Court of Appeal of Quebec

Séquestre de Media5 Corporation

500-09-028772-200

Schrager, Mainville, Hamilton

Appeal from a judgment of the Superior Court dismissing an application to appoint an interim receiver pursuant to s. 47 of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3). Allowed in part. Application to amend. Allowed.

Deeming that its creditors, the respondent companies, were insolvent, the appellant creditor asked the Superior Court to appoint the impleaded party as receiver pursuant to s. 243(1) of the Bankruptcy and Insolvency Act to sell their businesses on a going concern basis by soliciting offers. At the hearing for this application, the judge determined that this provision did not create a recourse in Quebec. He then invited the appellant to consider presenting an application to appoint an interim receiver pursuant to s. 47 of the Act. The judge also dismissed that application, inter alia on the ground that it was not justified.

The interplay between s. 243 of the Act, concerning the appointment of a receiver at the request of a secured creditor, and the provisions of a provincial statute concerning the conditions that must be complied with prior to enforcing a security, was the subject of exhaustive review in Saskatchewan (Attorney General) v. Lemare Lake Logging Ltd. (S.C. Can., 2015-11-13), 2015 SCC 53, SOQUIJ AZ-51230349, 2015EXP-3203, J.E. 2015-1778, [2015] 3 S.C.R. 419. In light of the teachings of that judgment, unless there is operational conflict or inconsistency of purpose, the provisions of the Civil Code of Québec (S.Q. 1991, c. 64) concerning hypothecary rights must coexist with those of the Bankruptcy and Insolvency Act concerning receivership, and vice versa.

Thus, the Superior Court may appoint a receiver pursuant to s. 243(1) of that statute at the request of a hypothecary creditor to sell the business of an insolvent debtor on a going concern basis. However, the notices and inherent time limits set out under the Civil Code of Québec to exercise a hypothecary right must be complied with. Once these requirements are met, the Superior court may then exercise its discretion under s. 243(1) of the Act to appoint a receiver and confer on it the powers it deems useful, including selling the insolvent debtor’s business on a going concern basis.

As for s. 47 of the Act, the legislative amendments brought to it as well as those brought to s. 243 were intended to ensure that the interim receiver would be appointed temporarily, with limited powers, that is, that it could accomplish only conservatory acts with respect to the insolvent debtor’s property. Accordingly, s. 47 does not allow an interim receiver to be appointed to undertake a process of soliciting offers to sell a business on a going concern basis. Instead, it is the receiver appointed under s. 243(1) of the Act who may, in this case, undertake such a measure.

Finally, it is better to refer the case back to the Superior Court to allow a different judge to perform the analysis required to exercise judicial discretion in accordance with s. 243(1) of the Bankruptcy and Insolvency Act.

Text of the decision: Http://citoyens.soquij.qc.ca

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