Thibault v. Central Trust Company of Canada

Thibault v. Central Trust Company of Canada

The mortgage was ultra vires and wholly void because it secured payment for the company's shares in contravention of the Companies Act; consequently the subsidiary covenant to pay taxes and add them to the principal could not operate and is unenforceable where the primary obligation is invalid.

Citation
[1963] SCR 312
Parties
Appellant (defendant): Camille Thibault; Respondent (plaintiff): The Central Trust Company of Canada, Trustee of the Estate of Thibault Auto Limited, In Bankruptcy
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
24 June 1963
Procedural Posture
Appeal to Supreme Court of Canada (commercial/company Law/mortgage Dispute) / On Appeal From the Supreme Court of New Brunswick, Appeal Division
Outcome
Appeal dismissed with costs.
Legal Topics
Ultra Vires, Mortgage Validity, Covenant to Pay Taxes, Severability of Security, Corporate Capacity to Charge Assets
Source Language
English
Commercial Law Company Law Property Law Bankruptcy Law Ultra Vires Mortgage Validity Covenant to Pay Taxes Severability of Security +1 more

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Parties

Camille Thibault

Appellant (defendant)

The Central Trust Company of Canada, Trustee of the Estate of Thibault Auto Limited, In Bankruptcy

Respondent (plaintiff)

Procedural Posture

Appeal to Supreme Court of Canada (commercial/company Law/mortgage Dispute) / On Appeal From the Supreme Court of New Brunswick, Appeal Division

Legal Issues

  1. 1 Whether a company could validly grant a mortgage to secure payment of purchase money for its shares by a third party contrary to s.37(1) of the Companies Act (R.S.N.B. 1952, c.33)
  2. 2 Whether a covenant in the mortgage permitting the mortgagee to pay taxes on the mortgaged land and to add those taxes to the principal is severable and enforceable where the main mortgage obligation is ultra vires and void
  3. 3 Whether portions of a security can be upheld where other parts are ultra vires

Ratio Decidendi

The mortgage was ultra vires and wholly void because it secured payment for the company's shares in contravention of the Companies Act; consequently the subsidiary covenant to pay taxes and add them to the principal could not operate and is unenforceable where the primary obligation is invalid.

Court Disposition

Appeal dismissed with costs.

Orders

  • Appeal dismissed with costs.