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ADMINISTRATION OF ESTATE - Sale of property - Directives

Monday, July 22, 2019 @ 9:21 AM  


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Appeal by the Superintendent of Bankruptcy from a decision that found the levy under s. 147 of the Bankruptcy and Insolvency Act was not applicable to payments made by the trustee to the respondent. The bankrupt made an assignment in bankruptcy. The trustee in bankruptcy made payments to the respondent, a secured creditor of the bankrupt, in respect of its secured debt. The funds were received pursuant to approval and vesting orders, which approved the sale of the bankrupt’s assets. The motion judge found when the trustee made the payments, it was not acting as an agent for the respondent or in its capacity as trustee administering the estate of the bankrupt.

HELD: Appeal allowed. Parliament’s intention in s. 147 of the Act was for all creditors who received payments through a proceeding under the Act to contribute to the cost of supervision of those proceedings. It was clear from the record, including the plain language of the approval and vesting orders, that the sale of the secured assets was undertaken by the bankrupt itself with the assistance of the trustee and under the supervision of the Superintendent. The payments were not analogous to a redemption of security which would otherwise have been exempt from the levy. The motion judge made a palpable and overriding error in finding, despite the plain wording of the approval and vesting orders, that the sale proceeds were being held by the trustee in escrow rather than in its capacity as trustee in bankruptcy. The motion judge failed to focus on the nature of the sale transactions and the capacities in which the parties were acting at that time. The secured creditors were not realizing on their security either directly or with the bankrupt or trustee acting as their agent. The motion judge made a palpable and overriding error in finding the trustee was not acting in its capacity as trustee administering the estate of the bankrupt when it made payments to the respondent and that the levy was not payable.

Topsyn Flexible Packaging Ltd. (Re), [2019] M.J. No. 168, Manitoba Court of Appeal, D.M. Cameron, J.A. Pfuetzner and J. leMaistre JJ.A., June 14, 2019. Digest No. TLD-July222019003