Sam Lévy & Associés Inc. v. Azco Mining Inc.

Sam Lévy & Associés Inc. v. Azco Mining Inc.
Collection
Supreme Court Judgments
Date
2001-12-20
Neutral citation
2001 SCC 92
Report
[2001] 3 SCR 978
Case number
27876
Judges
McLachlin, Beverley; L'Heureux-Dubé, Claire; Iacobucci, Frank; Major, John C.; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis
On appeal from
Quebec
Subjects
Bankruptcy and insolvency
Notes
SCC Case Information: 27876
Decision Content
Sam Lévy & Associés Inc. v. Azco Mining Inc., [2001] 3 S.C.R. 978, 2001 SCC 92
Azco Mining Inc. Appellant
v.
Sam Lévy & Associés Inc. Respondent
Indexed as: Sam Lévy & Associés Inc. v. Azco Mining Inc.
Neutral citation: 2001 SCC 92.
File No.: 27876.
2001: May 15; 2001: December 20.
Present: McLachlin C.J. and L’Heureux‑Dubé, Iacobucci, Major, Binnie, Arbour and LeBel JJ.
on appeal from the court of appeal for quebec
Bankruptcy and insolvency -- Courts -- Jurisdiction -- Trustee presenting petition to Quebec Superior Court sitting in bankruptcy seeking to “recuperate” assets held by company with office in British Columbia -- Company bringing motion to transfer petition to British Columbia -- Whether Superior Court lacked subject matter jurisdiction over petition -- Whether Superior Court erred in exercising discretion against making transfer order -- Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-1, s. 187(7).
The appellant is a company incorporated under the laws of Delaware, offering venture capital services from its office in British Columbia. In 1996, a deal involving the financing of an African gold mine was struck between the appellant and Eagle, a company with offices in Quebec. The parties reduced their agreement to a series of documents, each of which contained a clause stating that the agreement was to be governed by the laws of British Columbia. In September 1997, Eagle was adjudged bankrupt by the Quebec Superior Court sitting in bankruptcy and the respondent firm was appointed trustee in bankruptcy. In January 1999, the respondent trustee presented a petition seeking to “recuperate” the assets of Eagle, including the monetary value of numerous shares held or controlled by the appellant. The appellant then brought a motion to transfer the petition “to the Supreme Court of British Columbia, Bankruptcy Division of Vancouver”. The appellant’s motion was dismissed. The Court of Appeal unanimously upheld that decision.
Held: The appeal should be dismissed.
The bankruptcy petition was properly filed in the Quebec Superior Court sitting in bankruptcy. A creditor is required to file a bankruptcy petition in the court having jurisdiction in the judicial district of the locality of the debtor. Eagle carried on business in Quebec and its only connection to British Columbia was that the agreements between itself and the appellant referred to the law of that province. Nothing in the evidence suggested that the bankruptcy court in Quebec lacked subject matter jurisdiction over the petition or personal jurisdiction over Eagle when it made the receiving order. The bankruptcy court thereby acquired jurisdiction to deal with matters affecting the bankrupt estate arising in British Columbia. The Bankruptcy and Insolvency Act establishes a nationwide scheme for the adjudication of bankruptcy claims. Section 188(1) ensures that orders made by the bankruptcy court sitting in one province can and will be enforced across the country.
The bankruptcy court does not lack subject matter jurisdiction over the dispute because it is a contract case. While a trustee’s claim in relation to a “stranger to the bankruptcy” or lacking the “complexion of a matter in bankruptcy” should be brought in the ordinary civil courts, if the contractual dispute properly relates to the subject matter of the bankruptcy proceedings, the fact it also has a property and civil rights aspect does not in any way impair the bankruptcy court’s jurisdiction. Here, far from being a “stranger” to the bankruptcy, the appellant is potentially the most significant player in the role of either creditor or debtor, as the case may be. Further, while the bankruptcy court does not have the general jurisdiction of a civil court to award damages in breach of contract cases, the trustee’s claim is not properly characterized as a claim in damages but as a claim to specific property of the bankrupt which is being wrongfully withheld by the appellant.
The Bankruptcy and Insolvency Act prima facie establishes one command centre or “single control” for all proceedings related to the bankruptcy. “Single control” is not necessarily inconsistent with transferring particular disputes elsewhere, but a creditor (or debtor) who wishes to fragment the proceedings, and who cannot claim to be a “stranger to the bankruptcy”, has the burden of demonstrating “sufficient cause” under s. 187(7) to send the trustee scurrying to multiple jurisdictions. The motions judge was entitled to conclude that the facts of this case do not show “sufficient cause” to require the transfer to British Columbia.
The relevant agreements to which the appellant and Eagle were parties contained choice of law, not choice of forum provisions, and the Quebec courts are perfectly able to apply the law of British Columbia. Furthermore, arts. 3148 and 3135 of the Civil Code of Québec would only apply in bankruptcy court “[i]n cases not provided for in the Act or . . . Rules”. Since s. 187(7) of the Act specifically provides that a transfer will not be ordered unless there is satisfactory proof that a proceeding will be “more economically administered” in another division or district or “for other sufficient cause”, these particular provisions of the Code can have no application. Where, unlike in this case, a defendant has the benefit of a choice of forum clause, such a clause ought to be taken into careful consideration by a motions judge under s. 187(7) but it is not binding.
Cases Cited
Followed: Stewart v. LePage (1916), 53 S.C.R. 337; In re Ireland (1962), 5 C.B.R. (N.S.) 91; Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of), [2001] 3 S.C.R. 907, 2001 SCC 90; distinguished: Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897; referred to: Attorney-General for Alberta v. Atlas Lumber Co., [1941] S.C.R. 87; Boily v. McNulty, [1928] S.C.R. 182; In re Mount Royal Lumber & Flooring Co. (1926), 8 C.B.R. 240; Associated Freezers of Canada Inc. (Trustee of) v. Retail, Wholesale Canada, Local 1015 (1996), 39 C.B.R. (3d) 311; Kansa General International Insurance Co. (Liquidation de), [1998] R.J.Q. 1380; In re Morris Lofsky (1947), 28 C.B.R. 164; Sigurdson v. Fidelity Insurance Co. (1980), 35 C.B.R. (N.S.) 75; Re Holley (1986), 54 O.R. (2d) 225; Falvo Enterprises Ltd. v. Price Waterhouse Ltd. (1981), 34 O.R. (2d) 336; In re The Moratorium Act (Sask.), [1956] S.C.R. 31; Union St. Jacques de Montreal v. Bélisle (1874), L.R. 6 P.C. 31; Ellis v. Silber (1872), L.R. 8 Ch. App. 83; Cry-O-Beef Ltd./Cri-O-Bœuf Ltée (Trustees of) v. Caisse Populaire de Black-Lake (1987), 66 C.B.R. (N.S.) 19; In re Martin (1953), 33 C.B.R. 163; In re Reynolds (1928), 10 C.B.R. 127; Re Galaxy Interiors Ltd. (1971), 15 C.B.R. (N.S.) 143; Mancini (Trustee of) v. Falconi (1987), 65 C.B.R. 246; Geoffrion v. Barnett, [1970] C.A. 273; Arctic Gardens inc. (Syndic de), [1990] R.J.Q. 6; Excavations Sanoduc inc. v. Morency, [1991] R.D.J. 423; In re Atlas Lumber Co. v. Grier and Sons Ltd. (1922), 3 C.B.R. 226; In re Maple Leaf Fruit Co. (1949), 30 C.B.R. 23; Re Westam Developments Ltd. (1967), 10 C.B.R. (N.S.) 61; Re M. B. Greer & Co. (1953), 33 C.B.R. 69; Re M.P. Industrial Mills Ltd. (1972), 17 C.B.R. 226; Harelkin v. University of Regina, [1979] 2 S.C.R. 561; Re Lions D’Or Ltée (1965), 8 C.B.R. (N.S.) 171; Re M. Pollack Ltée (1979), 30 C.B.R. (N.S.) 256; Bourque Consumer Electronics Inc. (Syndic de), J.E. 91-1040; Sarabia v. “Oceanic Mindoro” (The) (1996), 26 B.C.L.R. (3d) 143, leave to appeal refused [1997] 2 S.C.R. xiv; Volkswagen Canada Inc. v. Auto Haus Frohlich Ltd., [1986] 1 W.W.R. 380; Ash v. Lloyd’s Corp. (1991), 6 O.R. (3d) 235, aff’d (1992), 9 O.R. (3d) 755, leave to appeal refused [1992] 3 S.C.R. v; Maritime Telegraph and Telephone Co. v. Pre Print Inc. (1996), 131 D.L.R. (4th) 471; Industrial Packaging Products Co. v. Fort Pitt Packaging International, Inc., 161 A.2d 19 (1960); In re Treco, 239 B.R. 36 (1999), aff’d 240 F.3d 148 (2001); Industrial Acceptance Corp. v. Lalonde, [1952] 2 S.C.R. 109; Coastal Steel Corp. v. Tilghman Wheelabrator Ltd., 709 F.2d 190 (1983); In re Diaz Contracting, Inc., 817 F.2d 1047 (1987); Hays and Co. v. Merrill Lynch, 885 F.2d 1149 (1989).
Statutes and Regulations Cited
Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 2(1) [am. 1997, c. 12, s. 1], 17(1), 30(1)(d), 43(5) [rep. & sub. 1992, c. 27, s. 15], 72(1), 183(1)(b), (c), 187(7), 188(1), (2).
Bankruptcy and Insolvency General Rules, C.R.C., c. 368 [am. SOR/98-240], s. 3.
Civil Code of Québec, S.Q. 1991, c. 64, arts. 3135, 3148.
Code of Civil Procedure, R.S.Q., c. C-25.
Constitution Act, 1867, ss. 91(21) , 92(13) .
Authors Cited
Bohémier, Albert. Faillite et insolvabilité, vol. 1. Montréal: Thémis, 1992.
Castel, J.-G. Canadian Conflict of Laws, 4th ed. Toronto: Butterworths, 1997.
Fletcher, I. F. Insolvency in Private International Law. Oxford: Clarendon Press, 1999.
Houlden, L.W., and G.B. Morawetz. Bankruptcy and Insolvency Law of Canada, vol. 2, 3rd ed. Toronto: Carswell, 1989 (loose-leaf updated 2001, release 7).
APPEAL from a judgment of the Quebec Court of Appeal, [2000] R.J.Q. 392, [2000] Q.J. No. 417 (QL), dismissing the appellant’s appeal from a judgment of the Superior Court, [1999] R.J.Q. 1497. Appeal dismissed.
Yves Martineau, for the appellant.
Jean-Philippe Gervais, for the respondent.
The judgment of the Court was delivered by
1 Binnie J. -- The long arm of the Quebec Superior Court sitting in Bankruptcy reached out to the appellant in Vancouver, British Columbia, in respect of a claim for shares and warrants and other debts allegedly due to the bankrupt which the trustee in bankruptcy values in excess of $4.5 million. The appellant protested that the dispute, which involves the financing of an African gold mine, has nothing to do with Quebec. It argues that the claim of the respondent trustee in bankruptcy is an ordinary civil claim that rests entirely on agreements that are to be interpreted according to the laws of British Columbia. For this and other reasons of convenience and efficiency, the appellant says, the claim ought to proceed in British Columbia. The bankruptcy court and the Quebec Court of Appeal rejected these submissions and, in my view, the further appeal to this Court ought also to be dismissed.
I. Facts
2 The appellant Azco Mining Inc. (“Azco”), a company incorporated under the laws of Delaware, offered venture capital services from its office in Vancouver, British Columbia. In 1996 it was introduced to Eagle River International Limited and Eagle River Exchange and Financial Services Inc. (hereinafter collectively referred to as “Eagle”), with offices in Gatineau, Quebec. Eagle was in the process of trying to develop promising gold mining properties in a 500 square mile area of Mali, West Africa. A deal was struck whereby Eagle would continue to use its expertise to bring the mines to production through subsidiary companies in Mali, and Azco would provide the financing. The parties reduced their agreement to a series of documents, each of which contained what the appellant contends is a choice of forum clause and the respondent argues is no more than a choice of law clause, as follows:
June 7, 1996 financing agreement
28. The agreement shall be governed by the law of British Columbia.
June 12, 1996 management services agreement
13. Arbitration: The Parties hereto agree that all questions or matters in dispute with respect to this Agreement shall be submitted to arbitration pursuant to the terms hereof.
. . .
20. Applicable Law: The situs of this Agreement is Vancouver, British Columbia, and, for all purposes this Agreement, will be governed exclusively by and construed and enforced in accordance with the laws prevailing in the Province of British Columbia.
3 In addition, Azco relies on the terms of the debenture entered into by Azco with Eagle’s subsidiary company in Mali (called West African Gold & Exploration S.A.), as follows:
West African Gold & Exploration S.A. Debenture dated August 9, 1996
17. [The] situs of this Debenture is Vancouver, British Columbia, and for all purposes this Debenture will be governed exclusively by and construed and enforced in accordance with the laws prevailing in the Province of British Columbia. In addition, the Company hereby expressly acknowledges and agrees to forthwith execute any and all documentation which may be necessary in order to ensure both the enforceability of this Debenture and the valid registration thereof as against the Mortgaged Property under the laws prevailing in each of the Province of British Columbia and the Republic of Mali and, in addition, and without limiting the generality of the foregoing, to attorn, if required, to any courts of competent jurisdiction in the Province of British Columbia in order to either administer or interpret this Debenture in accordance with the laws prevailing in the Province of British Columbia.
4 It was envisaged that if the project were successful Azco would ultimately own a majority interest in what the trustee describes as a joint venture holding company, Sanou Mining Corporation (“Sanou”). Eagle was to be a minority partner.
5 During the period of May 16, 1996 and May 1, 1997, Azco paid Eagle a total of US$3,844,858. For each payment, Eagle executed a promissory note, undertaking to repay Azco if it failed to fulfill its contractual obligations.
6 On September 12, 1997, Eagle was adjudged bankrupt. The respondent firm was appointed trustee in bankruptcy. Despite Eagle’s bankruptcy, the Mali project proceeded and, according to Azco, it is still underway. The trustee says that the appellant now controls the holding company Sanou and continues to withhold, wrongfully, the 3.5 million shares and 4 million warrants to which Eagle was (and is) entitled.
7 On January 18, 1999, the respondent trustee presented a petition to the Quebec Superior Court sitting in Bankruptcy (“the bankruptcy court”) seeking to “recuperate the assets” of Eagle, including the monetary value of what it considers the wrongfully withheld property of the debtor, namely 125,000 shares of Azco itself and 3.5 million shares and 4 million warrants of Sanou. The respondent trustee values the Azco shares at CAN$337,500 and the Sanou interest at US$1,875,000. In addition the trustee advances some monetary claims for a variety of alleged debts.
8 On February 24, 1999, the appellant brought a motion to transfer the petition “to the Supreme Court of British Columbia, Bankruptcy Division of Vancouver”. In support of its motion, the appellant stated that “it is a certainty that Azco will file a counterclaim for an amount in excess of $5,000,000 Cdn., based principally” on the financing agreements to recover about US$3.85 million in the payments to Eagle mentioned above which, as stated, were secured by promissory notes. The contractual arrangement, says Azco, was that if certain conditions in the agreements were not met, the advances would be treated as a demand loan. Azco says the conditions were not met and that it is entitled to immediate repayment of all advances. Azco submitted that “[t]he Superior Court of the Bankruptcy Division of Hull does not have jurisdiction to hear this contractual claim against Azco”. Its position, as stated, was that the file should be transferred to the Bankruptcy Division of Vancouver.
9 Azco’s Vice-President of Finance, Ryan Modesto, who lives in the United States, testified in support of the motion that Azco is a creditor in the bankruptcy:
Q. So is it Azco Mining’s position that it is the creditor in that bankruptcy of Eagle River?
A. Yes, it is.
Q. For what amount?
A. For three million eight hundred forty-four thousand eight hundred and fifty-eight dollars ($3,844,858) plus accrued interest.
Q. That’s U.S. currency?
A. That is U.S. currency.
Q. And you refer to interest. Are you referring to the interest referred to in the promissory note?
A. Exactly.
10 Azco’s motion was dismissed by Isabelle J. of the Quebec Superior Court on May 6, 1999. That decision was upheld by the Quebec Court of Appeal on February 21, 2000.
II. Judicial History
A. Quebec Superior Court, [1999] R.J.Q. 1497
11 Isabelle J. held that the Quebec Superior Court sitting in Bankruptcy had jurisdiction to deal with the respondent’s petition. The relevant provisions of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “Act ”), were clear and there was no need to refer to the Civil Code of Québec, S.Q. 1991, c. 64, or the Quebec Code of Civil Procedure, R.S.Q., c. C-25.
12 Azco had not argued that the bankrupt’s affairs could be more efficiently administered in British Columbia but rather that there were other “sufficient” reasons for transferring the proceeding to that province, including, in particular, certain clauses in the agreement (reproduced above) that Azco said required the dispute to be tried in British Columbia. Isabelle J. ruled that these clauses had to do with choice of law rather than choice of forum and in any event lacked an “imperative” character.
13 Isabelle J. accepted that he could transfer the proceeding to the Vancouver division of the Supreme Court of British Columbia sitting in Bankruptcy under s. 187(7) of the Act . There was no need to turn to the specific rules governing forum non conveniens set out in art. 3135 of the Civil Code of Québec. Having regard to all the circumstances, however, Isabelle J. did not think a transfer of proceedings would be justified. The legislator bestowed on the trustee the power to manage the affairs of the bankrupt in the most practical and economical manner possible. Vancouver may be convenient for the appellant, but the interests of all the creditors prevailed over the convenience of only one creditor. Accordingly, the appellant’s motion was dismissed.
B. Quebec Court of Appeal, [2000] R.J.Q. 392
14 A unanimous Court of Appeal dismissed Azco’s appeal. Robert J.A., concurred in by Proulx and Rousseau-Houle JJ.A., agreed that the Quebec Superior Court had jurisdiction over Eagle’s bankruptcy, noting that the company was carrying on business in Quebec when the bankruptcy proceedings were initiated. The petition against Azco was authorized by s. 30(1) (d) of the Act which empowers a trustee to bring legal proceedings relating to the property of the bankrupt with the permission of the inspectors.
15 Robert J.A. agreed with the motions judge that it would be most efficient and equitable to have a single court oversee the administration of the bankrupt estate despite the fact that a centralized bankruptcy might present certain difficulties and inconveniences for parties residing in provinces far from the bankruptcy forum. However, like Isabelle J., he noted that the courts retain some discretion under s. 187(7) to transfer a case to another division where there is proof that the bankrupt’s estate would be administered more economically or where some other sufficient reason exists. In the present case, Robert J.A. found that Azco had not demonstrated it would be more economical to proceed before the bankruptcy court in British Columbia. As to other circumstances, Robert J.A. ruled that the contractual terms that Azco characterized as choice of forum clauses did not bind the trustee in bankruptcy, who represented and acted for the benefit of all creditors. The clauses in question were not exclusive jurisdiction clauses but even if they were, the Act is a law of public order and its provisions must be rigorously applied given the consequences for the rights of both debtors and creditors.
III. Relevant Statutory Provisions
16 Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3
2. (1) In this Act ,
. . .
“locality of a debtor” means the principal place
(a) where the debtor has carried on business during the year immediately preceding his bankruptcy,
(b) where the debtor has resided during the year immediately preceding his bankruptcy, or
(c) in cases not coming within paragraph (a) or (b), where the greater portion of the property of the debtor is situated;
30. (1) The trustee may, with the permission of the inspectors, do all or any of the following things:
. . .
(d) bring, institute or defend any action or other legal proceeding relating to the property of the bankrupt;
43. . . .
(5) The petition shall be filed in the court having jurisdiction in the judicial district of the locality of the debtor.
72. (1) The provisions of this Act shall not be deemed to abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights that are not in conflict with this Act , and the trustee is entitled to avail himself of all rights and remedies provided by that law or statute as supplementary to and in addition to the rights and remedies provided by this Act .
183. (1) The following courts are invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers:
. . .
(b) in the Province of Quebec, the Superior Court;
(c) in the Provinces of Nova Scotia and British Columbia, the Supreme Court;
187. . . .
(7) The court, on satisfactory proof that the affairs of the bankrupt can be more economically administered within another bankruptcy district or division, or for other sufficient cause, may by order transfer any proceedings under this Act that are pending before it to another bankruptcy district or division.
188. (1) An order made by the court under this Act shall be enforced in the courts having jurisdiction in bankruptcy elsewhere in Canada in the same manner in all respects as if the order had been made by the court hereby required to enforce it.
(2) All courts and the officers of all courts shall severally act in aid of and be auxiliary to each other in all matters of bankruptcy, and an order of one court seeking aid, with a request to another court, shall be deemed sufficient to enable the latter court to exercise, in regard to the matters directed by the order, such jurisdiction as either the court that made the request or the court to which the request is made could exercise in regard to similar matters within its jurisdiction.
Bankruptcy and Insolvency General Rules, C.R.C., c. 368 (am. SOR/98-240)
3. In cases not provided for in the Act or these Rules, the courts shall apply, within their respective jurisdictions, their ordinary procedure to the extent that that procedure is not inconsistent with the Act or these Rules.
Civil Code of Québec, S.Q. 1991, c. 64
3135. Even though a Québec authority has jurisdiction to hear a dispute, it may exceptionally and on an application by a party, decline jurisdiction if it considers that the authorities of another country are in a better position to decide.
. . .
3148. In personal actions of a patrimonial nature, a Québec authority has jurisdiction where
. . .
(5) the defendant submits to its jurisdiction.
However, a Québec authority has no jurisdiction where the parties, by agreement, have chosen to submit all existing or future disputes between themselves relating to a specified legal relationship to a foreign authority or to an arbitrator, unless the defendant submits to the jurisdiction of the Québec authority.
IV. Analysis
17 Parliament has conferred on the bankruptcy court the capacity and authority to exercise “original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act ” (s. 183(1) ). On the face of it, the intent of this provision is to confer on the bankruptcy court powers and duties co-extensive with Parliament’s jurisdiction over “Bankruptcy” under s. 91(21) of the Constitution Act, 1867 except insofar as that jurisdiction has been limited or specifically assigned elsewhere by Parliament itself.
18 While the appellant’s motion simply asked that the dispute be transferred to the Vancouver Division of the Supreme Court of British Columbia sitting in Bankruptcy (thereby appearing to concede that the dispute is properly dealt with as a bankruptcy matter), its motion also contended that the trustee’s claims are “exclusively contractual” (para. 6) and that the “Superior Court of the Bankruptcy Division of Hull does not have jurisdiction to hear this contractual claim against Azco” (para. 20). Moreover, much of its oral argument suggested that the dispute ought to be tried in the ordinary civil courts. In addition the appellant takes the position that Quebec is not the convenient forum to deal with this dispute, and that the Quebec Superior Court sitting in Bankruptcy lacks a sufficiently long arm to require Azco to take its witnesses east to litigate. The proper forum, it says, is British Columbia because there is no substantial connection at all between this case and the Province of Quebec.
19 It is convenient to address the legal issues raised by the appellant in the following order:
1. Was the bankruptcy petition properly filed in the Hull Division of the Quebec Superior Court sitting in Bankruptcy?
2. If so, did that court thereby acquire jurisdiction to deal with matters affecting the bankrupt estate arising in British Columbia?
3. If so, are contract claims nevertheless excluded from federal bankruptcy jurisdiction?
4. If not, does this particular contract claim come within the bankruptcy court’s jurisdiction?
5. Even if fully clothed with jurisdiction to hear this case, should the bankruptcy court in Hull nevertheless have transferred the file to the court exercising counterpart bankruptcy jurisdiction in Vancouver?
1. Was the Bankruptcy Petition Properly Filed in the Hull Division of the Quebec Superior Court Sitting in Bankruptcy?
20 Parliament decided to utilize the superior courts of the provinces and territories to exercise bankruptcy jurisdiction (s. 183). It has long been established that, with respect to matters coming within the enumerated heads of s. 91 of the Constitution Act, 1867 , “the Parliament of Canada may give jurisdiction to provincial courts and regulate proceedings in such courts to the fullest extent”: Attorney-General for Alberta v. Atlas Lumber Co., [1941] S.C.R. 87, per Rinfret J., at p. 100. The courts mentioned in s. 183 retain their character as superior courts of inherent jurisdiction, but will be referred to here, perhaps with some imprecision of language, as the bankruptcy courts.
21 A creditor who wishes to obtain a receiving order against a debtor is required to file a bankruptcy petition “in the court having jurisdiction in the judicial district of the locality of the debtor” (s. 43(5)).
22 The “locality of the debtor” is defined under s. 2(1) as the “principal place”
(a) where the debtor has carried on business during the year immediately preceding his bankruptcy,
(b) where the debtor has resided during the year immediately preceding his bankruptcy, or
(c) in cases not coming within paragraph (a) or (b), where the greater portion of the property of the debtor is situated;
23 Section 43(5) expresses a rule of jurisdiction that apportions among the courts named in s. 183(1) judicial power over the adjudication of bankruptcy petitions. The evidence was that Eagle carried on business in Quebec even though it had not obtained a licence to do so. The agreements between Azco and Eagle (and the promissory notes on which Azco’s counterclaim is based) recite that Eagle has an office at 212 Labrosse Boulevard, Gatineau, Quebec. The same address appears on its corporate letterhead. Azco’s Vice-President of Finance testified that his meetings with respect to the financing were held at that office. There is no suggestion that Eagle vacated the premises prior to its bankruptcy, or that it had any other offices in Canada.
24 It appears that Eagle’s only connection to British Columbia is that the agreements mentioned above refer to the law of that province. It is clear that s. 43(5) would not have permitted the filing of the bankruptcy petition in British Columbia on such a ground. Nothing in the evidence, in my view, suggests that the bankruptcy court in Hull lacked subject matter jurisdiction over the petition and personal jurisdiction over Eagle when it made the receiving order on September 12, 1997.
2. Did the Bankruptcy Court Thereby Acquire Jurisdiction to Deal With Matters Affecting the Bankrupt Estate Arising in British Columbia?
25 The Act establishes a nationwide scheme for the adjudication of bankruptcy claims. As Rinfret J. pointed out in Boily v. McNulty, [1928] S.C.R. 182, at p. 186: [translation] “This is a federal statute that concerns the whole country, and it considers territory from that point of view”. The national implementation of bankruptcy decisions rendered by a court within a particular province is achieved through the cooperative network of superior courts of the provinces and territories under s. 188: In re Mount Royal Lumber & Flooring Co. (1926), 8 C.B.R. 240 (Que. C.A.), per Rivard J.A., at p. 246, [translation] “The Bankruptcy Act is federal and the orders of the Quebec Superior Court sitting as a bankruptcy court under that Act are enforceable in Ontario”. See also: Associated Freezers of Canada Inc. (Trustee of) v. Retail, Wholesale Canada, Local 1015 (1996), 39 C.B.R. (3d) 311 (N.S.C.A.), at p. 314, and Kansa General International Insurance Co. (Liquidation de), [1998] R.J.Q. 1380 (C.A.), at p. 1389.
26 The trustees will often (and perhaps increasingly) have to deal with debtors and creditors residing in different parts of the country. They cannot do that efficiently, to borrow the phrase of Idington J. in Stewart v. LePage (1916), 53 S.C.R. 337, at p. 345, “if everyone is to be at liberty to interfere and pursue his own notions of his rights of litigation”. Stewart dealt with the winding up of a federally incorporated trust company in British Columbia. As a result of the winding up, a client in Prince Edward Island instituted a proceeding in the superior court of that province for a declaration that certain moneys held by the bankrupt trust company were held in trust and that the bankrupt trust company should be removed as trustee. This Court held that the dispute, despite its strong connection to Prince Edward Island, could not be brought before the court of that province without leave of the Supreme Court of British Columbia. Anglin J. commented at p. 349:
No doubt some inconvenience will be involved in such exceptional cases as this where the winding-up of the company is conducted in a province of the Dominion far distant from that in which persons interested as creditors or claimants may reside. But Parliament probably thought it necessary in the interest of prudent and economical winding-up that the court charged with that duty should have control not only of the assets and property found in the hands or possession of the company in liquidation, but also of all litigation in which it might be involved. The great balance of convenience is probably in favour of such single control though it may work hardship in some few cases.
27 Stewart was, as stated, a winding-up case, but the legislative policy in favour of “single control” applies as well to bankruptcy. There is the same public interest in the expeditious, efficient and economical clean-up of the aftermath of a financial collapse. Section 188(1) ensures that orders made by a bankruptcy court sitting in one province can and will be enforced across the country.
28 I have concluded that the jurisdiction of the Quebec Superior Court sitting in Bankruptcy was properly invoked by the petitioning creditors in this case but counsel for the appellant company says that his client, with its office in British Columbia, is not within its reach. The argument, in part, is that whatever the power of Parliament to confer national jurisdiction on a provincial superior court, that court is nevertheless provincially constituted, and for service of process its long arm statute must be complied with. The factual record does not show precisely how service of the trustee’s petition was effected on the appellant, but if the appellant had any concerns regarding the proprieties of service of the petition to initiate proceedings against it, such concerns were waived when Azco did not raise them in its motion brought in Hull. A good deal of time was occupied on the appeal with arguments about how a Quebec court could acquire in personam jurisdiction over a corporation resident in British Columbia, and whether the Quebec rules for service ex juris applied. The argument that the Quebec Superior Court sitting in Bankruptcy cannot exercise in personam jurisdiction over creditors in another province under the Act is rejected for the reasons of national jurisdiction already mentioned. Any objections regarding service of process are answered by the fact that Azco not only appeared in Quebec but invoked the jurisdiction of the Quebec Superior Court sitting in Bankruptcy to transfer the proceedings pursuant to s. 187(7) of the Act to the bankruptcy court sitting in Vancouver. Any remaining issue with respect to in personam jurisdiction was thereby waived.
29 Azco did not, of course, waive its objection to jurisdiction over the subject matter of this particular dispute. That was a major point in its motion. I turn now to that issue.
3. Are Contract Claims Nevertheless Excluded From Federal Bankruptcy Jurisdiction?
30 The appellant’s motion, as stated, argued that the trustee’s claims against it are “exclusively contractual in nature” (para. 6) and that “[t]he Superior Court of the Bankruptcy Division of Hull does not have jurisdiction to hear this contractual claim against Azco” (para. 20). The theory underlying these contentions seems to be that contract claims relate to “Property and Civil Rights” within the meaning of s. 92(13) of the Constitution Act, 1867 and on that account lie outside the jurisdiction of the bankruptcy court. At para. 42 of its factum, for example, the appellant argues:
[translation] Contrary to what the Court of Appeal affirms, the trustee’s claim is therefore purely contractual in nature, under the civil law. It is not a remedy specifically provided for under the BIA such as the application to have preferential payments declared void (see sections 91 to 100 BIA). The mere fact that the plaintiff is a trustee does not alter the nature of the claim and does not turn it into a bankruptcy dispute.
31 Most bankruptcy issues, of course, present a property and civil rights aspect. It is true, however, that some of the decided cases which deny jurisdiction to the bankruptcy court do so on grounds that have a constitutional flavour, e.g., In re Morris Lofsky (1947), 28 C.B.R. 164 (Ont. C.A.), per Roach J.A., at p. 167; Sigurdson v. Fidelity Insurance Co. (1980), 35 C.B.R. (N.S.) 75 (B.C.C.A.), at p. 102; Re Holley (1986), 54 O.R. (2d) 225 (C.A.); In re Ireland (1962), 5 C.B.R. (N.S.) 91 (Que. Sup. Ct.), per Bernier J., at p. 94, and Falvo Enterprises Ltd. v. Price Waterhouse Ltd. (1981), 34 O.R. (2d) 336 (H.C.).
32 It is therefore necessary to come to an understanding of what is included in the subject matter of “Bankruptcy” within the meaning of s. 91(21) of the Constitution Act, 1867 .
33 In In re The Moratorium Act (Sask.), [1956] S.C.R. 31, it was stated by Rand J., at p. 46, that:
Bankruptcy is a well understood procedure by which an insolvent debtor’s property is coercively brought under a judicial administration in the interests primarily of the creditors.
34 The core concept of coercive administration appeared early in our bankruptcy jurisprudence. In Union St. Jacques de Montreal v. Bélisle (1874), L.R. 6 P.C. 31, Lord Selborne, speaking at p. 36 of general laws governing bankruptcy and insolvency, said: “The words describe in their known legal sense provisions made by law for the administration of the estates of persons who may become bankrupt or insolvent, according to rules and definitions prescribed by law, including of course the conditions in which that law is to be brought into operation, the manner in which it is to be brought into operation, and the effect of its operation”.
35 More helpful still was Lord Selborne L.C.’s description of bankruptcy in the context of the English Act in Ellis v. Silber (1872), L.R. 8 Ch. App. 83, at p. 86:
That which is to be done in bankruptcy is the administration in bankruptcy. The debtor and the creditors, as the parties to the administration in bankruptcy, are subject to that jurisdiction. The trustees or assignees, as the persons intrusted with that administration, are subject to that jurisdiction. The assets which come to their hands and the mode of administering them are subject to that jurisdiction; and there may be, and I believe are, some special classes of transactions which, under special clauses of the Acts of Parliament, may be specially dealt with as regards third parties. But the general proposition, that whenever the assignees or trustees in bankruptcy or the trustees under such deeds as these have a demand at law or in equity as against a stranger to the bankruptcy, then that demand is to be prosecuted in the Court of Bankruptcy, appears to me to be a proposition entirely without the warrant of anything in the Acts of Parliament, and wholly unsupported by any trace or vestige whatever of authority. [Emphasis added.]
36 Despite the fact that England is a unitary state without the constitutional limitations imposed by our division of powers, the courts in Canada have generally hewn ever since 1874 to the basic dividing line between disputes related to the administration of the bankrupt estate and disputes with “strangers to the bankruptcy”. The principle is that if the dispute relates to a matter that is outside even a generous interpretation of the administration of the bankruptcy, or if the remedy is not one contemplated by the Act , the trustee must seek relief in the ordinary civil courts. Thus in the Quebec case of Re Ireland, supra, the trustee brought proceedings to determine who had the right to proceeds of insurance policies taken out by the trustee on properties of the bankrupt estate. Bernier J. concluded that the Quebec Superior Court sitting in Bankruptcy lacked jurisdiction over the subject matter of the dispute. The controversy raised purely civil law questions and nothing in the Act conferred on the bankruptcy court a special jurisdiction to entertain these matters. Similar arguments prevailed in Cry-O-Beef Ltd./Cri-O-Bœuf Ltée (Trustees of) v. Caisse Populaire de Black-Lake (1987), 66 C.B.R. (N.S.) 19 (Que. C.A.); In re Martin (1953), 33 C.B.R. 163 (Ont. S.C.), at p. 169; In re Reynolds (1928), 10 C.B.R. 127 (Ont. S.C.), at p. 131; Re Galaxy Interiors Ltd. (1971), 15 C.B.R. (N.S.) 143 (Ont. S.C.); Mancini (Trustee of) v. Falconi (1987), 65 C.B.R. 246 (Ont. S.C.), and Re Morris Lofsky, supra, at p. 169.
37 The Quebec Court of Appeal has perhaps led the argument for a more expansive interpretation of what disputes properly come under the bankruptcy umbrella and can therefore properly be litigated in the bankruptcy court: Geoffrion v. Barnett, [1970] C.A. 273; Arctic Gardens inc. (Syndic de), [1990] R.J.Q. 6; and Excavations Sanoduc inc. v. Morency, [1991] R.D.J. 423. See also the dissenting judgment of LeBel J.A., as he then was, in Cry-O-Beef Ltd./Cri-O-Bœuf Ltée, supra, and In re Atlas Lumber Co. v. Grier and Sons Ltd. (