Ste. Rose & District Cattle Feeders Co-op v. Geisel, (2010) 255 Man.R.(2d) 45 (CA)

• Judge: Hamilton, Freedman and Beard, JJ.A.
• Court: Court of Appeal (Manitoba)
• Case Date: October 28, 2009
• Jurisdiction: Manitoba
• Citations: (2010), 255 Man.R.(2d) 45 (CA);2010 MBCA 52

Cattle Feeders Co-op v. Geisel (2010), 255 Man.R.(2d) 45 (CA);

      486 W.A.C. 45

MLB headnote and full text

Temp. Cite: [2010] Man.R.(2d) TBEd. MY.034

Ste. Rose & District Cattle Feeders Co-op (applicant/appellant) v. George Edward Geisel and Christopher William Geisel (respondents/respondents)

(AI 09-30-07165; 2010 MBCA 52)

Indexed As: Ste. Rose & District Cattle Feeders Co-op v. Geisel

Manitoba Court of Appeal

Hamilton, Freedman and Beard, JJ.A.

May 11, 2010.

Summary:

A Co-op and George Geisel entered an agreement by which the Co-op authorized funding so that George could borrow up to $75,000 and purchase cattle. George was to care for the cattle and take them to market by November 17, 2004. Title to and ownership of the cattle would remain in the Co-op until the cattle were sold, when the sale proceeds were to be paid directly to the Co-op. In November 2004, with George's concurrence, the cattle were sold at auction in the name of George's son, Chris. The sale proceeds were paid to Chris, who deposited the proceeds in his credit union account. Chris was indebted to the credit union. The credit union enforced security it held on Chris's assets and seized the sale proceeds. George defaulted on repaying the Co-op loan. The Co-op sued George and Chris (the respondents), alleging fraudulent transactions as against the Co-op. The Co-op entered default judgment against the respondents. The respondents filed assignments in bankruptcy and were discharged. The Co-op applied for a declaration pursuant to s. 178(1) of the Bankruptcy and Insolvency Act that their judgment was not released by the respondents' discharges from bankruptcy.

The Manitoba Court of Queen's Bench, in a decision reported at (2008), 233 Man.R.(2d) 106, dismissed the application. The court held that s. 178(1)(d) of the Act ("debt or liability arising out of fraud ... while acting in a fiduciary capacity") and s. 178(1)(e) ("debt or liability for obtaining property by false pretences or fraudulent misrepresentation") did not apply. The Co-op appealed the finding under s. 178(1)(d) in relation to George and the finding under s. 178(1)(e) in respect of each of the respondents.

The Manitoba Court of Appeal allowed the appeal under s. 178(1)(e) and ordered that the liability of the respondents on the judgment against them was not released by their respective discharges from bankruptcy.

Bankruptcy - Topic 8987

Discharge of debtor - Liabilities not released by discharge - Act of fraud of debtor - A Co-op and George Geisel entered an agreement by which the Co-op authorized funding so that George could borrow up to $75,000 and purchase cattle - George was to care for the cattle and take them to market by November 17, 2004 - Title to and ownership of the cattle would remain in the Co-op until the cattle were sold, when the sale proceeds were to be paid directly to the Co-op - In November 2004, with George's concurrence, the cattle were sold at auction in the name of George's son, Chris - The sale proceeds were paid to Chris, who deposited the proceeds in his credit union account - Chris was indebted to the credit union - The credit union seized the sale proceeds - George defaulted on repaying the Co-op loan - The Co-op sued George and Chris (the respondents), alleging fraudulent transactions as against the Co-op - The Co-op entered default judgment against the respondents - The respondents filed assignments in bankruptcy and were discharged - The Co-op applied for a declaration pursuant to s. 178(1) of the Bankruptcy and Insolvency Act that their judgment was not released by the respondents' discharges - The application was dismissed - The Manitoba Court of Appeal agreed with the judge's conclusion that George was not acting in a fiduciary capacity with the Co-op as required by s. 178(1)(d) ("debts or liability arising out of fraud ... while acting in a fiduciary capacity") - The court stated that "They were business parties, dealing at arm's length in a relationship closer to adversarial than fiduciary" - See paragraph 56.

Bankruptcy - Topic 8987

Discharge of debtor - Liabilities not released by discharge - Act of fraud of debtor - A Co-op and George Geisel entered an agreement by which the Co-op authorized funding so that George could borrow up to $75,000 and purchase cattle - George was to care for the cattle and take them to market by November 17, 2004 - Title to and ownership of the cattle would remain in the Co-op until the cattle were sold, when the sale proceeds were to be paid directly to the Co-op - In November 2004, with George's concurrence, the cattle were sold at auction in the name of George's son, Chris - The sale proceeds were paid to Chris, who deposited the proceeds in his credit union account - Chris was indebted to the credit union - The credit union seized the sale proceeds - George defaulted on repaying the Co-op loan - The Co-op sued George and Chris (the respondents), alleging fraudulent transactions as against the Co-op - The Co-op entered default judgment against the respondents - The respondents filed assignments in bankruptcy and were discharged - The Co-op applied for a declaration that their judgment was not released by the respondents' discharges from bankruptcy - The application was dismissed - The judge held that since the original debt to the Co-op was not tainted by fraud, s. 178(1)(e) of the Bankruptcy and Insolvency Act ("debt or liability for obtaining property by false pretences or fraudulent misrepresentation") did not apply - Further, whatever Chris may have said to the auction mart, the statement was not made to or acted upon by the Co-op and the Co-op could not say that they acted upon a fraudulent misrepresentation or false pretence made by Chris - The Manitoba Court of Appeal allowed an appeal, holding that s. 178(1)(e) applied and the respondents' liability on the judgment was not released by their discharges from bankruptcy - The judge focussed only on the "debt" aspect of s. 178(1)(e) and gave no consideration to the separate element of "liability" - The judge failed to consider that, while the borrowed funds were untainted by fraud at the time the debt for the funds was created, subsequently "property" in the form of the proceeds of sale was obtained by the respondents by false pretences or fraudulent misrepresentation - Further, the policy underlying the relevant provision strongly militated in favour of the survival of the liability after discharge, and the judge's reasons did not consider that factor - See paragraphs 66 to 116.

Bankruptcy - Topic 8987

Discharge of debtor - Liabilities not released by discharge - Act of fraud of debtor - Section 178(e) of the Bankruptcy and Insolvency Act, as it read at the material time, provided that a discharge from bankruptcy did not release the bankrupt from "(e) any debt or liability for obtaining property by false pretences or fraudulent misrepresentation ..." - Subsection (e) was subsequently amended, essentially by replacing the phrase "for obtaining property" with the phrase "resulting from obtaining property" - The Manitoba Court of Appeal held that the new wording was a clearer expression of what was meant by the previous phrase, and did not alter the substantive meaning of the previous phrase - See paragraphs 2 and 61 to 65.

Equity - Topic 3607

Fiduciary or confidential relationships - General principles - Relationships which are not fiduciary - [See first Bankruptcy - Topic 8987 ].

Equity - Topic 3713

Fiduciary or confidential relationships - Commercial relationships - Arm's length commercial transactions - [See first Bankruptcy - Topic 8987 ].

Practice - Topic 8800.2

Appeals - General principles - Duty of appellate court regarding findings of law - At issue on appeal was the interpretation of ss. 178(1)(d) and (e) of the Bankruptcy and Insolvency Act - The Manitoba Court of Appeal stated that the dispute was over the correct meaning of the two subsections in the Act, which meaning had to then be applied to the undisputed facts of the case - Thus, on all aspects of the appeal, all of which raised questions of law, the standard of review was correctness - See paragraphs 51 to 55.

Cases Noticed:

Ross & Associates v. Palmer (2001), 153 Man.R.(2d) 147; 238 W.A.C. 147; 2001 MBCA 17, refd to. [para. 15].

Kramer, Re (1975), 20 C.B.R.(N.S.) 97 (Sask. Q.B.), refd to. [para. 17].

Kurtz, Re, [2002] O.J. No. 2151 (Sup. Ct.), refd to. [para. 17].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 20].

Ronec v. Michalik, [2007] O.T.C. Uned. J39; 36 C.B.R.(5th) 159 (Sup. Ct.), refd to. [para. 31].

McAteer, Re - see McAteer v. Billes et al.

McAteer v. Billes et al. (2007), 409 A.R. 143; 402 W.A.C. 143; 34 C.B.R.(5th) 1; 2007 ABCA 137, refd to. [para. 31].

Maisonneuve v. Dalpe-Charron (1987), 64 C.B.R.(N.S.) 64 (Ont. H.C.), refd to. [para. 34].

Alevizos et al. v. Nirula (2003), 180 Man.R.(2d) 186; 310 W.A.C. 186; 2003 MBCA 148, refd to. [para. 35].

Woolf et al. v. Harrop, [2003] O.T.C. 1101; 50 C.B.R.(4th) 309 (Sup. Ct.), refd to. [para. 36].

Garofoli v. Kohm (1989), 77 C.B.R.(N.S.) 84 (Man. Q.B.), refd to. [para. 37].

Saskatchewan Wheat Pool v. Ewing Lake Farms Ltd. et al. (1998), 231 A.R. 3; 14 C.B.R.(4th) 155; 1998 ABQB 172, refd to. [para. 43].

Abstainers' Insurance Co. v. Pellegrino (1989), 77 C.B.R.(N.S.) 108 (Ont. Dist. Ct.), refd to. [para. 44].

Moose Jaw Credit Union Ltd. v. Kennedy (1981), 13 Sask.R. 252; 41 C.B.R.(N.S.) 132 (Q.B.), refd to. [para. 45].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 51].

Clarke (Bankrupt), Re, [2002] B.C.T.C. 809; 35 C.B.R.(4th) 73; 2002 BCSC 809, refd to. [para. 64].

Erie Mutual Fire Insurance Co. v. Konert et al. (1988), 28 O.A.C. 372; 70 C.B.R.(N.S.) 112 (Div. Ct.), refd to. [para. 64].

Citizens Bank of Canada v. Pastore et al., [2005] O.T.C. Uned. A14; 18 C.B.R.(5th) 231 (Sup. Ct.), refd to. [para. 64].

McDiarmid Lumber Ltd. v. God's Lake First Nation et al., [2006] 2 S.C.R. 846; 356 N.R. 1; 212 Man.R.(2d) 7; 389 W.A.C. 7; 2006 SCC 58, refd to. [para. 71].

Roberts v. Roberts, [1997] Man.R.(2d) Uned. 48 (Q.B. Master), refd to. [para. 74].

Loster v. Loster (2001), 154 Man.R.(2d) 287; 2001 MBQB 71 (Fam. Div.), refd to. [para. 75].

Cumming (P.R.) Manufacturing Co. Bank of Ottawa's Claim, Re, [1905] O.J. No. 615 (H.C.), refd to. [para. 75].

Bobyck v. Bobyck Estate (1993), 13 O.R.(3d) 559; 47 R.F.L.(3d) 310 (Gen. Div.), refd to. [para. 75].

Gestion Michel Noël Ltée v. 2323-0220 Quebec Inc., [1998] J.Q. no 1943 (C.A.), refd to. [para. 75].

Kruse Estate et al. v. Oakwood Construction Services Ltd. et al. (1982), 16 Man.R.(2d) 270 (C.A.), refd to. [para. 76].

McArthur (J.D.) Co. v. Alberta and Great Waterways Railway Co., [1924] 2 D.L.R. 118 (Alta. C.A.), refd to. [para. 77].

State v. Board of Trustees of Missoula County High School (1932), 7 P.2d 543 (Mont. Sup. Ct.), refd to. [para. 78].

Burnett v. Chase Oil & Gas Inc. (1985), 700 S.W.2d 737 (Tex. Ct. App.), refd to. [para. 78].

Slack v. Schwartz (1945), 161 P.2d 345 (Nev. Sup. Ct.), refd to. [para. 78].

Derry v. Peek, [1886-90] All E.R. Rep. 1 (H.L.), refd to. [para. 91].

R. v. Maroney, [1975] 2 S.C.R. 306; 3 N.R. 209, refd to. [para. 93].

R. v. Elias, [1989] 1 S.C.R. 423; 95 N.R. 383; 22 Q.A.C. 221, refd to. [para. 95].

Buland Empire Development Inc. v. Quinto Shoes Imports Ltd. et al. (1999), 123 O.A.C. 288; 11 C.B.R.(4th) 190 (C.A.), refd to. [para. 99].

Simone v. Daley et al. (1999), 118 O.A.C. 54; 8 C.B.R.(4th) 143 (C.A.), refd to. [para. 109].

Jerrard v. Peacock (1985), 61 A.R. 161; 57 C.B.R.(N.S.) 54 (Q.B. Master), refd to. [para. 109].

Martin v. Martin et al. (2005), 282 N.B.R.(2d) 61; 738 A.P.R. 61; 9 C.B.R.(5th) 235; 2005 NBCA 32, refd to. [para. 110].

Morgan v. Demers (1986), 71 A.R. 244; 60 C.B.R.(N.S.) 241 (C.A.), refd to. [para. 111].

Evancio Estate (Bankrupt), Re (2004), 185 Man.R.(2d) 310; 2004 MBQB 145, affd. (2004), 190 Man.R.(2d) 224; 335 W.A.C. 224 (C.A.), refd to. [para. 113].

713860 Ontario Ltd. v. Royal Trust Corp. of Canada et al. (1996), 27 O.R.(3d) 559 (Gen. Div.), affd. [1999] O.A.C. Uned. 45; 7 C.B.R.(4th) 1 (C.A.), refd to. [para. 114].

McAteer v. Billes et al. (2006), 397 A.R. 365; 384 W.A.C. 365; 2006 ABCA 312, refd to. [para. 115].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 178(1)(d), sect. 178(1)(e) [para. 1].

Authors and Works Noticed:

Kerans, Roger P., and Willey, Kim M., Standards of Review Employed by Appellate Courts (2nd Ed. 2006), p. 166 [para. 54].

Sullivan, Ruth, Sullivan on the Construction of Statutes (5th Ed. 2008), p. 210 [para. 70].

Counsel:

B.R. Mayes, for the appellant;

D.E. Swayze, for the respondents.

This appeal was heard on October 28, 2009, before Hamilton, Freedman and Beard, JJ.A., of the Manitoba Court of Appeal. The following judgment of the Court of Appeal was delivered by Freedman, J.A., on May 11, 2010.