>pe of their autliority. Third |)arties dealing- uitli them in j^ood faith may assume Ihat they ha\'e ImkIi jtowers as ai-e usually jxtssessed by such ollicers irspectively: Smith v. WilMUi. 11 i\ 15. S97 (1852). The followiu}; may be cited as illustrations on this point: !l,IJ'ST!t.\Tl(»NS. ■^•^ I f' I. rii<> manajjer of a. bank has not, as such, aullior- iity Id sell land beloiiuinj? to the bank, and it is doubt- ful if ii verbal authorization by the directors Is suih- [ticiii: Dominion Bank v. Knowlton, 25 (Jrant, 125 (1877). -. Where a note was made payable to "The <^'aua- [dian T.ank of (Commerce or order" it was endorsed " D. II. Charles, manaser." It was urfjed that the endorse- iiiient should have been by and in the name of the bank, under the corporate seal, or at least with the name of jtlic hank added to the manager's name, but the Court [did not find it necessary to determine the point: Small [v. Riddell, 31 U. C. C. P. 373 (1S80). :'.. A bank sold lumber held by it as secunty for idvaiiccs, and the purchaser required a guarantee whicli llic directors resolved to give after examination by a jcullcr. The manager, however, gave a writen guaran ice in the name of the bank without employing a cullei-. The purchaser being in good faith, the bank was held iable on the guarantee: Dobell v. Ontario Bank, 3 O. R. 2!)!» I1SS2). I. A bank manager is not acting beyond the scope )f his authority in accepting the cheque of a customer ^ IMAGE EVALUATION TEST TARGET (MT-3) I.C I! If: ISS IIM •^° 1^ III 2.2 Ml 1m ^ IIIIIM L8 1.25 |U III 1.6 < 6" ► V] W '%Z.^ ■'■ ^l °> > ^1 ^W^ om '/ /A Photographic Sciences Corporation 23 WEST MAIN STREET WEBSTER, NY. 14580 (716) S73-4503 ^^-. -^^^ ic- U.A V 84 THE BANK ACT. [s. 23 Jay, or Mol- lo deliver to another customer on a particular d on the happening of a wpeciilc event: Grieve v. sons Hank, 8 O. II. 162 (1885). 5. Where a deed of composition was executed by a local manager in the name of the bank under an ordin- ary seal, it was held not to be binding on the bank, not being under the corporate seal, nor under a signature or sign manual whereby it executed documents: Bank of CJommerce v. Jenkins, 16 O. R. 215 (1888). 6. The manager of a bank may deal in the ordinary and proper course of banking business with trading cor- porations, even though he is interested as a shareholder and director in them, and tins is not uecessjirily a viola- tion of the rule that an agent cannot be allowed to place his duty in conflict with his interests: Bank of Upper Canada v. Bradshaw, L. R. 1 P. C. 479; 17 L. C. R. 273 (1867). 7. Where the Bank of Montreal, by its manager, accepted cheques drawn on it by the City Bank, and the latter deposited them for value in the Banque Nationale. it was neld that the Bank of Montreal could not refuse its acceptance thus made, and was bound to guarantee and protect the (^ty Bank from all losses thereunder : Banque Nationale v. City Bank, 17 L. C. J. 11)7 ( 1873). 8. The president and manager of a bank has not, as such, authority to give to a creditor of the bank a considerable amount of the notes discounted by the bank to guarantee a debt existing before the pledge; a special resolution of the board would be necessary: Ex- change Bank v. C. & D. Savings Bank, 14 R. L. 8 (1885). 9. Where the cashier of a bank borrowed money from a savings bank in his own name, but on the repre sentation that it was for his bank, and the money was paid to him personally and not as cashier, but subse quently changes were made in the books, cha»*ging the loan to the bank, the bank having stopped payment, and the new board elected after the suspension not hav- if s. 23] INTERNAL REGULATIONS — ILLUSTRATIONS. 35 ing repudiated the entries for about a year, it was held by the Court of Appeal for Quebec that it was ratified by acquiescence: Oity and District Savings Bank v. Jacques Oartier Bank, 30 L. C. J. 106 (1886). This was reversed by the Privy Council on the ground that the new board had not full knowledge of the facts, and that acquiescence and ratification would not apply to a debt which the bank never owed: Banque Jacques Car- tier V. C. & D. Savings Bank, 13 App. Gas. Ill (1887). 10. Where the president and manager of a bank liad accepted cheques of a customer and made them payable at a future day, and these were discounted by another bank and paid at maturity by the first named biink, the latter was held liable for cheques subse- (liiently accepted Jind discounted in the same way. i>ijy- ment having been refused on the ground that the presi- dent and manager had exceeded his powers: Exchange Bank v. People's Bank, (S. O. Can.) 10 L. X. 302; 7 C. L. T. 387 (1887). 11. A bank which makes a loan and accepts as col- lateral certain shares of its own stock, which it pro' cures to be transferred to its manager, is liable to the borrower for the return of this stock when the latter lias paid the debt, although the transfer was illegal: Kxchange Bank v. Fletcher, 19 B. L. 377 (1890). 12. Directors cannot divest themselves of their per- sonal responsibility. While they are at liberty to employ such assistants as may be required to carry on the business of the bank, they are nevertheless respon- sible for the fault and misconduct of the employees, un- less the injurious acts complained of are such as could not have been prevented by the exercise of resisonable diligence on their part: McDonald v. Rankin, M. L. R. 7 S. C. 44 (1890). 13. Where a cashier whose duty it was to obtain the acceptance of bills of exchange, in which the bank was interested, fraudulently, but without the knowledge of i m M m ff m * i r".1; r, ■ ' ac) THE BANK ACT. [s. 2» the preHident or directorH, by a material false rcpi^e»en- tation, induced the drawee to accept such a bill, the bank was held liable: Mackay v. Oommercial Bank, L. R. 5 P. C. 394 (1874). 14. It is no part of the business of tlio agent of a bank to start a criminal prosecution, and when he docs so without special authority the bank is not liable: Thompson v. Bank of Nova Scotia, 13 C. L. T. 311 (18J):J). The powers and duties of a cashier in the United States have been laid down as follows: Ee is the chief executive officer through whom the wliole financial operations of the bank are conducted. Hi- receives and pays out its moneys, collects and pjivs its debts, and receives and transfers its commerciiU securities. Subordinate officers may be appointed, but they are under his direction. They may be clothed with power to certify cheques, but this would not aflfect liia right to do the same thing. The directors may limit his authority as they deem proper, but this would not aflfect those to whom the limitation is unknown: Merchants lijink V. Starte Bank, 10 Wallace (U. S.) at p. 650 (1870). The ordinary duties of a cashier do not compre- hend the making of a contract, which involves the pay- ment of money, without an express authority from the directors, unless it be such as relates to the customary transactions of the bank: Morse v. Mass. National Bank, 1 Holmes O. O. (U. S.) 209 (1873); U. S. v. Bank of Colum- bus, 21 Howard (U. S.) 364 (1858). He may indorse, negotiate and tramsfer all negoti- able paper on behalf of the bank : Wild v. Bank of Pass- amaquoddy, 3 Mason O. O. (U. S.) 505 (1825); but with- out special authority he has not a right to di8])08o of non^negotiable paper, or other property the dealing in which is not in the ordinary course of banking: Barrick V. Austin, 21 Barbour (N. Y.) 241 (1855). If the directors, through inattention or otherwise, allow the cashier to pursue a line of conduct for a oon« i- :-; 8. 23] INTEKXAL REfULATIONS. 37 siiij'i'ablt' period without objection, the banlv would be bound in favor of parties dealing with him in good faith: Ciildwcil V. National Itanlv, (54 Barbour (N. Y.) 333 (1869). L'. Before permitting any cashier, officer, clerk or s«'pviuit of the bunk to enter upon the duties of hiH office, the directors shall require him to give Itond, guarantee, or other security to the satisfac- tion of the directors, for the due and faithful i»er- lonnance of liin dutirs. It. H. (\ v. V2i). s. IS, s.-s. li. The taking of Heenriiy "for the due and faithful peifc'-inance of his duties'' from eaeh of thesc officers is e(»iii[)ul8ory. Direetors who iic^^lect this duty might be iK'ld iHTSonolly responsilde in ease of loss. A contract of guarantee l).v the Statute of Frauds and by Article 1233 of the Civil Code of Quebec must be ill writing. The employment of tlie person guaran- teed is a sufficient consideration for tlie contract. The relations and liability of the respective parties towards each other will be determined by the laws of the respec- tive provinces on the subject of 8\iretysliip, which, how- ever, do not mateiially dilTer. I'ormerly private bouJ.s were the rule ; now the bonds of incorporated guarantee companies are gener- ally given or requircMl. These usually contain special stipuljitions as to enipioyinent, noli«e of ii-regular- ities, etc., which should be carefully examined on be- half of the bank, to see that they fully comply with the requiivmeuteruf the Act. It is to be Iwme in mind that a surety's liability is not to be extended beyond the teiTus of his engagement. As a l>ond in the terms of the Act would be held to guarantee not only the honesty of the employee, but also his conii>«'ten«'y for the position, any material change in his position or duties which in- creases the risk would discharge the surety, unless the contract makes provisicm for it. Where the agreement between the bank and the employe** is made a part of the contract with the surety, a change, even if not ma- terial, would bring iibout the same result. In view of ■I: f ■ IK*''!.' t i. mi 15' h 88 THE BANK ACT. [s. 28 the law being so favorable to the release of sureties, banks cannot be too careful as to the bonds they accept. The following cases will aid in illustrating the law on the subject: ILLUSTIUTIONS. r 1. A bond given in favor of an agent of a bank will not cover losses occurring through his fault after his appointment as cashier: Bank of Upper Canada v. Oovei-t, 5 U. a O. S. 541 (183(5). 2. Where the bond said nothing about the salary of the employee, the sureties cannot set up as a defence a change in the mode of his remuneration: Bank of To- ronto V. Wilmot, 19 U. C. Q. B. 73 (1859). 3. Where a bond was given for faithful service " as clerk, or in any other capacity whatsoever," a plea that the clerk was transferred to the position of teller^ whereby the risk was increased, is bad: Koyiil Cana- dian Bank v. Yates, 19 U. C. C. P. 439, (1809). 4. The sureties of an absconding bank cashier are not relieved from liability by showing that the directors employed him in transacting what was not properly banking business, in the course of which he appropri- ated the bank funds to his own. use; the claim against the sureties being for the money so appropriated by him, and not for losses occasioned by such illegal trans- actions. Nor are the sureties discharged by the negli- gence of the directors in not inspecting the books and detecting such misappropriation, unless it amounts to connivance, or such gross negligence as to warrant the inference of fraud: Springer v. The Exchange Bank, 14 S. O. Can. 716 (1887). 5. Where a teller was engaged at a salary of £:iOO per annum, and by the same deed defendants became his sureties, a subset] uent reduction of his salary with- out the consent of the sureties freed them from liability g. 23J INTERNAL REGULATIONS — ILLUSTRATIONS. $S^ for losses occurring after such reduction: Oity Bank v. lirowu, '2 L. C. R. 246 (1852). (). The allowing by a bank manager of overdrafts, without security, is infidelity and an irregularity with- in the meaning of a bond guaranteeing the bank against loss by want of integrity, honesty and tid<*lity, or by negligence, default or irregularity on his pari : Itank of Toronto v. European Assurance Society, 14 L. 0. J. 180 (1870). Affirmed in P. C. 7 R. L. 57 (1875). 7. An employee left a large sum of money in opan bags in his room while he went to lunch. In his ab- sence the room was broken into and the money stolen. The company that had guaranteed that he should dili- gently and faithfully discharge his duties was held liable: Citizens Ins. Co. v. G. T. li. Co., 3 L. N. 312 (1880). 8. A package of bank notes was found to contain $((.300 h'ss than the amount which the teller had en- dorsed on it. The fraud had been going on for years, but was skilfully covered up by false entries, so that it had escaped detection during the regular inspections. The company which had guaranteed his fidelity was held liable, but only for $1,400, the amount taken sub- sequent to their guarantee: ISanque Nationale v. Lespei- ance, 4 L. N. 147 (1881). 9. A bond given in favor of a cashier, for the faith- ful performance of his duties "as an employee of the bank " does not cover defalcations after he was made managing director and president: Exchange Bank v. <;ault, 30 L. C. J. 259 (18SG). 10. A bank cashier took to his residence bank notes to sign. He brought them back to the bank, and there substituted $5 notes for $10 notes. It was held that as the taking of the notes to his house had not contri- buted to the defalcation, there was no negligence on the part of the bank to avfrid the policy, and his act came under the clause guaranteeing against loss caused by " fraud and dishonesty amounting to embezzlement." II . Iri fi' ■'■\ \ 1 ■'"'. I- . ■it f'''-!iii til m I 40 THE HANK ACr. [». 23 1 li J • ■ ■ ■ ; < i; i Ho al80 induced (he Ii'dgerkoeper to ccrlil^ his ohoques for a large huiu, althongli he Itad no fiindH, and some of tliese were paid. This was also licld to come under llie same clause. The bank gave notice to the guarantee company the day after his fraud was discovered. This was held to be in reasonable time, and the fact that after his absconding the bank foll(>wed him sind recover ed a large part of the money, dif^ not relieve the guaran- tee comj»any, as there remained a loss exceeding the amount of the policy: liondon Ouarantee Co. v. Hoche- laga Hank, Q. H. :\ Q. IJ. ii.'j (181KJ). 11. .Moneys received by an agjnt not in pursuance of the |»arlicular agency disclosed to the surety in tiie bond, are not covered by ji general clause as to handing over moneys received: Napier v. Bruce, 8 CI. & F. 470 (1842.) 12. Where a bank without the consent of the surety made a new arrangement with a clerk increasing his salary, and also increasing his liability, the surety was 1h'1(] to liavf* been relieved: IJonar v. Macdonald. '\ II. L. ('as. L'2(5 (1850). lo. Where tii" mode of payment of the em]tloyeo is recited in the bjnd, and this is changed, it may oper- ate to discharge the surety: LkjikIou & N. W. Ky. To. v. Wliinray, 10 Exch. 77 (is.-)4i. 14. A surety guaranti'cing I Ik* honcj^ty of an em- ployee is not relieved from his obligation because the employer fails to use all the means in his power to gufird against the consetpiences of dishonesty. Mere passive inactivity is not enough; tliei*e must be .some positive act done to the prejudice of the surety, or such d( gree of nejiligence as to imply connivance* am! )«• amount to fraud: IJIack v. Ottoman Bank, 8 Jur. X. S. (P. O.) 801 (18(52). 15- If the insured should be guilty of dishonesty and the bank retain him in its service without the know- ledge or consent of the surety, express or implied, it will I., R. 24] INTERNAL IIEOI LATIONS— ll.I.rsTltATIOXS. 41 have no recourHc aguiuMt the surety for any subs(M|uent loss: Phillips V. Foxall, U U. 7 Q. J J. (Uifi (1S72); Sandfi- Hon V, Aston, U B. 8 Ex. 73 (1873). 10. A bond well and truly to execute the duties of wishier or teller of a bank, includ<>s not only honesty, but reasonable skill and diligence. If, therefore, he |Mrfonn» thow dnties ncj^iij^eiitly and unskilfully, or if ln> violates tlu'ui from want of capacity and care, the condition of the bond is broken: Harnnp:ton v. Bank of W.ishinjrlon, 14 Sci-jrcanl & Hawlc iPsi.i 40.') (1826) ; Anu'Hcan IJank v. Adams, 12 Pickcrinj? (Mass.) 303 (is:i2); Minor v. Mechanics' Hank, 1 Peters, 46 (1828). 17. Where the bond was jxiven in favor of an assist- ant l)ookkeeper in a bank, that he slunild faithfully dis- ciiarjj[e the trust reposed in him as such assistant book- keeper, and while keeping a journal which until after the bond was given had been kept by the teller, he em- bezzled money and made fraudulent entries in this joniTial to conceal his crime, it was held that the suH'ties were not relieved: Kochester (Mty Hank v. El- W(M)d, 21 N. Y. SS (ISCO). See also Detroit Savings Bank v. Ziegler. 4!) Mich. 157 (1882). Several <»f tlu* banks have l.itterly established guar- ant(H' funds of their own. fpi 1 ' ) ' ' r 1 i 1'' i * I mi ■: I 21. The directors of the bank, or Jiny four of them, — or any nunibei' not less than twenty-tivc of the shareholders of the bank, who are together pro- prietors of at least one-tenth of the paid-up capi- tal stock of the bank, by themselves or by their proxies, — may, at any time, call a special general meetin.-r of tlu* shareliolders. to be held at their usnal place <»f meeting. )i])<>n giving six weeks' previous public nttlice. specifying in such notice the objeii of such meeting: K. S. C. c. 120, s. 11. s.s. 1. ' The public notice of such siMM-ial meeting should be publishe. n is Hitnnto, niid iiIho in tlio Cnnn<1a Gnzetto : see. lUi*. No busine88 can come before the ineetiiiK except that Mpecified iu the uotice. The proxieM should be leeiB than two years old, uu in the next Miction. Notices of special meetings are not to be construed with excessive Htrictness, provided they give the share- holders fair uotice of what is proposed to be done: Wright 'h (Jase, L. R. 12 Eq. a35w (1871). Notice of a meeting for special business \h not sufflcient for such a meeting: Wills v. Murray, 4 Ex. 843 (1850). f 2. If the object of tiny wuch special gemrul meeting is to consider the proposed removal of the presi- dent or vii'C prt'siUcnt, ov of ji director ot the bank, for mnhidniinistration or other specified and apparently just cause, and if a majority of the vot<^ of tiu' shareholders at such meeting is given for such removal, a director to replace him shall be elected or appointed in the manner pro- vided by the by-laws of the bank, or if there are no by laws providing there^for, then by the share- holders at such meeting; and if it is the presi- dent or vice-president who is removed, his office shall be filled by the directors in the manner pro- vided in case of a vacancy occurring in liie oiiice of i>resident or n(e-]>n'sid«'ii1. H. S. ('. c. 120, s. 11, 8. s. 2. In the absence of such special power as is contained in this siM'tion, the shareholders would have no right to remove the president, vice-president or a director; but tlu*y would hold office for the year for which they were elected, unless removed by the Court. The cause of complaint should be specitied in the notice. If the proceeding l>e bona fide the Courts will not interfere with the discretion of the sharehohlers. The voting on tlie question of removal must be by ballot: sec. 25. When a vacancy has been created by such a vote the vacant place on the board will be filled in the manner provided by the by-laws of the bank. If there be no by-law on the subject the shareholders will fill 8. 25] INTERNAL HKCU'LATImNH. 43 the place on the board by a biillot vot<> at Huch nioetiiiK. In Hiu'h a caHe this Klionid be iiienthMicd in the uotice. If it should be the president or vice-president that was thus removed, the board, as thus UIIimI up, would elect a 8Ut'(«'ssor in the manner provided hy sertinti 19, sub- sett ioiiH shareluilders present in person or represented by proxy; and the chair- man elected to preside at any such meeting of the shareholders shall vote as a shareholder only, un- less there is a tie, — in which case, except as to the election of a director, he shall have a casting vote: R. S. C. c. 120, s. 10. in part. At all mt^etings of shareholders they h.ave the right to elect any one of their number as chairman. The :.j THE HANK Arf. \h, 2.1 iMM'Tctury r8 ;\ bare majority of the Hhares preHent niul vatinf^ \h muHI- cient in nearly all rases. A by-law to n'tlnco tlic sto^k rcqulreK a majority of Ihc ^vhoI(^ slork: m*v. 27. A BharehohU'i' is not diHqiialiflcd because he has a i>ersonal peruniary iuten-Ht in tlie qiU'Htion: N. VV. Trnnsporta- ticm Co. V. Jieutty, L. 11. 12 A. (J. tiHi> (l«H7). 3. If two or uioi(> iM'i'HouH ur«> joint lioldcrH (»f niuires, any one of mucIi joint iioldeiH may Im' empowered, by letter of attorney from the other joint holder oi* ludihTN, or a majority of tiiem, to rcpresenl the said shares, and vote aocordinjjly: R. 8. C. c. 120, s. 10, in part. Joint liolders of sluires, such as executors, trust«H's, a firm, or the like, may either all join In a proxy to another shareholder, or one of tlicm may be authori/iCd by the others, or a majority of t liem, to act. " When ail act or tiling is required to be done by more tlian t \v(» persons, a majority of them may do it " : Interpreta- tion Act, R. 8. C. chap. 1, sec. 7 (42). They mijflit also all attend iind act jointly. 4, Shareholders may vote by proxy, but no pfrson other than a shart^holder eligible to vote shall be IH'rmitted to vote or act as such proxy, and no mana^jer, caslii(«r, clerk or other subordinate of- ticer of the bank shall vote either in person or by proxy, or hold a proxy for that purpose: R. 8. C. c. 120, s. 10, in part. Tlie word " manager " in this clause would probably not be held to apply to a managing director in a bank whicli has such an oflflcer. In the Bank Act of 1843 tlic exi)r('ssion was the " cashier or other officer," and it was held that the president was not an officer within the meaning of that clause: Reg. v. Rank of Upper Can ada, 2 U. C. O. 8. 222 (1848). 1»(!! INTEKNAI. UKlilJI.ATlONS. 4I» .'i. Xo appointment of a proxy io vote at any ni bank hIuiII be vjilid for that puri>OHe unlesfi it haH Ikmmi made or rc< ncwed in writing within the two years next pre- cifding the time of sucli met'ting: 1^. H. O. c. 120, s. 14. Iiider the former Act u proxy was good for three WiWH. n (i. \o Hliareholder shall vote, either in person or by proxy, on any que«tion proposed for the con- sideration of the HliarehoIderK «»f tlie banlc at any meeting of Htich Hlmreholdertt, or in any cas(> in wliich the votes of the shareliolders of the baiilc aiv talcen, unless he has paid all calls made by the directors which are then due and payable. K. H. O. e. 120, s. 13. •> 2<^ The capital stock of the bank nmy be increiiHcd from time to time, by such perwntage or by such amount, as is determined upon by by law passed by the shareholders, at the annual general nui'^t- ing, OP at any special general meeting called fop at least four weeks in the Canada Gazette, and in one or mope newspapeps published in the place where m^ f i!;'ll IVS'lf" im^ 46 THE BANK ACT. [s. 27 the chJ«^f office or place of business of tlie banlc is situate; notliing bei-ein contained, however, shall be construed to prevent the Treasury Board from refusing to issue such certificate if it thinks best so to do. Anj' dissatisfied shareholders would in this way have an opportunity of laying their grounds of objection before the Treasury Board. The last clause was no doubt inserted to prevent the recurrence of such a case as that of The Massey Manufacturing Co., 13 Ont. A. R. 446 (1886), where it was held that under the Ontario Letters Patent Act the Provincial Secretary was obliged to issue the notice of an increase of capital, when the conditions were com- plied with, and that he could exercise no discretion in the matter. 11 1; !JT. Any of the original unsubscribed capital stock, or of the increased stock of the bank, shall, when the directors so determine, be jiUotted to the then shareholders of the bank pro rata, and at such rate as is fixed by the directors, but no fraction of a share shall be so allotted; provided that in no ci\se shall a rate bo fixed by the directors, which will make the premium (if any) paid or payable on such stock so allotted exceed the percentage which the reserve fund of the bank then bears to the paid-up capital stock thereof; and any of such allotted stock which is not taken by the shareholder to whom such allotment has been made, within six months from the time when notice of the allotment was mailed to his address, or which he declines to accept, may be offered for subscription to the public, in such manner and on such terms as the directors prescribe. It will be seen that when offering this stock to the shareholders a maximum premium is prescribed. When offered to the public the directors have full power to fix the rate. They cannot, however, offer it be- low par. If they should do so the purchasers would be liable to be called upon to pay the difference iT: 28] INTERNAL IIEGULATIONS. 47 between the amount paid by them and tlie par value of their shares: Ooregum Gold Mininjjf Co. v. lloper, [1892] A. C. 125; Ex parte Weltou, [1805] 1 Oh. 255. If, how- ever, the stock had paswid into the hands of a bona tide purchaser for value without notice of the irregularity, he would not be liable to pay such difference: McCraken V. McJntyre, 1 S. G. Can. 479 (1877); Burkinshaw v. Nioolls, L. R. 3 A. O. 1004 (1878). *2H. The capital stock of the bank may be reduced by by-law passed by the shareholders at the annual general meeting, or at a speeial ge^neral meeting called for the purpose; but no such by-law shall come into operation or be of force or effect until a certificate approving thereof has been issued by the Treasury Board: Before the present Act a special Act of Parliament was required for reducing the stock, as well as for in- ci-easing it. 2. Xo such certificate shall be issued by the Treasury Board unless application therefor is made within three months from the time of the passing of the bylaw, nor unless it appears to the satisfaction of the Board that the shareholders voting for such by-law represent a majority in value of all the shares then issued by the bank, and that a co])y of the by-law, together with notice of intention to apply to the Treasury Board for the issue of a certificate approving thereof, has been published for at least four weeks in the Canada Gazette, and in one or more newspapers published in the place where the chief office or place of business of the bank is situate; nothing herein contained, however, shall be construed to prevent the Trea sury Board from refusing to issue such certiflca.te if it thinks best so to do: As to the last clause, see the note on section 20. sub-section 2. This is one of the few things in the Act which require a special majority. The affirmative vote at the meeting where the by-law is considered must be more than half the total shares of the bank. If im ■Mi''' ::,t ir IH r f '•' 1 !'l \ : k || m r 48 THE BANK ACT. [s. 29 Snb-si'ctioij G provides that in no case shall the capital of the bank be reduced below ^250.000. 3. In addition to evirlence of lls!' paHsinj? of the by- liiAv and tlie jniblicjition tlicieof in the manner ' ; above provided, statements showing the amount of stock issued and the number of shareholders, with the amount of stock held by each, repre- sented at such meeting, and the number of share- holders, with the amount of stock held by each, wlu» voted for such by-law, and also full state- ments of the assets and liabilities of the bank, together with a statement of the reasons and causes why such reduction is sought, shall be laid before the Treasury Board at the time of the application for the issue of a certificate approv- ing such bylaw: 4. The passing of such by-law, and any reduction of the capital stock of the bank thereunder, shall not, in any way, diminish or interfere with tlie liability of the shareholders of the bank to the creditors thereof at the time of the issue of the certificate approving such by-law: 5. If, in any case, legislation is sought to sanction any reduction of the capital stock of any bank, a copy of the by-law or resolution passed by the shareholders in regard thereto, together with statements similar to those above provided to be laid before the Treasury Board, shall be filed with the Minister of Finance and Receiver-General, at least one month prior to the introduction into Parliament of the Bill relating to such reduction : 6. The capital shall not be reduced below the amount of two hundred and fifty thousand dollars of paid-up stock. SHAKES AND CALLS. I 20. The shares of the capital stock of the bank shall be personal estate, and shall be assignable and transferable at the chief place of business of the bank, or at such of its branches, or at such place or places in the United Kingdom, or in any of the if. s. 29] SHARES AND CALLS. 49 British colonies or possessions, and according to such form, and subject to such rules and regula- tions, as the directors prescribe; and books of subscription may be opened, and the dividends accruing on any shares of such stock may be made payable at any of the places aforesaid; and tlie directors may appoint such agents in the United Kingdom, or in any of the British colonies or pos- sessions, for the purposes of this section, as they deem necessary. R. S. C. c. 120, ss. 19 & 29, in part. Shares in a bank would be personal estate without any declaration to that effect in the Act: Humble v. Mitchell, 11 A. & E. 205 (1839); C. C. Art 387. They would not be included in the expression " goods, wares, and merchandise": Knight v. Barber, 16 M. & W. GO (1846); Humble v. Mitchell, supra. They are not "se- curities," and would not pass under a bequest of bonds, moneys, and securities: Ogle v. Knipe, L. R. 8 Eq. 434 (1869); Collins v. Collins, L. R. 12 Eq. 455 (1871); Hud leston V. Gouldsbury, 10 *Beav. 547 (1847). They are property, and are, properly speaking, choses in action: Colonial Bank v. Whinney, 11 A. C. 426 (1886); Atty.- Gen. V. Monteflore, 21 Q. B. D. 461 (1888). In the Bank of Montreal v. Simpson, 6 L. C. J. 1, and 14 Moore P. C. 417 (1861), it was held that bank shares under the old French law were an immeuble fictif, and a tutor could not sell them without observing the formalities for the sale of immovables by him. TJnder Art. 387 C. C. they are now movables. As to the transfer of shares, see section 35 and the notes thereon. Where a bank had its head oflBce in Ontario, a sale by a bailiff of certain shares at the branch oflRce in Montreal, under an execution from the Superior Court there, was upheld, although it did not appear that the directors had established a share register at that branch, and the proper oflBcers were directed! to execute a transfer to the purchaser at the head oflBce : In re Bank of Ontario, 44 U. O. Q. B. 247 (1879). m'l.h.a — 4 Hi Vl '■ ■ ^^'rr."-J2 WWW' E'l li 60 30. THE BANK ACT. [h. 80 The shares of the capital stock shall be paid in by such instalments and at such times and places as the directors appoint: Provided always, that the directors may cancel any subscription for any share unless a sum equal to ten per cent, at least on the amount subscribed for is actually paid at the time of, or within thirty days after the time of subscribinj;; but such cancellation shall not relieve the subscriber from his liability to credi tors in the event of insolvency as hereinafter pro vided. R. S. C. c. 120, s. 20, in part. See the next section as to the amount of calls and the necessary interval between them. This Act does not, like the (Companies' Act, R. S. C, chap. 119, say in express terms that the stock must be paid in cash. In this respect it is like the English Companies* Act of 18G2, concerning which the Lord Chancellor used the following in rendering judgment in the case of the Ooregum Gold Mining Co. v. Roper, L. R 1892, A. C, at page 136: " It has been decided that under the Act of 1802 shai'es may be lawfully issued as fully paid up, for considei'ations which the company has agreed to accept as representing in money's worth the nominal value of the shares. I do not think any other decision could have been given in the case of a genuine transaction of that nature, where the consideration was the substantial equivalent of full payment of the shares in cash. The possible objection to such an arrange- ment is that the company may overestimate the value of the consideration, and, therefore, receive less than nominal value for its shares. The Court would doubt- less refuse effect to a colourable transaction, en- tered into for the purpose or with the obvious result of enabling the company to issue its shares at a discount; but it has been ruled that, so long as the company hon- estly regards the consideration given as fairly represent- ing the nominal value of the shares in cash, its estimate ought not to be critically examined." The right given to the directors to cancel subscrip nil m 8. 31] SHARES AND CALLS. SI lions to stock would apply not only to stock offen^d by tlieiri selves, but also to original subscriptions of stock (luring the term of ollice of the provisional directors. Under the former Act no share was lawfully subscribed iiuless at least ten per cent, was paid within thirty days. The last clause of the section is new, and no doubt was added in view of the objection that was raised in the matter of the Central Bank of Canada, P>aines' Case, 10 Ont. A. R. 237 (1880), that a shareholder was not obliged to pay the double liability because the ten per cent, was not paid within the thirty days. The C'Ourt of Appeal affirmed the judgment of the Chancellor, hold- ing the shareholder liable on the ground that the subse- (jncnt payment for the stock was equivalent to a new subscription, and that the shareholder, by his subse- quent payment, etc., was estopped from denying that he was a shareholder. This was subsequently aflirmed in Nasmith's Case in the same matter: 18 Ont. A. K. 201) (1891). It is worthy of notice that the Act does not say that the calls shall bear interest when not paid at the time fixed. The Companies' Acts, R. S. C. chaps. 118 and 119, provide that calls shall bear interest from the day ap- pointed for payment. Is the omission of all reference to interest in the Bank Act intentional? And if so, is the penalty of ten per cent, on the amount of the shares on which the unpaid call has been made intended as a substitute for interest? The effect of the omission will probably be to leave the question of interest to be detennined by the law of the respective provinces. In Hughes v. La Compagnie de Villas, M. L. R 5 S. 0. 129 (1889), it was held that the Quebec statute relating to building societies did not authorize interest on calls not paid when due. 31. The directors may make such calls of money from the several shareholders for the time being, upon the shares subscribed for by them respectively., as they find necessary: ; 'U-; Mi rr^ 52 THE BANK ACT. [a. 31 2. Such calls shall be made at intervals of not less than thirty days, and upon notice to be piven at least thirty days prior to the day on which such call shall be payable; and no such call shall exceed ten per cent, of each share subscribed R. S. C. c. 120, s. 21. A call can be made only at a meeting of directors duly called at which a quorum is present: Bank of Liverpool v. Bigelow, 12 N. B. (3 R. & C.) 236 (1878); On- tario Marine Ins. Co. v. Ireland, 5 U. C. C. P. 139 (1855). It may be made by by-law or resolution. It is made in point of time when the by-law or resolution is passed, and not when notice of it is given to the shareholder : Reg. V. Londonderry Ry. Co., 13 Q. B. 998 (1849); R. S. C. chap. 19, sec. 39. Where directors passed a resolution for a call but left the date of payment in blank, and some time afterwards a resolution was parsed fixing the date of payment, it was held that no proper call was made until the date of the second resolution: In re Cawley & Co., 42 Ch. D. 209 (1889). Only one call should be made in a single by-law or resolution. There should be an interval of not less than thirty days, not only between the dates of payment of successive calls, but also between the actual making of them: Robertson v. Banque d'Hochelaga, 4 L. N. 314 (1881); Oilman v. Court, 13 R. L. 619 (1882); Exchange Bank v. Darting, 16 R L. 649 (1884); Exchange Bank v. Campbell, 17 R. L. 246 (1885); Bank of Nova Scotia v. Forbes, 16 N. S. (4 R. & G.) 295 (1883); St. John Bridge Co. V. Woodward, 3 N. B. (1 Kerr) 29 (1840). The calls are to be " of money." The corresponding expression in the English and Canadian Companies' Acta is that they are to be paid " in cash." In construing this latter term the Courts have upheld honest transactions in which no cash has passed; they have treated payment in cash as equivalent to payment within the meaning of a plea of payment as distinguished from set-off, or ac cord and satisfaction : Fothergill's Case, L. R. 8 Ch. 270 (1873); Spargo's Case, ibid. 407 (1873). A settlement of s..']l] SHARES AND CALLS. 53 an account In which there would be a balance payable to the shareholder in cash would be sufficient: Ooates' (^ase, L. R 17 Eq. 1G9 (1873); Adamson's Case, L. R. 18 Kq. G70 (1874); Barrow-in-Furness Co., 14 Ch. D. 400 (1880). But where the original subscription is based upon an agreement that the stock shall be paid for in proptrty or services, such an agreement is not binding: National Insurance Co. v. Hatton, 24 L. C. J..2G (1879); ('ompagnie de Navigation v. Christin, 4 L. N. 1G2 (1880); Smart v. Bowmanville Machine Co., 25 U. C. C. P. 503 (1875); Pagin and Gill's Case, G Ch. D. 681 (1877); Burk- inshaw v. Nicolls, 3 A. C. 1004 (1878); White's Case, 12 Ch. D. 511 (1879); Barrow's Case, 14 Ch. D. 432 (1880). Shares cannot be issued at a discount, or as fully paid up, unless they are in fact paid as above stated; and a shareholder taking them would be liable to the bank, or to creditors, or to a liquidator in case of wind- ing up, for the amount not so paid. A person, however, who would take a transfer of such stock in good faith and in ignorance of the irregularity would not be liable: McCraken v. Mclntj-re, 1 S. C. Can. 479 (1877); Thorold v. Neelon, 22 S. C. Can. 390 (1893); In re The Ontario Express Co., 21 Ont. A. K. G4G (1894). "Not less than thirty days" and "at least thirty days " mean thirty clear dfjys, that is, exclusive of both the first and last days: Reg. v. Salop, 8 A. & E. 173 (1838); Mitchell v. Forster, 12 A. & E. 472 (1840); Young v. Hig- gon, G M. & W. 49 (1840). Shareholders are entitled to thirty clear days' no- tice before the day fixed for payment of a call. Tlie Act does not say how this notice shall be given. Public notices are to be given by advertisement in one or more newspapers published at the head office, and in the Can- ada Gazette: sec. 102. It would be prudent in the case of calls, besides the above public notice, to send a notice to each shareholder by registered letter. it ft 4 w I*)-. : I,: ^ • ir r r 54 THE BANK ACT. [h. '.V.\ In tlie case of insolvency of a bank, the directors may make any number of calls by one resolution: sec. 92, sub.-sec. 2. li'I. The directors may, in case of the non-i)aynient of any <'all, in the cori)orate name of the bank, sue for, recover, collect and pet in all such calls, or mav cause and declare such shares to be forfeited to the bank. R. S. C. c. 120, s. 22, in part. The shareholder who does not pay a call when due incurs a jjcnalty of ten per cent, of the amount of the shares in default: sec. 33. This is not limited to the case of forfeiture provided for by the next section, and it would appear that the penalty may be sued for and recovered along with the call. In view c* the im])osition of this penalty, it is doubtful if interest can be i"ecovered on the calls. The Companies' Act, K. S. C. chap. 119, provides for interest but no penalty: sees. ;'>9 and 42. Instead of suing, the directors have the ojjtiou of declaring the stock forfeited. If, however, the bank has threatened to sue, it cannot forfeit the stock without a notice to the shareholders that it intends to do so: Rob- ertson v. Banque d'Hochelaga, 4 L. K 314 (1881). Forfeiture being a penal provision, its operation will be kept strictly within the limits pi'cscribed by the Act, and Avhat in ordinary cases might be considered trilling irreguljiriticH may suffice to have it declared invalid and set aside: Hart v. Clarke, 6 H. L. C. G33 (1858); Johnson v. Lyttle's Iron Agency, L. R. 5 Ch. D. 087 (1S77); In i>e New Chile Gold Mining Co., L. R. 45 Ch. D. 598 (1890). The pi'ocedure for carrying out such forfeiture is laid down in the next section. Sli* If any shareholder refuses or neglects to pay any instalment upon his shares of the capital stock at the time appointed therefor, such shareholder '1^ Mr s. 33] SHARES AND CALLS. 55 shall incur a penalty to the use of the bank of a sum of money equal to ten per cent, on the amount of such shares; and if the directors declare any shares to be forfeited to the banlc they shall, within six montlis tlu'rcafler, without any previ- ous fornmlity other than lliirty days' public no- lice of their intention so to do, sell at public auc- tion the said sharcw, or so many of the said shares as shall, after deducting? the reasonable expenses of the sale, yield a sum of menalties in- curred upon the whole; and the president or vice- president, manaji;er or cashier of the bank shall execute the transfer to the purchaser of the shares so sold; and such transfer shall be as valid and eftectual in law as if it had been executed by the (>ri<;:inal holder of the shares thereby transferred; but the directors, or the shareholders at a jjeneral meetinjr, may, notwithstandin}? {iiiythinj; in this section contained, remit, either in whole or in part, and couditicmally or unconditionally, any forfeiture or penalty incurred by the non-payment of instalments as aforesaid, or the bank may en- force the payment of any call or calls by suit, instead of declaring the shares forfeited. K. S. C. c. 120, s. 23. To render a shareholder liable to the i)enalty of ten per cent., or to the forfeiture of his shares, the Act iimst have been strictly complied with. While the acts of directors de facto in dealing with outsiders Avould be valid and would bind the bank in favor of parties acting iu good faith, yet irregularity in the elecliuu of direc- tors or violation of the bj'-laws might be set up by sliareholders as an answer to a call or forfeiture: Gar- don dully Co. V. McLister, 1 A. C. 39 (1875). The business of a company was to be conducted by not less than five nor more than seven directors, and i>ower was given to fix a quorum. A quorum of four was fixed, but this was done irregularly; these four made a call and afterwards declared the stock forfeited for non-payment. It was held that the call and forfei- I ; ■ & •: 'i ^ ,Ov Vf , 1 . ;' \ ■ # W •H i ^ Wr : : iY 'i 56 THE BANK ACT. [s. 35 I:, ture were invalid: In re Alma Spinning Co., Bottomley'a Case, IG Ch. D. ()81 (1881). Where the bank notified a shareholder that in de- fault of payment they would sue, it was held that they had no right to forfeit his stock without further notice: KolHitson V. Bauque d'Hochelaga, 4 L. N. 314 (1881). The secretary sent a notice that unless a call was paid with interest from the day it was made it would be forfeited. Interest actually only ran from the date of payment. The forfeiture was consequently set aside: Johnson v. Lyttle's Iron Agency, 5 Ch. D. G87 (1877). When the rules required a notice after default in payment, and this was not given, the forfeiture was declai-ed invalid: In re New Chile Co., 45 Ch. D. 598 (1889). 34. im. In any action brought to recover any money due on any such call it shall not be necessary to set forth the special matter iu the declaration or statement of claim, but it shall be sufficient to allege that the defendant is holder of one share or more, as the case may be. iu the capital stock of the bank, and in indebted to the bank for a call or calls upon such share or shares, in the sum to which the call or calls amount, as the case may be, stating the amount and number of such calls, whereby an action has accrued to the bank to re- cover the same from such flefendant by virtue of this Act; and it shall not be necessary to prove the appointment of the directors. R. S. C. c. 120, TUANSFEIl A\I) TltANSMISSION OF SHARES. No assignment or transfer of the shares of the capital stock of the bank shall be valid unless it is made and registered and accepted by the per son to whom the transfer is made, in a book or books kept for that purpose, nor unless the person making the same has, if required by the bank, previously discharged all his debts or liabilities to the bank which exceed in amount the remain- ing stock, if any, belonging to such person, valued at the then current rate; and no fractional part : '1-'* }. 35] TRANSFER OF SHARES. 57 of a Bliarc, or less than a whole shnre, shall tH> assignable or transferable. K. S. C. e. 12U, s. 2i), in part. The directors have the right to prescribe the fomi for the transfer and acceptance of stock. They may keep stock registers for such transfers not only at the head office of the bank, but at any other place in the liritish Empire: sec. 29. The parties to such transfers must be persons capa- ble of contracting. These transfers may be set aside on the same grounds as other contracts, as infancy, in- capacity, fraud, etc Thus, when a father executed a transfer of certain shares in a bank to his minor son, and purported to accept the transfer on behalf of his son, and the bank acted upon the tninsfer and paid him dividends, it was held that the transfer was void for want of legal acceptance: Walsh v. Union Bank, 5 Q. L. R. 289 (1879). Where a father subi^cribed for stock in the name of his infant daughter, and nine months after coming of age she took steps to have her name removed from the list of contributors, it was held that slie was entitled to this relief: Re Central Bank, Hogg's Case, 19 O. R. 7 (1892). On account of the double liability which attaches to bank stock, transferees often seek to escape respon- sibility, in case of insolvency, by claiming that the tnmsfers to them or their predecessors are invalid for want of compliance with this section. In the case of the Central Bank, where the seller signed a transfer in blank, subject, by a marginal note, to the order of a broker, and the purchaser designated by the broker si^'ned the acceptance, it was held to be a sufficient com- pliance with the Act: Re Central Bank, IC Ont. A. IL 237 (1889). In the same matter, where a purchaser did not sign the acceptance, but dealt with the shares by selling and signing the transfer of them to another per- son, it was held that the latter was estopped from setting up the irregularity, and was properly placed on the list H THE HANK ACT. [h. 36 Itii':' of contributors: Ito Ontinil JJunk, Nasmlth's Case, 16 O. II 2U:J (1888); ufflrined in appt^ai, 18 Ont. A. B. 209 <181)1). Also tliat after a winding-up order has been made, it is too late for a sliai-eliolder who has accepted the transfer of certain shares to set up irregularities in previous transt'ers of these shares: lie Central Banlc, Home Savings and Loan Co.'s Case, 18 Ont. A. K. 489 (1891). Where there? was no valid transfer of the shares under the Act, but defendant had paid calls, given a i-eicipt for a dividend and combined with others in ap- I)ointing a proxy, he was held to be a sliareholder and liable for calls: Hank of Liverpool v. Bigelow, 12 N. S. (3 it. & C.) 2:JG (1878). If a transfer be made in blank the transferee has implied i)ower to All up the blanks: In re Tahiti Cotton Co., L. K. 17 Eq. 273 (1873). " Debts or liabilities to the bank " would include not only all sums actually due and payable, and those nuituring but not due, when the shareholder ip the prin eipal debtor, but also all sums for which he would bo liable only secondarily or conditionally as endorser, surety or the like. It would also include stock not yet called up, so that the bank might refuse to register a transfer of stock not fully called and paid up, if it was not satisfied to accept the i)urcha8er for the amount. Under the Act of 1871, it was only debts due to the bank thnt the shareholder could be obliged to pay, if so required, in order to have his transfer allowed. Under that Act it was held that the bank was obliged to allow a transfer of partly paid-up stock: Smith v. Bank of Nova Scotia, 8 S. C. Can. 558 (1883). A bonk has a lieu on the stock held in it by a member of a firm for a debt due to it by such, firm: In re Chinie, 14 Q. L. R. 289 <1888). When a bank gives a statement to an intending purchaser of the amount of its Hem on certain shares. ii s. :{7] TRANSFER OF SHARES. 51) l)iit before the IranBfer of tlic Htock other IlabilitieH iiccrue, it may hold the stock until the hitter ure paid: Cook V. Royal Canadian Bank, 20 Grant, 1 (1873). See Hection G5 as to a lik<' ilaiiu on dividends and as lo the mode of realizing the lien on BU«;h Htoek. The bank should not rejfister a transfer unlesB lilt' ninnbers of the shares are pven as required by sec- tion 37. In Smith v. Hank of Nova Scotia, 8 S. C. Can. 558 (I8s:{), it was held tliat a resolution adopted at a meet- injr of shareholders, authon/iuK a loan on U'half of the bank and agreeing to hold tlieir stock until this loan was fully paid, did not bind a shareholder who was not at tlie meeting although he joined in a bond as surety for the loan, and the bank had no right to refuse to trans- fer his stock. In liarss v. Bank of Nova Scotia, 18 N. S, ((I K. & G.) 254 (1885), a shareholder who was present at the nie(?ting in question was held entitled to have the transfer of his stock registered. iMJ- A list of all transfers of shares registered each day in the books of the bank, showing the parties to such transfers and the number of shares trans- ferred in each case, shall Ix' made up at the end of each day and kept at the chief place of busi- ness of the bank, for the inspection of its shaiv- holders. R. S. C. c. 120, b. 30. » 4 • All sales or transfers of shares, and all contracts and agreements in respect thereof, hereafter made or purporting to be made, shall be null and void (saving however, as to a purchaser not having knowledge of the defect, his rights and remedies under the contract of sale), unless the person mak- ing such sale or transfer, or in whose name or on whose behalf the same is made, is at the time thereof the registered owner in the books of the bank of the share or shares so sold or trans- ferred, or intended or purported so to be, or has the registered owner's assent to the sale; and the distinguishing number or numbers of such share F if 60 THE BANK ACT. [s. 3S or shares, if any, shall be designated in the con- tract or agreement of sale or transfer; and any person, whether principal, broker or agent, who viohiles the provisions of this section by wilfully selling or transferring, or attempting to sell or transfer, any share or shares by a false number, or of which the principal is not, at the time of sudi sale or attempted sale, the registered owner, or acting with the registered owner's assent to the sale, shall be guilt v of an offence against this Act. This section was not in the former Bank Act, and was designed to prevent gambling in bank shares, or engaging in transactions which are really betting on the rise or fall of the stock in th(^ market. It applies to all T)anks, including the Bank of British North America and the Bank of British Oolumbia. The other sections, from 8 to 4(5 inclusive, do not apply to those t^vo banks: sec. 0. When tlie transferrer has as many shares as are mentioned or more, but the numbers do not correspond, the transfer is not necessarily void; the figures might afterwards be rectified: In re International Contract Co., L. R. 7 Ch. 485 (1872). The penalty for an offence against this section is found in section 101, and is a fine not exceeding $1,000, or imprisonment for a term not exceeding five yt^ars, or both. »«. When any share of the capital stock has been sold under a writ of execution, the olticer by whom the writ was executed shall, within thirty days after the sale, leave with the bank an attested copy of the writ, with the certificate of such ofMcer indorseii thereon, certifying to whom the sale has been made; and thereupon (but not until after all debts and liabilities of the holder of the , . share to the bank, and all liens existing in favor of the bank thereon, have been discharged, as herein provided), .the ])re!sident, vice-president, I manager or cashier of the bank shall execute the 1 'f ' ^ k... s. 30] TRANSMISSION OF SHARES. 61 transfer of the share so sold to the purchaser; and such transfer shall be, to all intents and pur- poses, as valid and circctual in law as if it had been executed bv the holder of the said share. R. S. C. c. 120, s.' 31. The Act of 1871 named the sheriff as the ofiBcer who might sell bank stock under a writ of execution. In re Bank of Ontario, 44 U. C. Q. li. 250 (1879), a sale bv a bailiff in Montreal was held to have the same effect as a sale by the sheriff, and the sale was valid althoufjh the bank had its head office in Ontario, and only a branch office with no stock rcfj^ister in ^lontreal. In the Province of Quebec bank shares cannot be seized by means of saisie arret (jiarnishment), but should be seized conformably to Art. 560 of the Code of Pro- cedure: Hudon V. Trudelle, 7 R. L. 220 (1875). 3!*. If the interest in any share in the capital stock be- comes transmitted in consequence of the death, bankruptcy, or insolvency of any shareholder, or in consequence of the marriaj^e of a female share- holder, or by any other lawful means than by a transfer according to the provisions of this Act, such transmission shall be authenticated by a de- claration In writing,, as hereinafter mentio.ied, or in such other manner as the directors of the bank require; and every such declaration shall dis- tinctly state the manner in which and the person to whom such shares have been transmitted, and shall be made and signed by such person; and the person making and signing such declaration shall acknowledge the same before a judge of a court of record, or before the mayor, provost or chief magistrate of a city, town, borough or other place, or before a notary public, where the same is made and signed; and every declaration so signed and acknowledged shall be left with the cashier, man- ager or other officer or agent of the bank, who shall thereupon enter the name of the person en- titled under such transmission in the register of shareholders; and until such transmission has been so authenticated, no person claiming by vir- tue of any such transmission shall be entitled to m r pii: ' W« THE BANK ACT. [g. 40 participate in the profits of the bank, or to vote in respect of any such share of the capital stock • Provided always, that every such declaration and instrument as, by this and the next following .section of this Act, are required to perfect the transmission of a share in the bank which is made in any country other than Canada, or any other British Colony, or the United Kingdom, shall be further authenticated by the clerk of a court of record and under the seal of such court, or by the British consul or vice-consul, or other accredited representative of the British Government in the country where the declaration is made, or shall be made directly before such British consul or vice-consul or other accredited representative; and provided also, that the directors, cashier or other officer or agent of the bank may require corroborative evidence of any fact alleged in any such declaration. R. S. C. c. 120, s. 32. If the directors require the transmission to be au- thenticated in some other manner than is set out in this .and thel three following sections, any rules they make should be reasonable and not more onerous than thooe prescribed by the Act. Until such declaration is made, the person entitled to the transmitted shares would be debarred, not onlv from drawing dividends or voting on these shares, but could not transfer or deal with them. 40. If the transmission of any share of the capital stock has taken place by virtue of the marriage of a female shareholder, the declaration shall be ac- companied by a copy of the register of such mar- riage, or other parlioulars of the celebration thereof, and shall declare the identity of the wife with the holder of such share, and shall be made and signed by such female shareholder and her husband; and they may include therein a declara tion to the effect that the share transmitt**'^ is the separate property and under the sole control of the wife, and that she may receive and grant receipts for the dividends and profits accruing in respect thereof, and dispose of and transfer the s. 41] TRANSMISSION OF SHARES. 63 share itself, witlumt reciuiiing the consent or au- thority of her husband; nud such dechiration shall be binding upon the bank and i)ersons making the same, until the said persons see tit to revoke it by a written notice to that etlect to the bank; but the omission of a statement in any such declara- tion that the wife making the same is duly au- thorized by her husband to make the same shall not invalidate the declaration. It. S. C. c. 120, 8. 33. When the marriage domicile of the female share- holder is in a province or country where by law she has the exclusive control of her property as if she had re- mained single, the bank might dispense with the hus- band's joining in the declaration. If, however, the mar- riage domicile should be in the I'rovince of (Quebec, the husband would by law, in the absence of a notarial ante- nuptial contract of marriage, become entitled to the stock. In case there is such a marriage contract, it will I)robably make provision both as to the capital of the stock and as to the dividends. Even where the husband is by law entitled to the stock and dividends, the de- claration might be equivalent to a power of attorney to enable the wife to receive dividends, or even to transfer the stock. •81. If the transmission has taken place by virtue of any testamentary instrument, or by intestacy, the pro- bate of the will, or the letters of administration, or act of curatorship or tutorship, or an official extract therefrom, shall, together with such declaration, be produced and left with the cashier or other officer or agent of the bank, who shall, thereupon, enter in the register of shareholders the name of the person entitled under such trans- mission. R. S. C. c. 120, s. 34. The provisions of this section are included in the following section, which also contains certain additional provisions regarding the Province of Quebec, as well as other parts of the Empire and foreign countries. iv 64 THE BANK ACT. [s. 42 i: : Transmission is not a transfer within tlie meaning of section 35, and the bank cannot refuse to register the transmission on the ground of indebtedness or lien: In re Bentham M. S. Co., 11 Ch. D. 900 (1878). The Quebec Statute 55-56 Vict. chap. 17, imposes a tax on the transmission of property by death, and pro^ vides (Art llOlf/, 5) that no transfer of tlie property of any estate or succession shall be valid nor shall the title vest in any person until the tax has been paid. It was held that this statute was intra vires, and a bank was justified in refusing to register a transfer of shares bv executors until proof was given that the tax had been paid: Heneker v. Bank of Montreal, Q. R. 7 S. 0. 257 (1895). An executor filed with the bank a copy of the pro- bate of a will, and required the entry of his name as entitled to the stock of the testator in his capacity of executor. The bank refused on the ground that the stock was specifically bequeathed to certain legatees. He applied for an injunction, and it was held that it was the duty of the bank to enter his name in the regrister, and that there, was no obligation on the bank to see that the bequests of the will were carried out by the execu- tor: Boyd V. Bank of New Brunswick, Canadian Bank- ers' Journal, vol. 1, p. 80 (1893). 4'i. If the transmission of any share of the capital stock has taken place by virtue of the decease of any shareholder, the production to the directors and the deposit with them of an authentic notarial copy of the will of the deceased shareholder, if such will is in notarial form according to the law of the Province of Quebec, or of any authenti cated copy of the probate of the will of the de ceased shareholder, or of letters of administra tion of his estate, or of letters of verification of heirship, or of the act of curatorship or tutorship, granted by any court in Canada having power to grant the same, or by any court or authority in i England, Wales, Ireland, or any British colony, 8. 42] TRANSMISSION OF SHARES. 65 or of any testament testamentary or testament dative expede in Scotland, or, if the deceased sliareholder died out of Her Majesty's dominions, the niodnctiou to and deposit with the directors of any authenticated copy of the probate of his will or letters of administration of his property, or other document of like import, granted by any court or authority having the requisite power in such matters, shall be sufficient justitication luid authority to the directors for paying any dividend, or for transferring or authorizing the transfer of any share, in pursuance of and in conformity to such probate, letters of administration, or other such document as aforesaid. K. S. C. c, 120, s. 35. In the Province of Quebec a will may be made in any one of three forms: (1) Notarial, (2) holograph, and (3) in English form before two witnesses. The two latter require probate. A notarial will is made in the presence of two notaries, or of one notary and two witnesses, and does not require probate; a copy certified by the notary who retains possession of the original will being equally authentic with a copy of a will in one of the other forms admitted to probate and certified by the clerk of the Court. " Letters of verification of heirship " are issued by the Superior Court in Quebec in cases of intestacy when the deceased has property outside of that province: CJivil Code, Art. 650a. Administrators and letters of ad- ministration are unknown in Quebec. The property of a deceased intestate vests immediately in his heirs or next of kin, in accordance with the French legal maxim " le mort saisit le vif." These must provide for the ad- ministration of the estate themselves. Where shares belong to a Quebec minor he must be represented by a tutor appointed by the prothonotary or a Judge of the Superior Court: Civil Code, Art. 249. A curator is appointed by the same authority to any person who is interdicted for imbecility, insanity, mad- ness or prodigality; also to emancipate minors and to m'l. b. a. — 5 Wl I*-: f THE BANK ACT. [s. 43 children conceived but not yet born: Civil Code, Arts. 328 and 338. Curators to property are those appointed: (l)to the property of absentees; (2) in cases of substitu- tion; (3) to vacant estates; (4) to the property of extinct corporations; (5) to property abandoned, and (6) to pror perty accepted under benefit of inventory: Civil Code, Art. 347. 48 The bank shall not be bound to see to the execu- tion of any trust, whether express, implied or constructive, to which any share of its stock is subject; and the receipt of the person in whose name auy such thare stands in the books of the bank, or, if it stands in the name of more persons than one, the receipt of one of such persons shall be a sufficient discharge to the bank for any divi- dend or any other sum of money payable in respect of such share, unless express notice to the con- trary has been given to the bank; and the bank shall not be bound to see to the application of the money paid upon such receipt, whether given by one of such persons or all of them. R. S. C. c. 120, s. 37. The person who stands in the books of the bank aa the registered holder of shares has a right to deal with and transfer them. If, however, he holds them in trust, to the knowledge of the directors or officers of the bank, and is about to commit a breach of trust, they should notify the cestui que trust in order that he may takt> stepc to prevent it by injunction or otherwise. In the case of La Soci^t^ Generale v. Tramways Union Co., 14 Q. B. D. 424 (1884), the Master of the Rolls expressed a doubt as to the secretary or directors being personally liable for not preventing such a breach of trust. In the same case. Cotton, L.J., said, p. 44.5: ** Where the directors are asked to register a transfer \nich from circumstances in fact known to them at the time would be a violation of the rights of others, in my opinion they cannot, either safely to themselves or with- out disregard of their duty, register the transfer, at least m 8.44] SHARES HELD IN TRUST. 67 witliout allowing time for enquiry." Lindley, L.J., said, p. 453 : "I have no doubt, if directors allow a transferor to niiike a transfer which they know to be fraudulent, they could be made liable for the value of the shares trans- ferred ; they would make themselves parties to his fraud." It is worthy of note, hov^ever, that although the judgment in this case was afflnned in the Ho-ise of Lords, 11 A. C. 20 (1885), none of their lordships went quite so far as the above extracts from the remarks of the Judges in the Court of Appeal. The fact that bank shares are purchased " in trust " at a time when the trustee was solvent imports an inter- est in somebody else, and the onus is upon a party who has seized such shares to prove that they are in fact the property of the trustee, and as such available to satisfy the demand of his creditors: Muir v. Carter, and Holmes V. Carter, 16 S. C. Can. 473 (1889). r- 44. Ko person holding stock in the bank as executor, administrator, guardian or trustee, of or for any person named in the books of the bank as being so represented by him, shall be personally subject to any liability as a shareholder, but the estate and funds in his hands shall be liable in like manner and to the same extent as the testator, intestate, ward or person interested in such trust fund would be, if living and competent to hold the stock in his own name; and if the trust is for a living person, such person shall also himself be liable as a shareholder; but if such testator, intestate, ward or person so represented is not so named in the books of the bank, the executor, administrator, guardian or trustee shall be per- sonally liable in resi)ect of such stock as if he held it in his own name as owner thereof. R. S. 0. c. 120, s. 38. Where a person holds stock simply "in trust," or as " executor," " administrator," " trustee," or the like, he is personally liable for unpaid calls, and also for the double liability in case of the insolvency of the bank. The only way to escape such liability is to have the tes- THE BANK ACT. [S. 45 tator, intestate, cestui que trust, or other person whom he represents, also named in the books of the bank. An absolute transfer of bank shares was made bj trustees and executors to one of the residuary legatees, regardless of a provision in the will directing the sub- stitution of the legatee's lawful issue at his death, and the transferee disposed of the shares so as to defeat the rights of the issue. It was held that such registration by the bank, unless with actual knowledge of a breach of trust, was not wrongful. Notice that the shares were held by the executors in trust; possession by the bank of a copy of the will; the facts that transfers of other of its shares by the same executors to other residuary legatees contained notice of the substitution, that the president of the bank was also an executor of the will, and that the law agent of the bank was also law agent of the executors, were held to be insufficient to affect the bank with the knowledge of the particular trusts sought to be enforced: Simpson v. Molsons Bank, [1895] A. C. 270. The present section refers exclusively to shares of the bank held in trust; the other question as to the bank taking shares in a company held in trust as col- lateral security, or otherwise, dealing with them is treated under sections 64 and 66. ANNUAL STATEMENT AND INSPECTION. 45. At every annual meeting of the shareholders for the election of directors, the out-going directors shall submit a clear and full statement of the affairs of the bank, containing on the one part,— The amount of the capital stock paid in, the amount of notes of the bank in circulation, the net profits made, the balances due to other banks, and the cash deposited in the bank, distinguishing de- posits bearing interest from those not bearing interest; and on the other part, — The amount of the current coin, the gold and silver bullion, and the Dominion notes held by the bank, 8.45] ANNUAL STATEMENT. 69 the balances due to the bank from other banks, the value of the real and other ppoi>erty of the bank, and the amount of debts owing to the bank, including and particularizing the amounts so ow- ing" upon bills of exchange, discounted notes, mortgages and other securities, — Exhibiting, on the one hand, the liabilities of, or the debts due by the bank, and on the other hand the assets and resources thereof; and the said state- ment shall also exhibit the rate and amount of the last dividend declared by the directors, the amount of reserved profits at the date of such statement, and the amount of debts due to the bank, over-due and not paid, with an estimate of the loss which will probably accrue thereon. R. S. C. c. 120, s. 24. The date of the annual meeting is fixed either by the subscribers to the stock at their meeting for organiz- ation, or subsequently by by-law of the shareholders: sees. 1.3 and 18. The items of information required to be embodied in the annual statement are in the main the same as those in the monthly statement to the Min- ister of Finance: Schedule D. The profits, dividend, and probable loss on overdue debts are not in the returns to the GovemnKmt. This section does not apply to La Banque du Peuple, or to the Bank of British North America or the Banic of British Columbia: sees. 5 and G. By section 99 the making of a false statement is, unless it amounts to a higher offence, made a misde- meanor punishable by imprisonment for a term not ex- ceeding five years, and any officer of the bank who is a party thereto or uses the statement with intent to de- ceive, shall be held to have made the false statement wilfully, and shall also be responsible for all damages sustained by any person in consequence thereof. See Parker v. McQuesten, 32 U. C. Q. B. 273 (1872); McDon- ald V. Rankin, M. L. R. 7 S. C. 44 (1890); In re Uenham & Co., 25 Oh. D. 752 (1883). r 1 i ,1 n 4». THE BANK ACT. [s. 40 The books, correspon donee and funds of the hank shall, at all times, be subject to the inspection of the dinctors; but no ])ei'son, who is not a director, shall be allowed to insix'ct the account of any person dealing with the bank, K. S. C. c. 120, s. 25. While the directors have the rip'lit to inspecrt the books, correspondence and funds of the bank, they are not bound to do so: Hallmark's Cas<% 9 Ch. D. 332 (1878); In re Denham & Co., 25 Ch. 1). 752 (1S83). The fact that the directors have not insp(?cted the books, whereby they would have detected the embcz/lement of the bank funds by the cashier, is no defence in an action by the bank against the sui-eties of the cashier: Ex change Bank v. Barnes, 14 S. C. Can. 710 (1887). In England, in the case of Tassell v. Cooper, 9 C. H. 509 (1850), doubt Avas expressed by Maule, J., whether there was any such duty there ui)on a bank as that im posed by this section, not to disclose the state of a cus- tomer's account. In Hardy v. Veasey, L. R. 3 Ex. 107 (1808), Byles, J., expressed the opinion that a bank might make such disclosure on a justitiable occasion, and that when it was made with, a reasonable hope and an honest intention of getting assistance for the customer, no ac- tion would lie. In Foster v. Bank of London, 3 F. & F. 214 (1802), where a bill was presented and there were not suflicientassets, and the bank informed the holder of the amount of the deficiency, and so enabled him by paying in a small sum to obtain payment of the bill, it was held that tlie bank should not have gone further than to say "not sufficient assets," and tliat an action lay for this breach of duty. DIVIDENDS. U 1 M' ¥ ■ 1- : ^ i^. 47. The directors of the bank shall, subject to the pro^ visions of this Act, declare quarterly or half yearly dividends of so much of the profits of the bank as to the majority of them seems advisable; and they shall give at least thirty days' public 48] DIVIDENDS. 71 notice of the payment of such dividends previ- ously to the date flxo(' for such payment; and they may close the tninsfer books durinj? a certain time, not exceeding? fifteen days, before the pay- ment of each dividend. R. S. C c. 120, s. 26, in part Dividends are declared upon the paid-up capital. In case of a sale, if there be no affreement to the con- trary, a dividend, if declared before the sale, belongs to the seller; if after, to the purchaser, even although tlie transfer may have been completed only after the dividend was declared: Black v. Homershara, 4 Ex. D. 24 (1878). So in the case of the death of the holder: Wright V. Tuckett, 1 J. & H. 206 (1860); DeGendre v. Kent, L. R. 4 Eq. 283 (1807). The bank has a lien on unpaid dividends if the holder of the shares is indebted to it: sec. 65. Notice of the dividend is to be given for at least thirty days in one or more newspapers published at the head office of the bank, and in the Canada Gazette: sec. 102. The next two sections lay down the rules as to the amount of dividends, and as to the liability of directors. 4.S. No dividend or bonus shall ever be declared so as to impair the paid up capital; and if any dividend or bonus is so declared or made yiayable, the di- rectors who knowingly and wilfully concur therein shall be jointly and severally liable for the amount thereof as a debt due by tliem to the bank; and if any part of the paid-up capital is lost, the di- rectors shall, if all the subscribofl siock is not paid up, forthwith make calls upon the share- holders to an amount equivalent to such loss; and such loss and the calls, if any, shall be men- tioned in the next return made by the bank to the Minister of Finance and Receiver General: Pro- vided that, in any case in which the capital has been impaired as aforesaid, all net profits sliall be applied to make good such loss. R. 8. C. c. 120, s. 27. rr -■ 78 THE BANK ACT. b If the statement prepurod hy the proper ofllcers of the bonk shews that there is a surplus over and above the paid-up capital, directors declaring a dividend upon this in good faith would not be liable even if an examination of the boolvs would have revealed tiie actual situation. Only a director who knowingly joined in de- claring a dividend which impaired the capital would be liable. It is to be observed the calls required by this section would not restore the capital or enable divi- dends to be declared. This can only be done by allowing prollts to accumulate or by reducing the capital as provided by section 28. 41>. No division of profits, either by way of divi- dends or bonus, or botli combined, or in any other way, exceeding the rate of eight per cent, per annum, shall be made by the bank, unless, after making the tiame, it has a rest or reserve fund equal to at least thirty per cent, of its paid-up capital; and all bad and doubtful debts shall be deducted before the amount of such rest is cal- culated. R. S. C. c. 120, s. 28. RESEUVES. 50. The bank shall hold not less than forty per cent, of its cash reserves in Dominion notes; and every bank holding at any time a less amount of its cash reserves in Dominion notes than is pre- scribed by this section shall incur a penalty of five hundred dollars for each and every violation of the provisions of this section: R. S. C. c. 120, s. 39, in part. These Dominion notes are isued under R. S. €. chap. 81, as amended by 57-58 Vict. chap. 21. The limit is $25,000,000, and the Government must hold for their redemption at least twenty-five per cent, of the amount outstanding, in gold and securities guaranteed by the British Government They are a legal tender, and are redeemable in specie at the cliief city of each province. Monthly statements of the amount of notes outstanding r,i] NOTE ISHUE. 7S and the amount of gold and securities held for their rod«'nii)tion are published in the Canada (Jazette. Tlie local Legislature has authority to enact a law imposing a tax on the Dominion notes held by a bank as part of its cash reserves: Windsor v. Commercial Bank^ 15 N. S. (3 R & a.) 41i0 (1882). The penalty for the violation of this section may be recovered by the crown as provided in section 98. lianlvs are not required by the Act to keep any fixed reserve. The average amount of reserves in specie and Dominion notes kept by Canadian banks is nearly equal to tlie amount of the notes in circulation, and something more than ten per cent, of their total liabilities. Of this about sixty-five per cent, is usually held in Dominion nott. 8 and the other thirty-five per cent, in specie. 2. The Minister of Finance and Receiver-General shall make such anangementa as are necessary for insuring the delivery of Dominion notes to any bank, in excliange for an equivalent amount of specie, at the several otlices at whicli Dominion ;;6t.'^ are redeemable, in the cities of Toronto, M( nt.^eal, Halifax, St. John, N.B., Winnipeg, Charlottetown and Victoria, respectively; and such notes shall be redeemable at the office for redemption of Dominion notes in the place where such specie is given in exchange. R. S. C. c. 120^ s. 39, 88. 2, in part. NOTE ISSUE. Canadian banks are Banks of Issue as well as of Discount and Deposit Their notes form the chief circu- lating medium for sums of five dollars and upwardsi The amount of bank notes in circulation for the past few years has ranged from thirty to thirty-five million dollars. The bank may issue and re-issue notes payable to bearer on demand and intended for circulation; but no such note shall be for a sum less than five WF " IP'' 1 m' ^ 'i ' ^^t 71 THE BANK ACT. [8. 51 dollars, or for any sum which is not a multiple of live dollars, and the total amount of such notes, in circulation at any timej shall not exceed the amount of the unimpaired paid-up capital of the bank: R. S. C. c. 120, s. 40, in part Before 1871 Canadian banks issued notes for one dollar and upwards. The Bank Act of that year took away the right to issue notes for less than five dollars. In 1880 the present rule was adopted. Bank notes are promissory notes payable to bearer on demand. They circulate as cash, are not deemed to be overdue, and are not discharged by being returned to the bank, but may be reissued. They are not subject to the statutes of limitation or prescription, at least not until after demand and dishonor. 2. Notwithstanding anything contained in the next preceding sub-section, the total amount of such notes in circulation at any time of La Banque du Peuple and the Bank of British North America respectively shall not exceed seventy-five per cent, of the unimpaired paid-up capital of such banks respectively, but each of such banks may issue such notes in excess of the said seventy- five per cent, upon depositing, with respect to such excess, with the Minister of Finance and Receiver General, in cash or bonds of the Do minion of Canada, an amount equal to the excess; I'rovided always that in no case shall the total amount of the notes of either of the said banks in circulation at any time exceed the unimpaired paid-up capital of such bank; and the cash or ; bonds so deposited shall be available by the Minis- ter of Finance and Receiver General for the re- demption of notes issued in excels as aforesaid, in the event of the suspension of the said banks respectively : The limiting of the circulation of the notes of these two banks to seventy-five per cent, of their unimpaired paid-up capital instead of allowing them the full amount, as is done in the case of the other banks by the ■',h' • \t' 52] NOTE ISSUE. 75 preceding section, is on account of there being no double liability on their shares. 3. If the total amount of the notes of the bank in circulation at any time exceeds the amount au- thorized by this section, the bank shall incur penalties as follows: If the amount of such ex- cess is not over one thousand dollars, a penalty equal to the amount of such excess; if the amount of such excess is over one thousand dollars and is not over twenty thousand dollars, a penalty of one thousand dollars ; if the amount of such excess is over twenty thousand dollars and is not over one hundred thousand dollars, a penalty of ten thousand dollars; if the amount of such excess is over one hundred thousand dol- lars and is not over two hundred thousand dol- lars, a penalty of fifty thousand dollars; and if the amount of such excess is over two hundred thousand dollars, a penalty of one hundred thou- sand dollars: R. S. C. c. 120, s. 40, ss. 2, in part. These penalties are recoverable by tlie Attorney- General of Canada or the Minister of Finance and Re- ceiver-Greneral for the crown as provided in section 98. 4. All notes heretofore issued or r(>issned by the bank, and now in circulation, which are for a sum less than five dollars, or for a sura which is not a multiple of five dollars, shall be called in and cancelled as soon as practicable. R. S. C. c. 120, s. 40, in part. ! h ■52. The bank shall not pledge, assign, or hypothe- cate its notes; and no advance or loan made on the security of the notes of a bank shall be re- coverable from the bank or its assets: This whole section is new, and its provisions are intended to prevent the repetition of irregularities which have taken place in connection with more than one of the banks that have failed within the last few years, where attempts have been mjide to obtain fraudu- lent preferences by such irregular issue or pledging of notes. inr i- n THE BANK ACT. [s. 53 No bank should issue its notes except for bona fide circulation, and when so issued they form a first charge upon its assets in case of insolvency: section 53. 2. Every person who, being the president, rice-presi- dent, dircrtor, principal partner en comni.mdite, general miinager, manager, cashier, or other ofQ- cer of the bank, pledges, assigns, or hypothecates, or authorizes, or is concerned in the pledge, as- signment or hypothecation of the notes of the bank, and every person who accepts, receives or takes, or authorizes or is concerned in the ac- ceptance or receipt or taking of such notes as a pledge, assignment or hypothecation, shall be liable to a fine of not less than four hundred dollars and not more than two thousand dollars, or to imprisonment for not more than two years, or to both: 3. Every person who, being the president, vice-presi- dent, director, principal partner en commandite, general manager, manager, cashier, or other offi- cer of the bank, pledges, assigns, or hypothecates, delivers, or authorizes or is concerned in the issue or delivery of notes of the bank intended for cir- culation and not then in circulation, — and every person who, with knowledge of such intent, ac- cepts, receives or takes, or authorizes or is con- cerned in the acceptance, receipt or taking of such notes, — shall be guilty of a misdemeanor, and liable to imprisonment for a term not exceeding seven years, or to a fine not exceeding two thou- sand dollars, or to both. HSi. The payment of the notes issued or re-issued by the bank and intended for circulation, and then in cir- culation, together with any interest paid or payable thereon as hereinafter provided, shall be the first charge upon the assets of the bank in case of its insolvency; and the payment of any amount due to the Government of Canada, in trust or other- wise, shall be the second charge upon such assets; and the payment of any amount due to the gov- ernment of any of the Provinces, in trust or other- ; wise, shall be the third charge upon such assets: R. S. C. c. 120, 8. 79, in part. s. & 3] NOTE ISSUE. 77 Until 1881 holders of notes ranked concurrently with depositors and other unsecured creditors of a bank, after which the Act 43 Vict. chap. 22, sec. 12, pro- rided that " The payment of the notes issued by a bank and intended for circulation, then outstanding, shall be the first charge upon the assets of the bank in case of its insolvency." The provision as to interest and as to the ranking of the Dominion and Provincial Govern- ments is new. In the case of the Bank of Prince Edward Island, which existed under a provincial charter and never came under the Dominion Bank Act, it was held that the Dominion Government as a depositor had a right of priority over note holders and other ordinary credi- tors: The Queen v. Bank of Nova Scotia, 11 S. C. Can. 1 (1885). In the case of the Exchange Bank, which was under the Bank Act and had its head office in Montreal, it was held that the Crown was bound by the provisions of the Quebec codes, which only gave the Crown priority in the case of certain officials accountable for its moneys, and that as a depositor and ordinary creditor of a bank in liquidation the Dominion Government had no priority over the ordinary creditors: Exchange Bank v. The Queen, 11 App. Cas. 157 (188G). Where by an arrangement with the Dominion Gov- eniment an insurance company made the deposit of $50,000 required by the Insurance Act with the Marl- time Bank, which was to pay the interest to the com- pany, it was held that this was not the money of the Crown, but was held by the Finance Minister in trust for the company, and was not subject to the preroga- tive of payment in full in priority to other creditors: Maritime Bank v. The Queen, 17 S. C. Can. 657 (1888). The Provincial Government of New Brunswick had monies in the Maritime Bank when it failed. The Su- preme Court decided that under section 79 of R. S. 0. c 120, note holders had a right to priority over the Gov- rf' w ■ • t ^ 78 THE BANK ACT. [s. 54 emment, and that the latter had priority over depositors and simple contract creditors: Maritime Bank v. Re- ceiver-GeneraJ, 20 S. C. Can. 695 (1888). The liquida- tors of the bank appealed against the latter part of this judgment, but it was affirmed by the Privy Council: [1892] A. C. 437. if the present Act had been in force it would not have affected the first of these cases, as it was governed by the provincial law; in the case of the Exchange Bank the Government would have obtained priority over otlier depositors. 2. The amount of any penalties for which iho bank is liable sha.ll not form a charge upon the assets of such bank, in case of its insolvency, until all other liabilities are paid. The penalties for which the bank may become liable under the Act are $500 for not holding fortj'^ per cent, of its reserves in Dominion notes, sec. 50; up to $100,000 for over-issue of circulation, sec. 51 sub- sec. ?>; up to $500 for doing business prohibited by sections 64 to 78 inclusive, sec. 79; $50 a day for not sending in monthly returns, sec. 85, sub-sec. 2; $500 a day for not sending in special returns when required, sec. 86, sub- sec. 2; $50 a day for not sending in the list of share- holders, sec. 87, sub-sec. 3 ; and $50 a day for not report- ing unpaid balances, sec. 88, sub-sec. 3. These penalties are rec«n-erable at the suit of Her Majesty and belong to the Crown for the public uses of Canada: sec. 98. '- 54. Every bank to which this Act applies, ar.d which is carrying on its business at the time when this Act comes into force, shall, within fifteen days thereafter, pay .o the Minister of Finance and Receiver General, a sum of money equal to tv/o and one-half per cent, of the average amount of its notes in circulation during the twelve months next preceding the date of the coming into force of this Act, or if such bank has not been in opera- 8. 54] NOTE ISSUE 79 tion for twelve months, a sum of money equal to two and one-half per cent, of the average amount of its notes in circulation during the time it has been in operation; and each bank shall, within fifteen dajs from and after the first day of July, in the year one thousand eight hundred and ninety-two, pay to the Minister of Finance and Receiver General such further sum of money as is necessary to make the total amount so paid by each bank to be a sum equal to five per cent, of the average amount of its notes in circulation during the twelve months next preceding the date last mentioned, — which sum shall be adjusted an- nually as hereinafter provided: The provisions for " The Bank Circulation Redemp- tion Fund" provided for in this section are not found in any former Bank Act. As its name indicates it is intended to provide for the redemption of the notes of an insolvent bank when this is not done within the specified time in the ordinary course of the liquidation. The banks to which the Act applies are those named in schedule A. The Act came into force on the 1st of July, 1891: section 104. The Merchants' Bank of Prince Edward Island shall, on or before the day upon which it becomes subject to the provisions of this Act, pay to the Minister of Finance and Receiver General such sum as appears to the satisfaction of the Treasury Board to be equal to two and one-half per cent, of the average amount of its notes in circulation during the then preceding twelve months; and shall further pay to the Minister of Finance and Receiver General, within fifteen days from and flfter the first day of July in the year then next following, such further sum as is necessary to make the total sum paid by the said bank to be a sum equal to five per cent, of the average amount of its notes in circulation from the time the said bank became subject to the provisions of this Act to the said first day of July, — which sum shall be adjusted annually as hereinafter provided: " m ^ 80 THE BANK ACT. [8.54 The Merchants' Bank of Prince Edward Island be- came subject to the provisions of the Act on the 1st of March, 1892, in accordance with the minute of the Treasury Board of the 24th of December, 1891, pub- lished in the Canada Gazette on the 20th of February, 1892. 3. Th Minister of Finance and Receiver-General L,^ ,1, upon the issue of a certificate under this At:t authorizing a bank to issue notes and com- mence the business of banking, retain out of any moneys of such bank then in his possession the sum of five thousand dollars, — which sum shall 1k^ h*'Jo for the purposes of this section, until the ,. jiiUd- ;djustment hereunder takes place in the yeui *i i}>^xt following, at which time the ani«, .mt it tl e credit of the bank shall be ad- justed by p T ifnt to 0/ by the bank of such sum as i' le^essa' make the amount at the credit of the ! i.-ii« mi of money equal to live per cent, of the a ...:\gc amount of its notes in circulation from the time it commenced business to the time of such adjustment, — which sum shall be adjusted annually as hereinafter provided: Before the Minister of Finance can issue a certifi- cate to a new bank, it must have paid in to him at least 1250,000: see. 13. When he issues his certificate he pays to the bank the amount of its deposit, less the sum of 15,000 for " The Bank Circulation Redemption Fund." 4. The amounts so paid, retained, and kept on deposit as aforesaid shall form a fund to be known as " The Bank Circulation Redemption Fund," — which fund shall be held for the following pur- pose, and for no other, namely: In the event of * the suspension by the bank of payment in specie or Dominion notes of any of its liabilities as they accrue, for the payment of the notes then issued or re-issued by such bank, and intended for circu- lation, and then in circulation, and interest there- on; and the Minister of Finance and Receiver General shall, with respect to all notes paid out of the said fund, have the same rights as any ! other holder of the notes of the bank: m a. 51] BANK CiUCULATION REDEMPTION FUND. 81 If the liquidator of the insolvc^nt bank does not re- deem the notes in circulation within two months after the suspension, the Minister of Finance may redeem thcui with the moneys at the credit of the fund, and the the amount of these notes, with interest from the date of the susi)ension, will then be a first charge in his favor with other note holders on the bank: see. 53. 5. The fund shall bear interest at the rate of three per cent, per annum, and it shall be adjusted, as soon as possible after the thirtieth day of June in each year, in such a way as to make tlie amount at the credit of each jank contributing thereto, unless herein otherwise specially provided, ecjual to live per cent, of tlie average note circulation of such bnnk during the then next preceding twelve months: The average note circulaticm of a bank during any period shall be determined from the average of the amount of its nott s in circulatiou. as sliown by the monthly returns for such period made by the bank to the ]M1nister of Finance and Ileceivor General; and where in any return, the greatest amount of notes in circulation at anv time during the mouth is given, such amount shall, for the purposes of this section, be taken to be the amount of the notes of the bank in circulation during the month to which such return relates: In the event of the suspension by the bank of pay- ment in specie or Dominion notes of any of its liabilities as they accrue, the notes of such bank, issued or re-issued and intended for circulation, and then in circulation, shall bear interest at the rate of six per cent, per annum, from the day of such suspension to such day as is named by the directors, or by the liquidator, receiver, assignee or other proper official, for the payment thereof, — of which day notice shall be given by adver- tisement for at least three days in a newspaper published in the place in which the head office of the bank is situate; but in case any notes pre- sented for payment on or after any day named fop payment thereof are not paid, all notes then h'l.b.a.— 6 .*' ;■ ' i'-'M wr I i My'' i: 82 THE BANK ACT. [s. 54 unpuid and in circulation shall continue to bear interest to sucli further day as is named for pay- ment thereof, — of which day notice shall be given in manner above provided: Trovided always, that in case of failure on the part of the directors of the bank, or of the liquidator, receiver, as- signee or other proper official, to make arrange- ments within two months from the day of sus- pension of payment by the bank as aforesaid for the payment of all of its notes and interest thereon, the Minister of Finance and Keceiver General may thereupon make arrangements for the payment of the notes renmining unpaid, and all interest , ; thereon, out of the said fund, and shall give such notice of such payment as he thinks expedient, and on the day named by him for such payment all interest on such notes shall cease, anything herein contained to the contrary notwithstanding; but nothing herein contained shall be construed to impose any liability on the Government of Canada or on the Minister of Finance and Re- ceiver General beyond the amount available from time to time out of the said fund: If the amount at the credit of the fund should be insufficient to pay the notes in full with interest, it would appear to be inequitable that interest sliould cease from the day named as to those notes which can- not be then redeemed. 8. All payments made from the said fund shall bo without regard to the amount contributed thereto by the bank in respect of wiiose notes the pay- ments are made; and in case the payments from the fund exceed the amount contributed by such bank to the fund, and all interest due or accrninu; due to such bank thereon, the other banks shall, on demand, make good to the fund the amount of such excess, pro rata to the amount w'hich each bank has at that time contributed to the fund; and all amounts recovered and received by tiic Minister of Finance and Receiver General from the bank on whose account such payments wore made shall, after the amount of such excess hns been made good as aforesaid, be distributed among the banks contributing to make good such i. r #■' 1 |L JLlr Ui. 8.55] BANK CIRCULATION REDEMFriON FUND. 83 excess pro rata to the amount contributed by each: rrovidetl always, that each of such other banks shall only be called upon to make good to the sjiid fund its share of such excess, iu pay- ments not exceeding in any one year one per cent, of the average amount of its notes in circu- lation, — such circulation to be ascertained in such manner as the Minister of Finance and Receiver General decides; and his decision shall be final: 9. In the event of the winding up of the business of a bank by reason of insolv<'ncy or otherwise, the Treasury Board may, on the apidication of the directors, or of the liquidator, receiver, assignee or other ju'oper olTicial, and on being salislied that proper arrangemenls have been made for the payment of the notes of the bank and any inter- est thereon, pay over to such directors, licpiidator, r-.ceivcr, assignee or other proj)er oflicial, the amount at the credit of the bank, or such portion thereof as it thinks expedient: 10. The Treasury Board may make all such rules and regulations as it thinks expedient with refer- ence to the payment of any moneys out of the said fund, and the manner, place and time of such pay- ments, the collection of all amounts due to the said fund, all accounts to be kei)t in connection there- with, and generally the management of the said fund and all matters relating thereto: 11. The Minister of Finance and Receivcn* General may, in his official name, by action in theExchecjuer Court of Canada enforce payment (with costs of action) of any sura due and payable by any bank under the provisions of this section. S***. The bank shall make such arrangements as are necessary to ensure the circulation at par in any and every part of Canada of all notes issued or re-issued by it and intended for circulation; and towards this purpose the bank shall establish agencies for the redemption and payment of its notes at the cities of Halifax, St. Jolin, Charlotte- town, Montreal, Toronto, Winnipeg and Victoria, ■ and at such other places as are, from time to. ' time, designated by the Treasury Board. 84 THE BANK ACT. [vi. 58 Tliis is n«'\v law, and was enacted to secure th(j circulation of all bank notes at par throuills or notes of the bank not under its seal are jilaci'd ou the same footiuj? as similar paper issued by a private per.-du, and if tliey meet the rcciuirements of the delini- lioii of a bill of exchanj;o or pi'omissory nolo would come under section ." Take for exam])le an ordinary bank deposit receipt witliout the seal of the bank, payable to a person named. If it contains the words, '• Not transferable," or other Avords to that effect, it is not a ne.i;oiiable in- strument and is not: transferable bv deliverv or im'.orse- mcnt. It would be a chose in action, and would reijuire to be assigned ;n writing, either on the document its( If or by a. separate instrument in order to give the assigniM' the right to sue in his own name, according to the law of the res]>ective provinces. See tlie Ontario ■\f( rcanliie Amendment Act, R. S. O. chap. 12l', sec. 7; R. S. Man. chap. 1, sec. 3; Rev. Ord. N. W. T. chap. 51; Cons. Acts, B. C. chap. 10. In Quebec it would come under Articles 1570 and 1571, which would require that a copy of the instrument of sale should be served on the bank before the purchaser could sue in his own name. Its not being negotiable would prevent any holder ac- (piiring greater rights under it than possessed by the first holder. %^ Wl '■I i f. •' 80 ai>. THE HANK ACT. [a. GO : ! • '■ 1 ' ■ '■^' 1 1, : ^■«;i »»'■: « m ^ |j|: h ijiSi^ All bank noh'H and bills of the kink whereon the nami'! of any pei^ton intruMled or authorized to Bi^u Huch notes or bills on behalf of the bank is impressed by machinery i)rovided f<'r that pur- jiose, by or with the authority of the bank, shall be iiood and valid to all intents and pur[»ose8 as if such notes and bills had been subscribed in the projx'r handwriting? of the i)erson intrusted or authorized by tlie bank to si^n the same respec- tively, and shall be bank notes and bills within the meaninfj of all laws and statutes whatever, and nuiy be described as bank notes or bills in all indictments and civil or (;riminal jjroceedings whatsoever: Provided always, that at least one signature to each note or bill must be in the ao- tuali handwriting? of a person authorized to sign such note or bill. K. S. C. c. 120, s. 44. 60. Every persa.vnient of money, paid or delivered by tlie maker thei-eof to his immediate creditor, and is not designed to eircnlate as money or as a substitute for money. K. S. C c. 120, s. H'.\, 8.-8. 2. 01- Every person who in aiiy way defaces any Dominion or I'rovlncial note, or bank nole, whether by writ- ing?, printing,', drawin}^ or stampinj; thereon, or by attachinjf or atlixinj;^ thereto, anything in the nature or form of an advertisement, sliall l>e liable to a penalty not exceeding twenty dollar*. This penalty is recoverable under section 9l. 1i2. Every officer charged with the receipt or disburse- ment of public moneys, and every otlicer of any bank, and every person acting as or employed by any banker, shall stamp or write in plain letiera the word " counterfeit," " altered " or " worthless," upon every counterfeit or fraudulent note issued in the form of a Dominion or bank nole, and in- tended to circulate as money, which is '>re8ented to him at his place of business; and if swih officer or person wrongfully stamps any genuine note he shall upon presentation, redeem it at the face value thereof. 50-51 Vict. c. 47, s. 1. nil. Every person who designs, engraves, prints, or in any manner makes, executes, utters, issues, dis tributes, circulates or uses any business or pro- fessional card, notice, placard, circular, hand-bill or advertisement in the likeness or similitude of any Dominion or bank note, or {uiy obligation or sei'iii-ilv of i\\i\ (lovernnunt, or of anv bank, is liable to a penalty of one hundred dollars or to three months' imprisonment, or to both. 50-51 Vict. c. 47, 8. 2. This section has been repealed by section 981 of the Criminal Code, 1892; but has been re-enacted as section 442 of the Code. The offence is punishable by summary conviction before two justices of the peace. J III. Si TlIK HANK ACT. RUSTNKSS AXD I'OWKUS OF THE T'.ANK. [s. G4 Caniulian banks are Hanks of Tssuo, of Discount and of Deposit. Tlio sections rolatiii;^" 1<> tlicm as lianks of Issue are tliose fi'oni HI to 5!> inclusive. Tlie follow- in only authorized to (hal in mouty and docu- ments for the payment of money. Tliese latter they may buy, sell, discount, h iid nioniy ujuui, or take as col- lateral security for loans. lOxcept as authorized by the Act they are jn'ohibiled from dealin.u; in uooils or k'uids, 01' hndin^- money ujiOii thrir security. Sc'tion (it lays powers in a lU'eneiT.l way; (>5 )j,ives banks a ncsc dowii lien upon tlie stock and dividends of its debtors; 0(5 pre- scribes how they may deal with collat(ral si-curities; (iS with morii.'a,m('s taken as additional security; OT, (>!>, TO and 71 Vvilh lands; 72 with morl;j;ai;es on vess(ds; and 7;> to 7S inclusive v.ilh Avarchouse receipts, bills of lad- ing and analoj-ous securities. I<^^ < m m 01. The bank may ojicn branches, a.^encies and oC'ces, and may euiiajie in aad cari*y on business as a dealer in gold and silviM- c(uii and bullion, and it may deal in, discount, and lend mon( y and make adv;inces upon the security of, aitd may take as collateral security for any loan made by it, bills of exchanjre, pron}issory notes and other ne;^<)ti- able securilies, or the stock, bonds, debentures and obligations of municipal and other cor- porations, whether secured by mortgage or otherwise, or Dominion, I'rovincial, Dritish, foreign and other jiublic securities, and it may engage in and carry on such business gener- ally as appertains to the business of banking; but, except as authorized by this Act, it shall not, either directly or indirectly, deal in the buying, or Helling, or bartering of goods, wares and mer- CA] iniANCIlES or BANKS. S!> rhiiudise, or onsa}j;e or bi' f'nj;a}j;o(l iii any tradii or busin^'ss wliatsocvt-r; and ii shall not, cltlHr (lircclly ov indiicrtlv, iMU'cliasc, oi* deal in, or lend money, or make advances upon ilie seeurily or pled;;!' of any share of its own eai»iiiil sloeU, or of the caiiital slock of ;iny ban!-;; aiid it shall not, eilher directly or iiidirccily, lend money oi' nmkea(h,;!ices iijion ihe secnrily, mori;.',a;:<' or hy- i)olliecation 'ol' any l.ind, teni'meiits, orimi . »vable |ii*()i;eriy, or ol' any shijts or (it her vessels, or wy.on the secnrily oi" ariv ^^oods. wares and merchandise. li. S. C. e. i^O, ss.'i;'), 4(i, .")!) and GO, in itail. /)rr///f7K'.v.— The system of l!ranch Banks ado]»t(Ml in Cinnda. was iKu-rowed from Scotland. For some pur- poses a branch is treated its an independent instil ntioii, hilt lor most inirj)oses it; is considered as an inle:;ral part of the main l)ody. For the payment of clie(iiies it is considered as I'is- tinct from the head oHice or other branches. A cus- tniiK r at one bra.nch is not ( ntilhd to present a eluMpie except at the branch where liis aciomit is kej)!. if it is cashf li at another ln-anch, for a holder, all pailii s are ill the siinu' j)osition as thoti;;h ii \va > on iiuoiher Laiili: Woodland v. Fear, 7 E. & J! 1) (l! .»( The same principh? ajiplies as to notice of dis- honor or protest. Each branch imlorsin;;' has a day to ^ciid ncitice to the next preceding;- indorser: (Mode v. r.ayley, 12 il. & W. 51 (ISi:?); Prince v. Oriental Hank, L. K. :; A. O. at p. ;5.!2 (1878); Steinhotr v. Merchants' !!;ud<, 1(J U. C. Q. B. 25 (1881). A branch cannot keep open after roceivinj;" notice that the head (dli;-e has sus- pended payment; but until such notice is ri'ceived its auihorily to do business is not revoked. But for most j)urj)oses a bank and its branches are in I;iw held to be one. Where notice allecls the liability of a bank, it is not necessary that it should be [iiven to iill the branches. It is suilicient to give notice at the head ollice, and this will be «jo()d apiinst all the branches after a sufficient time has elapsed to allow of its beinj^ DO THE BANK ACT. [S. 64 sent from the head office to the branches: Willis v. Bank of England, 4 A. & E. 21 (1835). Another result of treating a head office and a branch as one, is, that entries of sums transferred or trans- mitted are on the same footing as entries in the same office. A note was paid in at the head office and transmitted to a branch where it was payable, and the signature there cancelled. The head office was no- tified Jind tlie amount credited; but before the customer was advised it was discovered that the note should not have been marked paid. It was marked "cancelled in error " and the entries reversed. Held that the bank had a right to do so: Prince v. Oriental Bank, L. R. 8 A. C. 325 (1878). See also Simson v. Ingham, 2 B. & C. 65 (1823); Irwin v. Bank of Montreal, 38 U. C. Q. B. 375 (187G); Bain v. Torrance, 1 Man. R. 32 (1884). Another result of this principle is that if a cus- tomer has accounts at two or more branches, the bank may consolidate them, and a cheque may be refused when there appears to be money to his credit, if upon the whole there are not sufficient funds: Gamett v. McKewan, L. R 8 Ex. 10 (1872); Prince v. Oriental Bank, 3 A. C. at p. 333 (1878); Teale v. Brown, 11 T. L. R. 56 (1894). A bank is bound to know the amounts of its own drafts, and if one branch pays a draft drawn by another branch, the amount of which had been fraudulently raised, the bank cannot recover the money from the holder who has acted in good faith: Union Bank v. On- tario Bank, 9 R. L. 631 (1879). Where ;i, bank has its liead office in another pro- vince, but has a branch in Ontario, it is deemed to be resident within Ontario, and moneys deposited at a branch in that province may be attached as debts due to the depositors: Wentworth v. Smith, 15 Ont. Pr. R. 372 (1893). The honh as a dealer. — In the Bank Act, R S. C. c. 120, it was provided by section 45, that a bank should s. 64] BUSINESS OF THE BANK. 91 not engage " in any trade whatsoever except as a dealer in gold and silver bullion, bills of exchange, discounting of promissory notes and negotiable securities, and in such trade generally as appertains to the business of banking." It will be seen that the terms of the present Aft are more specific, and that in addition to its right to discount, lend money, mtike advances, and take cer- tain collateral securities, which will be considered fur- ther on, a bank is given express power to deal " in gold and silver coin and bullion, bills of exchange, promissory notes and other negotiable securities, or the stock, l)()n(1s, debentures and obligations of municiiml and other corporations, whether secured by mortgage or otherwise, or Dominion, Provincial, British, foreign, and other public securities." " Dealing " in these instruments and securities, as contra-distinguished from discounting or lending money or making advances on them, would ordinarily mean buying and selling them outright without an indorse- ment of them by the customer, or with an indorsement "without recourse" when they are made payable to his order. This is the usual way in which these instruments and secirities, except bills of exchange and promissory notes, are disposed of. In that ev^nt the seller simply warrants that they are genuine j..id that he has a right to transfer them, and that he is not aware at tie time that they are valueless; practicalh' the same warranties as if he was selling coin or bullion. Bills of Exchange Act, sec, 58, sub-sec. 3; Lewis v. Jeffery, M. L. R. 7 Q. B. 141 (1875); Jones v. Ryde, 5 Taunt. 488 (1814); Gom- perty v. Bartlett, 2 E. & B. 849 (1853); Oumey v. Wom- ersley, 4 E. & B. 139 (1854); Nichols v. Fearson, 7 Peters (r.S.) 103 (1833). The Bank Act of 1871 contained a provision similar to that quoted above from R S. C. chap. 120. Like the lat- ter, it also authorized a bank to acquire and hold corpora- tion bonds and debentures as collateral security and to realize upon them. It was held that this authorized a m THE BANK ACT. [-. (M 1 i f i bank not only to lend money on these securities, but also to ijiircliaso them absolutely: Jones v. Imperial JJank, 2a (Jrant, 20!) (187(i). "Other securities" in this section means secuiilics of the same kind as those mentioned, namely, similar to bills of exchan^^e and promissor}' notes. It would i)i()- bably be held to include checjues, bonds payable to bearer or a i)erson named, ne};oliable deposit receipts and the like. JJiscoiiiif'^. — T'-y ihU section a bank is autliorizcMJ to discount •'bills of exchanjj,e, ]H'(iniissory uotes and cllni- nef:^otiable securities, or the stock, bonds, debentures and obligations of municipal cori)orations, or l)omii.ii!;i. Provincial, IVrilisli, foi'eign, and other i)ublic securitiis." '^Vhen•a l.iink discounts a negotiable instrument it n isliy becomes the purchaser, and the instrument beconu ;■. a part of its assets. The expression "discounting" is not, however, usually applied to the acquisition of such bonds, debentui'(>s and public sinuritits. .\s a rule tli.y are either bought Avithout the seller's indorseuu'ul or they are r(i(ived by the bank as collateral security. " Discountin/j: " is tisually applied to bills of exchange and promissory notes not yet due, and which the bani; :e- qaires from tlu^ drawer or indorser, crediting him wiiii the face of the instrument less the discount for the time it has to run. If the customer does not indorse it, il is a simple sale, and the seller only warrants its genuine- ness, and is not responsible if the maker or acceptor does not meet it or sulssequently becomes insolvent: Gurney V. Womersley, 4 E. & li. ir.:r(18o4). Usually, however, the customer indorses the bill or note discounted by a bank. This transaction is some- times spoken of as the bank lending him money on tlie security of the instrument; but such is not its real na- ture. It is in cll'ect a sale with warranty. The bill or noite becomes the property of the bank, absolutely, ami it agrees to look in the first instance to tlie acceptor or (it (!4] BANK DISCOUNTS. 93 u ; ;i'- 11 ^^il"il tiiUL' t, ii is 'iniiiu'- )i (!(•('!* nui'm'V Ibill or bn tlie pal 11 a- bill or I, and Itor 01' mnl^(T for pa^inent, and only to the customer in case of tluMi' default of payment at maturity and notice to him of sucli default: Carstairs v. Bates, 3 Camp. 301 (IS12); Morl.'v V. Culverwell, 7 M. & W. 174 (1840); Roquette v. Overmann, L. R. 10 Q. B. 525 (1875) ; Re Gomersall, 1 Ch. D. 142 (1875). A bank may discount a cheque as well as a bill or note. If this is done without jietting the customer's in- dorscTiicnt he cannot be sued upon it or directly for the money advanced him. When a cheque drawn njion one b'-anch of a banlc, was presented for paymeiit at jinother braricl) wh(>re tlie holder was known to the officers and tlu'v cashed it for him, it was held that the chv^ipie was caslu d on the credit of the holder, and that ilie bank was, on its dishonor, entitled to charge him with the iiioi'ey he recpived: Woodland v. Fear, 7 E. & B. 510 While discounted bills are current the bank has no liin l)ly on the discounted paper, and the bank without his ( onsent applied some of the moneys otherwise, the surety as held to be discharged: O'Gara v. Union Bank, 22 S. C. Can. 404 (1893). Where a customer gave a bank a bill of exchange to discount, it had no right to keep the bill and apply the proceeds on his former indebtedness without his con- sent: Landry v. Bank of Nova Scotia, 29 N. B. 564 (1889); Pleckner v. Bank of U. S., 8 Wheaton, 338 (1823). I? 94 THE BANK ACT. [a. 61 Collateral Security. — A bank may not only discount the negotiable instruments named in this section, but may also make advances upon them, and take them as collateral or further security for loans made by it. Tliere is this difference to be noted between discounting aud taking as collateral security. The former, as already stated, is a selling, and the instrument discounted be- comes the property of the bank. The latter is rather a pledging or hypothecating of the instrument, which re- mains the property of the customer, but is subject to the lien of the bank for the amount of the advances or loan, with interest and any other accessory charges. If such an instrument should be lost or destroyed, without neg ligence, the loss, if any, would fall on the customer and not on the bank. When a bank receives as collateral security a ne- gotiable instrument which is payable to bearer, or is indorsed in blank or indorsed in its favor, it becomes the holder of the paper within the meaning of the Hills of Exchange Act, and can exercise all the rights of a holder, one of which is that it may sue upon it in its own name. Such a pledging is a negotiation of the instru- ment: Bills of Exchange Act, sec. 31. When the bank so acquires it before maturity, in good faith, without notice of any defect in the title of the customer, it holds it free from any defect of title of prior parties: lb. sec. 38. The bank can sue upon such paper when it becomes due, and before the maturity of the debt for the security of which it was given as collateral: Shaw v. Crawford. 10 U. C. Q. B. 101 (1858); Ross v. Tyson, 19 U. C. 0. T. 294 (18G9); Ward v. Quebec Bank, Q. R. 3 Q. B. 122 (1894). If it realizes more than its debt from its collaterals or otherwise, it holds the surplus as a trustee for the customer, who is entitled to it, and also to the surrender of any collaterals on hand after payment of the debt 8. 04] COLLATERAL SECURITY. 95 The bank is liable if it does not exercise due diligence in presenting such collateral paper for payment and giv- ing notice to indorsers in case of non-payment: Pea(;ock V. rurcell, 14 C. B. N. S. 728 (18G3); Browne v. Oom- moi'cial Bank, 10 U. C. Q. B. 129 (1852); Ryan v. McCou- ncll, 18 O. R. 409 (1889). A power of attorney to sell, dispose of, assign and transfer promissory notes does not give the right to plf'dge them as security for a loan: Jonmenjoy v. Wat- son, 9 A. C. 561 (1884). "Where a bank took a note indorsed by a customer MS collateral security for past advances amounting to $10,000, and after the maturity of this note deposits aniouiiting to more than $100,000 were passed to his cre- dit in the books of the bank, it was held that in the ab- sence of any agreement as to the imputation of pay- ments, they would be applied on the oldest debt, and the ((iHateral was discharged, the bank having no claim on Die maker or the customer who indorsed it: Exchange IJank v. Nowell, 31. L. R. 3 S. C. 129 (1887). A letter of guarantee was given to secure advances on certain accepted drafts discounted by a bank. It was de.'hired to be a continuing guarantee. The drafts were renewed. It was held that the guarantee covered the renewals, although renewals were not expressly men- tioned: Brush v. Molsons' Bank, Q. R. 3 Q. B. 12 (189.3). The expression " collateral security " is sometimes used in the sense of a secondary', at other times in the sense of a primary security: Athill v. Athill, IG Ch. D. 211 (1S80). Where a bank has received as collateral security bills or notes or other securities, and also holds liable some person who may occupy the position of a surety, care should be exerci^ied in dealing with such securities if the surety is to be held responsible. The law of Que- bec on the subject is expressed in Article 1959 of the Civil Code: "The suretyship is at an end when by the act of the creditor the surety can no longer be subro- ■ ■? -'■■ . ■is m,-M^' 4 ■■ 1 m « i s •' .■ ii'': ':! li 1 96 THE BA\K ACT. [a. 64 giitofl in tlio rijrlits, privileges and hypothecs of such creditor." Tliis also expresses the law in the other pro- vinces where the English law prevails. In the case of the Central Bank v. Garland, 20 O. R 112 (18!)0), goods were sold for which the purchasers gave their notes and also hire receipts, by which the property remained in the vendor until the goods were paid for. These notes were discounted through a third party, and the bank was aware of the hii'e receipts being taken, but there was no express contract in regard to them. It was held that the hire receipts were accessory to the debt, and that the bank was entitled to recover them from the assignee of the vendor. Tliis case was aflirnied on appeal: 18 Ont. A. R. 438 (1891). The law in Ontario as to the right of the surety who pays to get an assignment of the securities held by th(? bank is contained in section 2 of the ^Mercantile Amend- ment Act, R. S. O. chap. 122, which reads as follows: "Every person who being surety for the debt or duty of another, or b(ing liable with another for any debt or duty, pays the d(4)t or performs the duty shall be en- titled to have assigned to him, or a trustee for him, every judgment, specialty, or other security which is held by the creditor in respect of such debt or duty, whether such judgment, specialty or other security be or be not deemed at law to have been satisfied by the payment of tlie debt or the performance of the duty." The Civil Code of Quebec is to the same effect: "Art. 1950. The surety who has paid the debt is subrogated in all the rights which the creditor had against the debtor." A bank received the note of a third party as col lateral security for a ^200 note which it discounted. On maturity of this latter note the maker paid |25 and gave his note for $17o. This did not relieve the maker of the note given as collateral: Canadian Bank of Commerce V. Wov^dward, 8 Ont. A. R. 347 (1883). When timber limits given to a bank as collateral security were offered at auction and withdrawn, and i;'-: «. 64] NEGOTIABLE INSTUUMENTS. 97 subsequently sold at private sale for what was held to be a grossly inadequate price, the bank was held liable for the difference between the sum obtained and the real value of the limits: Tivaitice /. Consolidated Bank, 13 Ont. A. R. 09 (1880). A bank on discounting a note received collateral security from a third party, on condition that it would use diligence in collecting the note. It renewed the note and released one of the indorsera for a (^()nside^a- tion. The depositor of the collateral sued for and re- covered it: lianque du Peuple v. Pacaud, Q. R. 2 Q. R. 424 (1893). NEGOTIAHLE INSTRUMENTS. This section authorize'? banks to deal in bills of ex- rliange, promissory notes and other '' negotiable secur- ities." The expression " negotiable securities " or " nego- tiable instruments" is used in two senses. It is fre- quently used to describe any written security which may be transferred bj' indorsement and delivery, or by de- livery alone, so as to vest in the holder the legal title, and thus enable him to sue upon it in his own name. In a narrower and more technical sense it applies only to tliose instruments which, like bills of exchange, by in- dorsement or delivery before maturity, vest in the bona tide holder for value not only the rights of the trans- ferrer, but the right to claim the full amount for which tile instrument is drawn: Goodwin v. Robarts, L. R. 10 Ex. 337 (1875); Crouch v. Credit Foncier, L. R. 8 Q. R. at p. 381 (1873); Simmons v. London Joint Stock Bank [ISlil] 1 Ch. at p. 294. The expression vsould seem to have been used in this section in the latter sense as there is added " or the stock, bonds, debentures, and obligations of municipal and other corporations, or Dominion, Provincial, British, foreign and other public securities," some of which would come within the former meaning. All of these 11'l.b.a.— 7 It 98 THE HANK ACT. [h. 64 when in their iiEual form, except " stock " when used to designate capital or shares, would be negotiable in- struuieiits in the wider sense; while some of them may come within that designation in the narrower or more technical sense. In the broader meaning it would in- clude warehouse receipts and bills of lading, which it is evident from subsecjuent sections wei'e not intended to be included. The powers conferred by the present section were evidently intended to be confined to money and securities for money. Bills and Notes- — Bills of exchange and promis- sory notes both had a negotiable quality by the law merchant, .ind they have always been recognized as such in Canada, as well in the Pronnce of Quebec through the French law, as in those provinces which derived their laws from England. By far the larger part of tlie business of our Canadian banks is in the discounting of bills and notes. For questions which may arise in connection witli them the reader is referred to the Bills of Exchange Act, 1890, and works on that subject. Cheques. — A cheque is defined by Section 72 of the Bills of Exchange Act as a bill of exchange drawn on a bank, payable on demand. Cheques are negotiable in the same sense and to the same extent as bills or notes. Being intended for immediate payment, and not bearing interest, they are seldom dealt in as negotiable securi- ties. As a rule, banks receive cheques on other banks or on their own branches only for collection. For the law on the subject of cheques, the reader is referred to that portion of the Bills of Exchange Act and the notes thereon, which is found in the present work following the schedules to this Act. Bank Deposit Receipts. — ^The instruments of this class which were considered in the earlier Canadian cases were not made payable to order or bearer, and so were held not to be negotiable instruments under the 04] DEPOSIT RECEIPTS — DEBENTURES. 9V law relating to promissory notes ns it then stood, so as to enable the holder by indoisenient or delivery to re- cover in his own name. HtM* Mander v. Koyal Cana- dian Bank, 20 U. 0. C. P. 12.") (ISO!)); Bank of .^lontreal V. Little, 17 Grant, 313 (1870); Lee v. Bank B. N. A. 30 U. C. C. r. 255 ; followed in Annour v. Imperial liank, 15 C. L. J. 391 (1805). In Voyer v. Richer, 13 L. C. J. 213 (1809), the Quebec Courts held that even when the receipt was paj'able to order it was not nej^otiable. In the Privy Council, L. R. 5 P. C. 4G1 (1874), it was said that there was " high authority in favor of considering it to be negotiable," but the case was decided on another ground. In Re Central Bank, 17 (). R. 574 (18S0), it was held that the bank which had issued such a receipt, pay- able to order, was estopped from denying its negotiable character. Under section 8 of the Bills of Exchange Act, if such a receipt contains words prohibiting transfer or indicating an intention that it should not be trans- ferable, it would not be a negotiable instrument, but would be a chose in action and require to be assigned in writing, in accordance with the provincial law. Such words would not prevent the depositor from thus transferring the receipt and enabling the trans- feree to draw the money. It would prevent its being transferred by indorsement or delivery under the law merchant or the Bills of Exchange Act, and would prevent the transferee from acquiring any greater rights than the transferrer had. It would enable the bank to set up against the holder any rights or claim it might have against the depositor. Municipal Debentures. — Banks are also authorized to deal in the stock, bonds, debentures, and obligations of municipal corporations, to discount them, to lend money and make advances upon their security, and to take them as collateral security for loans. Nor are they restricted to those issued by municipal bodies in Can- ada. Care, however, should be taken to see that they are authorized by statute, and that the requirements of m 100 THE BANK ACT. [8.64 !-.^ the statutes under which they purport to have beea issued have been complied witlL Where the power to issue debentures for a given purpose exists, but there has been some irregularity in connection with the passing of the by-law or non-compli- ance with certain directions, the corporation is estopped from denying the validity of the debentures in the hands of a bona tide holder: Webb v. Commissioners of ilerne Bay, h. R. 5 Q. B. M'2 (187U); Confederation Life v. Howard, LT) O. K. 1!>7 (LS!)4); Board of Knox Co. v. As- pinwall, 21 Jloward {V. S.) 5:51) (1M58); Supervisors v. Schenk, 5 Wallace (U. S.) 772 (1805); Pendleton County v. Amy, 13 Wallace (U. S.) 297 (1871). Where, however, the debenture refers to a by-law and the by-law on its face shows that it is for a pur- pose not authorized by law, the debenture is invalid: Ooufederation Life v. Howard, 25 O. K. 197 (1894); Wilt- shire V. Surrey, 2 B. O. K. 79 (1891); Marsh v. Fulton County, 10 Wallace (U. S.) ()70 (1870). Money paid for worthless debentures can be recover- ed back, as money paid without consideration, or for a consideration that has failed: Straton v. Itastall, 2 T. R. 3()() (1788); Young v. Cole, 3 Bing. N. C. 724 1(1837); Confederation. Life v. Howard, 25 O. K. 197 (1894). In 1855 by the Act of the old Province of Canada, 18 Vict. chap. 80, municipal debentures issued in tlpjx'r or Lower Canada, i)a3"able to bearer were declared to be transfeivable by delivery, and those payable to any per- son or order, by indorsement; the holder for the time being having the right to sue in his own name, and his title not being liable to be impeached if he was a bona fide Ivolder for value without notice. Similar provisions are found in the municipal Aci now in force in most of the provinces of the Dominion. See the Consolidated Municipal Act of Ontario, 1802, siib-secs. 405 to 414; R^ S. O. chap. 186, sec. 13; Municipal Code, Quebec, Arts. 981-987; R. S. Q. Arts. 4C29, 4630; also the special Acts of incorporation of the respective ill' ' «. (U] MUNICIPAL DKIiKNTUUKS. 101 cilit's in llio Provineo of Quebec; Kev. Stat. Man. eluip. KM), sees. UV.) to i'V.). Tlie ne^otiiil)ilil.v of niinilcipal dobonlnres is some- liuH^'* I'cstiMintMl by a provision for registration in the books i}f the corporation. They are usually issued for a term of years under the corporate ^eal, witli intei*eKt coupons j)ayable annu- ally or semiannually attaihed. It has been thought that their beinj^ under .seal would prt^vent their bein^; cousidered as ne<;otiabl(3 instruments; but section !H) of the Bills of Exchanj^e Act shows that this is not an objection in Canada. The cou])ons are {generally in the form of ordinary proniiss()ry notes sif^ned by one of the otlicers who execute the debi'utures. In Ontario such debentures have longf been held to be negotiable, and bona fide holders for value have been protec-ted: Anj^lin v. Kiu^^ston, IG U. C. Q, B. 121 (1857); Trust & Loan Co. v. Hamilton, 7 U. O. O. I». 1)8 (1857); Orawfcvrd v. Cobour{?, 21 U. C. Q. B. 113 (18G1); Sceally V. iMcCallum, 9 Grant, 434 (18(52). In Quebec they have been held to be negotiable like promissory notes, and in suing might be declared upon as sucli: Eastern Townships Bank v. Coniptou, 7 B. L. 447 (1871); Roxton v. E. T. Bank, Kamsay, A. C. 240 (1S82); Macfarlane v. St. Ccsaire, M. L. R. 2 Q. B. IGO (18SG); St. Cesaire v. Macfarlane, 14 S. O. Can. 738 (1887); Ottawa v.M. O. & W. Ry. Co., 14 S. C. Can. 193 (1886); Pontiac v. Ross, 17 S. C. Can. 40G (1890). In the United States, such municipal bonds, negoti- .orm, notwithstanding they are under seal, are with all the attributes of commercial paper, j)as8 \ I. ery or indorsement, and are not subject to >piities (when the power to issue them exists), in the hands of holders for value before maturity witliout iKMice: 1 Dillon, Municipal Corporations, 4th ed. sees. 4SG, 513: See < )mwell v. Sac Co. 96 (U. S.) 51 (1877). Decisions flict as to whether coupons are en- titled to grai rhe weight of authority is in favor of W: i 102 THE BANK ACT. [8.64 I their being payable on the very day of maturity with- out grace: 2 Daniel, sees. 1490a, 1505. Coupons dishonored bear interest from their ma- turity: R. S. O. cliap. 44, sec. 86 (2); C. O. 1069, 1077. Companjf Stock or S^'hares- — Banks are also author- ized to "deal in, discount, and lend money and make advances upon the security of, and take as collateral security for any loan made by it, the stock, bonds, deben- tures, and obligations of corporations, whether secured by mortgage or otherwise;" their powers as to dealing in these securities being the same as with regard to bills of exchange and promissory notes. The word " stock " in this section would include not only such corporation bonds and debentures as are sometimes called stock, and debenture stock when authorized by statute, but also the shares or capital stock of joint stock and other companies. These latter are not negotiable in the ordinary' sense, but are usually assigned or transferred in the books of the company in accordance with the provisions of the governing statute or by-laws. The power of a bank to " deal in " the stock of such coi*porations would probably not be held to justify their dealing in them as brokers, investors or speculators. By acquiring a controlling interest, for example, in trading or loan companies they might come within the spirit of the prohibition as to engaging in trade, or lending upon mortgage, Tlieir dealing in them should be in the way of a banking business. In Re Barned's Banking Company, L. R 3 Ch. 105 (18G»j, similar words were, however, held to authorize a company to take shares in anotluM* conip;niy. In the T^oyal Bank of India's Case, L. R. 4 Ch. 2r.2 (1800), Solwyn, L.J., said: " I entirely agree with the judgment of Lord Cainis in the case of Barned's Banking Company, that there is not, either by the common or statute law, anything to pre- vent one trading corporation from taking or accepting 8.64] COMPANY SHARES OR STOCKS. 103 shares in another trading corporatioiL ... I appre- hend that making advances upon shares in public com- panies is within the ordinary coarse of the dealing of bankers Then it is said that the consequence is one of very great hardship, as involving the share- holders in the Royal Bank of India in a great number of liabilities in respect of other companies with which they have had nothing to do, aad many cases have been suggested in argument, such as that of bankers becom- ing partners in a brewing company, or a shipping com- pany, or many other tilings with which, in their own articles of association, they had no connection what- ever. But I think the answer to that is, that such dangers are necessarily involved in lending money upon securities of this kind." The only prohibition is as 'to its own stock or the stock of another bank. Even where certificates are issued to represent such shares or stock they arc^ not recognized in England as being negotiable. Bee Hyau v. N. B. Australasian Co., 2 11. & C. 175 (1863); France v. Clark, 26 Ch. D. 257 (1S84); I^ndon County Bank v. River Plate Bank, 20 Q. B. D. 232 (1SS7); Sheffield v. London Joint Stock Bank, 13 A. C. 333 (1888); Williams v. Colonial Bank, 38 Ch. D. 388 (1888). In the United States they are not considered to be negotiable; but are said to be quasi-negotiable or assign- able, being generally subject to certain restrictions in the charter or by-laws of the company. See 2 Daniel, sees. 1708, 1709. Where a bank held shares of a. joint stock com- pany as collateral security, it was held not to be liable for calls on such shares: Railway Advertising; Co. v. Molsons Bank, 2 L. X. 207 (1871)); Kxcliange Bank v. C. & D. Savings Bank, M. L. R. 6 Q. P.. 196 (1887). P.ut in Ro Central Bank, Ilonie Savings & Loan Co.'s Case, 18 Ont. A. R. 489 (1891), where the loan company was Ml *■ ■■ m / ■ 1 .ri:, i 1 J;., 101 THE BANK ACT. [s. G4 authorized to Icud money on bank shares, and accepted transfers, absolute in form, it was liable for calls. Under the Act of 1871, as amended in 1879, a bank could not make loans on the stock of a joint stock com- pany, and no action would lie on behalf of a bank claim- ing? to have made a loss on such a loan induced by false re|>orts of directors of the company: Bank of ^lontreal V. Geddes, 3 L. N. 146 (1880). When a bank has advanced money on the slock of a coni])iiny it is not obliged to sell the stock before bring- ing an action against the directors of the company for ha ring made false reports and for jtaying dividends not justified by the profits, and thereby unduly intlating the pi-ice of the stock and inducing the bank to lend upon it: Montreal €. & D. Savings Bank v. Geddes, 19 K L. 084 (1890). Bonds or Debentures of Other Corporations. — Banks may also deal in these securities in the same manner as with bills and notes. Railway and other commercial corporations incoj'porated by sj)ecial Dominion or Pro- vincial Acts are usually authorized to issue bonds or delx'utures up to a certain limit, which are secured by a lien or mortgage on the undertaking made in favor of trustees for the holders of the bonds. Oonipanies in- corporated by Dominion letters patent may also issue bonds or debentures for boi-rowed money; R. S. (\ chai). 119, sec. 7. In Ontario, by R. S. O. chap. 122, sec. 9, bonds and debentures of cori)orations, if i)ayable to bearer, are transferable by deliverA', and if to order, by indorse- ment and delivery, and the holder may sue in his own name. Other provinces have similar provisions. See Bank of Toronto v. Cobourg P. & M. Ry. Co., 7 O. R. 1 (1884), wheif^ bonds are compared to promissory notes; and Desrosiers v. ISIontreal P. & B. Ry. Co., 6 L. N. 888 (1883), as to coupons. In England such bonds and debentures of both home and foreign companies have frequently come 8.64] CORPORATION BONDS. 105 before the Courts. Even when they were made payable to order or . bearer, the transferee has sometimes been denied the right to sue in his own name, although as a general rule the company which has issued such securi- tieH has been held to be estop])ed frcm denying their negotiability. The course of the jurisprudence has been towards placing such instruments more nearly on the same footing as bills and notes. The ease of Shefiield V. London Joint Stock I'.-ank, 13 A. C. 833 (ISSS), in the House of Lords, was understood to have somewliat restricted their negotiability. Tliis interpretation was put upon it in Simmons v. Ixindon Joint Stock Bank [181)1] 1 Ch. 270; but the House of Lords, in reversing this latter d'ecision, explained that the Sheffield judg- ment was based upon the particular facts of that case. For a full discussion of the law as to such bonds or del>entures in England, see He Blakely Ordinan(» Co., L. K. 3 Ch. 154 (1807); Ke Natal Investment Co., ibid. 355 (18(58); Re General Estates Co., ibid. 758 (1868); Be Imperial Land Co., L, R. 11 Eq. 478 (1870); Webb v. Ilcrne Bay Commissioners, L. R. 5 Q. B. (>42 (1870); Crouch V. Credit Foncier, L. R. 8 Q. B. 374 (1873) ; Good- win V. Robarts, 1 A. C. 470 (1870); Re Romford Canal Co., 24 Ch. D. 85 (1883); London Joint Stock Bank V. Simmons, [1892] A. C. 201. Where an agent in possession of debentures of a corporation, payable to bearer, which are past due, but on which interest is being paid, pledges them for an advance for himself, the fact that tliey are past due does not destroy their negotiable character, and is not alone sut)i('i(-nt to put the jK^'son advancing the money on his giiiird. Nothing short of bad faith will affect his title. The fact that they are past due does not affect jjersons claiming ownership, who are not liable as makers or in- dorsers. A negotiation of such delxntures is not sub- ject to Articles 1487, 1488, 1489 and 1490 of the Civil Code as to sales by persons who are not the owners of unde" a cliarter party, and where the bank has derived no benefit from such a cou- ti'iict a claim against it under such circumstances will !)(' dismissed: Johansen v. Chaplin, M. L. R. Q. B. Ill (issil); Watts V. Wells, M. L. R. 7 Q. B. 387 (1890). A Milwaukee bank sent to a Toronto bank a bill drawn at forty-five days, togetlier with a bill of lading for wh(at. It was held that in the absence of instructicms the latter bank was right in giving up the bill of lading on llic hill being accepted. Evidence of usage in the Uniled States and Ctinada was given. It was held that the latter ;ilou(^ was relevant: Wisconsin Bank v. Bank of British Xorth America, 21 U. C. Q. B. 284 (1801). To the same effect. Goodenongh v. City Bank, 10 U. C. C. P. 51 (1800). Where a customer deposits a cheque for collection and it is i>assed to his credit, the bank has a right to ir no THE BANK ACT. [8.64 iii charge it back when it is dishonored, even when the customer did not endorse it: Owens v. Quebec Bank, 30 U. O. Q. B. 382 (1870). When a bank receives for collection, without special instructions, a cheque on a bank in the same place, it should present it either the same day or the next busi- ness day; if on a bank in another place, it should be for- warded within the same delay: Redpath v. Kolfage, 16 U. O. Q, B. 433 (1858); Owens v. Quebec Bank, 30 ibid. 382 (1870); Boyd v. Nasmith, 17 O. R. 40 (1888); Blackley v. McCabe, 16 Ont A. R. 205 (1889) ; Sawyer v. Thomas, 18 ibid. 129 (1890); Marler v. Stewart, 2 Stephens, Que. Dig. Ill (1878); Hey wood v. Pickering, L. R. 9 Q. B. 428 (1874). The same diligence should be used in presenting for payment a bill payable on demand, and in presenting for acceptance a bill entrusted to the bank for that pur- pose. If a bill is not accepted within two days after it is presented for acceptance, it should be treated as dishonored: Bills of Exchange Act, sec. 42. A bank gave an open letter of credit for £15,000, and requested parties negotiating bills under it to indorse particulars on the back of it. Bills were drawn under it, and when negotiated were indorsed as requested. The bank failed, and the party to whom the letter was given was indebted to the bank apart from these bills. The bank was held liable to the holder of the bills, irrespective of the state of the account between it and the party to whom the letter was given : Agra & Masterman's Bank, Ex parte Asiatic Banking Corpora- tion, L. R. 2 Ch. 391 (1867). Business prohibited to Banks. — A bank being created for the purpose of carrying on a banking busi- ness, anything outside of that would be beyond its scope. There are, however, certain transactions or lines of busi- ness, more or less connected with banking, which it might be claimed that a bank had a right to engage in if not specially prohibited. 3.(34] BUSINESS PROHIBITED TO BANKS. Ill Subject to thp exceptions nomed in the Act, these are laid down in the present section as lollow^i: 1. A banlc is prohibited from dealing in the buying or s<'!ling or bartering of goods, wares and merchandise, or engaging in any trade or business whatsoever. Tlie excerptions are contained in sections <)8, I'i, 74, 75 and 70, which relate to property which a bank may acquire through a valid chattel mortgage, warehouse receipt, hill of lading or security. Such goods, wares and mer- chandise may be disposed of as pointed out in sections C8 and 78. In Radford v. Merchants' Bank, 3 O. R. 529 (1888), a bank sold goods which it had acquired by means not recognized by the Act, and was sued for breach of war- ranty. It was held that the action would not lie, as the bank was prohibited from selling goods. In Ayers v. South Australia lianking Co., L. R. 'J P. C. 548 (1871), a similar prohibition was considered, and it was said that it would not prevent the property from passing or the purchaser from the bank getting a good title to the goods. 2. A bank is also prohibited from purchasing, or dealing in, or lending money, or making advances upon the security of any pledge of any share of its own capital stock, or the capital stock of any bank. This prohibition is absolute. If directors should undertake to buy up shares with the bank's money in order to keep up the price of the stock or for any other purpose, they would be personally liable: McDonald v. Rankin, M. L. R. 7 S. 0. 44 (1890). In the winding up of the Central Bank, a question was raised as to shares which the cashier had purchased for the bank and which he had subsequently disposed of. It was held that the purchasers could not set up this illegality so as to escape payment of the double liability to the liquidators: Nasmith's Case, 16 O. R. 293 (1888). See Stone v. aty and County Bank, 3 C. P. D. 282 (1877). m p 112 Tllli 15ANK ACT. [s. Gi A person who had shares transferred to him on belialf of the bank is also rt'spousible for the double liability' on the winding up: Henderson's Case, 17 O. It. 110 (Ih^SD). It is unuL'oossar;^., however, for a bank to take se- curity upon itH own si.uck held by a debtor, as section G5 gives it a privileged litn on such stock and its divi- dends until the debt is paid. Sections 155 and 'AH also give it the power to prevent the transfer of any snrh stock until all liabilities to it are cleared oJf. Thisapplica not only to debts due but also those to mature. In the case of The Exchange liank v. Fletcher, 11) tx C t-an. -78 (181)0), it was assumed that under the Act of 1871 as iunended in 1871), a bank had no authority to lend u]M)n the secunty of the shares of another ban!;. Such shares were traiisferrc'd to t.he managing director of the Exchange Hank as security for advances made L'v the latter, lie fraudulently pledged them to another bank for his pnvate debt and absconded. It was held that the proihibition to make advance's on such secunly ai)i)lied to the bank lending, and not to the borrower, and the loan having been re])ald, the Exchange Ban!; wa.s condemned to return the shares or to pay their value. ',i. A bank is also prohibited from lending money or making advances upon the security, mortgage, or hypo- thecation of any land, tenements or immovable property. It may, however, take a mortgage on land by way ol additional security for debts contra<*ted to it in the course of its business: sec. 08. Kee the notes und<'r that sh1bit(>d in this sec- tion it would be difTicuIt to lay down any general rule, as each case would be governed largely by its pai'ticular circumstances. Tn the first place the bank would be liable to the penalty of $500 for each violation, which would be payable to the Dominion Government: sees. 70 and 98. In the next place it is to be observed that these acts, in so far as they do not come within the exceptions in otiier sections, are not onlj- ultra vires in the sense that they are outside the objects for which banks are in- corjtorated, but tliey are also illegal, as being positively prohibited by the Act. It has been laid down as the result of the Engllsli authorities on the subject, that while any such, transac- tion is merely executory, neither party can have as against the other any cause of action; and that even when executed wholly or in part by one of the parties, it is not, nor is any part of it enforceable by an action directly upon the engagement itself; the most that the party complaining can obtain is an account. If a loan is made and a prohibited security is taken, the bank would have no right to claim or enforce the security, but the borrower would be liable for the loan. Where m'l.b.a.— 3 m 114 THE RANK ACT. [h. 64 li i: :■. , U a socnrity is |tnr11y Ic^al and partly illojjal, the riplit of a bank Imxh boc^n niaintiaii)earties could enter into it, and, in defliince of the law, compel Courts to enforce and give effect to their illejjal transijK'tions." In the same case, at p. (517, Strong;, J„ said: "Whenever the doing of any act is expressly forbidden by statute, whether ou grounds of public policy or otherwise, the English Courts hold the act, if done, to be void, though no express words of avoidance are contained in the enactment itself." In the National Bank of Ausl ralasia v. Cherry, 3 L. R. P. C. 209 (1870), Lord Cairns laid down the rule that the prohibition to lend on tlie security of real estate was a matter of public policy, and that when such a transac- tion was entered into, the contract for the loan of tiio money would be perfectly valid, and the only question would be whether the bank had power to take the security. If this was ultra vires the bank could not hold it. It was also pointed out that the object of the legislation was not so much to make contracts for ad- vances void, but rather to make it ultra vires for the bank to take, on the occasion of contracts for these ad- vances, securities of the kind mentioned. Money was borrowed from a savings bank on the security of letters of credit of the Quebec GovernmeTit. The debtor assigned and the bank filed its claim with the curator. Certain creditors contested it on the ground that the transaction was ultra vires and illegal. It was 8.64] lU'srNEss i'U()iiii«iTi:i) to hanks. 115 Ih'M tluit thoupli tho lendinpof the money on the plodp;e of Huch sccurilioH woH ultra vircK, and tliouj;h this nii}?ht {iir<'(?ttiio plodf^e as repards third partit-rf intcrestiMl in tlie HiMurilies, it wa,s not, of itself, suid ipso facto, a radical nullity of public oi"der* of such a chanurtei' as to dis- entitle the bank from claiming back the money wiOi intevest: RoUand v. La Caisse d'Economie, 24 S. C. CiUi. 405 (1895). It is a question whether the only results of a bank's enj^aj^cinji; in prohibited business are the incurring; of the p( n.'iKies laid down in section 71), and the avoidance of the contract entered into and the security tjiken in cer- tain cases, or whether it also renders itself liable U) tlie forfeiture of its charter at the suit of tlie Crown. In 1S72 the Ministe. of Justice granted a flat for n scire facias to set aside the charter of Lji Banque Nationale on this ground, but the matter was not followed up. In ISSl another ai)plication was made to the then Minister of Justice for a fiat to prosecute the Bank of St. llya- cinthe in the Excliequer Court to have its cliartci- declared forfeited for engaging in business iirohibited by tlic Act. The ^Minister in refusing the application saibell. It must be understood that the deposit and the debt are respectively made and due not only by the same person but in tlie same right. ILLUSTRATIONS. 1. When advances are made by a bank contempor aneously with a deposit of title deeds, the presumption would be that the security was for the advances iind not for an antecedent debt. In a conllict of testimony, how- ever, the fact that the latter was legal and the former illegal was taken into account, and the transaction npheld: Koyal Canadian liank v. Cummer, 15 Grant, G27 (1809). 2. Commercial securities pledged to guarantee aspo cial loan cannot be retained by the creditor until a debt 8. G4] HANKERS LIEN. 117 anterior to that for which the securitiea were pled;ged should be paid, unless there was ti special agreement 1<> that effect: Exclumge Bank v. City and District Sav- ings IJMik, 14 R. L. 8 (1885). 3. Where warehouse receipts were pledged to a bank for a ciirtain debt, a i)ai'ol agi"eenient that the surplus of the [)roceeds after the imiie of the goods was to apply on oilier debts due to the Ixink, was upheld: Tliomp«on V. Molsons Bank, IG S. O. Can. (iG4 (1889). 4. If the bankers' lien exists in the Province of New Brunswick, the person against whom it is sought to en- forces it, must Ik' a custcuiier of the Iwuik: Allen v. Bank of New Brunswick, 17 N. B. (1 P. & B.) 440 (1877). n. A l)anker has a g<'neral lien u]K>n all the securi- ties in his hands belonging to any particular person for his gen<'i'al balance, unless thei-e be evidence to show that hi received any particular security under special cirrumstances, which would take it out of the coninuui rule: Davis v. Bowsher, 5 T. B. at p. 401 (1704), (*>. A liank has no lien for its general balance on s('(Ui-i(ieH casually left in the ofhco by a custoinei* after a i-efusal to make advances on them: Lucas v. Dorrieu, 7 Taunton, 278 (1817). 7. Security given by a customer for the amount "which shall or nuiy be found d\ie on the l>alanc<' " of liis account, covei's only the then existing balance, and •iocs not opci-ate as a continuing se<-iii'ity: Re Medewe, L'li IJcavan, r.SS (is,")!)). 8. The fact that securities were dejiosi ted as security for a s[»ecilic advance is not inironsistcnt w 'th tl'e claim of a bank to h(>ld them for th<' gciicial b.ilance: Jones V. Pcj.percorne, 2S L. .1. Ch. IHS (IS."!*!. !>. Where jilaintiff delivered to his broker scrip ceitill- calcs |>iii-})orting to be tfansferabh' by delivery, wliich tile hrokci' in fraud of iiis ]»rincij»al ileposited with a hanlc as security for his own debt, i>laintifi" was estopped nrrr Sl:f 118 THE BANK ACT. [s. (54 from (Icnyiiifjj llicir noj^oliiibility or tlio lien of the bank: Kuinball v. Mulropolilan J5aiik, L. K. 2 (^ j;. 1>. J!I4 (lS77j. 10. A bank lias no lion for* the balance of an account upon boxes conlainin*^ plate or securilicH, whicli were deposited with it for f-afe custody, the d('i)ositor retain- ing the keys: Lec-e v. Martin, L. K. 17 E(i. 2l'4: (1S7;J), 11. Where a customer has three separate accounts in a bank and there is no special agreement regarding them and the bank has had no notice that any of Lheni is for other persons, they have a lien on each fen* any balance due on the others: Teale v. iirowu, 11 T. L. K. .Ki (181)4). A(Ji;\Ts, ri{C.sri:i:s, nrr. Ditticult (lUcsliouH sometimes arise when banks receive securities oi' acipiire claims uiion them from agents, trustees and others who may b(-' acting for prin- cipals or other third parties. It is in the nature of bills and not(.*s and other instruments that ar<' n<'gotiable in (he full sense of that tcnn, that the person who actjuires them in good faitli before maturity for value without notice of any defect or irregularity, or in (he language of the Uills oi' Kxi-hange Act, Ix'comes a holdei' in due course, may acquire a better litle than that of the pei'soii from whom they are i-eceived. If a bank lakes such sei)onsible to llio real owner. See Muir v. (barter, and Holmes v. Cartor, K; S. C. Can. 47;i (18SI)); i:ai)hai"l v. McFarlane, IS S. (.'. Can. 183 (1800); and Shaw v. Sjx ucer, 100 Mass. 1^82 (18G8). In Petry v. La Caisse d'Economie, 11) S. C. Can. 713 (1801), the plaintilTs were held not to be entitled to get back moneys whi(;h one of them had paid to redeem such stock with full knowle(]fi;e of the facts. The case of Sheflield v. London Joint Stock Bank, \'.\ A. ('. XV.\ (ISSH), arose over certain Crand Trunk Kail- wiiy and other railway and canal bonds transferred in 'il,.nk and delivered to a broker or money lender, who advances on them. He dejtosited them with the ;i .'i; '>! peal, relying upon the case of Shetlie^ld against the same bank above cited, held that where a broker pUnlged certain foreign bonds of plaintitTs, with those of other persons, to raise a lump sum, the bank had no reason to beliiMc tliat Hie broker had authority to pledge the seenrilies in that way, and (lid not acipiire a good ntle. This decision was i-eversed by the House of Lords, which held that the circum- stances were not sutficient to have aroused the suspieion of the bank, which was entitled to retain and realize upon the secui'ities, as having ac(]nired them in good faith and for value. They further stated that the case of Sheffield against the bank turned entii'ely upon the special facts of that case: London Joint Stock I'.ank v. vSimmons, [1802J A. C. 201. 120 THE BANK ACT. [S. 64 m f In London & Canadian L. & A. Co. v. Duggan, [1893] A. C. 500, the I'l'ivy Council held, reversing a judgment of the Sup/ciiie Court of Canada, that where the manager of th(? Federal liank held certain shares in a joint stock conij)an.y simply as manager " in trust," these words implied that he held them in trust for the Federal Bank, and that there was nothing to put the London and Cana diaii Company upusiness day, pre- vaih'd. The acceptor or maker of a bill or note could no doubt claim that he was not liable for the costs of protest before '.i o'clock, and if he could show that lie was injured by notices <)f protest sent out before that time lie mij;lit have a rij^lit of action. Clcar'uiff IfoKfiC — The first cleaiin}; house was estab- li8h( d in London in 1775. It was at lirst simply a place of meeting where the clerks of the ditferent banks ex- changed cheques, bills, etc. The risks run in carrying large sums of money led to the appointment of several clerks who were common to all the banks using the cleiu'ing h()iis<», to whom each bank would report the payment of the balance settling the transaction. Tlie Kiiving in tlie use of money has been v«'ry great, as a rule not more than 3 or 4 per cent, of the aggregate tninsactions being paid in bank notes or specie. A clearing house was organized in Montreal on the 2(Mli of lleceiiiber, J.S.S8, an example since followed by T(»i()nt(», Halifax, Hamilton and Winnipeg. Its olijects iuid methods have been described as follows by David- son, .1.. in the case of La IlaiKiue Xatlonale v. Merchants' r.aiik, M. L. R. 7 S. C. (18!)1), at page :5:5(>: " Its i)uii>os(,'s arc lo ]»i'ovide simple and exiiedit ions fjuililies for the (lailv settlements of tlu' banks Avitli each other. l»y the cUVcting at one place and at one time of the daily ex- cliiinges between the associ.ited lianks, juid the payment of the (lilfei'ences resulting from such exchanges. These ulijcts are carried out in this way: Kvery nioniiiig at 10 o'clock each hank has at the clearing house all tint vliiMjiics and otluM* d<'mands it has received again.-t all the other banks during the preceding day, making 11. THE HANK ACT. [s. 05 ilnux lip inio s^parato biiiMllcs for each bank, with a Ktatt-mcut oil tlio cover showing the aggregate of tlie contents of each l)iin(lh', Tlie settlement is made on tliese 'statements, without regard to ili(^ fact wlietlier tlie contents of the bundle were cor,"ectly ticketed or found good claims against the bank charged. Thus each messenger is, in a few minutes, able to receive and la.ke to his bank all the claims of the other banks against it. To attempt to examine and challenge securities iit the clearing house would make its purposes inopera- tive. Thest? temj)ora.ry clearing house balances are sub- sequent ly verified at the bank by a scrutiny of the cluMjues and other demands of which they are com- posed." In the above case a temporary regulation made Wiien the clearing house was organiy.ed, that dislnmori'd cheques received in the morning should be returned before noon, was relied ui>on as a ground for refusing to receive one returned in the afternoon, the refusal bein<; based on the statement that the securities had been given up early in the afternoon. An attempt was also made to prove a usage to the same effect as the rule. The Court held that a custom or usage of trade or bank- ing must be strictly proved, that the rule in question only jjurported to Ixi a temporary one, that the usag, alleged was not general, and the rule had fallen into disus< : id that the wrdinary rule of law as to tlie return of che(]ues for which there are no funds had nut been su]>erseded. Previous to the ch-arin^z liouse the undis])uted practice was to return su<-k t*eques at 3 o'clock. ii^. Tlie bank yhall have a T)rivileg(^ lien, for anv debt or liability for any debt to the bank, on the shares of its own capital stock and on any unpaid dividends dC ihe debtor »»r i)ers(ui liable, and may de« line t(» allow any ti'ansfer of the shares of such debtor or ])(^rpon until such debt is ])aid; and the bank shall, within twelve months after sach debt has accrued and become payable, sell such shares, [s. ()5 s. 05] LIEN ON ITS OWN STOCK. 123 ,as also le rule. )!' bank- [uestiun (i usag- n Into to the iaS |iii)vides that the ollicers of the bank shall not execute *tiie transfer of sha'us sold under execution, until all debts, lialnlities and liiMis in fav U. li. D. 4:]() (1882); that it also meant " indebted whether solely or jointly with others" : IJentham ^lills Co. 11 Ch. I). !)00 (1870); and that where a bill was taken for the original debt the light existed, but the remedy was suspended until the maturity of the bill: Lendon, Birmingham, etc.. Bank- ing Co., 81 Beav. .832 (18()5j. m r I 124 THE HANK ACT. [8.(55 M i' The lanRuape of this 8ection, " any debt or liability for any debt to the bank," is ko coniprehenKive that it would appear to include any claim of the bank undor which the holder of the shares might ultimately become liable to it. It is to be observed that the jjeneral lien of the bank on securities or deposits exists only when the debt is due and payable. See the notes to the y)receding sec- tion and those under s(^ction 84. The lien would only exist if the debt or liability were against the holder in the same right or interest as that in which he held the shares. For instance, if the debt or liability was personal and the stock were held by him " as executor, administrator, guardian or trustee of or for some person nam(^d," as i)rovided in section 44, or vice versa, there would be no lien. Even if the person represented were not named, and the shares were held by him simply "as executor" or "in trust" the princijWe laid down in Bank of Mcmtreal v. Sweeny, 12 A. 0. (517 (1887), and Murray v. Pinkett, 12 CI. & F. 704 (184r»), world prevent the bank from obtaining a lifii after notice that the shares did not really belong to its debtor. A bank has a lien on its sliaivs held by a. memlx'r of a firm for a debt due to it by such firm: In re Chinic & Union Bank, 14 Q. U R. 289 (1888). The bank may rvaive its right of lien, but care should be taken in case it holds any sureties for tlie debt or liability. Article 1950 of the Civil Code says: "The suretyship is at an end when by the act of the creditor the surety can no longer be subrogated in the rights, hyjtothecs and privileges of such creditor." The Engllsli law as to sui'ctyship is to the same efTcct. The clause requiring the bank to sell the shares within twelve months after the debt has accrued and become payable is new. The sale shoijld be by auction after reasonable publicity .and notice. The notice to the- tii 4 «. f.O] SALE OF COLLATERALS. 126 (Ichloi- Hlioiild indiciilc llic time am! pliicc of siilo. If the bank does not exorcise its ri^'ht of sale under this prclioii within twelve months after the maturity of the (Icht, it would then need to fall back upon the remedy that mi},'ht be Kiven to it by the law of the particular province where its head office is situate. In most of the provinces it would require to jijet jud},nnent and sell the shares under execution, when it would, be paid by pre- ference out of the proceeds. Ofi. The stock, bonds, debentures or securities, ac- (luii'cd and held 'oy the bank as coHah-iai st-riirity, iiia.\', in case of default lo pay tlic dchl, f.sr siciir- in}^ which they were st, acquired and lield, be dealt wilh. sold and conveyed either in like manner and subject to the same restrictions as are herein i)rovided in respect of stock of the bank on which it lias accpiired a lien under this Act, or in like manner as and subject to the re- strictions under which a jjj'ivate individual might in like circumstan(;es deal wilh, sell and convey the same, but without obligation to sell the same within twelve months: K. S. O. c. 120, s. GO, s.-s. 2, in part. If any of the securities held by the bank as col- lateral secuntv mature before tlie del)t to wliich they are collateral, the bank has a right to collect them and ai>ply them in payment of the debt. The present section has reference to bonds or debentures that do not mature until after the debt, and! to stock and other similar wcurities. The bank is bound to use due diligence and pru- dence in realizing on these securities. It may eitlier pro- oewl as is prescribed for its own shares in the preced- ing section, or it may avail itself of the law of the province as to the disposal of articles held in pledge. Unless there be a special agreement to that effect, the bank does not acquire a title to the collateral securi- ties on the default to pay the debt. If the collateral he a security for a sum of money tlie bank may collect ■-n,«« 126 THE HANK ACT, [a. (; >l it wiun due; if it be stock or a KocurUy for tlio pa}- ment of iiiouey it may take steps to have it sold. At Enjjflish common law a pledgee may sell the pledge at public auction without judicial process on giving the debtor reasonable notice to redeem: Tucker v. Wilson, I I'cere Williams, liCl (1714); Lockwood v. Ewer, !) Modern, UTf) (1742); I'igot v. (Jublcy, 15 C. ]i. \. S. 7iil (18(14). In the Province of QuelK'c, in the absence of a special agivement, the hank would rcMjuire lo obi sin judgment, and then seize and sell in the ordinary way, when it would be ])aid l)y privilege out of the proceeds: 0. C. Art. 1971. The bank has the option of exercisin;,' these reuK.'dies or of pursuing the method indicated lu section G5. Where the j)ledgor has only a limited interest in the collateral the bank can only sell such interest. Where there is tlie right to sell wilhout judicial authnr. ity, the sale can only be made after reasonable notice of the time and place of sale, unless such notice has been waived by agreement, made when the debt was contracted, or when the time of payment was extended. See the next sub-section. 2. The right so to deal with and dispose of such stock, bonds, debentures or securities in manner aforesaid may be waived or varied by any agree- ment between the bank and the owner of such stock, bonds, debentures or securities, made at the time at which such debt was incurred, or if the time of payment of such debt has been ex- tended, (lien by an agreement made at tiie time of such extension. 07. The bank may acquire and hold refil and im- movable property for its actual use and occupa- tion and the management of its business, and may sell or dispose of the same, and acquire other property in its stead for the same purpose. R. S. O. c.*^120, s. 47. This would not prevent the bank from buying, leas- ing, or erecting a larger building than actually needed s. OH] HEAL ESTATE— MOUTOAGES. 127 for its own business, and renting the portion which it did not actually require. The validity of the transac- tion would tuni upon whether it was aciiuircd bona tide for its own business, or whether it was entered into as a sjieculatiou in violation of the Act: llorsey's Olaira, L. It. 5 Eq. 501 (18U8). (i*i. The bank may take, hold and dis[)os(> of mort- gages and h}i)0the(iue8 upon real or personal, immovable or movable property, by way of addi- tional security for debts contracted to the bank in the course of its business; and the rights, powcrw and ])iivil('ganking Act of the United States. Our jurisprudence has not been uniform as to ^\iiether our Act should be construed in the same sense as that of the United States. All are agreed that a mortgage cannot be taken to secure future advances. Opinions differ as to whether it can be taken to secure a debt contracted simultaneously with the taking of the ■?! ■■'■'' *.fl V] 71 7. ■^> ^v:> W^^ /A 7 IMAGE EVALUATION TEST TARGET (MT-S) 1.0 •^ 1^ III 2.2 I.I ^.'- ■- ^ MIA Hiotographic Sciences Corporation '•25 1.4 III 1.6 « 6" ► 'O :^" >/<^ ^ 33 WEST MAIN STREET WEBSTER, N.Y. 14S80 (716) 873-4503 '^' rr^^ Wf " t; u i fr*^ \\ i*v.-|^ k 12S THE BANK ACT. ^- [8.68 mortgage as additional security. The weight of autho^ ity woTildl ai)pear to be that possibly it may be taken at the same time, provided it be clear that the money is not really advanced on the security of the mortgajje. In a simultaneous transaction the presuraptJon would be against its validity, and if a very short time inter- vened this might be taken as a suspicious circumstance. This question was discussed in two cases- -one in Upper Canada before Confederation, and the other in Quebec since that event. In the former of these cases, Tlie Commercial Bank v. Bank of IT])per Canada, 7 CirMnr (1859),- at page 430, Chief Justice Robini«on says: "It is quite true that whenever the money is advanced, whether it be just before or at the time of making the mortgage, then there is literally a debt due, but not a debt contracted in the course of the business of the bank, that is, of its legitimate and proper business, which llie lending money upon mortgage of real property certainly cannot be, until the statutes are repealed or altered. When it is shown that the mortgage in any case was takc^ by a bank '' as an additional security for a debt con- tracted to it in the course of its business," then the question occur? whether that can only be taken to mean a debt that had been previously incurred with it in the course of its business, or whether ai mortgage may not be taken as an addition.al security for a debt that had no previoup existence, but which the bank Avas about to allow a party to contract, by advancing him money at that time in the proper course of their busi- ness. ... I think it might perhaps be held that the spirit and intention of the Act are not opposed to it, and that a mortgage so taken might be upheld, when it appears that the mortgage was really and in truth taken to secure the transaction upon the bill, and not that the bill was created for the mere purpose of upholding and giving color to the mortgage. That would be a question of fact, upon which the conclusion that a jury might come to would be in general so uncertain that I i si I' 8. G8] MOETGAGES ON HEAL ESTATE. 129 : not a e bank, ich the ;rtainly altered, se was 4)t con- len th«' o mean : in the lay not )t that ik Avas Dg him ir bnsi- hat the it, and /hen it "^1 talcen »t that lolding be a a jury that 1 dare say the banks will not think it prudent to risk their money on a real security in any such case, where the nature of the transaction might ai)i>ear to be at all ('(juivocal — so long, I mean, as the present statutes con- linue in force." In the Quebec case, Bank of Toronto v. Perkins, 1 Dorion, 357 (1881), Dorion, O.J., id giving the judgment of the Court, said: "1 am of opinion that the transfer made to the appellant of a mortgage 1o secure an iidvancc made on a promissor\ not«> discounted at the name time that the transfer was made, is an evasion of the Banking Act, 34 ^'ict. chap. 5, sec. 40. wliich forbids hanks to advance on the security of real estate, and that tli section, but merely to enable llie bank to secure themselves against the possibility of a loss by reason of a change in the position of tlu; (lcl»tor or his indorscrs, after tlie loan has been made.'' Sec also section 51, s>il>section 2. This case was taken to the Supreme Couri, where llic judgment holding the mortgage to be invali27 (18G9). 7. A mortgage was taken by a bank as additional security for notes under discount, and renewals. Sums were paid in on other transactions, and these notes wtre paid by cheques drawn against the proceeds of other discount notes. Held, Ili:it this mode of keeping tlie accounts had not operated as a discharge of the mort- gage debt: Cameron v. Kerr, 3 Ont. jV. R. 30 (1878); Dominion Bank v. Oliver, 17 O. R 402 (1889). 8. A mortgage or i)ledge of timber limits in Quebec " f ^i' advances made and to be made " by a i ank, is valid as to the fonuer, and invalid as to the latter: Grant v. Banque Rationale, O. R. 411 (1885). 9. ^Yhere a bank has taken a chattel mortgage as additional security, it may arrange for a sale and dis- posal of the mortgaged property. This is not a dealing in goods, but a realization of its securities : Stewart v. Union Bank, 15 Ont. A. K. 749 (1888). 10. An indorser took a mortgage on real estate belonging to a compan}' to secure his indorsements of the comi)aiiy's pnjiei' diseounfed by a bank. He assigneil the mortgage to the bank before the contemplated in- dorsements. This was not a violation of section 45 of the Bank Act, R. S. C. chap. 120: Essex Land Co., Trout's Case, 21 0. R. 367 (1891). 11. A bank took a mortgage on real estate as addi- tional security to secure notes. An indorser of one of the notes being sued, pleaded that the bank had released some of the land without his consent. It was held that this was no defence to the action on the note, but the Court reserved his right to make the bank account to him for its dealings with the property when the security m s. 68] MOllTaAOES HELD BV KANK. 133 had answered its purpose, or the debt was paid by the sureties, or the applicntiun of tlie moneys from the security could be properly ascertained: ^[olsons Bank V. Heilig, 26 O. K. 276 (1895). 12. An assignment of a mortgap' taken colorably as additional security on the discounting of a note, when the advance was in reality made on the secuilty of the mortgage, is null: Bank of Toronto v. IVrkins, 8 S. C. Can. 603 (1883). 13. Where an accommodation indorser paid to a bank a note that had been diconnted, he was held entitled to a mortgage on real estate given by the maker to the bank as collateral. It was urged in review for Ihe first time that this mortgage was null as having been given for future advances. This claim was not allowed; not being pleaded or legally proved: McCaffrey v. La Banque due Peuple, Q. R. 5 S. C. 135 (1894). 14. A chattel mortgage taken simultaneously with the discount of a note by a bank is void: Bathgate v. Merchants' Bank, 5 Man. R. 210 (1888). 15. A debtor to a bank mortgaged to it certain stock in trade, and all future stock to be acquired during the currency of the mortgage, and assigned book debts, and agreed to assign all future book debts of the business as security for the debt to the bank. The chattel mort- gage, besides the usual proviso for redemption, seizure and sale in case of default, etc., and for application of the proceeds, and covenants for j)ayment, contained a covenant on the part of the bank to pay the then com- mercial indebtedness of the mortgagor, and the expense of running the business out of the jiroceeds of the sale of the stock, and the book accounts and debts; but not so as to increase the then indebtedness to the bank, all moneys received being paid into the bank. When default occurred the bank took possession and sold, there not being enough to pay what was due to it. It was held that the securities taken were valid under the Bank Act, 134 THE BANK ACT. [a 69 f. '■ 7 !^, t j' 1- r 1 "^ r -si ; 1: R. 8. 0. chap. 120, and that the debtor could not com- pel the bank to pay the other creditors or to share with them: Gillies v. Commercial Bank, 10 Man. R. 460 (1895). IG. A custonici" of a bank gave a mortgage by the deposit of title deeds to secure advances to be made. This was ultra vires, but afterwards, when the bank sued, on condition of its not taking judgment, he agreed that the deeds should be a security for the sum for which judgment was about to be signed. This was held to be a valid security for a debt previously incurred: National Bank of Australasia v. Cherry, L. R. 3 P. C. 299 (1870). 17. The charter of a bank prohibited its making advances on merchandise. A statute allowed owners of sheep to give a preferential lien on the clip of wool from season to season. It was held that such a lien given to the bank for advances was valid : Ayers v. South Australian Banking Co., L. R. ,3 P. C. 548 (1871). 01>. The bank may purchase any lands; or real or im- movable property oflforod for pale under execution, or in insolvency, or under the order or decree of a court, as belonging to any debtor to the bank, or offered for sale by a mortgagee or other encum- brancer liaving priority over a mortgage or other encumbrance held hy the bank or offered for sale by the ban', under a power of sale given to it for that purpose, in cases in which, under similar cir- cumstances, an individual conld so purchase, with- out any restriction as to the value of the pro- perty which it may so purchase, and may acquire a title tlieve'lo* fts' fiiiy individual purchasing fit sheriff's sale, or under a power of sale, in like circiiiiistances, could do, and may take, have, hold and dis]>(>se of the same at pleasure. R. S. G. c. 120, 8. 49. Former Tiank Acts did not contain the above words authorizing the bank to purchase lands " offered for sale by a mortgagee or other encumbrancer having priority over a mortgage or other encumbrance held by the bank." An individual having a second mortgage has the 70] HEAL ESTATE HELD UY HANK. 186 same right to purchase aa a stranger, and to buy the pro* perty at less than its value, even if he himself be in actual possession when the sale is held : Shaw v. Bunny, .'{3 Beav. 494 (1864); Kirkwood v. Thompson, 12 L. T. N. a 811 (1805); Harron v. Yemen, 3 O. R at p. 133 (1883). A mortgagee exercising the power of sale cannot bc(;ome the purchaser either directly or indirectly. As the law of the Province of Quebec does not give a mortgagee any power to sell under a power of sale, the addition does not give a bank any new right in that province. 70. The bank may acquire and hold an absolute title in or to real or immovable property mortgaged to it as security for a di».bt due or owing to it, either by obtaining a release of the equity of redemption in the mortgaged property, or by procuring a fore- closure, or by other me.ins whereby, as between individuals, an equity of redemption can, by law, be barred, and may purchase and acquire any prior mortgage or charge on such property: Pro- vided always, that no bank shall hold any real or immovable property, howsoever acquired, except such as is required for its own use, for any period exceeding seven years from the date of the acquisition thereof. K. S. C. c. 120, s. 50. The policy of the Act with regard to the acquisition of real estate, other than that required for its own use, by a bank appears to be this: A bank can only acquire a valid mortgage on real estate by way of additional security for debts contracted to it in tlie course of its business: sec. 08. The question as to whether a mort- gage has been so acleert,v to the bank in that province. IWifore the rijjhts conferred on banks liad been prante South Wales v. Campbell, 11 A. C. 1S)2 (188(5). I»y section 08 a l)ank has like powers as to personal property mortgaged or hypothecated to it. If a bank should hold real estate other than that required for its own use, for more than seven years, it would be liable to a penalty of ^500: sec. 70. The Act does not impos" any other penalty or make any provi- sion as to what is to be done with such property. It may be that the Crown would have a right to have it declared forfeited: McDiarmid v. Hughes, IG O. K. 570 (1888); or that steps might be taken to have the bank charter annulled: Harazin v. Bank of St. Hyacinthe, 1*8 L. C, .1. 270 (1881). 71 j__ Nothing iiii any charter, Act or law shall be con- "" strued as ever having prevented or as preventing the bank from acquiring and holding an absolute title to and in any such mortgaged real or • I immovable property, whatever the value thereof is, or from exercising or acting upon any power of sale contained in any mortgage given to it or held by it, authorizing or enabling it to sell or convey awav any property so mortgaged. R. S. C. c. 120, s. 51. fit" 73. Every bank advancing money in aid of the building of any ship or vessel shall have the same right of ' acquiring and holding security upon such ship or vessel, while building and when completed, either by way of mortgage, hypotheque, h^-pothecation, privilege, or lien thereon, or purchase or transfer [h. 72 8. ( '^] LIEN ON VESSELS. 187 that wiu*r •eswit ed of • been i been ott, if Ne'.>- ?rf?oijal in that ears, it Che Act y provi- It may lo('lavei;erty are removed, ..nd the mortgag«' or other secur- ity may be taken either before, (u* at the time of, or sub- sequent to the advance, jind eitlu»r during the building or after the completion of the vessel. It also allows the hiuik to purchase the vessel to secure its advances. In iiddilion (o the rights thus given under provincial laws, the Dominion Act respecting the Registration of Ships, I{. S. C. chap. 72, contains imitortant provisions which by tiie i>resent section are made applicable to banks. A ship jihout to be built, or being built, may be recorded with tlie nearest registrar of shii)ping, and a mortgage given for advances in aid of its building in the form contained in a schedtile to the Act. Section 48 of the Act specially provides that deeds and documents relating to this matter in the Province of Quebec may be in notarial form. \'essela being personal property, banks may, in addi- tion to the rights conferred by this section, take a mort- ^iig*' upon th(Mn by way oif additional security under section OS. The provisions of R. S. C. chap. 72, above referred to, are enacted by tho Dominion Parliament under the authority given it by section !)1 of the British North America Act to make laws relating to Navigation and Shipping. 715. The bank may acquire and hold any warehouse receipt or bill of lading as collateral security for the payment of any debt incurred in its favor in the course of its banking business; and the ware- ■f l> 1 ■ ; 1 ^ ^ ! [i- i ll [■ ' " ¥ i: : ;■ '! " 1^'' rr i*i ^-.' ii i 138 TFE BANK ACT. [8.73 house receipt or bill of lading io acquired shall vest in the bank, from the dalv? of the acqui«itioD thereof, all the right and title of the previous holder or owner thereof, or of the person from whom Bueh goods, wares and merchandise were received or acquired by the Inuik, if the ware- house receipt or bill of lading is made directly in favor of the bank, instead of to the previous holder or owner of such goods, wares and merchandise: R. S. C. c. 120, 8. 53, 8.-S. 2. Tills section may be said to contain another exwp- tion to the rule laid down in section 64, that except as authorized by the Act, no bank shall lend money on the security of any goods, wares or merchandise. The bank cannot purchase or discount the warehouse receipt op bill of lading, it can only take th<*m as collateral secur- ity. Section 75 sets out the precise terms and conditions on whlc^h they may be taken by a bank. They may either be made out directly in favor of the bank, or they may be negotiated to it by indorsement or delivery, as tlie case may be. For the deflnition of " warehouse receipt," " bill of lading," and " goods, wares and merchandise," as used in the Act, see section 2, ante pp. 5, G and 8. Mortgages of real and personal property treated of In the preceding sections are such instruments as are recognized by that name under the laws of the respec- tive provinces. Tlie Act only authorizes banks to use them in part as individuals may under the respective provincial laws. Warehouse receipts and bills of ladiu},' in the present section and the "security" mentioned in section 74, on the other hand, are instruments defined In the present Act and may be in contiict with the laws of the vaiious ])rovinces. This has given rise to a constitu- tional question as to how far tlie Dominion Parliament, under the sub-sections of section 01 of the British NoHh America Act relating to " Banking," " Shipping " or the " Regulation of Trade and Commerce," can legislate on the subjects of warehouse receipts or bills of lading, and 8.73J WAKEHOUSE UECEII'TS. 189 wbetbor such legiHlation is vulid when it conflicts with that of the provinces legisluting on the Bume subjects wmWif the authority of section 1)2 regarding " Troperty and Civil Bights." Ill Outurio the legislation regarding warehouse re- ceiptH and bills of lading is found' in "The Mercantile Amendment Act," R. S. O. chap. 122. In Quebec it is to be found in R. 8. Q. Arts. 5G43-5()50. The foundation of both these Acts was in the Consolidated Statutes of Canada, 1859, chap. 54, which provided thut such docu- nu'iits Hhould be trauHferable by indormiiient. In Ontario there has b€»en subsei'o]>eity and civil rights in the province,'' and con- fers uj»on a bank privileges as a lender which the pro- vincial law does not recognize. Also, that legislation of the Dominion Parliament, so long as it strictly relates i: li mi 140 THE BANK ACT. [8.73 ilf 1 ! Il to tlie Rubiects eniimprated in section 91, is of para- mount authority, even thou},'li it trendies upon the mat- ters assijjned to the jn'ovincial leii:isla lures by section 92: Tennant v. Union IJanli. [\f<*M] A. 0. .'il. It is to bo observed tliat tlie conllict lias arisen larfjely from tlie fact tht'it successive liank Acts, begin- uin see that il complies with the definition in sec- tion 2 ((/). It should be a receipt given by a person for goods, wares or merchandise, in his actual, visible and continued possession, as bailee thereof in good faith, and not as his own property. He must be the owner or keeper of tln^ place or places where the property is stored. The jtlace of storage and the property should be described so that they may be clearly identitied. Other conditions will be found in flection 75. A warehouse receipt or bill of lading can only he taken as collateral security- for the payment of a debt incurred in favor of a bank in the course of its banking business, that is, business done by it in accordance with a i 3.73] WAUEIIOITSE UECEin'S. 141 the terms of section 64. The collateral security need not be furnished bv the principal debtor; it may be for the payment of any debt. m ILU'STUATIOXS. 1. Where there is a usage of trade authorizlnp it, a Wiirchotise receipt may cover (lour subsequently brought into (he warehouse in the place of a similar quantity re- iikivimI: Wilmot v. Maitlnnd, 'A (Jrant, 107 (1851). So of a bill of lading for wheat ground into Hour: Mason v. G. W. Ry. Co., 31 U. C. Q. B. 73 (1871). 2. A document in the following fonn, without any indoi'sement, is not a warehouse receipt: Con. Stat. Can- ada, chap. 54, or the Amending Act of 1801 : " Received in store at our warehouse at • » • fi-om sundry parties, 17,900 lbs. ba(ting, (o be delivered pursuant (o tlic order of the Rank of Rritish North Ameiica, to be indorsi'd hereon. The said batting is separate from, etc, etc." Rank of Rritish North America v. Clarkson, 19 U. C. 0. P. 182 (18(19). Followed in Royal Canadian Bank V. Miller. 29 U. C. Q. R. 2(;() [\Sm. 3. A shipper of flour sold it and deliver(>d two bills of lading endorsed by him in blank to the purchaser, who got a bill discounted by a bank to pay for the flour, and attached to it one copy of the bill of lading as col- lateral. A person holding (he other co])y of the bill of lading got possession of the Hour and dis])Osed of it. It was held that a bill of lading signed by the purser was valid, that an indorsement of it in blank was sulTicient nuder C S. C. chap. 54, and that the bank was entitled to recover the full Aalue of the (lour: Royal Canadian Bank v. Carruthers, 29 U. 0. Q. B. 283 (1870). 4. Where the usage of trade is that grain of the same quality received from different persons is stored together and mixed, a warehouse receipt covers the specified quantity of the quality mentioned: Coffey v. Quebec Bank, 20 U. C. O. P. 555 (1870); Bank of Hamilton v. Noye Mfg. Co., 9 O. R. 031 (1885). r rr ill 142 THE BANK ACT. [8. 73 m i ^ '» It i: 5. Where a bank held a warehouse receipt signed by the clerk of a warehouseman and indorsed by the latter, it was held that the receipt was invalid as the clerk was not a warehouseman, and the bank was not entitled to recover on an insurance policy assigned to it by the warehouseman: Todd v. Liverpool Insurance Co., 20 U. C. C. P. 523 (1870). G. The holder of warehouse receipts of grain had it insured, and then indorsed the warehouse receipts to a bank as collateral security. It was held that under the Dominion Act, 31 Vict. chap. 11, sec. 7, the property in the grain passed to the bank and he could not recover on a policy insuring him as owner: McBride v. Gore Insurance Co., 30 U. O. Q. B. 451 (1870). 7. A shipping note given by the agent of a railway is a bill of lading within the Ontario Statute, 33 Vict chap. 19, sec. 3. A bank is entitled to recover as indorsee without alleging that it received the bill of lading as collateral: Royal Canadian Bank v. Grand Trunk Ry. Co., 23 U. 0. O. P. 225 (1873). 8. A warehouse receipt indorsed to a bank for " 40 bales of corks " not distinguishing by separate marks or values, held not to cover corks received in the warehouse after its date to replace others taken out, the bales hav- ing distinguishing marks and being of varying values: Llado V. Morgan, 23 U. C. C. P. 517 (1874). 9. Incurring liability, as for instance, giving an ac commodation note, is not contracting a debt, for secur ing which a warehouse receipt may be taken: Cockburn V. Sylvester, 1 Ont A. B. 471 (1877); overruling Re Cole- man, 36 U. C. Q. B. 559 (1875). 10. Where warehouse receipts are indorsed to a bank as collateral security for discounts, the indorser has still an insurable interest in the goods: Parsons v. Queen Ins. Co., 29 U. C. 0. P. 188 (1878). s. 73] WAREHOUSE RECEIPTS. 143 11. The provisions as to warehouse receipts in the Bank Act do not apply to foreign banks: Commercial National Bank v. Corcoran, G O. R. 527 (1881). 12. The giving to the bank of warehouse receipts as security for advances to the company in question was h(>ld not to be such a hypothecating, mortgaging or I)l('dging of the company's property as required a by-law sanctioned by the shareholders under the Letters Patent Act: Merchants' Bank v. Hancock, (J O. K. 285 (18S4). 13. Where a bank advanced money to consignees to pay the draft attached to a bill of lading and returned tlio latter to the consignees, who stored the grain and delivered the warehouse receipt to the bank, it was held entitled to the grain as against execution creditors of tlie consignees: Dominion Bank v. Davidson, 12 Ont. A. R. 90 (1885). 14. A bank took several warehouse receipts as col- lateral security for notes discounted. The bank sold the goods, and the proceeds were more than the amount of the discounted paper. It claimed the right to apply the surplus on other debts of the customer, under a parol agreement It was held that the bank had a right to do so: Thompson v. Molsons Bank, 16 S. C. Can. 664 (1889). 15. A firm of saw millers obtained from a bank ad- vances on promissory notes indorsed by them. To the maker of the notes they gave warehouse receipts on logs, described as being in certain lakes in transit to the mills, and subsequently, in pursuance of a written agreement wiien the advances were made, gave warehouse receipts of the lumber manufactured from the logs. The maker of the notes indorsed the receipts to the bank. It was heldi that they were bad as to the logs, the lakes not being " places kept by the signers of the receipts," and ^'ood as to the lumber: Tennant v. Union Bank, 19 Ont. A. R. 1 (1892). 16. Groods held under a duly indorsed warehouse receipt as collateral security for advances may be pro- s if * li ii/i ; 'f ill r 144 THE BANK ACT. [s. 7a perly and lej^ally insured as bein{? tho properly of the holder of such receipt, who had made advances on it: Wilson V. Citizens Ins. Oo., 19 L. C. J. 175 (1875). 2. If the previous holder of such warehouse receipt or bill of lading is the agent of the owner of the goods, wares and merchandise mentioned therein, the bank shall be vested with all the right and title of the owner thereof, subject to his right to have the same re-transferred to him, if the debt, as security for which they are held by the bank, is paid: R. S. 0. c. 120, s. 53, s.-s. 3. The expression " agent," as used above, is defined in the next following subsection. An agent may be the holder of a warehouse receipt or bill of lading either as being the person named in the receipt or bill as the per- son from whom the goods were received, or ^to whose order they were subject, or as indorsee, or as the holder of a receipt or bill transferable by delivery. Such an agent may transfer to a bank a warehouse recei]»t or bill of lading under the circumstances men- tioned in section 75, and the bank become vested with all the right and title of the owner as above indicated, even if the agent has no right to pledge the receipt or bill and is acting fraudulently, provided of course the bank itself is acting in good faith. If the agent is a warehouseman he cannot give the bank a valid warehouse receipt for the goods of his priu cipal which he has in store. The powers given to an agent under this section are among those conferred on agents under the Factors Acts. The Ontario Act is K. S. O. chap. 128. Section 2 provides that such an agent may sell or pledge the goods of his principal. The clauses corresponding to the pre- sent section are as follows: " 2. Any ag:nt entrusted with the possession of goods or of the documents of title thereto, shall be deemed the owner thereof for the fol- lowing purposes, that is to say: ♦ * ♦ (3) To give validity to any agreement by way of pledge. s. 7a H. ( 3] AOENTS — FACTORS. 145 f the >n it: ipt or >f the erein, t and ;lit to debt, bank, lefined be the her as tie per- whose holder ■ekotise j8 men- Ith all |d, even or bill e bank ive the ^8 prin section i'actors stion 2 goods le pre- trusted )f title Ihe foi- ls) To )ledge. lion or security, bona fide made with such agent, us well for an original loan, advance or payment made iijion the security of the goods or documents, as for any further or continuing advance in respect thereof; and (4) To make such contract binding upon the owner of the goods and on all other persons interested therein, notwithstanding the person claiming such pledge or lien had notice that he was contracting only with an agent.'' " Documents of title " in the foregoing section includes wiirehouse receipts and bills of lading. By section 16 the owner may redeem the goods on pa^'ing the amount of the lien. The law of Quebec is found in Article 1740 of the Civil Code, and is in the same words as the Ontario Stiitute, both having been taken from chapter 59 of the Consolidated Statutes of Canada. A bank may avail itself of the provisions of the pro- vincial law in so far as the business of banking would justify, and there is no statutory prohibition of thr^ transaction in question. Tlie English Factors Act, 1889, is to the same effect. It has been held by the English Courts that bankers and others dealing with such agents or factors are pro- tected if they are acting in good faith, notwithstanding the bad faith of the agent, or the revocation of his au- tliority. See Navnlshaw v. Brownrigg, 2 Def}. >I. & (}. 441 (1852); Chunder Sein v. Ryan, 5 L. T. N. S. 550 (18(51): Shcppai'd V. Union Bank, 7 H. & X. 601 (1S02V, Jewan v. Whitworth, L. R. 2 Eq. G92 (18G6); Portalis v. Tetley.. L. R 5 Eq. 140 (1867). The pledge of goods to a bank by a trader as col- lateral security, the goods being held by him under ware- lionse receipts duly indorsed to him, and the pledge being in \lie course of the bank's regular business, is a com- nuTcial matter, and the bank receiving such pledge in I'dod faith and not knowing that the goods did not liihMig to the pledger, thereby acquires a valid title to M'r. n.A. — ]0 i^- f ^' 146 THE BANK ACT. [8.73 the goodn, and the n^ht to dispose of tliem for its beii" lit: (.'aimdian liank of Coniinei'ce v. Stevenson, i}, \i. 1 Q. B. 371 (1892). See also Robertson v. Lajoie, 22 L. C. J. 169 (1878). 'S. In this section the expression "agent" means any person intrusted with the j)ossession of goodH, wares and nier'e, upon the security of the goods, wares and merchandise manufac- tured by him or procured for such manufacture: " Tlie word * manufacturer ' includes maltsters, dis tillers, brewers, reiiuers and producers of petroleum, tanners, curriers, packers, canners of meat, pork, fish, fi'uit or vegetables, and any person who produces by hand, art, process, or mechanical means, any goods, ware« or merchandise " : sec. 2 (/). A wholesale merchant is one who deals only with persons who buy to sell again: Treacher v. Treacher, Weekly Notes, 1874, p. 4. A " wholesale manufacturer " is not defined in the Act, but would probably be held to be one who, as a rule, dis- poses of his manufactured products to merchants aad not to consumers. The expression goods, wares and merchandise is used in the extended sense indicated in the interpreta- tion clause, section 2 (c), and " includes, in addition to the h !f- 74] LOANS TO WHOLESAF-EltS. 149 "thinps usually unde^rstood thereby, timber, deals, boards, slaves. sawl<>jj;s and other lumber, petroleum, crude oil, and all agricultural produce and other articles of commerce." This section is a substitute for section 54 in the foraier Bank Act, It S. C. cha]). lliO. wliich provided that wharfingers, warehousemen, and certain manufacturers and dealers might give warehouse receipts to a bank for goods belonging to themselves. In the present Acft the instrument is not called a warehouse receipt, but dimply a *' security," and is in the form of an assignment. The form of the security to be taken by a bank under this section, and its effect, will be found in sub- section 3 and the notes thereon. A security including material to be manufactured would include the gooose of selling them again to merchants; a *' wholesale shipper," one wlio ships such products to merchants or witli a view to selling them to mercliants. In Bank of Hamilton v. She])hera, 21 Ont. A. R. ino il8!)4), the question was raised whether one Essery was ii wholesale purchaser, or shii)per of live stock. l)ut the Oourt did not find it necessary to decide this ])oint. The security was held to be bad because it was not given when the note was negotiated, or debt contracted as required by section 75. It was there laid down that one warehouse receipt or security under this section could not be substituted for another, and that the bank could IT 150 THE BANK ACT. [8.74 not l>e aiTt'cted with notice of the puii>o8e for which the money was borrowed, provided tlie borrower and the goods cauie within tlie description of the section. 3. Such security may be given by the owner and may be lalcen in tlie form set forth in Schedule O to this Act, or to the lilie effect; tuid by virtue of such security, the banlis shall acquire the sanif rights and powers in respect to the goods, warts and merchandise, stock or products covered thereby, as if it had acquired the same by virtue of a warehouse receipt. Only the " owner " can give the security mentioned in this section. He may do it either personally or by an attorney or agent duly authorized to that effect. When a bank lends upon such security it should know the owner, and that he is a wholesale manufacturer, or such wholesale purchaser or shipper. Care should also be taken that the goods are strictly within the descrip- tion, of one of the preceding sub-sections, and that tlie form is identical with that in Schedule C, or to the like effect, and that it is taken at the time the bill, note or debt is negotiated or contracted, or in accordance witli a written promise or agreement then given or made. The aecuritv under this s^'ction is verv much of the nature of a chattel mortgage, and yet the Act placew them upon a very different footing. The chattel moi-l. gage is the treation of the local legislature or within its domain, and the l>aiik Act simply recognizes it where it has been so created, and by section 08 allows it to b' taken only as an additional security by a bank for a debt contrncted in the courpe of its business, and almost al- ways, if not nhvays, previously contracfted. A security under this section, on the otlier hand, is the creation of the Bank Act, and by section 7.T is put on the same foot- ing as a warehouse receipt or a bill of lading, which can only be taki'U l:>y a bank if the bill. VA*\i\ or debt^. tli" payment of which it is intended to secure, is negotiatcii or contracted at the time the bank juqnires such secur ity, or on the written promise or agreement that it wonUl m H. ( ■IJ SECURITIES FROM WHOLESALERS. 161 bp pvon. S<'e linnk 13. N. A. v. Clarkson, li) U. C. C. P. 187 {\m\))\ Dominion HjuiI^ v. Oliver, 17 (). K. 402 (1889); Itjinii of Hamilton v. S1u'1>Ium(1, 21 Ont. A. K. 15(5 (1804); Ross V. MolHons Banlv, 2 Dorion, 82 (1881); IVrliins v. lios8, Q. L. li. 05 (1880); Hobertson v. l^joie, 22 L. O. J. 109 (1878). The fonn of the security given in Schedule C is as follows: — In consideration of an advance of dollars made by the (name of banl<) to A. B., lor which the said hanl< liolds the followinj? bills or notes (describe fully llic bills or nolcH held, if any), the floods, wares and mer- chandise mentioned below are hereby assijjned to the said bank as security for the jKiymtnit, on or before the day of of tlu' said advance, together with interest thereon at tln' rate of j^er cent, jn-r annum from the day of (or, of the said bills and notes, or renewals thereof, or substitutions therefor, aUvl interest thereon, or as the case may be.) This security is given under the provisions of section 74 of " The liank Act," and is subject to all the provi- sions of the said Act. The said goods, wares and merchandise r."^ now owned by and are now in possession, and are free from any mortgage, lien or charge tliereou (or as tlie case may be), and are in (place or ]>laces where goods ar<*), and are the following: (particular description of goods assigned). Dated at , 18 . This form should be dei)ai't(Ml from as little as pos sil)le, as opinions might differ as to whether tlie form substituted really was to the like eifect. It is not necessary that the goods should be in the possession of the owner. If they are not it may be so stated in the above form, or in that event a warehouse u 152 THE HANK ACT. ls.Ti n n'rcipl inl^lil be liikfii fi'oia the biiilrc ami I lie .scniriiv \h' li'wiu in I'lis iii;iiiinr. The t,'(M)ass the pjoperty at com- mon law; that after the assijjument to defendants the title was in defendants and not in the customer ; that under the authority of (Jreat Western IJy. Co. v. Hodgson, 44 U. C. Q. B. 187 (1879), and Bank of Hamil- ton V. Noye, 9 O. R. 631 (1885), defendants were entitled, as against the cuKtomer, to the substituted bacon; that consequently his assignment to plaiutilTs was null and void. It was also lield that the consolidation of the debts and securities did not o{)erate as a discharge, and the opinion was expressed that section 75 might be cou strued as not clearly prohibiting the taking of a security under this section for previous advances, and that the assignment might be good under section 08. Some of It ^. / '>] HANKS ArglTIHINfi SEcrHITIMS. ir)3 tliese poHitioiiH \vonl«l a|>|»(ar to lie open to (lucstioii, iiH IIh'V arc ill rpiillict with a Hci'irs of drcisiojiH in tin* liijjiicst <'ourtH in Ontario aii<1 (^mbt'c rcpirdinn ware- li(nis«> rcri'iplH, ami a >-«'ciiril,v iiiMlcf this scclimi is lilaccil on ll:«' saiiio looliiijjj'as a Nvarclioiisc i"»'cci|)t hy section 7.". Tlic t'as<' lias lie* n tjiUcii lo llic Siiiirciin' Coni't, s<> that tlio law upon tlie Kuhj»'. TIic Itanlv shall not ar(piir(' or hold any waro- liduso lecipt or liill of lading! or security under the next precediii}? section to secure the j?aynient of any bill, note or debt, unless such bill, note or debt is ne^rotiated or rontraclcd at the time of the accpiisitioii thereof by the bank, or uptm the written piomise or a/^reinient that such ware- house receipt or bill of lading or security would be ^ive!i to the bank; but such bill, note or debt may bo renewed, or the time for the payment thereof extended, without atTectinfJC any such security: H. S. C. c. 120. s. 5:?, s.s. 4. A warehouse receipt or bill of ladin};, or a security under section 71 can only Ix^ taken as collateral security by a bank (1) if the bill or nolo is nejjotiated at the time the bank ac(piires the security, or |2) if the debt is eon- trncled at the time of such acquisition, or (.'b if at the time the bill or note is nejjotiated or tlu? debt contract«'d there is a written jiromise or a}?reemont that such ware- house receipt or bill of ladin}? or security shall be fjiven. There are several prounda for a somewhat strict interpretation of the present section, and others of a like nature. The general rule is laid down in section •II. viz., that a bank shall not either directly or indi- rectly lend money on the security of any goods, wares nr merchandise. Sections 7'i and 74, which are among the exceptions to 04, are controlled by the present sec- tion, which is prohibitory in declaring that a bank shall not acquire or hold any of the documents of title named, except on the terms indicated. II i!-/ r 154 THE BANK ACT. [8.75 m I I3y section 31 of the Bills of Exchange Act '* a bill is negotiattMl when it is transferred froan one person to another in such a manner as to constitute the transferee the holder of the bill." "Holder" in that Act is de- fined as the payee or Indorsee of a bill or note, who is in possession of it, or the bearer thereof. He need not be the owner, he may have it merely for discount, col- lection or the like; so that the negotiation of a bill or note is not necessarily a sale of the instrument, but may be a pi dging or a mere transfer of possession, pro- vided the transferee is in a position thereby to acquire the status of a holder as above defined. The word * negotiated " would ai)pear to be used in a narrower sense in this section. Its being joined with the words " debt contracted " would seem to restrict it to the pur- chase or discount of the bill or note by the bank, and not to include the renewal, which is treated as somethiiiic distinct, in the concluding part of the section. See Jonmeiijoy Coondoo v. Watson, 9 A. (\ 5()1 (IS84). In the Bank of Hamilton v. She^dierd, 21 Ont. A. K. 156 (1894), a warehouse receipt was taken by the bank on the renewal of a note, no actual advance being then made. It was held that this was not a nc^gotiation, and the bank was not entitled to hold the security. The fact that when the renewal note and the ware- house receij>t were taken by the bank, another ware house receipt, which had been taken when the debt was contracted, was surrendei'ed. was held not to be a iK-gn- tiation or sufficient to biing the transaction within tlie piiovisions of this seetion. In ISank of llauiilton v. Xoye, 1) O. R. (Kil (1885), it had been considered that tin- surrendei" of the imtecedent lien and th(» taking of a new one with (h<' renewal, might be ticitted as a negotiatieii within the meaning of tiie definition given in Foster v. BoiWi's, 2 r. K. L'.")(; (1857). In Dominion Bank v. Oliver, 17 O. li. 402 (1889K ir was pointed out by Hoyd, 0., that in the correspondiut; clause of the fonner Act the negotiaiion of a note is 75] BANKS ACQUIRING SECURITY. 155 warc- wart' )t was liii tlie ton V. lat till' a new )tiati(ai )stor V. put in contrast with its rene-wal; and tliat the mere renewal cannot be so read as to mean negotiation. See to the same effect Banlv of IJritish North Amei-ica v. Ohirkson, 19 U. C. C. P. 182 (18G9). WTier'i a warehouse receipt was endorsed to the acceptor of an accommodation bill by way of securliy for his acceptance, it was held that there was no debt contracted at the time so as to give the acceptor a valid claim to the property mentioned in the warehouse ivceipt: (\>ckburn v. Sylvester, 1 Ont. A. R. 471 (1877). A warehouse reteipt may be transferred by indorse- ment as eollateral security for a debt contracted at the time. The obligation contracted at the time may be made to cover future advances, but not past indebted- ness: I?obertson v. Lajoie, 22 L. C. J. KiO (1878). Where a debtor pledged warehouse receipts as col- lateral security for drafts, and agreed that if the pro- ceeds of the goods were more than sutticient to pay these drafts the surplus should go to pay an old indebt- edness, the agreement was held void as to the latter: Perkins v. Ross, G Q. L. R. G5 (1880). Where a lumber com]>any gave to a bank docu- iiieiits ])ledging logs in a nver as security frr previous iKlvances, the bank acquired no lien on the logs: Ross V. Molsons liank, 2 Dorion, 82 (1881). WriltcH Promise or A (irrovided that the bill of lading or receipt should be transferred onlv when the bill or note was negotiated or the debt contracted, unless at that time there was an "understanding" that they sliould be given snb^:e- quently. In the Rank Act, R. S. C chap. 120, the word nsed is "promise" ; in the ])resent Act it is " writt'^n jimmise or agreement." Although these words hav been so long used in this connection it is surprising how seldom they have come uj) for judicial inteiiiretation. In the Royal Oanadian ]?ank v. Ross, 40 U. C. Q. R. 400 (1877), the bank made advances to be secured bj' M IV. -,' 156 THE BANK ACT, [8. 1.) u' I. bills of l.adinj? and warehonsie receipts for coal and stone when received. The goods came from lime to time, and bills of lading and warehouse receipts we;e given to the bank. The transactions were sustained. and it was held to be no objection that the agreement was to give bills and receipts for goods, of which, at tlie time, the customer was not possesscMl. kSee to the same <'ffect, McCrae v. Molsons Bank, 26 Grant, 519 (1878). In Suter v. Merchants' Bank, 24 Grant, 3(>5 (1877), a manu facturer, when getting advances from the bank, pro- posed that he should warehouse his goods as manufa<' tured and pledge the receipts with the bank. This w:is agreed to, and such receipts given from time to timt. It was held that it was no objection that the goods and receipt were not in existence at the time of the agree- ment. It was contended by plaintiff that the alleged agreement was not valid as it did not specify the number of cases or their value. This w^as held not to be too vague or uncertain to entitle the bank to hold the receipts. In Tennant v. Union Bank. 19 Ont. A. R. 1 (1892), the bank made advances to mill owners for getting out logs, on a promis-c that warehouse receipts would be given to the bank on the lumber to be manufactured from them. These were given from time to time as the lumber was manufactured and piled in the yard of the mill owners. The bank was held entitled to the lumber covered by these receipts. A somewhat analogous case is that where a chattel mortgage has been given in accordance with a previous promise or agreement, and it is sought to set it aside as a fraudulent preference. Instances of preferences being sustained on the ground of a previous promise or agreement will be found in Ex parte Hodgkin, L. R. -0 Eq. 74(1 (1S7.~)); Allan v. (Mark.scm, 17 Grant, 570 (1870); McRoberts v. Steinoff, 11 O. R. 369 (1886); Ciarkson V. Sterling, 15 Ont. A. R. 234 (1888); Embury v. West. ibid. 357 (1888); Lawson v. McGeoch, 20 Ont. A. R. 4(i4 <1893). p. 75] BANKS ACQUIRING SECIMUTIES. ir,7 In scarcely any of the cases on the subject da the precise terms of tlie aj^reement come in question. In most of them all that appears is that there was an agrt e- mcnt to give security. Once this was clearly provcHl it seems to have been considered, as a rule, that the con- ditions were met. In Lawson v. Mc(jcoc1i, supra, at pa{;e 475, Maclennan, J., says: "It is said that the afrreement was too vague and uncertain to be attended to, as it is not shown tluit any pai-ticuhir goods were iiicntiontHl, wliich were to be mortgaged. I am not pressed with this objection. The debtor was a fanner, iiiid thr i-.iortgage was to be a. chattel mortgage. I think that means a mortgage of the debtor's chattels; and that the defendant could have selected a sutlicirnt quantity (tf the debtor's goods, and have recjuired a mortgage upon them." It is probable that, in accordance with the favor shown to commercial and banking transactions, a promise o!' agreement to give one of the securities mentioned in this section would be more liberally construed than one to give a chattel mortgage. In drawing up such au agreement care should be taken that it is nmde wide enough. The promise may include more than the receipt or security, but the lattvr cannot cover more than the promise. The property need not be in the possession of the customer, or even in existence, when the customer obtains the advance; but it must be in c()ntem]>lation I hat he is to acquire it. The promise may be to give these securities from time to time. An agreeiiient to five a bill of lading, warehouse receij)t or security for a terrain class of goods up to a certain (piantity, or up to a certain value, would probably be a snllicient com- I>liaiue witli the law. In this way by an agreement with a wholesale manu- facturer, or purchaser or shipper, mentioned in section "^. a bank might, when making advances, provide that securities should be given it from time to time as the goods are manufactured or purchased, and thus keep 168 THE BANK ACT [s.75 its claim secured, while allowing the business to be carried on. RciicuaL — A bill or no-te may be renewed or the time extended without airecting any such secMirity. If taken as fisccurity for more tliau one bill or note it would not be necessary that they slioiild be kept distinct in taking renewals, provided the new bills or notes did not in the ag{.vrej;ate amount to more than tlie old \\itli the interest added, and provided no additional debt were included in any of the new paper: IJarber v. .M;ul;- rell, W. N. 181)2, p. 133. 2. The bank may, on shipment of any poods, Wiins and merchandise for which it holds a warehouM- receipt, or security as aforesaid, surrender such receipt or security and receive a bill of ladini: in exchanj^e therefor, or on the receipt of any jjoods. wares and merchandise for wnich it holds a bill of ladinji or security, as aforesaid, it may sui r( n der such bill of lading or security, store surji floods, wares and nu^r?handise, and take a wai;' liouse recei])t therefor, or may ship them, oi' jtaii of tliem. and take nnolher bill of lading tlierd'oi': R. S. C. c. 120, s. 53, s.-s. 5. 3. Every one is guilty of a misdemeanor and liiible to imprisonment for a term not exceeding two years who wilfully makes any false statement in any warehouse rtM'eipt, bill of lading or security. as aforesaid: K S. C. c. 120, s. 53, s.-s, 7. The Criminal Cwle, 1S92, section 376, provides that any warehouseman, forwarder, etc., who gives a false warehouse or shipping receipt is guilty of an indictable offence and liable to three years' imprisonment, as i^ also any person who knowingly and wilfully accepts, transmits or uses my such false receipt. Section oTS makes any person liable to the same punishment who wilfully makes any false statement in any receipt, certi ficate or acknowledgment for grain, timber or other goods or property which can be used for any of the ptn' poses in the Bank Act. Prosecutions should be under the Code as being the later Act. i 1 s. 76] PROCEEDS OF GOODS PLEDGED. 159 4. Every one is guilty of a miHtknioaiior and liable to imprisonmi^ut for a term not excetnling two years, who, liaving possession or control of any goods, wares and luercliandise covered by any warehouse receipt, bill of lading or security as aforesaid, and liaving knowledge of sudi receipt, bill of lading or security, and without consent of the bank, in writing r.nd before the advance, bill, note or de^bt thereby secured has been fully paid, wilfully alienates or paHs with any such goods, wares, or merchandise, or wilfully withliolds from the bank i>ossession ther(H)f upon demand after default in pavment of such advance, bill, note or debt. Section .'i7S of the Cnminal ("od •, 1802, provides that ;!iiy person guilty of such an offence as that described in Ihis subsection shall be liable to three years' im- [irisonment. 745. If goods, wares and merchandise ore niiiuufac- tured or produced from the goods, wares and mer- cliandise, or any of them, included in or covered by any warehouse receipt, or s-ecurity given under section seventy- four of tins Act, while so covered, the bank holding such warehouse receipt or secur- ity shall hold or continue to hold such goods, wares and merchandise, during the process and after the completion of such manufacture or pro- duotioTi, with the same light and title and for the same pui'poses and upon the same conditions as it held or could have held the original goods, wares and merchandise. R. S. C. c. 120, s. 56. In the former Act, R. S. C chap. 120, the principle of this section applied only to cereal grains manufac- tured into flour or malt, or hogs manufactured into pt rk, l>acon or hams. It is now made applicable to all manu- factured articles. Where other goods than those covered by the warehouse receipt or security enter into the com- poBition of the manufactured articles nice questions may arise. If these other goods belong to the manufacturer there probably would be no diflflculty, as thiat might be considered to be in the contemplation of the parties, and the blame, if any, would be on the manufacturer. f-\ ! if 160 THE BANK ACT. [s. 77 If, however, he Khould eoinbiiie material covered by two or more assignments under section 74 the difficulty would be greater. In that case the question would be settled by the provincial law, as the Act is silent on the point. In Quebec the Civil Code lays down a senes of rules in Articles 429 to 442, the principle being that the product miglit be divided according to the respective interests of the ijarties, or if not divisible, the party having the greatest interest might claim the whole on paying the others what they are entitled to. In Ke Goodfallow, 10 O. R. 200 (1800), a miller gave a bank a warehouse receipt for a certain quantity of " wheat and its jiroduct.'' It was held that once the wheat in the mill was reduced to a (juantity equal to or less than the amount in the receipt, the whole of it belonged to the bank, and so long as " the product '' could be traced, whether in flour or in money, it was recoverable by the bank as against the miller. The pi-inciple laid down iii this section had been adopted by the Courts before it had been incorporated in the statute. See Wilmot v. Maitland, 3 Grant, 107 (1851); Mason v. G. W. Ry. Co. 31 U. C. Q. B. 73 (1871). All advances mad.? on the security of any bill of lading or warehouse receipt, or security given under section seventy-four of this Act, shall give to the bank making such advances a claim for the repayment of such advances on the goods, wares and merchandise therein mentioned, or into which they have been converted, i)rior to and by prefer ence over the claim of any unpaid vendor; but such preference shall not be given over the claim of any unpaid vendor who had a lien upon such goods, wares and merchandise at the time of tlie acquisition by the bank of such warehouse re- ceipt, bill of lading, or security, unless the same Avas acquired without knowledge on the part of the bank of such lien. R. S. C. c. 120, s. 57, in part. ^ ■"S i^': 1^ p r a^m^Mf k ■ w ^' ■ wM' 1 1 i Ji»n, 8.77] PREFEUENCE OVER UNPAID VENDOR. 161 -.^iven The preccHlinj; section gives a bank the ripht to hold goods even when their foiin is changed. This section gives it priority for its chiim over the unpaid vendor, who, under the law of Quebec, ranks above the pledgee. By Article 1094 of the Civil Oode privileged claims upon movable property rank in the following order: "1. I^w costs and expenses incurred in the interest of the mass of the creditors. 2. Tithes. .'). The claim of the vendor. 4. The claims of creditors who have a right of pledge or of retention." Article 1998: "The unpaid vendor of a thing has two privileged rights: 1. A right to revendicate it. 2. A right of preference upon its price. In the case of in- solvent traders these rights must be exercised Avithin fifteen days after the sale." Article 1999: "The right to revendicate is subject to four conditions: 1. The sale must not have been made on credit 2. Tlie thing must still be entire and in the same condition. 8. Tlie thing must not have passed into the hands of a third party who has paid for it. 4. It must be exercised within eight days after the delivery, saving the provision concerning insolvent traders contained in the last preceding article." Article 2000: "If the thing be sold pending the proceedings in revendicMion, or if, when the thing is seized at the suit of a third party, the vendor be within the delay and the thing in the conditions prescribed for revendication, the vendor has a privilege upon the pro- ceeds in preference to all other privileged creditors hereinafter mentioned. If the thing be still in the same condition, but the vendor be no longer within the delay, or have given credit, he has a like privilege upon the proceeds, except as regards the lessor or the pledgee." The effect of the section is that if the bank has notice of the claim of the unpaid vendor it will rank after him; if it had not such notice at the time it ac- quired its lien it will have priority over him. The rule m'l.b.a.— 11 \ l' 5: f W'M'-' Efi^ 162 THE BANK ACT. [s. 78 laid down in Ihe ease* of Teunaut v. The Union liank, [1894] A. C. 31, would appear to uphold the constitution- ality of this pi-ovisiou, whieli overrides the civil law of the province. 7S. In Ihe event of the non-})avni('iit at maturity of any debt secured by a warehouse receipt or bill of ladinjf, or security given under section seventy four of this Act, the bank may sell the floods, wares and mei-chandise mentioned therein, or so much thei-eof as will suflice to pay such debt with interest and expensvs, returnin})ear to be null, at least in the I'rovince of Quebec, where the rule of the civil law pi'evails that '' ])rohibl- tive laws import nullity, althoujih such nullity be not therein expressed": C. 0. Art. 14, In such case the hank would be liable in dama;?es for its illegal act, and would also be subject to the penalty pi'ovided by sec- tion 79. pi«Iot tw the judji- p;oods lof the If Ens; lowing: Ibefoiv 3. Every such sale of any article mentioned in this section, without the consent of the owner, shall be made by public auction, after a notice thereof by advertisement, statin- bec, then at least one of such newsjiajters shall be a newspaper published in the Eujilish laufruaj^e, and one other such newspaper shall be a news- paper published in the French land to credit for |.'),7(lH..'{r), wlilch the banl< had! from time to time taken in the course of business over and above the legal rate of seven per cent. sr. No |)romissory note, bill of exchange or other nego- tiable security, discounted by or indorsed or other- wise assigned to the bank, shall be held to be void, usurious or tainted by usury, as regards such bank, or any maker, drawer, acceptor, indorscr, or indorsee thereof, or other party thereto, or bona fide holder theivof, nor shall any party thereto be subject to any jtenalty or forfeiture by reason of any rate of interest taken, stipulated or received by such bank, on or with respect to such promissory note, bill of exchange, or other negotiable secur- ity, or paid or allowed by any party thereto to another in comjx'nKalion for, or in consideration of the rate of interest taken or to be taken thereon by such bank; but no ])arty thereto, other than the bank, shall be entitled to recover or liable to pay more than the lawful rate of interest in the Province wher(> the suit is brought, nor shall the bank be entitled to recover a higher rate than seven per cent. ])er annum: and no innocent holder of or party to any ]>roinnssory note, bill of exchange or other negotiable security, shall, in any case be depj'ived of any remedy against any party th(>reto, oi- liable to any ])enalty or forfeiture, by r(>Mson of any usury or otTcnce against the laws of any such Province, respecting interest, committed in respect of such not(\ bill or negotiable security, without tlie complicitv or consent of such inno cent holder or party. R S. C. c, 120, s. 62. This section is taken from the Act of 1872 (35 Vict. chap. 8, sec. 2), which, as appears from the recital, was S'J. s. M4] COM-FX'TION AND ACFA'f'V IF.ES. 167 riuK'ted bocrincip;il thereof, and may pay tiie wlude or any part ef Mir intercHt thereon to sneli person, witliont tlie an thorily, aid, asHistanc*' or intervention of any per pon or ortli'ial bein^ re«inired, nnU'ss before snch repayment llie money so dej^osited in and re])a1(l by the Ixink \s lawfnlly claimed as the ])roperty of Home other i)erson, in which ease it may be paid to the depositor witii the consent of the claimant, or to the claimant with the consent of the deposi tor: I'rovided always, that if the i)erson makin;; any snch (h^'posit osit shall not. at any time, exce(^l the Slim of tive hundred dollars: K. S. C. c. 120, s. (50, as, 1. Sections (54 to 8li of the Act relate to banks as banks of discount; the present sectiim relates to them as banks of deposit. As the subject of civil ri}j;hta bidontijs exclusively to the piH)vincial lep;islalures, thep(Mv«.ns qua.lilied to enter into conti'acts dilfer in the several provinces. Those to whom the clause will ap|)ly are chietly minors in all the proviniH's, and marriep arale statements are to be made of (Ddieposits by the public, payable on demand; (12) deposits by the public, payable after notice, or on a fixed day; (."i) deposits pay- able on d<>mand. or after notice, or on a fixed day, made by other banks in Canada. S41 DKI'OSITS AND DKI'OSITOllS. 1()1) Cluqum. — As a rule, doposits j>ayal)Io on dt'inand juv withdrawn by cIumjiu'-s sifj^ned by the dt'positor. The law rclatinj; to Clio. The Minister of Finance and Receiver General may also call for special returns from any bank, when- ever, in his judgment, they are necessiiry to afford a full and complete knowledge of its condition: R. S. C. c. 120, s. 67. 2. Such special returns shall be made and signed in the manner and by the persons specified in the next preceding section; and every bank which neglects to make and send in any such special return within thirty days from the date of the demand therefor by the Minister of Finance and Receiver General shall incur a penalty of five hundred dollars for each and every day such neglect continues; and the provisions contained in the last preceding section as to the prima facie evidence of the date upon which returns are made up and sent in thereunder, shall apply to returns made under this section: Provided always, that the Minister of Finance and Receiver General may extend the time for sending in such si>ecial returns for such further period, not exceeding thirty days, as he thinks expedient. Special returns, when called for, are to be signed like the monthly returns by the chief accountant, the presiding officer, and the manager or cashier. The The penalty of |500 a day is imposed upon the bank itself and is to be recovered as laid down in section 98. The m m i \ m 176 THE BANK ACT. [s. 8a bank would have its recourse against the delinquent oflQoers. \l^\ HT. The bank shall, within twenty days after the close of each calendar year, transmit or deliver to tlie Minister of Finance and Receiver General, to be by him laid before Parliament, a (?ertilie, with ber of Lid the L20, ss. lentary nent of I letter COUl'Sl^ Depai't- list in id shall d every by the tion 98. delin- \e close to the „ to be of all |r more lor bal- ls have Is been \ate of tase of s. 88] llETUUNS BY BANKS. 177 moneys deposited for a fixed period, the period of five years above referred to shall be reckoned from the date of the tennination of such fixed period: 2. Such return shall be sifjned in the manner required for the monthly returns under section eighty-five of this Act, and shall set forth the name of each shareholder or creditor, his last known address, the amount due, the af,'ency of the bank at which the last transaction took place, and the date thereof; and if such shareholder or creditor is known to the bank to be dead, such return shall show the names and addresses of his legal repre- sentatives, so far as known to the bank: 3. Every bank which neglects to transmit or deliver to the Minister of Finance and Receiver General the return above referred to, within the time here- in'hefore limited, shall incur a penalty of fifty dol- lars for each and every day during which such neglect continues: 4. If, in the event of the winding up of the business of the bank in insolvency, or under any general winding-up Act, or otherwise, any moneys pay- able by the liquidator, either to shareholders or depositors, remain unclaimed for the period of three years from the date of suspension of pay- ment by the bank, or from the commencement of the winding up of such business, or until the final winding up of such business, if such takes place before the expiration of the said three years, such moneys and all interest thereon shall, notwith- standing any statute of limitations or other Act relating to prescription, be paid to the Minister of Finance and Receiver General, to be held by him subject to all rightful claims on behalf of any person other than the bank: and in case a claim to any moneys so paid as aforesaid is thereafter established to the satisfaction of the Treasury Board, the Governor in Council shall, on the report of the Treasury Board, direct payment thereof to be made to the person entitled thereto, together with interest on the principal sum thereof at the rate of three per cent, per annumr m'l.b.a.— 12 m 178 THE HANK ACT. [s. 81) iii A for a period not exceeding six years from the date of payment thereof to the said Minister of Fiuanc'c and Receiver General as aforesaid: Provided however, that no sucli interest shall be paid or payable on such principal sum, unless interest thereon was iKiyable by the bank payinjj; the sanu? to the said Minister of Finance and Receiver General: I'rovided also, that on payment to the Minister of Finance and Receiver (Jeneral as herein provided, the bank and its assets shall be held to be discharged from further liability for the amounts so paid. 5. T'^pon the windinjr-up of a bank in insolvency or under any fjeneral winding-up Act, or otherwise, the assignees, liquidators, directors or other offl- ' cials in charge of such winding-up, shall before the final distribution of the assets, or within thn^e ; years from the commencement of the suspension of payment by the bank, whichever shall first hap pen, pay over to the Minister of Finance and Re- ceiver General a sum out of the assets of the bank equal to the amount then outstanding of the notes intended for circulation issued by tlie bank; and upon such payment being made, the bank and its assets shall be relieved from all further lia- bility in respect of such outstanding notes. The sum so paid shall be held by the Minister of Finance and Receiver General and applied for the purpose of redeeming, whenever presented, such outstanding notes, without interest. The whole of this section is new law. The publi- cation by Parliament of the first return called for by sub-sections 1 and 2, showed that a very large number of unclaimed balances, the greater part of the amounts being small, were lying in all the banks. Subsequent returns show that as a result of the publicity thus given, very many of the amounts have been claimed and with- drawn. INSOLVENCY. S9. In the event of the property and assets of the bank being insufficient to pay its debts and. lia- bilities, each shareholder of the bank shall be [8.89 f^.90] DOUBLE LTAHILTTY. 179 > date iiaiKM' vided lid or terest same ceiver to the ral as lall be for the noy or erwise, er offi- beforo n three tension •st hap iiul Re 18 bank le notes ik; and nk and u>r lia- Tho ster of ied for sented, pnbli- for by lumber mounts equent given, with- of the Ind.m- lall be liable for the deficiency to an amount c(iual to the par value of the shares held by him, in addi- tion to any amount not paid up on such shares. R. S. C. c. 120, 8. 70. This liability of each shareholder to pay an amount equal to the par value of the slock held by him is com- monly called the double liability. It applies to all the banks doinj:!; business in Canada, except La Kanqiie du Peuple, the Rank of Rritish North America and tlie Bank of British Ck)lumbia: sees. 5 and (>. Where a savings bank holds shares as pledgee, but appears as owner in the books of the bank, it is not a shareholder within the meaning of this section, and not subject to the double liability. The bank is i)resumed to know that a savings bank cannot acquire bank shares or hold them except as pledgee : Exchange Rank v. C. & D. Savings Rank, M. L. R. G Q. R. 19(i (1887). Rui s(^ now the Savings Rank Act, post. A director who has drawn dividends on stock stand- ing in his name cannot set up irregularities in the issue of the stock to him to escape the double liability: Coui't V. Waddell, 4 L. N. 78 (1881). A loan company which by its charter is authorized to lend money on bank shares, and which advances money on shares transferred to it, and accepted by it in the ordinary absolute form, cannot escape liability on the ground that it is merely a trustee for the bor- rower: Re Central Bank, Home Savings & Loan C<).'s Case, 18 Ont. A. R. 489 (1891). A director, who had acted as such, was placed on the list of contributories for the number of shares re- quired to qualify directors, although, as a fact, no shares had ever been allotted to him, nor had he ap- plied for any: In re Rread Supply Association, [1893] W. N. 14. ?>0. As a condition of the rights and privileges con- ferred by this Act or by any Act in amendment thereof, the following provision shall have effect: f 1: } i '; 180 THE HANK ACT. [s. 91 The liability of the bank, under any law, custom or aurcomont to ropay monoyH deposited with il and Interest (if any) and to pay dividendg declared and payable on its capital stock, shall continue notwithslandinj; any statute of limitations or any enactment or law relating to prescription: 2. This section applies to moneys heretofore or hero- after deposited, and to dividends heretofore or hereafter declared. The provisions of this section are enacted for the first time. The relation between the bank and its cus- tomers being that of debtor and creditor, the ordinary limitation or prescription would run in favor of tln' bank, so that in the Province of Quebec the claim would be extinct in five years, and in the other provinces in six years. The same rule would apply to dividends. m ma m f. tH. Any suspension by the bank of payment of any of Us liabilities as tliey accrue, in specie or Do- minion notes, shall, if it continues for ninety days, consecutively, or at intervals within twelve con- secutive months, constitute the bank insolvent and operate a forfeiture of its charter or Act of incorporation, so far as regards all further bank- ing operations; and the charter or Act of incor- poration shall remain in force only for the pur- pose of enabling the directors or other lawful authority to make and enforce the calls mentioned in the next following sections of this Act and to wind up Its business. K. S. C. c. 120, s. 71. This section, with the others from 89 to 96 inclu- sive, does not apply to La Banque du Peuple, or to the Bank of British North America or the Bank of British Columbia. La Banque du Peuple suspended payment from July 16th, 1895, to November 4th, 1895, but ita charter was not therby forfeited. At a meeting of shareholders and creditors on the 10th of January, 1896, it was decided to go into voluntary liquidation. In former Acts only a suspension for ninety conse- cutive days constituted the bank insolvent. The day on 8.911 FNSOrA'EVCV OF A HWK. TSl [r. 91 iistoin ^ith it elared ntinuo or any r hero- ore OP for the its CUH- rdinary of th.' 1 would nces in lends. of any ^ or Do- ty days, Ive con- solvent Act of ?r bank- >f incor- the pnr- lawfnl [ntioned and to inclu- to tlie 1 British jayment Ibut its fing of iniiary, tdation. conse- 1 day on which the bank suKpciids is reckoned n» the first day of the ninety : Mechanics' Hank v. St. .lean, !) R. L. TmS (1879). A creditor of the bank for not h'ss than f 1.000 may, under the Winding-up Act, apply for a winding up order at the expiration of the ninety days, or s(»(»ner, if the bank comes under any of the provisions of sec. H of R. 8. C. chap. 129. If no such application is made by a creditor the directors must procecnl to wind up the business of the bank, and pay its debts. A creditor of an incorporated bank, wliich has sus- l)end«d payment, may, before the expiration of the ninety days, sue the bank and get judgment for his debt: Senecal v. Exchange Bank, M. L. R. 2 S. C. 107 (1884). A deposit of money made in a bank on the day and at the very hour when it suspended ])ayment may be lawfully returned to the depositor: Exchange Bank v. Montreal Coffee House, M. L. Rw 2 S. O. 141 (1880). A person who deposits in a bank after its suspen- sion cheques of third i)arties drawn on and a('ce])ted by the bank in question, is not entitled to be paid by privi- lege the amount of such dei)osit: ()ntari<» iJank v. Chap- lin, M. L. R. 5 Q. B. 407 (1889). A depositor, five days after the suspension of a bank, drew cheques upon it which were accepted. These he handed to different persons, who some days later got them cashed by the sns])ended bank. It was held that no action lay against the depositor; the right of action, if any, was against the persims who drew the money: Exchange Bank v. Hall, M. L. K. 2 i}. B. 409 (188G). A bank at Stratford received a deposit of |1,000 of the Mechanics' Bank bills, and later in the day learned that the Mechanics' Bank had suspended. That evening it forwarded the bills to Montreal, and three days latet charged the amount to the depositor. It was held that 182 THE BANK ACT. [8.92 the bills should have been tendered back the day they were deposited or the next day, and that the bank was liable: Conn v. Merchants' Bank, 30 U. C. O. P. 380 (1879). 02. If any suspension of payment in full in specie or Dominion notes of all or any of the notes or other liabilities of the bank continues for three months after the expiration of the time which, under the pi-ecedinj!; section, would constitute the bank in solvent, and if no proceedings are taken under any general or special Act for the winding up ol the bank, thi? directors shall make calls on the shareholders thereof, to the amount they deem necessary to pay all the debts and liabilities of the bank, without waiting for the collection of any debts due to it or the sale of any of its assets or property: R. S. C. c. 120, s. 72, s.-s. 1. Under the law as it stood in 1869 it was held that a bill would lie in equity at the suit of a creditor, on behalf of all the creditors, to enforce the double liability of the shareholders of an insolvent bank: Brooke v. Bank of Upper Canada, IG Grant, 249 (1869). 2. Such calls shall be made at intervals of thirty days, and ujton notice to be given thirty days at least prior to the day on wliich such call shall be i)ayable, and any number of such calls may be made by one resolution; any such call shall not exceed twenty per cent, on each share; and pa.yment of such calls may be enforced in like manner as payment of calls on unpaid stock may be enforced; and the first of isuch calls may be m;ide within ten davs after the expiration of the said three months: R. S. C. c. 120, s. 72, s.-s. 2. The provision as to making any number of such calls by one resolution is not contained in section 31, sub-section 2, Avhich regulates calls on unpaid stock. There no call is to exceed ten per cent.; on the double liability it may be twenty per cent. The directors must sue for unpaid calls; in proceedings under the Wind- ing np Act the Court may make an order placing share- holders on the list of contributoi'ies and directing the s. 94] DOUBLE LIABILITY. 183 manner In which they should pay: B. 8. O. chap. 129, sees. 42, 48. See Cloyes v. Darling, 16 R. L. 649 (1884), 3. Every director who refuses to make or enforce, or to concur in making or enforcing any call under this section, is guilty of a misdemeanor, and liable to imprisonment for any term not exceed- ing two years, and shall further be personally re- sponsible for any damages suffered by such default. 1>3. In the event of iiroceedings being taken under any general or special winding-up Act, in consequence ot the insolvency of the bank, the said calls shall be made in the manner prescribed for the making of such calls in such general or special winding- up Act. R. S. C. c. 120, s. 73. The general " Winding-up Act " is chapter 129 of th.. Revised Statutes of Canada, and will be found in the latter part of this work. The Maritime Bank, the Ex- change Bank and the Central Bank have been wound up under its provisions, and the liquidation of the Com- mercial Bank of Manitoba is proceeding under it. Under section 44 of the Winding-up Act share- holders may be placed on the list of contributories, and the Court may order the payment of the double liability without observing the resviictions named in section 92, sub-section 2 of this Act, as to the interval of thirty days between calls, and each call b(>ing limited to twenty per cent. Certain sections of the Winding-up Act, 97 to 104 inclusive, apply to banks alone. M4:. Any failure oij the part of any shareholder liable to any such call to pay the same when due, shall operate a forfeiture by siu-h shareholder of all claim in or to any part of the assets of the bank, — such call au^l any further call thereafter being nevertheless recovei'able from him as if no such forfeiture had been incurred. R. S. C. c. 120. s. 74. ■5 U I M 184 tM. THE lUNK ACT. [s. 96 Nothinjj in the six sections next preceding? con- tained shall be construed to alter or diminish Ihe additional liabilities of the directors as herein- before mentioned and declared. R. S. C. c. 120, 8. 75. The additional liabilities of the directors referred to are for declaring a dividend or bonus so as to impair the paid-up capital : sec. 48 ; or for pledging or hypothecating the notes of the bank: sec. 52. ?>0. Persons who, having been shareholders of the bank, have only transferred their shares, or any of them, to others, or registered the transfer thereof within sixty days before the commence- ment of the suspension of payment by the bank, and persons whose subscriptions to the stock of the bank have been cancelled in manner herein- before provided within the said period of sixty days before the commencement of the suspen- sion of payment by the bank, shall be liable to all calls on the shares held or subscribed for by them, as if they held such shares at the time of such suspension of payment, saving their recourse against those by whom such shares were then actually held. R. S. O. c 120, s. 77. The time mentioned in the former liank Act was a month instead of sixty days. The provision relating to cancelled stock is new. The reference is to section 30, which provides that the directors may cancel stock ou which the subscriber has not paid at least ten per cent. The liability in question is for the unpaid portion, if any, of the amount subscribed for and the double liability. If the stock has passed through several hands with- in the sixty days preceding the suspension, they are all liable; the prior holders having their recourse against those wlio held the stock subsequent to themsilves : Re Central liank, Baines' Case, 16 Ont A. R. 2:57 (1885)); Re Central Bank, Henderson's Case, 17 O. R. 110 (1889); Humby's Case, 26 L. T. N. S. 936 (1872). ii-*- it u «. 98] FRAUDULENT PUEFEREXCES. OFFENCES AND PENALTIES. 185 'mII 1>7. Every one is guilty of a misdemeanor and liable to imprisonment for a term not exceeding two years who, l)eing the president, vice-president, director, principal partner en commandite, manager, cashier or other officer of the banlv, wil- fully gives or concurs in giving any creditor of the bank any fraudulent, undue or unfair prefer- ence over other creditors, by giving security to such creditor or by changing the nature of his claim or otherwise howsoever, and shall further be responsible for all damages sustained by any person in consequence of such preference. R. S. C. c, 120, 8. 80. The Exchange Bank, Montreal, suspended payment on the 17th of September, 1883. Mr. Buntin, a director, had over $13,000 standing to his credit. Within a few days after the suspension the president of the bank paid him sums aggregating $10,000. A creditor of the bank laid an information against Mr. Buntin, who returned the money. He was, however, convicted and sentenced to imprisonment for ten days: Regina v. Buntin, 7 L. N. 395 (1884). " Other officers " in this section would probably be construed to mean some sui>erior officers of the bank of a rank corresponding to those named, on the principle of the doctrine of ejusdc i generis. ?JS. The amount of all penalties imiwsed upon a bank for any violation of this Act shall be recoverable and enforceable with costs, at the suit of Her Ma- jesty, instituted by the Attorney General of Can- ada, or the Minister of Finance and Receiver General, and such penalties shall belong to the Crown for the public uses of Canada; but the Governor in Council, on the report of the Trea- sury Board, may direct that any poi'tion of any penalty be remitted or paid to any person, or ap- plied in any manner deemed best adapted to attain the objects of this Act and to secure the due administration thereof. 1 ■ L ft'] ^-- 186 THE BANK ACT. [s. 9& As will be seen from the several sections in which these penalties are imposed, they are recoverable from the bank in the first instance. As in every case it would be for the neglect of a director or officer of the bank, it would have its recourse against the officer or officers in default. The directors of banks are quasi trustees for the general body of stockholders, and if any loss should accrue to the bank through their violating the provisions of the Act, they would be liable individually to make good the loss to the bank: Drake v. Bank of Toronto, 9 Grant, 116 (1862). 09. The making of any wilfully false or deceptive statement in any account, statement, return, re- port or other document respecting the affairs of the bank is, unless it amounts to a higher offence, a misdemeanor punishable by imprisonment for a term not exceeding five years; and every presi- dent, vice-president, director, principal partner en commandite, auditor, manager, cashier or other officer of the bank, who prepares, signs, approves or concurs in such statement, return, report, or document, or uses the stime with intent to deceive or mislead any person, shall be held to have wil- fully made such false statement, and shall further be responsible for all damages sustained by any person in consequence thereof. R. S. C. c. 120, s. 81. Complaints under this section, as a rule, either come under the statement submitted by the directors at the annual meeting: sec. 45; or under the monthly re- turns to the Government, section 85. In an indictment under this section in the former Act for having unlawfully and wilfully made a wilfully false and deceptive statement in a return respecting the affairs of the bank, it is not necessary to allege that the return was one requii*ed by law to be made by the accused, or that any use was made by him of such retvr^ or to specify in what particulars it was false. TLe en- numeration in the indictment of several alleged false I 8. 100] FALSE STA MENTS. 187 gtatemeiLts constitute but one count, and a general verdict is sufficient if the statement is shown to be false in any one of the particulars alleged. It is not neces- gary to allege in the indictment that the false state- ment was made with intent to deceive or mislead: The Queen v. Cotte, 22 L. C. J. 141 (1877). Where the Judge charged the jury that wilful intent to make a false return might be inferred from all the circumstances of the case proved to their satisfaction^ this was held to be a proper instruction: Beg. v. Hineks^ 24 L. C. J. 116 (1879). It is not necessary that the information should be laid by a shareholder or creditor of the bank; it may be done by any citizen, even though he is a debtor of the bank: Molleur v. Loupret, 8 L. N. 305 (1885). Directors may be held personally responsible for losses incurred through a statement which they know to be untrue, or where they are guilty of such gross negli- gence as to amount to fraud: Parker v. McQuesten, 32 U. O. Q. B. 273 (1872); McDonald v. Rankin, M. L. R. 7 S. C. 44 (1890). An innocent director, however, is not liable for the fraud of his co-directors in issuing to the shareholders false and fraudulent reports and balance sheets, if the books and accounts have been kept and audited h\ duly appointed and responsible oflflcers, and he has no ground for suspecting fraud: In re Denham & Co., 25 Cli. D. 752 (1883). See the Criminal Code, 1802, sec. 305. loo. Every person assuming or using the title of " bank," " banking comi)any," " banking house," "banking association" or *• banking institution," without being authorized so to do by this Act, or by some other Act in force in that behalf, is guilty of an offence against this Act. Up to the 1st of July, 1880, any person was at liberty to use the word " bank," or any of the expres- sions mentioned in this section. It was enacted by 43 Vict. chap. 22, sec. lO, that any one who used the word ufl vw m i ^' |h( ft 188 THE BANK ACT. [8. 103 ^* bank " after that date without being authorized to do so, should be guilty of a misdemeanor. The Act of 1883, 46 Vict. chap. 8, added the other expressions of this section, and required the addition of the words *'not incorporated." In the present Act the use of the words is absolutely forbidden. The punishment for a violation of this section is a fine not exceeding $1,000, or imprisonment not exceed- ing five years, or both : sec. 101. In accordance with the provisions of the Interi)re- tation Act, R. S. C. chap. 1, sec. 7, " person " would in- clude a body corporate or a partnership. 101. Every person, committing an offence declared to be an offence against this Act, shall be liable to a fine not exceeding one thousand dollars, or to im- prisonment for a term not exceeding five years, or to both, in the discretion of the court before which the conviction is had. The offences declared to be offences against the Act are: (1) Commencing business before getting a certifi- cate from the Treasury Board : sec. 14 ; (2) Selling shares by a false number, or shares of which the pro- posed transferrer is not the registered owner : sec. 37; and (3) Using the word "bank," etc., improperly : sec. 100. PUBLIC NOTICES. 102. The several public notices by this Act required to be given shall, unless otherwise specified, be given by advertisement in one or more news- papers published at the place where the head office of the bank is situate, and in the Canada Gazette. L [ 4 h * fjff ' a t ^^^ Wnn ' Ki*"^ i^^ ij 1.. DOMIXIOX COVEIiNMKXT CHEQUES. lOJJ. The bank shall not charge any discount or com- mission for cashing any oflBcial cheque of the Government of Canada, or of any department thereof, whether drawn on itself or on another bank. or com- of the artment another s. 104] WHEN ACT TAKES EFFECT. 189 COMMENCEMENT OF ACT AND llEFEAL. 104. This Act shall come into force on the first day of July, in the year one thousand eight hundred and ninety-one; and from that day chapter one hund- red and twenty of the Revised Statutes of Canada, intituled " An Act respecting Banks and Bank- ing," the Act passed in the fifty-first year of Her Majesty's reign, chapter twenty-seven, in amend- ment thereof, tlie Act passed in the session held in the thirty third year of Her Majesty's reign, chr.ptrr twelve, intituled "An Act to remove cer- tain restrictions with respect to the issue of bank notes in Nova Scotia," the Act passed in the ses- sion held in the fiftieth and fifty-first years of Her Majesty's reign, chapter forty-seven, intituled " An Act resi)ecting the defacing of counterfeit notes, and the use of imitations of notes," and chapter one hundred and twenty of the Revised t^fratutes of New Brunswick, " Of Banking," and the Act passed by the Legislature of the Pro- vince of New Brunswick in the nineteenth year of Her Majesty's reign, chapter forty-seven, in- tituled " An Act to explain chapter 120, Title XXXI., of the Rensed Statutes 'Of Banking,'" shall be repealed, except as to rights theretofore acquired or liabilities incurred in regard to any matter or thing done or contract or agreement made or entered into or offences committed under the said chapters or Acts, and nothing in this Act shall affect any action or proceedings then pend- I ing under the said chapter or Acts then repealed, but the same shall be decided as if such chapters and Acts had not been repealed. 1 P" 1 ■ "■ 1 B J ) rK: ■ 1 • ' ,_ ':■• ") ' rr| 190 THE BANK ACT. SCHEDULE A. BANKS WHOSE CHAIITEUS ARE CONTINUED BY TH IS ACT. 1. The Bank of Montreal. 2. The Quebec Bank. 3. La Banque du Peuple. 4. The Molsons Bank. 5. Tlie Bank of Toronto. 6. The Ontario Bank. 7. The Eastern Townships Bank. 8. La Banque Nationale. 9. La Banque Jacques Cartier. 10. Tlie Merchants' Banlc of Canada. 11. The Union Bank of Canada. 12. The Canadian Banlc of Commerce. 13. The Dominion Banlv. 14. The Mer<;hants' Bank of Halifax. 15. The Bank of Nova Scotia. If). The Bank of Yarmouth. 17. La Banque Ville Marie. 18. The Standard Bank of Canada. 19. The Bank of Hamilton. 20. The Halifax Bankinj? Company. 21. La Banque d'Hochelaga. 22. The Imperial Bank of Canada- 23. Tva Banque de St. Hyacinthe. 24. The Bank of Ottawa". 25. The Bank of New Brunswick. 26. The Exchange Bank of Yarmouth. 27. The Union Bank of Halifax. 28. The People's Bank of Halifax. 29. La Banque de St. Jean. 30. The Commercial Bank of Windsor. 31. The Western Bank of Canada, 32. The Commercial Bank of Manitoba. 33. The Traders' Bank of Canada. 34. The People's Bank of New Brunswick. 35. The Saint Stephen's Bank. 36. The Summerside Bank. u\ SCHEDULES. 191 SCHEDULE B. FORM OF ACT OF INCORFOUATIOX OF NEW BANKS An Act to incorporate the Bunk. Whereas the persons hereinafter named have, by their petition, prayed that an Act be passed for the pur- pose of establishing a bank in , and it is ex- pedient to grant the prayer of the said petition: Therefore Her Majesty, by and with the advice and consent of the Senate and House of Commons of Can- ada, enacts as follows: — 1 . The persons hereinafter named, together with such others as become shareholders in the corporation by this Act created, are hereby constituted a cor- poration bv the name of , hereinafter called " the Bank." 4. The capital stock of the bank shall be The chief oflSce of the bank shall be at the provisional directors of the Bank. dollars. shall be This Act shall, subject to the provisions of section sixteen of " The Bank Act," remain in force until the first day of July, in the year one thousand nine hundred and one. SCHEDULE 0. FORM OF SECURITY UNDER SECTION SEVENTY-FOUR. In consideration of an advance of dollars, made by the (name of bank) to A. B., for which the said bank holds the following bills or notes (describe fully the bills OP notes held, if any), the goods, wares and merchandise mentioned below are hereby assigned to the said bank as security for the payment, on or before the day of of the said advance, TT" w-.V '■ 1 if i :' I ' I :f|j 192 THE BANK ACT. together with interest thereon at the rate of pel* cent, per annum from the day of (or, of the said bills and notes, or renewals thereof, op substitutions therefor, and interest thereon, or as the case may be). This security is given under the provisions of sec- tion seventy-four of " The Bank Act," and is subject to all the provisions of the said Act. The said goods, wares and merchandise are now owned by and are now in possession, and are free from any mortgage, lien or charge thereon (or as the case may be), and are in (place or places where goods are), and are the following: (particular description of goods assigned). Dated at 18 *. ' SCHEDULE D. Return of the liabilities and assets of the bank on the day of , A.D. Capital authorized $ Capital subscribed $ Capital paid up $ Amount of rest or reserve fund . .| Rate per cent, of last dividend declared, per cent. LIABILITIES. 1. Notes in circulation $ 2. Balance due to Dominion Govr ernment, after deducting ad- vances for credits, pay-lists, etc 3. Balance due to Provincial Gov- ernments 4. Deposits by the public, payable ; on demand 5. Deposits by the public, payable after notice or on a fixed day. . 6. Loans from other banks in Can- ada, secured If fi SCHEDULES. 193 7. Deposits, payable on demand, or after notice or on a fixed day, made by other banks in Can- ada 8. Balances due to other banks in Canada in daily exchanges . . 9. Balances due to agencies of the bank, or to other banks or agencies in foreign countries. . 10. Balances due to agencies of the bank, or to other banks or agencies in the United King- dom 11. Liabilities not included under foregoing heads ASSETS. 1. Specie f 2. Dominion notes 3. Deposits with Dominion Govern- ment for security of note cir- culation 4. Notes of and cheques on other banks 5. Loans to other banks in Canada, secured 6. Deposits, payable on demand or after notice or on a fixed day, made with other banks in Canada 7. Balances due from other banks in Canada in daily exchanges 8. Balances due from agencies of the bank, or from other banks or agencies in foreign countries 9. Balances due from agencies of the bank, or from other banks or agencies in the United Kingdom h'l.b.a. —13 f 1*14 h I '•If 194 TIIF'] HANK ACT. 10. Dominion Government deben- tures or stoelis 11. Oanndian municipal securities, and Itritisli, Provincial, or for- eign, or colonial public securi- ties (other than Dominion) 12. Canadian, Brilish and other railway securities 13. Call loans on bonds and stocks 14. Current loans 15. Tx)ans 1o the Government of Canada 10. Loans to Provincial Govern- '/' ments ; 17. Overdue debts 18. Real estate, the property of the bank (other than the bank pre- f mises) 19. Mortgages on real estate sold by the bank 20. Bank premises '* 21. Other assets not included under ''" the foregoing heads r , r Aggregate amount of loans to directors, and firms of which they are partners, $ Average amount of specie held during the month, $ Average amount of Dominion notes held during the month, ^ Greatest amount of notes in circulation at any time during the month, $ I declare that the Above return has been y>roy,- under my directions and is correct accord -» •^" books of the bank. E. F., Chief Accountant In- SCHEDULES. 195 We declare that the foregoing return is made up from tlie books of the bank, and that to the best of our knowledge and belief it is correct, and sliows truly and clearly the llnancial position of the bank; and we further declare that the bank has never, at any time during the period to which the said return relates, held It'ss tluin forty per cent, of its cash reserves in Dominion notes. (Place) this day of A, B., President. O. D., General Manager. Itani ff W ( K lii ' ■i. s'i ji ii p : t- il ^ 1 ^': jitff' :J CHEQUliS ON A BANK. Bills of Exchange Act, 1850, 0^2Sr-A.3D A. 53 VICT. CHAP. 33. PART 111. The law of Canada on the subject of Cheques is found in the Third Part of the Bills of Exchange Act, which consists of ten sections, 72 to 81, inclusive. The first three of these relate to Cheques generally, and the remaining siven to Crossed Cheques. They are taken from the Imperial Bills of Exchange Act, 1882, with the single change that the word " bank " has been substituted for "banker." The reason Is that in Eng- land the banking business is carried on largely by in- dividuals and incorporated companies, while in Canada the Bank Act and the Bills of Exchange Act recognize only incorporated banks. Although the language of the Imperial and Cana- dian Acts is thus substantially identical, there are two marked differences between the law and the practice in the two countries. The first is in section GO of the Im- perial Act, which provides that when a bill payable to order on demand is drawn on a banker, and he pays it in good faith, he is not responsible even if the indorse- ments are forged. This rule applies to a cheque, which is a bill of exchange drawn on a banker payable on de- mand. An effort was made by the banks to have this clause embodied in the Canadian Act, but the House of Commons was unwilling to make the change. The use '11 198 CHEQUES ON A BANK. [8.72 ff'\r ■ of crossed cheques in England has been adopted largely to oveieonio the danger arising from such forged iu- dorsements. Under the Canadian law there is not the same necessity, and although the Act has introduced the English statute as to the crossing of cheques, the prac- tice has been adopted to a very limited extent The other great difference arises from the fact that the practice of getting cheques marked or accepted, so general in Canada, is almost unknown in Englana. Byles says in his work on Bills, that cheques are not accepted, and that to issue them accepted would probably be an infringement of the Bank Charter Acts. A cheque drawn upon a private banker would not be a cheque within the meaning of the Bills of Exchange Act, and would not be subject to the special rules con- tained in this part of the Act, such as crossing and the like. It would be simply a bill of exchange, payable on demand, and subject to such provisions of the Act as apply to an instrument of that kind. In the following notes the reference is to the Bills of Exchange Act, when the word " Act " or " section " is used without any more particular designation. 72. A cheque is a bill of exchange drawn on a bank, payable on demand. Imp. Act, s. 73. Reading this definition in connection with that of a bill of exchange in section 3 of this Act, a cheque is an " unconditional order in writing addressed by a person to a bank, signed by the person giving it, requiring the bank to pay on demand a sum certain in money to, or to the order of a specified person, or to bearer." According to the definition in section 2 (c), " bank " means " an incorporated bank or savings bank carrying on business in Canada"; that is, one of the banks to wliicli the r»ank Act, 53 Vict. chap. 31, applies; or the City and District Savings Bank of Montreal, or La Caisse d'Economio do Notre Dame de Quebec: 53 Vict. chap. 32; or a bank under an old provincial charter. m s. 72] DEFINITION OF A CHEQUE. 199 In Quebec, under the Code, a cheque might be drawn upon a private banlcer as well as upon an incorporated bank: Art. 2349. And this was the law before the Act in the other provinces. A cheque should be addressed; to the bank by its proper corporate name, and not to the " cashier," " manager " or " agent " of the bank. An instrument addressed to one of these would not, strictly speaking, be a cheque within the meaning of the Act, and if marked or accepted it might be claimed that the bank was not liable, as it would not be the drawee of the instrument and consequently could not become liable by acceptance. The words " on demand " need not be on the cheque, as they are understood when no time for payment is ex- pressed: sec. 10 {h). A cheque may be antedated or postdated: sec. 13, sub-sec. 2; Wood v. Steplieupo'\ IG U. O. Q. B. 419 (1858); and the fact that it is postdated is not an irregularity: Hitchcock V. Edwards, (U) L. T. N. S. 03(5 (1S89); Carpen- ter V. Street, G T. L. R. 410 (1890). IJut a cheque dated seven days after delivery is in substance a bill of ex- change at seven days' date: Forster v. IMackreth, L, R. 2 Ex. 163 (18G7). In the United States there has been a conflict as to whether a cheque may be made payable on a day sub- sequent to its date. The weight of authority is in favor of what is law under our Act, that such an instrument is not a cheque, and has threv days' grace. See Bowm V. Newell, 13 N. Y. 290 (185,-); Moi'iison v. Bailey, .') Ohio St. 13 (1855); Harrison v. Nicollet Bank, 41 Minn. 488 (1889); 2 Daniel, sec. 1574. 15nt sic (ontra Ke r>r(»\vn. 2 Story, O. O. 502 (1843); AVcstminstcr Bank v. Whcaton, 4 R. I. 30 (185()); Champion v. (Jordon, 70 Penn. St. 474 (1872); Way v. Towle, 155 Mass. :',74 (1892). The Act does not make it a part of the definition that the drawer should be a customer of the bank; but if a person gets goods or money on the strength of a :^!| i 'Ml 200 CHEQUES ON A BANK. [8.72 cheque when he has no account he is guilty of obtaining the goods or money by false pretences, and is liable to three years' imprisonment: Criminal Code, 1892, sec. 359; Rex V. Jackson, 3 Camp. 370 (1813); Reg. v. Hazelton, L. R 2 O. O. 134 (1874). 2. Except as otherwise provided in this part, the pro- visions of this Act applicable to a bill of exchange payable on demand apply to a cheque. Imp. Act, sec. 73. The exceptions are, (1) that failure to present a cheque for payment within a reasonable time does not discharge the drawer, except in so far as he is damaged thereby: sec. 73; (2) that the bank should not pay after notice of the customer's death: sec. 74; and (3) the pro- visions relating to crossed cheques: sees. 75 to 81, in- clusive. The chief provisions of the Act relating to bills pay- able on demand, which also apply to cheques, are the following: (1) There are no days of grace: sec. 14; (2) when they appear on their face to have been in circula- tion for an unreasonable length of time they are deemed to be overdue, so as to prevent a holder from acquiring them free from defects of title: sec. 30, sub-sec. 3; (3) they must be presented for payment within a reasonable time after indorsement to charge an indorser: sec. 45, sub-sec. 2(6). A cheque being a bill of exchange does not operate as an assignment of funds in the hands of the bank avail- able for the payment thereof, and until it accepts a cheque the bank is not liable on it: sec. 53. The holder of an unaccepted cheque, consequently, cannot sue the bank upon it, except under the circumstances mentioned in section 73 (c). Urder the Code it was held in Quebec that a cheque was a assignment of so much of the drawer's funds: Marler v. Molsons Bank, 23 L. C. J. 293 (1879). This is the law in Scotland: sec. 53, sub-sec 2 of the Imperial Act; and also in France: Nouguier, ss. 392, 431. i 72] ILLUSTHATIONS. 201 )perate avail- epts a holder ue the tioned Quebec 3f the J. 293 sec 2 er, 8S. ILLUSTRATIONS. 1. The production of a cheque is not even prima facie evidence of money lent by the drawer: Foster v. Fraser; Bob. & Jos. Dig. 652 (1840); Nichols v. Ryan, 2 R. L. Ill (1868); Dufresne v. St. Louis, M. L. R. 4 S. C. 310 (1888). 2. A cheque may be postdated, and is then payable on the day of its date without grace: Wood v. Stephen- son, 16 r. O. Q. B. 419 (1858). 3. "^Vhere plaintiffs accepted from defendant a cheque of a third party in part payment of goods, and pre- sented it at the bank the next day, and also applied several times to the drawer, but did not notify the de- fendant for a week, held that the latter was not liable: Redpath v. Kolfage, 16 U. C. Q. B. 433 (1858). 4. A cheque operates as payment until it has been dishonored. It ma}' be received either as conditional or as absolute payment: Hughes v. Canada Pennanent L. & S. S., 39 V. C. Q. B. 221 (1870). 5. Plaintiff deposited in defendant's bank the cheque of a third party on another bank in the same town. Defendants credited it in his pass-book as cash and stamped it as their property. They presented it the next business day when it was dishonored. If they had pre- sented it the same day it would have been paid. Held, that the bank was not liable: Owens v. Quebec Bank, 30 U. C. Q. B. 382 (1870). 6. The bank of Montreal allowed a private banker at London to put on his cheques, " payable at Bank of Montreal, Toronto, at par." Held, that these words Bimply meant that there would be no charge for cashing tli cheques, and not that the Bank of Montreal woula ;>av t 01 if there were no funds of the drawer to raeei l(:{;-L': rk:»p«:;-Belford Printing Co. v. Bank of Montreal, 12 U. B. 014 (1886). i 1 I'M' r * ■ ',■[ fI '< »■ ]:'■' ^ '■'■ !'■ *'<: '" 202 CHEQUES ON A BANK. [fe. 7: 7. Where a bank paid cheques on forged indorse- ments, the receipt given by the plaintiffs at the end of the month wa«, at most an acknowledgment that the balance was correct on the assumption that the cheques had been paid to the proper parties. Where the names of the payees had also been forged on an application for a loan to plaintiffs, the cheques were not payable to flc titious payees: Agricultural S. & L. Association v. Fede ral Bank, 6 A. B. 192 (1881). 8. The payee of a cheque took it to the bank on which it was drawn the same day as he received it from the drawer, and had it marked " good," the amount being charged to the drawer's account; but he did not demand payment. The bank suspended payment that evening, and the next day the cheque was presented for payment and dishonored. Held, that the drawer was discharged from all liability thereon: Boyd v. Nasmith, 17 O. R. 40 (1888); Merchants' Bank v. State Bank, 10 Wall (U.S.) 647 (1870); First National Bank of Jersey City v. Levach, 52 N. Y. 350 (1873). 9. The handing by a debtor to his creditor of the cheque of a third person upon a bank in the place where the creditor lives, the maker of the cheque having funds there to meet it, is a " payment of money to a creditor " within the meaning of R. S. O. chap. 124, s^ec. 3, sub-sec. 1: Ai-mstrong v. Hemstreet, 22 O. R. 33G (1892). 10. A bank was held liable for the amount of a cheque it had lost, which the drawer disputed, although the latter had been guilty of negligence in not objecting earlier when it wa.s entered in his pass-book: Foumier V. Union Bank, 2 Stephens' Que. Dig. 99 (1873). 11. Where an account bears interest, it ceases on the amount of a cheque drawn on the account when the cheque is marked, although the money is not actually drawn out until long after: Wilson v. Banque Ville Marie, 3 L. N. 71 (1880). M It s. 72] ILLUSTllATIONS. 20tJ 12. A bank was held liable to the holder of a marked cheque: Banque Nationale v. City Hank, 17 L. C. J. 11)7 (1873); even when marked j'ood only on a future day by the president and cashier: Exchange Bank v. Banque du Peuple, M. L. R. 3 Q. B. 232 (188G). Items of claim older than a cheque cannot properly be set up in com- pensation against it: Dorion v. Dorion, 5 L. N. 130 (1882). 13. A cheque should be presented the day after delivery and notice of dishonor given to charge the iu- dorser: Lord v. Hunter, 6 L, N. 310 (1883). 14. A bank acting as agent for another bank is not authorized, in the ab nee of an express agreement, to cash a cheque drawn upon the principal bank, but not accepted by it: Maritime Bank v. Union Bank, M. L. R» 4 S. O. 244 (1888). 15. A cheque payable to C. M. & S., or bearer, was indorsed by them and stamped for deposit to their credit in the bank where they kept their account. Their clerk, instead of depositing it. took it to the bank on which it was drawn, and the teller paid it without noticing the writing on the back. It was held that such a i-heque could not be restrictively indorsed, and the bank so pay- ing it was not liable: Exchange Bank v, Quebec Bank, M. L, R. S, O. 10 (1890). 16. A person receiving a cheque seven months after its date, and after it was drawn, has no greater right agjiinst the drawer than the previous holder, in whose hands it was void as having been given for illegal ex- penditure at an election: Dion v. Boulangcr, Q. R. 4 S. C. 358 (1893). 17. The initialling of a cheque by the cashier does not amount to an acceptance. A cheque so initialled received by the defendant onh' a few days before the trial, when it was more than four years old, could not be used by him as a set-off to the bill of exchange on which 1 m 1 '■ '; §■■■ i ' if ■'' 204 CHEQUES ON A BANK. [8.72 he was sued: Commercial Bank v. Fleming, 1 Stevens' N. B. Dig. 294 (1872). 18. H. owed defendant $500, and induced him to indorse his (H.'s) cheque for $1,000 on a bank at N., out of the proceeds of which the debt was to be paid. The two went to a bank at W. to get cash for the cheque. H. alone went into the manager's room, and on his return told defendant he had given the cheque to the manager to forward it to N. for collection. H. in fact retained the cheque and the same day transferred it to plaintiff for value. Held, that defendant was liable on the cheque: Arnold v. Caldwell, 1 Man. L. R 81 (1884). 19. Where a bank certified a cheque at the request of the drawer, who afterwards altered it, making it pay- able to bearer instead of to order; this is a material alteration, and the bank is not liable on the cheque to the drawer or his assigns: Re Commercial Bank, Banque d'Hochelaga's Case, 10 Man. L. R. 171 (1894). 20. A banker paid a cheque where the amount had been raised, but in such a way that it could not be easily detected. He was held liable to the customer for the •difference between the genuine and the altered cheque: Hall V. Fuller, 5 B. & C. 750 (1826). 21. Where a cheque was so carelessly drawn as to be easily altered by the holder to a larger sum, so that the bankers, when they paid it, could not distinguish the alteration: Held, that the loss must fall on the drawer, as it was caused by his negligence: Young v. Grote, 4 Bing. 253 (1827). 22. Filling in a blank cheque with a larger sum than that authorized is forgery: Reg. v. Wilson, 2 C. & K. 527 (1847). 23. An authority to draw cheques does not neces- sarily include an authority to draw bills: Forster v. Mackreth, L. R. 2 Ex. 163 (1867). 1:,H f?« sit ' ■ it:*.- '. 8.73] PRESENTMENT FOR PAYMENT. 205 24. A cheque is not an equitable assignment of so much of the drawer's funds in the hands of his banker, or of a chose in action: Hopldnson v. Forster, L. R. 11) Eq. 74 (1874); Schroeder v. Central Bank, 34 L. T. N. S. 735 (1876). 25. Where a person pays a postdated cheque into his bank in order that the amount may be placed to the credit of his account, and the amount is so placed, the bank are holders for value of the cheque: Royal Bank v. Tottenham, [18J)4] 2 Q. B. 715. 26. A cheque is drawn in favor of a person who does not really exist, although the drawer supposes that he does. This does not prevent the cheque being really pnyable to bearer, under sec. 7, sub-sec. a, of tlie Bills of Exchange Act, as being payable to a fictitious or non- existing person: Clutton v. Attenborough, [1895] 2 Q. B. 707. 27. If the drawer of a cbeque gets it accepted and Ihen delivers it to the payee, the drawer is not discharged; and if the ])ayee before delivery requests thi> drawer to send it to the bank and get it ac<'e])ted, tlie rule is tlie same: Randolph Bank v. Ilorablower, 160 Mass. 401 (1894). 7!S. Subject to the provisions of this Act — (a) Where a cheque is not presented for payment within ji reasonable time of its issue, and the drawer or the person on whose account i: is drawn had the riglit at tlic time of sncli ])resent- ment, as between him and tlie bank, to liave the cheque paid, and suffers aciual damugo through the delay, he is disoharjied to the extent of such damage, that is to say, to the extent to which such drawer or person is a creditor of such bank to a larger amount than he would liave been had such cheque been paid. Imp. Act, s, 74 (1). The provisions of the Act to which this section is subject, are those in section 46 relating to excuses for non-presentment and delay in presentment. 20G CHEQUES OX A HANK. [s. 73 it As reprnrtls the drawer, the effect of not presontin<]; a olieqne for paymoiit within a reasonahle lime (liff) Tlie holder of such cheque, as to which such drawer or person is disclia.'ged, shall be a credi- tor, in lieu of such drawer or person, of such bank to the extent of such discharge, and entitled to recover the amount from it. Imp. Act, s. 74 (2), (3). This is, to a certain extent, a modification of the rule in section 53. In England it introduced partially 208 CHEgUES ON A HANK. [s.74 ill the Scotch principle of 8ul>section 2 of that soction, and in Cajiada it rt'coj^nizos in tliis particular case the prin ciple laid down in Quebec in Marler v. MoleonH iBank, 23 L. 0. J. 2J)3 (1879). These countries adopted it from the civil law. •74. The duty and authority of a bank to pay a chequ(» drawn on it by its customer are terminated by — (a) Countermand of payment; (?>) Notice of the customer's death. Imp. Act, s. 75. A bank having sufflcient funds of the drawer of a cheque in its hands is bound to pay it, and in case of refusal is liable to an action of damages: Marzetti v. Williams, 1 li. & Ad. 415 (18.30); Foley v. Hill, 2 H. L. Gas. 28 (1848); Rolin v. Steward, 14 C. B. 595 (1854); Todd V. Union Bank, 4 Man. R 204 (1887). The dam- ngoH I'ccoverabic by a non-tiader for the wrongful refusal of a bank to allow him to withdraw a special deposit, are nominal or limited to interest on the money: Hen derson v. Bank of Hamilton, 25 (). R. 041 (1894); Bank of New South Wales v. Milvain, 10 Vict. R. (Law) i:'. (1884). A bank may, without special instructions, pay any bills or notes, of which the customer is acceptor or maker, and which are payable at the bank: Jones v. Bank of Montreal, 29 U. C. Q. B. 448 (1869); Kym(>r v. Laurie, 18 L. J. Q. B. 218 (1849); Robarts v. Tucker, Ki Q. B. 500 (1851); Vagliano v. Bank of England, [1891] A. C. 107. Cheques are payable in the order in which they aie presented, irrespective of their dates, provided the dat>' is not subsequent to the presentment: Kilsby v. Wil- liams, 5 r». & Aid. 819 (1822). Wliere a customer keeps his account at one branch of the bank, other branches are not bound to honor his cheques: Woodland v. Fear, 7 E. & B. 519 (1857). But if he has accounts in two or more branches the bank may combine them against him, provided they are all iu I iiSS ' n, aii'l e prin iBiink, t from cheqn(^ •d by- t, 8. 75. XT of il case of :zetti V. 2 H. L. i (1854); lie da 111- 1 refusal deposit, y: Htn ); Bank aw) i:!. [pay any ■ptor or ones V. ymor v. ickor, 1(> , [18011 they are the dat-' V. Wil- brant^h )nov his J). Bi-'t le bank he all iu s. 74] CKOSSKl) (HKylJKS. •209 the same ri^jht: (jarnell v, .McKcwan, L. |{, S |-;x. (1872); Prince v. Oricntul Hank, [i A. <^ :{25 (1H7S). 10 Entries made in a customer's pass book are prima facie evidence aKainst llie bank: Commercial Jlaiik v, ithind, :J Macq. 11. L. (It:? (IStiO); Couper's Trustees v. National Bunk of Scotland, Ift Sess. Cas. 412 (IHSS)). Countermand. — A customer may stop payment of a che(iuo before it is accepted, but not after: Cohen v. Hale, 3 Q. B. D. 371 (1878); McLean v. Clydesdale Bank, [) A. C. 1)5 (1883). It has also been held that a bank is not bound to honor a customer's checiues after a garnishe*" order is served on it, even althouj^h the balance excee^l the judg- nient: Rogers v. Whiteley, [18!)2] A. C. 118. Death of a Customer. — Payment after the death but before notice is valid: Rogerson v. Ladbroke, 1 Bing. f)3 (1822). It has been lield in England that after the death of a partner, the surviving partner may draw cheques upon the partnership account: Backhouse v. Charlton, 8 Ch. D. 444 (1878). In Quebec the deatli of a partner terminates the partnership, and also the right of the survivors to act for the Ann, in the absence of a -special agreement to the contrary: C. C. 18S)2, 1897. A cheque given as a donatio mortis causa must he presented or negotiated before notice of the d( ath of the donor in order to charge his estate: Hewitt V. Kaye, L. R. 6 Eq. 198 (1868); Beak v. Beak, L, R. 13 Ev 489 (1872); Rolls v. Pearce, 5 Ch. D. 730 (1877). But see Colville v. Flanagan, 8 L. 0. J. 225 (18G4); and Cle^ ment v. Cheesman, 27 Ch. D. 631 (1884). CROSSED CHEQUES. Sections 75 to 81, inclusive, treat of crossed cheques. They are copied from the Imperial Act, with the substi- tution of " bank " for " banker," as private bankers are not recognized by the Canadian Act. The practice of m'l.b.a.— 14 ,'■ 1 i.' i. ^ • If ;. s ■ 210 CHEQUES ON A BANK. [8.7+ cropisinf; cli<»ques did not i)revail in Canada b'^fore the Act, and it is not liliely to be generally adopted now, as the drawer can pi-otect himself by making a cheque pay- able to order, since our Parliament refused to adopt sec- tion GO of the Imperial Act, which relieves a bank from responsibility for the genuineness or authorization of the indorsement on cheques drawn upon it. The practice is a comparatively modem one in Eng- land, and is another illust"ation of the elasticity of the law merchant by wliich a custom obtains for itself judi- cial sanction or legislative r'^coguition. From the report of Stewart v. Lee, 1 M. & M. at p. IGl (1828) it would appear tli.Jt the elT'ect of crossing was not then fully settled. It is described in Boddington v, Schlenker, 4 B. & Ad. 752 (1833); and in liellamy v. Majoribanks, 7 Ex. at p. 402 (1852i. Baron Parke there gives a his- tory of its origin and growth. The practice originated at the London clearing house, the clerks of the different bankers who cllu busi- ness tliere lin\in,f.'; bcfn acciistonud to write across th" cheques the names of their employers, so as to enable the clearing house clerks to make up the accounts. It afterwards became a common i»i'actice 1o cross cheques which were not intended to go through tlie clearin!). This was copied in our Canadian criniiiijil law, and be- came R. S. C, chap. 165, see. 31, but it is tlie English crossing that is there referred to, and declared to be a felony. That section is not applicable to the crossing authorized by the Canadian Act. If the obliteration, addition or alteration does not amount to forgery, it would come under section 138 of the Criminal Code, 1892, which makes any person who, without lawful excuse, disobeys an Act of Parliament, guilty of an offence, and liable to one year's imprison- ment. 7H. Where a cheque is crossed specially to more thajx one bank, except when crossed to another bank as agent for collection, the bank on which it is drawn shall refuse payment thereof: 2. Where the bank on whicli a cheque so croa^ied is dra'W'Ti, nevertheless pays the same, or p? ys a cheque crossed generally otherwise than to a 214 CHEQUES ON A BANK. Is. 79 bank, op if crossed specially, otherwise than to the bank to which it is crossed, or to the baak acting as its agent for collection, it is liable to tlir true owner of the cheque for any loss he sus- tains owing to the cheque having been so paid: Provided, that where a cheque is presented for i)ay- ment which does not at the time of presentment appear to be crossed, or to have had a crossing which has been obliterated, or to have been added to or altered otherwise than as authori/.ed by this Act, the bank paying the cheque in good faith and without negligence shall not be responsible or incur any liability, nor shall the payment be questioned by reason of the che(]ue having been crossed, or of the crossing having bet n obliterated or having be«n added to or altered otherwise than as authorized by this Act, and of payment having been made otherwise than to a bank or to the bank to which the checjue is or was crossed, or to the bank acting as its agent for collection, as the case may be. Imp. Act, s, 79. The first clause would prevent the thief or finder of a specially crossed cheque, or any holder subsequent to him, fi'om crossing the cheque a ; e^-oiid time and so getting paid through another bank. Before acceptance there is no privity between the holder of a cheque and the bank upon which it is drawn: but sub-section 2 gives' a remedy to the true owner against a bank which improperly pays a crossed cheque. 71>. Where the bank, on which a crossed cheque is drawn, in good faith and without negligence pays it, if crossed generally, to a bank, or, if crossed Bpecially, to the bank to wiiich it is crossed, or to a bank acting as its agent for collection, the bank paying the che(ine, and if the cheque has come into the hands of tlio payee, the drawer, sliall respectively be entitled to the same rights and be placed in the same position as if payment of the cheque had been made to the true owner thereof. Imp. Act, 8. 80. This section gives to a bank on which a cheque is drawn the protection, in the case of a crossed cheque. 80] CROSSED CHEQUES. 215 which our Parliament refused to pive it as to demand bills and ordinary cheques by striking; out of the bill the clause corresponding to section GO of the Imperial Act. On the other hand, it furnishes to the other parties to a cheque a strong reason for objecting to the crossing of a cheque. If a crossed cheque which has not been made " not negotiable " is lost or stolen before it reaches the hands of the payee, and the bank pays it in good faith and without negligence even upon a forged In- dorsement, the drawer has no recourse against the bank which has paid or the bank which has collected, but can only look to the guilty party or some subsequent holder. See Ogden v. Benas, L. R. 9 C. P. 513 (1874); Patent Safety Gun Cotton Co. v. Wilson. 49 L. J. C. P. 713 (1S8()): «ec. 81. If it is lost or stolen after reaching the hands of the payee, and is paid in like manner, the drawer is released, but the i)ay('o, indorsee, or holder who has lost the bill, or from whom it has been stolen, is in the same position as the drawer in the case just mentioned. The paj'ee of a crossed cheque specially indorsed it to plaintiffs and posted it to them. A stranger having obtained possession of it during transmission obliterated the indorsenKMit to plaintiffs, and having si)e(ially in- dorsed it to himself, presented it at defendants' bank and requested them to collect it for him. They did so and handed him the money. In an action for convei'- sion defendants were held liable for the amount of the cheque: Kleinwort v. Compton Nationale d'Escompte, [1S94] 2 Q. B. 157. HO. Where a person takes a crossed cheque which bears on it the words " not negotiat)Ie," he shall not have and shall not be capable of giving a better title to the cheque thjui that which had the person from whom he took it. Imp. Act, s. 81. Making a cheque " not negotiable " puts it on the same footing as an overdue bill, so that any holder takes it subject to the equities attaching to it, and no person can become a holder in due course. If such a cheque f f 1 i ,'.<:,■ f •> ■ 216 CHEQUES ON A HANK. [S. 81 Bhould be lost or stolen the person receiving the money from the collecting bank would be liable in any event. Where a cheque crossed "not negotiable" was drawn in favor of a firm, and one partner S., in fraud of |>laintiff, his co-partner, indorsed it to defendant, who got it cashed for S., defendant was held liable to the CO -partner, who under the partnership articles was en- titled to the cheque: Fisher v. Roberts, 6 T. L. R. 354 (1890). See National Bank v. Silke, [1891] 1 Q. B. 435. SI. Where a bank, in good faith and without negli- gence, receives for a customer payment of a cheque crossed generally or specially to itself, and the custouK'r has no title, or a dd'ective title thereto, the bank shall not incur any liability to the true owner of the cheque by reason only of having received such payment Imp. Act, s. 82. Section 79 relieves the bank on which the crossed cheque is drawn; this section, the bank which collects it. If it be indorsed " per proc." and tlie banker makes no inquiry as to the authority to so indorse, this may be negligence: Bissel v. Fox, 53 L. T. N. S. 193; 1 T. L. R. 452 (1885). See Mathiessen v. London & County Bank, 5 C. P. D. 7 (1879) ; Bennett v. London & County Bank, 2 T. L. R. 765 (1886). Where the only transaction between an individual and a bank is the collection of a crossed cheque, such ir lividual is not a custonie*' of the bank within this sec- tion: Matthews v. Williams, 10 E. 210 (1894). ■flR SAVINGS BANK ACT, O^IsT^ID J^. 53 VICTORIA, CHAPTER 32. An Act respecting certain Savings Banlis in tlie Pro- vince of Quebec. This Act was passed in 1890, having been assented td on the 16th of May, and came into force on the Ist day of July, 1891. Previous to that time the two sav- ings banks to which it applies were regulated by R. 8. C. c 122, which applied not only to them but to all the savings banks in Ontario and Quebec which existed under the Savings Bank Act of 1871, 31 Vict, tliap. 7. This latter Act provided that the savings banks then existing might either transfer their assets and lia- bilities to the Dominion Government, or to a chartered bank, or the Grovemor-General might grant them new ijharters under that Act. These charters were granted for ten years, and they \>.re subsequently extended by 44 Vict. chap. 8, to tlie first of July, 1891. The only s-ivinga banks which have continued their separate existence are the City and District Savings Bank, of Montreal, and La Caisse d'Economie, of Quebec. It will be seen that a number of the provision^ of this Act are similar to those in the Bank Act. For notes and authorities on these points the reader is referred to the corresponding sections of the Bank Act in the pre- ceding part of this work. 1.^ wm ' ^1 218 HAVINGS BANK ACT. INTKRPHETAT [8.4 1 . In this Act, unless the context otherwise requirew, the expression "the bank" means either of the savio^^s banks to which tliis Act applies. CHARTERS CONTINUED. *2. The charter of the City and District Savings Bank of Montreal, and of La Oaisse d'Econoniie de Notre Dame de Quebec are hereby continued and shall remain in force until the first day of July in the year one thou- sand nine hundred and one, except in so far as they, or either of then), are or become forfeited or void under the terms thereof, or of this Act, or of any other Acts heretofore or hereafter passed relating to the said sav- ings banks, by non^performance of the conditions of such charters or Acts respectively, or by insolvency or other- wise. INTERNAL REGULATIONS. J* Public notice shall be given by the directors of the bank of the holding of annual or other meetings, by publishing the same for at least four weeks in a news- paper at the place where the head office of the bank is situate; and such notice shall be given in both the Eng- lish and French languages. 44 V. c. 8, s. 3, in part. 4. The qualification of a director shall be the hold- ing of twenty-five shares of stock; and the directors shall be elected annually at a general meeting of the shareholders, and shall be eligible for re election. 2. Eacl. shareholder sliall, on every occasion on which the votes of the shareholders are taken, have one vote for epch share held by him for at least three months before the time of voting: « 3. Shareholders may vote by proxy, but no person but a shareholder shall vote or act as such, proxy: 4. No cashier, clerk, or other officer of the bank shall vote, either in person or by proxy, or hold a proxy for that purpose: S.7] I\TEI{\Ar. IlKGULATIONS. 219 5. Every director of the bank who l>ecoines insol- vent, or assigns his estate and effect h for tlie benefit of hia creditors, or absents liinis<'lf, witliout the consent of tlie board, for twelve conHeciilive niontlis from tlie meet- ings of tlie directors, or is convicted of any felony, shall thereupon, Ipso facto, ceas<' to be a director, and the vacancy so created shall fortliwith be tilled uj) in the manner provided by the charter. 'M X. c. 7, ss. 7 and 27. •"> No failure to elect directors of the bank shall operate any dissolution of the cf>r[)oration, but in case of such failure to elect the required election shall be made as soon thereafter as possible, at a special meeting of the shareholders, which the directors are hereby author- ized to call for that purpose; and until such subsequent election takes place, the official acts of the directors holding oflTice shall lie valid. 34 V. c. 7, s. 2G. CALLS. edient to make such calls; and all amounts paid upon stock, and all accumulated x)rotits thereon after deduction of dividends as hereinafter provided, shall be invested or lent in tlie manner hereinafter provided as to the investment or loan of moneys deposited with the hank: Provided that the limitatl(m of the amount of iiiiy call, or of the intervals at wliieli calls may i»e made, sliall not ai)})ly to the case of deficiency of tlie funds of the bank to meet the claims (if depositors and other lia- bilities hereinafter pro\id(Hl for. 'M V. c. 7, s. 9; 30 V. c. 71., 8. 1, in part. 7. The amount of every sucli call, if not ])aid when due, may be recovered with interest by the directors, in the name of the bank, in any eourt having jurisdiction to the amount; and in any action for the recovery thereof it shall be sufficient to allege and prove the charter, and that the calls were made under this Act, and that the defendant is the holder of a share or shares in respect of which the amount is due, without alleging or proving any other matter or thing whatsoever; and the evidence of jiny officer of the bank, cognizant of any fact required w TIT^ 1 1 I ■ i 1 1- ) ( I 220 SAVINGS BANK ACT. [s. 8 to be proved, shall be sufficient proof thereof; and any copy of the charter, purporting to be certified as a tr\ie copy thereof by the Secretary of State of Canada, shall bo (Icenu'd iintlientic and shall be priuiii facio I'vidi'iico of the charter and of the contents thereof. 34 V. c. 7, 8. 10. s. LIAlilF-ITY OF SllAUKHOl.DKHS. S The sliart'lioldcrs of the bank shall, in the evont of its funds in money and assets immediately convertible into money becoming insufficient to satisfy its debts and liabilities, be liable for the deficiency, so far as that each shareholder shall be liable to an amount equal to the amount, if any, not paid up, of his shares, and no more; and the directors may and shall make calls on the stock not paid up to the full amount not paid up, or to such less amount as they deem necessary to pay all cash claims and other liabiliiies. without waiting for the collection of any debts due to the bank, or the sale of any of its assets or property: 2. Such calls shall be made at intervals of thirty days, and upon notice to be given thirty days at least prior to the day on which the call is payable: 3. No such call shall exceed twenty per centum on each share, and pajTuent thereof may be enforced in the manner hereinbefoi«e provided as to calls on unpaid-up stock : 4. The first of such calls shall be made within ten days after such deficiency is ascertained: 5. Failure on the part of any shareholder liable to such oail to pay the same when due shall operate a for- feiture by such shareholder of all claim in or to any part of the assets of the bank; but such call and any further call thereafter shall nevertheless be recoverable from him as if no such forfeiture had been incurred. 6. Every director who refuses to make or enforce, or to concur in making or enforcing any call under this section, is guilty of a misdemeanor and shall be person- ally responsible for any damage suffered by reason of su<'li default; and every liquidator or other officer or person appointed to wind up the affairs of the bank, in case of tn 12] LIAHILITY OF SlIAKIillOl-DKHS. 221 its insolvency, shall have the powers of the directors with rcHpi'i't to such calls'. 34 V. c. 7, s. 11 and s. 12, in part. « riMsons who. havinjj bi'cn shareholders In the hank, liavo only transferred their shares or any of them to others, or registered the transfer thereof, within two months before the commencement of the failure of the hank to meet the claims of its creditors on demand, sliall be liable to calls on such shares under the next precedin{jf section, as if they had not transferred them, saving tlieir recourse against those to whom they were transferred.^ 34 V. e. 7, s. 12, in part. DIVIDENDS. |0. Tlie directors of the bank shall make half-yearly dividends of so much of the profits of the bank as to tlie majority of them seems advisable, and is not inconsistent with the provisions of this Act, and they shall give public notice of the payment of such dividends at least thirty days previously, in the manner herein provided as to notices of meetings. 44 V. c. 8, s. 4. TKANSFEll OF SHARES AND DETOSITS. 1 1 . The shares in the bank shall be transferable in the manner provided by the by-laws and regulations made as prescribed by the charter; and the transferee shall have the rights and shall be subject to the pliabilities of the original holder: 2. No share shall be divided, and if any share is held by several persons jointly, one of them shall be appointed by letter of attorney by the others to vote thereon, to receive dividends and to do all things that require to be done in respect thereof; and such letter of attorney shall be lodged with the bank. 34 V. c. 7, s. 13. IS. If the interest in any deposit or share in the bank becomes transmitted in consequence of the death or in- ' See section 89 of the Bank Act and notes on the double liftbility, ante p. 178. 'See sectioa 9o of the Bank Act and notes thereon, ante p. 184. IMAGE EVALUATION TEST TARGET (MT-3) h 4 v\ ^^ A I/. ^o :/. 1.0 I.I >^ ^U 112.2 I2& II 2.0 L25 III 1.4 V] roduced and left with the mana}?er or other otHcer or ajient of tlu' bank, who shall there- \i[Hm enter the name of the |>erson entitled under such transmission in the books of the bauk.^ 154 V. c. 7, s. 29. DEI'OSITS ANM) LOANS. 14. The bank may receive deposits of money for the benefit of persons deixtsitin}; the same, and may invest the same as luTeinafter juuvided, and may accumulate tlie revenues and profits dei'ived from tlie investnumt of so much thereof as is not re«iuired to meet oi-dinary de- mands by the dejiositors, and out of such accumulation may allow and p;iy to the depositors tlienof siicli riilc of inter<'st on such deposits as is from time to time fixed l»y the (lovernor in Council, not beinic more than the per centum per annum. .^4 V. c, 7. s. 14; 44 V. c. 8. s. 2. 15. Every depositor, on makini^: his first deposit in the bank, shall disclose and decliti-e his name, residence, addition and occupation. .'?4 V. c. 7, s. lo. I*?. The bank may receive depoyils fmm any person, wliatever is his status or coiKlitiou of life, and whet In r such iK'rson is (jualifMHl l)y law to enter into ordinary contracts or not; and the bank may pay the princi|>al or any ]>art thereof, and the wliole or any i)ai't of llie liit(>rest thereon, to such person, without the authoiity. aid. assistance or intervention of any jtei-son or ollicial beiufr required: I'rovided always, that if the i)erson making any deposit in the bank is not. by the laws of ' See Boctions 40, 41 and 42 of tlio Hank Act iiii 1 the notca thereon, nnte p. (]2. 224 SAVINGS BANK ACT. [8.20 the Province of Quebec, authorized so to do, the total amount of deposits made by such person shall not exceed the sum of two thousand dollars. 34 V. c. 7, b. 16. 17. Any payment of interest or dividend, or of the whole or any part of any deposit, made in pood faith to any person who appears prima facie to be entitled to such interest, dividend or deposit, by the production of a d*' claration in wrilin}^ and of the documents herein men tioned in support thereof, shall be valid; and the dig- charge of such i)erson shall be sulllcient, and shall dis- charge the bank from all or any further claim by any person for such interest, dividend or deposit. 34 V. c. 7, 8. 31. l^i. The bank shall always hold at least twenty per centum of the moneys deposited with it in Dominion securities, or deposits in chartered banks. 36 V. c. 72, s. 1, in part. 111. The bank may, subject to the provisions in the next preceding section contained, invest any moneys deposited with it in any stock or public securities of the Dominion of Canada, or any of the Provinces of Canada, or in any municipal debemtures, or in such securities as are ac- cepted by the Government of Canada as deposits from Insurance Companies,^ or in the manner provided in the two sections next following, and not otherwise; but the bank may continue to hold any stock of any now exist- ing chartered bank, held by it before it received its charter, and may sell and dispose of such stock. 34 V. c. 7, 8. 17; 36 V. c. 72, e. 1. 20. The bank may also lend such moneys, upon the personal security of individuals, or to any corporate bodies, provided that collateral securities of the nature mentioned in the next preceding section, or British or foreign public securities, or stock of some chartered bank in Canada, or stock in any incorporated building or loan society, or bonds or debentures or stock of any incorporated institution or company, or such securities as are accepted by the Government of Canada as deposits from Insurance Companies, are taken in addition to such ' This clause in new. As to these securities, see B. B. C. 0. 124, s. 8, as amended by 67 & 58 V. c. 20, s. 4. [8.20 ^ total exceed of the aith to to such f a d*' n men he dis- all dis by any V. c. 7, nty per >minion I. c. 72, the next eposited ominion |r in any are ac- ts from in the but the tv exist- ived its 34 V. c. )on the ^rporate nature itish or [artered Wilding of any Icurities deposits [to such 124, ■. 8, 22] DEPOSITS AM) LOANS, 225 personal or corporate security, with authority to sell such securities if the loan is not paid, and provided also that tho bank may lend moneys without collateral se- curities to the Dominion or any Provincial (Joverument, or to the corporation of any city in Canada with a poi)u- lation of at least twenty thousand inhabitants, within the limits of the borrowing powers of such corporation.^ 34 V. c. 7, 8. 18, in part; 30 V. c. 72, s, 1, in part. 21* The bank shall not make any loan, directly or in- directly, upon the security of real or immovable pro- perty, or with any reference to the security of real or immovable i)roi)erty; but nothing herein contained shall p 'event the bank from taking security upon real or im- movable property in addition to such collateral securi- ties, subsequently to the making of the loan and sub- sidiary to the security originally taken therefor.^ 34 V. 7, s. 18, in part. 22. In the event of the non-payment of any loan within thirty days after such loan becomes due and payable, or ' A coiTiparisoii of tliis and the preceding; section with section 61 of the Bank Act will show the main differences between the two classes of banks. It is contemplated that the chief business of the other banks sliall be a discounting of commercial paper and deaiin({ in exchanjied while the chief business of these savings banks shall be a non-commercial lending and investing business. Other banks are prohibited from taking security on bank shares; savings banks may take them as collateral. Other banks may take as additional security chattel mortgages, mort- gages on vessels, warehouse receipts, bills of lading and securities under section 74 ; these are not among the securities which savings banks may take. Both classes of banks may take mortgages on real estate as additional security subsequent to a loan, and may buy in mortgage, lands and hold them for seven years. A savings bank can only hold bank shares as pledgee, so that it is not the owner or subject to the double liability, and the bank whose shares it holds must know that it is not the owner although registered in the transfer book as such : Exchange Bank v. {3itv and D. Savings Bank, M. L. R. 6 Q. B. 1!»6 (1887). But now see last clause of sec. •22. s-s. 4. A savings bank made a loan on the security of letters of the Qnehrc Government. The borrower failed and the bank filed a claim on his estate, which was contested by the curator on the ground that the trans action was illegal, the bank not being authorized to lend on such security. It was held that if the bank had no right to take such a security, this did not affect the lending of the money or the obligation of the borrower and his estate to return it: Holland v. La Caisse d'Economie, 21 S. C. Can. 405 (18S>.')). The collaterals mentioned in this section should be taken when the oan is made, and on every loan except to the Dominion or a Provincial Government, or to cities oif over 20,000. ' See section 68 of the Bank Act, ante p 127. A savings bank can- not take a chattel mortgage as security ; nor can it take a mortgage on rial estate at the time a loan is made. h'l.b.a. — 15 m W 'I! , 226 SAVIXfiS HAN'K ACT. [8. 2:t within Mucii Hliortcr dciii.v an hIuiII Ik* fixed by ainj^ii^ree- UK lit iiiiulc Im>1v\(>(Ii the liniik iiinl I lie Ixtrrowcr at the time Hiirli loan in coiit ratted, the liiinU iii)i,v Kell in iiiaii- ner lieiein provided tlie eolliileial htiiiiilies, other llian real) estate. Iield l).v it an hetuiiiv lor kimIi loan, or no iiiueh thereor aH will sntlii-e to \u\y lh(> anioiiiil of such loan and all interest thereon and tlie eosts and expenses of sale, ret liming the siiiplus. if sniy, to the borrower, or person or eapers tuie at least shall be piiblislicd in the Kii^lish lanKiniKe and one otluT in the French laii<;u:i.ue; and notice of the time and place of such ^^ale sh.ill ite ^iven to the ]>erson d<'positin;; such collalei il secuiity, by ad dressing; and mailing; to the last annhase, and may ' In til is wfiy a sivvin^s bank may now booome the owner of hnuk BliareR, and Rubjcct to tlie double liability ; or it nmy become the holder of partly paid up stoci; in an incorporated company. [b. 2:i il tht' I iniin- r tliiin or so f KUfh •r.twei', L's: le slmH rt'of \».v •h Halt', ll'CSt to \\ lU'NVS ic; ainl . by ail person, 1)0 bank balaiu*' in any rson (le- casbiov .1 by tb»' so sobi security rausfer, •on» any at any of tbe Imovabb' 1 suit of la iiowcr |i Nviru'b, so i>tir ,alu(' of bd may Ir of t>fti>'^ Ithe liolcitr H. -itij INTKKN.M. UK(Jtl,AII(>XS. OvJ a('(|uir(' a titb» IIhmcIo, as any individual ptip- chasing at slH'i'ifl'M sale or undtM* a power of wib', in like (ircunistanccH, could do. an<1 may take, bavc. bold and di8po8(> of the sume >\t pleaisupe.* 34 V. c. 7, a. 20. *24. The bank may acquire and hold an absolute title in or to land inoHjjafjed to it as sectirity for a debt due or owiuf; to it, either by obtaining a releas<' of the e«iuity of ndemption in the nmrtjiaj;ed property, or by i)rvision8 of this section the bank shall inc'ur a penalty not excetnlinj; live hundred dollars, which shall be re- coverable with costs in any court of competent jurisdic- tion by any person who sues for the same, and oiiehalf thereof shall be ]>aid to the Minister of Finance and Re- ceiver General for the public uses of Canada, and the other half thereof to the person sninp for the same.- 'M V. c. 7, 8. 21. 25. Nothinjr in any charter, Act, or law shall be con* strued as bavin}; prevented or as preventin}; the bank from acquiring; and holdinjj; an absolute title to and in any such niorl};a}re OENEllAL PROVISIONS. JJT. The directors of the bank shall continue to dis- tribute to charitable institutions yearly, as heretofore, the interest accruing on the amounts invested for that purpose: 2. The principal of the Poor Fund of the City and District Savings Bank of Montreal, which has been ascer- tained and settled at one hundred and eighty thousiuid dollars, shall continue invested and shall be held by the said bank in the city and municipal debentures in which the same is now invested and held, with power to chaage the investment of the same or of any part thereof, from time to time, with the approval and permission of the Treasury Board, but not otherwise:^ 3. The principal of tlie Charity Fund of La Gaisse d'Economie de Notre-Dame de Quebec, which has been ascertained and settled at eifjhty-three thousand dollars, shall continue invested and shall be held by the said bank in debentures of the city of Quebec, with power to change the investment of the same or of any part thereof, from time to time, with the approval and per- mission of the Treasury Board, but not otherwise.^ 34 V. c. 7, 8. 25, in part; 30 V. c. 72, ss. 3 and 4. 2*. The shareholders may authorize the directors to establish guarantee and pension funds for the offi- cers and employees of the bank and their families, and to contribute thereto out of the funds of the bank. New. 2!l. The bank shall not issue any bank note, or note intended to circulate as monev or as a substitute for J. -rt. ' Tliis bank was organized nnder the general Act of the old province of Tanadft relating to Ravings Banks with the Roman Catholic Bishop of Montreal as patron and a large list of Honorary Directors, the profits being devoted to charities. In ISfi'i a special Act, 25 Vict, chap, 66 was passed, creating a reserve fnnd and making other changes. It received iv special charter nnder 34 Vict. chap. 7. This was amended by 36 Vict. chap. 72, the Poor Fund being flxed at $180,000 the interest thereon being distributed among the incorporated charitable institutions of Montreal. ''This bank was organized in a similar way with the Archbishop of Quebec as patron. It came under the special Act, 29 & 30 Vict. cap. IHO and the general Act of 1871. By .36 Vict. chap. 72 the Poor Fund was fixed at $83,000, the interest of which is distributed among the charities of the city of Quebec. [h. 2i) 32] llETUUNS TO (JOVEUXMKNT. 22i> money, or be deemed a bank within the mocaninj; of "The liank Act." 34 V. e. 7, s. 35. to dis- tofove, )r that ,ty and 1 ascer- ousand by the 1 which change )f, from i of the I Caisse las been dollars, the said h power my part and per- 186.2 34 actors to the offl- hies, and Ik. New. or note itute for kd province \ Bishop of [Uio profits lap. 66 wfts I receiven a hy 36 Vict- 1st thereon litutions of Ihbishop of ^t. cap. li'^ f Fnnd was le charities SO* The bank shall not be bonnd to see to the execn tion of any trust, whether e.\j)re8s, implied or construe tive, to whicli any dei)osit or sliare (lierein is subject; and tlie receipt of the person in whose name any such deposit or share stands in the books of tlie bank, or, il' it stands in tlie name of more ])('rsons than one, the re ceipt of one of the persons shall be a sufficient discharjje to the bank for such deposit or share, interest or dividend thereon, or for any other sum of money payable in n - 8|>ect of such dei)osit or share, unless express notice to the contrary has been 0\en to the bank, or such deposit is made uj)on express conditions as to the person or persons to whom such deposit shall be paid, in which case such deposit shall be jjoverned by such conditi(ms. notwithstanding; any trust to which such deposit is then subject, and whether or not the bank has had notice ol such trust; and the bank shall not be bound lo sie to the application of the money ])aid on such receipt, whether jjiven bv one of such i)ersons or bv all of them.' 34 V. c. 7, s. 30." 31. Monthly returns shall bemade, by the bank, to the Minister of Finance and Keceiver (Jeneral, and shall be made up within the first ten days of each month, and shall exhibit the condition of the bank on the last juridi- cal day of the month next preceding; and such monthly returns shall be signed by the president or vice-])r('sident, or the director then acting as president, and by the manager, cashier or other principal officer of the bank at its chief place of business, and shall be j)ublished in the Canada Gazette; and such monthly returns shall be in the form set forth in the schedule to this Act. 36 V. c. 72, s. 2, in part. 32. The bank shall furnish annually to the Minister of Finance and Receiver General, to be laid before Parlia- ment, certified lists of the shareholders, with their addi- tions and residences, and the number of shares they re- spectively hold and the amounts paid up thei*eon. 44 V. c. 8, 8. 6. ' See sections 43 and 84 ss. 2 of the Bank Act, ante pp. G6 and 171. p If < '230 SAVINGS HANK ACT. [h. :{» i!i 111%. Tho bank shall, within twenty days after the cIohc of each calendar year, trangniit (H* deliver to the Minister of Finanee and l{<'('eiver GiMieral, to l»e laid by hiui Iw fore Parliament, a return of all dividendH which have remained unpaid for more than five yearn, and alH(» of all amounts or balances in which no interest has been paid during; the five years prior to the date of such re- turn. Provided always, that in case of moneys deposited for a lixed period of tive years above ivferred to, shall be reckone nanu's and addresses of his lepil representatives, so far as known to the bank; (Ji) If the l)ank neglects to transmit or deliver to the Minister of Finance and Receiver CJeneral the return alxne referred to, within tlie time hereinbefore limited, it shall incur a penalty of fifty dollars for each and every day dunng which such nejjlect continues; (4) Upon the winding; up of the bank in insolv«Micy or under any }?eneral wlndin^j-up Act or otherwise, and before tlie tinal distribution <»f the assets, or within three years from the commencement of the susjM'nsiou of pay- ment by the bank, or the commencement of the winding up therefore whichever shall first happen, the assijjnees, lifjuidators, directors or other olTicials In cluirge of such winding up shall, notwithstanding any Statute of Limita- ti(ms, or other enactment or law relating lo prescription* pay to tlie Minister of Finance and lt«'ceiver CJeneral out of the assets of the bank any moneys payable either to shareholders or depositors, which nviy then remain nn claimed, and upon such payment being made the bank and its assets shall be relieved from all further liability in respect to the amount so paid; (5) The moneys paid to him as aforesaid shall be held by the Minister of Finance and Receiver General, subject to the rightful claims on behalf of any person other than the bank, and in case a claim to any moneys so paid as aforesaid should be thereafter established to 8. 8*] iiKituNs TO «;o\ i:iinmi;nt. 231 tlu' HnllKfiution of llic Tifiinmy IJojinl, tin* tJovonun* la (*uuii(il hIimII, un tlii' npoi i oi' ili(> Ti-c:isiii-,v Itoai'd, dirccl pa.viiicnt llicrcor lo lie iiiiMii' (o ilie panics culilled tli«'i«-(o, io^(>ili('i- with iiil('r*'si ui\ (lie piiiM-ipal Mini tlui-col al ilic rale ot Wuvr (icr <«miIiiiii per aiiiiiiiii for a p('i'i(> liom iIm- dal<> of pay- nirnl llificdt' lo llu* said MinisitT of Finance and Kc- ccivci- (lent lal as alorcsaid: I'lovidcd, liowcvcr, lliat no such Interest nlnill Itc paid or payaldc on sncti piimipal Muni, nnlcss interest llici-con was pa,valde hy ilie baiil\ pa.vin^ tlic same lo tliu said Minister of Finance and lU'ceivei* (leueral; (({) Ah a condition of Ilie rifjlits and privile};os coii- f(M'rcd hy tliis Act or hy any Act in anicndnitMit tiicrcof, the fidlowinjr provision sliall iiave (fleet, namely: — Tiu' liability of the Itank under any law, ciisloni or ayree- inent to repay moneys deposited with it. and interest, if any, and to pay dividends d( dared and payable on its capital sitick shall contiiiiie, not wiilistandin^ any Sta- tute of Limitations or any cnactineul or lavv relatinji to prescription: 2. Tills s«'ction apjdies to moneys hereiofore or here- after deposited and to dividends heretofore or hereafter declared. New. 84. Kvery otticer, clerk, or servant, who is employed under the provisions of this .\( I. and who defaces, alters, erases, or in any manner or way whatsoever, changes the effect of the lnwdis of account kept under the pro- visions of this Act. oi- any entry in the said b«»oks of account, for any frandiih nt piiipose, and every such olticer, clerk or servant, who secretes. a|>pro|M'iates or eiiibe//Ies any bond, obli;>aiion, bill or note, or any sc<;urlty for money, or any money oi* elTecIs intrusted to him, or in his custody, or \o w hie li lie has obtained access as such agent, officer, clerk or siivant. t<) whomsoever the said ]>rop<>rty beloiiy;s. is fiiiilty of felony, ami. on conviction thereof, shall be llalile to imprisonment for life: Provided always, that iiolliiii^ Ik rein ((Uitained, nor the conviction or punishnu'iil of the otTeiider, shall previMit, lessen or im])air any remedy which Her Majesty or the Minister of Finance and Receiver (leneral, or any other person, would otherwise have aj^ainst any otlwiP person wliatswver.' 34 V. c. 7, s. 32. ' See tie Criininal Code. IS'.l'i. sec. 423, aa to forgory ; sec. 305, as to theft ami sec. i^Oti aa to false entries. 2:i2 SAVINTS BANK \n\ [h. 87 Sid- Evcrv porHon who. with Intoni to dofrnnd, fulwl.y pH'triHlH to he lh(> owntT of any deposit iiia(I<' under tliiH Act. or of tlie intoroHt upon hiicIi deposit, and wlio is not sncii owner, and wlio demands or claims from tlie Itanl; will) wliicli siicli d(>poHit lias lie(>n ma<1e, or from any |M'rson (Mn|)loyed under tiris Act. tlie payment of sucli deposit or interest, or of any portion tliereof, as tlie case may l>e. and wlietlier lie do<'s or docs not thereby obtain any part of sucli deposit or inli'rest, is jrnilly of a nds- demeanor, and Hliall !)e punishable accordin^rly.* 'M V. c. 7. s. .'{15, in part. Jt'fi The making of any wilfully false or dece])tive state- ment in any account, return, repoi't or other document respectinj; the affairs of the bank is, unless it amounts to a hij^lier otT<'nce, a misdemeanor punishabl(> by im- prismmont for a term not exieedinjj five years, and every president, vice-president, director, auditor, manager, cashier or other olticer of the bank, who i)repares. sijins, appioves or con<'urs in such statement, return, n port oi* document, oi- uses the sanu* with intent to deceive or mislead any ix'rson. sliall be held to have wilfully m.ide su( h false statenu'iit. and shall further be res])onsiblc for all damages sustained bv sucli iierson in consecjuence thereof.2 34 V. c. 7, s. 34. roMMEXCl-.MKNr OF ACT. 8T. This Act shall come into force on the first day of July in the year one thousand eijjht hundred and ninety- one, and from the last nientioned day chapter one hun- dred and twenty-two of the Revised Klatutes of Canada, intituled "An Act respecting certain Savin^rs Hanks in the Provinces of Ontario and Quebec," shall be repealed, except as to ri<;hts theretofore acquii*ed or liabilities incurred in rejjard to any matter or thinp done, or con- tract or ajjreement made or entered into, or otTence com- mitted theivunder, and nothing in this Act shall affect any action then j>endinp under the said chapter, but the same shall l)e decided as if the said chapter had not been repealed. ' See the Criminal Coile, 1892. sees. 308 and 358. ^ See the Criminal Code, sec. 305. HCHEDl'F.E. 235) SCHEDULE. Return of the ninount of linbililicH and asMels of the (name of the bank) on tht* day of C'aimtai. Stock. ^ Oaimtal i'aim ri', !? LIAHII-ITII-S. Ct8. 1. Dominion Govornment dopoHits, payable on demand 2. Ppovint'ial Oovernmcnt deposits, i)ayable on demand 3. Otlu'P d«'[)osits, |)ayable on demand.... 4. Dominion (lovernmcnt deposils, jiayable after notice or on a lixcd day 5. Provincial (lovernmcnt deposits, payable after notice or on a fixed day 6. Other dejjosits, payable after notice or on a tix«'d day 7. Special Poor Fund or riiarity Fund Trust 8. Liabilities not included under the fore- poinjf lieads AS.SE'I\S. $ 1. Dominion securities 2. Provincial or Municipal securities .... 3. Loans for which Dominion or Provincial securities are held as collateral securities 4. Loans for which bank stocks are held as collateral security 5. Loans for which other stocks, bonds or debentui*es, as authorized by law, are held as collateral security. 6. Ciish in hand or on deposit or call in chartered banks 7. Special' Poor Fund or Charity Fund in- vestments cts I ■Ji 234 SAVINGS HANK ACT. It' { I-- s cts. 8. Investmrnts in bank stock made previous to tlu» iueorporatiou of tho bank. . . . 9. Other assets, not included under the fore- going heads We deehire that the foregoing return is made up from the btwks of lh<» bank, and that it is correct, to the best of our knowledge and belief. (Place) this day of A. B., rresident, etc. O. D., Cashier. '•mi *fi I IS- 1 - THE WINDING UP ACT. REVISED STATUTES OF (^ANADA, CUAW 1'29, AS AMKNDKD IN ISSI), 1S1)2 AND ISI),"). An At't ivsiuH'tiii}; Insolvent Hjuiks, Insniiuico Com- IKUiios, Loan Conipanit's, ltuil(lin}<; Siuiciics, juul TnuUufj; Corporations. HER Majesty, by and >\ith \\\o advice and consont of tlio Senate and House of Conunons of Canada, enacts as follows: — SHOUT TIT!-K. 1. This Act nuiv bo cited as "The Windinj? l'\y Act."' INTKIM'UETATION. 2. In this .\ct, unless the context otherwise re- quires, — ((/) TTk". expression " company " includes any cor- poration subject to the pi*ovisions of this Act; (b) The expression " insurance conipany " means a cany, except a railway or telep;rapli company, carry- inj? on business similar io that carried on by apothe- • Tins Act is iiitrn vires tho Doiniiiion I'urlianuMit. Immii^; in tlio nature of an insolvency law : Hhoolbred v. Clarke, 17 S. C ("an. li(>S (IS'.IO). '&i. plw f .% y. 236 THE WINDING UP ACT. [s. -2 caries, auctioneers, banlvers, brokers, briclvniakers, build- ers, carpenters, carriers, cattle or slietp salesmen, coach proprietors, dyers, fullers, keepers of inns, taverns, ho- tels, saloons or cotTee houses, liuie burners, livery stable keepers, market gardeners, millers, miners, packers, printers, quarrymcn, share-brokers, shipowners, shij)- wrights, stockbrokers, stock-jobbers, victuallers, wan- housemen, wharfingers, persons using the trade of mer- chandise by way of bargaining, exchange, bartering, coni- missioji, consignment or otherwise, in gross or by retail, or by ])ersons who, either for themselves, or as agents or factors for others, seek their living by buying and selling or buying and letting for hire goods or commodi- ties, or by the manufacture, workmanship or the con- version of goods or commodities or trees; (d) The expression " court " means, in the Provinci' of Ontario, the iligh Court of Justice for Ontario; in the Province of (Quebec, the Superior Court for Lower Can- ada;^ in the Province of Nova Scotia, the Supreme Court; in the IM'ovince of New l>i'unsv»ick, the Supreme Court; in. the Province of Prince Edward Island, the Supreme Court; in the Province of British Columbia, the Supreme Court; in the Province of Manitoba, Her Majesty's Court of (Queen's Pench for ^lanitoba; in the North-AVest Territories, the Supreme Court of the North- West Territories; and in the District of Keewatin, such court or magisli-ate or other judicial authority as is designated, from time to time, by proclamation of the Ciovernor in Council, published in the Canada Gazette: (r) The expression " Offici.al Gazette " means the Canada (lazette and the Clazette ])ublished under the authority of the Ciovernment of the Province, where the proceedings for the winding up of the business of the company are carried on, or used as the official means of communication between the Lieutenant Governor and the people, and if no such (Jazette is published, then it means any newspa]>er published in the Province, which is designated by the court for publishing the notices required by this Act; (/) The expression " contributory " means a person liable to contribute to the assets of a company under ' That is, the Superior Court for the district wliere the head oflRce of the companv is situate : Dupont v. Gompagnie de Moulin, 11 L. N. 225 (1888). \! it;* 1 8. INTEHPRETATION. 287 this Act; it also, in all procet'dings for determining the persons who are to be deemed contributories and in all proceedings prior to the final determination of such per- sons, includes any person alleged to be a contributory; ig) The expression " winding-up order " means an order granted by the court under this Act to wind up the bu .luess of the company, and includes any order granted by the court to bring within the provisions of this Act any company in liquidation or In process of being wound up. 45 V. c, 23, ss. 3, 4, 5, G, 8 and 13, part; 49 V. c. 25, s. 14. APPLICATION OF ACT. 3. This Act applies to incorporated banks, savings banks, incorporated insurance companies, loan com- panies hanng borrowing powers, building societies hav- ing a capital stock, and incorporated trading companies, doing business in Canada, wheresoever incorporated;^ and — (a) Which are insolvent; or — (6) Which are in liquidation or in process of being wound up, and on petition by ar r of their share- holders or creditors, assignees or liiiuidntors, ask to be brought under the provisions of this Act: 2. Tills Act does not apply to railway or telegraph companies or to building societies which have not a capi- tal stock. 47 V. c. 39, s. 1. 4- Tlie provisions of sections eight to ninety-six, both inclusive, are, in the case of a bank other than a savings bank, subject to the provisions contained in ' The Act applies to companies incorporated by a provincial lej^isla- tnre: Shoolbred v. Clarke, 17 S. C. Ciui. 2i\r> (IHOO)". Where a Scotch company in being wound np in Scotland, a winding-up order ancillary to that in Scotland may, with the consent of the liquidator appointed there, be taken out in Canada : Allen v. Hanson, {8 S C. Can ()()7 (1890). There is no clashing between this section and the Winding,' up Amend- ment Act of 1889. The latter provides for the voluntfiry winding,' np of companies at the instance of shareholders; this for their compulsory liquidation on the application of creditors. A company incorporated under an Ontario Act and doing business in Ontario comes under thia section : Re Ontario Forge Co., 25 O.'R. 407 (1894). Where Canadian creditors of an Imperial company are proceeding to execnte a judgment here, the English liquidator cannot have the assets removed to Enyland for distribution there : Quebec Bank v. Bryant, Q. R. 3 8. C. 122 (1893) '■•i; ti] 23S THE WINDING UP ACT. [a. 5 nettions ninety-seven to one hundred and four, both in- clusive; and, in the case of an insurance (company, the provisions of sections eight to ninety-six, both inclusive, are subject to the provisions contained in sections one hundred and five to one hundred and twenty-three, both inclusive. 45 V. c. 23, s. 2. WHKX COMl'.WY UKEMHI) INSOLVENT. C "-Vn ' ' 'Sill'' i ■ I 5. A company is deemed insolvent — (a) If it is unable to pay its debts as they become due;^ (h) If it calls a m(M*tin}j of its creditors for the pui^ pose of compounding with them; (c) If it exhibits a statement showing its Inability to meet its liabilities; ((/) If it has otherwise acknowledged its insolvency ;2 (r) If it assigns, removes or disposes of, or attempts or is about to assign, remove or disjjose of, any of its I)r«)])erty, with intent to defraud, defeat or delay its creditors, or any of them; if) If, with such intent, it has procured its money, goods, chattels, lands or y)roperty to be seized, levied on' or taken, under or by any process or execution; (f/) If it liMS made any general conveyance or assign- ment of its property for the benefit of its creditors, or if. being unable to me(»ts its liabilities in full, it makes any sale or conveyance of the whole or the main part of its stock in trade or assets, Avithout the consent of its creditors, or without satisfying their claims ;3 ' Til a ii-'titioii fi)i' iin or.ler ai'aiiist a ooiv.pivny, the petitioner alleued that tlie company "is insolvent and utterly nnablj to pay your poti- tionnr's said debts and its other debts. " //('/ound for the same to the satisfaction of the ereditor.2 45 V. c. 23, ss. 10 and 11. PROCEEDINGS FOR WINDIN(}-UP ORDER. 7. The winding up of the business of a company shall be deemed to commence at the time of the service of the notice of presentation of the petition for winding up. 45 V. c. 23, s. 12. .H. When a company becomes insolvent, a creditor for the sum of at least two hundred dollars may, after four days' noti. The court may make the order applied for, may dimnisB the petition with or without eoHts, may adjourn the hearing conditionally or unconditionally, or may make any interim or other order that it deems just.' 45 V. c. 1'3, 8. 14. lO. If the company opposes the application, on the ground that it has not become insolvent within the meiuiing of this Act, or that its suspension or default was only temporary, and was not caused by any deli ciency in its assets, and shows reasonable cause for believing that such opposition is well founded, the court, in its discretion, may, from time to time, adjourn the proceedings upon such application for a time not ex- ceeding six mouths from the date of the application, — and may order an accountant, or other person, to inquire into the affairs of the company, and to report thereon within a period not exceeding thirty days from the date of such order. 45 V. c. 23, s. 15. il. Upon the service on the company of an onler made under the next preceding section, for an inquiry into the affairs of the comjiany, the i)resident, directors, officers and employees of the company and every other person shall respectively exhibit to' the accountant or other person named for the puri'ost' of making such in- quiry, the books of account of the company and all in- ventories, papers and vouchers referring to the business of the company or of any person therewitl , which are in his or their possession, custody or control, respec- tively; and they shall also respectively give all such information as is required by such accountant or other person as aforesaid, in order to form a just estimate of the affairs of the company; and any refusal on the part of the president, directors, officers or employees of the company to give such information, shall be a contempt of the court, and shall be punishable by fine or im- (.'i R. * G.) at p. 55 (1884». A petition based on a judgment obtained by a tliird party of which it was alle{»ed the petitioner " is now ft bona fide holder and owner " is suflicient : Re Rapid Citv F. E. Co., 9 Man. 571 (1894). ' A wide discretion is given to the Court by this aection. It appeared that the company had made a vohmtary assignment for the benefit of creditors, and that it was the desire of the great majority in number and value of tlie creditors that liquidation should proceed under the assign- ment, the application was refused : Wakefield Rattan Co. v. Hamilton Whip Co., 24 O. R. 107 (1893). [s. 11 15] WINDING-UP ORDER. 241 r, may djourii r may just/ on the lin the default ly deii- jse for cj court, irn the not ex- ition, — inquire thereou he date n order inquiry irectors, •y other itant or such in- l all in- Misiness lich are resper- 11 such r other ate of |he part of the ntempt or im- 1 obtftined Iw ft bona ]..•) Man. ippeareti benefit of iber and |e assitjn- lamilton prisonment, or by both, in the discretion of the court. 45 \'. c. '2'.i, a. U>. Mi. Upon receivinj? the report of the accountant oi person ordered lo iiKjuire inl«> the allairs of the company, and after hearinj; suth shareholder.s or creditors of the company as desire to be heard thereou, the court luay either refiisie the api)licat1on or make the winding-up order. 45 W c. li^i, s. 17. IJi. The Court may, upon the application of the company, or any creditor or contributory, at any tiuse after tlie presentation of a petition for a winding-up order and before making the order, restrain further pro- ceedings in any action, suit or proceeding against the company, uj)ou such terms as the court thinks fit. 45 V. c. 23, s. 18. 14. Any shareholder, creditor, assignee, receiver or li(luidator of any comjiany which was in li(iuidalion or in process of being wound uj) on the seventeenth day of May, one thousand eight hundred and eighty-two, may apply, by petition, to the court, asking that the company may be brought within and und<'i' the provisions of (his Act. and the couit may make such order; and the wind- ing up of su( h company shall thereafter i)e carried on under this Avt: 2. The court, in making such order, may direct that the assignee, receiver or liquidator of such company, if one has been appointed, sliall become the liquidator of the company under tliis Act, or nuiy ajtpoint some other person to be liquidator of the companv. 47 ^^ c. 30, ss. 2 and 3. PROCEEDINGS AFTEIl WINDING-UP ORDER IS MADE. 15. .Tlh' company, from the time of the making of the windingup order, shall cease to carry on its busi- ness, except in so far as is, in the opinion of the liquida- tor, required for the beneficial winding up thereof: 2. All transfers of shares, exce|)t transfers made to or with the sanction of the liquidators, under the au- fliority of the court, and every alteration in tlie status of the members of the company, after the commencement of such winding up, shall be void; but the corporate m'l. b. a.— 1() 242 THE WINDING UP ACT. [h. 18 state and all the corporate jxjwers of the coini)any, not- witlislaiidiiiji it is olherwisL' provided by tiie Act, charier or inslninicnt of incorporation, shall continue until tlic affaiis of the company are wound up. 45 V, c. 'SA, s. J!). IC AVhen the windinjf-up ord€»r is made, no suit, action or other ijrocccdiu}; sliall be ])roceedcd with or commenced ajiiiinst the company, except with the leave of the couit and subject to sucli terms as the court iin poses.' 45 V. c. 23, s. 20. IT. Ev(M'y attachment, sequestration, distress . The court may, as to it seems just, as to all matters relating? to the windinj:' up, have ropird to the wishes of the creditors, contributories. shareholders or nienibei's, as j)roved to it by any sufiicient evidence, and may, if it thinks it expedient, direct meetiujjs of the creditors, contributories, shareholders or members to be summoned, held and eoudueled in sncli manner as the court directs, for the purpose of ascertaining: their wishes, and may appoint a person to act as ehairman of any such meeting, and to report the result of such nieel- inj^ to the court :^ 2. In the case of creditors, reany. 45 V. c. 2:?, s. 'iO. 5T. A liquidator may resifm or may be removed by the court on due cause shown, and every vacancy in the oftic«» of liquidator shall be filled by the eourt.^ 45 V. c. 23, s. 31. 2H. The liquidator shall be paid such salary or remuneration, by way of percentage or otherwise, as the court directs, upon such notice to the creditors, con- tributories, shareliolders or members, as the co\irt orders: and if there is more tlian one liquidator, tlie remuneration shall be distributed amon«;st them in such proportions as the court directs.^ 45 V. c. 23, s. 32. 1 The Hpciiritv nerd not he tixerl hv the winding-np order ; it may he le't to thelMaster : Schoolhred v. Clarke, 17 S. C. Can. 205 (1890). -Where there is want of harmony hetween liquidators, the Court will remove one of them on the advice oif the creditors: Cloyes v. Darlinii, 16 R L. r.l9 (IHM); Exchaniie Bank v. Camphell, 15 R. L. 373 (1885). See a'po Re Assinihoine, etc.. Co., Man. 10.') (1889). 'The remuneration of the liquidators cannot be fixed at the time of their appointment ; but the Court adopted the snggeations of the meetings as to the proportions in which the several liquidators should share in the amount to be allowed: Re Commercial Bank. 9 Man. 342 (189.3). Tlie remuneration is not to he increased becanse three liquidators are to be paid instead of one. The recompense is usually a percentage based [8. 28 up- iciiuil le ap- tioual tl, the • by a [>ne or H'unty t.^ 45 all the in the presen- intuu'ut ator of X 8. HO. ive. In all proeeedinjjK connected with tlie company a liquidator nhall be described as the^ *' li(]nidatm]>iiny is or appears to hv entitled, and he shall inTfurm siicli duties in reference to winding up the biisiness of the rany, as the case may be;- oliiefly on the time occupied, the work dnno aiiil the rpsponsihility imposed. After beint; fixed it will bo divided eqnitiihly if there lire more tlian one liquidator: Ilo Central Runk, 15 O. R. HO'.t ilHH7). In fixing the conipengation of tlie licpiidiitor it is proper to take into account amounts ndjusted or set off, bnt r.nt actually received. i\ conitnissiou of two ftiid a quarter per cent, having; been allowed on the amount colkvited, a further commission of one and a quarter percent. on S'iH 1,000, adiusted or Be* otT, was allowed. The compensation should be spread ov(!r the whole period of liquidation so as to ensure vitjilance at all stas^os : Re Central Bank, Lye's Claim, 22 O. R. '217 (IH'.l'i). The liquidator should furnish proof of the services rendered, work done, etc. : I'ixchantie Hank V. Campbell, 15 R. L. 873 (IKH")) ; Rj Assiniboine Valley Co., tl Man. IHt (1880). The Court decided to follow tlie principle followed under the Eu'.,'lish Windin','-up /vets, but reduced tlio scale adoDted there, and allowed ^o a day for each day of H hours, and $100 additional for pre- pariuf,' the report: Re Saskatchewan Coal Co., (1 Man. 't'Xi (l.S'.tO). 1 Money was paid into Court on an interpleader order. Bifore judg- ment a windinji-up order was issued. Tlie plaintiff succeeded on the interpleader issue and was held entitled to the money as a^iainst the liquidator, although he had tiled a claim : Calt v. .Saskatcht wan Coal Co., 4 Min. 301 (1887). When a depositor left with the prosideiit of a bunk, a blank clie(pie to draw the money if he found an invostiUfiit, and the president, when the bank was about to suspend, filled up tiie cheque and drew f 1,'iOO in bills, which he placed in an envelope addressed to the depositor and left in the vault of the bank, it was held that the money beion^^ed to the bank : Re Commercial Bank, Robertson's Claim, 10 J\Ian. 61 (1894). ^ A general authorization to sue for and get in the assets of the com- pany is not sufficient: Freygang v. Daveluy, Q. R. 2 S. C. 505 (18rsiMiaI anil licrital>l<> and niov- abl«' |)roi»('i'(y, rlTcits and clios^'s in action of the com pan.v, by public aurliim or sums of money; and the drawinj;, acceptiu};, makinj; or indorsinj; of every such bill of exchanjje or promissory note, as aforesaid, on behalf of the comi)any, shall have the same effect, with resjiect to the liability of such company, as if such Itill or note had bi en drawn, ac- cepted, made or indorsed by or on behalf of such com- pany in the course of the carryinj; on of its business; (f/) Do and execute all such other things iis are necessary for windinj? up the affairs of the company and distributing its assets. 45 V. c. 23, s. 35. ^'*^ The liquidator may, with the approval of the court, api)oint a solicitor or law ajrent to assist him in the performance of his duties,^ 45 V. c. 23, s. 30. nil. The liquidator may, with the approval of the court, compromise all calls and liabilities to calls, debts ' It is preforablo to liave a solicitor who is totally unconnected with the company which is being wound up : Re Joseph Hall Manufacturing Co., 10 Pr. B. 485 (1884). ^ k a 37] LIQUIDATORS. 247 and liabilitioB capable of rcMultiti}]: in dobtH, and all claims, whether present op future, certain or contingent, ascertained or soundin}? only in daniii^es, Hiibsistin^' or 8Uj)poH('d to HultHist between the company ami any con- tributory or otlier debtor or person appreliendin^j lia- bility to tlie company, and all (piestiuns in any way relating to or atlVctinj^ the aHs<'ts of the c«>mpany or the windinj; .'p of the compiiiiy upon the receipt of hikIi sums, payable at such times, and {^eiieriilly upon such terms, as are agreed u|M)n; and may take any s;e of laich debts or liabilities, and ffive a complete dischai'<;e in resjiect of all or any such calls, debts or liabilities. 4.' V. c, 2:?, s. 37. JJ4. Upon the apiK)intm(nt of the liquidator, all the powers of the directors shall cease, except in so far as the court or the liijuidator sanctions the continuanci' of such powers.' 4.'> V. c. 23, s. 38. Jli^- The liquidator shall deiK)sit at interest in some chartered bank or post otllce savinjfs bank or otln-r Government savinjjs batik designated by the court, all sums of money which he has in his liands belonging to the comi>any, whenever anf, or if he is by law liable to the company or its members or creditors, as the case may be. to an amount beyond the amount unpaid on his shares, he sliall be deemed a member of the company 'A solvent company issuerl stock to its sliareliDlders at a disconnt. It was afterwards freshly incorporated with these shari's treated as fully paid up. It became insolvent and was beius,' wound up It was helrl that these shareholders were not liable as contributories : Re Owen Sound Dry Dock Co., 21 O. R. 319 (1H<»1). Where new stock was issued ille^jally and was ultra virex the company, the holders of these shares, should not be placed on the list as contributories : Re Ontario Express and Transportation Co., 21 Ont. A.R. 040 (18i)4.) Where a promoter buys property for the company, for which paid-up shares are tjiven, and he secretly receives part of them, be may be placed on the list of contribu- tories: Re Hess Manufacturing Co., 23 S. C. Can. 014 (1894). IBT^ m I 1 M ,.' i 250 THE WINDING UP ACT. [s. 4<) for the purposes of this Act, and shall be liable to con- tribute, as aforesaid, to the" extent of his liabilities to the company or its members or creditors, independently of this Act; and the amount which he is so liable to contribute shall be deemed an asset and a debt as afore- said. ^ 45 V. c. 2;j, s. 49. 40. The liability of any person to contribute to the assets of a company under this Act, in the event of the business of the same being wound up, shall create a debt accruing due from such person at the time when his liability commenced, but payable at the time or respec- tive times when calls are made, as hereinafter men- tioned, for enforcing such liability; and in the case of the bankruptcy or insolvency of any contributory, tlie estimated value of his liability to future calls, as well as calls alreadv made, may be proved against his estate. 45 V. c. 23, 's. 50, part. 4T. The court may, at any time after making a winding-up order, require any contributory for the time being settled on the list of contributories as trustee, receiver, banker, agent or officer of the company, to pay deliver, convey, surrender or transfer fortlivlth. or within such time as the court directs, to or into the hands of the liquidator, any sum or balance, books, pa])ers, estate or effects which are in his hands for the time lieing, and to wliich the compauv is prima facie entitled. 45 V. c. 2.3, s. 51. 4.S. Tlie court may, at any time after making a winding up order, make an order on any contributory for the time being settled on the list of contributories, direct- ing payment to be made, in manner in the said order mentioned, of any moneys (\uo from him or fi'oni the estate of iho person whom lie rejn'esents, to the com- pany, exclusive of any moneys whicli he or the estate of the person whom he represents is liable to contribute by virtue of anv call made in pursuance of this Act. 45 Y. c. 2.'?, s. 52. 4». The court may, at any time after rr^king a winding up order, and either before or after it has ascer- 1 Where a shareholder transferred hia stock to avoid liability for calls it was held to be valid althoueh he knew the society was insoivent; Re Provincial Buildiu-? Society, 30 N. B. 628 (1891). 8. 53] CONTRIRITTORIFS. 251 tained the siifticioncy of tlie assets of the conipanj, make calls on and order payment thereof by all or any of the contributories for the time bein^ settled on the list of contributories, to the extent of their liability, for pay- ment of all or any sums it deems necessary to satisfy the debts and liabilities of the company, and the costs, charges and expenses of winding? up, and for the adjust- ment of the rights of the contributories amongst them- selves; and the court may, in making a call, ta.ke into consideration the jtrobability that some of the contribu- tories upon whom the same is made may parily or wholly fail to pay their respective portions of the same: Pro- vided, however, that no call shall compel payment of a debt before the maturity thereof, and that the extent of the liability of any contributory shall not be increaseil by anything in this section contained. 45 V. c. 23, s. HO, part, and s. 53. ♦50. The court may order any contributory, pur- chaser or other person from whom money is d\ie to the company, to ])ay the same into some chartered bank or post office savings bank or other Government savings bank, to the account of the court, instead of to tlie liquidator; and such order may be enforced in the same manner as if it had directed pavment to tlie liqiiidator, 45 V. c. 23, a. 54. -'^1 The court sliall adjust the rights of the con- tributories among themselves, and distribute, among tlie persons entitled thereto, anv suii)lus tliat remains. 45 V. c. 23, s. 55. ^^- The court may, at any time before or after it has made a winding-up order. uj)on j>r(w)f Ixing given that there is reasonable cause for believing that any con tributory or any past or present director, maiiagev, officer or emjiloyee of the com])any is about to (]uit (Canada nr otherwise abscond, or to remove or conc(\'il any of liis goods or chattels, for the purpose of evading payment of calls, or for avoiding examination in res])e( t of th<' affairs of the com])any. cause sucli ]>erson to be arrested, and his books, papers, moneys, securities for moneys, goods and chattels to be sei/.ed. and him and tlicm to be safely ke])t until such time as the court orders. 45 V. c. 23," s. 50. S^*^- Tf the business of a company is being wound up under this Act, all books of the company and of the mrr VrmtM 252 THE WINDING UP ACT. [8. 56 ii.k ;:i 1 il i( ;■■ t W-m V" Bl^iM'^ ^'; 1 *i nttiiiw- 3..;.'. '■' 1 B^PnT' '^-'^' * ' i KtiC^-i^flBi ■ t* K«' '^- ' y H'ij ■I' liquidators shall, as between the contributories of the company, be prima facie evidence of the truth of all matters purporting to be therein recorded. 45 V. c. 23, s. 57. 54. After a winding-up order has been made, the court may make such order for the inspection, by the creditors, shareholders, members or contributories of the company, of Its bookn and papers, as the court thinks just; and any books and pai>ers in the possession of the company may be inspected in conformity with the order of the court, but not further or otherwise. 45 V. c. 2.3, s. 58. 15*5. Ko contributory, creditor, shareholder, or mem- ber shall vote at any meeting unless present personally or represented by some person acting under a written authority, tiled wi«^li the chairman oi* liquidator, to act as such representative at the meeting, or generallv. 45 \. c 23, s. 59. creditors' claims. 5H. When the business of a company is being wound up under this Act, all debts payable on a contingency, and all chums against the company, present or future, certain or contingent, ascertained or sounding only in damages, shall be admissible to proof against the com- pany, — fi just estimate being mad<', as far as is possible, of the value of all such debts or claims as are subject to any contingency or sound only in damages, or which, for some other reason, do not bear a certain value: 2. Clerks and other pwsons in or having been in the employment of the comi)any in or about its business or trad(\ sliall be^ collocated in the dividend sheet by si)ecial i)rinlege over other creditors, for any arrears of salary or wages due and unpaid to them at the time of the making of tlu^ winding-up order, not exceeding the arrears which have accrued to them during the three months next i)revious to the date of such order. 34 V. c 23, s. GO, part; 49 V. c. 40, s. 1. ' There is notliinj; in this section which alters or interferes with the lex loci contractus in case of a claim. The company entered into a lease in Quebec anrl by the law of that province (Civil Code, Art. 1092) on the insolvency of the company the lease became void at the option of the lessor, and the rent at the end of the term became at once exigible, the lessor was allowed to rank for the full amount of rent, taxes, etc. : Re Harte and Ontario Express Co , 22 O. R. 510 (1892). s. 60] CREDITORS CLAIMS. 253 57. The law of set-off, as admizistored by the courts, whether of law or equity, shall apply to all claims upon the estate of the company, and to all proceediii}?s for the recovery of debtsdueoraccruinj? due to the com- pany at the commencement of the windinfj up, in the same manner and to tlie same extent as if the business of the com])any was not being wound up under this Act.^ 45 V. c. 23, s. GO, part. SiS, The property of tlie com])any shall be applied in satisfaction of its liabilities and the chai'fics incurred in winding? up its affairs; and unless it is otherwise ]»ro- vided by law or by the Act, charter or instrument of incorporation, any ju'operty or assets remaininjr shall be distributed amonpst the members or shareholders, ae- cordiuK to tlu'ir ri<;hts and interests in the companv.- 45 V. c. 23, s. 61. Siiim The court may fix a certain day or certain days on or within which cr<'ditors of the com])any and others who linve claims thereon mnv send in their claims.^ 45 V. c. 23. s. (12. I50. When the liquidator has jfiven such notices of the said day as are ordered by the court, the^ liquidator may, at the expiration of the time named in the Kaid notices or the last of the said notices, for sendinj; in such claims, distribute the assets of the com])any. or any part thereof, amongst the persons entitled th<>reto, having regard to the claims of which the lia};es, judj^nients, executions, hypothecs and liens, and upon his securing the estate of the company to the satisfaction of the li(iuidat<*i- auainst any claim by reason of such previous moi't;^age8, judjif- nients, executions, hypothecs and liens and if tliere are niorljijifics, judjjnients, executions, hyjjothecs or liens thereon, snbstMiucnt to tliose of such creditor, he shall only obtain the prop<'i'(y l>y consent of the subsequently secured creditors, oi* upon their filing; their claims speci- fying!: their security thereon ;is of no value, or upon his piiying tlicni the value by them i)laced thereon, or upon his securinfi: the estate of the company to the satisfac- tion of the liquidator afjainst any claim by reason of sncli subsequcMit mortgajfes, judj^ments, executions, hypothecs and liens. 45 V. c. 23, s. 6G. G4. Upon a secured claim beinj; filed, with a valua tion of the security, the liquidator shall procure the au- thority of the court to consent to the retention of the security by the creditor, or shall require from him an assignment and delivery thereof. 45 V. c. 23, s. 07. 6S. In the preparation of the dividend sheet, due regard shall be had to the rank and privilege of every creditor, but no dividend shall be allotted or paid to any creditor holding security upon the estate of the company for his claim until the amount for which he may rank as a creditor upon the estate, as to dividends therefrom, is established, as herein provided.^ 45 V. c. 28, s. 68. 06. No lien or privilege upon cither the real or per- sonal property of the company shall be created for the amount of any judgment debt, or of the interest thereon, by the issue or delivery to the sheriff of any writ of execution, or by levying upon or seizing under such writ the effects or estate of the company; nor shall any lien, claim oi' privilege be created upon the real or personal property of the company, or ui)on any debts due oi* ac- cruing or becoming due to the company, by the filing or registering of any memorial or minute of judgment, or by the issue or making of any attachment or garnishee order or other process or proceeding, if, before tlie pay- mcmt over to tlie plaintiff of the moneys actually levied, I»aid or received under such writ, memorial, minute, ' A mechanic 9 lieu is a praferential claim : Re Empire Brewing Co., 8 Man 424 (1891). F- I, ■: J I'^r 256 THE WINDING UP ACT. [8.07 attacliment, garnishee order or other process or pro- eeedinj;, tlie windinj; up of the business of the company lias eoininenced; but this section shall not aflfect any lien or jirivile^e for costs, which the plaintiff possesses under the liiw of the Province in which sucli writ, attach- ment, pirnishec order or other process or proceedini^ was issued. 45 V. c. 23, s. 69, part. 07. Any liquidator, creditor or contributory or shareliolder or member may object to any claim filed uitii tlie licjuidator, or to any dividend declared: 2. Tf a claim or a dividend is objected to, the objec- lions shall be filed in writinj; with the liquidator to- jrether with evidence of the previous service of a copy thereof on the claimant: 3. The claimant shall have six days to answei' tlif objections, or such further time as the court allows, and the contestant shall have three days to reply, or such further time as the court allows: 4. T'pon the completion of the issues upon the objec- tions, the liquidator shall transmit to the court all neces- sary papers relatinj; to the contestation, and the court shall tlK'n, on the application of either party, fix a day for takinj; evidence ujwn the contestation, and hearing and determininjjf the same: 5. The court may make such order as seems proper in respect to the payment of the costs of the contestation by either party, or out of the estate of the company: n. Tf, after a claim or dividend has been duly ob- jected to. the claimant does not answer the objections, the court may, on the application of the contestant, make an ordei* barrintr the claim or correctint; the dividend, or may make such other order in reference thereto as appears ri^ht: 7. The court may order the person objecting: to a claim or dividend to give security for the costs of the contestation within a limited time, and may. in default, dismiss the contestation or stay proceedings thereon. upon such terms as the court thinks just. s. 70; 52 V. c. 32, s. 15. 45 V 23. [S.G7 70] FUAUDULENT PUEFERENCES. 257 p pro- npany it any ittaoh- ecdint? ory or Ti fiknl ' objoi'- itor to- a copy allows, or sucli le obj ce- ll neces- le court X a (lay hoarinj; propiM' ^station •any: Inly ob- loctions^, It. make Ivuli'nd. Ireto as kp; to a of the lefanlt, icreon, c. 23. FRAUDULENT rUEFERENCES. ilH. All gratuitous contracts, or conveyances or con- tracts without consideration, or with a merely nominal consideration, respectinfj; either real or personal pro- perty, made by a company in respect to which a windin done by a company, respecting either real or personal property, with intent fraudulently to imp«'d(\ obstruct or delay its creditors in their remedies against it, o'* with intent to defraud its cn^ditors or any of tlKMu.— and so made, done and intended with the knowledg' of the person contracting' or acting with the comniinv, whether such person is its creditor or not, — nnd which have the effecft of impeding, obstructing or delaying th" creditors of their remedies, op of in luring them, or any of them, shall be null and void. 45 V. c 23, 8. 73. m'l.b.a. -T7 Mi fprr 1 Mil *i'; 258 THE WINDING UP ACT. [h. 73 71. If any sale, deposit, i)ledge or transfer is niadt' of any properly, real or personal, by a company in contemplation of insolvency under this Act, bv way of secuiity for payment to any creditor, — or if any property, real oi* persrred within the time and under the circum- stances in the next preceding section mentioned, or ;il any time afterwards, to a contributory who knows or has probable cause for believing the company to be un- able to meet its engagements, or in contem[)lation of its insolvency under this Act, for the purpose of enabling such contributory to set up, by way of compensation or set-off, the debt so transferred, suchl debt shall not be set up by way of compensation or set-off against the claim upon such contributory. 45 V. c. 23, s. 76. * The Master in Ordinary is not a Court of competent jurisdiction for the purpose? of this section : Re Sun Lithographing Co., 22 O. R. 57 (1S92) ; Re Ontiirio Express Co., 25 O. R. 247 (1894). 'A fair transaction by a bank after suspension will be upheld : Ex- change Bank v. Stinson, 8 O. R. 667 (1885). Where a depositor gave his cheque to a debtor of a suFipended bank, which the bank accepted for the debtor's notes maturing, no action lies against the depositor as he has received nothing from the bank : Exchange Bank v. Counsell, 8 0. R. 673 (1885) ; Ibid v. Stinson, supra. k^ > ':. [s. 73 8. 76] AI'I'EALS. 259 111 ad L' ,uy in \i\\ ol" >pt'i'ty, L'ctH or y such »btains • credi- lymcnt nay be liqui- \u\(\ if le coni- at any M'vn s ) :\, s. 74. ys next ilcv tliiw lonis in ijr prob- bo void, lu> liqni nt inris- » in con- valnc retnrn any has circnni- or at ows or bo un- ition of nablin^ tion or not bp nst the '6. risdiction 2 O. R. 57 ^leld : Ex- it gave his led for the ei3 he hufl 8 O.K. AIM'KALS. "74. Any jxTson dissalisiicd willi an order or deci- Hion of the court <)r a siii^U' jud};*' in any prdcct'diii}; under this Act may, by loavc of a judjic of tlic court, ap- peal therefrom, if the (piestion to l)e raised on tlie appeal involves future ri}j;hts, or if the order or decision is liUely to affect other cases of a similar nature in the windiii}; up proeeedinjjfs, or if tlie amount involved in the appeal exceeds live hundred (hdlars:' 2. Such appeal shall lie, — In Ontario, to the Court of A])peal for Ontario; In Quebec, to the Coui't of (Queen's Bench ; In any of the other Provinces, and in the North- West Territories, to the full court: 3. In the district of Keewatin any i)erson dissatis- fied Avith an order or decision of the court or a single judge, in any proceeding under this Act may, by have of a judge of the Supreme Court of Canada, ajipeal therefrom to the Supreme Court of Canada: 4. All appeals shall be regulated, as far as possible, according to the practice in other cases of the court appealed to: but no such apjx'al shall be entertained unless the appellant has, within fourteen days from the rendering of the order or decision, or within such further time as the court ai)pealed from allows, taken i)roceed- ings therein to perfect his api>eal, nor unless, witliin the said time, he has made ca deposit or given sntlicient security, according to the practice of the court that he will duly prosecute the said ap])(\'il and pay such dam- ages and costs as mav be awarded to the respondent. 45 V. c. 23, s. 78, part,' and s. 79 ; 39 V. c. 2."), s. 10. 5. If the party appellant does not proceed with his appeal, according to the law or the rules of practice, as the case may be, the court appealed to, on the appli- cation of the respondent, may dismiss the appeal, with or without costs. 45 V. c. 23, s. 80. T«. An appeal shall lie to the Supreme Court of Canada, by leave of a judge of the said Supreme Court, ' An appeal lies from the decision of a Judge directing the winding up under this Act of a company which was being wonnd up under the Ontario Act : Re Union Fire Ins. Co., 13 Ont. A. R. 268 (1886). 200 THE WINDING Ul' ACT. [h.78 from the jiulmiuMit of the Coiu'l of ApiK'iil for Ontario, the (Vmrt of t^in'cn's ISciuli in CiiulM'c, or the full fonri in any of llic liy such order is ordered to pay any money or ('i)stH, charges or ex- I>enses. oS-H!) V. c. IS, s. 1.' 7!>. l)<'l)ts due to any person against whom kiicIi ordei" for tlu' payment of money, costs oi" expenses lias been obtained, may l)e attached and f^aniisheed in the same manner as debts due t(> a jud;nnent del>toi' may be attached and ^arnisheed by a judfjment creditor in any Province wliere the attachment and garnishment of debts is allowed by law. 4(> V. <•. 2:?, s. 2. HO. In any action, suit, pi'oceedin}? or contestation under tliis Act, the court may order the issue of a writ of snbp(ena ad testificandum or of subi)nMia (Uices tecum, commandinff the attendance, as a witness, of any person who is witliin r'anada. 4.") V. o. 23, s. SI. ^il. The court may, after it lias made a windiner»on named by it, any officer of tlie comi>any or person Icnown or sus- pected to have in his possession any of the estate ov effects of the company, or supi>os<'d to be indel)ted to tlie company, or any ]»erson whom the court deems cap able of ^nvinfr information concerninjj tlie trade, deal- injjs, estate or eflfects of the company: and the court may require any such otticer oi* ]>ers()n to produc" anv book, pajX'r, deed, writin}? or other document in his cus- tody or pow(u' relatinpf to the company: 2. If any ])erson so summoned, after beiiij; tend<^red a reasonable sum for his expenses, refuses, without a lawful excuse, to attend at the time appointed, the court may cause such person to be ai)itrehended and broujjht up for examination; but in cases in which any ]»!'rs()n claims any lien on papers, deeds, writinjjs or documents produced by him, sucli production shall be without pre- judice to such lien, and the court shall have jurisdic- tion in the windinjr "p. to determine all questions relat- ing to such lien. 4io V. c. 23, s. 82. H*2. The court or the person so named may examine upon oath, either by word of mouth or upon written TT ' - 55" '. ?vi |;v ] 262 THE WINDING UP ACT. [8. 85 interrogatories, any person appearing or brought up in manner aforesaid, concerning tlie att'airs, dealings, estate or effects of the company, and may reduce to writing tiie answers of any such person, and require him to sub- scribe the same; and if such person, witliout lawful excuse, refuses to answer the questions put to him, he shall be liable to be punished as for contempt of court. 45 V. c. 23, s. 83. Hit. When, in the course of the winding-up of the business of a company under this Act, it appears that any i>ast or present director, manager, liquidator, re- ceiver, employee <»r olficer of such company has misap- plied or retained in his own hands, or become liable or accountable for any moneys of the company, or been guilty of any misfeasance or breach of trust in relation to the company, the court ma}', on the application of any liquidator, or of any creditor or contributory of the company, notwithstanding that the offence is one for whicli the offender is criminally liable, examine into the conduct of su(^h director, manager, liquidator, receiver, officer or employee, and compel him to repay any moneya so misapplied or retained, or for which he has become liable or accountable, together with interest, at &uch rate as the court thinks just, or to contribute such sums of money to the assists of the company, by way of com- pensation in respect of such misai)i)lication, retention, misfeasance or breach of trust, as the court thinks fit. 45 V. c. 23, s. 84; 47 Y. c. 39, s. 6. H4. The courts of the various T'rovinces, and the judges of the said courts respectively, shall be auxil- iary to one another for the purposes of this Act; and the winding uj) of the business of the company or any matter or proceeding relating thereto may be transferred from one court to another with the concurrence, or by the order or orders, of the two courts, or by an order of the Supreme Court of Canada. 45 V. c, 23, s. 8(5. t Hfi. Allien any order made by one court is required to be enforced by another court, an office copy of the order so made, certified by the clerk or other proper officer of the court which made the same, and under the seal of such court, shall be produced to the proper officer of the court required to enforce the same, and the production of such copy shall be sufficient evidence of such order having been made; andl thereupon such Is j;: . 901 PROCEDURE. 263 last mentioned court shall take such steps in the matter as are requisite for enforcing such order, in the same manner as if it was the order of the court (mlorciug the same. 45 V. c. 23, s. 87. .**(». The rules of procedure, for the time being, as to amendments of pleadings and proceedings in the court, shall apply, as far as practicable to all pleadings jMid ]>i'((. All courts, judges, justices, commissioners and persons acting judicially sliall take judicial notice of the seal, or stamp or signature, as the case may be, of any such court, judge, notary public, commissioner, jus- tice, chief municipal officer, consul, vice-consul, li(|ui- dator or other person attached, appended or subscribed to any such affidavit, affirmation or declaration, or to anv other document to be used for the pur[)os('s of this Act. 45 V. c. 23, s. 90. ^"0 Any powers by this Act conferred on the court are in addition to, and not in restriction of any other powers subsisting either at law or in equity, of institut- ing proceedings against any contributory, or the estate ■^1 ^m 204 THE WINDING UP ACT. [8. 94 of any contributory, or against any debtor of the com- pany, for the recovery of any call or other sums due from sucli contributory or debtor, or his estate; and such proceedings may be instituted accordingly. 45 V. c. 23, s. 92. S>1. All costs, charges and expenses properly in- curred In the winding up of a company, including the remuneration of the liquidator, shall be payable out of the assets of the company, in priority to all other claims. 45 V. c. 23, s. 93. *-i i. In Ontario, the judges of the High Court of Justice; in Quebec, the judges of the Court of Queen's Bench; and in the other Provinces the judges of the court, or a majority of the judges in each case, of whom the chief justice shall be one, from time to tim." may make and frame and settle the forms, rules and regulations to be followed and observed in proceeding;< under this Act, and may make rules as to the costs, fees and charges which shall or may be had, taken or paid in all such cases by or to attorneys, solicitors or counsel, and by or to officers of courts, whether for the officers or for the Crown, and by or to sheriffs, or other persons, or for anv service performed or work done under this Act. 45 V. c. 23, s. 97. ^tti. Until such forms, rules and regulations are made, the various forms andi procedures, including the tariff of costs, fees and charges in cases under this Act, unless otherwise specially ])rovided, shall, as ne.arly as may be, be the same as those of the court in other cases. 45 V. c. 23, s. 98. UNCLAIMED DIVIDENDS. Of. All dividends deposited in a bank and remain- ing unclaimed at the time of the final winding u]) of the business of the company, shall be left for three yi ars in the bank where they are de])osited, subject t ) the claiTii of tlie ]»(M"son entitled thereto, — and if still un- claimed, shall then be paid over by sucli b!ink. with in- terest accrued thereon, to the Minister of Finance and Receiver Ceneral, — and, if afterwards duly claimed, shall be paid over to the persons entitled thereto. 45 V. c. 23, s. 91. IM^ m) 99] OFFENCES. 26i OFFENCES. fIJS. Every person who, with intent to defraud or deceive any person, destroys, mutilates, alters or falsi ties any book, paper, writing or security, or makes or is privy to the making of any false or fraudulent entry in any register, book of account or other document belong- ing to the company, the business of which is being wound up under this Act, is guilty of a misdemeanor and liable to imprisonment in the penitentiary for any term not less than two years, or to imprisonment in any gaol or place of confinement for an^' term less than two years, with or without hard labor.^ 43 V. c. 23, s. 85. 1M^. When a winding-up order is made, if it appears in the course of such winding-up that any past or pre- sent director or manager, officer or member of the com- pany is guilty of any offence in relation to the company for which he is criminally liable the court may, on the application of any person interested in such winding-up, or of its own motion, direct the liquidator to institute and conduct a prosecution or prosecutions for snch of- fence, and may order the costs and expenses to be paid out oif the assets of the company. 45 V. c. 23, s. 95. PROVISION'S APPLICABLE TD l?A\KS. ^*T The provisions of sections ninety-eight to one hundred and four, both inclusive, apply to banks only, not including savings banks. 45 V. c. 23, sub-title. !».H In the case of a bank, the application for a winding-up order shall be made by a creditor for a sum of not less than one thousand doiliirs, and the courJ sliall, before making the order, direct a m<'eting of the shareholders of the bank and a meetincc of the creditors of the bank to be summoned, held and conducted as the court directs, for the purpos(» of ascertaining thiii- re- spective wishes as to the appointment of liquidators. 47 V. c. 30, s. 7, part. 1M>. The court may appoint a person to act as chair- man of the meeting of shareholders, and in default of ' An officer or employee of the onmpany ciiilty of snoli an offence is liable to seven years' imprisonment : Criminal Code, 1892, sec. 366. m fW If ■■\ if ii • :l ^■ 5> } 11 f .! II'. 1* t 266 THE WINDING UP ACT. [S. 101 such appointment, the president of the bank or otlier person who usually presides at a meeting of share- holders, shall preside; the court may also appoint a person to act as chairman of the meeting of creditors, and in default of such appointment, the creditors shall appoint a chairman. 47 V. c. 39, s. 7, part. Km*. In taking a vote at such meeting of share- holders, regard shall be had to the number of votes con- ferred by law or by the regulations of the bank on each shareholder present or represented at such meeting; and in the case of creditors, regard shall be had to the amount of the debt due to each creditor. 47 V. c. 39, s. 7, part. Sol. The chairman of each meeting shall report the result thereof to the court, and if a winding-up order is made, the court shall appoint one or more liquidators, not exceeding three liquidators, to be selected in its dis- cretion, after such hearing of the parties as it deems expedient, from among the ])ersons nominated by the majorities and minorities of the shareholders and credi- tors at such meetings respectively.^ 47 V. c. 39, s. 7, part; 52 V, c. 32, s. 17. ' It is desirable tlisit disinterestecl persons shoulcl be appointed. Where the double litibility of a bank is likely to be called up, the nominee of the creditors is naturally to be preferred to that of the share- holders : Re Central Bank, 1.5 O. ' R. 300 (18rt7). The English ciissos under the Winding up Act lay down rules which it is desirable to follow. Other things being equal, the Court will adopt the recommendation of those most interested in the liquidation. Where a company was being wound up by the sheriff of the county under the Ontario Act, and the assets, books, etc., were tin i i, the Court appointed him liquidator on the Domination of the body o!' creditors over an accountant outside tiie county proposed by the petitioning creditor : Re Alpha Oil Co., 12 Pr. R. 298 (iShl). The judge ajjpointed the nominees of the creditors as liquidators of the insolvent bank, the creditors objecting to the nominees of the shareholders on the ground that they were shareholders, and, as such, their interests were opposed to the purpose of the proceeding. On appeal the Court was equally divided as to whether the order should he sustained or set aside : Re Bank of Liverpool, 22 N. S. 97 (1889). There is nothing in the Act requiring both creditors and shareholders to be represented on the board of liquidators : Forsyth v. Bank of Nova Scotia : Re Bank oi Liverpool, 18 S. C. Can. 707 (1890). The Court is confined to a selection betweeii the persons nominated at these meetings; but is not bound to accept the choice of the majority ; it must exercise its own disci-etion. If the creditors and shareholders differ and the bank be solvent, the nominees of the latter will be preferred, other things being equal. If the bank bo insolvent, or its position doubtful, the wishes of the creditors will have particular regard. It is important that the chief liquidator should have experience in banking. It isundesiriiblo to appoint a debtor of the bank, even if it holds securities, if these be at all doubtful : Re Commercial Bank of Manitoba, 9 Man. 342 (1893). s. 10(5] PROVISIONS APPLICABLE TO BANKS. 267 loa. If no one has been so nominated, the liquida- tor or liquidators shall be chosen by the court. 52 V. c. 32, s. 18 lOJi. The li(inidators shall ascertain, as nearly as possible, the amount of notes of the bank intended for circulation and actually outstanding, and shall reserve, until the expiration of at least two years after the date of the winding up order, or until the last dividend, if that is not made until after the expiration of tlui said time, dividends on such part of the said amount in respect of which claims are not filed; and if claims are not filed and dividends applied for in respect of any part of the said amount befei-e tlic ]>eriod liei'dn limited, the divi- dends so resen'ed shall form the last or part of the last dividend. 45 V. c. 23, s. 104. MM. Publication in the "Canada Gazette" and in the ollRcial gazette of each Province of Canada, and in two newspapers issued at or nearest the place where the head office of a bank is situate, of notice of any pri> eeeding of which, under this Act, creditors should be notified, shall be sufficient notice to holders of bank notes in circulation; and if the head ofTiici' is situate in the Province of Quebec, one of the newsi)ap(Ts in wliich publication is to be made shall be a newspaper published in English and the other a newspaper published in French. 45 V. c. 23, s. 105. PROVISIONS APPLICABLK TO LIFE INSURAN(;E COMl'ANIES. 105. The provisions of sections one hundred and six to one hundred and fourteen, both inclusive, apply only to life insurance companies, and to insurancc^ companies doing life and other insurance, in so far as ndalcs to the life insurance business of such companies, 45 V. c. 23, sub-title. KMi. Except in the cases provided for in the thirty- second and thirty-third sections of " The Insurance Act," a company shall be liable to be dealt with in the manner herein prescribed for the case of insolvency, win never its license has expired or been withdrawn under the said Act, and has not been renewed within thirty days after such expiry or withdrawal. 40 V. c. 42, s. 15, part. WW 26S THE WINDING UP ACT. [S. 108 .V I 14>7. In case of the insolvency of any company, the deposits of such company held by the Minister of Fiiunui' and UcceivcM' (Icnenil and the assets held by the trustees under " The Insurance Act," shall be applied pro rata towards the discharge of all claims of policy holders in Canada duly authenticated against such company. 40 y. c. 42, s. 15, part ; 45 V. c. 23, s. 107. »0?*. Upon the insolvency of any such company and the making of a winding-up order under this Act, the policy holders in Canada shall be entitled to claim for the full net values of their several policies at the time of the winding up order (including bonus additions and , ..,/!*^ ifcrned), less any amount |)reviously advanced by tht^ om^pany on the security of the policy, and such clai:.-' ,,r;l rank with judgments obtained and claims maiuret; <>ii "Canadian policies, in the distribution of the i»f etr.: 2. ''lie Vi« ' UoT may require the superintendent of insurance i,> \a' n; procure to be valued under his siupervision, the policies before mentioned, basing such valuation on the mortality table of the Institute of Actuaries of Creat l^ritain and on a rate of interest at four and one-half j)er centum per annum, — ^excej)t in the case of bonus additions or other profits ac<'rued or declared before the twenty-eighth day of April, one thousand eight hundred and seventy-seven and then valued on the basis of a rate of interest other than that above mentioned, which, in any such valuation, shall con- tinue to be A'alued on such other basis; and the expenses of such valuation, at a rate of three cents for each policy or bonus addition so valued, shall be retained by the Minister of Finance and Receiver General from the securities held by him: 3. Upon the completion by the liquidator of the statement to be prepared by him of all judgments against the company upon policies in Canada, and of all claims upon policies matured or outstanding as aforr*- said, the court shall cause the securities held by the Minister of Finance and TJi'ceiver G.'noral for such com- pany, and the assets held by the truste'^s prov^'ded in *' Tlie Insurance Act," or any part of them, to b^ sold or realized in such manner and after such notice and formalities as the court appoints: 4. The proceeds thereot, atter paying expensf^M in- curred, shall, except in so far as they h.ive been applied. 8. 109] LIFE INSURANCE COMPANIES. 269 under this Act, to effect a reinsurance of the policies, be distributed pro rata amongst the claimants according to 8uch statement ; and if the said proceeds are not sufficient to cover in full all claims recorded in the state- ment, such policy holders shall not be barred from any recourse they have, either in law or equity, against the com])any issuing the policy or against any share- holder or director thereof, other than for a share in the distribution of the proceeds above mentioned, or in any distribution of the general property and assets of the company, other than the deposit and the assets vested in trustees: 5. Provided always, that in all cases of distribu- tion of the proceeds of the deposit in the hands of thi' Minister of Finance and Receiver General, and the assets vested in the trustees as provided for in this secticn, if it appears from the charter, Act of incorporation or articles of association of the company, and from the conditions of the policy, that any Canadian policy holder claiming a share in such distribution has been insuri d on the " mutual " principle — then such policy holder shall be entitled only to claim a share in the distribu- tion as aforesaid, at the same rate as all other holders of policies under the same conditions are entitled to claim in the distribution of the total assets of the com- pany, whether they are holders of Canadian policies or otherwise; but this proviso shall only apply, in respi'ct to those companies chartered, incorporated or associ- ated together in a country (other than Canada) under the laws of which the holder of a Canadian policy issued by any such company is entitled to claim a share in tlu' distribution in such country at the same rate as all other holders of ])olicies, under the same conditions, are entitled to claim in the distribution of the total assets of the company, and to enjoy all the rights and privi- leges as policy holders which are enjoyed by the policy holders who are natives of or naturalized in such country. 40 V. c. 42, s. 16, part; 45 V. c. 28, s. 108. part. lOfl. Whenever the company or the liquidator or the holder of the policy or contract of insurance exer- cises any right, which it or he has, to cancel the policy or contract, the holder shall be entitled to claim as a creditor for the sum which, under the terms of the policv or contract, is due to him upon such cancellation. 4o V. c. 23, s. 108. part. II 270 THE WINDING UP ACT. [S. Ill IIO- Tlic li(iui(latoi" shall, without the filing of any claim, notice or evidence, or the taking of any action by any i)erson, make a statement of all the persons ap- l)earing, by the books and records of the officers of the company', to be creditors or claimants under the two sections next preceding, and of the amounts* due to each such person thereunder, and every such person shall be collocated and ranked as and shall be entitled to .the rights of a creditor or claimant for sucli amount, with- out tiling any claim, notice or evidence, or taking any action; but any such collocation mav be contested bv any ])erson in I crested, and any person who is not col- located or who is dissatisfied with the amount for which he is collocated, may file his own claim: 2. A copy of such statement, certified by the liqui- dator, shall forthwith, after the making of such stiitc- mc nt, be filed in the office of the superintendent of insur- ance at Ottawa; and notice of such filing shall forthwith be given by the liquidator by notice in the Canada Ga- zette }ind in llie otlicial (lazette of each Province in Can- ada, and in two newspapers issued at or nearest the place where the head office in Canada of the company is siiu- ate; and the liquidjitor siiall also, forthwith, send by ip.nil, prepaid, a. notice of such filing to eacli creditor Dnmed iii tlic statement, addressed to the addresses in Canada of such creditors, as far as the same are known, and in the case of foreign creditors, addressed to the jiddresses of their representatives or agents in Can- ada, as far as the same are known. 45 V. c. 23, s. 109, 'receding section, shall be entitled to claim as a credi- tor for the full net amount of such claim — less any amount previously advanced by the company on the security of the policy or contract; and the said state- ment and the dividend sheet shall, if necessary, be amended accordingly: 2. No claim which accrues after the expiration of the thirty days above mentioned, shall rank upon the estate unless and until there is sufficient to pay all creditors in full. 45 V. c. 23, a 110. ■>"i 8. 115] LIFE INSURANCE COMPANIES. '271 I I!t2. If, before the expiration of the thirty days here- inbefore mentioned, the holder of a policy or contract of life insurance, on which a claim has not accrued, signi- fies, in writing, to the liquidator, his willingness to accept an insurance in some other company for ilv, amount which can be secured by the dividend on his claim to which such holder is or may become entitled, the liquidator may, with the sanction of the court, etfect for such holder an insurance to the amount aforesaid in another com])any or companies, approved of by the superintendent of insurance, and may api)ly to that pur- ]»ose the dividend on his claim to wliich such hohler is or may become entitled: but such insurance shall be effected only as part of a general scheme for the as- sumption, by some other com])any or compnnies, of th » whole or part of the outstanding risks and liabilities of the insolvent company. 45 V. c. 23, s. 111. Il«$. If the company is licensed under "The Itisni'- ance Act," the liquidator shall report to the sui)erin- tendent of insurance once in every six months, or oftener as the superintendent requires, on the condition of the affairs of the company, with such further particulars as the sunerintendent requires. 45 V. c. 28, s. 112. 11-1. Publication in the Canada Gazette and in the official gazette of each Province of Canada, and in two newspapers issued at or nearest the place where the head office in Canada of an insurance company is sitnati', of notice of any proceeding of which, und'M' this Act, creditors should be notified, shall be sufficient notice to holders of policies or contracts of insurance in respect of which no notice of claim has been receiv<^d. 45 V. c. 23, s. 100. PROVISIONS APPLICABLE TO INSURANCE COMPANIES OTHER THAN LIFE INSURANCE COMPANIES. 1 l»l. The following provisions of this Act, apply only to insurance companies other than life insurance com- panies, and to insurance companies doing life and other insurance, in so far as relates to the insurance business of such companies which is not life insurance business. 45 V. c 23, sub-title. i , i ■) ii72 THE WINDING UP ACT. [8. U^ " i 110. Any company shall be deemed insolvent upon its failure to pay any undisputed claim arising, or loss insured against, in Canada, upon any policy held in Canada, for the space of sixty days after becoming due, or, if disputed after final judgment and tender of a legal valid discharge, — and (in either case) after notice thereof to the Minister of Finance and Receiver General: 2. Provided, that in any case when a claim for loss is by the terms of the policy payable on proof of such loss, without any stii)ulated delay, the notice to the Min- ister of Finance and Ueceiver (reneral under this sec tion shall not be given until after the lapse of sixty days from the time when the claim becomes due. 38 V. c. 20, s. 16, part 117. Any deposit held by the Minister of Finance and Receiver (Jeneral for policy holders, shall be ap- plied pro rata towards the ]>ayment of all claims duly autlK nticated against such com]»any, ui><)n or in respect of policies issued to policv holders in Oanadju 38 V. c. 20, s. U\, part; 45 V. c 23, s. 114, part. 1 IH. Holders of policies or contracts of insurance on which no claim has accrued at the time the winding-up order is madt^ shall be entitled to claim as creditors, for a i)art of the ])remium paid, i)ropor(ionate^ to the ]>eriod of their ])olicies or contracts res])ectively unex- pired at the date of the winding-up order; and such return or unearned premium shall rank with judgments ebtnined and claims accrued, in the distribution of the jissets: 2. Upon the completion of tb(^ statement to be pre- ]>ared by the liquidator under this Act, the court shall cnns<' the securities held by the Minister of Finance and Receiver (reneral for such company, or any part of them, to be sold in such manner and' after sudi notic*^ and formalities as the court appoints; and the proceeds thereof, after paying expenses incurred, shall (except in so far as they have been applied under this Act to eflFect a re-insurance of the policies) be distributed pro rata amongst the claimants according to such statement: and if the proceeds are not sufficient to cover in full all claims recorded in the statement, suchi policy holders shall not be barred from any recourse they have either at law or in equity against the company issuing the i 1 '' Il 8. llbi upon r losH _4d in g due, hereof or los-i it' such le Miu- lis si'C- f sixiy ue. 38 bi' ap- iis duly res])ect 3S V. Muco on fidinjx-uj) •editor-, to th*' V unex- d such jTTnonts of the hv pn>- [rt shall Ince and >f thenu lic'^ and jroceedi' (except Act to ked pro (tement : full all [holders Ip either ling the 8. 120] OTHER INSURANCE COMPANIES. 273 policy, other than that for a share in the distribution of the proceeds of the securities held for such eompauy by the Minister of Finaueo ajud lleceiver General: 3. Whenever the company or the liquidator, or the holder of the policy or contract of iusunince exercises any right which it or he has to cancel the policy or con- . tract, the holder shall be entitled to claim as a creditor for the sum which, under the terms of the policy or con- tract, is due to him upon such cancellation. 38 \'. c. 20, s. 17, part; 45 V. e. 23, s. 115, part. lltl>. The liquidator shall, without the filing of any claim, notice or evidence, or the taking of any action by any person, make a statement of all the persons appear- ing, by the books and records of Uie officers of the com- piuiy, to the creditors or claimants under the next pre- ceding section, and of the amounts due to each such person thereunder; and every such person shall be col- located and ranked as and shall be entitled to the rights of a creditor or claimant for such amount, without filing any claim, notice or evidence, or taking any action; but jiny such collocation may be contested by any person interested and any person not collocated or dissatis- fied with the amount for wliich he is c(dlocated, may file his own claim: 2. A copy of such statement, certified by the liqui- dator shall, forthwith after the making of such state- ment, be filed in the office of the sup<'riutendent of in- surance, at Ottawa, and notice of such filing shall be forthwith given by the liquidator by notice in the Can- ada Gazette, and in the oificial Gazette of each Province of Canada, and in two newspapers issued at or n(\areat the place where the head office in Canada of the com- pany is situate; and the liquidator shall also forthwith send by mail, pre-paid, a notice of such filing to each creditor named in the statement, addressed to the ad- dresses in Canada of such creditors, as far as the same are known — and in the case of foreign creditors, adi- dressed t» the addresses of their representatives or agents in Canada, as far as the same are known. 45 V. c. 23, s. 116. I20. The holder of a policy or contract of insurance, other than life insurance, upon which a claim accrues after the date of the winding-up order, and before the m'l.b.a. — 18 »f '. 274 THE WINDINO UP ACT. [h. 123 expiration of thirty days after the fllinR, in the office of tlu? superintendent of insurance, of tlie statement re- ferred to in the next preceding section, sliall be entitled to claim, as a creditor, for the full net amount of Kuch claim; and the said statement and the dividend sheet shall, if necessary, be amended accordingly: 2. No claim which accrues after the expiration ol the thirty days hereinbefore mentioned, shall rank upon th(> estate, unless and until there is sufficient to pay all creditors in full. 45 V. c. 23, s. 117. 121. Before the expiration of the thirty days above mentioned, the liquidator may, with the sanction of the court, arrange with any incorporated insurance com- pany, approved of for such purpose by the superintend- ent of insurance, for the re-insurance by such company of the outstanding risks of the insolvent company, and for the assumption by such company of the whole or any part of the other liabilities of the insolvent com- pany; and in case of such arrangement tlxe liquidator may pay or transfer to such company, such of the assets Af the insolvent company as may be agreed on as the consideration for such re-insurance or assumption, an in such case the arrangement for re-insurance shall be in lieu of the claim for unearned premium: Provided always, that any remaining assets of the insolvent com- pany shall be retained by the liquidator as a security to the creditors for the payment of their claims, and shall, if necessary, be so applied, and shall not be returned to the company, except on the order of the court after the satisfaction of such claims. 45 V. c. 23, s. 118. 122. If the company is licensed under "The Insur- ance Act," the liquidator shall report to the superin- tendent of insurance once in every six months, or ofteuer, as the superintendent requires, on the condition of the affairs of the company, with such further particulars as the superintendent requires. 45 V. c. 23, s. 119. 12». Publication in the Canada Gazette, and in the official Gazette of eacli Province of Canada, and in two newspapers issued at or nearest the place where the head office of an insurance company is situate, of notice of any proceeding of which, under this Act. creditors are to bel notified, shall be sufficient notice to holders of policies or contracts of insurance, in respect of which no notice of claim has been received. 45 V. c. 23, s. 113. «. 3] THE AMEN'DINCi A r>:> VICTORIA, CIlAPTEIl :; An Act to amend "Tho Wliidineriip Act," chapter one hundred aud tweuty-uiiie of the KeviHed Statutes. [Assented to IGth April, 1881),] HER Majesty, by and with tlie advice and consent of the Senate and House of Commons of Canada, enacts as follows : — SirOHT TFTLK. 1. This Act may be cited as "The Winding-up Amendment Act, 1889." INTEUPUETATION. 2. The expressions mentioned in section two of •"The Winding-up Act" whenever they occur in this Act, have the meaning assigned to hem respectively by the said section two; and tliia Act shall be read witli and' construed as forming part of "The Winding-up Act." ArPLICATtOX OF ACT. 3. This Act applies to all corporations incorpo- rated by or under the authoiity of an Act of the Parlia- ment of Canada or by or under the authority of any Act of the late Province of Canada, or of the provinces of Nova Scotia, New Brunswick, Prince Edward Island or British Columbia, and whose incorporation and the affairs whereof are subject to the legislative authority of the Parliament of Canada:^ 2. This Act does not apply to railway or telegraph companies or to building societies which have not a capital stock, ' There is no clashing hptweon this section unci section 3 of the Windinfj Up Act, R. S. C. c. 1'2'.). This provides for tlie voluntary wind- ing up of these companies at the instance of shareholders; the other for the compulsory liquidation of companies on the application of creditors: Re Ontario Bolt & Forge Co., 23 O. R. 407 (1894). m h. vv li 1 ; 276 THE AMENDING ACT OF 1889. [s. 8 WINDING UP. 4. The court may make a winding-up order: — ((/) Wliere the period, if any, fixed for the duration of the company by the Act, charter or instrument of in- corporation has expired ; or where the event, if any, has occurred, upon the occurrence of which it is provided by the Act or charter or instrument of incorporation that tlie company is toi be dissolved ; (h) Where? the company at a s}>ecial meeting of fhareliolders called for the purpose has passed a resolu- tion requiring the company to be wound up; (e) When the conipany is insolvent within the mean- ing of " The Winding up Act " ; (d) When the capital stock of the company is im- paired to the extent of twenty- live per cent, thereof, and when it is shown to the satisfaction of the court that the lost capital will not likely be restored within one year; (e) When the court Is of opinion that it is just and equitable that the company should be wound up. a. The application for such winding up order may, in the cases mentioned in paragraphs (a), (h) and (c) of the next preceding section, be made by the company or by a shareholder, and in the other cases mentioned in the said section, the application may be made by a shareholder holding shares in the capital stock of the company to the amount of at least five hundred dol- lars « Such application shall be by petition to the court in the province where the head office of the com- pany is situated, or where the chief place of business in Canada is situated, if the head office is not in Canada. 7. The })owers of the court in respect to such ap- plication and the subsequent proceedings thereon shall be the same as nearly as may be as if the application were made by a creditor under the provisions of " The Winding-up Act." W. If the company opposes the application on thi» ground that it has not become insolvent, or that its sus- pension or default was only temporary, and "vas not I' J . Ik .; [s. 8 a. 13] THE AMENDING ACT OF 1889. 277 iuration It of in- \ny, has )rovide(i poratiou eting of a resolu- te mean- ly is ira- reof, and ; that the 3ne year; just and up. der may, ind (c) of npany or ioned in de by a : of the red dol- »n to the the com- siness in anada, such ap- ?on shall plication of " The on thi> It its sus- -vas not ■caused by any deficiency in its assets, or that the capital stock is not impaired to the extent aforesaid, or that such impairment does not endanger the capacity of the company to pay its debts in full, or that there is a pi-o^ bability that the lost capital will be restored within a year or within a reasonable time thereafter, and shows reasonable cause for believing that such opposition is well founded, the court, in its discretion, may, from time to time, adjourn proceedings uiwn such application, for a time not exceeding six months from the date of the application, and may order an accountant or other person to inquire into the affairs of the company and to report thereon within a period not exceeding thirty days from the date of such order. O. Sections eleven and twelve of "The Winding up Act " extend to an order made under the next prv*- ceding section of this Act. lO. The following sections of this Act apply in every case in which a winding-up order is made, whether under " The Winding up Act " or this Act. 1 8 . The court may, by any order made after the winding-up order and the appointment of a liquidator, dispense with notice to creditors, contributories, share- holders or members of the company as re«inired by the said Act, where in its discretion such notice may pro- perly be dispensed with. ItJ. The court may provide by any order subsequent to the winding-up order, that the liciuidator may exercise any of the powers conferred upon hiin by the said Act or this Act, without the sanction or intervention of the court; and where a provisional li(iuidator is ajtpoinfed it may limit and restrict his powers by the order appoint- ing him. lit. In directing meetings of creditors, contribu- tories, shareholders or members of the company to be held as pro^^ded in the said Act, the court may eitlier appoint a person lo act as chairman of such meeting, or direct that a chairman be appointed by the persons entitled to be present at such meeting; and in case the appointed chairman fails to attend the said meeting, the persons present at the meeting may elect a chair- man qualified, who shall perform the duties prescribed by the said Act. m I 1 111 1 1 m m 1 m ■I,' - '■ , '';"' 1 : ^i r: ii |i ifr-' 278 THE AMENDING ACT OF 1889. [s. 20 14. The liquidator may give notice in writing ta creditors wlio have sent in their claims to him, or of whose claims he has notice, and whose claims he considers should not be allowed without proof, requiring such creditors to attend before the court on a day to be named in such notice, and prove their claims to the satisfaction of the court; and the court may allow or disallow the said claims ; and in case any creditor does not attend in pursuance of such notice his claim shall be disallowed, unless the court sees fit to grant further time for the proof thereof. 55-56 V. c. 28, s. 1. 15. Section sixty-seven of the said Act is hereby amended by inserting after the word " Any " in the first line of the said section the word " liquidator." 16. Section seventy-three of the said Act shall apply- to all persons indebted or liable in any way to the com- pany, in the same manner and to the same extent as it now applies to contributories. '7. Section one hundred and one of the said Act is hereby amended by inserting before the words "three liquidators " in the third line of the said section, the words " one or more liquidators, not exceeding." I S. Section one hundred and two of the said Act is- hereby repealed and the following is substituted there- for: •* 102. If no one has been so nominated, the liqui- dator or liquidators shall be chosen by the court." lO. The court shall have the same power and juris- diction to cause or allow the service of process or pro- ceedings under the said Act and' this Act, to be made on persons out of the jurisdiction of the said court in the same manner, and with the like effect, as in ordinary actions or suits within the ordinary jurisdiction of the court, but this provision shall not apply to service made before the passing of this Act. 20. Subsection two of section seventy-seven of the said Act is hereby repealed, and the following substi- tuted therefor: — "2. After a winding-up order is made, the court may, from time to time, by order of reference, refer and delegate, according to the practice and procedure of [8.20 21] THE AMENDING ACT OF 1889. 279 such court, to any officer of the court ar^^T ^f +»,^ t^l^irvhn "^ *"^ " ^ »-/ let zt:i ing tne same, as to such court may seem meet anhipnf ai . The proceedings under a windinKup order shall ^anSn,°r°/'r"l5' ''^ """y "-^ '" «"! same m *ne" Sic?r„n^"th?c«"nV'*""' "■' P™^'^"'^ "'*"'■' "'^ J""' the I 280 THE AMENDING ACT OF 1892. 55-56 VICTORIA, CHAPTER 28. An Act further to amend " The Winding-up Act." [Assented to 9th July, 1892.] HER Majesty, by and with the advice and consent of the Senate and House of Oommons of Canada, enacts as follows: — 1 Section fourteen of The Winding-up Amend- ment Act, 1889, is hereby amended by inserting in the second line thereof after the word " him " the words " or of whose claim he has notice," 2. AVhenever a company is being wound up and th(? realization and distribution of its assets has proceeded so far that in the opinion of the court it becomes ex- pedient that the liquidator should be discharged, and the balance remaining in his hands of the moneys and assets of the company' can be better realized and dis- tributed by the court, the court may make an order dis- charging the liquidator and for payment, delivery and transfer into court, or to such officer or person as the court may direct, of such moneys and assets, and the same shall be realized and distributed, by or under the direction of the court, among the persons entitled thereto, in the same way, as nearly as may be, as if the distributior were being made by the liquidator; the court may likewise make an order directing how the books, accounts and documents of the company and of the liquidator may be dispelled of, and may order that they be deposited in court or otherwise dealt with as may be thought fit. ». This Act may be cited as The Winding-up Amendment Act, 1892. ■-i c, THE AMENDING ACT OF 1896. 281 58-59 VICTORIA, CHAPTER 18. An Act further to amend " The Winding-up Act." [Assented to 22nd July, 1895.] HER Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows: — C Section seventy-eight of The Winding-up Act, being chapter one hundred an twenty-nine of the Re- vised Statutes, is hereby repealed and the following sub- stituted therefor: — " 7H. Evei-y order of the court or judge for the pay- ment of money or costs, chargf s or expenses made under this Act shall be deemed a judgment of the court, and may be enforced against the person or goods and chat- tels, lands and tenements of tlie person ordered to pay, in the manner in which judgments or decrees of any superior court obtained in any suit may bind lands or be enforced in the province where the court making the 8ame is situate. "2. The practice from time to time in force in the superior courts or in any superior court in th(^ province where any such order is made, with respect to the dis- cover^' of assets of judgment debtors shall be applicable to and may be availed of in like manner for the dis- covery of the assets of any person who by such order is ordered to pay any money or costs, charges or expenses." ill If: THE CRIMINAL CODE, M, GJ^ nsr -A. X) ^. 55-56 VICTORIA, CHAPTER 29. m Sections of Special Interest to Bankers. HER Majesty, by and with the advice and consent of the Senate and House of Commons of Canada^ enacts as follows: — Part I. — Preliminary. I. This Act may be cited for all purposes as The Criminal Code, 1892. ti. This Act shall come into force on the first day of July, 1893. S. In this Act the following expressions have the meanings assigned to them in this section unless the context requires otherwise: (c) The expression " banker " includes any director of any incorporated bank or banking company; R. S. C. c. 164, s. 2 ig). {(]) The expression " document of title to goods " includes any bill of lading, India warrant, dock warrant, warehouse-keeper's certificate, -warrant or order for the delivery or transfer of any goods or valuable thing, bought and sold note, or any other document used in the ordinary course of business as proof of the posses- sion or control of goods, authorizing or purporting to authorize, either by endorsement or by delivery, the ■I * V lii ¥■■■ K* 11: luni 284 THE CRIMINAL CODE. [s. 3 po88(?8sor of such document to transfer or receive any goods thereby represented or therein mentioned or referred to; K. S. C. c. 164, s. 2 (a). (bh) The expression " trustee " means a trustee on some express trust created by some deed, will or instru- ment in writing, or by parol, or otherwise, and includes the heir or personal representative of any such trustee, and every other person upon or to whom the duty of such trust has devolved or come, whether by appoint- ment of a court or otherwise, and also an executor and administrator, and an official manager, assignee, liquida- tor or other like officer acting under any Act relating to joint stock companies, bankruptcy or insolvencj', and any person who is, by the law of the Province of Quebec, an " administrateur " or " fldeicommissaire;" and the exjiression '' trust " includes whatever is by that law an "administration" or " fideicommission " ; R. S. C. c. 104, s. 2 (c). (cc) The expression " valuable security " includes any order, excheciuer acquittance or other security entitling or evidencing the title of any person to any share or interest in any i)ublic stock or fund, whether of Canada or of any province thereof, or of the United Kingdom, or of Great Britain or Ireland, or any British colony or possession, or of any foreign state, or in any fund of any body corporate, company or society, whether within Canada or the United Kingdom, or any British colony or possession, or in any foreign state or country, or to any deposit in any savings bank or other bank, and also includes any debenture, deed, bond, bill, note, warrant, order or other security for money or for pay- ment of money, whether of Canada or of any province thereof, or of the United Kingdom or of any British colony or possession, or of any foreign state, and any document of title to lands or goods as hereinbefore defin- ed wheresoever such lands or goods are situate, and any stamp or writing which secures or evidences title to or interest in any chattel personal, or any release, receipt, discharge or other instrument, evidencing payment of money, or the delivery of any chattel personal; and e/ery such valuable security shall, where value is material, be deemed to be of value equal to that of such unsatisfied money, chattel personal, share, interest or deposit, for the securing or payment of which, or delivery or transfer or sale of which, or for the entitling or evi- t ( TFl [s. 3 8. 201] PRELIMINARY. 285 eludes jcui'ity to .any hetlier Jnited British in any hether British untry, bank, note, r pay- vince ritlsh d any defin- id any to or ceipt, nt of and ue is such st or llivery r evi- dencing title to which, such valuable security is appli- cable, or to that of such money or chattel personal, the* payment or delivery of which is evidenced by such valuable security; 53 V. c. 37, s. 20. (a:) The expression " writing "' includes any mode in which, and any nuiterial on which, words or figures whether at length or abridged are written, printt'd or otherwise exi)rcssed, or any map or plan is inscribed. ms. Every one is guilty of an indictable olTence and liable to one year's imprisonment who, without lawful excuse, disobeys any Act of the Parliament of Canada or of any legislature in Caujida by wilfully doing any act which it forbids, or omitting to do any act which it rt'(]uir('s to be done, unh'ss some penalty or other mode of punishment is expressly provided by law. Part XIV. — Nuisances. ii4M. Every one is guilty of an indictable offence and liable to five years' imprisonment, and to a fine of five hundred dollars, who, with the intent to make gain or profit by the rise or fall in price of any stock of any incorporated or unincorporated company or undertaking, either in Canada or elsewhere, or of any goods, wares or merchandise — (a) without the bona fide intention of acquiring any such shares, goods, wares or merchandise, or of selling the same, as the case may be, makes or signs, or author- izes to be made or signed, any contract or agreement, oral or written, purporting to be for the sale or purchase of any such shares of stock, goods, wares or merchan- dise ; or (6) makes or signs, or authorizes to be made or signed, any contract or agreement, oral or written, pur- porting to be for the sale or purchase of any such shares of stook, goods, wares or merchandise in respect of which no delivery of the thing sold or purchased is made or received, and without the bona fide intention to make or receive such delivery. 2. But it is not an offence if the broker of the pur- chaser receives delivery, on his behalf, of the article sold, notwithstanding that such broker retains or pledges the same as security for the advance of the purchase money or any part thereof. •IS!* I If 286 THE CRIMINAL CODE. [h. 305 ;, y If 3. Every office or place of business wherein is car- ried on the business of making or signing, or procuring to b(? made or signed, or negotiating or bargaining for tlie making or signing of such contracts of sale or pur- chase as are prohibited in this section is a common gaminghouse, and every one who as principal or agent occupies, uses, manages or maintains the same is the keeper of a common gaming-house. 51 V. c. 42, ss. 1 and 3. Paut XXIII. — Defamatouy Limel. *2iHl. No one commits an offence by publishing to another person defamatory matter for the purpose of giving information to that person with respect to some subject as to which he has, or is, on reasonable grounds, believed to have, such an interest in knowing the truth as to make the conduct of the person giving the infor- mation reasonable under the circumstances: Provided, that such defamatory matter is relevant to such sub- ject, and that it is either true, or is made without ill- will to the person defamed, and in the belief, on reason- able grounds, that it is true. Part XXIV.— Theft Defined 805. Theft or stealing is the act of fraudulently and without color of right taking, or fraudulently and without color of right converting to the use of any per- son, anything capable of being stolen, with intent — (a) to dej)rive the owner, or any person having any special ])roj)erty or interest therein, temporarily or absolutely of such thing or of such property or inter- est; or (?>) to pledge the same or deposit it as security; or (c) to part with it under a condition as to its return which the person parting with it may be unable to per- form; or ( 1 1 i iH 28d THE CRIMINAL CODE. [a. 319 uecounlinj? for the money or proceeds, or part thereof ISO entered, and in such ease no fraudulent conversion of the amount accounted for shall be deemed to have taken place. !$01>. Every one commits theft who, beinj^' entrusted either solely or jointly with any olher person, with any power of attorney for the sale, mortgage, pledge or other disposition of any pi'operty, real oi* personal, whether cap- able of being stolen or not, fraudulently sells, mortgages, pledges or otherwise disposes of tlie same or any part thereof, or fraudulently converts the proceeds of any sale, nu)rtgag<', pledg<' or other disposition of such pro- perty, or juiy |)art of such proceeds, to sonu* purj)ose other than that for which he was intrusted with such power of attorney. 11. S. C. c. 104, s. 62. J?IO. Every one commits theft who, having re- ceived, either solely or jointly with any other person, any money or valuable security or any i)Ower of attorney for the sale of any j)roperty, real or personal, with a direction that such money, or any part thereof, or the proceeds, or any part of th<» proceeds of such security or such property, shall be ai)plied to any i)urpose or paid to any person specified in such direction, in violation of good faith and contrary to such direction, fraudulently applies to any other ])urpose or pays to any other per- son such money or j)roceeds, or any part thereof. 2. Provided, that where the person receiving such monej', security or power of attorney, and the person from whom he receives it, deal with each other on such terms that all money paid to the former would, in the absence of such direction, be properly treated as an item in a debtor and creditor account between them, this sec- tion shall not apply unless such direction is in writing. Part XXVI. — Punishment of Theft and Of'wnt'k^ Resembling Theft. »lt>. Every one is guilty of an indictable otfence and liable to fourteen years' imprisonment, who — (a) being a cleiic or servant, or being employed for the purpose or in the capacity of a clerk or servant, steals anything belonging to or in the possession of his master or employer; or f ; '', 8. 863] PUNISHMENT OF TIIEKT. '289 \fr such person >n such in the in item lis sec- rritinj]; )ir<'nce led for Irvant, of his (h) bcinjj; n cashier, assistant cashier, manager, officer, cU'rU or servant of any hank, or savings hank, steals any bond, obligation, bill oblipUory or of iredit, or other bill or note, or any security for money, or any money or etTccts of such bank or lodged or deposited witli any such bank; or (c) being eiYii)loyed in the s('rvic<> of ITer Majesty, or of the (Jlovernment of Canada or the (lovernment of any province of (-anada, or of any municipality, steals anvthiuf; in his possession bv virtue of liis emplovment. R.^S. G. c. 104, ss. 51, 52, 5.'?; 54 and 5J). 2tt20. Every one is guilty of an indictable otTence and liable to fourteen years' imprisonment who steals anything by any act or omission amounting to theft under tlu> provisions of sections three hundred and eight, three hundred and nine and tliree hundred and ten. tS53. Every one who destroys, cancels, conceals or obliterates any document of title to goods or lands, or any valuable security, testamentary instrument, or judicial, official or other document, for any fraudulent purpose, is guilty of an indictable offence and liable to the same punishment as if he had stolen such document, security or instrument. R. S. C. c. 164, s. 12. Part XXVII. — Obtaining Property ry False Pretences. 361. Every one is guilty of an indictable olTrmce and liable to three years' imprisonment who, wrong- fully and with wilful falsehood, pretends or al- leges that he inclosed and sent, or caused to be inclosed and sent, in any post letter any money, valuable security or chattel, which in fact he did not inclose and send, or cause to be inclosed and sent therein. R. S. C. c. 164, s. 79. 363. Every one is guilty of an indictable offence and liable to seven years' imprisonment who, being a trus^ "e of any property for the use or benefit, either in who or in part, of some other person, or for any public or ri table purpose, with intent to defraud, and in vi ton of his trust, converts anything of which he is tru ^e to any use not authorized by the trust. UL.B.A. -19 i/^iii 290 THE CUIMINAL CODE. [S. 306 li' { Paut XXVIII.— Fraud. 364. Every one is guilty of au indictable offence and liable to seven years' imprisonment who, being a director, manager, public officer or member of any body corporate or public company, with intent to defraud — (a) destroys, alters, mutilates or falsifies any book, paper, writing or valuable security belonging to the body corporate or public company; or <^) makes, or concur.^ in making, any false entry, or omits or concurs in omitting to enter any material particular, in any book of account or other document. K. S. (J., c. 1G4, s. ()8. 36*>. Every one is guilty of an indictable offence and liable to live years' imprisonment who, being a pro- moter, director, or public officer or manager of any body corporate or public company, either existing or intended to be formed, makes, circulates or publishes, or concurs in making, circulating or publishing, any prospectus, statement or account which he knows to be false in any material particular, with intenc to induce persons (wliether ascertained or not) to become shareholders or partners, or with intent to deceive or defraud the mem- bers, shareholders or creditors, or any of them (whether {isccrlaincd or not), of such body corporate or public company, or with intent to induce any person to intrust or advance any property to such body corporate or public conipiuiy, or to enter into any security for the benefit thereof."^ R. S. C. c. 104, s. 09. SSOO. Every one is guilty of an indictable offence and liable to sev(m years' imprisonment who, being or acting in the capacity of an office"*, clerk or servant, with intent to defraud — Ui) destroys, alters, mutilates or falsifies any book, paper writing, valuable security oi document which belongs to or is in the possession of his employer, or has been I'oceived by him for or on behalf of his em- ployer, or concurs in so doing; or (?>) makes, or concurs in making, any false entry in or omits or alters, or concurs in omitting or altering, any marerial particular from, any such book, paper, writing, valuable security or document. ■"TPS 36& 8. 376] FRAUD. 291 UGH. Every one is guilty of an indictable ofuMice and liable to a fine of eight hundred dollars and to one years' imprisonment who — (a) with intent to defraud his creditors, or any of them, (i) makes, or causes to be made, any gift, convey- ance, assignment, sale, transfer or delivery of his pro- perty; (ii) removes, conceals or disposes of any of his property; or (b) with the intent that any one shall so defraud his creditors, or any one of them, receives any such property. K. S. C. c. 173, 8. 28. 30f>. Every one is guilty of an indictable otl'ence and liable to ten years' imprisonment who, with intent to defraud his creditors or any of them, destroys, alters, mutilates or falsities any of his books, papers, writings or securities, or makes, or is i)rivy to the making of, any false or fraudulent entry in any book of account or other document. K. S. C. c. 173. s. 27. try m any Jiting, STO. Every one is guilty of an indictable offence and liable to three years' imprisonment, who — (a) being the keeper of any warehouse, or a for- warder, miller, nmster of a vessel, wharfinger, keeper of a cove, yard, harbor or other place for storing timber, deals, staves, boards, or lumber, curer or packer of pork, or denier in wool, carrier, factor, agent or other person, or a clerk or other person in his employ, knowingly and wilfully gives to any person a writing fnirporting to be a receipt for, or an acknowledgement of, any goods or ( ther property as having been received into his warehouse, vessel, cove, wharf, or other ])lace, or in any su('h place about which he is employed, or in any other manner received by him, or by tlie person in or about whose business he is employed before the goods or other property named in such receipt, acknowledgiiion' or writing have been actually delivered to or received by him as aforesaid, with intent to mislead, deceive, injure or defraud any person, although such person is then un- known to him; or (h) knowingly and wilfully accepts, transmits op uses anv such false receipt or acknowledgment or writ- ing. R. S. C. c. 164, s. 73. ii'ljlill H'i 292 THE CRIMINAL CODE. [s. 378 »77. Every one is guilty of an indictable offence and liable to three years' imprisonment, who — (a) having, in his name, shipped or delivered to the keeper of any warehouse, or to any other factor, agent or carrier, to be shipped or carried, any merchandise upon which the consignee has advanced any money or given any valuable security afterwards, with intent to deceive, defraud or injure such consignee, in violation of good faith, and without the consent of such consignee, makes any disposition of such merchandise different from and inconsistent with the agreement made in that behalf between him and such consignee at the time of or before sucli inonev was so advanced or such negotiable security so given; or {h) knowingly and wilfully aids and assists in mak- ing such disposition for the purpose of deceiving, de- frauding or injuring such consignee. 2. No person commits an offence under this section who, before making such disposition of such merchan- dise, pays or tenders to the consignee the full amount of any advance made thereon. R. S. C. c. 164, s. 74. Ji7S. Every one is guilty of an indictable offence and liable to three years' imprisonment, who — (a) wilfully makes any false statement in any re- ceipt, certificate or acknowledgment for grain, timber or other goods or property which can be used for any of the purposes mentioned in The Bank Act; or (h) having given, or after any clerk or person in his •employ has, to his knowledge, given, as having been received by him in any mill, warehouse, vessel, cove or other place, any such receipt, certificate or acknow- ledgment for any such grain, timber or other goods or property, — or having obtained any such receipt, certifi- cate or acknowledgment, and after having indorsed or assigned it to any bank or person, afterwards, and with- out the consent of the holder or endorsee in writing, or the production and delivery of the receipt, certificate or acknowledgment, wilfully alienates or parts with, or does not deliver to such holder or owner of such receipt, certificate or acknowledgment, the grain, timber, goods or other property therein mentioned. R. S. C. c. 164, 8. 75. Tr-;'(s^ 8. 420] FRAUD. 293 J$7». If any offence mentioned in any of the three sections next preceding is committed by the doing of anything in tlie name of any firm, company or copart- nership of persons the person by whom sucli thing is actually done, or who connives at the doing thereof, is guilty of the offence, and not anv other person. K. S. C. c. 1«4, 8. 7G. de- 3fl4. Ev.My one is guilty of an indictable offence and liable to seven years' imprisonment who conspires with any other person, by deceit or falsehood or other fraudulent means, to defraud the public or any person, ascertained or unascertained, or to affect the public mar- ket price of stocks, shares, merchandise or anything else publicly sold, whether such deceit or falsehood or other fraudulent means would or would not amount to a false pretense as hereinbefore def ned. Paut XXXI.— Forgeuy. 41!>. A document means in this part any paper, parchment, or other material used for writing or print- ing, marked Avith matter capable of being read, but does not include trade marks on articles of commerce, or in- scriptions on stone or metal or other like material. in his been [)ve or know- >ds or ertifl- ed or with- ng, or ate or th, or 'ceipt, goods 164, 420 . 'Bank note" includes all negotiable instru- ments isstied by or on behalf of any person, body cor- porate, or company carrying on the business of banking in any part of the world, or issued by tlie authority of the Parliament of Canada or of any foreign princ(s or state, or government, or any governor or other authority lawfuUv aulliorized thereto in anv of Her Maiestv's dominions, and intended to be used as equivalent to money, either imnu'diately upon their issue or at some time subsequent thereto, and all bank bills and bank post bills; ((/) *' Exchequer bill " includes exchequer bonds, notes, debentures and other securities issued under the authority of the Parliament of Canada, or under the authority of any legislature of any province forming part of Canada, whether before or after such province so became a part of Canada. I'll '"If. 294 THE CRIMINAL CODE. [s. 422 11 t. 'hi- ■i 4t5l. The expression " false document " means — (a) a (lo<'ument the whole or some material part of which purports to be made by or on behalf of any per- son who did not make or authorize the malvin}^ thereof, or which, though made by, or by the authority of, the person who i>urports to make it is falsely dated as to time or j)lace of making, where either is material; or (/>) a document the whole or some material part of which purports to be made by or on behalf of some per- son who did not in fact exist; or (c) a docuuient which is made in the name of an • existing person, either by that person or by his author- itj, with the fraudulent intention that tlie document should pass as being made by some person, real or ficti- tious, other than the person who makes or authorizes it. 2. It is not necessary that the fraudulent intention should appear on the face of the document, but it may be proved by external evidence. 4313. Forgery is the making of a false document, knowing it to be false, with the intention th.at it shall in any way be used or acted upon as genuine, to the pre- judice of any one whether witliin Canada or not, or that some person should be induced by the belief that it is genuine, to do or refrain from doing anything, whether within Canada or not. 2. Making a false document includes altering a genuine document in any material part, find making any material addition to it or adding to it any false date, attestation, seal or other thing which is material, or by making any material alteration in it, either by erasure, obliteration, removal or otherwise. 3. Forgery is complete as soon as the document is made with such kno ledge and intent as aforesaid, though the offender w y not have intended that any particular person should use or act upon it as genuine, or be induced, by the belief that it is genuine, to do or refrain from doing anything. 4. Forgery is complete although the false document may be incomplete, or may not purport to be such a docu- ment as would be binding in law, if it be so made as, and is such as to indicate that it was intended, to be acted on as genuine. «. 423] FORGERY. 2'.)') ring a ng any date, or by asure, 43IS. Every one who commits forgery of the docu- ments hereinafter mentioned is guilty of an indictable offence and liable to the following punishment : — (A) To imprisonment for life if the document forged purports to be, or was intended by the offender to be understood to be or to be used as — (/) any transfer or assignment of any share? or in- terest in any stock, annuity or public fund of the United Kingdom or any part thereof, or of Canada or any part thereof, or of any dominion, possession or colony of Her Majefity, or of any foreign state or country, or receipt or certificate for interest accruing thereon; R. S. C. c. 1G5, ss. 8 and 25; or {m) anj' transfer or assignment of any share or interest the debt of any public body, comi)any or society, British, Canadian or foreign, or of any share or interest' in the capital stock of such company or society, or re- ceipt or certificate for interest accruing thereon; K. S. O. c. ]()5, s. 8; or (o) any power of attorney or other authority to transfer any interest or share hereinbefore mentioned, or to receive any dividend or money payable in respect of any such slmre or interest: R. S. C, c. 165, s. 8; or {p) any entry in any book or register, or any certifi- cate, coupon, share, warrant or other document which by any law or any recognized practice is evidence of the title of any person to any such stock, interest or share, or to any dividend or interest pavable in respect thereof; R. S. C. c. 165, s. 11; or (q) any exchequer bill or endorsement thereof, or receipt or certificate for interest accruing thereon; R. S. C. c. 165, s. 13; or (/•) any bank note or bill of exchange, promissory note or cheque, or any accejjfance, endorsement oi* as- signment thereof; R. S. (\, c. 165, ss. 18, 25 and 28; or {u) any deed, bond, debenture, or writing obliga- tory, or any warrant, order, or other security for money or payment of money, whetlier negotiable? or not, or en- doi'sement or assignment thereof; R. S. C. c. 165, ss. 26 and 32; or (r) any accountable recei])t or acknowledgment of the deposit, receij)t, or delivery of money or goods, or en- dorsement or assignment thereof; R. S. C. c. 165, s. 29; or BH « "s J'i '1 ■^•■'i ;!St '; ■ ]\V '■ Vu ' i ■ ^1 ^ mi ■ i". ^Sg, fci- ^^ 1^ ij.!;:; v-'lr . US »ir.i ^ ^ in \ $' \ mv 296 THE CRIMINAL CODE. [s. 429 (w) any bill of lading, charter-party, policy of insur- ance, or any shipping document accompanying a bill of lading, or any endorsement or assignment thereof; or (x) any warehouse receipt, dock warrant, dock- keeper's certificate, delivery order, or warrant for the delivery of goods, or of any valuable thing, or any en- dorsement or assignment thereof; or (y) any other document used in the ordinary course of business as proof of the possession or control of goods, or as authorizing, either on endorsement or de- livery, the possessor of such document to transfer or receive any goods. (C) To seven years' imprisonment if the document forged purports to be, or was intended by the offender to be understood to be, or to be used as — (/) any power or letter of attorney or mandate; or (;) any authority or request for the pjiynient of money, or for the delivery of goods, or of any note bill, or valuable security; R. S. C. o. If55, s. 29; or (k) any acquittance or discharge, or any voucher of having received any goods, money, note, bill or valuable security, or any instrument which is evidence of any such receipt; K. S. C, c. 165, s. 29; or 434. Every one is guilty of an indictable offence who, knowing a document to be forged, uses, deals with or acts upon it, or attempts to use, deal with, or act upon it, or causes or attempts to cause any person to use, deal Avitli, or act upon it, as if it were genuine, and is liable to the same punishment as if he had forged the document. 2. It is immaterial where the document was forged. 42S. Every one is guilty of an indictable offence who, with intent to defraud, causes or procures any tele- gram to be sent or delivered as being sent by the author- ity of any person, knowing that it is not sent by such authority, with intent that such telegram should be acted on as being sent by that person's authority, and IP liable, upon conviction thereof, to the same punish- ment as if he had forged a document to the same effect as that of the telegram. '490. Every one is guilty of an indictable offence and liable to two years' imprisonment who, with intent 429 s. 434] FOllGERY. 297 to injure or alarm any person, sends, causes, or pro- cures to be sent any telegram or letter or other message containing matter which he knows to be false. 430. Every one is guilty of an indictable offence and liable to fourteen years' imprisonment who, without lawful authority or excuse (the proof whereof shall lie on him), purchases or receives from any person, or has in his custody or possession, any forged bank note, op forged blank bank note, w hether complete or not, know- ing it to be forged. R. S. C. c. 1G5, s. 19. 4Jtl. Every one is guilty of an indictable offence who, with intent to defraud and without lawful author- ity or excuse, makes or executes, draws, signs, accepts or endorses, in the name or on the account of another person, by procuration or otherwise, any document, or makes use of or utters any such document knowing it to be so made, executed, signed, accepted or endorsed, and is liable to the same punishment as if he had forged such document. R. S. C. c. 165, s. 30. Part XXXII. — Preparation for Forgery and Offences Resemrling Forgery. offence intent 434. Every one is guilty of an indictable offence and liable to fourteen years' imprisonment who, without lawful authority or excuse (the proof whereof shall lie on him) — (fl) makes, begins to make, uses or knowingly has in his possession, any machinery or instrument or material for making excliequer bill paper, revenue paper or paper intended to resemble the bill paper of any firm or body corporate, or person carrying on the business of banking; R. S. C. c. lo5, ss. 14, IG, 20 and 24; or (h) engraves or makes upon any plate or material anything purporting to be, or apparently intended to resemble, the whole or any part of any exchequer bill or bank note; R. S. C. c. 1G5, ss. 20, 22 and 24; or (c) uses any such plate or material for printing any part of anv such exchequer bill or bank note; R. S. C. c. 165, ss. 22 and 23; or m m 1*'. llvB M 298 THE CRIMINAL COJ)E. [s. 440 (d) knowingly has in his possession any such plate or material as aforesaid; K. S. C. c. 165, ss. 22 and 23; or (e) makes, uses or knowingly has in his possession any exchequer bill paper, revenue paper, or any paper intended to resemble any bill jiaper of any firm, body corporate, company or person, carrying on the business of banking, or any paper upon which is written or printed the whole or any part of any exchequer bill, or of any bank note; K. S. C. c. 165, ss. 15, 16, 20 and 24. (/) engraves or makes upon any plate or material any thing intended to resemble the whole or any dis- tinguishing part of any bond or undertaking for the payment of money used by any dominion, colony or pos- session of Her Majesty, or by any foreign prince or state, or by any body corporate, or other body of the like nature, whether within Her Majesty's dominions or without; R. S. C. c. 165, s. 25; or ig) uses any such plate or other material for print- ing tile whol<> or anv part of such bond or undertaking; R. S. C. c. 165, s. 25; or (/<) knowingly offers, disposes of, or has in his pos- session any paper upon which such bond or under- taking, or any part thereof, has been printed; R. S. C. c. 165, s. 25. 440. Ever^' one is guilty of an indictable offence and liable to fourteen years' imprisonment who, with intent to defraud — (fl) makes any untrue entry or any alteration in any book of account kept by the Government of Canada, or of any province of Canada, or by any bank for any such Government, in which books are kept the accounts of the owniu's of any stock, annuity or other public fund transferable for the time being in any such books, or who, in any manner, wilfully falsifies any of the said books; or (h) makes any transfer of any share or interest of or in any stock, annuity or public fund, transferable for the time being at any of the said banks, in the name of any person other than the owner of such share or interest. R. S. C. c. 165, s. 11. It v:. ' '^ s. 458] FORGERY. 299 441. Every one is guilty of an indictable offence and liable to seven years' imprisonment who, being in the employ of the Government of Canada, or of any province of Canada, or of any bank in which any books of account mentioned in the last i)recediug section are kept, with intent to defraud, nuikes out or delivers any dividend warrant, or any warrant for the paj^ment of any annuity, interest or money payable at any of the said banks, for an amount great «'r or less than that to which the person on whose account such warrant is made out is entitled. K. S. C. c. KJu, s. 12. 44:2. Every one is guilty of an offence and liable, on summary conviction before two juslices of the peace, to a fine of one hundred dollars or three months' impris- onment, or both, who designs, engraves, prints or in any manner makes, executes, utters, issues, distributes, circulates or uses any business or professional card, notice, placard, circular, hand-bill or advertisement in the likeness or similitude of any bank note, or any obligation or securitv of anv Government or any bank. 50-51 V. c. 47, 8. 2; 53 V. c". 31, s. 3. Part XXX 1 V. — Person ation. 458. Every one is guilty of an indictable offence and liable to fourteen years' imprisonment who falsely and deceitfully personates — (a) any owner of any share or interest of or in any stock, annuity or other public fund transferable in any book of account kept by the Government of Canada or of any province thereof, or by any bank for any such Government; or {!)) any owner of any share or interest of or in the debt of any public body, or of or in the debt or capital stock of any body corporate, company, or society; or (c) any owner of any dividend, coupon, certificate or money payable in respect of any such share or interest as aforesaid; or (d) any owner of any share or interest in any claim for a grant of land from the Crown, or for any scrip or other payment or allowance in lieu of such grant of land; or (r) any person duly authorized by any power of attorney to transfer any such share, or interest, op to :.i 'I 'M 300 THE CRIMINAL CODE. [8. 704 receive any dividend, coupon, certificate or money, on behalf of the person entitled thereto — and thereby transfers or endeavors to transfer any share or interest belonging to such owner, or thereby obtains or endeavors to obtain, as if he were the true and lawful owner or were the person so authorized by such power of attorney, any money due to any such owner or payable to the person so authorized, or any certificate, coupon, or share warrant, grant of land, or scrip, or allowance in lieu thereof, or other document which, by any law in force, or any usage existing at the time, is deliverable to the owner of any such stock or fund, or to the person authorized by any such power of attorney. R. S. C. c. 105, s. 9. Part XLIII. — Phoceduue in Pauticulau Cases. 547. No proceeding or prosecution against a trustee for a criminal breach of trust, as defined in section three hundred and sixty-three, shall be com- menced without the sanction of the Attorney-General. R. S. C. c. 164, s. 65. OS4. No person accused of an offence under any of the hereunder mentioned sections shall be convicted upon the evidence of one witness, unless such witness is corroborated in some material particular by evidence implicating the accused: (r) Forgery, Part XXXI., section four hundred and twenty-three. 704. Whenever, on the trial of a person charged with making an agreement for the sale or purchase of shares, goods, wares or merchandise in the manner set forth in section two hundred and one, it is established that the person so charged has made or signed any such contract or agreement of sale or purchase, or has acted, aided or abetted in the making or signing thereof, the burden of proof of the bona fide intention to acquire or to sell such goods, wares or merchandise, or to deliver or receive delivery thereof, as the case may be, shall rest upon the person so charged. i INDEX Abbrgvlatlons, xxix. Accountant to sign returns, 174. Accounts of customers, only directors to Inspect, 70 Action to recover calls, 54, 55, 5(j, penalties, 185. Administration, letters of. on transmission 63 Administrator, when personally liable, U7. Advances on bank notes not recoverable, 75. for building ships, 13G. Advertisements, defacing notes with, 87. Affairs of bank managed by directors, 23. annual statement of, 08. Agencies, bank may open, 88. Agency charges for collection, 107. Agent, definition of, in sec. 73, 140. of bank to enter name on transmission, 03. banks dealing with, 118. transferring warehouse receipt, 144. powers of, under Factors Acts, 146. Aggregate issue of bank notes, 74. Agreement to give security, 153, 155. Aid in building vessels, 136. Allotment of unsubscribed stock, 46. Annual meeting, shareholders fix day for, 19, 27. provisions respecting, 20. election of directors at, 27, 68. public notice of, 27. failure to elect directors at. 30. statement to be submitted at, 08. Annual statement and inspection, 08. details to be contained in, 68-9. of amounts unclaimed, 176. list of shareholders, 176. Annulment of bank charter by Court, 11. Appeals under Winding-up Act, 259. Application of Winding-up Act, 237. Arrear, shareholders in, cannot vote, 45. 'I-:' '\ : ,\n ao2 INDP.X. Assets, annual statement of, fSU. notes a first charge on, 70. Dominion claims a second cliarge on, 70. Provincial claims a third charge on, 7(1. monthly return of, to government, 174. form of return of, 1'.».'{. Assignment of shares — See Transfer. under sec. 74— See Security. Attorney-General of Canada may sue for penalties, 185. Auction, forfeited shares to be sold at, 55. sale of pledged goods at, 1(*.'{. Authentication of declaration of transmission, ttl. B. Ballot, president and vice-president elected by, 28. shareholders to vote by, 43. Bank, definition of, 5. unauthorized use of title, 187. Bank Act, l.S4:{, 44. 1850, V2i]. 1871. 74, 104, 112, 139, 155. 1872, 137. 1880, 7. Bank Charters in Canada, xxxii. term of, xxxv. Bank Circulation Redemption Fund, 78. Bank holidays, 120. Bank Notes — See Notes. Bank of British Columbia, application of Act to, 5, 12, 179. Bank of British North America, application of Act to, 5, 12, 17*). issue of notes by, 74. Banker's lien defined, 11,5. illustrations, 110-8. Banking in Canada — Introduction, xxxi. principles of xxxvii. assigned to Dominion by B. N. A. Act, 2. general business of, 88, 107. hours, 120. association using title improperly, 187. company using title improperly, 187. house using title improperly, 187. institution using title improperly, 187. Banks to -which the Act applies, 5, 9, 190. first Canadian, xxxix. winding up insolvent, 265. ' ll'= lis INDEX. Banque du Peiiple. former leglHlutlon, '2, ii. application of Act to, \o, 11, !.>.•{, 170. suspeiiHlon of, 1'2, i,so. directors make regulations for, 10. issue of notes by, 74. Bill of lading, definition of, .s. banks may acquire, as collateral security ly? Ontario and Quebec legislation on, i;{9. lllustrauions as to, 141. agent transferring, 144. In possession of, 14({. when bank may acquire, I.').!, written promist- to give, ir»;!. exchange for warehouse receipt, 158. false statement In, ir»,S. preference over unpaid vendor, 1(50. sale of goods covered by K!" * Bills and notes, discounting of. by bank, UH.' Bills to be binding on bank, S4. Bills of exchange, bank may deal In, 88. negotiation of, security taken at time, m:\ Rni« nf V u ^^^^ provisions applicable to cheques, 200. Bills Of Exchange Act. Canadian, sn. .,1. 04, !)8, UU, 101, 110. 120 l-'l. ir.4, H\U, 170, 190. Imperial, 200. Bonds guarantee to be given by officers. '.\7. of bank, how to be executed, 84. ' assignable by indorsement, 84. of other corporations, bank may deal in, 88 104 Bonus or dividend not to impair capital. 71. T,„ , ^ '^^^^ "lay exceed eight per cent 7'' Books, subscription, for stock, 14. 4s. tran;5fers to be regircered in, .KJ. inspection of, by directors 70 Borrower and the Branch system, xlix Branch system, benefits of, xlix. _ borrowed from Scotland 8!) Branches, directors may be appointed for, ;}2. bank may open, 88, S!>. sometimes considered distinct. 80. generally as one with main bodv M British North America Act. banking fn, 2 3 Columbia, banking law before 1871 2 public securities, bank may deal in,' 88, 106 subjects, majority of directors to be, 27 Broker dealing with securities 119 303 Ffi 304 INDEX. Bullion, bank may deal in, 88. Business, when bank may commence, 17. of bank managed by directors, 23, 31. and powers of bank, 88. banks may do a general banking, 88, 107. prohibited to banks, 8)), 110. bank engaging in prohibited, 115. of savings banks, 22."). i3y-laws, shareholders may make, 19, 22. on whom binding, 22. old, to be in force until repealed, 23, 31. directors may make, 31. to increase the capital stock, 45. to reduce the capital stock, 47. i-l: Caisse d'Economie de Quebec, 218. Calls, only those who have paid can vote, 45. stock may be cancelled for non-payment, 50, 54. directors may make, 51. Interval between, and notice of, 52. not to exceed ten per cent., 52. remedy in case of non-payment, 54. by directors in winding up, 182. refusal to make, a misdemeanor, 183. on shares of savings banks. 219. Canada, banking in, xxxi. history ot, xxxvi. banking legislation in old, 1. Canada Gazette, notice of annual meeting, 27. increase of capital stock, 45. reduction of capital stock, 47. public notices in, 188. Cancellation of subscriptions to stock, 50. Capital stock of banks incorporated hereafter, 13, 14. subscription of, in new banks, 15. minimum amount for commencing business, 15. may be increased. 45. reduced, 47. not to be reduced below $250,000, 48. annual statement of, 68. not to be impaired by dividends, 71. if any lost, calls to be made, 71. of banks, bank not to lend upon, 89. Cases cited, xiii. n ' INDEX. Cashier, powers of, 34, 35. powers of in U. S., 36. to give guarantee bond, 37. to enter name on transmission, G3. not to vote or hold proxy, 44. to sign monthly returns, 174. giving creditor fraudulent preference 185 making false statement. 186 Casting vote in case of a tie, 30 43 Certificate to begin business, 17', is. of increase of stock, 45, of reduction of stock. 47. Charitable funds of savings banks '>28 Charlottetown, banks to redeem their notes at. 83 Charters of banks continued to 1901. 10. annulment of by Court, 11. of new banks, 13, 191. forfeited by 90 days' suspension, 180 Cheques, negotiable instruments, 98. on a bank, law as to, 197. definition of. 198. form of. 199. provisions as to demand bills apply. 200 illustrations as to, 201-5. not presented in a reasonable time, 205 holder of, when creditor of bank 207 termination of authority to pay 208 '^0^ crossing of, 211. ' ~ ' ' who may cro.<^s, 212. crossed generally, 211, 213 ^, . , specially, 212, 213. Chief accountant to sign returns, 174 Chief ofllce of Bank of B. C, 12 B. N. A. 12. shares transferable at, 48. notes payable at, 84. relation of branche-? to. 89. public notices in newspaper at 188 Choses f,n action are not goods 6 Circulation, what notes bank may issue for 73 limit of notes bank may issue, '74 " penalty for over issue, 75 Cities where Dominion notes can be obtained 7'^ nii,r ^ ^. ^^^^^ ™"^' redeem their rotes' S'i City and District Savings Bank, 218. M'l,.Ii.A._20 305 306 INDEX. Civil Code, 37, 49, 05, GG, 85. 95, 9G, 105, 11G, 124, 12(5, 145, 14G, 147, 148, IGO, 101, 102, KU*], 172, 19!), 200, 252. Claims under Winding-up Act, 252. Clearing house, origin and methods, 121. crossing cheques originated in, 210. Clerks, directors may appomt, .'{2. must give guarantee bond, 37. Code of Civil Procedure, 01. Collateral Security, what bank may take as, S8, 04, 137. sale of stock, etc., held as, 125. bank acquiring warehouse receipt as, I'M. bill of lading as, 137. Collections by a bank, 107. additional charge for, 107. Commandite, partnership en, 11, 76. Commencement of Bank Act. 189. Commission, none on government cheques, lo8. Companies Act, 18G2, 2(>, 50. Company stock, bank dealing in, 88. 102. when deemed insolvent. 238. Conditions of transfer of shares, 5(5. Confederation, bank legislation before. 1. Consent of owner to sale of pledged goods, 162. Constitutionality of Dominion legislation, 3. 'Contents table of, v. Contract, deposits from persons unable to, 167. Contribu'ories under Winding-up Act. 249. Conversion of pledged goods, 1.59. Correspondence, inspection of by directors, 70. •Counterfeit notes to be stamped, 87. Countermand of payment of cheque, 208, 209. Creditors' claims under Winding-up Act, 252. Criminal Code, 1892, 283. preliminary provisions, 283. nuisances, 285. defamatory libel, 286. theft defined, 28(i. punishment of theft and offences resembling theft, 289. obtaining property by false pretences, 289. fraud, 290. forgery. 293. preparation for forgery and offences resembling forgery, 297. personation, 299. procedure in particular cases, 300. 145, 14(;, as, I'M. !7. INDKX. Crossed cheques, 209. origin of. 210. not generally used in Canada, 211 not used in United States -'ll payment of in good faith '214 " Crossing^fl---^-„-^r.,oodf.^ Crown,pe:i^-rh:S"^sF^^^- Cus omer of ban^. who is 2i« ' Dealer, the bank as a. 88, Oo, ' 307 embling 9. emblin? D. Death Of customer s^ops unpaid cheque, 208 009 DehPnf ''^r^"'^^'"' transmission by. Gl ci Debentures, bank may deal in, 88. municipal, 99. Dohf ,. V °^ °*^^'' corporations, I04 Debt or liability, shares held for V>-> 121 " Dehtr'"'!'"^ *"'^'" ^' "'"^ °f contracting 153 Debts contracted," meaning of, in Act 127 foo due bank in annual statement 09 Decease, transmission of shares by OH Declaration of transmission of shares 61 fio ,-. Defacing notes, penalty for. 87 ' ' '"' "•'• Defamatory libel in the Criminal Code 286 Definition of terms used in the Bank Act . agent in section 73. 146 cheque, 198. terms used in Savings Bank Act. 218 Winding-up Act. 235 „ . see Woras a„,^P,tTel ^""'^ '«^- ' Depo« receipt,, whether a.JZ.. ,«, „„ r> , transfer of, 170 Depositor, position of 1 Deposits, bank may receive, Uu from persons unable to contract 107 in trust, payment of 171 statute of limitations not to apply i^n transfer of, in savings banks, 221 In savings banke, 2-'3 Directors, number of, 15, u)^ 21. " election of, 15, 27, 28 qualification of, ij), 23, 26 mmn 4 m>^ '; 308 INDEX. Directors, quorum of, 19, 24, 25. remuneration of, 19, 22. by-law may limit loans to, 19. manage the affairs of the bank, 23. business to be done at meetings, 24. acts of de facto, binding on bank, 24. majority to be British subjects, 27. vacancy in board, how filled, 29. president to preside at meetings, 30. may make by-laws, 31. may appoint officers, clerks, etc., 32. may be appointed for branches, 32. illustrations of powers of, Sb-G. must require cashier, etc., to give security, 37. four may call special meeting, 41. special meeting to remove, 42. when subscriptions may be cancelled by, 50. may make calls, ~>1. may sue for calls or forfeit stock, 54. may inspect books, etc., 70. may declare dividends, 70. when liable for impairing capital, 71. pledging notes of bank, 70. may borrow for the bank, 108. making returns, when acting as president, 174. when to wind up bank, 182. to make calls on double liability, 182. refusing to make calls a misdemeanor, 183. giving fraudulent preference, a misdemeanor, 165. giving fraudulent preference, a misdemeanor, 185. Directors, provisioinal ; see Provisional Directors. Discount, shares not to be issued at a, 53. Canadian banks are banks of, 88. paper and securities, bank may, 88. what it is to, 92. bank may charge seven per cent., 164. additional charge for collection, 167. Dominion government cheques, not subject to, 188. Discoun'?, shareholders may fix maximum, 19, 22. Dividends, where may be made pavable, 49. what receipt suffloieni for, 66. directors may declare, 70. or bonus not to impair capital, 71. directors liable for impairing capital by, 71. when may exceed eight per cent., 72. lien of bank on unpaid, 122. INDEX. 309 Dividends, unpaid for five years, return of, 176. Statute of Limitations not to apply, 180. on shares in savings banks, 221. unclaimed under Winding-up Act, 264. Dominion banking legislation upheld, 3. cheques to be cashed at par, 1S8. government ranks second on assets, 76. notes, annual statement of amount held, 68 forty per cent, of reserves to be in, 72. to be exchanged for specie, 73. to be supplied if asked for, 84. securities, bank may deal in, 88, 106. Donatio mortis causa, cheque given as, 20D. Double liability of shareholders, 178. charter continues to enforce, 180. when directors are to make calls on, 182. punishment of directors for not enforcing, 183. enforcement under Winding-up Act, 183, 250. forfeiture for non-payment of, 183. Duties and powers of bank oflftcers, 33. illustrations, 33-6. E. Election of directors, 15, 27, 28. if not made on day appointed, 30. president and vice-president, 28, 21>, Execution, sale of shares under writ of, 60. Executor, when personally liable on shares, 67. declaration of transmission by will, 63, <)4. F. 188. Factors Act. Ontario. 144. Imperial, 1877, S. 1880, 145. Factors Acts, powers of agents under, 144. ■failure to elect directors at annual meeting, 30. False number, selling shares by, (10. pretences, obtaining property by, 289. statement in warehouse receipt, etc., 1.58. returns, etc., ISO. Fiat paper money in French Canaada, xxxvii. Fine for committing offence, 188. See Penalty. Foreign public securities, bank may deal in, 88. 310 INDEX. i.'t'. Forfelture of stock for non-payment of calls, ."54. directors or shareholders may remit, 55. by shareholders on winding up, ]8;{. Forgery under the Criminal Code. 29;}. Form of Act of incorporation of new banks, 191. security under sec. 74, 191. monthly returns, 192. Fraud under the Criminal Code, 200. in connection with savings banks, 232. Fraudulent preference to creditors, 185. under Winding-up Act, 257. Frauds, Statute of, 5, 37. Free Banking Act, xl. French Canada, paper money in, xxxvii. Functions of savings banks, 225. Funds, inspection of, by directors, 70. G. Gazette, see Canada Gazette. General banking business, banks may do, 88, 107. Gold, banks may deal in, 88. Goods, wares, and merchandise, definition of, 5. bank not to lend on, 89, 113. deal in, 88, 111. covered by warehouse i-eceipt, 137. bill of lading. 137. title of owner vests in bank, 138. possession of, by agent, 14G. of wholesale manufacturer, security on, 148. effect of security from owner, 150. form of security under sec. 74, 151, 191. produced from pledged goods, 159. sale of, for non-payment of debt, 162. Government, Dominion ranks second on assets, 7l>. Provincial ranks third on assets, "S^L securities, banks may d«al in. i^, 3**6. cheques (Dominion) to be cashed ar par, 188. Guarantee cashiers, officers, etc., must give, ;>7. illustrations of liability on bonds, :iS-41. fund, shareholders may authorize, 22. Guardian, when personally liable on shares, 07. H. Half-yearly dividends may be declared, 70. Halifax, banks to redeem their notes at, 83. 4 INDEX. 311 Historical sketch of banking In Canada, xxxvli. Historical sketch of banking in Canada, xxxviii. Holder of cheque, when creditor of bank, li07. Holidays, bank, 120, Hours, banking, 120. Hypotheques, bank may take as additional security, 127. I. Illustrations, duties and powers of bank offlcers, 3.3-0. guarantee bonds, .'58-41. bankers' lien, 11(»-.S. mortgages held by banks, 1.31-4. warehouse receipts and bills of lading, 141-4. cheques, 201 -.5. Imitating bank notes, penalty for, 87. Immovable property, bank not to lend on, 89. acquired for use of bank, 120. mortgages on, as additional security, 127. bank may purchase debtor's, 1.34, 1.30. hold for seven years, 135. Impairment of capital by dividends, 71. Imprisonment for fraudulent preference, 185. false statement, 180. committing an offence, 188. Incorporation of new banks, 13. form of Act for, 101. Increase of capital stock, 45. Indorsement, bonds etc., assignable by, 84. negotiable instruments assignable by, 97. Insolvency of bank, 178. suspension for 90 days, 180. calls in case of, 182. special winding up provisions for, 205. Insolvent, when company is deemed, 238. Inspection of books, etc., by directors, 70. Instalments, stock to be paid by, .'')(). Insurance companies, winding up, 271. Interest, on unpaid calls, 51. on bank notes, after suspension, 81. bank may charge seven per cent., 104, 100. allow any rate of, 1(i4. action to recover back excessive, 105. not paid for 5 years, 17f>, Internal regulations of bank, 19. savings bank, 218. m I l« 312 INDEX. Interpretation of terms in Bank Act, 5. Savings Bank Act, 218. Winding-up Act, 235. Criminal Code, 283. Interval between calls, 52, 53. Intestate when named, administrator not liable, 67. Introduction — Banking in Canada, xxxi. Joint holders of shares, how they vote, 44. depositors, withdrawal of money, 171-2. Land, bank not to lend money on, 89, 112. may acquire for its own use, 12G. may take mortgage as additional security, 127. illustrations, 131-4. may purchase debtor's, 134, 136. how bank may acquire, 135. may hold for seven years, 135. savings banks not to lend on, 225. may purchase debtor's, 226. Legislation before Confederation, 1. by Dominion Parliament, 2. by Provincial legislatures taxing banks, 4. for reduction of capital stock, 48. of Ontario as to warehouse receipts, 139, Letter of Credit, not a negotiable instrument, 106, xx.vl. Letters of administration on transmission, 63. verification of heirship in Quebec, 64. Liabilities, annual statement of, 69. scher -lie of, 192. Liability on guarantee bonds, 38-41. not diminished by reduction of stock, 48. of shareholder, when personal, 67. bank has lien on stock for any, 122. meaning of, 124. double, of shareholders. 178. of directors not diminished, 184. of shareholders of savings banks, 220. Libel, defamatory, 286. Lien, banker's, defined, 115. illustrations. 116-8. of bank on its own shares, 122. Life Insurance Companies, winding up, 267. INDEX. Limltatlong, when Statute of not to annlv isn Liquidation of bank by directors. 182 '^' ''^■ Liquidators to pay In unclaimed moneys. 177. money for notes not presented 17S under Winding-up Act. L'4:{ Loans on bank notes not recoverable. 75. what, banks may make. 88. for building vessels, l:J6. to wholesale manufacturers, 14,s. . , merchants and shippers 149 by savings banks. 2".S Loss, estimate of. m annual statement, (Ji). 313 M. J- ui votes at meeting governs, 4.3 o Jril^"''' °' ''"'■^^ ""'y "-"^^ ^-ttornev 44 of trustees may withdraw deposits. 171 n value of shares may vote to reduce canital 47 not to vote or hold a proxy 44 to sign monthly returns, 174 making false statement ],S(? making false statements, lS(i Manufacturer, definition of, 9, l4,s. Marria^P Lr. ^f"'^ ""^^ ^^°^ ^"^ wholesale, 148. Marriage, transmission of shares by r," Meeting for organization of bank. 15 annual general, of shareholders, 19 00 or directors. 24, no. special general,' of shareholders 41 who may call, notice, 41 ' " Merchants' Bank of Prince Edward Island i-? 70 Minimum capital of banks hereafter I4 ' ''• subscribed capital to commence business 15 Minister ofCance^^^^^o" 00 ^^^ 'IT'^'''^''' ^' retr:ft;rtoTs;;rr"*°'-'^«- to furnish Dominion notes 7.? ^ receive percentage of circulation, 78 80 83 may redeem notes of insolvent bank 82 St " 314 INDEX. Minister of Finaiico, monthly retuniH to. 174. annnal returns to. 17(5. to receive unclaimed moneys on winding up, 177, 178, may sue for penalties, 18r». Misdemeanor, false statement In warehouse receipts, etc., 158. imlawful alienation of pledged goods, 159. unlawfully withholding possession of goods, 159. directors not making calls. In winding up, 183. officer giving fraudulent preference, 185. making a false statement In returns, 186. Money, calls to be paid In, 51, .52. other bills not to circulate as, 80. Monthly returns by banks, 174. Montreal, chief office of Bank of B. N. A. at, 12. banks to redeem their notes at, S'A. Mortgage, bank may take as additional security, 127. on personal property as well as real, 127. on vessels, as additional security, l.'JO. for aid in building a vessel, 136. bank may purchase lands under, 1.^4, 1.3.5, exercise power of sale In, 134, 136. Illustrations. 131-4. Municipal Act. Ontario. 100. Code, Quebec, 100. debentures, bank may deal In, 88, 89. negotiability of, 101. N. Negotiable securities, bank may deal in, 88, 91, 97. instruments, meaning of, 97. Negotiation of bill, security at time of, 153. defined, 1.54. New Brunswick, banking law before 1S(i7, 3. Newspaper, notice of annual meeting in, 27. Increase of stock In, 45. reduction of stock in. 47. redemption of notes In, 81. sale of pledged goods in, 1()3. both English and French In Quebec, 163, public notices in, ISS. Non-payment of calls, remedy for, .54. of debt, securities may be sold, 102. " Not negotiable" on crossed cheque, 211, 215. Notarial copy of Quebec will, 64. Note Issue, history of Canadian, xli. I^vi; INDEX. Notes Issued by banks for circulation, TA. denominations and amount of, 7;!. aggregate amount of allowed, Vi. penalties for over-issue of, 75. fine for pledging, 7(i. payment of, first charge on assets, 7(1. when payable out of special fund. 7(J. to circulate at par throughout Canada, 83. where to be redeemed, s:\. to be binding on bank, 84. payable at head office, 84. who are to sign for bank, 84. counterfeit, to be stamped, S7. ^ penalty for defacing, S7. Notice of calls, -,-. See Public Notice. of sale of shares under lien, li'i'. of sale of pledged goods, !(;;{. of customer's death stops payment of cheque "08 public, how to be given, 188 Nova Scotia, banking law before, 18(17 2 Nuisances under Criminal Code, 28;") Number of directors, ],-., lii, i>i. ' Numbers, shares to have distinguishing, 59. 315 Obtaining property by false pretences "SO Offence, to commence business without certificate 17 to sell shares by false number, 00 other than registered owner to sell shares <50 to use title of " bank" etc.. without autho'rity 187 penalty for committing, ISS. under Winding-up Act,' 2(i.5 Officer selling shares under writ of execution, 00 Officers of bank, directors may appoint, :V2 who are ucluded in term. 3;{. powers of various. 'A:i. illustrations of, 3;{-0. must give security, .'!7. giving fraudulent preference, 18.5. making false statement, 180 Ontario legislation on warehouse receipts 3 139 . P°7«^« «f agents under Factors Act'of "l44 Opening of stock books. 14. 49. ' Overdue debts in annual statement, 09. m IMAGE EVALUATION TEST TARGET (MT-3) A 4^ 1.0 I.I 1.25 1^ 1^ 12.2 2.0 m 1.4 V] 7} ^l ^' w °w /A Photographic Sciences Corporation 33 WEST MAIN STREET WEBSTER, N.Y. 14SS0 (716) 873-4503 :/. 4^ S 816 INDEX. Owner, warehouse receipt gives rights of, 13P. where previous bolder is agent of, 144. paying debt, entitled to re-transfer, 144. security under sec. 74 to be given by, 150. consent of, to sale of goods, 1U3. M Paper money in French Canada, xxxviii. Par, a bank to take its own notes at, 84. Dominion government cheques to be cashed at, 188. Parliament, Jurisdiction of, as to banking, 2, 3. list of shareholders to be laid before, 176 Partnership, limited, or en commandite, 11, 76. Payment of notes first charge on assets, 76. at seven cities named. S3, at head office, 84. any office to receive notes at par in, 84. in Dominion notes if requested, 84. ^ Penalties, when to rank on bank assets. 78. not holding Dominion notes, 72. how to be recovered, 185. to belong to the Crown, 185. may be remitted by Governor, 185. Penalty for non-payment of calls, 54, 55. not holding Dominion notes, 72. over-issue of notes. 75. issuing bills, etc., as money. 86. defacing notes, 87. nout. for usury, 164. violation of sees. 68 to 74, 164 not sending monthly returns, 174. list of shareholders. 176. unpaid dividends, etc., 177. Pension fund, shareholders may authorize, 22. Personal estate, bank shares are, 48. liabiltiy of trustees, executors, etc., 67. Personation under the Criminal Code, 299. Pledgee, ranking with unpaid vendor, 160, 161. Pledging notes of bank prohibited, 75 . Possessor of goods or documents of title, 146. Post office money order not a negotiable instrument, 107. savings banks, liv. Powers of various bank officers, 3.3-6. Preference of bank over unpaid vendor, 160. fraudulent, of creditor by officer of bank, 186. under Winding-up Act, 2.^»7. INI) IX. 317 btc, 177. 186. Prescription when not to apply to bank, 180. Presentation of cheque In a reasonable time, 203. President, shareholders fix remuneration of, 19. election by directois, 28. to preside at meetings of directors, 30. has double or casting vote in case of a tie, 30. special meeting of shareholders to remove, 42. to transfer shares sold at auction, 55. under execution, 00. pledging notes of bank, TO. to sign the monthly returns, 174. giving fraudulent preference to creditor, 185. making false statement, 180. Prince Edward Island, banking law before 1873, 2. Principles of banking, xxxvll. Probate of will to be left with bank, 63. Procedure under the Winding-up Act, 200. Criminal Code, 300. Proceedings for winding up order, 239. after order is made. 241. Profits, annual statement of, 00. division of. when may exceed 8 per cent. 72. Prohibited business to banks, 110. Promise, written, to give security, 153, 155. Promissory notes, bank may deal in, 88. discounting, by bank, 08. Provincial taxation of banks upheld, 4. government ranks third on assets. 70. securities, bank may deal in, 88, 100. Provisional directors, to be named in Act, 13. number, and term of office, 14. may open stock books, 14. to call first meeting of subscribers, 15. Proxies, shareholders may make regulations as to, 19, 21. valid for only two years, 47). Proxy, shareholders may vote by, 44. who may act as, 44. Public auction, sale of forfeited shares by, rCt. pledged goods by, 103. Public notice, of opening stock books, 14. of first meeting of subscribers, 15. annual meeting, 27. special meeting, 41. Increase of stock. 45. reduction of stock, 47. sale of forfeited shares, 55. 818 INDEX. Public Notice, of dividends declared. 70. how to be given, 18«. Public securities, bank may deal in, 88. Purchase of lands by bank, 12(5, l.'{4, 1,*{5. goods pledged, 127. Purchaser of products, loans to, 149. m U\l I. 1 j II;; , ,?' Qualification of directors, 10, 2:i, 2(:. Quarterly dividends may be declared, 70. Quebec taxation of banks upheld, 4. notarial copy of will, 04. legislation on warehouse receipts, l.'^D. law as to agents and factors, 145. ranking of unpaid vendor in, IHl. See Civil Code. Quorum at meeting of shareholders, 17. directors, 10, 21, 24, 25, 29. R Real estate, bank not to lend money on, 80. bank may acquire for its own use, 126. take mortgage as additional security, 127. purchase debtor's, 134, 136. hold for seven years, 135. savings banks not to lend on. 225. may purchase debtor's, 226. Reasonable time, cheque to be presented in, 205. what is, for a cheque, 20G. Recovery of calls by suit, 5G. Recrossing an uncrossed cheque, 212. Redemption of notes of insolvent bank, 81. by insolvent bank, 83, 84. i Reduction of capital stock, 47. effect of. 48. legislation for, 48. Registered owner of shares alone can sell. 59. Registration of transfers of shares, 5(S. Remuneration of directors, 10, 22. Renewal of bill or debt not to affect security, 153. definition of, l.')8. Repeal of former Acts, 180. Reserves, 40 per cent, in Dominion notes, 72. required for dividend over 8 per cent., 72. not actually required by law, Iv. • t I. INDEX. Resources of bank. In annual statement. 60 Rest required, for dividend over 8 per cent" 72 Retroactive. Statute of Limitations Z to app, 180 Returns, monthly by bank. 174. ^^' ^' under Schedule D.. 174. special may be called for. 175. of list of shareholders, i;o. of dividends unpaid for 5 years 170 form for monthly, W2. monthly by savings banks, 220 annual by savings banks, 229. '•1 819 I KJurlty, 127. I, 226. Sale of forfeited shares. 55. shares under execution, no. held under Hen. 122 securities held as collateral. '125 bank premises, I2(i. mortgaged lands by bank, 134 130 goods covered by warehouse receipt, etc loo securities by savings banks. 220 Savings Bank Act. 1890. 217. banks subject to. 218. commencement of Act, 232. Savings Banks, 218. charters continued. 218. Internal regulations. 218. calls on shares. 219. liability of shareholders, 220. dividends on shares, 221. transfer of shares and deposits, 221 deposits and loans, 223. functions compared with other banks 005 business of. 22.'. not to lend on real estate, 225. sale of securities by, 220. may purchase lands of debtors, 22(5 charitable funds of. 228. not bound to see to trusts, 229. to make monthly returns, 229. annual list of shareholders. 2^*9 unclaimed dividends and balances. 230 punishment for false entries. 231. frauds In connection with. 232 Schedule A to Bank Act, 190. Schedule B to Bank Act, 191. 320 INDEX. lu'i 3! H. m -a; fcifi (I.': '«• n i:> il ii 'i". Schedule C to Bank Act, 191. Schedule D to Bank Act, 102. Schedule to Savings Bank Act, 233. Scrutineers at first meeting, 17. Securities, bank may deal in public, 88, 01, 02. negotiable, defined, 07. government, 88, 100. received by banks from agents, 118. held as collateral, 125. right to dispose of, 126. sale of, on non-payment of debt, 163. by savings banks, 220. Security, cashier and other officers must give, 37. from wholesale manufacturer, 148. purchaser or shipper, 149. under section 74, 7. l.^»0, 1.'j2. form of, 150, in, 191. written promise to give, 15a, 1, 5. when bank may acquire, 153 . preference over unpaid vendor, 160. fraudulently giving, to creditor, 185. Shareholders may make by-laws, 19, 22. ^ date of annual meeting, 19, 20. regulate proxies, 19. fix number of directors, 19, 21. remuneration of directors, 19, 22. maximum discounts, 19, 22. may authorize guarantee and pension funds, 22. special general meeting of, 41. majority may remove directors, 42. vote by ballot, 43. majority of shares voting governs, 43. have one vote for each share. 43. may vote by proxy, 44. in arrear for calls not to vote, 45. may vote increase of capital stock, 45. allotment of unsubscribed stock to, 46. majority in value, may vote to reduce capital, 47. refusing or neglecting to pay calls, 54. list of. to be laid before Parliament. 176. double liability of, 178. forfeiture for non-payment of calls, 183. liable for sixty days after transfer, 184. of savings banks, liability, 220. list of, in savings banks, 229. ^■lUi INDEX. 8Si 122. nds, 22. Lpltal. 47. Shares, to be |100 each in new banks, 14. held for 30 days entitled to vote, 43. personal estate and assignable, 48. payable by instalments. 50. transfer of forfeited, 55. transfer of, conditions of valid, 50. list of daily transfers to be kept, 59. to be numbered, 50. sold under execution, 60. transmission of, 01. bank not to deal in its own or other bank shares, 88, 111. of corporations, bank dealing in, 102. under lien, when to be sold, 122. transferred within 00 days of suspension, 1&4. transfer of, in savings banks, 221. Ships, banks not to lend on, 80, 112. may aid in building, 136. Short title of Act, 1. Signing of bonds and notes for bank, 84, 80. monthly returns, 174. special returns, 175. annual returns, 176. Silver, banks may deal in, 88. Special meeting, who may call, and how, 41. to remove president or directors. 42. returns may be called for, 175. Stamped, counterfeit notes to be, 87. Statement to obtain reduction of stock, 48. for annual meeting, 08. false, in warehouse receipt, etc., lijS. of assets and liabilities monthly, 174, 192. false, a misdemeanor, 186. Statute of Frauds, 5, 37. Statute of Limitations, when not to apply, 180. Statutes cited, xvii. St. John, banks to redeem their notes at, 83. Stock books, where may be opened, 14, 4!). of corporations, bank dealing in, 102. Subscribers to stock, meeting for organization, 15. Suit, recovery of calls by, 54, 50. Surety who pays, rights of, 96. Suspension for ninety days, insolvency, 180. ^. Taxation of banks by provinces, 4, 64. Dominion notes, 73. m'l.b.a.— 21 822 INDEX. ■.'I > K-i ! Terms used, interpretation of, 5, 218, 2:15, 283. Testamentary instrument, transmission by, 03. Testator when named, executor not liable, 07. Theft under Criminal Code, 280. punishment of, 2»D. offences resembling, 280. Tie, how decided in election of directors, 28. casting vote in meetings of directors, 30. shareholders. 43. i ' Toronto, banks to redeem their notes at, 83. Trade, banlc not to engage in, 88. Transfer of shares, where to be made, 48. books to be kept, 40. assignments registered in, n(S. may be closed 1.1 days, 71. of forfeited sh-ires sold at auction, rt4. conditions of valid, r»(S. invalid if transferrer indebted, 50. list of daily, to be kept, .TO. of shares sold under execution, 00. tax to be paid before, 04. held under lien, 123. within (>() days of suspension, 184. in savings banks, 221. Transferrer of shares, to be registered owner, 50. not to owe bank, 50. Transmissirn of shares, how authenticated, 01, 02, 0.?, 04. by death or insolvency, 01. by marriage of female shareholder, 02. by testamentary instrument, o:^. Treasury Board defined, 5. certificate to begin uusiness, 17, 18. may approve of increase of capital, 45. reduction of capital, 47. statements to be laid before, 48. may recommend remission of penalties, 185. Trust, bank not bound to see to, GO, 171. when holder personally liable for shares, 07. bank acquiring shares held in, 110. deposits in, 171. savings banks not bound to see to, 220. Trustee, when personally liable on shares, 07. banks dealing with, 118. majority may withdraw deposits, 171. INDEX. 323 1^ Unclaimed balances In banks. 176. savings banks, 230. Uncrossing a crossed cheque, 212. United Kingdom, stock books kept anywhere In. 40 agents may be appointed In, 49 !'„.* . c dividends paid anywhere in. 40. United States banking compared with Canadian. ,xxil in savings banks. 2;{0 vendor, when ranks after bank. KJO. how ranks in Quebec, Kii • Unpaid dividends, list for Minister of Finance, 17« usury, no penalty for, 164. no bill void for, IGO. V. Vacancies in board of directors in oj) Varying agreement as to sale of securties lop, crossing on a cheque, 212. Vendor, ranking of unpaid, loo, loi. Vessels, banks not to lend on, ,S!), 112. may aid in building, ].3(5 Vice-president, election of by directors, 28 presides in absence of president. 30 special meeting to remove 4" may transfer shares sold at auction, 5.5. Pledging notes of bank. 7.""''' '"'""°"' '"• may sign the monthly returns I74 giving fraudulent preference to creditor im making false statement, ISO ' ^• Victoria, chief office of Bank of B. C. at 1- " banks to redeem their notes at 'v> Vote, one for each share held 30 days 4.^' * VoMn °°/\*''«holder In arrear shall, k ' Voting at shareholders' meetings, by ballot. 43. ^1 ■'I * 1 li-' 5 ■• Si- ■ ' ' 324 INDEX. w. Waiver of HghtR as to sale of securities, 120. Ward, if named, guardian not liable, 07. Warehouse receipt, definition of, (5. banks may acquire as collateral security, 137. effect of transfer to bank, KIS. given directly to bank, l.'{8. Ontario and Quebec legislation on, 139. illustrations as to, 141. when previous holder of, agent of owner, 144. agent in possession of, 140. when bank may acquire, 15.'!. written promise to give, 15.1. exchange for bill of lading, 158. false statement in, l.'iS. covers product of pledged goods, 150. preference over unpaid vendor, 100. sale of goods covered by, 102. Wholesale manufacturer, loans to, 14S. purchaser of products, loans to, 141). shipper of products, loans to, 140. Wife, declaration of transmission to, 02. Will, transmission of shares by, Gii, 04. notarial copy of Quebec, 04, 05. probate of, to be produced, OH, 04. Winding-up, unclaimed moneys on, 177. when to be done by directors. 182. calls to be made, 18^i. Winding-up Act, 2.'i5. interpretation of terms in, 235. application of, 2H7. when company deemed insolvent, 2.38, proceedings for winding-up order, 239, after order is made. 241. liquidators under, 243. contributories under, 240. creditors' claims, 2.'>2. fraudulent preferences, 257. appeals from orders, 2.59. procedure, 200. unclaimed dividends, 204. offences. 205. INDKX. 825 lurlty. 137. 139. iwner, 144. 50. 7rK 1N1»2, 2.S(), 1M>5, 281. Winnipeg, banks to redeem their notes at, 83. Words and phrases defined: — adminlstrateur, 2S4. agent, 14((. bank, 5. Bank Circulation Redemption Fund, 78. bank holidays, 120. bank note, 21)3. banker, 283. banker's lien, ll."». banking hours, 120. bill of lading, 8. cheque, 1U8. clearing house, 121. company, 235. contributory, 230. court, 2.'{0. debts contracted, 127, 130. document of title, 2811. exchequer bill, 2t)3. false document, 2i»l. fldeicommlssaire, 284. forgery, 204. goods, wares and merchandise, 5. holder of a cheque, 212. insurance company, 2.35. manufacturer, 0. negotiable instrument, 07. negotiable securities, 07. negotiation, 154. Official Gazette, 2,30. reasonable time, 200. shares, 49. theft, 286. trading company, 235. Treasury Board, 5. trust. 284. trustee, 284. ,, u'l.b.a.— 22 (>;' -• 'I 82tf INDEX. WordH ami plirason doflucd: — valuable security, 284. warehouse receipt, (I. wholesale manufacturer, 14S. wholesale merchant. 148. wholesale purchaser, 140. wholesale shipper, 149. winding-up order, 2U7. writing. 28r». Written promise to give security, 15:1, l.'t.'^. consent of owner to sale of goods, W2. f ~5^