E B M COMPANY, LTD Vs. DOMINION BANK

JUDGEMENT

(1.) In this case E. B. M. Company Limited (a company incorporated by Dominion Letters Patent dated 8 May 1922, and granted under the Dominion Companies Act) appeals from a judgment and order of the Court of Appeal for Ontario which affirmed a judgment or order of Kelly, J. in favour of the respondents, the Dominion Bank. The relevant facts which led up to the litigation in which this appeal arises must first be stated; the appellant Company being referred to as the old Company, and the respondent Bank being referred to as the Bank. The old Company (whose name was originally "Carling Export Brewing and Malting Company Limited", the change of name being effected by Supplementary Letters Patent dated 24th October 1930), was formed for the purpose and with the object of carrying on the business of brewers and maltsters in all its various branches, and for other purposes and objects enumerated in the Letters Patent. It also possessed all the powers conferred by S. 32, Dominion Companies Act. The old Company carried on its business as brewers until June 1927. Its share-holders at all relevant times were five in number, viz., Charles Burns, Marco Leon, his wife Freda Leon, Harry Low and his wife Norah Low. All five were also the directors of the Company. The ladies each held one share. The rest of the issued capital (over $726,00000) belonged to the three men in equal shares. The old Company had banking accounts with the Bank at the latter's London (Ontario) and Windsor (Ontario) branches.

(2.) By an agreement dated 14 June 1927, the old Company sold its undertaking and assets to a Company called Carling Breweries Limited, which may be conveniently referred to as the new Company. At that time a claim was pending against the old Company by the Dominion Government in respect of certain taxes under the Special War Revenue Act 1915. The new Company was protected against liability in respect of this claim by the old Company depositing $400,000 Dominion of Canada Victory Loan Bonds with the Bank to meet any judgment which might be obtained against the old Company with respect to the taxes. The bonds were lodged with the Bank, and the terms upon which they held them are shown in a letter of 26 October 1927, from the old Company to the Bank's head office in Toronto, which runs thus :

(3.) Messrs. Roadhouse and McTague have handed you today $400,000 of Canada Victory Loan 5? per cent. Bonds due 1 November 1934. These are to be held by you to meet any final judgment that may be obtained by the Dominion Government against Carling Export Brewing and Malting Company Limited, in respect to action now pending with reference to sales and gallonage tax on export sales.