Iwasaki v R, 1968 CanLII 1297 (CA EXC), 1 Ex CR 281

Sheppard, D.J. — #

The suppliant, Torazo Iwasaki, alleges by petition that the Custodian as trustee for the suppliant as evacuee committed a breach of trust in selling land of the suppliant without any power of sale, or by selling to the specific grantee, Salt Spring Lands Limited, and for such acts of the Custodian the Crown is liable by respondeat superior. 

The Crown in defence says: 

(1) That there was no trust; 

(2) That there was no breach of trust in selling; 

(3) That the suppliant’s claim is barred by limitation of action and by laches; 

(4) That the suppliant’s claim is barred by release. 

As the issue raises the effect of certain Orders in Council, it is convenient to recite the legislation in proper sequence. The War Measures Act, R.S.C. 1927, c. 206, s. 3 [now R.S.C. 1952, c. 288], empowers the Governor-General in Council to enact such Orders in Council as he may deem necessary or advisable. That legislation has been held to be valid: Reference re Deportation of Japanese, [1946] 3 D.L.R. 321, [1946] S.C.R. 248; affirmed sub nom. Co-operative Committee on Japanese Canadians et al. v. A.-G. Can., [1947] 1 D.L.R. 577, [1947] A.C. 87. 

The first group of Orders in Council relates essentially to the person in declaring a protected area and by requiring any person of the Japanese race to leave that area. Those Orders in Council are Order in Council 5295, being the Defence of Canada Regulations (Consolidation) 1941 (ex. 84) which by s. 4 conferred the power to declare a protected area and to control the movement of persons therein; Order in Council 365 (ex. 5) amended s. 4 by allowing the Minister of National Defence and the Minister of Justice to declare the protected area and to require all or any enemy alien to leave; Order in Council 9760 (ex. 6) declared a protected area in all land west of the Cascades, including Saltspring Island, where are situated the lands in question; Order in Council P.C. 1486 [75 Can. Gaz. 3475] (ex. 7) amended the Defence of Canada Regulations (Consolidation) 1941, by authorizing the Minister of Justice to require any or all persons to leave the protected area, and by order of the Minister of Justice of February 26, 1942 (ex. 9), every person of the Japanese race was to leave the protected area forthwith. 

The second group of Orders in Council relates to the lands in question. Order in Council P.C. 1665 [75 Can. Gaz. 3628] (ex. 10) established a security commission and s. 12 provided that all property situate in the protected area of British Columbia belonging to any person of the Japanese race and resident in such area should be vested in and subject to the control and management of the Custodian. Order in Council P.C. 2483 [Proclamations & Orders in Council, vol. 6, p. 252] (ex. 11) amended Order in Council P.C. 1665 [75 Can. Gaz. 3628] by defining a person of the Japanese race as follows: 

“Person of the Japanese race” means any person of the Japanese race required to leave any protected area of British Columbia by Order of the Minister of Justice under Regulation 4, as amended, of the Defence of Canada Regulations (Consolidation) 1941. 

and by repealing s. 12 and substituting therefor the following: 

12(1) Subject as hereinafter in this Regulation provided, as a protective measure only, all property situated in any protected area of British Columbia belonging to any person of the Japanese race (excepting fishing vessels subject to Order in Council P.C. 288 of January 13th, 1942, and deposits of money, shares of stock, debentures, bonds or other securities) delivered up to any person by the owner pursuant to an order of the Minister of Justice, or which is turned over to the Custodian by or on behalf of the owner, or which the owner, on being evacuated from the protected area, is unable to take with him, shall be vested in and subject to the control and management of the Custodian as defined in the Regulations Respecting Trading with the Enemy, (1939); provided, however, that no commission shall be charged by the Custodian in respect of such control and management. 

(2) The Custodian may, notwithstanding anything contained in this Regulation, order that all or any property whatsoever, situated in any protected area of British Columbia, belonging to any person of the Japanese race shall, for the purpose of protecting the interests of the owner or any other person, be vested in the Custodian, and the Custodian shall have full power to administer such property for the benefit of all such interested persons, and shall release such property upon being satisfied that the interests aforesaid will not be prejudiced thereby. 

(3) For the purposes of the control and management of such property by the Custodian, the Consolidated Regulations Respecting Trading with the Enemy, (1939) shall apply mutatis mutandis to the same extent as if the property belonged to an enemy within the meaning of the said Consolidated Regulations. 

The Consolidated Regulations Respecting Trading with the Enemy (1939) (ex. 83), which are incorporated by reference by s. 12(3), defines Custodian by s. 23(1), vests the property of the enemy in the Custodian, and by s. 24 (2) provides: 

This regulation shall be a vesting order and shall confer upon the Custodian all the rights of the original enemy holder, including the power of sale, management and otherwise dealing with such property rights and interests as he may in his sole discretion decide. 

Additional powers of the Custodian are conferred by ss. 36 to 40 inclusive and 43 to 46 inclusive. 

Order in Council P.C. 469 [[1943] 1 C.W.O.R. 224] (ex. 21) empowered the Custodian to sell property of persons of the Japanese race. 

Section 12(3) of Order in Council 2483 adopts by reference Regulations Respecting Trading with the Enemy (1939). Consolidated Regulations under Order in Council P.C. 3959 [74 Can. Gaz. 757] (ex. 95) were in force and applied initially to the Custodian. On November 13, 1943, Revised Regulations Respecting Trading with the Enemy (1943) [P.C. 8526, [1943] 4 C.W.O.R. 713] (ex. 28), were substituted and the former Regulations were repealed. 

The facts follow. 

The suppliant was born in Japan of parents who were also born in Japan (examination for discovery, Qq. 5 to 10 inclusive) and was naturalized as shown by Certificate of Canada Citizenship dated June 19, 1951 (ex. 82). On April 5, 1942 (ex. 12) the suppliant, pursuant to the notice (ex. 9) did register as a person of the Japanese race. The suppliant was subsequently evacuated and moved to Greenwood, British Columbia (letter of his solicitor of September 17, 1942 (ex. 19)), and on May 23, 1943, the Custodian filed in the Land Registry Office in the City of Victoria a certificate of vesting of the suppliant’s land (ex. 24). 

In 1944 the Custodian issued a catalogue (ex. 29) of real properties for sale by public tender which included the lands of the suppliant on Saltspring Island, and this catalogue states: 

Persons interested in the purchase of any of the properties listed herein are asked to contact the agent whose name is set opposite each property. These agents will be pleased to supply additional information and to arrange for the inspection of the property. 

Also the catalogue referred interested parties for property on Saltspring Island, B.C., to Gavin C. Mouat of Ganges, B.C., described as an agent. The Custodian received offers from Captain Smith (ex. 30) and Salt Spring Lands Limited (ex. 31) to which the Custodian replied, saying that he required an independent valuation. The Custodian also received a third tender from one Bush (ex. 32) which was refused as filed too late. D. K. Wilson, the evaluator of the Custodian, reported the value of the land at $5,000 (ex. 33) and the Custodian thereupon wrote Smith (ex. 34) and Salt Spring Lands Ltd. (ex. 35) that he would not consider any offer of less than $5,000. Subsequently Salt Spring Lands Ltd. offered to purchase at $5,250 and that offer, being the highest, was ultimately accepted (exs. 36, 38, 39 and 40). By deed of March 1, 1945, the Custodian conveyed to Salt Spring Lands Ltd. (exs. 45 and 46). Having received the purchase-money (exs. 47 and 48) the Custodian, on May 23, 1945, accounted to the suppliant (ex. 51). 

By Order in Council 1810 of July 14, 1947 (ex. 58), it is recited that persons of the Japanese race were evacuated and claims have been made that they suffered pecuniary loss and therefore it was deemed advisable to appoint a commissioner to investigate the claims and to make recommendations. H. I. Bird, then Justice of the Appeal Court, later the Chief Justice of British Columbia, was appointed commissioner. By letter of May 23, 1945 (ex. 51), to the suppliant, the Custodian reported the sale of the land at $5,250 and reported the balance of $4,838.54 standing to the suppliant’s credit. By letter of August 19, 1947 (ex. 60), the suppliant objected to the sale of his property, and by letter of August 28, 1947 (ex. 61), the Custodian remitted the balance standing to the credit of the suppliant and reported to him that Mr. Justice Bird had been appointed as commissioner to investigate certain claims of persons of the Japanese race evacuated from British Columbia. Cheques were enclosed by letters of October 5, 1948 (exs. 66 and 67). Subsequently the suppliant was notified of the date of the hearing before the commissioner (ex. 63), and the suppliant gave evidence before the commissioner (ex. 86) and was there represented by counsel (ex. 62). 

The commissioner reported (ex. 72) as follows: 

I have the honour to report upon the investigation into claims of persons of the Japanese race made by me pursuant to the terms of Order-in-Council P.C. 1810 of July 18th, 1947, as subsequently amended. 

Subsequently a policy of liquidation of the property of these evacuated persons was laid down by Order-in-Council P.C. 469 of January 19th, 1943. This policy was put into operation soon after, and on March 8th, 1943, two Advisory Committees were set up by the Custodian to advise the Director upon the disposition or effective use of real and personal property of evacuated persons of the Japanese race then vested in the Custodian. 

The first of these Committees was appointed for the Greater Vancouver area, the personnel of which comprised The Honourable Mr. Justice Sidney Smith, Justice of Appeal, British Columbia, as Chairman; Charles Jones, Esquire (then Alderman of the City of Vancouver and later Mayor); and K. Kimura, Esquire. 

The other Advisory Committee, known as the Rural Property Committee, had jurisdiction over all vested property situate outside the Greater Vancouver area, including Prince Rupert and the vicinity, Victoria and elsewhere on Vancouver Island, as well as the Fraser Valley. This Committee was composed of His Honour the late Judge David Whiteside, deceased, as Chairman; D. E. McKenzie, Esquire, New Westminster; Hal Menzies, Esquire, Haney, B.C., and J. J. McLellan, Esquire. Mr. McLellan resigned soon after his appointment and was replaced by William Mott, Esquire, Mayor of New Westminster. 

The personnel of these Advisory Committees was such as to provide complete assurance that the administration and liquidation of the property of evacuated persons under their auspices would be performed with competence and just consideration for the interests of the owners. 

I am satisfied on the evidence adduced before me that the very onerous task imposed upon the Director of the Custodian’s office at Vancouver, under the guidance and with the assistance of the Advisory Committees, was competently performed, with due regard to the interest of the owners of such property, notwithstanding that the task had to be performed in an atmosphere of public hysteria induced by war. The fact that I have found that in certain respects fair market value was not realized on sales made by the Custodian in no sense reflects upon the work of the Custodian’s organization. On the contrary, the evidence brought out on this Inquiry strongly supports the conclusion that this organization, in spite of the magnitude of the responsibilities imposed upon it, has substantially succeeded in administering and subsequently selling property of evacuated persons with due regard to the owner’s interest. 

These Committees advised the Director in respect to all matters arising in connection with the administration and sale of real and personal property under their jurisdiction, including the disposal of all property vested in the Custodian under the Orders-in-Council before mentioned, the methods to be adopted in appraisal of such property, the offering of the same for sale, the prices which should be realized, and the terms of contracts for sale, as well as the leasing of lands the immediate sale of which was considered inadvisable by the Committees. 

Dealing now with Group 2 above, being real property situate in rural areas other than those included in numbers 1 and 3: The parcels included in this group, as before noted, were widely distributed throughout the Province of British Columbia. Consequently, the Director of the Custodian’s office in many instances was unable to obtain the assistance of appraisers with such outstanding qualifications as those who were retained to act in the urban area of Greater Vancouver, nor does it appear that the appraisers employed had the intimate knowledge of the properties appraised which was enjoyed by those retained in the urban area. Moreover, the Rural Advisory Committee, drawn largely from residents of the Fraser Valley, could not bring to their deliberations the same intimate knowledge of properties dealt with by them as was possible in the case of the Urban Committee. I have directed attention earlier to the fact that the Rural Advisory Committee found it necessary to adopt in all circumstances the price fixed by the appraisers. Furthermore, the market for real properties passed upon by the Rural Advisory Committee was a much more limited market than that available in the Greater Vancouver area. 

The evidence satisfies me that all reasonable efforts were made by the Director of the Custodian’s office, as well as the Rural Advisory Committee, to realize the fair market value on the sale of those properties. However, it is my conclusion that the circumstances before outlined did not permit of that realization to the same degree as in the case of properties in the Greater Vancouver area. 

and further reported his conclusions (ex. 74): 

Counsel for the claimant caused an appraisal to be made in June, 1949, by R. M. Hall, of Pemberton Homes, Ltd., Victoria, B.C. This appraisal shows that a cruise of the timber on this parcel was made in 1921 by Ryan, Hibbertson, Ltd., who estimated the timber stand to comprise 4,335,000 ft. Claimant sold part of this timber on a stumpage contract made in 1939, at $2.00 per M. 

The logging contractors took out, in the period 1940 to 1944, approximately 1,250,000 ft. Hall estimates that from 3,000,000 to 3,500,000 ft. remained on the property at the date of sale, which then had a stumpage value of about $4.00 per M., i.e., that there was a value in timber alone of from $12,000 to $14,000. 

Hall describes the sea frontage to a depth “of approximately 300 ft. as being exceptionally valuable for building sites. He considers that this part of the land, comprising approximately 100 acres, could have been sold, if subdivided and road connection furnished, at about $5,000, i.e., minimum $50.00 per acre. He appraises the property as at March, 1945 (the date of sale) at $12,000.00.” 

Mr. Hall’s estimate of the value of 100 acres having waterfrontage, i.e., about $5,000, taken into consideration along with the value of timber as well as the remaining 400 acres of wild land lying back of the water frontage mentioned, in my opinion supports the conclusion that the property at the date of sale had a fair market value of not less than $12,000.00. 

Since the property was sold by the Custodian at $5,250.00 I recommend payment to the claimant of the sum of $6,750.00, to which should be added any charges deducted by the Custodian from the purchase price paid to the claimant. 

The commissioner found that although the land had been valued at $5,000, yet the fair market value was $12,000, and therefore he recommended that payment of the excess of $6,750 be made. That amount was eventually paid to the suppliant pursuant to his release under seal dated October 28, 1950, whereby the suppliant purported to release His Majesty the King and the Custodian from all actions, claims and demands; the additional sum was paid to the suppliant or to his order (exs. 78, 79 and 80). Subsequently these proceedings were commenced by petition of right. 

The suppliant alleges in the petition of right: 

I. A Trust — The Secretary of State, the Custodian, took custody in trust for and in the interest of the suppliant; 

II. A Breach — The lands were vested in the Custodian and sold and conveyed by him to Salt Spring Lands Ltd. 

III. That such breach imposed liability on the Crown. 

The prayer for relief (cl. G) asks: 

(a) That the Crown return the lands or 

(b) alternatively, pay damages of $1,500,000. 

The declarations preceding cl. G are merely ancillary to the allegations and relief in cl. G. 

As to the prayer for return of the lands the suppliant cannot succeed on the suppliant’s own pleading. The return of the lands involves more than a simple action in ejectment, but involves also rescission of the title issued to the Custodian and any subsequent title, also, the certificate of vesting (ex. 24) and the deed from the Custodian to Salt Spring Lands Ltd. The remedy of rescission is a remedy to be obtained in equity (Richards v. Collins (1912), 9 D.L.R. 249 at p. 254, 27 O.L.R. 390 at p. 398, excepting the Ontario statutes not here applicable) and in equity a decree will not be made in the absence of a person who will be affected thereby. In Tryon v. Peer (1867), 13 Gr. 311, VanKoughnet, C, at p. 316 stated: “It is a general rule that all parties interested in the subject matter of a suit should be before the Court …” In Best v. Beatty, Calvert v. Beatty (1920), 53 D.L.R. 44, 47 O.L.R. 265 [revd in the result 58 D.L.R. 552, 61 S.C.R. 576], Masten, J., at p. 51 D.L.R., p. 273 O.L.R. stated: 

Upon this ground it is that in all actions by persons claiming under a trust, the trustee or other person in whom the legal estate is vested is required to be a party to the proceeding; and the rule is the same whether the trust be expressed or only implied. 

(quoting from Daniell’s Chancery Practice, 8th ed., pp. 151-2). Moreover, under the rule audi alteram partem, all such parties must be given an opportunity to plead and to present their case: Manning v. Gieschen and Royal Printers & Stationers Ltd. (1965), 55 D.L.R. (2d) 280, 56 W.W.R. 124; S. A. de Smith on Judicial Review of Administrative Action (1959), p. 103. In the absence of such necessary parties as the Salt Spring Lands Ltd. and the present holder of the legal title, no decree for rescission can be made. It cannot be assumed that such persons could have no answer to this remedy, by election to affirm as in Clough v. London & North Western Railway Co. (1871), L.R. 7 Ex. 26 at p. 34; Barron v. Kelly, 41 D.L.R. 590, 56 S.C.R. 455, [1918] 2 W.W.R. 131, or by laches as in Lagunas Nitrate Co. v. Lagunas Syndicate, [1899] 2 Ch. 392. 

The alternative remedy to rescission is account. The obligation to account depends upon a trust. Where there is a trust there is the obligation to account; where no trust, there is no obligation to account. In Civilian War Claimants Ass’n, Ltd. v. The King, [1932] A.C. 14, Lord Buckmaster at p. 24 stated: 

Finally, when the moneys were received, it is said that from and after that moment the Crown became a trustee. I have pointed out in the course of the argument, and I repeat, that if that were the case, unless you are going to limit the rights which the beneficiaries enjoy, those rights must include, among other things, a claim for an account of the moneys that were received, of the expenses incurred, and the way in which the moneys have been distributed. Such a claim presented against the Crown in circumstances such as these would certainly have no precedent, and would, as it appears to me, invade an area which is properly that belonging to the House of Commons. 

In Barnes v. Addy (1874), L.R. 9 Ch. 244 and in Mara v. Browne, [1896] 1 Ch. D. 199, the evidence was not sufficient to make the defendants trustees, therefore the suit was dismissed. In Barnes v. Addy, supra, Lord Selborne, L.C., at pp. 251-2 stated: 

Now in this case we have to deal with certain persons who are trustees, and with certain other persons who are not trustees. That is a distinction to be borne in mind throughout the case. Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort, or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust. But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees. Those are the principles, as it seems to me, which we must bear in mind in dealing with the facts of this case. If those principles were disregarded, I know not how any one could, in transactions admitting of doubt as to the view which a Court of Equity might take of them, safely discharge the office of solicitor, of banker, or of agent of any sort to trustees. 

Equity does not give damages: Erlanger v. New Sombrero Phosphate Co. (1878), 3 App. Cas. 1218, except where provided by Lord Cairns Act, 1858 (U.K.), c. 27, s. 2, in lieu of injunction or specific performance and that is not this case. However, this suppliant alleges a trust and breach thereof as the basis of his petition, hence the claim for damages may be read as a claim for the personal remedy of account as the remedy arising out of a trust. The pleadings may be taken to allege: 

I. A trust in the Custodian to the suppliant under Orders in Council 1665 and 2483. 

II. The breach thereof in part by reason that Order in Council 469 authorizing a sale is alleged ultra vires, therefore there was a breach in the trustee having sold and conveyed to Salt Spring Lands Ltd. 

III. For such breach the Crown is responsible in account.

Those allegations have not been made good. 

I. The suppliant contends that the lands vested in the Custodian as trustee and that trust is inferred under the following circumstances

The suppliant contends that the trust arises because any vesting under Orders in Council 1665 and 2483 is subject to the provisions of s. 12 (P.C. 2483) (ex. 11) which provide that the vesting is “as a protective measure only” and limited to “the control and management of the Custodian” [s-s. (1)] and “for the purpose of protecting the interests of the owner or other person” (s. 12(2)) and to administer “for the benefit of all such interested persons and shall release such property upon being satisfied that the interests aforesaid will not be prejudiced thereby” (s. 12 (2)). “For the purpose of control and management” the Consolidated Regulations are made applicable (s. 12(3)). 

In Nakashima v. The King, [1947] 4 D.L.R. 487, [1947] Ex. C.R. 486, Thorson, P., at pp. 494-5 D.L.R., p. 494 Ex. C.R. points out the discretionary powers given to the Custodian under the Consolidated Regulations Respecting Trading with the Enemy (1939) (Order in Council P.C. 3959 [74 Can. Gaz. 757]) (ex. 95). By s. 21(2) he may deal with the interest of the enemy; by s. 23 he may have the property transferred to his name; by s. 38 he may liquidate; by s. 40 he may dispose of the property publicly or privately. Further by s. 49 the property is free from attachment or execution; by s. 50 the Custodian is not liable for any charge; by ss. 42 to 44 he may set up an office and engage a staff, have full control over his funds and may deposit in any bank and may pay office expenses therefrom. Those powers, and particularly the discretionary powers of the Custodian are inconsistent with any trust. 

Again, in referring to the alleged limitations, “as a protective measure only” and “to the control and management of the Custodian”, which the suppliant alleges limit the application of the Consolidated Regulations, Thorson, P., in the Nakashima case states at p. 497 D.L.R., pp. 496-7 Ex. C.R.: 

In my opinion, even if this were conceded, it would not alter the character of the Custodian’s powers and duties. His discretionary powers might be more limited in scope than in the case of alien enemy property, but the difference would be one of degree rather than of kind. He would still have very wide free discretionary powers in the field of control and management. And if P.C. 469 is valid, there would be no difference at all in the scope of the Custodian’s discretionary powers as between alien enemy property on the one hand and Japanese evacuee property on the other. 

and Thorson, P., thereafter stated that Order in Council 469 was valid, in the following words (p. 504 D.L.R., p. 504 Ex. C.R.): 

It was, therefore, within the power of the Governor in Council to pass P.C. 469 embodying the terms against which the suppliants protest and they were validly enacted. The Custodian has, therefore, the lawful right to liquidate, sell, or otherwise dispose of the property vested in him, including the properties of the suppliants. 

It therefore follows that the Custodian is under no trust in favour of an alien enemy, but all the rights and powers of the alien enemy in the property are vested in the Custodian, and the Custodian is in the same position with reference to evacuee property. 

The Nakashima case refers to Consolidated Regulations Respecting Trading with the Enemy (1939) contained in Order in Council 3959 of August 21, 1940 (ex. 95). Those Regulations were cancelled on November 13, 1943, and Revised Regulations Respecting Trading with the Enemy (1943) [P.C. 8526, [1943] 4 C.W.O.R. 713] were substituted therefor (ex. 28), but these Revised Regulations (1943) have not lessened the powers of the Custodian in that the equivalent sections are included sometimes under different numbers. The Custodian is vested with the property (s. 21(1)) and all the rights of the enemy (here evacuee) (s. 21(2) and s. 22), with power of sale (ss. 38, 40(1)), with discretion to release (s. 39) and to deal with property (ss. 21(2), 38, 39); vested property is excepted from attachment (s. 49); the Custodian is not liable for charge or tax (s. 50) and may deduct his charges (s. 44). There appears to be no material lessening of the powers of the Custodian by the Revised Regulations (1943) and hence it is immaterial whether there is applicable to the Custodian the Consolidated Regulations, P.C. 3959, referred to in the Nakashima case or the Revised Regulations (1943). Both depend upon the War Measures Act, R.S.C. 1927, c. 206, s. 3(2) and hence are conditioned that once the Governor in Council has considered “that the Order is necessary or advisable for any of the purposes mentioned that is the end of the matter”: Nakashima case, p. 504 D.L.R., p. 504 Ex. C.R. 

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