Trynor Construction (Newfoundland) Ltd., Re, (1971) 1 Nfld. & P.E.I.R. 586 (NFSC)

JudgeMifflin, J.
CourtSupreme Court of Newfoundland and Labrador (Canada)
Case DateFebruary 15, 1971
JurisdictionNewfoundland and Labrador
Citations(1971), 1 Nfld. & P.E.I.R. 586 (NFSC)

Trynor Constr. Ltd., Re (1971), 1 Nfld. & P.E.I.R. 586 (NFSC)

MLB headnote and full text

Estate of Trynor Construction (Newfoundland) Limited v. Trynor Construction Company, Limited

Indexed As: Trynor Construction (Newfoundland) Ltd., Re

Newfoundland Supreme Court

At Trial

Mifflin, J.

February 15, 1971.

Summary:

Trial Court dismissed the action of the Plaintiff trustee of a bankrupt estate and held that a chattel mortgage given by the bankrupt to the defendant in return for advances of funds was valid. At the time of the advances, the bankrupt was in serious financial trouble. The advances were made by the defendant, which was a related company for the purpose of providing operating capital to the bankrupt. Trial Court found that the bankrupt was insolvent when the chattel mortgage was made and that it became bankrupt within six months of the granting of the chattel mortgage. By virtue of Sections 64 and 64A of the Bankruptcy Act, Trial court stated that a presumption was raised that the chattel mortgage was made to give the defendant a fraudulent preference over other creditors. However, Trial Court found that the presumption was rebutted by evidence that the dominant purpose of the advances was to keep the bankrupt in business. Trial Court held accordingly that the chattel mortgage was not made as a fraudulent preference.

Trial Court held that the chattel mortgage was not void for omission of the serial number from the descriptions of motor vehicles mortgaged therein in accordance with Section 6(2) of the Bills of Sale Act. Trial Court referred to Section 20 of the Bills of Sale Act, which provided that no document should be invalidated for an omission in the absence of any interested party being misled thereby. Trial Court held that Section 20 cured the defect, since the chattel mortgage adequately described the vehicles and the plaintiff was not mislead by the omission.

Trial Court held further that since it held the mortgage transaction was a proper one, the claim of the defendant should not be postponed pursuant to Section 96(1) of the Bankruptcy Act until all the other creditors of the bankrupt were satisfied. Court held that in any event Section 96(1) was inapplicable since it referred only to unsecured creditors and the defendant was a secured creditor.

Bankruptcy - Topic 7346

Setting aside transactions prior to bankruptcy - Chattel mortgages - Rebuttal of presumption of preference - Fraudulent preference - Section 64 of Bankruptcy Act - Whether chattel mortgage securing advances of funds to mortgagor was fraudulent preference - Mortgagor insolvent at date of mortgage and declared bankruptcy five months later - Dominant purpose of advances to keep mortgagor in business - Presumption that mortgage made to give a fraudulent preference rebutted - The Newfoundland Supreme Court refused to declare chattel mortgage fraudulent and void.

Chattel Mortgages and Bills of Sale - Topic 1192

Validity - Curing of defects or omissions - Description of motor vehicle failing to include serial number in accordance with section 6(2) of the bills of sale Act - Whether chattel mortgage void - Curative effect of section 20 of bills of sale Act - Interested party not mislead by omission - The Newfoundland Supreme Court held that in the absence of omission causing interested party to be mislead the chattel mortgage was valid.

Statutes Noticed:

Bankruptcy Act, R.S.C. 1952, c. 14, sect. 2A, sect. 2B, sect. 41(6), sect. 64, sect. 64A, sect. 86, sect. 96(1).

Bills of Sale Act, S.N. 1955 c. 22, sect. 2E, sect. 6(2), sect. 20.

Counsel:

The Honourable F.A. O'Dea, Q.C., for the plaintiff;

James R. Chalker, for the defendant.

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