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BANKRUPTCY OF TENANT - Landlord's claim - Arrears of rent

Thursday, May 09, 2019 @ 8:37 AM  

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Application by the Royal Bank, a secured creditor of the bankrupt, for a declaration that $223,990 paid to the bankrupt’s landlord pursuant to distress proceedings was a preferential payment. The landlord distrained substantially all the bankrupt’s assets in satisfaction of unpaid rent within three months preceding the bankruptcy. At the time of the seizure, the bankrupt was $79,586 in arrears of rent. The landlord realized $223,990 from the sale of the bankrupt’s assets as the bankrupt’s rent arrears had continued to accrue. As of the date of the bankruptcy, the bankrupt owed Royal Bank $498,799.

HELD: Application allowed in part. Section 95 of the Bankruptcy and Insolvency Act did not apply to set aside the distress proceedings taken and completed prior to the bankruptcy. Had Parliament wanted to include landlord distress proceedings in s. 95, they could have done so by expanding its scope. Section 95 of the Act only included payments made by an insolvent person. The landlord’s distress was not a judicial proceeding. The landlord’s distress was a protected executed transaction under s. 70 of the Act. The seizure was excessive. The landlord was entitled to retain the proceeds of its valid distress proceedings in the amount of $79,586. The remaining amount of $144,404 was unexecuted upon arrears of rent and was to be remitted to the Royal Bank pursuant to the s. 38 order.

Royal Bank of Canada v. Parkland Properties Ltd., [2019] A.J. No. 412, Alberta Court of Queen's Bench, K.M. Eidsvik J., April 4, 2019. Digest No. TLD-May62019011