Botham Holdings Ltd. (Bankrupt), Re, 2009 BCCA 521

• Judge: Finch, C.J.B.C., Lowry and Groberman, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: September 24, 2009
• Jurisdiction: British Columbia
• Citations: 2009 BCCA 521;(2009), 283 B.C.A.C. 12 (CA)

Botham Holdings (Bankrupt), Re (2009), 283 B.C.A.C. 12 (CA);

    480 W.A.C. 12

MLB headnote and full text

Temp. Cite: [2010] B.C.A.C. TBEd. FE.020

Abakhan & Associates Inc., The Trustee of the Estate of Botham Holdings Ltd., a Bankrupt (respondent/plaintiff) v. Braydon Investments Ltd. (appellant/defendant)

(CA036607; 2009 BCCA 521)

Indexed As: Botham Holdings Ltd. (Bankrupt), Re

British Columbia Court of Appeal

Finch, C.J.B.C., Lowry and Groberman, JJ.A.

November 24, 2009.

Summary:

Pursuant to an agreement made on October 31, 2005, Braydon Investments Ltd. (Braydon) transferred virtually all of its assets to Botham Holdings Ltd. (BHL). By May 2007, BHL was bankrupt. BHL's trustee in bankruptcy (the plaintiff) sued Braydon, claiming that the transaction was a fraudulent conveyance within the meaning of the Fraudulent Conveyance Act (FCA) or, in the alternative, an illegal settlement contrary to s. 91 of the Bankruptcy and Insolvency Act (BIA). Braydon brought a motion under rule 18A, seeking an order dismissing the plaintiff's action. The plaintiff requested judgment in its favour.

The British Columbia Supreme Court, in a decision reported at [2008] B.C.T.C. Uned. E07, granted judgment for the plaintiff, holding that the transfer was a fraudulent conveyance within the meaning of the FCA. Therefore, the court found it unnecessary to consider whether the transaction came within s. 91 of the BIA. Braydon appealed.

The British Columbia Court of Appeal affirmed that the transfer was a fraudulent conveyance within the meaning of the FCA and dismissed the appeal.

Fraud and Misrepresentation - Topic 1455

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under modern statutes - Conveyance to defeat creditors - Pursuant to an agreement made on October 31, 2005, Braydon Investments Ltd. (Braydon) transferred virtually all of its assets to Botham Holdings Ltd. (BHL) - By May 2007, BHL was bankrupt - Following a trial on affidavit evidence under rule 18A, a summary trial judge held that one purpose of the asset transfer was to put BHL's assets out of reach of its creditors, and the transfer was therefore a fraudulent conveyance within the meaning of the Fraudulent Conveyance Act - The trial judge held this to be so, despite the fact that BHL's and Braydon's principal, Botham, had no dishonest intent, or mala fides, and acted on professional advice to effect legitimate business purposes - Braydon appealed - The British Columbia Court of Appeal agreed with the trial judge's conclusion and dismissed the appeal.

Fraud and Misrepresentation - Topic 1458

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under modern statutes - Intention required - [See Fraud and Misrepresentation - Topic 1455 ].

Fraud and Misrepresentation - Topic 1458

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under modern statutes - Intention required - Section 1 of the Fraudulent Conveyance Act provided that "If made to delay, hinder or defraud creditors and others of their just and lawful remedies (a) a disposition of property, by writing or otherwise, (b) a bond, (c) a proceeding, or (d) an order is void and of no effect against a person or the person's assignee or personal representative whose rights and obligations by collusion, guile, malice or fraud are or might be disturbed, hindered, delayed or defrauded, despite a pretence or other matter to the contrary." - The British Columbia Court of Appeal considered the legislative history of the Act and prior versions which were criminal or quasi-criminal in nature and contained penal provisions - For many years, and certainly since the repeal of the penal provisions in 1987, the purpose and scheme of the Fraudulent Conveyance Act had been to provide a civil remedy to creditors - Its purpose was to protect creditors where property dispositions by debtors "... were effected for the purpose of defeating the legitimate claims of creditors" - As a result, the words "by collusion, guile, malice or fraud" no longer performed a meaningful function in the text - The Act not only made sense after removal of these words, but accorded with the modern purpose and scheme of the Act - Therefore, the court struck the words "by collusion, guile, malice or fraud" - The only intent now necessary to avoid a transaction under the modern version of the Act was the intent to "put one's assets out of the reach of one's creditors" - No further dishonest or morally blameworthy intent was required - See paragraphs 15 to 73.

Statutes - Topic 1205

Interpretation - Construction where meaning is plain - Where plain meaning inconsistent with purpose of statute - [See second Fraud and Misrepresentation - Topic 1458 ].

Statutes - Topic 1604

Interpretation - Extrinsic aids - General - History - [See second Fraud and Misrepresentation - Topic 1458 ].

Statutes - Topic 2601

Interpretation - Interpretation of words and phrases - Modern rule (incl. interpretation by context) - General principles - [See second Fraud and Misrepresentation - Topic 1458 ].

Statutes - Topic 8506

Remedial statutes - General principles - Interpretation - [See second Fraud and Misrepresentation - Topic 1458 ].

Cases Noticed:

Westinghouse Canada Ltd. v. Caldwell et al. (1979), 31 C.B.R.(N.S.) 276 (B.C.S.C.), disagreed with [para. 17].

First Royal Enterprises Ltd. et al. v. Armadillo's Restaurant Ltd. et al. (1995), 66 B.C.A.C. 170; 108 W.A.C. 170; 15 B.C.L.R.(3d) 254 (C.A.), disagreed with [para. 17].

Mandryk v. Merko et al. (1971), 19 D.L.R.(3d) 238 (Man. C.A.), consd. [para. 17].

Chan v. Stanwood et al. (2002), 175 B.C.A.C. 86; 289 W.A.C. 86; 6 B.C.L.R.(4th) 273; 2002 BCCA 474, refd to. [para. 31].

Allison & Burnham Concrete Ltd. v. Mountain View Construction Ltd. et al. (1965), 54 D.L.R.(2d) 67 (B.C.S.C.), refd to. [para. 41].

Havel v. Galemar Holdings Ltd. and Fabbro (1981), 36 O.R.(2d) 348 (H.C.), refd to. [para. 54].

Freeman v. Pope (1870), L.R. 5 Ch. App. 538, refd to. [para. 58].

MacKay v. Douglas (1872), L.R. 14 Eq. 106, refd to. [para. 59].

Ocean Construction Supplies Ltd. v. Creative Prosperity Capital Corp. et al., [1995] B.C.T.C. Uned. B75; 34 C.B.R.(3d) 241; 1995 CanLII 740 (S.C.), refd to. [para. 60].

Jaston & Co. et al. v. McCarthy, [1996] B.C.T.C. Uned. C01; 41 C.B.R.(3d) 212; 1996 CanLII 2982 (S.C.), refd to. [para. 61].

Sykes (Bankrupt) et al., Re (1998), 103 B.C.A.C. 81; 169 W.A.C. 81; 48 B.C.L.R.(3d) 169; 156 D.L.R.(4th) 105 (C.A.), refd to. [para. 62].

Ramgotra (Bankrupt), Re, [1996] 1 S.C.R. 325; 193 N.R. 186; 141 Sask.R. 81; 114 W.A.C. 81; 37 C.B.R.(3d) 141, refd to. [para. 62].

Royal Bank of Canada v. North American Life Assurance Co. and Ramgotra - see Ramgotra (Bankrupt), Re.

Royal Bank of Canada v. Clarke, [2009] B.C.T.C. Uned. 481; 2009 BCSC 481, refd to. [para. 64].

Bell ExpressVu Limited Partnership v. Rex et al., [2002] 2 S.C.R. 559; 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1; 2002 SCC 42, refd to. [para. 66].

Canadian Imperial Bank of Commerce v. Boukalis (1987), 34 D.L.R.(4th) 481; 11 B.C.L.R.(2d) 190 (C.A.), refd to. [para. 87].

Statutes Noticed:

Fraudulent Conveyance Act, R.S.B.C. 1996, c. 163, sect. 1, sect. 2 [para. 33].

Authors and Works Noticed:

Dunlop, Charles Richard Bentley, Creditor-Debtor Law in Canada (2nd Ed. 1995) (Looseleaf Supp.), p. 592 [para. 20].

Dunlop, Charles Richard Bentley, Fraudulent Conveyances and Preferences: A Feasibility Study, Uniform Law Conference of Canada, Civil Law Section (August 23-26, 2004), paras. 6 [para. 36]; 36 [para. 37].

Springman, M.A., Stewart, George R., Morrison, J.J., and MacNaughton, Michael J., Fraudulent Conveyances and Preferences (2009), pp. 1-13, 1-14 [para. 68].

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), pp. 178, 179 [para. 71].

Counsel:

G.K. Macintosh, Q.C., and S. Hern, for the appellant;

R.A. Millar and L. Sulek, for the respondent.

This appeal was heard at Vancouver, B.C., on September 24, 2009, by Finch, C.J.B.C., Lowry and Groberman, JJ.A., of the British Columbia Court of Appeal. Finch, C.J.B.C., delivered the following reasons for judgment for the court on November 24, 2009.