Meyers Norris Penny Ltd. v. Barcellona, (2005) 191 Man.R.(2d) 184 (QBM)

• Court: Court of Queen's Bench of Manitoba (Canada)
• Case Date: January 13, 2005
• Jurisdiction: Manitoba
• Citations: (2005), 191 Man.R.(2d) 184 (QBM);2005 MBQB 10

Meyers Norris Penny v. Barcellona (2005), 191 Man.R.(2d) 184 (QBM)

MLB headnote and full text

Temp. Cite: [2005] Man.R.(2d) TBEd. JA.031

Meyers Norris Penny Ltd. (plaintiff) v. Castrenze Barcellona and Wanda Barcellona (defendants)

(CI 03.02.01085; 2005 MBQB 10)

Indexed As: Meyers Norris Penny Ltd. v. Barcellona

Manitoba Court of Queen's Bench

Brandon Centre

Harrison, Master

January 13, 2005.

Summary:

A husband and wife declared bankruptcy. A trustee in bankruptcy was appointed. The trustee sued the husband's parents seeking to quash a transfer of land and obtain possession of the land. The trustee asserted that the transfer was void as against the trustee on three alternative grounds: (1) it was a fraudulent preference under s. 95(1) of the Bankruptcy and Insolvency Act; (2) it was a settlement contrary to ss. 91(1) and 91(2); and (3) it was a fraudulent conveyance contrary to the Manitoba Fraudulent Conveyances Act. The trustee moved for summary judgment.

A Master of the Manitoba Court of Queen's Bench deemed the transfer to be fraudulent and void as against the trustee pursuant to ss. 95(1) and 95(2) of the Bankruptcy and Insolvency Act and granted summary judgment.

Bankruptcy - Topic 2611

Trustees - Duties - General - A trustee in bankruptcy sued the parents of one of the bankrupts, seeking to quash a transfer of land as being void as against the trustee - The parents asserted that the trustee failed to provide notice to them as creditors and that as a result they were denied an opportunity to assist and prevent the bankruptcies - A Master of the Manitoba Court of Queen's Bench held that the failure to provide statutory notices was neither a defence to a tracing action nor a triable issue under the summary judgment process - The failure was irrelevant to whether the transfer was void under the Bankruptcy and Insolvency Act - Notices provided to creditors were not a prerequisite to the validity of a bankruptcy declaration - They were a consequence - See paragraphs 53 and 54.

Bankruptcy - Topic 7250

Setting aside transactions prior to bankruptcy - Fraudulent preferences - Rebuttal of presumption of preference - A trustee in bankruptcy sued the parents of one of the bankrupts, seeking to quash a transfer of land - The trustee sought summary judgment, asserting that, inter alia, the conveyance was a fraudulent preference under s. 95(1) of the Bankruptcy and Insolvency Act - The parents asserted that there had been no intention to prefer - Their position was supported by the affidavit evidence of one of the bankrupts - A Master of the Manitoba Court of Queen's Bench granted summary judgment - The presumption of a preference applied (s. 95(2)) - The parents had to demonstrate that a rebuttal of the presumption was a triable issue - There was no evidence or assertion that the transfer was made in the ordinary course of business - No other reasons for the transfer was provided - The case suffered from the fact that the bankrupts were directly related to the defendants - In any situation where all or most of the debtors' property was transferred to related parties, the presumption would be difficult to rebut - See paragraphs 41 to 52.

Bankruptcy - Topic 7323

Setting aside transactions prior to bankruptcy - Settlements - Settlement defined - A trustee in bankruptcy sued the parents of one of the bankrupts, seeking to quash a transfer of land - The trustee sought summary judgment, asserting, inter alia, that the conveyance was a settlement contrary to ss. 91(1) and 91(2) of the Bankruptcy and Insolvency Act - A Master of the Manitoba Court of Queen's Bench denied summary judgment on this basis - Pursuant to s. 2(1) of the Act, a settlement included a contract, covenant, transfer, gift and designation of beneficiary in an insurance contract, to the extent that it was gratuitous or made for merely nominal consideration - There was evidence that the parents had advanced $55,000 and assumed the money owing under the bankrupts' mortgage - Alternatively, full value payment was not required - The definition only required that the contract not be made for merely nominal consideration - The affidavits disclosed more than nominal consideration - Although the consideration was past consideration, present consideration was not required - See paragraphs 39 and 40.

Fraud and Misrepresentation - Topic 1458

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under modern statutes - Intention to prefer - A trustee in bankruptcy sued the parents of one of the bankrupts, seeking to quash a transfer of land - The trustee sought summary judgment, asserting, inter alia, that the transfer was a fraudulent conveyance contrary to the Manitoba Fraudulent Conveyances Act - A Master of the Manitoba Court of Queen's Bench denied summary judgment on this basis - Section 2 of the Act required an intent to defeat, hinder, delay or defraud - Intent was defined as "a purpose" - Inherent in the definition was the requirement for a court to receive evidence respecting the state of mind - It would be a rare situation that would allow a court to ascertain anyone's state of mind, at a specific point in time, solely from his or her affidavit - The parents had raised the issue of their own intent and the bankrupts' intent - A decision on the issue would require a trial - See paragraphs 36 to 38.

Fraud and Misrepresentation - Topic 4042

Practice - Evidence and proof - Affidavit evidence - [See Fraud and Misrepresentation - Topic 1458 ].

Practice - Topic 5708

Judgments and orders - Summary judgments - Bar to application - Existence of issue to be tried - [See Fraud and Misrepresentation - Topic 1458 ].

Cases Noticed:

Podkriznik v. Schwede (1990), 64 Man.R.(2d) 199 (C.A.), refd to. [para. 22].

Van der Liek, Re (1970), 14 C.B.R.(N.S.) 229 (Ont. S.C. Bktcy.), refd to. [para. 42].

Deloitte & Touche Inc. v. White Veal Meat Packers Ltd. (2000), 143 Man.R.(2d) 289; 16 C.B.R.(4th) 74; 2000 CarswellMan 72 (Q.B.), affd. (2000), 153 Man.R.(2d) 81; 238 W.A.C. 81; 21 C.B.R.(4th) 234; 2000 CarswellMan 602; 2000 MBCA 120, refd to. [para. 49].

David, Re (1924), 5 C.B.R. 323, affd. (1925), 7 C.B.R. 113 (Ont. C.A.), refd to. [para. 51].

Thomas, Re (1922), 3 C.B.R. 55 (Ont. S.C.), refd to. [para. 51].

Koop v. Smith (1915), 51 S.C.R. 554; 8 W.W.R. 1203; 25 D.L.R. 355, refd to. [para. 51].

Olexson, Re (1979), 30 C.B.R.(N.S.) 193 (Sask. Q.B.), refd to. [para. 51].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 91(1) [para. 4]; sect. 95(1) [para. 3].

Authors and Works Noticed:

Houlden, Lloyd W., and Morawetz, Geoffrey B., The 2005 Annotated Bankruptcy and Insolvency Act (2005), pp. 460 [para. 39]; 462 [paras. 8, 38]; 478 [para. 42].

Counsel:

B. Mayes, for the plaintiff;

D.A.S. Paterson, Q.C., for the defendants.

This motion was heard by Harrison, Master, of the Manitoba Court of Queen's Bench, Brandon Centre, who delivered the following reasons for judgment on January 13, 2005.