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
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".
We are all of the view, for the reasons set out by Monet J.A. of the Quebec Court of Appeal (reported at (1983), [1982] C.A. 501, 44 C.B.R. (N.S.) 190), that this appeal must fail.
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.
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.
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.
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.
- 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
- 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.