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Supreme Court of Canada

Contracts—Document purporting to be agreement between spouses as to ownership of shares—Husband admitting signature but denying knowledge of or having signed document—Non est factum established.

In an action brought by the appellant against his former wife for the partition and sale of certain lands registered in the names of appellant and respondent as joint tenants and for an accounting, the respondent, in defending the action, claimed to be the beneficial owner of a one-half interest in the shares of a private company known as Fred Westerlund & Sons Limited. The question of the ownership of these shares became the principal issue, the determination of which turned almost wholly on whether a document purporting to be an agreement between the appellant and the respondent had or had not been entered into between the parties. While the appellant denied all knowledge of the document or of entering into or signing any such document or

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agreement, he did not deny that it contained his signature. He said that his signature must have been put on the document while he was drunk or by some trick.

The trial judge found as a fact that the document in question, although signed by the appellant, was not what on its face it purported to be. Accordingly, he gave judgment in favour of the appellant for partition and sale of the real estate held in the joint names of the parties and he dismissed the respondent’s counterclaim in respect of the shares in the company. An appeal by the respondent was allowed by the Court of Appeal (Davey C.J.B.C. dissenting) in respect of her claim to one-half of the shares. The judgment of the trial Court was upheld in respect of the partition and sale of the real estate. The appellant appealed to this Court to restore the judgment of the trial Court in respect of the shares.

Held: The appeal should be allowed.

The findings of fact made by the trial judge should not be disturbed. The view of the evidence held by the majority in the Court of Appeal ignored the specific finding by the trial judge that the impugned document was not entered into as the respondent said it was. This was not a finding that the respondent was generally not to be believed, but was a specific finding that her evidence could not be believed on this most crucial aspect of the case. In reaching his conclusion that the respondent was not to be believed and in accepting the evidence of the appellant, the trial judge had not acted on any wrong principle nor was he influenced by any irrelevant matter.

APPEAL from a judgment of the Court of Appeal for British Columbia[1], allowing an appeal in part from a judgment of Gregory J. Appeal allowed.

C.D. McQuarrie, Q.C., for the plaintiff, appellant.

A.W. Johnson, for the defendant, respondent.

The judgment of the Court was delivered by

HALL J.—This appeal arises out of an action brought by the appellant against his former wife from whom he was divorced in December 1964

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for the partition and sale of certain lands registered in the names of appellant and respondent as joint tenants and for an accounting. In defending the action, the respondent claimed to be the beneficial owner of a one-half interest in the shares of a private company known as Fred Westerlund & Sons Limited which will hereafter be referred to as “the company”. The question of the ownership of the shares in this company became the principal issue at the trial and in the Court of Appeal1 as well as in this Court. The determination of this issue turned almost wholly on whether a document dated August 8, 1958, ex. 10, and purporting to be an agreement between the appellant and the respondent had or had not been entered into between the parties.

The factual situation is somewhat unique in that while appellant denies all knowledge of the document dated August 8, 1958, or of entering into or signing any such document or agreement, he does not deny that it contains his signature. However, in acknowledging that the signature was his, he testified that when he was first faced with the document he did not believe the signature on it to be his. In that situation his solicitor, Mr. Ray Hughes, submitted the document to a handwriting expert who said that the signature was that of the appellant. Accordingly, although persisting in his denial that there was any such agreement and that he had ever signed any such agreement, he admitted the signature was his because the handwriting expert said it was. This expert was not a witness at the trial.

The appellant, while in this manner admitting the signature to be his, says it must have been put on the paper dated August 8, 1958, when he was drunk or by some trick when he was unaware that he was putting his signature to what now appears as an actual agreement.

In these circumstances there was a heavy onus on the appellant if he was to succeed in his plea of non est factum. The issue between the parties as to the shares fell to be decided on the very contradictory evidence given at the trial and on discovery by the appellant on the one hand and by the respondent on the other.

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The learned trial judge found as a fact the document bearing date August 8, 1958, although signed by the appellant, was not what on its face it purported to be. Accordingly, he gave judgment in favour of the appellant for partition and sale of the real estate held in the joint names of the parties and he dismissed the respondent’s counterclaim in respect of the shares in the company. The respondent appealed to the Court of Appeal for British Columbia and that Court (Davey C.J.B.C. dissenting) allowed her appeal in respect of her claim to one-half of the shares in the company. The judgment of the trial Court was upheld in respect of the partition and sale of the real estate. The appellant now appeals to this Court to restore the judgment of the trial Court in respect of the shares.

The learned trial judge dealt at length with the alleged agreement of August 8, 1958, and with the contradictory evidence given relative thereto, and he made specific findings of fact and of credibility as follows:

In support of her position the defendant has produced an agreement in writing purporting to be signed by both parties and to have been executed by them on August 8, 1958, a few days after they had returned from their honeymoon. The defendant swears that it was signed by both of them on the date it bears, that its wording was agreed upon after a discussion lasting half to three-quarters of an hour, and that it set out the understanding they reached on their honeymoon that there should be one pocket-book and that everything should be equal between them and that it was never rescinded or amended. The plaintiff swears that he has no recollection whatever of signing, that if he signed it he must have been too drunk to know that he was signing it, that it does not set out their understanding and that he never even saw the agreement until 1964, by which time of course the marriage was well and truly on the rocks.

On the whole of the evidence I am satisfied that the agreement, ex. 10, is not what, on its face, it purports to be. I reject the defendant’s evidence that the plaintiff signed it on the date it bears while sober and in full possession of his faculties, and find that if he did sign it he did so without any comprehension of its meaning and without any agreement

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having been reached between the parties that the shares in the company were to be included in the 50 - 50 division of assets.

As I have made a finding of credibility adverse to the defendant, I believe I owe it to her and to her counsel to give at least some intimation of my reasons for doing so.

First was the manner in which the defendant gave her evidence. It did not impress me favourably that she could remember figures to the last dollar involved in transactions nine years ago and yet, for example, be unable to remember whether or not she had instructed Mr. Nyack to give a copy of the agreement to Mr. McQuarrie. The defendant’s memory was either too good when giving evidence favourable to herself in chief or too poor when answering embarrassing questions put to her on cross-examination—perhaps both. Neither her demeanour nor the evidence she gave impressed me favourably.

Second is the inconsistency between the existence of an agreement such as ex. 10 sets out and the conduct of both parties. It is common ground that following their return from their honeymoon the parties set about sharing their assets, other than the company, 50 - 50. A chartered accountant was engaged to keep track of their financial affairs. It simply does not make sense to me that everything that was done should be done in such a business-like manner and yet something as valuable as the shares of the company left out. The defendant’s evidence was that she was not prepared to transfer any of her assets to joint ownership until their sharing agreement had been put in writing and signed. Her acquiescence until January, 1963, or later in financial statements showing that she had no interest in the company is inconsistent with what she asserts to have been the agreement in force since 1958. At the meeting in Mr. Nyack’s office in January, 1963, there was some discussion about dividing the shares in the company. The defendant testified that the plaintiff agreed to divide the shares 50 - 50 provided she would be a wife for the rest of his life. Mr. Nyack’s evidence was to the same general effect, that the plaintiff intended to give her a half interest if she was a good wife. It is stretching credulity too far to believe that the defendant would allow any such statement as this to go unchallenged, if, as she asserts, she had an agreement in writing evidencing her entitlement to the shares since August, 1958. If there was such an agreement surely the defendant’s

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claim to the shares would have been based on the agreement, yet it was not even produced, even though the plaintiff and his accountant had gone to Mr. Nyack’s office for the very purpose of hearing the defendant’s objections to and rectifying the accounts between the parties. Not only was the agreement not produced, but the objections made to matters as shown in the accounts while Mr. Russel was present included no mention whatever of the shares of the company. The agreement was not only not asserted as the foundation of the defendant’s claim as of right to be entitled to half the shares and not produced to the accountant who was supposed to rectify the financial statement to show the true state of affairs—it had not, according to Mr. Nyack’s recollection, even been produced to him, by that time, Mr. Nyack’s inability to remember whether it was before or after that meeting that he first saw the agreement is understandable enough because he had some time later given up his file to the defendant at her request and was relying on memory. But the file could have been produced to him to refresh his recollection as to the date on which he first saw the agreement. It was not produced and its non-production was not accounted for. I draw the inference that it was not produced because it would have indicated to Mr. Nyack that he had not seen the agreement when the meeting was held. This, coupled with the facts that Mr. Nyack never sent a copy to Mr. McQuarrie, although invited to do so, and that the defendant could not recall whether she had ever instructed Mr. Nyack to send Mr. McQuarrie a copy, leads me to conclude either that it was not in existence on January 17, 1963, or that the defendant knew that it did not truly set out the understanding that the parties had reached. I rather anticipate myself to observe at this point that I do not find that there was any acquiescence or laches such as Mr. Johnson argued against, which, if it had existed, might have barred the defendant from relying on the agreement now to obtain her shares. On the contrary I find that there was no agreement that she should have any shares. One further inconsistency is the defendant’s acquiescence in the plaintiff’s giving of six shares to his children and four to her children. The defendant’s conduct and that of her former solicitor are quite inconsistent with her belief in the existence of any authentic document such as ex. 10 purports to be.

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I have no hesitation in rejecting her evidence where it is contradicted by that of the plaintiff or any of his witnesses. In case it might be thought that I have overlooked the defendant’s evidence that she inquired about her shares around the time the wills were made in 1959 and that she accepted the plaintiff’s assurance that her share certificate had been left with Mr. McQuarrie for safekeeping, let me say that I have considered her evidence but reject it and accept the plaintiff’s evidence that no such conversation took place.

* * *

I am satisfied on the whole of the evidence that it was never any part of the agreement made between the parties that the defendant would receive half of the plaintiff’s interest in the Westerlund Company, and I am satisfied that the agreement they did reach was fully performed by both parties when they put title to their real property in joint tenancy and their money in joint bank accounts.

and in respect of the claim for partition of the real estate, he found as follows:

I find that they intended to be and became in law equal co-owners of the assets they pooled. I hold as a matter of law that the plaintiff is entitled to partition and an accounting and I so order.

In the Court of Appeal Davey C.J.B.C., in dealing with the trial judge’s findings of fact, said:

There is ample evidence to support those findings of fact. Since the learned trial Judge was justified in disbelieving the evidence of the appellant I shall say little more about that, except to comment later on several attacks on his reasoning, and to emphasize one point lightly touched on by him that in my respectful opinion is conclusive.

I agree that the evidence tendered to support a plea of non est factum or fraud must be carefully considered because it is no light thing to relieve a person from a contract in writing on which his signature appears. Some of the niceties of a plea of non est factum do not arise in this appeal because this is not a case of the respondent contending against an innocent party that the document was not his contract, but a case of his asserting against the alleged guilty person that she procured his signature

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by fraud or a trick, and so cannot rely on the document. If so, the agreement is unavailable to the appellant whether her fraud made the agreement void, as in the case of non est factum, or merely voidable, as in the case of ordinary fraud.

The respondent does not remember signing the document, and so he cannot say how the appellant secured his signature. He says he must have been drunk. His firm signature does not appear to be that of a completely drunken man, so I do not think that is the explanation, nor did the learned trial Judge proceed on that ground. The respondent must have been tricked in some way into signing it, if his evidence is believed; the learned trial Judge did believe him, and his evidence does seem to have a ring of truth.

When a person pleads that his signature was secured by fraud or a trick, but he cannot say when he signed the document or under what circumstances, the evidence must be examined very carefully. Several ways occur to one by which a person may be tricked into signing a document without knowing that he is doing so, or intending it. In some forms of this type of fraud the more skilful the trick the less likely the victim will know he has been tricked. The moment the respondent’s evidence in this case is believed and the appellant’s rejected, and the moment it appears that the appellant did not produce the agreement, when its production was called for by circumstances, and she would have produced it if it had been genuine, the inference is inescapable that it is not a genuine document.

Appellant’s counsel did not take the ground before us that any finding that the respondent was tricked in some other way into signing the document was outside the allegations made by the respondent in paragraph 6 of his reply. Indeed on the trial and before us the appellant made no attempt to confine respondent’s case that he had been tricked into signing the document to the allegation in his reply that appellant had secured his signature when she knew he was so drunk he could not understand it.

and after directing his attention to several of the attacks made on the learned trial judge’s reasons for disbelieving the respondent, Davey C.J.B.C. continued:

The most telling circumstance against the appellant, apart from her demeanour, is the fact that in

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1959 the respondent secured from his sons 40 out of 100 issued shares in the company, and had two each transferred to his three children and her two children. When he showed her the five share certificates in the children’s name, she says she inquired about the certificate for her 45 shares and was told that Mr. G.R. McQuarrie had kept it for safekeeping. If her evidence was true she believed the certificate for 45 shares in the company had been made out in her name in 1959 and was being held by Mr. McQuarrie. When the respondent told her and Nyack in January or February 1963 that he had always intended to give her half the company provided she was a good wife, she must have surely replied, if her evidence was true: “You have already given me half the shares and Mr. McQuarrie holds them for me. I want them.” But she did not say that; she neither called for the share certificate nor produced the agreement. She says she didn’t want to produce the agreement, because she was trying to hold her marriage together; this notwithstanding it must have then been apparent from the respondent’s remark that he had grossly deceived her about the share certificate having been made out in her name and left with Mr. McQuarrie for safekeeping. Her evidence is simply incredible.

Robertson J.A., with whom Tysoe J.A. agreed, was of the view that the appellant was not entitled to succeed on his plea of non est factum. He said:

In the final analysis, my opinion comes down to this: There is no doubt that the signature on the 8th August agreement is the husband’s. One may suspect that it was obtained by the wife by representing that the document was of a different nature from what it was, or that she had him sign on a sheet of paper protruding below another that was placed on top of it and that appeared to be the one he was signing, or that the signature was obtained by some other trick. But there is not a tittle of evidence to support a conclusion that such was the case. Belief that the wife is generally not to be believed does not supply such evidence. There is, therefore, nothing to displace the written agreement.

I do not think that this Court can, in the light of the evidence, disturb the findings of fact made by the learned trial judge and concurred in by the learned Chief Justice of British Columbia. There was evidence upon which those findings

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could be made and they are supported by the circumstances emphasized by Gregory J. and by Davey C.J.B.C. Robertson J.A.’s view of the evidence ignored, I think, the specific finding by the learned trial judge that the document of August 8, 1958, was not entered into as the respondent says it was. This was not a finding that the respondent was generally not to be believed, as Robertson J.A. suggests, but was a specific finding that her evidence could not be believed on this most crucial aspect of the case. I am unable to discern that in reaching the conclusion that the respondent was not to be believed and in accepting the evidence of the appellant, Gregory J. acted upon any wrong principle or was influenced by any irrelevant matter. He had the great advantage which the Court of Appeal had not and which this Court has not of hearing the parties give their evidence, observing their demeanour and judging as to their veracity with this assistance. Nothing in the record suggests that he failed to use or that he misused the advantage afforded to him of seeing and hearing the witnesses.

I would, accordingly, allow the appeal and restore the judgment at trial with costs in this Court and in the Court of Appeal. The cross-appeal will be dismissed without costs.

Appeal allowed with costs; cross-appeal dismissed without costs.

Solicitors for the plaintiff, appellant: McQuarrie & Selkirk, New Westminster.

Solicitor for the defendant, respondent: A. Miles Nottingham, New Westminster.

 



[1] (1969), 68 W.W.R. 689, 5 D.L.R. (3d) 507.

 

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