Ramgotra (Bankrupt), Re, (1996) 193 N.R. 186 (SCC)

• Judge: Gonthier, McLachlin, Iacobucci and Major, JJ.
• Court: Supreme Court (Canada)
• Case Date: November 08, 1995
• Jurisdiction: Canada (Federal)
• Citations: (1996), 193 N.R. 186 (SCC);193 NR 186;[1996] SCJ No 17 (QL);141 Sask R 81;132 DLR (4th) 193;[1996] 1 CTC 356;1996 CanLII 219 (SCC);37 CBR (3d) 141;[1996] 3 WWR 457;[1996] CarswellSask 418;50 DTC 6157;[1996] 1 SCR 325;13 ETR (2d) 1

Ramgotra (Bankrupt), Re (1996), 193 N.R. 186 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Royal Bank of Canada (appellant) v. North American Life Assurance Company and Balvir Singh Ramgotra (respondent)

(24316)

Indexed As: Ramgotra (Bankrupt), Re

Supreme Court of Canada

La Forest, L'Heureux-Dubé, Sopinka,

Gonthier, McLachlin, Iacobucci

and Major, JJ.

February 22, 1996.

Summary:

In June 1990, Ramgotra transferred funds from two RRSP's into a registered retirement income fund (RRIF) under which his wife was the designated beneficiary. In February 1992, Ramgotra made an assignment in bankruptcy. The RRIF constituted a life in­surance annuity and was therefore exempt from creditors' claims on the basis of s. 67(1)(b) of the Bankruptcy and Insolvency Act (BIA) when read in conjunction with ss. 2(kk)(vii) and 158(2) of the Saskatchewan In­surance Act. The trustee in bankruptcy ap­plied for a declaration that the transfer of the RRSP funds into the RRIF was a settle­ment which was void against the trustee in bankruptcy under s. 91(2) of the Bankruptcy and Insolvency Act.

The Saskatchewan Court of Queen's Bench, In Bankruptcy, in a decision reported at 108 Sask.R. 257, dismissed the appli­cation. The Royal Bank, a creditor in the bankruptcy, appealed the decision.

The Saskatchewan Court of Appeal, in a decision reported at 120 Sask.R. 277; 68 W.A.C. 277, dismissed the appeal. The Royal Bank appealed.

The Supreme Court of Canada dismissed the appeal. The court held that even though Ramgotra effected a void settlement under s. 91(2) when he designated his wife as bene­ficiary of his RRIF, the trustee could not divide the RRIF among creditors because its exempt status under s. 67(1)(b) continued regardless of s. 91.

Bankruptcy - Topic 483

Property of bankrupt - Exemptions or exclusions - Property exempt from seizure under provincial laws - Section 67(1)(b) of the Bankruptcy and Insolvency Act (BIA) provided that property of the bank­rupt divisible among his creditors did not include property which was exempt from execution or seizure under provincial legislation - The Supreme Court of Cana­da stated that "a bankrupt cannot enjoy the benefit of a s. 67(1)(b) exemp­tion where the property in question became exempt by reason of a fraudulent conveyance de­clared void pursuant to provincial law ... Since a fraudulent con­veyance rendering property exempt is void against creditors by operation of provincial law, the prop­erty is not exempt from exe­cution or sei­zure by creditors under pro­vincial law, as required by s. 67(1)(b) of the BIA" - See paragraph 56.

Bankruptcy - Topic 483

Property of bankrupt - Exemptions or exclusions - Property exempt from seizure under provincial laws - [See both Bank­ruptcy - Topic 7327 ].

Bankruptcy - Topic 7323

Setting aside transactions prior to bank­ruptcy - Settlements - Settlement defined - The Supreme Court of Canada stated that "a jurisprudential consensus has emerged that the designation of a bene­ficiary under a life insurance policy con­stitutes a s. 91 [Bankruptcy and Insolvency Act] settlement" - See paragraph 32.

Bankruptcy - Topic 7323

Setting aside transactions prior to bank­ruptcy - Settlements - Settlement defined - The Supreme Court of Canada held that a "settlement" in s. 91 of the Bankruptcy and Insolvency Act required a disposition by the settlor to a third party and did not include self-settlements - See paragraphs 20 to 29.

Bankruptcy - Topic 7327

Setting aside transactions prior to bank­ruptcy - Settlements - Settlements of exempt property - In 1990 Ramgotra trans­ferred funds from two RRSP's into a registered retirement income fund (RRIF) under which his wife was the designated beneficiary - In 1992 Ramgotra made an assignment in bankruptcy - The RRIF con­stituted a life insurance annuity and was therefore exempt from creditors' claims on the basis of s. 67(1)(b) of the Bankruptcy and Insolvency Act (BIA) when read in conjunction with ss. 2(kk)(vii) and 158(2) of the Saskatchewan Insurance Act - The Supreme Court of Canada held that although Ramgotra ef­fected a settlement which was void against the trustee in bankruptcy pursuant to s. 91(2) of the BIA when he designated his wife as beneficiary of his RRIF, the trust­ee could not divide the RRIF among cred­itors because its exempt status under s. 67(1)(b) continued regardless of s. 91 - See paragraphs 44 to 52.

Bankruptcy - Topic 7327

Setting aside transactions prior to bank­ruptcy - Settlements - Settlements of exempt property - The Supreme Court of Canada stated that "ss. 91 and 67 [Bank­ruptcy and Insolvency Act] relate to two different stages of bankruptcy. Section 91 dictates that certain settled property will fall back into the estate of the bankrupt in the possession of the trustee, while s. 67 is directed at the exercise of administrative powers over the estate by the trustee. Where a settlement is void against the trustee under s. 91, then in normal cir­cumstances, the trustee is empowered to administer the settled asset, and use it to satisfy the claims of creditors. However, in the special case where the asset is exempt under s. 67(1)(b), then the trustee is pro­hibited from exercising his or her distribu­tion powers because the asset is not sub­ject to division among creditors ... There­fore, while an asset which is exempt under provincial law passes into the possession of the trustee at the time of bankruptcy, the exemption itself bars the trustee from dividing the asset among creditors where s. 67(1)(b) is operative" - See paragraph 49.

Bankruptcy - Topic 7328

Setting aside transactions prior to bank­ruptcy - Settlements - Intention of settlor - The Supreme Court of Canada stated that "whether a settlor has acted in good faith, or for the purpose of defeating creditors, is not relevant to the question of whether a settlement has been made within s. 91 [Bankruptcy and Insolvency Act]. In contrast, however, a settlor's intention is highly relevant where a settlement is being challenged under provincial (or territorial) fraud legislation" - See paragraphs 54 and 55.

Fraud and Misrepresentation - Topic 1203

Fraudulent conveyances and preferences - Provincial legislation - Interpretation - The Supreme Court of Canada stated that "[a]ll the provincial fraud provisions are clearly remedial in nature, and their pur­pose is to ensure that creditors may set aside a broad range of transactions involv­ing a broad range of property interests, where such transactions were effected for the purpose of defeating the legitimate claims of creditors. Therefore, the statutes should be given the fair, large and liberal construction and interpretation that best ensures the attainment of their objects, as required by provincial statutory interpreta­tion legislation ... Given the need for a broad and liberal interpretation, I would suggest that there is a strong case for concluding that a life insurance beneficiary designation is both a 'juridical act' and a 'disposition' or 'conveyance' of 'property'" - See paragraphs 59 and 60.

Fraud and Misrepresentation - Topic 1406

Fraudulent conveyances and preferences - Impeachable conveyances and preferences under Statute of Elizabeth - Conditions precedent to setting aside conveyance - The Supreme Court of Canada stated that "[s]everal of the provincial fraudulent conveyance statutes impose an insolvency requirement ... assuming without deciding that the Statute of Elizabeth remains in force in those jurisdictions, it would allow creditors to challenge fraudulent con­veyances without having to prove that, at the time of the conveyance, the debtor was insolvent, was unable to pay his or her debts in full, or knew that he or she was on the eve of insolvency" - See paragraph 62.

Insurance - Topic 7150

Life insurance - Beneficiaries - Desig­nation of - General - [See first Bank­ruptcy - Topic 7323 and Fraud and Mis­­repre­sentation - Topic 1203 ].

Cases Noticed:

Royal Bank of Canada v. Oliver and Babiy (Bankrupts) (1992), 102 Sask.R. 48; 11 C.B.R.(3d) 82 (Q.B.), refd to. [para. 8].

Lowndes, Re; Ex parte Trustee (1887), 18 Q.B.D. 677, refd to. [para. 12].

Shrager v. March, [1908] A.C. 402 (P.C.), refd to. [para. 12].

Husky Oil Operations Ltd. v. Minister of National Revenue et al., [1995] 3 S.C.R. 453; 188 N.R. 1; 137 Sask.R. 81; 107 W.A.C. 81, refd to. [para. 15].

Minister of National Revenue v. Anthony et al. (1995), 129 Nfld. & P.E.I.R. 91; 402 A.P.R. 91; 124 D.L.R.(4th) 575 (Nfld. C.A.), refd to. [para. 16].

Wilson and Wilson (Bankrupt), Re (1988), 88 A.R. 205; 69 C.B.R.(N.S.) 156 (C.A.), disagreed with [para. 20].

Wozniuk (Bankrupt), Re (1987), 76 A.R. 42 (Q.B. Bktcy), consd. [para. 21].

Malloy, Re (1983), 48 C.B.R.(N.S.) 308 (Ont. H.C.), refd to. [para. 22].

Guimond (Bankrupt), Re (1987), 83 A.R. 392; 70 C.B.R.(N.S.) 125 (Q.B.), refd to. [para. 22].

Camgoz (Bankrupt), Re (1988), 70 Sask.R. 70; 70 C.B.R.(N.S.) 131 (Q.B.), affd. (1988), 72 C.B.R.(N.S.) 319 (C.A.), refd to. [para. 22].

Klassen (Bankrupt), Re (No. 2) (1990), 90 Sask.R. 29; 1 C.B.R.(3d) 263 (Q.B.), refd to. [para. 22].

Bozanich, Re, [1942] S.C.R. 130, agreed with [para. 23].

Geraci, Re (1970), 14 C.B.R.(N.S.) 253 (Ont. C.A.), consd. [para. 31].

Douyon, Re (1982), 134 D.L.R.(3d) 324 (Que. S.C.), refd to. [para. 32].

MacDonald, Re (1991), 21 C.B.R.(3d) 211 (Alta. Q.B.), refd to. [para. 32].

Yewdale, Re (1995), 30 C.B.R.(3d) 194 (B.C.S.C.), disagreed with [para. 32].

Geraci, Re (1969), 13 C.B.R.(N.S.) 86 (Ont. S.C.), consd. [para. 37].

Sykes, Re (1993), 18 C.B.R.(3d) 148 (B.C.S.C.), consd. [para. 40].

Canadian Imperial Bank of Commerce et al. v. Meltzer and Essers (Bankrupt) (1991), 74 Man.R.(2d) 105; 6 C.B.R.(3d) 1 (Q.B.), refd to. [para. 40].

Marzetti v. Marzetti (Bankrupt), [1994] 2 S.C.R. 765; 169 N.R. 161; 155 A.R. 340; 73 W.A.C. 340, refd to. [para. 47].

Pearson, Re (1977), 23 C.B.R.(N.S.) 44 (Ont. S.C.), consd. [para. 49].

Thompson v. Coulombe (1984), 54 C.B.R.(N.S.) 254 (Que. C.A.), refd to. [para. 52].

Deloitte Haskins & Sells Ltd. v. Zemlak (1987), 58 Sask.R. 203; 66 C.B.R.(N.S.) 1 (C.A.), refd to. [para. 52].

Sovereign General Insurance Co. v. Dale (1988), 32 B.C.L.R.(2d) 226 (S.C.), consd. [para. 58].

Nicholson v. Milne and Davis et al. (1989), 96 A.R. 114; 74 C.B.R.(N.S.) 263 (Q.B.), consd. [para. 61].

Technurbe Building Construction Ltd. v. McKinley (1989), 102 A.R. 1; 76 C.B.R.(N.S.) 106 (Q.B.), refd to. [para. 61].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 67(1)(b), sect. 91 [para. 6 et seq.].

Statute of Elizabeth, 1571, 13 Eliz. 1, c. 5, generally [para. 61].

Authors and Works Noticed:

Caplan, Lisa H. Kerbel, Case Comment (1994), 26 C.B.R.(3d) 252, p. 253 [para. 54].

Cuming, R.C.C., Section 91 (Settlements) of the Bankruptcy and Insolvency Act: A Mutated Monster (1995), 25 Can. Bus. L.J. 235, pp. 235, 238, 242 [para. 25].

Dunlop, Charles Richard Bentley, Credi­tor-Debtor Law in Canada (2nd Ed. 1995), pp. 597 [para. 63]; 598 [para. 59].

Houlden, Lloyd W., Life Insurance Con­tracts in Ontario (1963), 4 C.B.R.(N.S.) 113, p. 115 [para. 38].

McCabe, Michael J., Execution Against an R.R.S.P. (1990), 76 C.B.R.(N.S.) 218, p. 234 [para. 41].

McKee, David J., Debtor-Creditor Issues Affecting Annuity Contracts (1993), 12 Estates and Trusts J. 247, pp. 272 to 278 [para. 33].

Norwood, David, Weir, John P., Norwood on Life Insurance Law in Canada (2nd Ed. 1993), pp. 253 to 256 [para. 33].

Counsel:

Robert G. Kennedy and Ian A. Sutherland, for the appellant;

Gary A. Meschishnick and Eric M. Singer, for the respondent, North American Life Assurance Co.;

Robert D. Jackson, for the respondent, Balvir Singh Ramgotra.

Solicitors of Record:

Gauley & Co., Saskatoon, Saskatchewan, for the appellant;

MacDermid, Lamarsh, Saskatoon, Sas­katche­wan, for the respondent, North American Life Assurance Co.;

Goldstein, Jackson, Gibbings, Saskatoon, Saskatchewan, for the respondent, Balvir Singh Ramgotra.

This case was heard on November 8, 1995, before La Forest, L'Heureux-Dubé, Sopinka, Gonthier, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada. The following decision of the Supreme Court was delivered in both of­ficial languages by Gonthier, J., on February 22, 1996.