Hitch v. Clarkson Co. Ltd., 1981 CanLII 2914 (ON SC)
In 1981 all
members of the Ontario Provincial Legislature, without exception, voted to frustrate the laws of the Dominion by pre-empting
and interfering with the administration of justice in their direct attempt to
supplement independently the enforcement
provisions of federal laws of federal insolvency legislation and the enforcement
of federal criminal legislation.
By so doing they criminally and knowingly conspired to ignore the
Constitutional and Charter Rights of an Individual Canadian born citizen by illegally
passing a law to freeze one's assets and property rights. Further, they all
committed a Criminal Breach of Trust #IMHOPEOPLE and as supported by the decisions
of the Ontario High Court of Justice at the time. (Copy below)
As the only true nature and character of
the Act was NOT legislation of general application as agreed to by Justice Callaghan
J. The law was found to be ultra vires.
Further, these elected representatives of the public from all political
parties failed in their elected individual duties and obligations to NOT vote for legislation that they should have known was unconstitutional. Ignorance
of the law is not a defence on any of their parts or that of their respective
party leaders.
As of today NOT a single member of that legislative body of 1981 has been charged or held
accountable for such contempt of democracy; the laws and human rights abuses and Breach of Trust against
a fellow citizen let alone apologized!
Shameful……..
NOTE: The offence of breach of trust by a public officer is
established where the Crown proves beyond a reasonable doubt
that: (1) the accused is an official; (2) the accused was
acting in connection with the duties of his or her office; (3) the accused
breached the standard of responsibility and conduct demanded of him or her by
the nature of the office; (4) the accused’s conduct represented a serious
and a marked departure from the standards expected of an individual in the
accused’s position of public trust; and (5) the accused acted with the intention to use his or her public
office for a purpose other than the public good, for example, a
dishonest, partial, corrupt, or oppressive purpose. [58]
Ontario High Court of
Justice
Citation: Hitch v. Clarkson Co. Ltd.
Date: 1981-10-16*
Callaghan J.
Counsel:
Ian G. Scott, Q.C., Peter W. Hogg, Q.C.,
and Ian J. Roland, for applicants.
D. J. M. Brown, for respondents, Clarkson Company Limited and McMillan,
Binch.
John L. Ronson, for respondents, David L. Richardson
and Peter F. M. Jones.
Anne M. Molloy, for respondent, Montreal Trust Company
of Canada.
Lorraine E. Weinrib, for intervenant, Attorney-General of
Ontario.
[1]
CALLAGHAN J. (orally):—This is an application
pursuant to leave granted under Rule 124 for a determination of the following
question:
Is The Co-operative Health Services of Ontario
Assets Protection Act, 1981 within the legislative jurisdiction of the
Province of Ontario or in the alternative is it rendered inoperative by the
terms of the Winding-Up Act, R.S.C. 1970, Chap. W-10?
[2]
This application arises in the following circumstances, which for the
purposes of these proceedings are undisputed. Co-operative Health Services of Ontario (Co-op) is a co-operative corporation under the provisions of the Co-operative Corporations Act, R.S.O.
1980, c. 91, created by letters of amalgamation dated October 2, 1969.
[3]
The
applicant Clarke was at all material times the general manager of Co-op and the applicant Hitch was a barrister and solicitor
practising law in the City of North York, in the Province of Ontario.
[4]
The applicants purchased premises in the City of North York, at 20 Finch
Ave. W., 277 Duplex Ave., and 279 Duplex Ave., on April 6, 1979, and June 13,
1979, respectively. Title to both properties was taken in the name of the
applicant W. Ross Hitch "in
trust". By an agreement dated January 28, 1981, Hitch in trust agreed to sell the lands
and premises to 462333 Ontario Limited. This transaction was stipulated to
close on February 27, 1981.
[5]
On February 20, 1981, by order of the Supreme Court of Ontario leave was
granted nunc pro tunc to the Clarkson Company Limited (Clarkson)
to execute a petition for an order declaring the insolvency of Co-op and ordering its winding-up. The
petition was granted and Clarkson was
appointed as liquidator of Co-op
pursuant to the provisions of the Winding-up Act, R.S.C. 1970,
c. W-10. Since the date of its appointment, Clarkson has
acted as liquidator of Co-op
pursuant to the provisions of the Winding-up Act and as such
has initiated and participated in various trial proceedings all pursuant to the
provisions of that Act. In February of 1981, Clarkson,
as liquidator, claimed an interest in the lands hereinbefore referred to. It
also claimed an interest in the profits from the sale thereof and subsequently
commenced various proceedings in the Supreme Court of Ontario to enforce that
claim pursuant to leave granted under the Winding-up Act.
[6]
On April 6, 1981, Clarkson,
as liquidator of Co-op, obtained
an ex parte order from the Master of this Court under
the Winding-up Act empowering Clarkson, inter alia:
to compromise all
calls and liabilities to calls, debts and liabilities capable of resulting in
debts and all claims, demands and matters in dispute in any way relating to or
affecting the assets of the company or the winding-up of the Company, upon
receipt of such sums, payable at such times, and generally upon such terms, as
are agreed upon, without further notice and without further application to or
approval of the court,
and
to institute or
defend any action, suit or prosecution or other legal proceeding, both civil
and criminal, in its own name as Liquidator or in the name or on behalf of the
company, as the case may be, without further notice and without further
application to or approval of the Court.
[7]
Clarkson brought interlocutory motions to
restrain the disposition of the land or the proceeds from the sale of the land
in which it claimed an interest.
[8]
This litigation led to discussions between the solicitor for Clarkson and the solicitor for the
applicants herein, with regard to the agreement of purchase and sale of the
said premises and a possible settlement of the issues in dispute in the
proceedings instituted in this Court. A formal agreement in writing
between Clarkson, as liquidator
of Co-op, Hitch in trust and the Montreal Trust
Company of Canada (Montreal Trust) dated May 21, 1981, was entered into (the
Agreement). The Agreement provided, inter alia:
1. Payment of
Proceeds of Sale. If the sale of the Lands to 462333 Ontario Limited
is completed, the proceeds of such sale, including interest accrued on such
proceeds, net of:
(a) the amount
required to discharge all mortgages affecting the Lands including, without
limitation, mortgages assigned to the Canadian Imperial Bank of Commerce;
(b) real estate commission
payable in connection with the sale transaction; and
(c) adjustments for
realty taxes, rent and utilities shall be paid as follows:
(i) $50,000 to Hitch in Trust or as he may direct to be
dealt with in his sole discretion, free of any claim by the Liquidator with
respect to Hitch in Trust for
an accounting or otherwise;
(ii) the remainder to
the Trustee, to be invested by the Trustee in renewable 30-day term deposits,
which remainder and the interest accrued thereon are hereinafter referred to as
the "Balance".
2. Trust. The
Liquidator and Hitch in Trust
confirm that the Balance will be held by the Trustee in trust for the
Liquidator and Hitch in
Trust;
(a) until the final
disposition of interlocutory motions in Actions Nos. 3762/81, Whitby, and 4704/81,
Toronto, currently brought by the Liquidator and at present returnable May 19,
1981, to restrain W. Ross Hitch and
Peter R. Clarke from disbursing the Balance until final judgment in or other final
disposition of the hereinbefore recited actions; and
(b) if such
interlocutory motions brought by the Liquidator are successful, until a final
judgment in or other final disposition of such actions declaring the respective
entitlements of the Liquidator and Hitch in
Trust to the Balance or until further order of the Court.
3. Payment
without Prejudice. Payment of the Balance to Hitch in Trust under paragraph 2(a)
(which shall be made unless paragraph 2(b) applies), shall be without prejudice
to the Liquidator's rights to demand an accounting with respect to the Balance
and if any final judgment or other final disposition so provides, to demand and
receive payment to it of the Balance so paid to Hitch in Trust.
4. Payment by
Trust of Balance. The Trustee shall release the Balance in accordance
with the joint written direction of the Liquidator (or its counsel, McMillan,
Binch) and Hitch in Trust (or
his counsel, Cassels, Brock) and the parties will execute, or will cause their
respective counsel to execute, such direction expeditiously to give effect to
paragraph 2.
[9]
On May 21, 1981, the sale referred to closed and on the basis of the
above-mentioned agreement the mortgages were discharged and the net proceeds of
the sale, $378,200, were paid to Montreal Trust pursuant to its terms.
[10]
The interlocutory
motions were terminated on June 8, 1981, by a decision of this Court. An
application for leave to appeal was dismissed on June 11, 1981. These motions,
it is agreed, were the interlocutory proceedings and motions referred to in the
Agreement and had all been finally resolved pursuant to the provisions of that
Agreement as of June 11th.
[11]
On June 15, 1981, the
solicitors for Clarkson wrote
to the solicitors for the applicants in the following terms:
Dear Sirs:
In view of the
disposition of the motion for leave to appeal, would you kindly advise what
arrangements you wish to make for the disbursal of the funds held by Montreal
Trust.
We would also refer
you to paragraph 13 of the Affidavit of Mr. Clarke dated May 15th, 1981, in
action No. 4704/81. Would you kindly indicate what arrangements you wish to
make for the payment of the Patterson notes in the amount of $93,403.00 and
$50,000.00 respectively. Perhaps a Direction to Montreal Trust would be the
most convenient method of finalizing such arrangement. In return, Clarksons' would endorse the notes to Mr.
Clarke without recourse.
We look forward to
hearing from you.
[12]
On June 17, 1981, the
Legislature of the Province of Ontario enacted the Co-operative Health Services of Ontario
Assets Protection Act, 1981 (Ont.), c. 7. On July 13, 1981, Clarkson executed the direction to
Montreal Trust referred to in the Agreement. On July 14, 1981, upon
presentation of the direction executed by Clarkson as
liquidator and by the solicitors for the applicants, Montreal Trust refused to
pay over the proceeds with the advice that it was unable to distribute or
release the funds except as permitted by the terms of the Act. These funds have
not been released to date. The liquidator states that the enactment of the Act
frustrates its ability to perform its obligations under the aforementioned
Agreement.
[13]
In the present action
the applicants seek a declaration that the Act is ultra vires the
Legislature of Ontario and damages againstClarkson for
breach of contract, i.e., the Agreement. The applicant also
claims damages against all defendants, except Montreal Trust for conspiracy to
injure.
[14]
The defendants plead
that the Act frustrated Clarkson's
obligations under the Agreement and deny the conspiracy. The Montreal Trust in
a separate pleading awaits direction of this Court as to its obligations with
respect to the funds held by it. Concurrent with this action, Clarkson as liquidator of the estate,
has initiated another action in the Supreme Court of Ontario against the
applicants as defendants to determine entitlement to the trust fund which is
the subject of the Agreement.
An Act respecting
Certain Potential Assets of Co-operative
Health Services of Ontario
HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the
Province of Ontario, enacts as follows:
1. In this Act,
"trust property" means the funds in the possession of Montreal Trust
Company of Canada on the 17th day of June, 1981, and any interest thereon, from
the sale of the lands known municipally as 20 Finch Avenue West and 277 and 279
Duplex Avenue, all in the City of North York, in The Municipality of
Metropolitan Toronto, sold by W. Ross Hitch,
in Trust, to 462333 Ontario Limited.
2. Notwithstanding
the decision of any court, the trust property shall be held by Montreal Trust
Company of Canada, as trustee, or by such other trustee as may be named by the
Lieutenant Governor in Council, until such time as The Clarkson Company Limited applies to the
Supreme Court of Ontario for discharge as liquidator of the estate and effects
of Co-operative Health Services of
Ontario.
3. The trustee shall
not distribute or, except for the purposes of transferring the trust property
to a trustee appointed under clause a of section 4, release
the trust property until The Clarkson Company
Limited makes the application referred to in section 2.
4. The Lieutenant
Governor in Council may, by order,
(а) name a person to
act as trustee of the trust property and, where a person is so named, the
trustee, as of the day of the order, shall take all steps necessary to transfer
the trust property to the new trustee; and
(b) prescribe
one or more classes of investments that may be made by the trustee with respect
to the trust property and fix the compensation of the trustee, which
compensation shall be paid out of the trust property.
5. This Act shall be
deemed to have come into force on the 17th day of June, 1981.
6. The short title of
this Act is The Co-operative
Health Services of Ontario Assets Protection Act, 1981.
[16]
The explanatory note
accompanying the Act after reference to the concurrent action above mentioned
provides as follows:
The Clarkson Company Limited applied for an
interlocutory injunction to preserve the funds until the trial of the action.
The application and leave to appeal were denied. The Bill preserves the funds
until all matters related to the distribution of the assets of Co-operative Health Services of Ontario have
been determined.
[17]
The validity of the
Act is impeached on the grounds that the Legislature in purporting to preserve
the "trust property" has invaded the exclusive legislative domain in
relation to insolvency ascribed to Parliament under s. 91(21) of the British North America Act, 1867: see R.S.C. 1970, App.
II.
[18]
Counsel for the
Attorney-General for Ontario whose submissions were adopted by all the
respondents except Montreal Trust herein and who appeared pursuant to s. 35 of
the Judicature Act, R.S.O. 1980, c. 223, submits that the
provisions of the Act simply preserve the availability of the trust property
for distribution under the Winding-up Act and as such is
analogous to noncoercive provincial moratorium legislation. Furthermore, it is
submitted that the Act merely preserves the status quo for a
fixed period of time. It is argued that it is validly enacted pursuant to s. 92(13) of the British North America Act, 1867.
[19]
There is no doubt
that the Province may in certain circumstances and in proper aspects enact
moratorium legislation: see Abitibi Power & Paper Co. Ltd. v. Montreal Trust Co. et al., 1943 CanLII 303 (UK JCPC), [1943] 4
D.L.R. 1 at p. 9, [1943] A.C. 536 at pp. 547-8, [1943] 3
W.W.R. 33. This power, however, is circumscribed within defined limits.
In Canadian Bankers' Ass'n et al. v.
A.-G. Sask., 1955 CanLII 78 (SCC), [1956] S.C.R.
31 at p. 42, [1955] 5 D.L.R. 736 at p. 752, 35 C.B.R. 135,
Mr. Justice Locke stated:
Power to declare a
moratorium for the relief of the residents of a province generally in some
great emergency, such as existed in 1914 and in the days of the lengthy
depression in the thirties, is one thing, but power to intervene between
insolvent debtors and their creditors, irrespective of the reasons which have
rendered the debtor unable to meet his liabilities, is something entirely
different.
It is in light of that caution that one
approaches the submission of the intervenor in this case. The sole issue for
determination is the true nature and character of the Act. The Act is not
legislation of general application. Rather, it appears to be legislation
directed solely to the property held by Montreal Trust pursuant to the
Agreement. That Agreement was a compromise arrived at between a liquidator
under the Winding-up Act and the applicants in the course of
the administration of the estate of the insolvent. Neither the authority nor
the propriety of the liquidator in arriving at such a compromise has been
placed in dispute in these proceedings. Indeed, such arrangements are clearly
contemplated under the order of the Master of this Court, dated April 6, 1981:
see Record, pp. 37-40.
[20]
The Agreement
contains precise terms under which Montreal Trust is obliged to pay out the
proceeds of the sale. That the liquidator, in the course of the administration
of the estate, had an interest in the payment of part of those funds
notwithstanding its failure to obtain all of them by the various curial
proceedings initiated by it, is manifest from the letter of June 15, 1981, to
the solicitor for the applicant.
[21]
The Act by s. 2, in
my view, frustrates that Agreement and imposes a freeze on the "trust
property" in the hands of Montreal Trust. Indeed, that section appears to
deny the liquidator that portion of the "trust property" claimed in
the letter of June 15, 1981, until such time as Clarkson applies to the Court for a discharge.
[22]
Further, s. 4 of the
Act appears to empower the Lieutenant-Governor in Council to vary the terms of
the Agreement. In so doing the Act authorizes the Lieutenant-Governor in
Council to, in effect, rewrite the compromise arrived at by the liquidator in
the course of the administration of the estate under the Winding-up
Act. By that section, the Lieutenant-Governor in Council may replace
the trustee, Montreal Trust, direct the interim investment of the trust funds,
fix the amount of compensation the trustee may claim, and charge the trust
property with that compensation.
[23]
In my opinion,
legislation which so directly interferes with property subject to a compromise
arrangement between a liquidator under the Winding-up Act and
a third party is not simply
legislation analogous to moratorium legislation; but, rather, is legislation
which in its true nature and character pre-empts and interferes with the
administration of the insolvent's estate by actively assuming the protection of
potential estate assets. In so doing, it is no more than a legislative attempt
to supplement the enforcement provisions of the federal insolvency legislation.
[24]
The general scope of
the jurisdiction in relation to bankruptcy and insolvency conferred under s. 91(21) is a subject which has been much
traversed in the case-law. It is clear that compositions, arrangements and the
administration of the insolvent's estate are within that jurisdiction:
see Reference Re Farmers' Creditors Arrangement Act, 1934, 1936 CanLII 35 (SCC), [1936] S.C.R.
384 at pp. 389 and 393, [1936] 3 D.L.R. 610 at pp. 613 and
617, 17 C.B.R. 359, per Duff C.J. [affirmed 1937 CanLII 367 (UK JCPC), [1937] 1
D.L.R. 695, [1937] A.C. 391, [1937] 1 W.W.R. 320]. It is equally
clear that the Province cannot step in and assume the protection of an
insolvent or his estate: see Canadian Bankers' Ass'n, supra, per Rand
J., at p. 47 S.C.R., p. 740 D.L.R.:
If the province
steps in and actively assumes the general protection of such a debtor, by
whatever means, it is acting in relation to insolvency, and assuming the
function of Parliament; it is so far administering, coercively as to creditors,
the affairs of insolvent debtors. In this it is frustrating the laws of the
Dominion in relation to the same subject.
Furthermore, a provincial Legislature
has no mandate to supplement federal insolvency legislation: see Re
Wentworth Ins. Co., 1968 CanLII 38 (ON CA), [1968] 2 O.R.
416 at p. 425, 69 D.L.R. (2d) 448 at p. 457, 11 C.B.R.
(N.S.) 265, per Laskin J.A.; affirmed 1969 CanLII 18 (SCC), [1969] S.C.R.
779, 6 D.L.R. (3d) 545, 12 C.B.R. (N.S.) 265, sub nom. A.-G.
Ont. v. Policyholders of Wentworth Ins. et
al.:
It is as
incompetent for a provincial Legislature to seek independently to supplement
the enforcement of federal insolvency legislation as it
is to seek to supplement independently the enforcement of federal criminal
legislation.
[25]
The legislation in question
on this application purports
to exercise legislative power in relation to and for the purposes of assisting
in matters relating to the distribution of the assets of an estate of an
insolvent.
[26]
The Act in assuming to protect potential estate
assets and thereby directly frustrating a compromise arrangement negotiated by
the liquidator under the Winding-up Act is, in my view,
legislation in relation to matters falling directly within the subject of
insolvency and is, accordingly, ultra vires. The declaration
sought will be granted and the question of law propounded will be answered in
accordance with these reasons.
