McNeill Electronics Ltd. v. American Sensors Electronics Inc., (1998) 58 O.T.C. 305 (GD)

• Judge: Swinton, J.
• Court: Ontario Court of Justice General Division (Canada)
• Case Date: February 11, 1998
• Jurisdiction: Ontario
• Citations: (1998), 58 O.T.C. 305 (GD)

McNeill Electronics v. Am. Sensors (1998), 58 O.T.C. 305 (GD)

MLB headnote and full text

Temp. Cite: [1998] O.T.C. TBEd. MR.098

McNeill Electronics Limited (plaintiff) v. American Sensors Electronics Inc. (defendant)

(Court File No. 96-CU-98950-CM)

Indexed As: McNeill Electronics Ltd. v. American Sensors Electronics Inc.

Ontario Court of Justice

General Division

Swinton, J.

March 11, 1998.

Summary:

McNeill Electronics Ltd. sued American Sensors Electronics Inc. (ASEI). ASEI was noted in default. In a decision reported [1996] 15 O.T.C. 20, a motion to set aside the noting in default was dismissed and McNeill obtained default judgment. In a decision not reported in this series of reports, a motion to set aside judgment was dismissed. ASEI appealed the orders and obtained an order staying the enforcement of the judgment after posting an irrevocable letter of credit for $350,000 as security. Subsequently, ASEI made an assignment in bankruptcy. In a decision reported 108 O.A.C. 257, the Ontario Court of Appeal allowed the appeals to set aside the earlier judgment and noting in default. The trustee in bankruptcy claimed entitlement to the proceeds of the letter of credit in priority to McNeill as the property of ASEI under s. 70(1) of the Bankruptcy Act or, alternatively, as the contingent property of ASEI.

The Ontario Court (General Division) rejected the trustee's arguments and dismissed the motion.

Bankruptcy - Topic 438

Property of bankrupt - Particular property - Fund for payment of contingent debt - See paragraphs 1 to 16.

Banks and Banking - Topic 4505

Letters of credit - General - Nature and effect of letter of credit - See paragraphs 1 to 16.

Banks and Banking - Topic 4523

Letters of credit - Payment by bank - Autonomy of documentary letters of credit - See paragraphs 1 to 16.

Cases Noticed:

Tradmor Investments Ltd. v. Valdi Foods (1987), Inc. (1997), 43 C.B.R.(3d) 135 (Ont. C.A.), refd to. [para. 8].

M.J. Roofing & Supply Ltd. v. Guay, [1982] 1 W.W.R. 259 (Man. Q.B.), refd to. [para. 8].

Canadian Credit Men's Trust Association v. Beaver Trucking Ltd. (1959), 38 C.B.R. 1 (S.C.C.), refd to. [para. 8].

Bank of Nova Scotia v. Angelical-Whitewear Ltd. and Angelica Corp., [1987] 1 S.C.R. 59; 73 N.R. 158; 6 Q.A.C. 1, refd to. [para. 9].

885676 Ontario Ltd. (Trustee) v. Frasmet Holdings Ltd. (1993), 12 O.R.(3d) 62 (Gen. Div.), refd to. [para. 10].

Westpac Banking Corp. v. Duke Group Ltd. (1994), 20 O.R.(3d) 515 (Gen. Div. Bktcy.), refd to. [para. 12].

Meridian Developments Inc. v. Toronto-Dominion Bank; Meridia Developments Inc. v. Nu-West Group Ltd., [1984] 5 W.W.R. 215; 53 A.R. 39 (Q.B.), refd to. [para. 12].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 2(1), sect. 67(c), sect. 70(1) [para. 6].

Authors and Works Noticed:

ICC Uniform Customs and Practices for Documentary Credits (1993), generally [para. 9].

Counsel:

John R. Connolly, for the plaintiff/responding party;

Craig J. Hill, for the trustee in bankruptcy/moving party.

This motion was heard on February 11, 1998, before Swinton, J., of the Ontario Court (General Division), who delivered the following judgment on March 11, 1998.