Orion Industries Ltd. (Bankrupt) v. Neil's General Contracting Ltd., (2013) 556 A.R. 389

• Judge: Rowbotham, O'Ferrall and Veldhuis, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: September 30, 2013
• Citations: (2013), 556 A.R. 389;2013 ABCA 330

Orion Ind. v. Neil's General Contracting (2013), 556 A.R. 389; 584 W.A.C. 389 (CA)

MLB headnote and full text

Temp. Cite: [2013] A.R. TBEd. OC.005

Grant Thornton Alger Inc. in its capacity as Trustee of Orion Industries Ltd. (appellant/applicant) v. Neil's General Contracting Ltd. (respondent/respondent)

(1201-0233-AC; 2013 ABCA 330)

Indexed As: Orion Industries Ltd. (Bankrupt) v. Neil's General Contracting Ltd.

Alberta Court of Appeal

Rowbotham, O'Ferrall and Veldhuis, JJ.A.

September 30, 2013.

Summary:

An insolvent debtor made a preferential payment to one of its creditors within three months of its bankruptcy. The Trustee in Bankruptcy applied under s. 95 of the Bankruptcy and Insolvency Act to set aside the payment as a "preference". The bankruptcy judge dismissed the application, finding that the presumption of preferential payment had been rebutted (payment made to secure an asset which might be sold to generate revenue). The Trustee appealed.

The Alberta Court of Appeal dismissed the appeal.

Bankruptcy - Topic 7210

Setting aside transactions prior to bankruptcy - Fraudulent preferences - General - The Alberta Court of Appeal stated that "section 95(2) of the Bankruptcy and Insolvency Act provides that if a payment to a creditor has the effect of giving that creditor a preference, it will be presumed to have been made with a view to giving a voidable preference unless there is evidence establishing that the payment was not made with the view to giving that creditor a preference over other creditors. The term 'fraudulent preference' has sometimes been used in this context. Obviously, if the preference is fraudulent, it is voidable. However, ... [it has been] suggested that the use of the term 'fraudulent' is sometimes inappropriate. We agree. Using the term 'fraudulent preference' may wrongly impugn the integrity of the creditor receiving the payment because it may not know that it is being paid in preference to others. It may also wrongly impugn the integrity of the debtor making the payment because it may not know that its destiny, within the next three months, is bankruptcy. ... neither may be aware that bankruptcy is imminent when the payment is made. Also, when the payment is made, it may not be apparent to either party that the payment in fact gives a preference to the recipient creditor over other creditors. That is, the fact that such payment has had the effect of conferring a preference may only be apparent with the benefit of hindsight. Sometimes, of course, only the insolvent debtor knows that a preference is being given. The creditor receiving the payment does not. A preferable phrase to describe these potentially voidable payments is 'preferential payment'. Preferential payments are those which in fact confer a preference on one creditor over another. Preferential payments are not voidable per se. Only those preferential payments made with a view to giving the preference are voidable at the instance of the trustee. But if the payment confers a preference in fact, the presumption will be that the payment was intended to confer the preference. And if the presumption is not rebutted, the payment will be void as against the trustee." - See paragraphs 4 to 6.

Bankruptcy - Topic 7212

Setting aside transactions prior to bankruptcy - Fraudulent preferences - What constitutes a fraudulent preference - An insolvent debtor made a preferential payment to one of its creditors within three months of its bankruptcy - The creditor had refused to give up one of the debtor's assets unless paid for its services - The value of the asset exceeded the debt owed to that creditor - The Trustee in Bankruptcy applied under s. 95 of the Bankruptcy and Insolvency Act to set aside the payment as a "preference" - The bankruptcy judge dismissed the application, finding that the presumption of preferential payment had been rebutted - This was a payment to secure an asset which the debtor intended to sell to generate revenue in an attempt to avoid bankruptcy - The payment was not made by the debtor with a view to giving a preference - The Alberta Court of Appeal dismissed the Trustee's appeal - There was no palpable and overriding error in finding that the presumption had been rebutted - The bankruptcy judge's decision that the payment was a legitimate and sensible commercial decision was entitled to deference.

Bankruptcy - Topic 7221

Setting aside transactions prior to bankruptcy - Fraudulent preferences - Intention - Meaning of "with a view of giving a preference" - [See Bankruptcy - Topic 7212 ].

Bankruptcy - Topic 7250

Setting aside transactions prior to bankruptcy - Fraudulent preferences - Rebuttal of presumption of preference - [See Bankruptcy - Topic 7212 ].

Cases Noticed:

Piikani Energy Corp. (Bankrupt), Re (2012), 537 A.R. 211; 2012 ABQB 187, revd. (2013), 556 A.R. 200; 584 W.A.C. 200; 2013 ABCA 293, refd to. [para. 5].

Salter & Arnold Ltd. v. Dominion Bank, [1925] S.C.R. 621; [1926] 3 D.L.R. 684, refd to. [para. 10].

Canadian Credit Men's Association Ltd. v. Jenkins, [1928] 3 D.L.R. 139; 10 C.B.R. 77 (Ont. C.A.), refd to. [para. 11].

St. Anne-Nackawic Pulp Co. (Bankrupt), Re (2005), 286 N.B.R.(2d) 95; 748 A.P.R. 95; 255 D.L.R.(4th) 137; 2005 NBCA 55, refd to. [para. 12].

St. Anne-Nackawic Pulp Co. v. Logistec Stevedoring (Atlantic) Inc. - see St. Anne- Nackawic Pulp Co. (Bankrupt), Re.

Molson Bank v. Halter (1890), 18 S.C.R. 88, refd to. [para. 31].

Norris (Bankrupt), Re (1996), 193 A.R. 15; 135 W.A.C. 15; 45 Alta. L.R.(3d) 1 (C.A.), refd to. [para. 34].

Counsel:

R.N. Billington, Q.C., and J.M. Blitt, for the appellant;

M.L. Engelking, for the respondent.

This appeal was heard on March 7, 2013, at Calgary, Alberta, before Rowbotham, O'Ferrall and Veldhuis, JJ.A., of the Alberta Court of Appeal.

On September 30, 2013, Rowbotham, J.A., delivered the following memorandum of judgment for the Court of Appeal.