IMPERIAL BANK OF CANADA Vs. MARY VICTORIA BEGLEY

JUDGEMENT

(1.) This is an appeal by special leave from a judgment of the Supreme Court of Canada, dated 21 December 1934, reversing a judgment of the Appellate Division of the Supreme Court of Alberta, dated 24 March 1934, which allowed an appeal from the judgment of Boyle, J., the trial Judge. It may be mentioned here that there was a jury at the trial until the close of the evidence; but counsel for both parties agreed that the jury should be dispensed with and the decision of the case was left to the trial Judge who gave judgment in favour of the respondent for the full amount of her claim, viz., for $13,356 with costs. The judgment was reversed and the action was dismissed by the Appellate Division (McGillivray, J. A., dissenting). The Supreme Court of Canada restored the judgment of the trial Judge in respect of the claim for $8,500. The reasons for the judgment were delivered by Duff, C. J., Crockett, Hughes and Maclean, JJ., concurring; but there was a dissenting judgment by Cannon, J. The present appeal is concerned only with the claim for $8,500 with interest from 29 June 1929, and it will be unnecessary to deal with anything but that claim.

(2.) The respondent is the widow of Robert Wilson Begley, a farmer who died on 26th December 1928, leaving a will under which she was sole executrix and sole beneficiary. She was in no sense a business woman and instead of taking out probate she gave a power of attorney to one, J.W. McElroy, also a farmer who had been a neighbour and close friend of the respondent and her husband for many years. He was granted administration of the estate with the will annexed; and on 27 June 1929, having completed the administration of the estate he was discharged. The respondent had had for a considerable time a small savings account with the appellants, the Imperial Bank of Canada, at their Calgary branch, and on the completion of the administration of the estate the proceeds of the estate were deposited to the respondent's credit in the said account. They amounted to the sum of $13,006. The total sum to her credit in the said account amounted after such deposit to the sum of $13,081. McElroy had had for a considerable time an account in the same branch of the bank which had generally showed a debit balance; and at this period his debit balance exceeded $8,000. The Bank for some years had been pressing him for payment. They held security by way of mortgage on McElroy's land, but shortly before the events to be stated this mortgage was postponed to enable McElroy to mortgage the same lands to raise money for the purpose of discharging a part of his indebtedness to the appellants which had amounted in December 1929, to $18,690. The appellants were apparently not satisfied with their security, and the assistant general manager at Toronto continued to urge Mr. Weaver, the local manager of the bank at Calgary, to obtain payment from McElroy of his debt. In April 1929, Weaver learnt that a sale which had been in prospect of one of McElroy's farms to one Herron, from the proceeds of which McElroy had promised to discharge his debt to the Bank, might fall through, and at that time McElroy is said to have stated to Weaver that, if the sale did fall through, he could borrow from the respondent a sufficient sum to pay his debt.

(3.) The respondent at this time was in the United States; and on 7 June 1929, McElroy appears to have told Weaver that the respondent had not yet returned from the States and that he would make arrangements with her when she came back. The respondent returned to Calgary on 19 June 1929. She desired that McElroy should attend to the investment of her money, and on 24 June she executed a power of attorney in his favour, using for the purpose a printed form in very wide terms supplied by the appellants. This power of attorney, which in fact bears date 28 June 1929, was executed at the office of Mr. Moyer, a solicitor who had acted for some years for McElroy, and had acted as solicitor in the administration of Robert Wilson Begley's estate. The respondent visited the Bank on 21 June with McElroy and Moyer and had a short conversation with Weaver, and she also visited the Bank on 24 June and again on 25 June. She then arranged with the Assistant Manager, Chambers, for the transfer of some money for her use in Hamilton, Ontario where she was going to pay a visit. Nothing however, was said to her about the suggested discharge of McElroy's indebtedness to the Bank out of moneys standing to her credit. On 26 June she left for Hamilton, and three days after her departure, that is on 29 June 1929, McElroy, purporting to act under the power of attorney, transferred from the respondent's savings account to his own account a sum of $ 8,500, which, together with a small sum of his own, was sufficient to discharge the whole of his debt to the appellants. The cheque was signed "Victoria Begley, per J. W. McElroy, Atty."; it was drawn in favour of "J. W. McElroy or Order," and was endorsed "Deposited to the credit of J. W. McElroy." McElroy was not called as a witness and the only direct evidence as to what occurred on 29 June 1929 is that of the assistant manager Chambers. According to his account McElroy, had stated that he was going to borrow sufficient money from Mrs. Begley's account to pay off his liability to the bank and was going to give her a promissory note payable on demand with interest at 7 per cent per annum. Chambers made out the note which McElroy signed and he also made out the cheque in favour of McElroy for $8,500; and the indebtedness of McElroy to the appellants was in this way apparently discharged. Chambers took the promissory note, but did not ask, on the respondent's behalf, for security (although the appellants had had a third mortgage as security for their debt), nor did they communicate in any way with the respondent or her Solicitor Moyer, who was in Calgary. The respondent had never authorised such a use of the power of attorney, and it was clearly a fraudulent act on the part of McElroy. The object of the power of attorney was explained at the meeting at Moyer's office between the respondent McElroy and Moyer on 24th June, and it is not in dispute that the object was to make arrangement for the investment of the money in her savings account and that McElroy was to try to get, subject to Moyer's approval, investments at a higher rate of interest than the ordinary bank rate on deposits. It is unnecessary for their Lordships to comment upon the participation of the officers of the bank in this curious transaction, carried through without the smallest endeavour to verify from the respondent herself, who, it may be mentioned incidentally, was in very bad health at the time, that she was lending so large a proportion of her property without security to a man whose financial position was known to the bank to be of an unsatisfactory character. Mr. Tilley, as counsel for the appellants, did not seek to question the view entertained by all the Judges who have dealt with the case, including those in the Supreme Court that the bank came under a fiduciary obligation towards the respondent as regards the whole of the sum of $8,500. There can indeed be no question that in the circumstances of the case McElroy, when he signed the cheque in his own favour on the authority of the power of attorney, apart from any liability at common law, became a constructive trustee of the sum of $8,500 [Burdick V/s. Garrick, (1870) 5 Ch 233, Gray V/s. Johnston, (1868) 3 HL 1 and John V/s. Dodwell, (1918) AC 563 at p. 569]. Nor can it be doubted that the appellants who for their own benefit concurred in the transaction without any inquiry became subject to a fiduciary obligation similar to that by which McElroy was bound [Bridgman V/s. Gill, (1857) 24 Beav 302, Coleman V/s. Bucks. and Oxon. Union Bank, (1897) 2 Ch 243 and B.A. Elevator Co. V/s. Bank B.N.A., (1919) AC 658].