MacKay and Hughes (1973) Ltd. v. Martin Potatoes Inc. and Dominion Stores Ltd., (1984) 4 O.A.C. 1 (CA)

• Judge: Blair, Thorson and Tarnopolsky, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: May 07, 1984
• Jurisdiction: Ontario
• Citations: (1984), 4 O.A.C. 1 (CA)

MacKay and Hughes v. Martin Potatoes (1984), 4 O.A.C. 1 (CA)

MLB headnote and full text

MacKay and Hughes (1973) Ltd. v. Martin Potatoes Inc. (defendant) and Dominion Stores Ltd. (garnishee)

Indexed As: MacKay and Hughes (1973) Ltd. v. Martin Potatoes Inc. and Dominion Stores Ltd.

Ontario Court of Appeal

Blair, Thorson and Tarnopolsky, JJ.A.

June 8, 1984.

Summary:

Martin Potatoes gave a floating charge debenture to the Bank of Montreal. Upon default, the bank appointed a receiver. No notice of the appointment was given to Martin Potatoes' own creditors and debtors. A creditor, MacKay and Hughes, obtained a garnishee order against Dominion Stores, a debtor of Martin Potatoes. The bank and the receiver applied to set aside the garnishee order. The Master dismissed the application on the ground that the failure to give notice of the appointment of the receiver to MacKay and Hughes and Dominion Stores prior to the garnishee order was fatal to their claim for priority. The bank and receiver appealed.

The Ontario Divisional Court, in a decision reported in (1981), 40 C.B.R. 80, dismissed the appeal. The bank and receiver appealed.

The Ontario Court of Appeal allowed the appeal and set aside the garnishee order.

Company Law - Topic 5428

Borrowing - Debentures - Crystallization of floating charge - The Ontario Court of Appeal held that a floating charge debenture crystallized when a receiver was appointed and took control of the assets and undertaking of the debtor - The court held that no notice of the appointment to the debtor's own creditors and debtors was necessary to give effect to the crystallization - See paragraphs 6 to 14.

Company Law - Topic 5432

Borrowing - Debentures - Priorities - A debenture holder crystallized its floating charge and appointed a receiver for a company - The company's creditors and debtors received no notice of the receiver's appointment - A creditor garnisheed a debt owed to the company - The Ontario Court of Appeal held that the debenture holder had priority over the garnishor/creditor - See paragraphs 12 to 16.

Creditors and Debtors - Topic 4303

Garnishment by creditor - Garnishee order and priorities - Effect of order - The Ontario Court of Appeal referred to the effect of a garnishee order - See paragraph 13.

Personal Property - Topic 6163

Security interests - Floating charge - Nature of - The Ontario Court of Appeal discussed the nature of a floating charge - See paragraph 12.

Personal Property - Topic 6165

Security interests - Floating charge - Crystallization of charge - Notice - The Ontario Court of Appeal held that a floating charge debenture crystallized when a receiver was appointed and took control of the assets and undertaking of the debtor - The court held that no notice of the appointment to the debtor's own creditors and debtors was necessary to give effect to the crystallization - See paragraphs 6 to 14.

Personal Property - Topic 6168

Security interests - Floating charge - Priority - A debenture holder crystallized its floating charge and appointed a receiver for a company - The company's creditors and debtors received no notice of the receiver's appointment - A creditor garnished a debt owed to the company - The Ontario Court of Appeal held that the debenture holder had priority over the garnishor/creditor - See paragraphs 12 to 16.

Practice - Topic 7021

Costs - Party and party costs - Entitlement to - Successful party - Exceptions - Conduct - A debenture holder appointed a receiver of the debtor's assets and business - The receiver consciously failed to notify the creditors and customers of the debtor - A creditor commenced garnishee proceedings against a customer in ignorance of the receiver's appointment - The debenture holder and receiver, on appeal, successfully set aside the garnishee order - The Ontario Court of Appeal refused to award costs to the successful parties because of their conduct - See paragraph 16.

Cases Noticed:

Re Zurich Insurance Company and Troy Woodworking Limited (1984), 2 O.A.C. 183, appld. [para. 6].

Alberta Paper Company Ltd. v. Metropolitan Graphics Ltd. and Banister Continental Ltd. (garnishee) (1983), 47 A.R. 279; 49 C.B.R.(N.S.) 63 (Alta. Q.B.) appld. [para. 7].

Coopers & Lybrand Limited v. National Caterers Ltd. (1982), 47 C.B.R.(N.S.) 57 (B.C.S.C.), appld. [para. 7].

Bank of Montreal et al. v. Woodtown Developments Ltd. (1979), 25 O.R.(2d) 36; 99 D.L.R.(3d) 739, dist. [para. 9].

Re Roundwood Colliery Co., [1897] 1 Ch. 373, dist. [para. 9].

Bank of Montreal v. Union Gas Co. of Canada Ltd., [1969] 2 O.R. 776; 7 D.L.R.(3d) 25, not appld. [para. 10].

Attorney General of Canada v. Royal Bank of Canada, [1979] 1 W.W.R. 479; 13 A.R. 318; 29 C.B.R.(N.S.) 227, ref'd to. [para. 10].

Ontario Development Corp. v. Trustee of the Estate of I.C. Suatac Construction Ltd. (1976), 12 O.R.(2d) 465, ref'd to. [para. 12].

Dearle v. Hall; Loveridge v. Cooper (1828), 3 Russ. 1; 38 E.R. 475 (L.C.), not appld. [para. 13].

In re Combined Weighing and Advertising Machine Co. (1889), 43 Ch.D. 99, ref'd to. [para. 13].

Norton v. Yates, [1906] 1 K.B. 112, ref'd to. [para. 13].

Cairney v. Back, [1906] 2 K.B. 746, ref'd to. [para. 13].

Kare v. North West Packers Ltd. et al., [1955] 2 D.L.R. 407 (Man. C.A.), dist. [para. 14].

Gen. Brake & Clutch Service Ltd. v. W.A. Scott & Sons Ltd. (1975), 59 D.L.R.(3d) 741 (Man. C.A.), ref'd to. [para. 14].

Authors and Works Noticed:

Kerr on Receivers (15th Ed. 1978), p. 161 [para. 12].

Counsel:

Harold Beaudry, Q.C. and D.J. Bamberger, for the appellants, Bank of Montreal and William Sinclair;

D. Crabbe, for the respondent, MacKay and Hughes (1973) Ltd.

This appeal was heard before Blair, Thorson and Tarnopolsky, JJ.A., of the Ontario Court of Appeal on May 7, 1984. The decision of the Court of Appeal was delivered by Blair, J.A., and released on June 8, 1984.