Robitaille v. American Biltrite (Canada), [1985] 1 S.C.R. 290
In the bankruptcy of Pacific Mobile Corporation
Gérald Robitaille, Trustee Appellant;
and
American Biltrite (Canada) Ltd.
Respondent.
File No.: 17286.
1985: March 27, 28; 1985: April 4.
Present: Dickson C.J. and Beetz, McIntyre, Lamer, Wilson, Le Dain
and La Forest JJ.
on appeal from the court of appeal of quebec
Bankruptcy ‑‑ Fraudulent preferences ‑‑
Late payment ‑‑ Validity of payment dependent on whether made in
“ordinary course of business” ‑‑ “Ordinary course of business” to
be considered in circumstances of each case, taking into account business
relationship between debtor and creditor and industry standard ‑‑ Late
payment normal between companies involved and standard for their industry ‑‑
Bankruptcy Act, R.S.C. 1970, c. B‑3, s. 73.
Cases Cited
Hudson v. Benallack,
[1976] 2 S.C.R. 168, distinguished.
Statutes and Regulations Cited
Bankruptcy Act, R.S.C. 1970, c. B‑3, s. 73.
APPEAL from a judgment of the Quebec Court of
Appeal, [1982] C.A. 501, 44 C.B.R. (N.S.) 190, allowing an appeal from a
judgment of Jacques J. (1979), 34 C.B.R. (N.S.) 8, maintaining the application
of the trustee in bankruptcy to annul a payment. Appeal dismissed.
Louis Dorion
and Claude Fontaine, for the appellant.
David B. Campbell
and Gaétan Dumas, for the respondent.
The following is the judgment delivered by
1. The
Court‑‑This appeal raises two narrow questions in the area
of bankruptcy law. First, what is meant by the term "ordinary course of
business" in the context of s. 73 of the Bankruptcy Act, R.S.C.
1970, c. B‑3. Second, was the overdue payment in this case made in the
"ordinary course of business".
2. We are all of the view, for the reasons
set out by Monet J.A. of the Quebec Court of Appeal (reported at (1983), 44
C.B.R. (N.S.) 190), that this appeal must fail.
3. It is not wise to attempt to give a
comprehensive definition of the term "ordinary course of business"
for all transactions. Rather, it is best to consider the circumstances of each
case and to take into account the type of business carried on between the debtor
and creditor.
4. We approve of the following passage from
Monet J.A.'s reasons discussing the phrase "ordinary course of
business" at p. 205:
It is
apparent from these authorities, it seems to me, that the concept we are concerned
with is an abstract one and that it is the function of the courts to consider
the circumstances of each case in order to determine how to characterize
a given transaction. This in effect reflects the constant interplay between law
and fact. With all due respect, however, I do not think that it can be said
that a payment that is not made when due cannot be regarded as having been made
in the ordinary course of business.
5. In this case, it is clear, based on the
evidence adduced, that the payment was made in the ordinary course of business.
The late payment by Pacific Mobile to American Biltrite was not only normal in
the context of their business relationship, but was also standard for their
particular industry.
6. In his factum, as well as in oral
argument, the appellant relied upon this Court's decision in Hudson v.
Benallack, [1976] 2 S.C.R. 168, to interpret the term "ordinary course
of business". He placed particular emphasis on the following passage at
pp. 175‑76:
The
object of the bankruptcy law is to ensure the division of the property of the
debtor rateably among all his creditors in the event of his bankruptcy. Section
112 of the Act provides that, subject to the Act, all claims proved in the
bankruptcy shall be paid pari passu. The Act is intended to put all
creditors upon an equal footing. Generally, until a debtor is insolvent or has
an act of bankruptcy in contemplation, he is quite free to deal with his
property as he wills and he may prefer one creditor over another but, upon
becoming insolvent, he can no longer do any act out of the ordinary course of
business which has the effect of preferring a particular creditor over other
creditors. If one creditor receives a preference over other creditors as a
result of the debtor acting intentionally and in fraud of the law, this defeats
the equality of the bankruptcy laws.
7. In our view, the appellant has
incorrectly interpreted the above passage. Hudson, supra, dealt
with one point only: whether the words "with a view to giving such
creditor a preference", contained in s. 73(1) of the Bankruptcy Act,
require an intention on the part of the insolvent debtor alone to prefer or a
concurrent intent on the part of both the debtor and creditor. The Court held
that only the intention of the debtor was relevant. That case did not, in any
way, consider or determine the meaning of the term "ordinary course of
business" and is, therefore, not helpful in the resolution of the issues
at hand.
Conclusion
8. For the reasons set out by Monet J.A. of
the Quebec Court of Appeal, the payment made by Pacific Mobile to American
Biltrite was a payment made in the "ordinary course of business".
Therefore, the payment is not void as against the appellant under s. 73 of the Bankruptcy
Act. The appeal is accordingly dismissed with costs.
Appeal dismissed with costs.
Solicitor for the appellant: Louis Dorion, Québec.
Solicitors for the respondent: Hackett, Campbell, Bouchard, Sherbrooke.
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