New Brunswick Rail Company v British & French Trust Corporation Ltd

APPEAL from a decision of the Court of Appeal.

The appellants, the New Brunswick Railway Company, were incorporated by an Act of the New Brunswick Legislature in 1870, and were by an Act of the Dominion Legislature of 1881 empowered to issue mortgage bonds. In 1884 they issued a large number of these bonds by the terms of which they promised to pay to the bearer or registered holder on August 1, 1934, “the sum of one hundred pounds sterling of gold coin of Great Britain of the present standard of weight and fineness at its agency in the City of London, England, with interest thereon at the rate of five pounds sterling per centum per annum semi-annually on February 1 and August 1 in each year in the said City of London or, at the option of the holder, at the office of the company in New Brunswick on presentation and surrender of the interest warrants or coupons hereto annexed as they severally become due.” The bonds were secured by a first mortgage or deed of trust executed by the company to the Central Trust Company of New York as trustee, covering its railway and other property. Attached to each bond was a coupon in these terms: “£2 10s. Stg. No. 100. New Brunswick Railway Company will pay the bearer Two pounds ten shillings stg. at its agency, in the City of London, England, or at its office in New Brunswick, on the first day of …., being six months' interest on its First Mortgage Bond No ……”

The present action concerned 992 of these bonds which were bought by the respondents on August 15, 1934, that is, after the date when the principal fell due for payment. At an earlier date, however, they had bought one bond, and on August 20, 1934, they issued a writ claiming the following relief in respect thereof: (1.) a declaration that upon its true construction the respondents (the plaintiffs in the action) were entitled to receive from the appellants (the defendants in the action) (a) such a sum as represented the price in London in sterling of 12,327.447 grains of gold of the standard of fineness specified in Schedule 1 of the Coinage Act, 1870; and (b) half-yearly interest thereunder on August 1, 1934, a sum equal to 2½ per cent. of the amount specified in (a) above, less income tax; (2.) payment of the sums due to the respondents in accordance with the foregoing declaration, with interest; and (3.) alternatively, damages for breach of the appellants' promise to pay the sum of 100 l. sterling gold coins of the standard of weight and fineness existing on August 1, 1884, together with half-yearly interest thereon at 5 per cent.

Leave to serve the writ in that action out of the jurisdiction was obtained, but the appellants did not enter an appearance, and thereafter judgment was entered for the respondents, it being adjudged and declared “that upon the true construction of the bond …. the plaintiffs are entitled as holders thereof to receive from the defendants (A) by way of the principal due thereunder on August 1, 1934, such sum as represents the price in London in sterling (calculated as on that day) of 12,327.447 grains of gold of the standard of fineness specified in the First Schedule to the Coinage Act, 1870, and (B) by way of the half-yearly interest due thereunder on the said 1st day of August, 1934, a sum equal to 2½ per cent. of the amount specified in (A) above less income tax.”

On March 20, 1935, the respondents issued the writ in the present action claiming a declaration in the terms set out above. By their defence the appellants contended that they were entitled to discharge their obligation by tendering 100 l. sterling for each bond with interest (less income tax) at 5 per cent. in legal tender.

By their reply the respondents pleaded that the appellants were estopped by the judgment above referred to from raising their present contention.

The action was tried by Hilbery J., who by his judgment dated January 16, 1936, held that upon the proper construction of the bonds and attached interest coupons the appellants were entitled to discharge their liability in respect of principal and interest by paying the nominal amount of currency called for by the bonds, and that the appellants were not estopped from contending for this construction; he accordingly dismissed the action with costs.

The respondents appealed to the Court of Appeal, but before the appeal came on for hearing Canada passed the Gold Clause Act, 1937, which by s. 4 provided as follows: “In the case of any gold clause obligation governed by the law of Canada payable in Canada or elsewhere, in money other than money of Canada, tender of the nominal or face amount of the obligation in currency which is legal tender for the payment of debts in the country in the money of which the obligation is payable shall be a legal tender and the debtor shall, on making payment in accordance with such a tender, be entitled to a discharge of the obligation.” The appellants applied for leave, and leave was granted, to raise the question whether they were not in any event by reason of this legislation entitled to discharge their obligations under the bonds and interest coupons by paying the nominal amount thereof. The appeal was thereafter heard and allowed, the Court holding that the present respondents were entitled to receive in respect of each bond such a sum as represented the price in London on August 1, 1934, in sterling (calculated as on that day) of 12,327.447 grains of gold of the...