McGILL LAW JOURNAL
Volume 15
Montreal
1969
Number 4
Corporations Not Subject to Canadian Bankruptcy Law*
Stephen A. Scott**
I. T he P roblem …………………………………………………………………………………………..
521
II. An Analysis of the Authorities: Some Tedious Exercises in Statutory
C onstruction ………………………………………………………………………………………..
537
(1) Can a body corporate other than a section 5(f) “corporation”
be a “person” within 2(m )? ……………………………………………………….
537
The Ditchburn Boats Case (This analysis may be skipped by
the general reader) ……………………………………………………………………..
542
The Inverness Case (This analysis may be skipped by the
general reader) …………………………………………………………………………….
543
Under the present Act (This analysis may be skipped by the
general reader) ……………………………………………………………………………
548
C onclusion ……………………………………………………………………………………..
553
(2) Can a non-profit body corporate be a “company incorporated
or authorized to carry on business by or under an Act of the
Parliament of Canada or of any of the provinces of Canada” or
“an incorporated company, wheresoever incorporated, that has
an office in or carries on business within Canada”‘? ………………..
554
*A general revision of the Bankruptcy Act being expected in the near future,
it
is desirable -to remind the reader -that this article discusses the Act as
it stands in May, 19170, being R.S.C. 1952, c. 14, as Famended by 1445 Eliz. II,
S.C. 1066-67, cc. 25 and 32.
** Of the Bar of the Province of Quebec and the Faculty of Law, McGill
University.
520
McGILL LAW JOURNAL
[Vol. 15
(a) Does the term “company” properly embrace non-profit
bodies corporate? ………………………………….
……………………………… 557
Bankruptcy decisions suggesting that non-profit bodies
corporate are not “companies” …………………………………………….
557
A critique of the view that “non-profit” bodies corporate
cannot be “com panies” …………………………………………………………
579
(b) Can a “non-profit” body corporate, assuming
IS a
“company”, meet the other requisites for qualification
as a section 2(f) “corporation”? ………………..
………………. …. 586
it
Under the present A ct ……………………………………………………….
586
U nder the old A ct …………………………………………………………….
589
(c)
Is the character of a body corporate to be tested by its
objects, by its powers, or by its actual activities? What if
these are m ultiple? ………………………….
………………………………… 590
Activities carried on in fact ………………………………………………..
594
Capacity, Objects, and Powers …………………………………………..
597
III. Conclusions …………………………………………………………………………………………….
600
APPENDIX ONE:
Report of the judgment of Montpetit, J., in Chauss6
V. L’Association du Bien-Etre de la Jeunesse, Inc.,
M arch 12, 1957 ……………………………………………………….
602
APPENDIX TWO:
Report of the judgment of Montpetit, J., in Re
Centre Culturel du Vieux Montreal, February 6,
196 ………………………………………………………………………
606
APPENDIX THREE: Bankruptcy and Winding-Up Acts …………………….
607
APPENDIX FOUR:
Insolvent Building Societies, Banks, and Insurance,
Trust, Loan, and Railway Companies ……………………
609
APPENDIX FIVE:
Provincial Laws Cognate to Bankruptcy and Insol-
vency ………………………………… 612
APPENDIX SIX:
The Definitions Under the 1919 Act …………………..
19
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
521
I. The Problem
Wholesale exclusion of “non-profit” corporations from Canadian
bankruptcy jurisdiction is now indicated by decisions involving
(apart from municipal and church corporations) 1 a credit union
(“caisse populaire”) 2 and a building co-operative 3 –
both incor-
porated under the Quebec Cooperative Syndicates Act 4 –
as well
as a building society,5 a youth welfare organization,” and, most
recently, a cultural centre,7 all three incorporated without share
capital under Part III of the Quebec Companies Act.8
This development, one may confidently hazard, is scarcely to be
expected by anyone who reads the language of the present Canadian
Bankruptcy Act 9 free from preconceptions as to its proper inter-
‘ For church corporations, see infra, n. 15; for municipal and school corpora-
tions, n. 16.
2 Feeney v. Lacroix, (1938), 65 BR. 686, 20 C.B.R. 149 (Coram Tellier, C.J.,
Rivard, Galipeault, St-Jacques and Barclay, JJ.); decided under the 1919 Act
as revised, then being the Bankruptcy Act, R.S.C. 1927, c. 11.
3 1n re Construction Cooperative de Montreal v. Z. Berthiaume & Fils Ltde,
(1939), 66 B.R. 409, 2 0 C.B.R. 351 (Coram L6tourneau, Galipeault, Walsh, St-
Jacques, and Langlais ad hoc, JJ.); reversing (1938), 20 C.B.R. 285
(C.S.),
(Boyer, J.). The case was decided under the 1919 Bankruptcy Act as it stood
in R.S.C. 1927, c. 1.
4 R.S.Q. 1925, c. 254; now the Cooperative Syndicates Act, R.S.Q. 1964, c. 294.
G Philippe de Gasp6 Beaubien v. L’Union Economique d’Habitation, [1947]
(Boyer, J.); decided under the 1919 Act as revised,
C.S. 33, 28 C.B.R. (C.S),
R.S.C. 1927, c. 11.
6 Chauss6 v. LAssociation du Bien-Etre de la Jeunesse Inc., [1960] B.R. 413
(Coram Pratte and Owen, JJ.; Rinfret, J., dissenting), affirming a judgment of
the Superior Court sitting in Bankruptcy rendered by Hon. Mr. Justice Andr6
Montpetit on March 1t2, 1957, No. 240/1956, hitherto unreported, dismissing
without costs a petition in bankruptcy. The case was decided under the present
(1949) Act as it stood revised as R.S.C. 1952, c. 14. The judgment of the Hon.
Mr. Justice Montpetit is reported infra, as Appendix One, pp. 602 et seq.
7 In re Centre Culturel du Vieux Montreal, Superior Court of the Province of
Quebec: In Bankruptcy; Montreal, No. 7714; Hon. Mr. Justice Andr6 Montpetit,
February 6, 1968. The case, being hitherto unreported, is reported here, infra,
as Appendix Two, pp. 606 et seq.
8 The Quebec Companies Act, R.S.Q. 1041, c. 276, in the first two cases; in the
third, the same Act as presently revised, being the Companies Act, R.S.Q. 1964
c. 271.
9 The Bankruptcy Act, 1949, 16 Geo. VI, S.C. 1949, 2nd Sess., c. 7, as revised
and re-enacted in the Bankruptcy Act, R.S.C. 1952, c. 14, and amended by the
:Rliz. II, S.C. 1966-67, c. 25, and
Government Organization Act, 1966, 14-15
further -amended by An Act to amend the Bankruptcy Act, 14-15 Eliz. II, S.C.
1966-67, c. 32; which last statute received royal assent on July 11, 1966 and
was in force from that date, but by section 23 provided that certain of its
provisions should apply only in the case of assignments, proposals by insolvents,
McGILL LAW JOURNAL
[Vol. 15
pretation. It is the more surprising in the light of the broad historical
evolution of bankruptcy law, from a jurisdiction for traders only,
into a general jurisdiction ;1o and it is especially striking in the face
of what seems the distinct policy of Canadian bankruptcy legislation
(which differs in that respect from the British) to embrace persons
natural and artificial of every description,” save only those which,
for special reasons, are to be dealt with in special ways ;12 and those
which, like public authorities, are –
to be presumed [if not constitutionally deemed],14 by reason of their
nature or status, to be outside the scope of bankruptcy legislation.
at any rate by implication 13 –
or receiving orders, made thereafter. The text of the Act as it now stands is
most conveniently accessible in the form of an Office Consolidation published by
the Queen’s Printer in 1968.
10 For an historical account of bankruptcy and insolvency law, and references,
see Duncan and Honsberger, Bankruptcy in Canada, 3rd ed., (Toronto, 1961),
chapters 1-4. As to England, see p. 3 and esp. n. 14; as to territories now
forming part of Canada, pp. 5 et seq.; as to Canada and its provinces since
Confederation, pp. 15 et seq.
1 See Appendix Three, infra, pp. 607 et seq.
12See Appendix Four, infra, pp. 609 et seq.
’13 Commission Municipale de Quebec v. Ville d’Ayl mer, (1933), 71 C.S. 117,
14 C.B.R. 437; and (in an English translation)
[1933] 2 D.L.R. 638 (Superior
Court: Trahan, J.). The case involved a municipal corporation and the decision
dealt with municipal and school corporations; see infra, n. 16.
‘4 In Ladore v. Bennett, [1939] A.C. 468, [1939] 3 D.L.R. 1, 21 C.B.R. 1,
[1939] 2 W.W.R. 566, [1939] 3 All E.R. 98, the Privy Council, affirming the
Court of Appeal for Ontario (Latchford, Masten and Henderson. JJ.A.), [1938]
O.R. 324, [1938’] 3 D.L.R. 212, which had affirmed a judgment of Hogg, J., upheld
the constitutional validity of various Ontario statutes providing for the amal-
gamation of municipalities in default to meet their obligations, the supervision
and control of their affairs by a public board and later by a government depart-
ment, and the refunding of debts on a compulsory basis by a public board having
power to change the terms and conditions of the obligations, more particularly
in respect of times of payment and interest rates. Lord Atkin said for the
Board, [1939] A.C. 468, at p. 480: “Insolvency is the inability to pay debts in
the ordinary course as they become due; and there appears to be no doubt that
this was the condition of these corporations. But it does not follow that because
a municipality is insolvent the Provincial Legislature may not legislate to provide
remedies for that condition of affairs. The Province has exclusive legislative
power in relation to municipal institutions in the Province. … If local govern-
ment in any particular area becomes ineffective or non-existent because of the
financial difficulties of one or more municipal institutions, or for any other
reason, it is not only the right, but it would appear to be the duty, of the
Provincial Legislature to provide the necessary remedy, so that the health of
the inhabitants and the necessities of organized life in conmunities should be
preserved. If corporation A or B or C is unable to function satisfactorily it
would appear to be elementary that the Legislature must have power to provide
that the functions of one or all should be transferred to some other body or
corporation. For this purpose, as the corporation could be created by the Prov-
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
523
More intriguing still, the statutory construction upon which rests
this exclusion of “non-profit” corporations seems, in its origin, to
have been little more than a rationale designed to justify, upon the
very terms of the Act then in force rather than merely upon common-
ince, so it could be dissolved, and a new corporation created as a municipal
institution to perform the duties performed by the old. The result of dissolution
is that the debts of the dissolved corporation disappear. … And in creating the
new corporation with the powers of assuming new obligations it is implicit in
the powers of the Legislature (sovereign in this respect) that it should place
restrictions and qualifications on the obligations to be assumed.. .”. (At p.
481): “That for the purpose of keeping control over municipal institutions the
Legislature provided that a department of the Provincial government should
have the means of ascertaining whether a particular municipal body was solvent
or insolvent does not make its legislative provision in that regard an encroach-
ment on the general powers of the Dominion over bankruptcy and insolvency…”.
(At p. 482): “The statutes are not directed to insolvency legislation; they pick
out insolvency as one reason for dealing in a particular way with unsuccessful
institutions….
The existence of the provincial power does not, it is submitted, of itself prove
the non-existence of federal power. A power to deal with municipalities without
regard to their solvency or otherwise does not negative a power to deal with
insolvents without regard to whether they are municipalities. See Henderson,
J.A., for the Court of Appeal in Ladore v. Bennett, [1939] O.R. 324, at p. 352;
is argued that the field of bankruptcy and insolvency is fully occupied by
“It
legislation of the Dominion of Canada. It is, however, conceded that the existing
Dominion legislation does not apply to municipal institutions. It is a serious
question, in my opinion, whether bankruptcy and insolvency legislation could
have any application to municipalities, but that need not be discussed. See
Sarrazin v. Des Curd et Marguilliers de l’Oeuvre et Fabrique de la Paroisse de
St-Gabriel de Brandon, (1935), 16 C.B.R. 350. It is sufficient to say that it
has not done so.” Clearly, federal power was not in issue.
Per St-Germain, J., in St-Gabriel de Brandon v. Sarrazin, (1,935), 59 B.R. 128,
at p. 137, 16 C.B.R. 326: “Or, il est assez difficile de concevoir que la loi de
faillite puisse s’appliquer i ces corporations de droit public, tant eccldsiastique
que lalique. I1 ne semble faire de doute pour personne qu’une corporation muni-
cipale n’est pas soumise h ]a loi de faillite et je doute fort d’ailleurs que le
Parlement fidral pourrait s’autoriser du pouvoir qui lui est attribu6 de 16gif~rer
sur la banqueroute et la faillite, une mati~re, encore une fois, qui fait plut6t
partie du droit priv6, pour imposer une loi de faillite h cette corporation muni-
cipale, 6tre moral, qui personnifie la collectivit6 des habitants d’une portion
d~termin6e de territoire d’une province et qui est rev6tue par le gouvernement de
de cette province des pouvoirs ndcessaires pour veiller aux intfrcts et droits que
ces habitants peuvent avoir en commun.”
‘Les corporations municipales sont des 61]ments constitutifs de l’organisation
sociale, dont la crdation appartient aux provinces, et l’on concevrait difficilement
que sous pr~texte de lgifdrer en mati~re de faillite, le pouvoir f~dral pit s’in-
gdrer dans le fonctionnement de ces corps publics. Or, s’il en est ainsi pour les
corporations municipales, pourquoi n’en serait-il pas de m~me pour les fabriques
qui sont aussi des corporations publiques et qui remplissent vis-a-vis des habi-
tants d’une paroisse, pour les fins du culte les fonctions que les conseils muni-
MCGILL LAW JOURNAL
[Vol. 15
law rules of interpretation, the extension to church corporations 10
of the immunity from bankruptcy jurisdiction already attributed by
judicial decision to municipal and school corporations.’0
cipaux remplissent vis-h-vis des m~mes habitants pour tous les autres objets et
besoins locaux ?”
In sustaining the constitutional validity of provincial legislation subjecting
defaulting municipalities
to the control of a provincial government board,
Trahan, J., in Commission Municipale de Qugbec v. Ville d’Aylmer, (1933), 71
C.S. 117, (1933), 14 C.B.R. 437, held that it did not infringe upon exclusive
federal legislative authority, but, in upholding the provincial power, left open
the question of federal power; at 71 C.S. 117, at p. 122, his Lordship, speaking of
the provincial statute, said: “[E]lie demeure de cette comp6tence tant et aussi
longtemps que le Parlement n’aura pas, dans l’exercice de son pouvoir concer-
nant la faillite et l’insolvabilit6, adopt6 une l6gislation incidente pour la rendre
inop~rante[.]” The case is reported in an English translation in
[1933] 2
D.L.R. 638. On constitutional matters, see infra, Appendices Three and Four.
‘0 Bricault v. Curg et Marguilliers de l’Oeuvre et Fabrique do la Paroisso do
St.-Etienne, (1935), 58 B.R. 1O0, 16 C.B.R. 1.6 (Coram Tellier, C.J., Dorion,
Bernier, St.-Jacques and Barclay, JJ.); reversing (1933), 71 C.S. 471, 39 R.J.
452, also reported, together with the decision on appeal, 1. C.B.R. 196, at
p. 197 (Superior Court: Boyer, J.); and also Curg ot Marguilliors dv l’Oeuvro
et Fabrique de l, Paroisse de St.-Gabriel de Brandon v. Sarrazin, (1935),
58 B.R. 103, 16 C.B.R. 326 (Coram Dorion, Rivard, Itourneau, Hall, and
St.-Germain, JJ.); reversing the decision of Boyer, J., in the Superior Court,
reported, together with that on appeal, at (1933), 16 C.B.R. 326; refusal,
with reasons, of leave to appeal to the Supreme Court of Canada, being
reported at [1935] S.C.R. 419, [1935] 3 D.L.R. 554, 16 C.B.R. 350 (Davis, J.,
in Chambers). The judgments of the Queen’s Bench in both cases were delivered
on January 31, 1935.
that that Act was not applicable
16 In Commission Municipale do Qudbec v. Ville d’Aylmer, (1933), 71 C.S. 117,
14 C.B.R. 437, Trahan, J., in the Superior Court of Quebec, in upholding the
constitutional validity and operation of provincial legislation subjecting defaulting
municipalities to the control of the Quebec Municipal Commission, held inter alia
that there was no conflict with the Bankruptcy Act, R.S.C. 1927, c. 11, for
the reason (semble, amongst others)
to
municipal and school corporations; speaking at (1933), 71 C.S. 1.17, at p. 122,
his Lordship said: ” … [L]a loi de faillite du Canada n’est pas applicable
aux corporations municipales et scolaires; elle ne contient, en effet, aucune
disposition pouvant permettre au syndic qui serait nonm6 de pr~lever sur les
biens imposables de la municipalit6 les sommes requises pour le paiement des
montants dus aux crdanciers de la corporation; comme susdit, ceos biens r6pondent
du paiement des dettes de ]a corporation, et constituent la seule garantie pratique
des cr~anciers; elle serait done absolument inefficace au cas d’une cession
volontaire ou de la mise en faillite d’une municipalit6… “. This passage may
be found in English translation in [1933] 2 D.L.R. 638, at p. 642. The case
was referred to by Hogg, J., in Ladore v. Bennett, [1938] O.R. 324, at p. 346,
and the point made above by the learned judge Trahan J. was conceded by
counsel before the Court of Appeal for Ontario in Ladore V. Bonnet; see the
remarks of Henderson, J.A., for the Court, [1938] O.R. 324, at p. 352, quoted
supra, n. 14.
No. 4]
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
525
The results of the course of interpretation seem highly anomalous.
A wide range of corporate bodies appears wholly excluded by judicial
decision from the operation of all Canadian insolvency legislation;
and in this these bodies are unique, not only amongst corporations,
but also amongst individuals, even individuals not engaged in gain-
ful activities –
and this, though the specific ground of exclusion
of the corporations in question is precisely that they are not incor-
porated with object of gain.
Excluded from the Bankruptcy Act, they are equally excluded
from the federal Winding-up Act,17 except such as are federally in-
corporated; for the federal Winding-up Act applies to companies
otherwise than federally incorporated only if 18 they are ‘incorporated
17 R.S.C. 1952, c. 296, as amended in immaterial respects by the Government
Organization Act, 1966, 14-15 Eliz. II, S.C. 1966-67, c. 25, s. 38. Insolvency is
defined by sections 3 and 4. By section 2(a), capital stock includes a capital
stock de jure or de facto. The position of various types of corporations is
discussed below in detail in Appendix Four. The principal relevant sections are
as follows:
APPLICATION
6. This Act applies to all corporations
incorporated by or under the
authority of an Act of the Parliament of Canada, or by or under the
authority of any Act of the late Province of Canada, or of the Province
of Nova Scotia, New Brunswick, British Columbia, Prince Edward Island
or Newfoundland, and whose incorporation and the affairs whereof are
subject to the legislative authority of the Parliament of Canada; and
also to incorporated banks, savings banks, incorporated insurance companies,
loan companies having borrowing powers, building societies having a
capital stock, and incorporated trading companies doing business in Canada
wheresoever incorporated and,
(a) which are insolvent; or
(b) which are in liquidation or in process of being wound up, and, on
petition by any of their shareholders or creditors, assignees or liquidators
ask to be brought under the provisions of this Act.
7. This Act does not apply to building societies that have not a capital
stock or to railway or telegraph companies.
18But not necessarily
they are. As regards bodies neither federally
if
incorporated nor continued
in
respect of their incorporation under federal
legislative authority, the application of the federal Winding-up Act is predicated
upon actual or apprehended insolvency (B.N.A. Act, s. 91 (21)). In addition
to the authorities referred to in Appendices Three and following, reference may
be had to the usual works on Canadian company law.
McGILL LAW JOURNAL
CVol. 15
trading companies doing business in Canada’ 19 or ‘incorporated
banks, savings banks, incorporated insurance companies, [or] loan
companies having borrowing powers, [or] building societies having
a capital stock.. ‘.20 Parliament, having in terms indicated the exclu-
sion from the Bankruptcy Act of ‘building societies having a capital
stock, … incorporated banks, savings banks, insurance companies,
trust companies, loan companies [and] … railway companies’, 21 has
made special provision for them, 22 in most cases giving them a home
under the Winding-up Act,23 as we have just seen. But no such
special provision has been possible as a correlative to exclusions
from the Bankruptcy Act by judicial gloss.24
19 The term “trading company” is defined in section 2 (i) as follows:
INTERRETATION
2. In this Act,…
(i) “trading company” means any company, except a railway or telegraph
company, carrying on business similar to that carried on by apothecaries,
auctioneers, bankers. brokers, brickmakers, builders, carpenters, carriers,
cattle or sheep salesmen, coach proprietors, dyers, fullers, keepers
of inns, taverns, hotels, saloons or coffee houses, lime burners, livery
stable keepers, market gardeners, millers, miners, packers, printers,
quarrymen, sharebrokers, ship-owners, shipwrights, stockbrokers, stock-
jobbers, victuallers, warehousemen, wharfingers, persons using
the
trade of merchandise by way of bargaining, exchange, bartering,
comnission, consignment or otherwise, in gross or by retail, or by
persons who, either for themselves, or as agents or factors for
others, seek their living by buying and selling or buying and letting
for hire goods or commodities, or by the manufacture, workmanship
or the conversion of goods or commodities or trees[.]
20 Section 6. See infra, Appendix Four, at pp. 609 et seq. for details about each.
21 These are excluded from the definition of “corporation” in the Bankruptcy
Act, s. 2(f); see infra, Appendix Four, at pp. 609 et seq. for details about each.
22With the sole exceptions of trust companies not federally incorporated;
loan companies without borrowing powers and not federally incorporated; and
railway companies whose operations are not governed by federal aaws. Infra,
Appendix Four, at pp. 609 et seq. The above exceptions appear deliberate.
23 R.S.C. 1952, c. 296 as amended; infra, Appendix Four, at pp. 609 et seq.
24 1ndeed, in Beaubien v. L’Union Economique d’Habitation, [1947] C.S. 33,
Boyer, J., in the Quebec Superior Court held that a company incorporated
without object of pecuniary gain under Part III of the Quebec Companies Act,
R.S.Q. 1941, c. 276, to obtain housing at moderate cost for its members, was
subject neither to the then Bankruptcy Act, R.S.C. 1927, c. 11, nor to the
Dominion Winding-up Act, R.S.C. 1927, c. 213. It being a non-profit body
corporate, the Bankruptcy Act was held not to apply. And the Dominion
Winding-up Act was held not to apply (see [1947] C.S. 33, at p. 34) because
the company was neither a trading company nor (as it lacked a capital) within
the category of ‘building societies having a capital stock’ such as were expressly
subject to the Winding-up Act, R.S.C. 1927, c. 213, s. 6 –
correlatively, it
seems clear, to their exclusion from the Bankruptcy Act. Surely this case
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
527
in
(save
Deprived of the operation of the Bankmptcy Act, creditors of
“non-profit” corporations have
those cases where the
Winding-up Act can be applied),25 for example, no other means of
setting aside contracts and payments as preferential, than any which
may be validly prescribed by provincial statute or by any surviving
common-law or unrepealed statutory rules.26 They have, likewise, no
other special rights or means of recovering property so transferred
from the third, fourth and fifth parties into whose hands it has
come.27 Such creditors have, moreover, no other statutory preferences
intention of Parliament. There
to the Bankruptcy Act (supra, n. 9),
the creditors immensely the more powerful weapons.
provides a powerful illustration of the manner in which the current judicial
interpretation frustrates the clear
is surely
no way to justify refusal to treat the two Acts as together embracing all
insolvent building societies. The Bankruptcy Act expressly excluded those with
a capital stock; the Winding-up Act expressly included them and also expressly
excluded those which had none, See infra, Appendix Four, at pp. 609 et seq.
25 See sections 96 and following. Especially since the most recent amendments
is the latter statute which gives
26 Relevant provisions do appear on the statute books of the provinces under
various designations
(assignments, fraudulent preferences, fraudulent con-
veyances, and so on), but, as will be seen below, serious doubts exist as to
the extent of their constitutional validity and, at all events, as
to their
operation in the face of federal
legislation. See le.g. Re Bozanich, [19421
S.C.R. 130, 13 C.B.R. 234, [1942] 2 D’.L.R. 145. See Appendix Five, infra, pp. 612
et seq.
it
27 The tracing provisions found in the various provincial statutes mentioned
infra, Appendix Five, at pp. 610 et seq. are often wide enough to allow tracing
property concerned in transactions avoided under other laws. Even so, they can
serve no greater purpose than the substantive provisions whose machinery they
are; if the latter cannot operate, neither can the former.
The terms of the tracing provisions themselves vary in their stringency from
province to province. Where such provisions are inserted they permit at least
the following of the property into its proceeds, so long at least as the proceeds
are in the hands of the beneficiary of the void transaction. How far (i) the
property itself, and (ii)
its proceeds, may be followed into the hands of third
parties, is more clear in some provinces than in others. Even where such rights
are not specifically enacted, they may be presupposed by clauses inserted to
protect “innocent purchasers”; and it is of course arguable that common law
or equitable rights of tracing may exist in consequence of the operation of the
statutes in question. In R.S.A. 1055, c. 120, s. 12(1) ; R.S.M. 1954, c. 11, s. 49(1) ;
and R.S.S. 1965, c. 397, s. 13(l): “the money or other proceeds, or the amount
thereof, whether further disposed of or not”; (emphusis added). In R.S.B.C. 1960,
c. 156, s. 5: “the money or other proceeds or the amount or value thereof”. In
R.S.N.B. 1052, c. 13, s. 21: “the money or other proceeds realized therefor”.
In R.S.N.S. 1967, c. 16, s. 20(1) and R.S.O. 1960, c. 25, s. 12(1): “the money or
other proceeds”. See also R.S.N. 1952, c. 114, s. 254. The terms of the relevant
provisions differ in other material respects. Compare s. 66 of the Bankruptcy
Act, itself far from unambiguous. On R.S.M. 1,954, c. 1,
s. 49, see Smith, J.,
in Re Mid-West Catering Co. Ltd., (1965), 9 C.B.R. n.s. 72, at p. 77. See
also for example Re Shelly Films Ltd., and Re Hecimovic, infra, Appendix Five,
at pp. 616-617.
McGILL LAW JOURNAL
[Vol. 15
amongst themselves than such as may already validly result from
provincial laws such as those in Quebec establishing privileges and
hypothecs, those in the common law provinces establishing rights of
mortgage and lien, and other federal and provincial laws creating
analogous rights of property or security and a few preferences.27 a
Nor, indeed, are such creditors necessarily assured even of a
rateable share of the property taken in execution. Even though
there seem to be statutes in most Canadian provinces denying prefer-
ence amongst judgment creditors in an execution,2 8 and even allow-
ing non-judgment creditors a right to share,2 9 anomalous results
are still possible. Thus the Quebec Code of Civil Procedure 30 denies,
where insolvency is alleged, preference amongst ordinary judgment
creditors;31 it furthermore allows non-judgment creditors to file
their claims. 32 But the claims of privileged creditors –
that is to
say those having privileges and hypothecs – must of course be pre-
ferred to ordinary creditors;33 and a judgment creditor for a sum
27a Preferences, for example, for wage claims, can, of course, be found on the
statute books of various provinces; see R.S.A. 1955, c. 103, s. 16; R.S.B.C. 1960,
c. 135, s. 6; R.S.M. 1954, c. 76, s. 9; R.S.N.B. 1952, c. 244; R.S.N. 1952, c. 114,
s. 2A1, s. 251; R.S.N.S. 1967, c. 70, s. 21; Civil Code, arts. 1994(9), 1D94d,
2009(7) and (9), 201ld, etc.; R.S.S. 1965, c. 98, s. 15.
28 The Execution Creditors Act, R.S.A. 1955, c. 103, s. 3; Creditors’ Relief Act,
R.S.B.C. 1960, c. 85, s. S; The Executions Act, R.S.M. 1954, c. 76, s. 24; R.S.N.B.
1952, c. 50, s. 3; Creditors’ Relief Act, R.S.N.S. 1967, c. 70, ss. 2 and 41 (denying
priority amongst creditors in distribution of personal property, and excluding
the Act from operating as to land): the author being unaware as to whether
any similar provision is to be found as to lands; The Creditors’ Relief Act, R.S.O.
1,960, c. 78, s. 3; The Creditors’ Relief Act, R.S.S. 1965, c. 98, s. S. For Quebec,
see infra, nn. 30-31. By The Judgment and Execution Act, R.S.P.E.I. 1051,
c. 78, s. 1, a judgment against a debtor operates as a lien on his lands, and
s. 12 denies preference to execution creditors against previously registered judg-
ments. There does not seem to be in P.E.I. or Newfoundland creditors’ relief
legislation analogous to that in the other provinces. No doubt the view is that
a bankruptcy will accomplish much the same result. The Newfoundland Judicature
Act, as infra indicated (Appendix Five) contains a set of general insolvency
provisions such as are presumably now superseded by the Bankruptcy Act. On the
provincial legislative power to deal in this fashion with executions, the leading
decision is of course the Voluntary Assignments Case, A.-G. Ont. v. A.-G. Can.,
[.1894] A.C. 189.
29 See the statutes listed supra, n. 28. Provision is made in these Acts for
the filing of claims by other creditors, their contestation, and so forth.
3013-14 Eliz. II, S.Q. 1965, c. 80.
31 Art. 578 C.C.P.
32 Ibid., para 2.
33 Arts. 613 and 615 C.C.P. (seizure in execution of moveable property); 711
and 716, 715 et seq. C.C.P. (seizure in execution of immoveables); arts. 19&1,
1982, 2016 C.C.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
529
certain may by certain formalities of registration acquire a judicial
hypothec on any of the debtor’s immoveable property.34 The result
seems clear that a creditor of an insolvent “non-profit” corporation
may by winning the race to judgment, and complying with the
formalities necessary to obtain judicial hypothec, obtain in Quebec
a preference prescribed by law; and a preference which, should the
current interpretation of the Bankruptcy Act stand, cannot be
disturbed by those provisions of that Act which would ordinarily
operate to avoid the judicial hypothec.3 5
“Non-profit” corporations have been excluded from the scope
of the present Act, to put the matter most succinctly, by excluding
them [by construction] from the statutory definition of “corpora-
tion”; thence from the statutory definition of “person”; thence from
the statutory definitions of “debtor” and “insolvent person”; and, in
consequence, from the Bankruptcy Act.
The reasoning by which this has been accomplished will be
examined below. But of all the decisions mentioned above as support-
ing the exclusion of “non-profit” corporations, two only 36 are based
upon the present statute, the Bankruptcy Act, 19 4 9,3T which con-
tinues in force as revised 38 and amended.39 The earlier decisions
34 Arts. 2034 to 2036 C.C.; and see art. 2026 C.C.
35 Sections 41(1) and 41(.2) of the Bankruptcy Act, R.S.C. 1952, c. 14. The
Privy Council case sustaining the constitutional validity of such an enactment
by the Parliament of Canada is of course one of the leading constitutional deci-
sions on the subject of the federal power over bankruptcy and insolvency: Royal
Bank of Canada v. Larue, [1928] A.C. 1897. It dealt precisely with the question
whether a Quebec judicial hypothec could be avoided by the predecessor of
s. 41(1).
30 Chaussi v. L’Association du Bien-Etre de la Jeunesse, Inc., [.1960] B.R. 413,
affirming a judgment of Montpetit, J., reported herein, infra, Appendix One
(see supra, n. 6); -and In re Centre Culturel du Vieux Montrial, Quebec Superior
Court, District of Montreal, Montpetit, J., February 6, 1968, reported by the
author herein, infra, Appendix Two (see supra, n. 7).
37 13 Geo. VI, S.C. 1949, 2nd Sess., c. 7.
38Bankruptcy Act, R.S.C. 1952, c. 14.
39 In particulars not material, by the Government Organization Act, 1966, 14-15
Eliz. II, S.C. 1966-67, c. 25, and as to the substance of bankruptcy law by An
Act to amend the Bankruptcy Act, 14-15 Eliz. II, S.C. 1966-67, c. 32. See supra,
n. 9.
McGILL LAW JOURNAL
[Vol. 15
depend upon the Bankruptcy Act, 1919, as amended 40 and revised; 41
their continuing authority cannot therefore be taken for granted,
but must depend upon a rather careful comparison of the relevant
statutory provisions.42
Under the present Act it is necessary, in order to be liable to a
receiving order, to be (aanongst other things) a “debtor”. 43 This is
an important term, and we shall shortly examine its statutory
definition. 44 But a receiving order is of course by no means the only
basis of bankruptcy jurisdiction: under the present Act, as under the
old, a bankruptcy may equally be founded upon an assignment of
property for the general benefit of creditors;4 and, in addition, a
proposal made by an insolvent under the Bankruptcy Act, hitherto
doubtless at least a form of proceeding within the scope of the Act,40
40 The Bankruptcy Act, 1919, 9-10 Geo. V, S.C. 1919, c. 36 was amended by
a considerable number of statutes, references to which may be found in Duncan
& Honsherger, Bankruptcy in Canada, 3rd ed., (Toronto, 1961), p. 30. Of the
sections which we are discussing, the only closely significant amendment appears
to have been made by The Bankruptcy Act Amendment Act, 1921, 1142 Geo. V,
S.C. 1921, c. 17 which, by s. 5, replaced the former section 2(aa) defining
“person” with a new definition. Other amendments to the sections under dis-
cussion concerned the application of the Winding-up Act where it overlapped
with The Bankruptcy Act; reference to these are given in the third paragraph
of Appendix Three, infra, at p. 608.
41 R.S.C. 1927, c. 1.1. All the major cases on the old Act, with one exception,
were decided under the Bankruptcy Act as it appeared in that revision.
42 For a review of the various statutory provisions and their evolution, see
Appendix Six, infra, at pp. 6,19 et seq.
43 By section 21(1), “one or more creditors may file in court a petition for a
receiving order against a debtor” under the circumstances set forth.
44 Section 2(i), which is set out in the next following paragraph of the text.
45 Section 26.
46 For a history of the rules concerning proposals, see Duncan & Honsberger,
op. cit., pp. 260 et seq. An insolvent could, from 1910 to 1923, make a proposal,
even though he had not been adjudicated bankrupt; and, under the 1949 Act
(s. 27), the same has been possible. Refusal by the court to approve a proposal
might, it would seem, be followed by an adjudication of bankruptcy (see Duncan
& Honsberger, op. cit., p. 272), and annulment by the court of a proposal most
certainly could be followed by an adjudication of bankruptcy: The Bankruptcy
Act, 1919, 9-10 Geo. V, S.C. 19,19, s. 18,(14); Bankruptcy Act, 1949, 13 Geo. VI,
S.C. 1,949, 2nd Sess., c. 7, s. 36, and see Duncan & Honsbarger, op. cit., pp. 278
et seq. Refusal or annulment would however merely provide the occasions for an
adjudication in bankruptcy, which would not relate back to the making of the
proposal: The Bankruptcy Act, 1919, s. 26(14), Duncan & Honsberger, op. cit.,
p. 280. Now, however, where the creditors or the court refuse their approval,
the debtor is deemed to have made an assignment on the day the proposal was
filed; the proposal becoming in effect the commencement of the bankruptcy.
Where a proposal is annulled, the debtor is deemed thereupon to have made an
assignment. See infra, nn. 47, 48, 49 and 50. An ‘assignment now follows auto-
matically both from refusal of approval and from annulment
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
531
(even furnishing the occasion for an adjudication of bankruptcy)
can since 196647 commence an actual bankruptcy: whether in conse-
quence of the refusal of the creditors to accept the proposal;48 the
refusal of the court to approve it;49 or its annulment by the court
pursuant to default, to the occasioning of injustice or undue delay,
or to fraud in obtaining the approval of the court.50 In connection
with assignments and proposals, as distinguished from receiving
orders, the present Act speaks of the “insolvent person” rather
than of the “debtor”. It is to the “insolvent person” that the Act gives
the right to make an assignment 51 or a proposal ;52 and the “insolvent
person”, too, is, like the “debtor”, the subject of statutory definition
–
though it should be observed that one who is an “insolvent person”
47 By An Act to amend the Bankruptcy Act, 14-15 Eliz. II, S.C. 1966-67, c. 32,
s. 7 (adding inter alia a new s. 32B., concerning the consequences of non-approval
by creditors), s. 8 (amending s. 34, so as to provide inter alid for the conse-
quences of non-approval by the court), and s. 9 (substituting a new s. 36 which
provides inter alia for the consequences of annulment).
Heretofore, refusal of the court’s approval might provide the occasion for an
adjudication of bankruptcy, which would only operate from the time when it
was made. Now, refusal of the creditors’ approval or of the court’s approval
automatically operates as an assignment in bankruptcy, and the commencement
of the bankruptcy is the time of filing the proposal.
Heretofore, annulment by the court of the proposal might provide the occasion
for an adjudication of bankruptcy; now it automatically has that result, though,
as before, only from the time of the court order.
See supra, n. 46; infra, nn. ’48, 49, and 50.
48 Section 32B.
(1) provides that “Where the creditors refuse to accept a
proposal by an insolvent person… the debtor shall be deemed to have made
an assignment on the day the proposal was filed…” (Emphasis added.) The
bankruptcy results automatically, and its commencement is the filing of the
proposal.
49 Section 34. (10) provides that “Where the court refuses to approve a proposal
by an insolvent person a copy of which has been filed under section 35, the
debtor shall be deemed to have made an assignment on the day that the proposal
was so filed…” (Emphasis added.) The bankruptcy results automatically, and
its commencement is the filing of the proposal.
50 Section 36(1). A proposal may also be annulled at the request of the trustee
or any creditor if the debtor be aftorwards convicted of any offence under the
Act: section 36(3). By section 36(4), “Upon the proposal being annulled, the
debtor shall be deemed to have thereupon made an assignment and the order
annulling the proposal shall so state.” (Emphasis added.) The bankruptcy is
automatic, but only begins from the time of the order. Compare, nn. 48 ‘and
49 supra.
51 Section
52 Section 27(1) (a).
,6(1).
McGILL LAW JOURNAL
[Vol. 15
is also by definition a “debtor”, 53 and is often referred to as such
by the Act.54
The scope of bankruptcy jurisdiction thus expands or contracts
with the statutory definition of the terms “debtor” and “insolvent
person”, which may conveniently be quoted here.
2. In this Act,…
i) “debtor” includes an insolvent person and any person who, at the
time an act of bankruptcy was committed by him, resided or carried
on business in Canada and, where the context requires, includes a
bankrupt;
j) “insolvent person” means a person who is not bankrupt and who
resides or carries on business in Canada, whose liabilities to creditors
provable as claims under this Act amount to one thousand dollars, and
i) who is for any reason unable to meet his obligations as they
generally become due, or
ii) who has ceased paying his current obligations in the ordinary
course of business as they generally become due, or
iii) the aggregate of whose property is not, at a fair valuation,
sufficient, or, if disposed of at a fairly conducted sale under
legal process, would not be sufficient to enable payment of all
his obligations, due and accruing due[.]
2. Dans la pr~sente loi, l’expression…
i) cd~biteuri comprend une personne insolvable et toute personne qui,
A l’6poque oiL elle a commis un acte de faillite, r6sidait au Canada
ou y poursuivait des affaires, et, lorsque le contexte l’exige, comprend
un failli;
j) cpersonne insolvableD signifie une personne qui n’est pas en faillite
et qui reside au Canada ou y poursuit des affaires, dont les obligations,
envers les cr~anciers, prouvables comme r~clamations aux termes
de la pr~sente loi, s’61lvent A mille dollars, et
i) qui, pour une raison quelconque, est incapable de faire honneur
h ses obligations au fur et A mesure de leur 6ch6ance, ou
ii) qui a cess6 d’acquitter ses obligations courantes dans le cours
ordinaire des affaires au fur et A mesure de leur 6ch~ance, ou
iii) dont la totalit6 des biens n’est pas suffisante, d’apr~s une juste
estimation, ou ne suffirait pas, s’il en 6tait dispos6 lors d’une
vente bien conduite par autoritd de justice, pour permettre
l’acquittement de toutes sos obligations 6chues ou A 6choir[.]
It can be seen from these definitions how their terms in effect
delimit Canadian bankruptcy jurisdiction in, for example, the terri-
53 Section 2(i), defining “debtor”, provides that it “includes an insolvent
person…”.
54 Section 26(1), for example, gives an “insolvent person” the right to make
an assignment; 26(2) then speaks of the “property of the debtor”, and 26(3) of
the “locality of the debtor”. Section 27(2) uses a similar variation of language
in deading with proposals. References in the Act to debtors are of course intended
to cover insolvent persons wherever applicable.
No. 4]
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
533
torial sense –
produce, in effect, a rule of jurisdiction ratione
personae vel loci – but this is not our present concern. Our interest
lies not in deciding in what cases foreign persons are amenable to
Canadian bankruptcy jurisdiction, but rather in determining what
types of person –
and, more particularly, what types of corporate
person –
are susceptible to it.
For this purpose, it is sufficient to notice that both “debtor” and
“insolvent person” are defined in terms of the single word “person” :r5
it is sufficiently clear that one who is not a “person” can be neither
a “debtor” nor an “insolvent person”.
Thus, in order to be a “debtor” or an “insolvent person” and
is first necessary to be a
therefore subject to bankruptcy law, it
“person”; and, in order to be a “person”, it is necessary, one must
suppose, to be a “person” within the definition of that term provided
by the statute. 5 Section 2 gives that definition as well; it provides
that, in the Act,
m) “person” includes a partnership, an unincorporated association, a
corporation, a co-operative society or organization, the successors
55 The same was true of the definitions of the old Act: see infra, Appendix Six,
at pp. 619 et seq.; but, there, as the author will point out below, restrictions on the
scope of the term “debtor” were effected, not by restricting the definition of
“person” [which indeed seems to have been widened to its utmost extent to allow
its natural use elsewhere in the Act] but rather by incorporating all the restric-
(through qualifying
tions into the term “debtor” itself, either immediately
language) or mediately (through restricting the definition of “corporation”).
56 Per Pratte, J., in Chauss6 v. L’Association du Bien-Etre de la Jeunesse Inc.,
tre susceptible d’Atre d~clar6 en faillite, sous l’empire
[19,60] B.R. 413: “Pour
de la Loi sur ]a faillite, il faut 6tre d6biteur. Et qu’est-ce qu’un ddbiteur, aux
termes de la Loi sur la faillite? C’est tne personne insolvable… (art. 26), le
mot “personne” devant 6tre pris dans le sens que lui donne l’art. 2(m) de la ll,
ci-aprbs reproduit: [here quoting the definition] … ” See also Argus Adjusters
and Appraisers Ltd. v. Assistance Loan and Finance Corporation, [1.964] B.R.
375; (1963), 44 D.L.R. (2d) 692, where however the translation is not entirely
reliable.
Per Owen, J., at p. 416: “Section 21 of the Bankruptcy Act sets out the
conditions under which a petition for a receiving order may be filed against a
‘debtor’.
“Section 2(i) of the said Act provides as follows: [here the learned judge
quotes the definition of ‘debtor’ in terms of ‘an insolvent person and any person
who [etc.]’.
“The next inquiry is as to the meaning to be given to the word ‘person’ in the
said Act. Section 2(m) of the Bankruptcy Act provides as follows: [here the
learned judge quotes the definition of ‘person’ provided by section 2(m)].”
The same is presupposed by Rinfret, J., as well, in his judgment, at pp. 417
et seq. It is after this point that the reasoning of Rinfret, J., diverges from
that of the majority.
McCILL LAW JOURNAL
[Vol. 15
of such partnership, association, corporation, society or organization,
and the heirs, executors, administrators or other legal representative
of a person, according to the law of that part of Canada to which
the context extends;
and, in the French version,
m) xpersonne; comprend une soci6t6 en nom. collectif, une association
non constitute en corporation, une corporation, une soci6t6 ou
organisation coop6rative,
en
nom collectif, association, corporation, soci6t6 ou organisation, ainsi
que
testamentaires, administrateurs ou
tout autre repr4sentant l6gal d’une personne, conform6ment at la loi
de la partie du Canada A laquelle s’6tend le contexte[.]
les successeurs de pareille
les h~ritiers, exdcuteurs
soci~t1
This may usefully be compared with the definition of “person” set
forth in
the Revised
Statutes of Canada, 1952, re-enacted contemporaneously with the
Bankruptcy Act: 57
the Interpretation Act as it was found in
35. In every Act, unless the context otherwise requires ….
(22) “person” or any word descriptive of a person, includes any body
corporate and politic, and the heirs, executors, administrators or
other legal representatives of such person, according to the law
of that part of Canada to which the context extends;
35. Dans une loi, a moins que le contexte ne s’y oppose, l’expression,…
(22)
tpersonne;, ou tout mot ou expression ayant le sens du mot
personne , comprend tout corps politique constitu6 en corporation,
et les h~ritiers, exdcuteurs
testamentaires, adnministrateurs ou
autres repr~sentants lgaux de cette personne, suivant la loi de
a partie du Canada h laquelle s’4tend le contexte[.]
This latter definition has been replaced by another in
the new
Interpretation Act 58 recently enacted by the Parliament of Canada:
28. In every enactment,…
(.27) “person” or any word or expression descriptive of a person, includes
a corporation;
28. Dans chaque texte l6gislatif,…
(27) zpersonne2, ou tout mot ou expression ayant le sens du mot
epersonne d6signe 6galement une corporation[.]
How far the new Interpretation Act can be taken to alter the mean-
ings of antecedently enacted statutes is perhaps rather too fine a
point to merit investigation here, even assuming that the Interpre-
tation Act’s definition of “person” is not wholly superseded for bank-
ruptcy purposes by that contained in the Bankruptcy Act. ,a
57 The Interpretation Act, R.S.C. 1952, c. 158.
55816-1-7 Eliz. II, S.C. 1967-68, c. 7. The Act was itself amended (not in any
respect material to us) by c. 25, s. 58 of the same session.
55aIn Part II(1) of this article it will be suggested that “person!’ must, even
in the Bankruptcy Act, be understood in its wider, natural, sense –
despite the
restrictive definition imposed by section 2 of the Act. If this be so, it is to the
No. 4] CORPORATIONS NOT SUBJECT TO BANKRIUPTCY LAW
5
Of the various rubrics under which one may enter the class of
“persons” as defined by the Bankruptcy Act, that of most importance
to us is the “corporation”; it,
too, is defined in section 2:
f) “corporation”
includes any company incorporated or authorized to
carry on business by or under an Act of the Parliament of Canada
or of any of the provinces of Canada, and any incorporated company,
wheresoever incorporated, that has an office in or carries on business
within Canada, but does not include building societies having a capital
stock, nor incorporated banks, savings banks, insurance companies,
trust companies, loan companies or railway companies;
f) gcorporation2, comprend toute compagnie constitu6e en corporation
ou autoris6e A poursuivre des affaires en vertu ou sous l’autorit6
d’une loi du Parlement du Canada, ou de l’une des provinces du
Canada, ainsi que toute compagnie constitude en corporation, en
quelque lieu qu’elle ait Wt constitute en corporation, qui a un bureau
au Canada ou qui poursuit des op6rations au Canada, mais ne
comprend pas les soci6ts de construction avec un capitalaetions,
ni les banques, caisses d’6pargne, compagnies d’assurance, compagnies
de fiducie, compagnies de pr~t ou compagnies de chemin de fer
constitu4es en corporations[.]
Now the reasoning upon which “non-profit” corporations have
been excluded from the scope of bankruptcy law is, essentially, the
following.
(1) Any body corporate which is not a “corporation” within the
definition of that term in section 2 (f), is also, in consequence, not
a “corporation” in the list of those who may be “persons” as defined
by section 2 (m). Furthermore [so the argument runs], it cannot
come, otherwise than as a “corporation”, within the definition of
“person” –
either under any other of the headings of section 2(m),
or (even if that list of headings be not limitative) under any residual
category which may then exist. Such a body corporate is thus excluded
from entering the class of “persons” under any heading whatever.
(London, 1962) says (p. 58)
Interpretation Act that one ought first to have recourse. But which? Is it the
old, or the new, Interpretation Act which is to be preferred? Maxwell on The
Interpretation of Statutes, 11th ed.,
that the
“words of a statute will, generally, be understood in the sense which they bore
when it was passed.” This would favour the Interpretation Act, R.S.C. 1952,
c. 158, which was contemporaneous with the Bankruptcy Act, R:S.C. 1952, c. 14.
But both would, in the present context, seem equally suitable. Both make “person”
include “corporation” [and by “corporation” is not meant the restrictive defini-
tion in section 2(f) of the Bankruptcy Act, which is exactly what makes the
2(m) “:person” too narrow to serve generally in the Bankruptcy Act; the very
thing which forces us to look outside the Bankruptcy Act for a wider definition].
For the authorities which entitle us to disregard the Bankruptcy Act definition
of “person”, see infra pp. 539-549 and esp. n. 94.
McGILL LAW JOURNAL
[Vol. 15
(2) But, if it is to be a “corporation” within section 2 (f),
and thus be a “person” within 2 (m), a body corporate must, it is
clear, be a “company”. Furthermore, it must [it is supposed] either
be incorporated to carry on business or else be authorized to carry
on business.
But the term “company” does not [ it is said] properly embrace
“non-profit” bodies corporate. Alternatively the activities which
“non-profit” bodies corporate are incorporated or authorized to carry
on are [it is thought] not business. In either event., “non-profit”
bodies corporate cannot [so it is concluded] be “corporations” as
defined by section 2(f).
(3) Not being a “person”, a “non-profit” body corporate can be
neither a “debtor” nor an “insolvent person”, and is, in consequence,
excluded from bankruptcy law.
The chain of reasoning outlined above is of course vulnerable at
a number of points, at several of which, if broken, it will be ir-
reparable. As the courts have appreciated, it is a consideration of
these points of controversy which is decisive one way or the other.
But such a consideration, regrettably, necessarily involves somewhat
abstruse and indeed rather tedious exercises in statutory interpre-
tation. Parliament, however, has chosen to insinuate the rules govern-
ing the scope of Canadian bankruptcy jurisdiction into the definitions
59 For strictures on this practice, see the authorities cited in Craies on Statute
Lau, ,6th ed., (London, 1963), p. 212; Odgers’ Construction of Deeds and Statutes,
5th ed., (London, -1067), p. 315.
See, for example, the remarks of Rivard, J., in Paroisse do St-Gabriel do
Brandon v. Sarrazin, (1935), 58 B.R. 123, at p. 125:
“Et que faut-il entendre, ici, par d6biteur?
“Le mot est clair, et ne prbte A aucun 6quivoque. I1 ne faut pas moins prendre
garde aux explications que la loi mbme a cru donner l-dessus, dans des clauses
dites interprtatives. Un procd couramment employ6 dans la confection des lois
consiste, en effet, A ddfinir d’abord les termes dont le l6gislateur entend se servir
pour dire sa volontd. Ce proc~d, qu’on a critiqu6, en effet, West pas toujours
heureux: souvent on le croirait plut8t assorti au dessein de mettre une expres-
sion peu sire au service d’une pens6e inddcise. Cependant, il ne laisse pas que
d’6tre utile parfois: on y a justement recours quand le sens des mots manque de
prdcision, quand on veut leur attribuer une acception particuliire pour laquelle
il n’y a pas de terme propre, ou marquer des nuances que le contexto est im-
puissant h indiquer; mais il arrive aussi que, sous le couvert d’une apparente
definition, on 6dicte plut6t une v6ritable disposition l6gislative, par quoi, au lieu
de ddfinir un mot, on pose une rbgle qui fait partie de la loi proprement dite.”
And, having quoted the definition of debtor in the then Act (R.S.C. 1927,
c. 11; see infra, Appendix Six) his Lordship continued:
“Ce n’est pas L une ddfinition: le sens ordinaire du mot d~biteur subsiste.
C’est plut~t une disposition lgislative oii il est r~glM que, pour 6tre trait~e
No. 43
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
537
of a number of terms; the interpretation of those rules is, in con-
sequence, necessarily a word game.5 9 The analysis undertaken below
follows the order of the heads of judicial reasoning as outlined and
arranged above.
II. An Analysis of the Authorities:
Some Tedious Exercises in Statutory Construction
(1) Can a body corporate other than a section 2(f) “corporation”
be a “person” within 2 (m) ?
All effort expended on a restrictive construction of the term
“corporation” must, of course, prove fruitless unless it can be assured
that, when once a body corporate is held not to be a “corporation”
as defined by section 2(f), it cannot, otherwise than as a “corpora-
tion”, be a “person” as defined in section 2(m) [and capable, as
such “person”, of becoming a “debtor” or an “insolvent person” and
accordingly subject to bankruptcy law]. There is obviously no point
in excluding “non-profit” bodies corporate from bankruptcy juris-
diction under one title if they can enter in another guise.
There are, indeed, very powerful reasons for conceding at once
that “corporations” as restrictively defined by section 2(f) are ex-
haustive of the bodies corporate who may be “persons” subject
to bankruptcy law. A variety of bodies corporate have, as we have
seen, been expressly excluded from the statutory definition of “cor-
poration” with the plain object of excluding them in this way from
the scope of the bankruptcy law. To the successful accomplishment
of that object it is necessary to say not only that such bodies corpo-
rate are not “corporations”, but furthermore that they are not alter-
natively “persons” under any other head. This in turn requires that
the definition of “corporation” be exhaustive of the bodies corporate
which can be persons. A negative answer to the question posed in
the title above is therefore necessary to the solution of the problem
of keeping out of bankruptcy law a variety of bodies corporate in-
contestably intended to be kept out.
comme d~bitrice sous l’empire de la loi de faillite, une personne doit poss&ler
l’une ou l’autre des qualitds 6num~r~es. Par IA, le sens propre du mot ddbiteur
ne se trouve ni diargi, ni restreint, ni d6tourn6, mais l’application de Ia loi de
faillite est limitce aux ddbiteurs qui ont quelqu’une de ces qualitds.”
See also the remarks of Hall, J., at pp. 132-3, inter alid: “It is unfortunate
that the authors of the Bankruptcy Act were -not more careful in their choice
of terms, the ambiguity of which renders very difficult the interpretation of
certain so-called definitions.”
McGILL LAW JOURNAL
[Vol. 15
Nothing, for example, is clearer 0 than that the Act, in excluding
by its express language inter alia banks, insurance companies, railway
companies and trust companies from the definition of “corporation!’,
means thereby to exclude them from being subject to bankruptcy law
altogether: it is, indeed, difficult to conceive what other imaginable
purpose the express statutory exclusions from the definition of
“corporation” could serve. Yet if these very bodies corporate –
banks, insurance companies, trust companies and railway compa-
nies –
could, though excluded from the definition of “corporation”,
yet be “persons” otherwise than as “corporations”, they would again
become immediately subject to bankruptcy law by another name:
to have been taken, and (with respect)
a point which appears
taken with good reason, by Pratte, J., in Chauss6 v. L’Association
du Bien-Etre de la Jeunesse Inc. 61 For the courts, having then given
up reliance on the words plainly intended to keep the banks, etc.,
out of bankruptcy law, would have nothing else whatever in the
Act to point to as justifying any such exclusion. Moreover, deprived
of its obvious raison d’6tre, the list of expressly excluded undertakings
would be rendered useless language, language to which no plausible
function whatever could be attributed. The express limitation of the
definition of “corporation” would then seem pointless.
One need not balk, therefore, at admitting, in sum, that, in the
list of those who may be “persons” as defined by section 2(m),
the rubric “corporation”
in principle completely exhausts bodies
corporate; and, further, that the rubric “corporation” under section
2 (m) means exactly what it is defined to mean by section 2 (f), and
embraces neither more nor less.
6 0 Pratte, J., for example, in Chauss6 v. L’Association du Bien-Etre do
la
Jeunesse, Inc., [1-9.60] B.R. 4143, remarks, at p. 414: “Aussi le l6gislateur a-t-il
jug6 h propos de dire, A l’art. 2(f) de la loi, quelles sont les corporations qui
sont susceptibles d’etre dclar6es en faillite.” The definition of corporation is
thus assumed to be tantamount to a regulation of the scope of bankruptcy
jurisdiction. Per Owen, J., at p. 417: “Obviously all corporations are not governed
by the provisions of the Bankruptcy Act. Some corporations are specifically
excluded.” See also Argus Adjusters and Appraisers Ltd. v. Assistance Loan
and Finance Corporation and Taxi Owners’ Reciprocal Insurance Association,
[M964J B.R. 375; (19.3) 44 D.L.R. (2d) 69, where however the translation is
not entirely reliable.
61 [1960] B.R. 413, at p. 416: “Au surplus, il ne paraltrait pas raisonnable
que le 16gislateur, apr~s avoir pr~cis6 quelles sont les corporations qui peuvent
6tre d6clar6es en faillite, efit voulu que d’autres puissent l’6tre sous une autre
appellation.”
His Lordship, of course, is, in the passage quoted, applying this reasoning not
to bodies corporate expressly excluded from the definition of “corporation”, but
to bodies which, contrary to the view of the present author, he finds impliedly
excluded from the definition of “corporation”.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
539
Yet it is also right to point out immediately that such an answer,
if it will solve some problems, will merely create others. For if the
courts, recognising the manifest purpose of the Act to exclude [for
example] railway companies from bankruptcy law, prefer, as a
means of so doing, reliance on express statutory language obviously
enacted to that end, to dependence instead on an arbitrary judicial
fiat to the same effect, it is yet as well to observe that, owing to
the faulty structure of the definitions, the courts will simply be
driven instead to arbitrary expedients to allow the same railway
companies back into the Act –
to claim, for example, as creditors.
For it is not the debtor alone who must be a “person”; the creditor,
too, must equally be one: thus, section 2 provides that, in the Act
(h) “creditor” means a person having a claim, preferred, secured or
unsecured, provable as a claim under this Act[.]
One way, or another, the Act becomes unworkable without a strained
construction of its terms. The question becomes not whether, but
rather where, it shall be so strained. Indeed, those who have been
excluded by definition from the class of “persons”, in order that
they may not become bankrupts, could not, on a consistent application
of the statute, inter alia, be persons related to anyone or parties to
a reviewable transaction (sections 2 A. and 2 B.); be trustees in
bankruptcy (s.3) ; record a complaint with the Superintendent for
investigation (s.3 (3) (f)) ; be engaged by the Superintendent to take
necessary action (s.3 (5)); be subjected to an order for disclosure
of records to enable tracing the property of an estate (s.3 (7)) ; give
rise to investigations by the Superintendent in connection with an
offence, be examined in connection therewith, or be guilty of
impeding the same (s.3A.) ; be disentitled to withhold the books,
papers, or property of the bankrupt (s.9 (3) and 8 (5)) ; be subjected
to criminal proceedings by the trustee though authorized thereto
(s.8 (13)); semble, buy property from the estate (s.10(1)); apply
to the court for a revision of the trustee’s acts (s.15) ; exclude their
own property, held in trust for them by the bankrupt, from division
amongst
(s.39 (a)); be garnished as
employers to deposit wages (s.39A.); (possibly) be protected as
buyers in good faith at a sale in execution being an act of bankruptcy
(s.42 (1)); be denied as security holders the right to realize a
bankrupt’s property pending a trustee’s decision whether or not to
redeem it (s.48) ; be denied a recourse against the trustee personally
for innocently seizing their property as being that of the bankrupt
(s.49) ; be denied the right to claim their property in the bankrupt’s
possession though completely disregarding section 50; be pursued
for money or property which has come into their hands under a
fraudulent preference or other void or voidable transaction (s.66 (1)) ;
the bankrupt’s creditors
McGILL LAW JOURNAL
[Vol. 15
be examined by the trustee in connection with the bankruptcy or be
required to disclose relevant books and papers
(s.121 (1)ff.) ; be
subjected to search for, or seizure of, the bankrupt’s property
(s.146 (1)); be entitled to disclosure by undischarged bankrupts,
on pain of fine and imprisonment, that they are such, when the
latter obtain credit or engage in business transactions
(s.157);
be guilty of a variety of bankruptcy offences; render liable par-
ticipating officers, directors and agents (s.162) ; or, most importantly,
be creditors in bankruptcy entitled to petition for a receiving order,
prove a claim, obtain payment thereof, vote, or exercise any of the
other multifarious rights and powers of creditors.
This has not, indeed, gone unnoticed, and parties before the
courts have not been slow to claim that the sauce for the goose be
applied to the gander. In Re Selkirk Spruce Mills Limited,62 Collins,
J., in the Supreme Court of British Columbia observed :03
Counsel for the debtor took a preliminary objection that the petitioner, being
an incorporated bank, has no status to present a petition for a receiving
order under s. 21 of The Bankruptcy Act, R.S.C. 1952, ch. 14, on the ground
that an incorporated bank is not a “creditor” within the meaning of that
term as used in said s. 21. He presented a carefully worked-out and inter-
esting argument in support of his objection …
Having quoted the relevant definitions, his Lordship continued :04
Counsel for the debtor argued that the definition of “corporation” found
in (f) as quoted above requires the exclusion of an incorporated bank from
the definition of “person” when considering the problem of whether an
incorporated bank is a “creditor” who may file a petition under s. 21.
In this case, however, the learned judge was able to rely on section
169 of the Bankruptcy Act, which provides that
169. Nothing in the provisions of this Act shall interfere with or restrict
the rights and privileges conferred on banks and banking corporations by
the Bank Act.
Accordingly, Collins, J., ruled: 6 5
After a study of the able arguments of both counsel, a consideration of
The Bankruptcy Act, other relevant statutes and certain judicial decisions,
I have come to the conclusion that the preliminary objection of counsel for
‘the debtor cannot be sustained …
My view is that those provisions of The Bankruptcy Act which may
appear on first reading to affect the rights and privileges of an incorporated
bank must be considered in conjunction with s. 169 Therefore, in matters
concerning the rights and privileges of an incorporated bank, when con-
sidering the meaning of the word ‘person” in a section of that Act, it becomes
necessary to consider whether “person” should be interpreted in its un-
62 (1958), 37 C.B.R. 11, 25 W.W.R. 598.
63 (1958), 37 C.B.R. 11, at p. 12.
64 Ibid., p. 13.
65 Ibid., p. 12 and p. 12.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
541
restricted sense, as defined in The Interpretation Act above referred to,
or alternatively whether it should be interpreted in a narrower sense
embodying the restricted meaning of the term “corporation” as defined in
s. 2(m).
Referring to the statutory power of a bank to carry on the business
of banking, his Lordship said: 66
This implies the right to collect money loaned, and to use such lawful means
to protect its position as a creditor as are available to other creditors save
in so far as its rights may be restricted by law. The Bank Act also gives a
bank certain further powers unnecessary to consider here. If
the word
“creditor” in s. 21.(1) of The Bankruptcy Act were to be interpreted in
a sense restricted by excluding an incorporated bank from its meaning such
an interpretation would interfere with the right and privilege of such bank
to protect itself as a creditor by taking such steps as may be lawful for
creditors generally to take. Such an interference would be an interference
with the rights and privileges conferred on it by The Bank Act.
Sensible though this result is, and with all the strength of section
169 to support it in the case of banks, it still has not escaped doubts
as to whether it could be justified on the terms of the statute; thus
a learned commentator suggesting at the same time a legislative
solution, said: 67
The result arrived at in this case certainly seems to be correct but it is
open to question whether on the wording of The Bankruptcy Act it can
be justified.
The purpose of the limitation in the definition of “corporation” in s.
2(f)
is to prevent the presentation of a petition against a bank, or
the making of an assignment. It would seem preferable to extend s. 25 of
The Bankruptcy Act so as to make this clear and to take out the limitations
contained in s. 2(f) which lead to the difficulty which has occurred in the
present case.
A similar problem occurs in the appointment of trustees. Section 5
provides that a “person” can apply to be licensed as a trustee and s. 2(m)
defines “persons” to include a partnership and an incorporated association.
The licensing of a partnership as a trustee can certainly lead to real diffi-
culty, and again it would seem better if the Act were to make it clear that
only individuals or corporations can receive a licence, and to limit the
wording of s. 5.
Even in the case of banks, however, the balance of the Act is not
wholly redressed by section 169: a bank might understandably be
well content, for example to be excluded from the provisions respecting
reviewable transactions; to be freed from garnishment of employees’
wages; to be allowed to recover its property from a trustee without
complying with section 50 of the Act; or to be freed from pursuit
66 Ibid., p. 14.
67 Lloyd D. Houlden, of the Ontario Bar, Consulting Editor of the Canadian
Bankruptcy Reports, in a comment on the case which appears in 37 C.B.R., at
p. 17, immediately following the report.
McGILL LAW JOURNAL
[Vol. 15
in connection with fraudulent preferences: and the literal application
of the Act which would bring it these privileges could scarcely be
said to “interfere with or restrict the rights and privileges” of the
bank, contrary to s. 169. But if s. 169 does not suffice to restore
a balanced operation of the Act as regards banks, still less is the
balance restored as regards insurance companies, trust companies,
and so on, which, like banks, are expressly excluded from being
“corporations” by section 2(f), but in favour of whom there is no
section analoguous to section 169 in favour of banks. In their case
it becomes perfectly clear that the choice is either to exclude them
purely arbitrarily from being capable of bankruptcy, or to include
them purely arbitrarily as capable of the rights of other persons.
And, as indicated above, it is probably the latter course that is
preferable, as it does not leave a statutory list of types of corporation
dangling in a definition without any purpose or effect, and this
in a situation moreover where it is obvious that the intended purpose
is to immunize them from becoming bankrupts. This appears to
have been the general attitude of the courts in analogous problems
arising under the old Act so far as any conclusion at all is possible
from the cases. The examination which follows of the relevant
decisions may be passed over without loss by any reader not requiring
a nice examination of the precise state of the authorities, as may
the ensuing discussion applying the sections of the present Act.
The general reader may resume the thread of the discussion after
bypassing the portion included below between asterisks, which is
placed here, not because it is in controversy, but because the com-
pleteness of the argument requires that it be dealt with, and because
in ‘logical order it belongs next. It is unfortunately rather laboured.67 a
The Ditchburn Boats Case. In Re Ditchbur Boats & Aircraft
(1936) Limited 6 Urquhart, J., in the Ontario Supreme Court in
1938, was apparently willing to carry the exclusion of trust companies
from the definition of “corporation” far enough to make use of it
to stop a trust company from voting proxies –
a practice to which
67a The thread of discussion may be resumed infra, at p. 553.
68 (1938), 19 C.B.R. 216,
[1938] 2 D.L.R. 518. Related proceedings are
reported (1938), 19 C.B.R. 240, [1038] O.W.N. 241 (quashing of appeal as
incompetent); and (1938), 19 C.B.R. 248.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
543
his Lordship was openly and distinctly hostile 19 –
though seemingly
not so far as to prevent it from voting as a creditor. His Lordship,
referring to section 99 of the old Act, which provided that a corpo-
ration might vote at creditors’ meetings by authorized agent,70
observed somewhat inconclusively: 71
I realize that if carried to its logical conclusion this interpretation of
sec. 99 would not permit certain building societies,
incorporated and
savings banks, insurance companies, trust companies, loan companies or
railway companies from voting as creditors either, but we must take an
Act of Parliament as we find it.
The Inverness Case. Of rather more authority but of problem-
atical effect, is Re Inverness Railway and Collieries Ltd.: Royal
Bank of Canada v. Eastern Trust Co.,72 which came in 1923 to the
Supreme Court of Canada from the Supreme Court of Nova Scotia.
69 Per Urquhart, J., at (1938), 19 C.B.R. 2,16, at p. 219: “Another argument
advanced by the appellant was that the maxim “delegatus non potest d’elegare”
applied. I am inclined to think that it does and that a trust company by its
very nature is prevented from acting as proxy for creditors generally…
It
will be noted that an authority to delegate may be implied from “the very
nature of the employment”; but this is quite different from saying than an
authority to delegate may be implied from the very nature of the agent…
I am of opinion that if the trust company is to delegate, the instrument creating
it as agent must expressly give it power to delegate its duties further. I am
advised in this case that the proxy forms were in the usual form and merely
appointed the trust company to be proxy and there was nothing else to the
effect that certain officers could act as agents for the trust company in
voting same.”
Compare also the order for costs at (1938), 19 C.B.R. 216, at pp. 220-M22
with that made at (1038), 19 C.B.R. 248, at p. 250. Per Urquhart, J., (1938),
19 C.B.R. 216, at p. 221: “Trust companies are now invading many fields’, and
if they go into a field where there is no authority for them doing so, they must
be prepared to pay the costs if they are wrong.”
Compare the refusal of Urquhart, J., to allow the Premier Trust Co.
to
act as trustee and the determination in favour of Mr. Higgins, (1938), 19
C.B.R. 2,16, with Urquhart, J’s, change of view when the administration proved
unprofitable to Mr. Higgins: (1938), 19 C.B.R. 248.
70 Section 42(18) of the Act of 1919, which at the date of the case in question
appeared as the first paragraph of section 99 of The Bankruptcy Act, R.S.C.
1927 c. 11, provided that “A corporation may vote at meetings of creditors as
if a natural person, by an authorized agent.”
71 (1938), 19 C.B.R. 216, at p. 220.
72 In the Supreme Court of Canada, [.1923] S.C.R. 177, 3 C.B.R. 7,24, [1929]
1 D.L.R. 498, [19,26] I W.W.R. 937 (Coram: Davies, C.J.. and Idington, Duff,
Anglin, and Brodeur, JJ.); on appeal from the Supreme Court of Nova Scotia,
55 N.S.R. 306, 3 C.B.R. 271, 65 D.L.R. 109 (Coram: Russell, J., Ritchie, E.J.,
Chisholm and Mellish, JJ.).
McGILL LAW JOURNAL
[Val. 15
It involved two basic questions: (i) whether an assignment of book
debts to the above-mentioned bank was valid against the trustee;
and
(ii) whether the first-mentioned company was a railway
company within the meaning of the words of section 2(ik) of the
1919 Act, excluding “railway companies” from the definition of
“corporation” [and therefore from the definition of “debtor”, and
therefore from the power to make an assignment in bankruptcy
altogether].
On the former question, it was urged for the bank that section
30(1), avoiding (in favour of the trustee) certain assignments of
books debts, spoke 73 (at the time of the impugned assignment of
debts) of assignments by one “person” to another “person”; and that,
banks being expressly excluded from the definition of “corporation” 74,
the Royal Bank could not, in consequence, be a “person” as defined
by the Act of 1919, 75 and could not therefore be prejudiced by
section 30 (1).
A majority both in the Supreme Court of Canada 76 and in the
Supreme Court of Nova Scotia, 77 held the assignment of debts to
the bank to be indeed void by s. 30(1) against the trustee. The
majority of the Supreme Court of Canada which considered and
upheld the contention that the assignment of debts to the bank was
invalid must be taken, in holding the assignment invalid under the
then section 30(1), to have decided that – whether or not the bank
was a “person” generally within the definition in s. 2 (aa) of the
73 The Bankruptcy Act, 9-10 Geo. V, S.C. 1919, c. 36, s. 30(1). By the date
of hearing, this section had been replaced by The Bankruptcy Act Amendment
Act, 1921, 1142 Geo. V, S.C. 1021, c. 17, s. 25, but the earlier enactment appears
to have been treated as applicable, though the later one was referred to: see
Russell, J., in 65 D.L.R., at pp. 141-2, and Mellish, J., at p. 150; compare
however the opinion of Chisholm, J., at p. 147, where it seems to be the amended
legislation that is being applied. It is not clear from the report at what date
(i)
the assignment in
bankruptcy of the debtor, took place. At least the first appears to have been
effected before the amending act came into operation, and it is the date of the
assignment of the book debts which would seem to be material to the application
of s. 30. In the Supreme Court, Anglin, J., speaking in [1923] S.C.R., at p. 181,
for himself and Davies, C.J., applies the earlier Act; and Duff, J., approves
the opinion of Mellish, J., who does likewise.
the -assignment of book debts to the bank, and
(ii)
74 Section 2(k) of the Act of 1919; quoted in Appendix Six, inf ra, at p. 610.
75 Section 2(aa), quoted in the next following paragraph of the text, and
in Appendix Six, infra, at p. 619. The amending Act of 191, quoted in Appendix
Six, infra, ‘pp. 620-621, replaced this definition with one which left no doubts as to
its wide scope. At the date material for the assignment of debts, the earlier
version would seem to have been applicable; see supra, n. 73.
76 Davies, C.J.; Duff, and Anglin, JJ.
77 Chisholm, J.; Ritchie, E.J., and Mellish, J.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
545
8 [‘”person” includes corporation and partnership’]
1919 Act 7
the bank was at least a person within s. 30 (1). Indeed, in the Nova
Scotia Supreme Court, Chisholm, J., with whom Ritchie, E.J., con-
curred, spoke to the latter effect: 79
–
With respect to the contention that the bank is not a person within the
meaning of the Act, the general rule is that when a word is used more
than once in a section, the same meaning must be given to it whenever
it occurs. That would work a result with respect to sec. 30(1) which I
cannot believe to have been intended by Parliament. I should rather read
the section as being intended to enact that where any person who is
liable to be adjudicated bankrupt or is capable of making an assignment,
under the provisions of the Act, makes an assignment to any person capable
of taking an assignment of book debts, etc., the assignment shall be void, etc.
Russell, J., spoke more generally, indicating that a given body cor-
porate, though it be outside the definition of “corporation”, could
yet be a “person”, not merely within a particular section, but even
within the general definition of “persons” : 80
At the date of the assignment to the bank the statute, sec. 30(l) referred
only to an assignment to “any other person” and it is contended that the
word “person” is by the Bankruptcy Act made inapplicable to an incorporated
bank. This argument is founded on the definition in sec. 2 (ea.) which
enacts that “person includes corporation and partnership[.]”
If we were
confined to the Bankruptcy Act in our search for the meaning of the term
we should have to say that the bank is not a person, because it is not a
partnership and it is not a corporation as defined in the Act, the latter
term expressly excluding incorporated banks. But the Bankruptcy Act,
while it enacts that the term person “includes” a partnership and a
corporation, meaning corporation as defined
in the Act does not say
it may not include other things as well. It certainly must include an
individual homo sapiens, and I know of nothing in the Bankruptcy Act
which excludes the definition of person given in the Revised Statutes of
Canada as including any body corporate and politic.
Mellish, J.’s words were similar in their general effect to those
of Russell, J. :81
It is contended on behalf of the bank that it is not a ‘person’ within the
meaning of this section; and that although the word ‘person! includes by
78 9-10 Geo. V, S.C. 1010, c. 36, s. 2(aa), quoted in Appendix Six, infra, p. 620
with the definition put in its place by the amending Act of 1921. The reasons do
not make clear what date was considered material as regards the law to be applied
to the debtor’s assignment in bankruptcy. The assignment took place, as appears
from the judgment of Chisholm, J., 65 D.L.R., at p. 145, on February 26, 121, –
that is to say, several months before the commencement of the amending Act of
1921, 4th June, 1921, the day of its assent. The hearing in the Nova Scotia
Supreme Court appears to have taken place afterwards. See supra, nn. 73 and 75.
70 (1922), 65 D.I.R. 139, at pp. 147-8.
80 Ibid., at p. 141.
8165 D.L.R., at p. 150.
McGILL LAW JOURNAL
(Vol. 15
sub-sec. 2(aa) above quoted a ‘corporation’ the latter word must there be
held to be used in the restricted sense as defined in sec. 2(k).
Undoubtedly sec. 2 is a part of the Act, but a perusal of the section
itself I think indicates that the word ‘corporation’ as therein used is not
always intended to be read in such a restricted sense. Where such restricted
sense is clearly intended in this section the words ‘corporation as defined
by this section’
(see sub-sec. 2(o)) are used. I am therefore of opinion
that the word ‘corporation’ is used in sub-sec. 2(aa) in its ordinary and
unrestricted sense, which indeed is the usual and proper way of using
definitive language, and that consequently the word ‘person’ in sec. 30, line 2,
includes an incorporated bank.
In the Supreme Court of Canada, of the five justices who took
part in the appeal, 82 only the three forming the majority found it
necessary to deal at all with the question of the bank’s assignment;
of these Duff, J., found that the judgment of Mellish, J., ‘presents
the considerations governing the disposition of this appeal exactly as
I conceive them’, 3 and Anglin, J., with whom Davies, C.J., concurred,
said on the point in question only that:
I also agree with the unanimous view of the learned judges of
the
Supreme Court of Nova Scotia that the appellant bank is an “other person”
within the meaning of that term as used in section 30(1) of the statute.
Anglin, J., and Davies, C.J., thus say nothing at all as to whether
the bank would be a “person” for any other purposes than those of
– more especially, whether it could be a “person”
section 30 (1)
generally within the definition of section 2 (aa).
It is most important to say at once that they could have done so
without in any way prejudicing the exempt status of banks from being
debtors under the Bankruptcy Act. For, under the Act of 1919, the
question, whether a body corporate excluded from “corporation” could
yet be a “person”, had not the same implications as under the present
Act. True, susceptibility to bankruptcy law then depended, as it does
now, on being a
‘ debtor”: but under the 1919 Act “debtor” was
defined,8 4 not (as now) purely in terms of “persons”, but rather in
terms which, on a fair reading, appeared to make it necessary also
to be either an individual or a “corporation”.85 Susceptibility to bank-
ruptcy law did not, therefore, under the 1919 Act, arise once one was
found to be a “person”. Person or not, if a body corporate was
outside the definition of “corporation”, 86 then, not being an individual
either, it was outside a fair reading of the 1919 Act’s definition of
“debtor”, and thus not subject to bankruptcy jurisdiction. That it
82 Davies, C.J., and Idington, Duff, Anglin, and Brodeur, JJ.
83 [192a] S.C.R., at p. 181.
84 Quoted in Appendix Six, infra, at p. 619. Section 2(o) in the Act of 1919.
s5 See infra, pp. 589-590.
86 Quoted in Appendix Six, infra, at p. 6,10. Section 2(k) of the 1919 Act.
No. 4]
CORPOR1ATIONS NOT SUBJECT TO BANKRUPTCY LAW
547
might be a “person” was therefore not determinative. Thus the
Royal Bank, for example, though a body corporate, was expressly
excluded from being a “corporation”. Not being an individual either,
it was thus fairly outside the definition of “debtor” –
and therefore
outside bankruptcy jurisdiction – whether it was a person or not.
The courts might thus with perfect equanimity have held it to be
a “person” generally under the Act without thereby raising any
inconsistency with its express statutory immunity from bankruptcy
law. Indeed, when the 1919 Act was generally amended in 1921,7
the definition of “person” was so far widened in its express terms
as to include all bodies corporate – without however thereby
rendering subject to bankruptcy law such bodies corporate as, not
being “corporations” (and thus not “debtors”) had not theretofore
been subject to bankruptcy law: for, though now “persons” beyond
question,88 they would still not be “corporations”, therefore still not
“debtors”, therefore still not subject to bankruptcy law. So likewise
even before the 1921 amendments, a body corporate, though it were
not also a “corporation” as defined, might nevertheless have been
held to be a “person!’, without for that reason alone becoming subject
to bankruptcy jurisdiction.
The courts then might, without prejudicing the bank’s.immune
status under the 1919 Act, have held that banks, though neither
“corporations” nor “debtors”, were nevertheless within the general
definition of “person”. They did hold that a bank was at least a
“person” within s. 30(1), and so subject to the same rules in that
respect as everyone else.
The decisions in Re Inverness Railway and Collieries Ltd.: Royal
Bank of Canada V. Eastern Trust Co.89 thus afford only a very limited
assistance. Chisholm and Ritchie, JJ., in saying that the bank is
at all events a person within s. 30 (1), support the proposition that
a body corporate can, even should it, by reason of restrictions, not
be a “person” generally within a statutory definition, yet be a
“person” within the meaning of a section when this result is required
for the proper operation of the Act.
Russell and apparently also Mellish, JJ., (with the latter of whom
Duff, J., in the Supreme Court agreed) by their holding that the
87 The Bankruptcy Act Amendment Act, 1921, 1-1.2 Geo. V, S.C. 1-21, c. 1.7.
88 The author considers this clear beyond discussion. The word person was
to be used in its natural sense throughout the Act; it was the words debtor
and corporation which were to be restricted. Compare however Construction
Coopgrative de Montrial v. Z. Berthiaume et Fils, Ltde, (1939), 66 B.R. 409;
2 C.B.R. 351, discussed infra, pp. 573-576.
89 Citations supra, n. 72.
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bank was indeed a “person” within the general definition of section
2 (aa) of the 1919 Act, support the proposition that in construing
such a phrase, ‘”person” includes partnership and corporation!, one
cannot necessarily say that “corporation [s] “, as defined in turn by
another special definition, exhaust the bodies corporate which may be
persons within the first-mentioned definition. This may be because
“includes” is not necessarily equivalent to “includes only” –
is not,
in sum, necessarily a synonym for “means”. 0 Or it may be because
because “corporation” as a rubric in the definition of “person” is not
confined to “corporation [s]” as elsewhere defined.0 1
In the Supreme Court of Canada, while Duff, J., by concurring
with Mellish, J., supports the latter proposition, Anglin, J., and
Davies, C.J., by their general concurrence with the result below,
concur with one or other or both of the propositions; but which,
it is impossible to say.
It would seem, however, that one can collect a majority of the
Supreme Court of Nova Scotia in favour of the position that, in
the context under discussion, such terms as “person” and “corpo-
ration” may in the Bankruptcy Act have different meanings from
those assigned to them in the definition sections. Chisholm and
Ritchie, .JJ., in the passage above quoted from the opinion of the
former, clearly state that the term “person”, supposing it to be
defined restrictively, may be used in the Act in a wider sense.
Mellish, J., in the passage quoted above, is willing to vary the meaning
of the term “corporation”.
Under the present Act. The cases on the old Act thus afford
some slight authority for the proposition that what may not 0 2 be
a “corporation” or “person”
in general, may have to be taken
specially as a “corporation” or “person” within some one or more
provisions, in order to allow a reasonable operation to the Act. The
definition sections of the present Act seem to see the “person”, and
not only the “corporation”, 9 primarily as debtors; and, with their
90 See infra, at p. 550 and n. 96.
91 See -text infra, at p. 549 and esp. n. 94.
92By reason of a restrictive statutory definition, especially one evidently
designed for certain limited purposes.
93 On a fair construction of the 1019 Act, an entity would not, even though
a “person”, be a debtor liable to bankruptcy law unless it were also either an
individual or a “corporation” as defined. Hence liability to bankruptcy law
did not, under the old Act, arise by reason only of being a “person” within the
meaning of the successive definitions of that term. See supra, pp. 546-54V and
infra pp. 562 in fine to 565.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
549
position as such in mind, the terms of the Act restrictively define
the scope of these categories. But, in other contexts, the “person”
and “corporation” so restrictively defined become unworkable. The
cases on the old Act (so far as they go) indicate accordingly that,
where desirable for the proper operation of the Act, a considerable
license will be allowed to the courts to widen by construction such
phrases beyond the narrow limits fixed by statutory definition or
by the judicial gloss thereon. In some measure, we shall be allowed
to have our cake and eat it, too. This we may do in better conscience
for being assured of the support of the authorities on statutory
interpretation. 9
The necessity of a measure of interpretive flexibility in this
direction has already been pointed out. Bodies corporate kept from
becoming subject to bankruptcy law under the present Act, by being
excluded from status as “corporations” and as “persons”, must be
re-admitted to status as such for a variety of purposes, not least
the right to claim as “creditors”. Apart from the general authorities
on statutes, the cases on the old Act already lend some countenance
to this sort of flexibility. Where the terms of the statutory
definitions have been explicitly restrictive, the Act has been
made workable by not carrying the effect of the restrictive
definitions inexorably to their logical and systematic consequences.
The further restrictions brought to the same statutory definitions by
judicial gloss can admittedly likewise be lived with for the same
reason –
that the restrictive definitions will not be applied in too
thoroughgoing a manner. So much can be willingly enough conceded.
Even therefore if non-profit bodies corporate succeed in the end in
eluding “debtor” status on the ground that they are (contrary to
the author’s view) neither “corporations” nor “persons”, it will not
necessarily follow that they will not be allowed to be “persons” for
any purpose at all. Whatever other arguments are therefore available
against the line of decisions coming from the Quebec Queen’s Bench,
this particular argument ab inconvenienti is probably not one of
them. So much the cases on the old Act seem to suggest. Those
inclined to pursue a course of restrictive definition can thus do so
without too much concern at being held later to a reckoning for wholly
disastrous consequences.
O4 Maxwell on The Interpretation of Statutes, lth
ed., Roy Wilson, Q.C., ed.,
(London, 1962), p. 311 ff.; Craies on Statutes Law, 6th ed., S.G.G. Edgar, ed.,
(London, 163), p. 168 ff.; p. 212 ff.; Odgers’ Construction of Deeds and Statutes,
5th ed., G. Dworkin, ed., (London, 1967), p. 254 ff.; 35 ff. See also supra,
nn. 58a and 59.
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Is there then any substantial reason why it should not be
accepted that section 2 (f) “corporations” are exhaustive of the bodies
corporate which may be “persons” within section 2(m)? We have
admitted that the resulting restrictive definition of “person”,
whether it stem from restrictive statutory language or restrictive
judicial gloss, can be faced with some equanimity, because it need
not be applied in so thoroughgoing a manner as to entail entirely
catastrophic consequences. So far as the mechanical steps in reaching
the above result aTe concerned, we have already at least agreed 5
to accept that, in the list of categories of those who may be “persons”
under section 2 (m), the rubric “corporation” in principle exhausts
bodies corporate; and moreover that “corporation” in section 2(m)
means just what it is defined to mean in section 2(f). Does any
link remain to be forged?
Yes, for section 2(m) merely provides that “person” includes
a partnership, an unincorporated association, a corporation, and so
forth. “Includes” need not necessarily mean “includes only”. “Person”
may thus be wider than the list which follows it in section 2 (m).
Clearly, in order that the restrictive effect of the definition of
“corporation” in section 2(f) be carried over the definition of
“person!” in section 2(m),
it is necessary also to prevent bodies
corporate excluded from 2(f) from insinuating themselves into the
definition of “person” in 2 (m) on the basis that “person” as defined
by section 2(m) merely “includes” amongst others the categories
there listed.
Now, “includes”, as used in section 2(m), clearly cannot mean
“includes only”; for, if it did, individuals could not be persons within
that section: they not being listed. “Person” in section 2(m) must
therefore in some measure be open-ended. This was true for the
same reason under the old Act both as it originally stood and as
it was subsequently amended; it was also recognized in the case law.00
95 Supra, pp. 537-538.
90 See the passage quoted supra, at p. 545 from the judgment of Russell. J.,
in Re Inverness Railway and Collieries Ltd., (1922), 65 D.L.R. 1S9.
In Bricault v. Paroisse de St.-Etienne, (1935), 58 B.R. 100, Barclay, J., in his
concurring opinion whose reasons were adopted also by St.-Jacques, J., said
at p. 131 (on the old Act):
“The wording of section 2 presents difficulty. It is entitled an “Interpre-
tation” section and in the margin is the word “Definition”, and it says
that “in this Act, unless the context otherwise requires or implies, the
expression” –
and then follows a long list of expressions, some of which
are followed by the word “includes” and some by the word “means”. The
word “includes” has at least two shades of meaning. It may apply where
that which is affected is the only thing included, and it is also used to
No. 4]
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
551
Yet even allowing an open-ended character to the definition of
“person” in section 2(m),
it will still be possible to carry over
into section 2 (m) the restrictive effect of 2 (f) provided that we are
express the idea that the thing in question constitutes a part only of the
contents of some other thing. Generally speaking, it
is employed as a
term of enlargement and not as a term of limitation. It is obvious, for
example, that it is not to be taken as limitative in section 2(z), which
says that “oath” includes affirmation and statutory declaration.
Section 2(k), which states that “corporation” includes…, etc., taken
by itself would not appear to be limitative, but in section 2(cc), which
includes a corporation as a person, the words are “a corporation as
restrictively defined by this section”, so that in sub-section (k) the word
“includes” is evidently used in the same sense as the word “means”.
When we come to section 2(p),
the word “includes” also seems to be
used as equivalent to “means” because it appears to be all-embracing.”
Again, in Paroisse de St. Gabriel de Brandon v. Sarrazin, (1935), 58 B.R.
103, Rivard, J., whose reasons were adopted by Ltourneau and St. Germain, JJ.,
said of section 2 (p) of the old Act defining “debtor”, at p. 126:
“Aussi importe-il fort peu que le par. p ait employ6 l’expression includes,
au lieu de means. Seules, les personnes tombant dans l’un ou l’autre des
quatre cas 6nu 6r~s sont assujetties aux dispositions de la loi de faillite
qui frappent les d6biteurs. Ainsi, l’individu qui serait vraiment un d~biteur
et qui commettrait un acte de faillite, mais qui ne se trouverait pas
personnellement au Canada, qui n’y rdsiderait pas ordinairement, qui n’y
aurait pas de lieu de rdsidence, qui n’y ferait commerce ni personnellement
ni par mandataire, ne serait pas sujet aux dispositions de la loi de faillite
applicables aux d6biteurs. Et de mbme, s’il s’agit d’une personne morale,
elle ne sera sujette A la loi que si elle est une corporation.”
And, speaking in the same case of the old definition of “corporation”
in
section 2(k) of the former Act, Hall, J., said, at p. 103:
“It
is argued by the appellant that the word includes is used in the
sense of means, and that, therefore, the act does not apply to any corporation
except those specified, which are trading or commercial corporations.
It is difficult to accept this interpretation of the word “includes” unless
it is used in two entirely different senses in the same interpretation clause
of the act. For instance, paragraph jij says:
Sheriff includes bailiff and any officer charged with the execution of
a writ or other process.
It was certainly not the intention to restrict the meaning of sheriff
the
in that paragraph,
to bailiffs and other officers, and, therefore,
word includes is not used in the sense of means.
It is difficult to believe that the word includes is used in the same
sense in the two paragraphs. It is quite reasonable to say that the word
sheriff includes other officers, because without that proviso
it would
be impossible to argue that a bailiff is a sheriff, but if it was intended
to subject every corporation to the jurisdiction of the act, there could
have been no reason for seeking to claify the term by declaring that a
corporation includes a company. Every company is, of course, a corporation,
although every corporation is not a company.”
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willing to concede that, in the ultimate determination of the scope
of “person” in section 2 (m),97 whatever else may be included beyond
the categories listed, the rubric “corporation” in principle 98 exhaust-
ively covers the ground of bodies corporate, and means what it is
defined to mean in section 2 (f) –
both reasonable concessions.
In Chauss6 v. L’Association du Bien-Etre de la Jeunesse Inc.,99
decided under the present Act, the Quebec Bench, by a majority
(Pratte and Owen, JJ.; Rinfret, J., dissenting) held that a youth
welfare organization, incorporated without share capital for purposes
other than gain under Part III of the Quebec Companies Act, 00 was
outside bankruptcy jurisdiction as not being a “corporation” within
the present statutory definition [section 2(f)] and [so] also outside
the definition of “person”; the Court accordingly affirmed a judg-
ment of Montpetit J. dismissing a petition in bankruptcy.’ 0′ Whether
this organization was correctly held to be outside the definition of
“corporation” is a question which will be considered below. The
majority justices, however, being of that view, but rightly appreciat-
ing that the matter did not end there, went on to hold that the body
in question, if it was not a “corporation”, was not a “person”‘ either:
for, as listed in the enumeration of those who were “persons” under
2(m), “corporation” was exhaustive of bodies corporate; and
“corporation” in the enumeration of 2(m) meant what it did in
2(f). So Owen, J., though without elaboration as to his reasons,
said: 102
Returning to section 2(m) of the Bankruptcy Act, I am of the opinion
that respondent would come within the definition of “person” therein only
as a “corporation”.
… Having concluded that respondent is a corporation my next step
is to determine whether it is a corporation subject to the provisions of the
Bankruptcy Act. Section 2(f) of that Act provides…
[the definition of
“corporation”] …
And, inter alia, Pratte, J., made the general remark that: 103
97 And not merely, as earlier conceded, that in the list of categories in section
2(in), the rubric “corporation”
in principle exhausts bodies corporate. See
supra, p. 550. The compulsion for the wider proposition: supra, pp. 537-538.
98 “In principle” is a caveat introduced because it will be generally, though not
universally, true, that “corporation” will cover the whole ground of bodies
corporate. It is still possible, for example, that a body corporate may enter
the class of “persons” under the rubric of “heirs, executors, administrators or
other legal representative of a person”; or, as a partner in “a partnership”.
99 [1960] B.R. 413.
100 R.S.Q. 1964, c. 271.
101 Reported infra, Appendix Two.
102 [1960] B.R. 41S, at p. 417.
103 [1960] B.R. 413, at p. 416.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
553
Au surplus, il ne paraitrait pas raisonable que le lgislateur, apr~s avoir
pr~cis6 [sc. dans la definition de “corporation”] quelles sont les corporations
qui peuvent 6tre dclar~es en faillite, eut voulu que d’autres puissent
1’6tre sous une autre appellation
[so. entre celles d6clares “personnes”
par la section 2(m)]…
a clear acceptance of the almost self-evident conclusion that the
restrictive definition of “corporation” cannot, in the mechanics of the
Bankruptcy Act definitions, achieve its object without being carried
over to restrict the definition of “person”.1 04
Conclusion. So far as the present statute is concerned, it would
along the lines indeed already
that “corporation” as specially defined is
seem on balance necessary to concede –
traced by the courts –
104 Before his Lordship’s general observation, however, as just quoted, Pratte,
J., had dealt particularly with one other category of “person” within which
it was sought to put the respondent organization if it should not be a “person”e
as a “corporation”. This was the category of “unincorporated association”.
It had been argued that if the Association du Bien-Etre de la Jeunesse, Inc.
was not a “corporation”, then it must be deemed “unincorporated”; and, if
“unincorporated”, then an “unincorporated association” and as such a “person’.
This argument, indeed, found favour with Rinfret, J., dissenting, who took
if indeed not a “corporation” [as to which
the view that the respondent –
his Lordship expressed no opinion: [1060] B.R. 418, at pp. 419 and 420] –
would then instead be a “person” as an “unincorporated association”. Consistency
of interpretation between 2(f) and 2(m) required, in Rinfret, J.’s view, that
whatever was not a “corporation” must be held correlatively
to be “un-
incorporated.” Certainly the majority were in no position to quarrel with
Rinfret, J.’s insistence that “corporation” meant exactly the same in 2(f) as
in 2(m) –
after all, their whole position rested on just that proposition.
not literally –
not therefore unincorporated –
What the majority might have answered was that there was no strictly
formal reason why corporation should be coextensive with incorporated; non-
corporation with unincorporated. [For corporation and unincorporated are
not formally –
correlatives. Consequently, even though not a
“corporation”, as formally defined, a body could nevertheless be considered
incorporated –
still less an “unincorporated
association”.] The courts, in sum, though faced with an artificially narrow
definition of “corporation”, would not be forced to reciprocate with an artificially
wide definition of “unincorporated association”. They would be free to define
“unincorporated association” in a sense not so artificially wide as to include
every body corporate that might on a true construction of “corporation” be
held excluded from being a “corporation”. And, in avoiding having to make
such bodies corporate “persons” under the head of “unincorporated associations”,
the would avoid also utterly defeating the very object of the exclusion of
these bodies from the definition of “corporation”. The majority might, in
short, have said that even if, under compulsion of statute, a given body corporate
must be deemed not to be a “corporation”, it still need not for that reason
alone be considered to be an “unincorporated association”
a term which
–
McGILL LAW JOURNAL
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exhaustive of corporate “persons” within the definition of the latter
term and, therefore, exhaustive too of corporate “debtors”. The
restrictions on “corporation” must be carried over onto “persons”,
and thence onto “debtors”.
It has, of course, been shown that the Act does not operate
properly when bodies corporate outside the definition of “corporation”
are systematically denied status as “persons” for all purposes. The
terms of the statute are therefore to be stretched to include them as
“persons” notwithstanding the defining clause, whenever necessary.
All that can be said in defence of this mode of construction is that,
within the accepted canons of construction,10 5 it is rather easier to
include them arbitrarily as “persons” by way of exception from the
definition, specially within those sections of the Act that seem to
require it, –
is to exclude them arbitrarily from being
“debtors”, as Parliament clearly appears to have intended, and as
must be accomplished one way or another.10 6
than it
It
is submitted, therefore, on balance, that the question posed
as the title to this Part must in principle be answered in the
negative. A body corporate other than a section 2(f) “corporation”
cannot be a “person” as defined by section 2(m). But, this much
being conceded, it is necessary to add the important qualification
that the term “person”, as used in many –
sections
of the Bankruptcy Act, has a different meaning from the definition
of “person”, found in section 2(m), when so interpreted. Even in
the Bankruptcy Act, it is the ordinary meaning of “person” –
that
prescribed by the Interpretation Act 1 0 7 – which will commonly apply.
if not most –
(2) Can a non-profit body corporate be a “company incorporated
or authorized to carry on business by or under an Act of the
Parliament of Canada or of any of the provinces of Canada” or
“an incorporated company, wheresoever incorporated, that has
an office in or carries on business within Canada”?
the courts would still be free to define in the ordinary way, without regard
to the artificial restrictions on the definition of “corporation”.
Pratte, J.’s answer to Rinfret, J.’s argument was, however, in substance, that,
[at least] when one used the French texts, the term “association non constituce
en corporation” in 2(m) was not correlative to “corporation” in 2,(f), because,
Pratte, J., considered, the application of the latter definition merely produced
and, in any event, the rule that a term must mean the
an infinite regress –
same thing throughout a statute was not absolute: [1960] B.R. 41S, at p. 415.
105 See supra, n. 94.
106 Supra, pp. 537-38, esp., at p. 538.
10 7 Supra, p. 534 and nn. 57 and 58.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
555
If, then we accept the plausibility of the judicial view that
whatever restrictions are imposed upon the definition of “corporation”
must be carried over into the definition of “person”, it becomes
critical to decide just how severe those restrictions are.
Indeed, it is just at the point that the definition of “corporation”
has been subjected by judicial gloss to limitations more severe than
those explicitly imposed by statute, that the decisions of the courts
are most vulnerable to adverse criticism.
The definition of “corporation” found in the present Act may
here conveniently be repeated for ease of reference:
2. In this Act,…
(f) “corporation” includes any company incorporated or authorized to carry
on business by or under an Act of the Parliament of Canada or of any of
the provinces of Canada, and any incorporated company, wheresoever
incorporated, that has an office in or carries on business within Canada,
but does not include building societies having a capital stock, nor incorporated
banks, savings banks, insurance companies, trust companies, loan companies
or railway companies ….
It will be noticed at the outset that “corporation” so defined is
said to include the listed classes of bodies, not to mean (i.e. include
all and only) the listed classes. So far as the Act goes, therefore,
“corporation” might thus be wider than the listed classes. There is,
indeed, enough here alone to serve as a basis for an argument that,
however far the judicial gloss may succeed in restricting the phrases
“company incorporated or authorized to carry on business” and
“incorporated company … that has an office… or carries on business”,
“corporation” might nevertheless still “include” even a body outside
the scope of these last phrases. After all, the explicit restrictions
imposed by the Act would not be undermined thereby, for the
definition, in terms, says that “corporation” does NOT include banks,
railways, and the other expressly excluded undertakings. Whatever
is “included”, they will stay excluded. But it is by no means necessary
to rely at all on this distinction between “includes” and “means”.108
One can still easily succeed in restoring “non-profit” bodies corporate
to the definition of “corporation” without relying on any extension
whatever of “corporation” beyond the listed classes of bodies express-
ly declared by s. 2 (f) to be included in that term. For the natural
and ordinary meaning of the words employed in defining these
categories which go to make up “corporation”, are quite wide enough
in themselves to embrace non-profit bodies corporate.
We can therefore accept that, for the purpose of the Act,
“corporation” “includes” the bodies listed, not in the sense only that
108 Supra, p. 550 and n. 96.
McGILL LAW JOURNAL
[Vol. 15
it comprehends them, but in the sense that it comprehends only the
categories listed; that is to say, “corporation” means the categories
listed. “Corporation”, in sum, is defined by section 2 (f) exhaustively
in terms of the listed categories, and embraces no more. Indeed, were
it not so, the definition of “corporation” could arguably fail in its
limitative purpose. The solution that the categories listed are exhaust-
ive was also adopted by the cases on the old Act, for the same
reason. 0 9
But if “non-profit” bodies corporate are not to be brought into
the scope of the Act on the basis that “corporation” is wider than
the categories expressly declared to be “corporations”, it remains to
see whether non-profit bodies corporate do not indeed already fall
squarely within one or other of the listed categories.
The opposite suggestion, which is that favoured (contrary to the
author’s view) by the weight of judicial opinion, requires that we
accept either that “non-profit” bodies corporate are, by reason of
being such, not “companies”; or else (as a prima facie alternative)
that they are, even if companies, not companies “incorporated or
authorized to carry on business”.
It will be argued below that each of these arguments is false;
and indeed that the second, even if it were correct in all other respects,
would still not lead to the result desired by its proponents. But each
has a greater or lesser measure of support from the case law
interpreting the definition of “corporation” found under the old
Act.” 0 So far as those cases may be held to have been correctly
decided on the terms of the old Act, they are, it must be conceded,
relevant, though perhaps not decisive, on the new Act. The authority
of the interpretation of the one on the interpretation of the other
derives from two factors. First, the definitions of “corporation” are
virtually identical under both Acts.”‘ Second, and equally important,
the definitions of “corporation” have performed, under, both closely
similar, if not quite identical, functions. Thus under the old Act, an
entity other than an individual had, in order to come within the
scope of bankruptcy law, to be a corporation as specially defined,”2
EVEN IF IT WAS a “person”.” 3 Under the present Act, an entity
which is a body corporate must, in order to be subject to bankruptcy
109Supra, n. 96.
110 See supra, nn. 40, &1 and infra, Appendix Six, at pp. 619 et seq., for
references to and relevant excerpts from, the old legislation.
111 For the definitions quoted in full, see supra, pp. 532-535 (the new Act);
and Appendix Six, infra, pp. 619 et seq. (the old Act).
112 Ibid.; s. 2(k) of the old Act.
113 See infra, pp. 562 in fine to 565 and nn. 144 to 148.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
557
law, be a “corporation as specially defined SO THAT IT CAN BE
a “person”.
(a) Does the term “company” properly embrace non-profit bodies
corporate? Much the most effective argument for excluding non-
profit bodies corporate from the definition of “corporation” –
and
so from the scope of the Bankruptcy Act –
is that such bodies are
not companies, whilst the Bankruptcy Act by the definition in
section 2 (f) requires that a “corporation” be a “company incorporat-
ed or authorized… [etc.].” It is indeed on this question that, it is
submitted, the susceptibility of non-profit bodies corporate
to
Canadian bankruptcy jurisdiction must in the end turn.
Bankruptcy decisions suggesting that non-profit bodies corporate
are not “companies”. Judicial authority, in construction of the old
and present Bankruptcy Acts, favouring the proposition that all
–
“non-profit” bodies corporate
are not “companies”, can be traced to the decisions in 1935 respecting
the status in Canadian bankruptcy law of fabriques, or Roman
Catholic parish church or vestry corporations in Quebec.” 4
or certain particular types of –
In two separate decisions, 115 two panels of five justices of the
Quebec Queen’s Bench sharing only one individual judge, agreed
that fabriques were not subject to the 1919 Bankruptcy Act, as it
then stood revised and amended; 116 reversing
in each case a
judgment of Boyer, J., in the Superior Court.117
In one of these cases, Bricault v. Les Curds et Marguilliers de
the fabrique
l’Oeuvre et Fabrique de la Paroisse de St-Etienne,”5
114 Citations are given supra, n. 15.
115 Bricault v. Cur6 et Marguilliers de l’Oeuvre et Fabrique do la Paroisse do
St-Etienne, (1&35), 58 B.R. 1O0, 16 C.B.R. 196 (Coram Tellier, C.J., Dorion,
Bernier, St-Jacques and Barclay, JJ.); reversing (1.3-3), 71 C.S. 471, 39 R.J.
452, reported also together with the appeal in 16 C.B.R. 196, at p. 107 (Superior
Court: Boyer, J.); and also Cur6 et Marguilliers de I’Oeuvre et Fabrique de la
Paroisse do St-Gabriel do Brandon v. Sarrazin, (1935), 58 B.R. 123, 16 C.B.R.
326 (Coram Dorion, Rivard, Ldtourneau, Hall, and St-Germain, JJ.); reversing
the decision of Boyer, J., in the Superior Court, reported, together with that on
appeal, in (193), 16 C.B.R. 326; refusal, with reasons, of leave to appeal to
the Supreme Court of Canada, is reported in [,1935] S.C.R. 419, [1985] 3 D.L.R.
554, 16 C.B.R. 350 (Coram Davis, J., in Chambers). The judgments of the
Queen’s Bench in both cases were delivered on January 31, 1935.
116 R.S.C. 1’927, c. 11.
117 See supra, n. 115.
118 (1935), 58 B.R. 100; other citations supra, n. 15.
McGILL LAW JOURNAL
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supported and desired the exercise of bankruptcy jurisdiction; 119
in the other, Les Curgs et Marguilliers de l’Oeuvre et Fabrique de la
Paroisse de St-Gabriel de Brandon v. Sarrazin,120 the fabrique resisted
It cannot therefore be concluded that the issues came before
it.121
the Quebec Queen’s Bench in a posture which suggested that bank-
ruptcy jurisdiction was inherently hostile to the activities of the
church. But while it would be unjustified to explain the result in
that way, it is clear that the inherent appropriateness or otherwise,
as it would have appeared to the judges, of the exercise of bankruptcy
jurisdiction upon a fabrique, had great influence –
and justifiably
so. To take account of such considerations is simply to weigh whether
a given object is inherently suitable as the subject-matter of a statute
which it is sought to apply to it.122 Such considerations had indeed
been prominent amongst the reasons given in 1933 by Trahan, J.,
in the Superior Court in Commission Municipals de Qu6bec V. Ville
d’Aylmer123 for holding that the Bankruptcy Act 24 did not apply
to municipal and school corporations, even though neither type of
body was expressly excluded by the terms of the statute. The view
that fabriques were so far bodies iuris publici that the Bankruptcy
Act must likewise be presumed to exclude them from its scope emerges
plainly in the per curiam considgrants given by the Court in Bricault
v. Paroisse de St-Etienne: 125
Consid~rant que la fabrique de la paroisse de St-Etienne, comme, du reste,
g~n6ralement toute autre fabrique de paroisse, en cette province, est un
corps public, constitu6, non pour des fins de commerce, d’industrie, ou de
gain, ni pour aucune autre fin d’intgr~t privg ou d’ordre priv6, ni mame
pour des fins de propagande religieuse ou autre, mais uniquement pour
participer dans ]a mesure et en la manibre d~termin~es par la loi,
la
coutume et l’usage, h l’adminisbration des biens de lEglise, dans la paroisse,
et de l’6cole ou des 6coles de fabrique, qu’elle peut avoir A son nom; qu’elle
est r6gie, & cet 6gard, par le droit public ou administratif tant eccldsiastique
que civil; qu’un tel corps public, si endett6 soit-il, ou puisse-t-il 6tre, n’est
pas, -au regard de la loi de faillite, une des corporations ou personnes, ni,
cons~quemment, un des d~biteurs contre qui une ordonnance de s6questre
119 The fabrique was resisting the annulment of the receiving order, and
alternatively contending inter alia that it had in substance made, and had a
right tDo make, an assignment in bankruptcy: see 58 B.R. 100, at pp. 102-3
and 108-9.
120 (9 935), 58 B.R. 1M3; other citations supra, n. 115.
121 The respondent fabrique contested the petition for a receiving order and,
on appeal, was successful: (1935), 58 B.R. 123, at p. 125.
122 See, for example, Maxwell on The Interpretation of Statutes, 1,1th ed.,
(London, 1062), pp. 83-95.
123 (1921), 7 C.S. X43, 14 C.B.R. 437; English translation, [1933] 2 D.L.R. 638.
124RS.C. 1027, c. l1.
125 (.1035), 58 B.R. 100, at p. 103; emphasis added.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
559
peut valablement Atre 6mise, ou qui, de son chef, pourrait faire valablement
une cession de biens autorise ….
And Sir Mathias Tellier, C.J., with whose individual opinion Bernier
and St-Jacques, JJ., concurred, twice drew an analogy with municipal
and school corporations. Speaking of the conjoint effect of the
definitions of “debtor” and “corporation”, Tellier, C.J., said: 126
Or, A mon avis, ces deux d6finitions, qu’il faut prendre ensemble et en
s6rie, lorsqu’il s’agit d’une corporation, ne comprennent pas les fabriques,
non plus que les corporations municipales et scolaires.
Later, resuming the same theme: 127
Tout comme les corporations municipales et les corporations scolaires, les
fabriques sont des corporations publiques ou corps publics, dont
les
pouvoirs et les devoirs sont d6termin6s par le droit public. Elles -sont
constitutes et elles existent, non pour des fins de commerce, ou d’industrie,
ni pour l’exercice d’un mdtier ou d’un emploi, dans un but de gain ou de
lucre, mais uniquement pour l’administration, sous l’autoritk suprieure
de l’vque et la direction du cur6, du temporel des paroisses, ce qui,
parfois, quoique tr&s rarement, comprend une 6cole ou des 6coles.
On congoit difficilement qu’un gardien ou un syndic nomm6 en vertu de
La Loi de Faillite, pourrait remplascer le cu-r6 et ,es marguilliers de l’oeuvre
et fabrique, pour l’administration du temporel d’une paroisse ou pour la
direction d’une 6cole de fabrique; et A cause de cela, il est difficile de
croire que le Parlement a voulu qu’il en soit ainsi. Raison de plus pour
interpreter les textes de ladite Loi comme je 1’ai fait ci-dessus.
Donc, je suis d’opinion que la Fabrique n’est pas une des corporations
auxquelles La Loi de Faillite s’applique ou peut s’appliquer.
Dorion, J., in a concurring opinion, makes the same reasoning
an explicitly distinct ground of decision ;128 by their very nature, his
Lordship thinks, fabriques are inappropriate to the operation of
to
bankruptcy legislation, so that the Act cannot be construed
embrace them: 129
tre dkclar~es en faillite
Cependant, l’F6num~ration des personnes qui peuvent
est limitative, et quoiqu’on mentionne quelques exceptions (Loi de Faillite,
sec. 2(k) (p)), il peut se trouver des personnes, ou corporations, qui, par
leur nature mime ne sont pas susceptibles d’6tre mises en faillite. Tel est
le cas des corps publics qui sont charg6s d’exercer l’autorit6 de l’Etat dans
certaines branches de l’administration.
La Fabrique transige des affaires, mais uniquement dans l’administration
des biens n~cessaires aux fonctions du service religieux et moral des fabriciens
et les biens qu’elle administre sont, en g6n~ral, inali~nables.
126 Ibid., p. 114.
127 Ibid., p. 116.
128 Ibid., p. 1-18: “Je concours, en outre, dans le motif donn6 par mes savants
collkgues, savoir que la loi de faillite est applicable aux corporations qui sont
des compagnies, mais non aux autres.” The question whether they are companies
or corporations as defined is regarded as a separate question.
120 Ibid., pp. 117-8.
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Sans doute, 1inalidnabiliM de la plus grande partie de ses biens ne
rdsout pas la question. Elle peut servir cependant pour aider h fixer le
caractZre principal et dominant de cette corporation.
La Fabrique est un corps public qui fonctionne avec la sanction de
l’Etat, sous la surveillance d’un officier public charg6 d’homologuer l’ordon-
nance m~me qui 6rige civilement la paroisse et la Fabrique.
Les constructions m6mes des Eglises et presbytbres sont faites sous la
surveillance et la sanction des commissaires nomm6s par le Lieutenant-Gou-
verneur de la Province.
L’Etat intervient autant dans la cr6ation et dans les affaires des
Fabriques, que dans les affaires des corporations municipales.
Similar considerations can be detected in the opinions delivered
by those of the Quebec Queen’s Bench who sat in the other panel to
hear Paroisse de St-Gabriel de Brandon v. Sarrazin.130 Of the latter
five, Dorion, J., whose views we have already seen in the St. Etienne
case, was one. Of the remaining judges, however, only St. Germain,
J.,131 appears to make a separate and distinct ground of decision out
of his finding that fabriques are as a matter of implication excluded
from the Bankruptcy Act as inherently inappropriate to it by their
nature :132
Que si los termes de cette loi pouvaient laisser quelque doute dans
l’interpr6tation que nous lui donnons, quant i son application aux Fabriques,
ce que cependant je n’admets pas, il suffirait, il me semble, de consid6rer
le caractbre public de ces personnes morales que l’on appelle des Fabriques
pour conclure que ladite Loi do Faillite, dont la mati~re est du domaine
du droit priv6 et sur laquelle le f6d6ral s’est particuli6rement r~serv6 le
pouvoir de l6gifhrer, ne saurait affecter ces sortes de corporations en main
morte r~gies A la fois par les lois eccldsiastiques reconnues civilement et
par les lois administratives de notre province.
And, having cited substantial excerpts of statute law and commentary
on parishes and fabriques, St. Germain, J., carried the matter beyond
the arena of
one of mere statutory
constitutional power: 133
interpretation, and
into
I1 ressort des citations ci-dessus que les biens de fabrique d’une paroisse
sont la propr~t6 des paroissiens catholiques de cotte paroisse, qui ferment
une communaut6 ou corporation en main morte eot que les membres qui com-
posent le conseil d’administration des biens de la Fabrique ne sont quo
los mandataires de ladite corporation et que ces mandataires administrent
des biens publics.
Or, il est assez difficile de concevoir que La Loi do Faillite puisse
s’appliquer h ces corporations r6gies par le droit public, tant ecclciastique
130 (tI935), 58 B.R. 1,23; other citations are given supra, n. 1.15; see pp. 124,
1w7, ISO ff.
131 ([1 35), 58 B.R. 1,23, at p. 135. His Lordship concurs in Rivard, J.’s, analysis
of the terms and goes on to make the remarks next quoted.
132 (c1qS5), 58 B.R. 123, at p. 135.
133Ibid., at p. 1,7-8.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
561
que laique. 11 ne semble faire de doute pour personne qu’une corporation
municipale n’est pas soumise h La, Loi de Faillite et je doute fort d’ailleurs
que le Parlement f~d~ral pourrait s’autoriser du pouvoir qui lui est attribu6
de 16giffrer sur la banqueroute et la faillite, une mati~re, encore une fois,
qui fait plutbt partie du droit priv, pour imposer une loi de faillite h cette
tre moral qui personnifie la collectivit6 des habi-
corporation municipale,
tants d’une portion d6termin6e de territoire d’une province et qui est rev6tu
par le gouvernement de cette province des pouvoirs n~cessaires pour veiler
aux int6rcts et droits que ces habitants peuvent avoir en commun.
Les corporations municipales sont des 616ments constitutifs de l’organi-
sation sociale, dont la creation appartient aux provinces, et l’on concevrait
difficilement que sous pr~texte de 16gif6rer en matibre de faillite, le pou-
voir f~d~ral pfit s’ing6rer dans le fonctionnement de ces corps publics. Or,
s’il en est ainsi pour les corporations municipales, pourquoi n’en serait-dl
pas de m~me pour les Fabriques qui sont aussi des corporations publiques
et qui remplissent vis-h-vis des habitants d’une paroisse, pour les fins du
culte, les fonctions que les conseils municipaux remplissent vis-h-vis des
mbmes habitants pour tous les autres objets et besoins locaux?
Nous avons vu, par les citations ci-dessus, le concours que i’Etat apporte
S’Eglise pour l’ex~cution des d~crets canoniques dans toutes les matires
relatives A l’drection des paroisses, b leur division, h la construction et b la
reparation des 6glises, des presbytbres et des cimeti~res, de m~me que pour
le pr~lvement des fonds n6cessaires h ces fins au moyen de cotisations
autoris~es par les commissaires. Or, les fabriques sont des corporations
cr66es en mnme temps que la paroisse et eharg6es d’un service public qui
nalt aussi avec la paroisse, savoir, i’administration des biens meubles et
immeubles n~cessaires au culte et & la desserte.
His Lordship accordingly concludes, emphasizing the analogy with
municipalities :’3
Je suis donc d’avis, pour les raisons additionnelles ci-dessus expos~es,
que la loi de faillite ne s’applique pas aux Fabriques, pas plus qu’elle ne
saurait s’appliquer aux corporations municipales. Je n’ai aucune hesitation
h maintenir cet appel.
The result is that a majority of the court in the St-Etienne case, 35
and two judges in the St-Gabriel de Brandon case, 3 6 were prepared
to consider the inherent nature of fabriques to be sufficient to
operate their implied exclusion from the Bankruptcy Act 137 –
quite
apart from recourse to any particular interpretation of those statutory
definitions by which bankruptcy jurisdiction was regulated under the
Act as it then stood. 3 8
134 Ibid., at p. 1,38.
35 Tellier, C.J., Dorion, Bernier, and StTacques, JJ.
1
136 Dorion and St-Germain, JJ.
137 R.S.C. 1927, c. 1L.
138 Quoted in Appendix Six, infra, pp. 610 et seq., esp. 620 for the revision
of 1.927. The present definitions are quoted in the text above, at pp. 592-535.
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Had this been the only reasoning given to support the resulting
decision that fabriques were outside the Bankruptcy Act, the two
cases would still have been of interest, no doubt, but very much more
limited in the significance of their implications. The reasonableness
of the judicial assessment both of the character of fabriques and of
the policy of excluding them would have been a matter of individual
opinion. Nor would it have mattered a great deal whichever way the
cases went.
But the judges preferred to base their decision upon grounds
more closely rooted in the words of the Bankruptcy Act. To these
latter grounds may be attributed the institution of a class of
impliedly-exoluded bodies corporate which has become ever wider,
extending much beyond bodies of a governmental 130 or quasi-govern-
mental or public character, to include (as defined at least since
1947) all bodies of a “non-profit” character –
a private golf club,
for example.
Susceptibility to jurisdiction under the 1919 Bankruptcy Act
– whether as it originally stood 140 or as subsequently revised and
amended 141depended 142 on being a “debtor” as specially defined. This
term appeared in the Revised Statutes of Canada of 1927 – without
having undergone any alteration material for our purposes 143
defined as follows:
–
2(p) “debtor” includes any person, whether a British subject or not,
who, at the time when any act of bankruptcy was done or suffered by him,
or any authorized assignment was made by him,
(i) was personally present in Canada, or
(ii) ordinarily resided or had a place of residence in Canada, or
(iii) was carrying on business in Canada personally or by means of an
agent or manager, or
139 See cases cited supra, n. 5 and reported in Appendices One and Two, infra,
at pp. 602 and 606 respectively.
140 9-10 Geo. V, S.C. 391%2 c. 36; see quotations in Appendix Six, infra, pp.
619-620.
141 The material amendments, which are quoted in Appendix Six, infra, pp.
620-62f1, were made by 11-12 Geo. V, S.C. 1021, c. 17, and the cases were for the
most paxt decided under the Bankruptcy Act, R.S.C. I2N7, c..11. A more detailed
legislative history may be had through the references, supra, n. 10 and infra,
Appendix Three, at pp. 607 et seq.
142 Section 4 (receiving orders); section 9 (assignments). As to proposals,
see, under the 1919 Act, 9-10 Geo. V, c. 36, s. 13, and, under the 1027 revision,
R.S.C. 127, c. 11, s. 11; and, generally, supra, n. 46.
143 The numeration of paragraphs was altered, and, as may be seen from the
references infra, Appendix Three, at pp. 607 et seq., the provisions as to the
Winding-up Act were amended and ultimately placed elsewhere.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
563
(iv) was a corporation or a member of a firm or partnership which carried
on business in Canada[.]
(i),
A fair reading of this definition is that paragraphs
(ii)
and (iii) deal only with individuals, and (iv) only with corporations,
(and members of firms and partnerships), with the consequence
that, even if one were a “person”, one could not be a “debtor” (and
as such subject to bankruptcy jurisdiction) unless one were also
itself specially defined.
either an individual or a “corporation”,
This appears to have been accepted, demonstrably by a majority
both in Bricault v. Paroisse de St.-Etienne 144 and Paroisse de St.-
Gabriel de Brandon v. Sarrazin,145 certainly without dissent by any
144 Per Tellier, C.J., (1035), 58 B.R. 100, at p. 114: “II n’est pas tout A fait
exact de dire que la loi de faillite s’applique d’une manire gdndrale h toutes
personnes au Canada, sauf exception. Ce qui est vrai, c’est qu’elle s’applique a
& tout ddbiteur compris dans dans le d6finition que l’article 2, paragraphe (p)
de ladite loi, donne du mot ‘d6biteur’, et, lorsqu’il s’agit d’une corporation, com-
pris en, outre, dans la definition que le mgme article donne du met ‘corporation’.
[Emphasis added.] The reasons of Teller, C.J., were expressly concurred in by
Bernier, J., (p. 118) and by St-Jacques, J., (p. 119).
Barclay, J., in whose reasons St-Jacques, J., expressly concurred
(p. 119),
that: “A petition may be presented whenever a debtor
remarked (at p. 120)
[emphasis added] commits an act of bankruptcy.” (At p. 212, referring to the
definition of “debtor” in s. 2(p)), his Lordship continued: “As regards the first
sub-section –
‘who was personally present in Canada’, the context clearly shows
that the reference is to an individual and not to a legal entity other than indi-
vidual. The same may be said of sub-section 2, which speaks of a person who
resided or had a place of residence in Canada, and of sub-section 8 –
a person
carrying on business personally or by means of an agent or manager… The
only section, therefore, that refers to persons other than individuals is the fourth
sub-section, which refers to a corporation. As the word “corporation” has been
restrictively defined, such entity must be an entity coming within the definition
of the word ‘corporation’..!’
145The opinion written by Rivard, J., (1935), 58 B.R. 128, at p. 125, was
in by L ourneau, J., (at p. 132) and St-Germain, J.,
expressly concurred
(at p. 1M5).
That the restriction on bankruptcy jurisdiction was accomplished under the
old Act by restricting “corporation”, and hence “debtor” –
and not by restricting
appears in the opinion of Rivard, J., (at p. 125): “La loi de faillite
“person” –
s’applique-t-elle aux fabrques? Pour Atre, sous l’empire de cette loi, susceptible
d’&tre dclar6 en faillite, il faut d’abord qu’on soit dbiteur… Et que faut-il
entendre, ici par d6biteur?…” (At p. 126) “[Ill arrive aussi que, sous le cou-
vert d’une apparente d6finition, on 6dicte plut~t une v6ritable disposition 16gis-
lative, par quoi, au lieu de d~finir un mot, on pose une rTgle qui fait partie de
la loi proprement dite… Ainsi, la loi de faillite contient, en son article 2, une
suite de paragraphe oii se trouve d6termin6 le sens d’un grand nombre de termes.
Le par. p se rapporte au mot d~biteur. [Here his Lordship quotes the defini-
McGILL LAW JOURNAL
[Vol. 15
judge, and probably with the concurrence of all. That such was
indeed the way the judges read the definition emerges rather clearly
from the per curiam reasons in the latter case. 140 And in the
tion.] … Ce n’est pas lh une definition: le sens ordinaire du mot d~biteur sub-
siste. C’est plut8t une disposition l6gislative oi il est r~gl6 que, pour 6tre trait6e
comme d~bitrice sous l’empire de la loi de faillite, une personne doit poss~der
l’une ou l’autre des qualit~s 6num6res… Aussi importe-t-il fort peu que le
par. p ait employ6 l’expression includes, au lieu de Means. Seules, les personnes
tombant dans l’un ou l’autre des quatre cas 6num6r~s sont assujetties aux dispo-
sitions de la loi de faillit qui frappent les dgbiteurs. Ainsi, l’individu qui serait
vraiment un d~biteur et qui commettrait un acte de faillite, mais qui ne se
trouverait pas personnellement au Canada, qui n’y r~siderait pas ordinairement,
qui n’y aurait pas lieu de r6sidence, qui n’y ferait commerce ni personnellement
ni par mandataire, ne serait pas sujet aux dispositions de la loi de faillite
applicables aux d~biteurs. Et de mnme, s’il s’agit d’une personne morale, elle ne
sera sujette h la loi que si elle est une corporation.” [Italics on phrases longer
than a single word are the author’s.]
The point is further illustrated by the way in which Rivard, J., met one of
counsel’s arguments. It had been pressed on the court that the fabrique was at
all events a “body politic and corporate”, a head added in 1921 to the definition
of “person”: 11-12 Geo. V, S.C. 1951, c. 17, s. 5, redefining “person”. The fabrique,
so the argument ran, was therefore a “person”. The conclusion sought to be
drawn was that, as a “person”, it was subject to bankruptcy jurisdiction. The
learned judge answered this contention inter alia by pointing out that, even
if it was a “person”, that alone did not make it a “debtor”, and only “debtors”
were subject to bankruptey jurisdiction. At p. 128 his Lordship asks: “[U]ne
fabrique pourrait-elle 6tre dclar~e en faillite, par le motif que le par. cc dit
que le mot personne comprend un corps constitu6 et politique?… Rappelons
d’abord que la premibre solution ddvelopp6e ci-idessus r6pond h cette question,
en l’6cartant: le par. p [d6biteur] ne mentionne pas les corps constituas et
politiques parmi les personnes assujetties aux dispositions de la loi concernunt
les ddbiteurs.
146 “Consid6rant que nul ne peut 6tre dielar6 en faillite ou faire une cession
de ses biens, sous l’empire de la loi de faillite, s’il n’est d6biteur; qu’aux termes
m~mes de cette loi, les seules personnes fictives ou morales qui peuvent 6tre,
en vue de leur mise en faillite, traites comme d6bitrices sont les corporations
poursuivant des affaires au Canada; que le mot corporation, tel que limitative-
ment dafini dans ladite loi, d6signe ‘toute compagnie constituae en corporation
ou autorls6e h exercer un commerce sous l’empire d’une loi du Parlement du
Canada, ou de l’une des provinces du Canada, et toute compagnie constitu6e en
corporation, en quelque lieu que ce soit, qui a un bureau au Canada ou qui y
poursuit ses operations’;
“Consid~rant qu’aux termes de ladite loi, le mot personne peut s’entendre d’une
association, d’une socitY, d’une corporation telle que limitativement d6finie
si-dessus, et d’un corps constitu6 et politique; mais qu’en vue de la mise en
faillite, l’application de la loi est restreinte comme il est dit plus, aux personnes
physiques dans certaines conditions et ‘aux persomes fictives qui sont des cor-
porations; …
“Par ces motifs, la Cour… rejetto la p6tition en faillite…”: (1935), 58 B.R.
123, at p. 124.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
565
subsequent decision of Feeney v. Lacroix,147 Barclay, J., so read the
two earlier decisions, with approval. 148
There is no reason to doubt the correctness of the judicial reading
to the above effect. If it is correct, it was then quite unnecessary,
merely in order to exclude a fabrique or any other given type of
body corporate from being a “debtor” (and subject as such to the
Act) to go to the lengths of showing that it was not a “person”
– whether “person” as originally defined in 1919:149
2. In this Act, unless the context otherwise requires or implies, the
expression
(aa) “person” includes corporation and partnership;
or “person” as more widely redefined [possibly ex majore cautela] 150
in 1921: 151
(aa) “person” includes a firm or partnership, an unincorporated association
of persons, a corporation as restrictively defined by this section, a body
corporate and politic, the successors of such association, partnership, corpora-
tion, or body corporate and politic, and the heirs, executors, administrators
or other legal representatives of a person, according to the law of that part
of Canada to which the context extends,
or indeed “person” as defined in the Interpretation Act: 152
37. In every Act, unless the context otherwise requires,
(20) “person” or any word or expression descriptive of a person, includes
any body corporate and politic, and the heirs, executors, administrators or
other legal representatives of such person, according to the law of that part
of Canada to which ‘the context extends[.]
A fabrique or other body corporate would be quite effectively
excluded from the Act by showing that it was not ‘a corporation or
a member of a firm or partnership which carried on business in
147 (1938), 65 B.R. 386.
1481bid., at p. 389: “The definition of the word ‘debtor’ therein contained deals
with persons who are individuals or a corporation or -a member of a firm. It
has been held by this Court in two cases (Bricault v. Des Curg et Marguilliers
‘Oeuvre et Fabrique de la Paroisse de Saint-Etienne, and Des Cur6 et Mar-
do
‘Oeuvre et Fabrique de la Paroisse V. Sarrazin), that, from the
guillfers de
point of view of the Bankruptcy Act, the application of the law is restricted to
individuals or physical persons under certain conditions and to fictitious or moral
persons who are corporations…”.
149 The Bankruptcy Act, 1919, 94t Geo. V, S.C. 1919, c. 36, s. .(aa).
150 It might have been widened, for example, by the conclusion of “unincorpo-
rated association of persons”. But it would, at any rate, settle such questions as
whether a bank was a “person” subject like all others to the rules against taking
fraudulent preferences: see the Inverness case, supra, pp. 543 et s.eq.
151 The Bankruptcy Act Amendment Act, 1921, 1,142 Gee. V, S.C. 1921,
c. 17, s. 5.
192 R.S.C. 1927, c. 1.
McGILL LAW JOURNAL
[Vol. 15
Canada’, and so not a “debtor”, without also attempting a baseless
and destructive 153 demonstration professing to show 154 that such
a body was not even a “person!’.
that it did not carry on business –
Though some judges did attempt to show, at least as a further
or additional reason, that fabriques were not even “persons”,1 5 effort
was concentrated on the demonstration that a fabrique was not
‘a corporation or a member of a firm or partnership which carried
on business in Canada’, and so not a “debtor” within paragraph (iv)
of the definition. This could obviously be done either by establishing
that it was not a “corporation or a member of a firm or partnership”
or that it did not “carry on business in Canada”.’ 50 The second
alternative –
is no doubt justified
if one assumes that by business is meant economic gain; though
it is by no
(whatever may be true of fabriques or municipalities)
means obvious that the activities of non-profit institutions can never
be described accurately as their “business”. 5 T The exact meaning of
the phrase “carrying on business” is, however, obviously less im-
portant under the present Act where it is enough if a “debtor”
or an “insolvent person” [unlike the “debtor” and “insolvent debtor”
under the old Act] resides OR carries on business, and where [as
was always the case] it is enough to be a “corporation” if a company,
wheresoever incorporated, has an office in OR carries on business
within Canada OR [in the author’s view] if it is incorporated by
or under a federal or provincial statute. Such being the diminished
importance of the second of the two alternative lines of argument,
153 Baseless and destructive because it creates gratuitously all the absurdities
described supra, pp 53,9-540, without in any way assisting the working of any other
part of the Act.
154 It is impossible to accept the view that they were not even “persons”. If
they were not such under the rubric “corporation as restrictively defined”, they
would at least enter under “body corporate and politic” whose very purpose
was to enlarge the definition of “person”. See infra, pp. 573-576.
155 See, in the St-Gabriel de Brandon appeal, the remarks of Rivard, J., in
(1035), 58 B.R. 123, at pp. 129-30, offering this, apparently, as an alternative
reason: “on pourrait aussi rdpondre autrement…”. Lftourneau and St-Genrmain,
JJ., concurred in the reasons of Rivard, J.
156 The words “which carried on business in Canada” would appear to qualify
both “corporation” and “member of a firm or partnership”. It will be shown
below that the terms of the present Act have been changed so as to exclude that
qualification: infra, Pp. 586-550.
257 Most commonly, the phrase “carrying on business” does of course have the
flavour of activities caried on for pecuniary gain and, indeed, in a commercial
manner. See, for example, Fry, L.J., in Graham v. Lewis, (1888), L.R. 22
Q.B.D. 1, at p. 5, and compare Ex parte Breull; In re Bowie, (1880), L.R. 16 Ch.
D. 484. See also infra, p. 586.
No. 4]
CORIPOIZATIONS NOT SUBJECT TO BANKRUPTCY LAW
561
it is the first which is of major significance: the one which sought
to show that a fabrique was not a “corporation or a member of a
firm or partnership” within the meaning of the then Act. This first
alternative, which is the basis of the continuing authority of these
decisions to-day, was a line of argument depending on the construction
of the definition of “corporation” : 1rs
2. In this Act, unless
expression…
the context otherwise requires or
implies, the
(k) “corporation” includes any company incorporated or authorized to
carry on business by or under an Act of Parliament of Canada or of any
of the provinces of Canada, and any incorporated company, wheresoever
incorporated, which has an office in or carries on business within Canada,
but does not include building societies having a capital stock, nor incor-
porated banks, savings banks, insurance companies, trust companies, loan
companies or railway companies[.]
Though in terms “corporation” is merely said to include the listed
classes, it was accepted that in the context this meant “corporation”
means the listed classes,159 particularly in view of the reference,
contained in the 1921 redefinition of “person”, to “corporation as
restrictively defined by this section”.
If “corporation” was then no wider than the listed classes, it
would suffice, in order to exclude a fabrique or some other body
thence from the
corporate from the definition of “corporation” –
to show that it
definition of “debtor”, and thence from the Act –
did not constitute a company. Accordingly, considerable judicial
attention was devoted to this point.
So in Bricault V. Paroisse de St.-Etienne 160 the Chief Justice,
Sir Mathias Tellier, with whom Bernier and St-Jacques, JJ.,
concurred, said that: 101
Comme on le voit, une corporation, au sens de la loi de faillite, c’est une
compagnie qui poursuit des affaires, which carry on business. Il n’est ques-
tion, dans tout le paragraphe (k), m6me dans l’exception, que de compagnies
faisant ou ayant fait des affaires.
Pourquoi n’a-t-on pas mentionn6, dans l’exception,
les corporations
municipales et les corporations scolaires ? 162 C’est 6videmment, parce que ce
158 The Bankruptcy Act, 1919, 9-10 Geo. V, S.C. 191.9, c. 36; the Bankruptcy
Act, R.S.C. 1927, c. 11. The continuing authority of the exposition of the old
section is discussed supra, pp. 528-529, 556; infra, pp. 589-590.
159 See, supra, n. 96.
160 (1935), 58 B.R. 100.
161 Ibid., p. 115.
162 His Lordship’s question is answered in his own judgment in either of two
ways. Even if admitted to be “corporations” within the definition of that term,
they could be held not to carry on business and so fall outside head (iv) of the
definition of “debtor”; alternatively they could be held impliedly excluded from
the scope of bankruptcy legislation as inappropriate to it,
the Act containing
no express language to include them.
McGILL LAW JOURNAL
[Vol. 15
ne sont pas des compagnies, et qu’elles ne font pas ou ne poursuivent pas
ce qu’on est convenu d’appeler “des affaires”, business. Or, les fabriques
sont dans le m6me eas; elles ne sont pas des compagnies; elles ne font pas
ou ne poursuivent pas des affaires.
The phrase “business”, one should perhaps add, is apparently conceiv-
ed by his Lordship both as it is used in the statute, and as employed
by himself, in the sense of economic gain: 163
les
L’expression “poursuivre des affaires”,
dispositions ci-dessus, implique, il me semble, des actes ou des op6rations
faits en vue d’un profit ou d’un gain, dans l’exercice d’un commerce, d’une
industrie, d’un m6tier ou d’un emploi.
to carry on business, dans
Seules des compagnies ou corporations priv~es sont supposges faire de
tels actes ou op6rations.
Dorion, J., delivering his concurring judgment in the same case,
added to his own reasons the following: 164
Je concours, en outre, dans le motif donn6 par mes savants collbgues, savoir
que la loi de faillite est applicable aux corporations qui sont des compagnies,
mais non aux autres.
Barclay, J., concurring, added the following: 160
Is a fabrique a corporation within the meaning of that section? [i.e.,
section 2(k)]
In the first place, the definition of “corporation” is restricted to compa-
nies incorporated to carry on business in Canada. A fabrique is not a company
incorporated or authorized to carry on business by or under an act of the
Parliament of Canada or any of the Provinces. Not only is it not an incorpo-
rated company but it does not “carry on business” in the ordinary sense of
that expression. Nor is it an incorporated company which has an office in
or carries on business within Canada. A fabrique, therefore, escapes wholly
from the definition of the term “corporation” …
It is clear that it is because, in his Lordship’s view, a fabrique
is not a “company”, that fabriques are held to escape even the
phrase “incorporated company, wheresoever incorporated, which has
an office in … Canada.”
In Paroisse de St-Gabriel de Brandon v. Sarrazin,0 0
the decision
that the fabrique was not a company appears in the reasons delivered
per curiam: 167
Consid6rant que les fabriques ne sont pas des personnes naturelles ou
physiques; qu’elles ne peuvent ftre des personnes morales qu’h titre de
corporations; mais qu’en tout cas elles ne sont pas des compagnies, dont
elles diffbrent par leur constitution, leur nature et leur fin ….
163 Ibid., pp. 115-16.
164 Ibid., p. 118.
165Ibid., p. 12 .
166 (1-935), 58 B.R. 122; other citations supra, n. 115.
167 (1.35), 58 B.R. 1.23, at p. 104.
Xo. 41
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
569
Rivard, J., with whose opinion L6tourneau and St-Germain, JJ.,
concurred, 168 elaborated: 19
Or les fabriques sont des personnes fictives ayant le caract~re de corpo-
rations, mais elles ne sont pas des compagnies. Cette double proposition n’a
pas besoin d’6tre autrement d~montr~e. Les fabriques different des personnes
artificielles, nominees compagnies, autant par leur constitution que par leur
nature et leur fin; ni dans leur composition, ni dans leurs op6rations, elles
n’ont rien de ce qui caracthrise les compagnies. Du reste, elles n’exercent
aucun commerce; elles ont ceci de particulier, qu’elles n’existent et n’ont
de pouvoir q-ue pour administrer les biens d’autres corporations, qui sont les
paroisses religieuses. En tout cas, elles ne constituent pas des compagnies.
Les propres definitions de la loi de faillite font done 6chapper les
fabriques A son application.
Le raisonnement pourrait 6tre r~sum6 dans les propositions suivantes:
Ne peuvent 6tre mis en faillite que les d6biteurs.
Les seules personnes morales qui peuvent 6tre, en vue de la faillite,
traitkes comme d6bitrices sont les corporations.
Les corporations, sous 1’empire de la loi de failite, ne comprennent
que les compagnies.
Or, les fabriques, si elles sont des corporations, ne sont pas des com-
pagnies.
Done les fabriques ne peuvent pas 6tre d6clar~es en faillite.
Ces consid6rations suffisent, et la conclusion s’impose.
Hall, J., in a concurring judgment, added: 170
I conc[o]ur with Mr. Justice Rivard in the opinion that the clause in question
defining corporation, restricts the application of the act to commercial corpo-
rations, that is, companies authorized to carry on business
And, in another concurring opinion, St-Germain, J., said:1 7,
La principale question qui nous est soumise sur le pr6sent appel est de
savoir si une fabrique peut 6tre mise en faillite sons l’empire de la loi de
faillite.
Un examen raisonn6 du texte des d6finitions des mots person-ne, corpo-
ration et d~biteur dans ladite loi suffit pour nous pernettre de r6pondre
A cette question. Mon honorable coll6gue, M. le juge Rivard, a fait cet
examen; il en est ainsi arriv6 h la conclusion que ]a loi de faillite ne
s’applique pas aux fabriques, et je contours enti~rement dans los motifs
qu’il donne au soutien de cette conclusion.
Leave to appeal to the Supreme Court of Canada was sought in
the latter case and refused by Davis, J., on motion in chambers. 72
168 Ibid., pp. 1S2 and 135 respectively.
109 bid., pp. 127-8.
170 Ibid., at p. 135.
171 Ibid.
172 [1035) S.C.R. 419, [1935] 3 D.L.R. 554, 16 C.B.R. 350.
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His lordship, however, gave written reasons which, though they
supported the result reached below, seem (even supposing them to
have the authority of a decision of the Court) to leave open the
general 173 question whether non-profit corporate bodies were, under
the 1919 Act’ 7 4 as it then stood, excluded as such from bankruptcy
jurisdiction. These reasons we shall examine below. 5
The judicial dicta in the Queen’s Bench both in the St-Etienne and
the St-Gabriel de Brandon cases rely heavily, as we have seen, on
a fabrique not being a company. This view is, in itself, far from
indefensible; it would be plausible, for example, to adopt the view
that the term “company” is equally inappropriate to municipalities
or school corporations. But the judicial remarks are also heavily
interlaced with observations to the effect that fabriques do not carry
on business. Some of these last-mentioned observations may be
attributable to the definition of “debtor” in section 2(p) of the old
Act, which required that in order to be a “debtor”, a body which was
a corporation be furthermore a corporation which “carried on busi-
ness in Canada”.176 Not all the observations seem so directed,
however. It is difficult to escape the inference that it is meant also
to insist that incorporation with the object of carrying on business
is an essential condition even of being a “company” at all. So read,
the judicial dicta do not merely say that fabriques are bodies iuris
publici like municipalities, not properly described as “companies”.
173His Lordship
thought
the Bankraptcy Act “essentially designed”
for
“persons or corporations carrying on business”; but that does not mean
exclusively confined to such persons, since individuals were and are embraced
whether or not they carried on business; and at all events his Lordship was
directing himself to “ecclesiastical bodies”. See infra, p. 585.
174 R.S.C. 1927, c. 1i.
1 75 Infra, p. 585.
176 Speaking of the definition of “corporation”, Tellier, C.J., in Bricault V.
Paroisse de St-Etienne, (1S35) 58 B.R. 100, at p. 115: “Comme on le voit, une
corporation, au sens de la loi de faillite, c’est une compagnie qui poursuit des
affaires, which carry on business. II n’est question, dans tout le paragraphe (7c),
m~me dans l’exception, que de compagnies faisant ou ayant fait des affaires.”
Later, referring to head (iv) of the definition of “debtor”, which did use
language about carrying on business his Lordship said: “Egalement, dans le
(IV), il n’est question que des corporations
paragraphe (p), sous-paragraphe
qui “poursuivent des affaires”, which carry on business.”
In St-Gabriel de Brandon v. Sarrazin, (1935), 58 B.R. 123, at p. 124, the court
recited: “Considrant… qu’aux termes m6mes de cette loi, les seules personnes
fictives ou morales qui peuvent b-re, en vue de leur mise en failflte, trait6es
comme d6bitrices sont les corporations poursuivant des affaires au Canada…”.
Rivard, J., said, at p. 127: “Ajoutons que les corporations qui peuvent atre
trait6es comme d~bitrices sont celles qui exercent un commerce. Le paragraphe p
le dit express6ment: … which carried on business in Canada.”
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
571
Rather, the dicta seem to say also that NO body which does not
carry on business in the sense of gain, can be a company. This is
a view of much wider repercussions; and leads in the end to the
conclusion that a golf club incorporated under a Companies Act
is not a company. Such indeed has been the direction taken by
subsequent decisions, relying, especially -at first, on the two cases
involving fabriques, which could certainly be supported on the much
narrower grounds suggested above.
In Feeney v. Lacroix176a the Quebec Queen’s Bench held the same
Bankruptcy Act not to apply to a caisse populaire (credit union)
incorporated under the Quebec Cooperative Syndicates Act1′ 77 sub-
stantially, it would seem, on the basis that a co-operative syndicate so
incorporated could not be described as a company, and so fell outside
the statutory definition of “corporation”. 178 Apart from the individual
opinions of the judges, considgrants were delivered per curiam
which appear to support the conolusion just mentioned upon the
basis that bodies created under the Quebec Cooperative Syndicates
Act, while not denied to be bodies corporate,1 79 were not companies
but bodies only partly assimilated to companies: “the responsibility
of its members or shareholders being assimilated to a company for
the purpose of limiting the liability of its members.”‘ 8 0
17fa (1938), 65 B.R. 386.
177 R.S.Q. 1025, c. 254; now R.S.Q. 1964, c. 294.
178 The court below had held the caisse populaire outside the Act “because,
on account of its operations, it was in reality a savings bank and loan company”
(.65 B.R., at p. 387) and so expressly excepted from the definition of “corporation”.
The Queen’s Bench explicitly confined itself to affirming in its considgrants
the disposition of the case below, while giving other reasons. And the appellate
court further stated per curiam “that the first question to be decided is whether
such a corporation as the one in question comes under the Bankruptcy Act
in
at all, and not whether it comes within one of the exceptions contained
section 2(k) of the Act…” (ibid.); a question on which its guiding principle
was “that the Bankruptcy Act is not of universal application, but only applies
It may accordingly be concluded
to such persons as are therein defined…”
that the Queen’s Bench expressed no opinion on the question whether the
caisse populaire, whether by reason of the objects of its incorporation or by
reason of the activities which it in fact carried on [whichever be material:
infra, pp. 590-599], was within the exceptions expressly made for various kinds
of banks and loan companies. See at p. 388 the doubts entertained by Barclay,
J., (in whose opinion Rivard and Galipeault, JJ., and apparently also Tellier,
C.J., concurred); quoted infra, pp. 594-595.
179 The court, referring to the caisse populaire, by implication accepted that
it was a body corporate, at p. 387: “Considering that the Act does not apply
to all corporations, but only to corporations which come within the said restrictive
definition.”
180 (1938), 65 B.R. 386, at pp. 387-88.
McGILL LAW JOURNAL
[Vol. 15
The view that the co-operative syndicate was not a “corporation”
because not a “company” emerges clearly from the opinion of
Barclay, J., with whom Rivard and Galipeault, JJ., and apparently
also Tellier, C.J., expressed their concurrence. His Lordship said: 181
In section 2(k) a corporation is defined as “any company incorporated or
authorized to carry on business”. Only companies incorporated or companies
authorized to carry on business by or under an act of the Parliament of
Canada or any of the Provinces of Canada and incorporated companies,
whensoever incorporated, which have an office in or carry on business within
Canada, are included in the definition. A corporation which is not a company
does not come within the definition.
And speaking more specifically of La Caisse Populaire de St-Eusabe
de Stanfold in the case at bar, his Lordship said: 182
La Caisse Populaire, as a co-operative syndicate, is authorized under the
terms of chapter 254 of the Revised Statutes of Quebec (1925). Section 2
of that Act allows the formation of co-operative syndicates for certain pur-
poses. Section 3 declares that “such syndicate or association shall be of
the nature of a joint stock company, the responsibility of its members or
shareholders being limited to the amount of their respective shares”. It is
obvious from this section that the association is not a company, but is
assimilated to a company for the purpose of limiting the liability of its
members. The Bankruptcy Act does not deal with corporations assimilated
to companies or of the nature of companies, but only with corporations which
are incorporated companies, or companies authorized to carry on business.
It has been argued that this is manifestly not the intention of the legislation.
The Bankruptcy Act has been enacted and re-enacted, amended and partially
repealed many times, and the intention of the legislature must be gathered
from what the enactment says rather than what it may be thought was
intended to be said.
St. Jacques, J., who wrote a concurring opinion, seems to have
shared the view of his brethren that the caisse populaire was not
a “corporation” as defined because it was not a company.18 3 Neither
the considgrants given per curiam nor the individual opinions make
it clear in what respects the caisse populaire was thought to lack
the qualities of a company. The first of the passages quoted above
from the opinion of Barclay, J., may be taken to imply that, in the
view of a majority, the caisse populaire was not incorporated to
“carry on business” and that this was what negatived its character
as a company. It is by no means obvious, however, that the activities
of a credit union do not constitute the carrying on of business, even
181 Ibid., at p. 388.
182 Ibid., at p. 390. Emphasis added.
183 Ibid., at p. 394: “Ce n’est pas une compagnie au sens de la loi de faillite
et elle n’a pas 6t6 cr66e ou autoris~e ‘to carry on business’ pour d’autres fin
que la loi des syndicats coop6ratifs a en vue, c’est-h-dire la cooperation au
b6n~fice de ses membres.”
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
573
if with limited objects and on a mutual or co-operative basis only.
Indeed St. Jacques, J., appears to concede that the caisse populire
was incorporated to carry on a business, albeit one of limited objects:
“elle n’a pas WA cr66e ou autoris~e ‘to carry on business’ pour d’autres
fins que celles que la loi des syndicats coop6ratifs a en vue, c’est-A-dire
la coop6ration au b6n6fice de ses membres.”‘ 18 4
Feeney v. Lacroix 115 was followed In re Construction Coop6rative
de Montr6al v. Z. Berthiaume & Fils Limite, 8 6 where the appelant,
also incorporated under the Quebec Cooperative Syndicates Act,
contesting a petition for a receiving order, had in the Superior Court
relied mainly upon the contention that it was within the express
words excepting from the definition of “corporation”
‘building
societies having a capital stock’. s7 Boyer, J., there rejected this
argument, holding (without explanation) the stated exception to be
applicable rather to such building societies as were incorporated
under the Building Societies Act.1 88 On appeal the Queen’s Bench
agreed on this point 8 9 without elaboration, but reversed the Superior
Court on the different ground taken by appellant 190 that, even if not
18.Ibid., at pp. 394-5.
Is; Ibid.
1s8 (1938), 20 C.B.R. 285 (Superior Court in Bankruptcy: Boyer, J.); reversed
by 20 C.B.R. 351 (Queen’s Bench: L6tourneau, Galipeault, Walsh, St. Jacques
and Langlais ad hoc, JJ.).
187 20 C.B.R. 285, at p. 287 and 20 C.B.R. 351, at p. 353.
ISs R.S.Q. 1925, c. 251. Per Boyer, 20 C.B.R. 285, at p. 287: “Quant h un
autre moyen qu’il s’agit d’une compagnie de construction A laquelle La Loi de
Faillite ne s’appliquerait pas, la d6bitrice n’est pas dans ce cas car elle a 6t6
incorporde en vertu du Quebec Co-operative Syndicates’ Act, R.S.Q. 1925, c.
254, et non du Building Societies’ Act, R:S.Q. 1925, c. 251, qui concerne les
socidtds de construction vis6es par l’article 2(k).”
189 Per St. Jacques, J., with whom Langlais and Ldtourneau, JJ., (the only
other members of the bench who wrote opinions) expressed concurrence; 20
C.B.R. 351, at p. 353: “En Cour sup6rieure, l’appelante parait surtout avoir
soutenu qu’elle est une socidtd de construction et que, comme telle, elle doit
6tre class.e dans les exceptions de l’article 2(k) de La Loi de Faillite… La Cour
supdrieure n’a pas accueilli cette pr~tention, et je crois qu’elle a eu raison.
Ce sont les socidtds de construction constitudes sous l’autorit6 du chapitre 251
des Statuts refondus de 1925 qui peuvent bdn6ficier de cette expression.”
190 Per St. Jacques, J., for the court, 20 C.B.R. 351, at p. 353: “Devant
cette Cour, l’appelante a pos6 la question diffdremment. Elle soumet que,
m~me si elle n’est pas une socidtd de construction, au sens du chapitre 251 des
Statuts refondus, elle n’est pas, non plus, l’une des personnes vis6es par La Loi
de Faillite. C’est bien ainsi qu’il faut envisager la question.”
McGILL LAW JOURNAL
[Vol. 15
within the expressly excepted classes, it was nevertheless not such a
body corporate as was subject to the Bankruptcy Act.
In so doing, the Court based itself 101 on Feeney v. Lacroix,0 2
which decision had not been reported at the time of the judgment
a quo, and the reasoning in which had not been used as argument
by counsel in the present case. 93
St. Jacques, J., in speaking on appeal for the Queen’s Bench,0 4
expressly noted concession by counsel for the respondents that the
appellant was not within the statutory definition of “corporation!’ 195
a concession approved by St. Jacques, J., apparently, on the usual
–
ground that the body in question was not a “company”. 1 6 [It may
be added that counsel, having made this most surprising concession
sought to overturn Feeney v. Lacroix 197 on the [unpromising] 10)
ground that the earlier court had there failed to appreciate that a
co-operative syndicate, if not a “corporation”, was at least a “person”,
and, being a “person” [it was argued] subject to administration
under bankruptcy law. In pursuing this argument counsel appears
191 (1989), 20 C.B.R. 351, at p. 353; per St.-Jacques, J., for the Court:
“Cette Cour a formellement d6cid6 In re: Feeney v. Lacroix, qu’un tel syndicat
n’est pas l’une des personnes morales ou juridiques qui puissent prendre avantage
La Loi de Faillite ou atre contraint par cette loi.”
192 (1988), 65 B.R. 386.
193 (1939), 20 C.B.R. 351, at pp. 353-4; per St.-Jacques, J., for the Court:
“Ce jugement de la Cour d’appel n’avait pas encore 6
rapport6 lorsque la
pr~sente cause a 6t6 dfcidde en Cour sup6rieure, et il ne parait pas que ni un ni
l’autre des procureurs des parties ait fait devant la Cour sup irieure l’argument
qui avait 6t6 soutenu avec beaucoup de vigueur e.t d’habiletd dans la cause de
Feeney et Lacroix.”
194 Ldtourneau, Galipeault, Walsh, St.-Jacques, and Langlais ad hoc, JJ.;
apart from general considdrants delivered per curiam no opinions were written
other than that of St.-Jacques, J., and very short opinions of Langlais and
Letourneau, JJ., expressing concurrence.
195 (1939), 20 C.B.R. 351, at p. 354: “Les intimfes ont reconnu devant la
Cour, et ils admettent 6galement h leur mdimoire 6crit, que l’appelante n’est pas
une corporation, telle que d6finie par La Loi de Faillite.”
196 (1 30), 20 C.B.R. 351, at p. 354, immediately following -the words quoted
in n. 18/, supra: “En effet, le mot ‘corporation’ dans cette loi comprend
toute compagnie constitude en corporation ou autorisfe A exercer un commerce
sous l’empire d’une loi du Parlement du Canada, ou de lune des provinces du
Canada, etc.”
197 (193&), 65 B.R. 386.
108 See supra, pp. 562-566, and nn. 143 to 154.
No. 4]
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
575
to have neglected the fact that subjection to bankruptcy jurisdiction
depended on being not a “person” but a “debtor”, and that the term
“debtor”, as read judicially, was confined –
and probably correctly
confined –
to persons who were also either individuals or “corpo-
rations”. 19 Success in his contention that appellant was a “person”
would still have left respondent’s counsel far from establishing
that appellant was a “debtor” –
impossibly far, given his concession
that appellant was not a “corporation”. Unfortunately, however,
St. Jacques, J., for the Court, does not seem to have appreciated the
irrelevancy of the respondent’s argument that appellant was a
“person”, and appears to have thought it necessary to refute it. This
was indeed impossible, short of perverse 20 0 interpretation of “person”,
since long before 1939 –
the definition of “person” had read:
even before the fabrique201 cases in 1935 –
(cc) “person” includes a firm or partnership, an unincorporated corporated
association of persons, a corporation as restrictively defined by this section,
a body corporate and politic, the successors of such association, partnership,
corporation, or body corporate and politic, and the heirs, executors, adminis-
trators or other legal representative of a person, according to the law of
that part of Canada to which the context extends …
and the construction co-operative, even if rightly held not to be a
“corporation” as defined, was clearly (if incorporated) at least a
body politic and corporate. But respondent’s counsel 202 seems to
have suggested only “unincorporated association of persons” as the
rubric under which the co-operative should be a “person”, and it
109 See infra, pp. 586 et seq., esp. 589-590; supra, pp. 562-565.
200 See supra, pp. 565-566.
2 0 1 See the references supra, n. 15.
202 (,1&39), 20 C.B.R. 35,1, at p. 354: “Les intim6es n’en persistent pas moins
A soutenir que l’appelante est une personne vis6e par La Loi de Faillite. Ce
n’est assur6ment pas une personne physique; ce ne peut 6tre qu’une personne
morale ou une entit6 juridique.
“C’est bien ainsi, du reste, qu’elles Pont d~crite dans la requfte pour mise en
faillite, et c’est cette personne moral dont la Cour sup~rieure a ddclar6 la mise
en faillite.
“Les intim6es soutiennent que l’appelante doit Ure classde dans la seconde
categorie des personnes vis6es par l’article 2 (cc) [9 C.B.R. 23]: ‘an unincorporated
association of persons’ (version frangaise: ‘une association de personnes non
constituges en corporation’ [2 (z) ]).”
McGILL LAW JOURNAL
[Vol. 15
was easy enough for St. Jacques, J., to show 213 that the appellant
was not an unincorporated association of persons.] 204
Whatever generality one may care to find in the foregoing cases
wherein the term “company” was held to be too narrow to embrace
the kinds of bodies then in question, it is, at latest, in 1947 that
203 (1939), 20 G.B.R. 351, at p. 355 in fine: “Ce syndicat ou soci6t6, dit
‘article 3, est de la nature d’une soci6t6 par actions, la responsabilit6 de ses
membres ou actionnaires 6tant limite au montant de leurs mises respectives.
“Ce n’est donc pas v~ritablement une soci6t6 par actions, sauf en ce qui
concerne les responsabilit6s de ses membres, telle que limit e. Ce n’est pas
et qa ne peut 9tre, ‘une association de personnes non constitutes en corporation’,
ainsi que le soumettent les intim6es devant cette Cour, afin de contourner, si
possible, la porte et le sens v6ritable de la d6cision In re: Feeney v. Lacroix.”
A difference of view might have been possible as to whether, under the
Quebec Co-operative Syndicate’ Act, R.S.Q. 1-925, c. 254, co-operative syndicates
were or were not incorporated. The Act does not appear to have explicit words
of incorporation, though the Act. as published in the Revised Statutes, appears
with the [probably unofficial] heading “Incorporation” over page 3103. The
section of the Act [s. 3] declaring the syndicates to be “of the nature of a
joint stock company” is not in itself conclusive of incorporation, because the
term “joint stock company” does not necessarily mean a corporate company:
Wegenast, The Law of Canadian Companies, (Toronto, 1931), pp. 4-5. On the
other hand, the -then Quebec Companies’ Act, R.S.Q. 1,925, c. 223, dealt with
unmistakably corporate bodies, under Part I of the Act, “Incorporation of Joint
Companies by Letters Patent”.
But whether a co-operative syndicate under the legislation then in force
was or was not incorporated would be immaterial to its being “person” within
the Bankruptcy Act definition of that term;
if not a “body corporate and
politic” it would be an “unincorporated association of persons.”
It should be noted that the Co-operative Syndicates Act, R.S.Q. 1964, c. 294,
s. 3, now reads “Such syndicate or association shall be a civil corporation. An
associate shall be responsible only for the unpaid amount of his subscription.”
204 St.-Jacques, J., also indicated, in reasoning not wholly clear, that in his
view the definition of “person” contemplated, in any event, not the unincorporated
association collectively, but its individual members, as “persons”.
Thus his Lordship said,
(1039), 20 C.B.R. 351, at p. 354: “Les
intim6es
soutiennent que l’appelante doit Ctre classie dans la seconde cat6gorie des
personnes vis~es par l’article 2 (cc) [9 C.B.R. 23]: ‘an unincorporated association
of persons’
‘une association de personnes non constitudes
en corporation’ [2 (z)]).
(version frangaise:
“Comme on le voit clairement par la version frangaise de cette loi, les mots
‘non constitutes en corporation’ ne s’appliquent pas h l’association, mais aux
personnes qui sont ainsi jointes ou associ6es ensemble pour faire des affaires
et contracter des dettes.
“I1 en est de mime du mot ‘unincorporated’ dans la version anglaise qui ne
qualifie pas le mot ‘association’, mais bien, plutbt, le groupe de personnes.
“On comprend facilement que le 16gislateur ait ajout6 cette cat6gorie de
d6biteurs h l’article 2(cc) [sic], tel qu’amend6 en 1021; on sait que, particu-
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
577
the decisions were said to have established the general proposition
that non-profit bodies corporate as a class were outside the then
Bankruptcy Act; 20 5 in Beaubien V. L’Union Economique d’Habita-
tion,205 Boyer, J., in the Quebec Superior Court cited Paroisse de
St-Gabriel de Brandon v. Sarrazin,207 Feeney v. Lacroi, 20
and
Construction coop6rative de Montrgal v. Berthiaume2osa as establishing
that “La Loi de faillite est limitative dans son application et ne
s’applique pas aux soci6tds organisees sans but de profit.” That case
involved a company incorporated without share capital under Part
III of the Quebec Companies Act,20 9 which provides for the incorpo-
ration of companies for objects “without pecuniary gain”. The
company in question had, it appears, been incorporated to obtain
for its members dwellings at moderate cost. His Lordship evidently
thought the matter too well established by authority to require him
to review again the relevant statutory provisions, and contented
himself with supporting the above-quoted principle on the cases cited
li~rement dans les provinces de l’ouest, des cultivateurs, ou m~me des commer-
gants, se groupent ensemble pour acheter et exploiter des machines agricoles,
des grains de semences, ou autres effets ncessaires h leur industrie. Ces
associations on groupements de personnes, qui ne sont incorpor6es sous l’empire
d’aucune loi, peuvent tout de mgme contracter des dettes dont elles sont respon-
sables, en parts 6gales, i l’dgard des cr~anciers.”
If this explanation were correct, it would seem that the head “unincorporated
association of persons” would add absolutely nothing to the definition of
“person”;
individuals already being unquestionably “persons”. Furthermore,
whether (in the English or French versions or both) it is the “persons” who
have not been incorporated, or the association which has not, seems utterly
irrelevant. In either case, the association is included ex facie as a collectivity
in the definition of “person”.
More to the point, and probably correct, is his Lordship’s view (20 C.B.R.
351, at p. 355)
that unincorporated groups cannot be “debtors” [as distinct
from “persons”] collectively –
but only as individuals: “S’il s’agissait, dans
la prdsente cause, d’un groupe de personnes ainsi associ6es sans s’&ore constitutes
en corporation, il aurait fallu que la requite pour ddclaration de faillite ffit
dirig6e contre chacune des personnes qui composent ce groupe et qui sont
d6bitrices.” But if this be true it is because the definition of “debtor” appears
to require debtors to be either individuals or corporations –
not because the
definition of “person” lacks a definition wide enough to embrace unincorporated
associations as collectivities.
205 R.S.C. 1927, c. 11 (the Act of 191 as revised).
206 [1947] C.S. 33. See infra, pp. 589-590 and 594.
207 (1935), 58 B.R. 123, 16 C.B.R. 326; leave to appeal to the Supreme Court
refused, [1935] S.C.R. 419, 16 C.B.R. 850.
208 (1938), 65 B.R. 386, 20 C.B.R. 149.
208a (1939), 66 B.R. 409, 20 C.B.R. 351.
209 R.S.Q. 1941, c. 276; now the Companies Act, R.S.Q. 1964, c. 271.
McGILL LAW JOURNAL
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above, though it must be observed that he stated in general terms
what may plausibly be said to have been theretofore only (at most)
a principle implicit in a series of particular cases.
Chauss6 v. L’Association du Bien-Etre de la Jeunesse Inc.210
appears to have been the first reported case on the question to be
decided under the present Act, that of 1949, as revised.211 The
Quebec Queen’s Bench in 1959 by a majority (Pratte and Owen, JJ.;
Rinfret, J., dissenting) held that a youth welfare organization in-
corporated without object of gain under Part III of the Quebec
Companies Act 2 12 was outside the scope of bankruptcy jurisdiction.
One of the majority, Pratte, J.,213 relied on the view that the re-
spondent Association was not a “company” in order to show that
it was not a “corporation”, hence not a “person” : 214
Je dirais donc que les seules corporations qui sont vis~es par la Loi sur la
faillite sont les compagnies incorporated or authorized to do business …
Or, l’intim~e n’est pas une compagnie: elle n’a pas de capital-actions,
et le lgislateur a pris soin de substituer le mot “corporation” au mot
“compagnie”, dans toutes les dispositions de la loi la concernant; elle n’a
pas 6t constitue pour poursuivre des affaires (incorporated to do business)
et n’est pas non plus autoris~e h le faire.
(It is not clear whether the fact that respondent was neither
incorporated nor authorized to do business was offered by the learned
judge as going to negative altogether its character as a company,
or whether the remark was directed only to the qualifying words,
“company incorporated or authorized to carry on business” – which
latter was the basis of Owen, J.’s opinion,215 but which, standing
by itself, will be shown below to be an insufficient basis for keeping
“non-profit” bodies out of the definition of “corporation”. 210 )
It is sufficiently clear from the judgment below that at least
Montpetit, J., in the Superior Court, appreciated that only by
negativing altogether respondent’s character as a company could
respondent be excluded from all the alternative heads of the defi-
nition of “corporation”: 21
7
‘article 2(f), une “corporation” doit 6tre soit “une compagnie
Or, selon
constitu6e en corporation”, soit une compagnie “autorisic 4 poursuivre des
affaires… en vertu ou sous l’autoritM d’une loi … de l’une des provinces
du Canada.”
210 [1960] B.R. 418.
211 R.S.C. 1952, c. 14.
212 R.S.Q. 1941, c. 276; now the Companies Act, R.S.Q. 1964, c. 271.
213 For Owen, J’s reasoning, see infra, pp. 586-587.
214 [1,960] B.R. 413, at pp. 414-15.
215 [960] BE.R. 41, at p. 417; quoted infra, pp. 586-587.
216 Infra, pp. 587-589.
217 Appendix One, infra, at p. 605.
No. 43
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
579
D’autre part en me r~f6rant h la troisi~me partie de la Loi des compa-
gnies de Quebec, je constate qu’une corporation ainsi constitute n’est pas
une compagnie, c’est-A-dire qu’elle n’est pas une entit6 corporative ou un
“body politic and corporate” dont le but principal est de r6aliser des profits
ou des b~n6fices grace b un capital quelconque qui y est pr6alablement investi.
The judgment of Montpetit, J., in this case, reported herein by the
present author, 218 may be taken as the most cogent of the authorities
supporting the view that “non-profit” corporations are not subject
to the present Bankruptcy Act. While one may disagree with his
Lordship’s conclusion –
the judgment
in the Superior Court is free from ambiguities and arguments
demonstrably unsound on the face of the Act.
as does the present author –
His Lordship’s more recent judgment in 1968 In re Centre Cul-
turel du Vieux Montrcal,219 reported by the author herein,220 holding
that another Quebec Part III company, organized for cultural ac-
tivities, was not amenable to bankruptcy jurisdiction, is supported
simply 221 on the authority of Chauss6 v. L’Association du Bien-Etre
de la Jeunesse,222 and therefore does not profess to carry the matter
further.
A critique of the view that “non-profit” bodies corporate cannot
be “companies”. The author has attempted in the foregoing pages
to catalogue all the judicial authority available in the context of
the present problem, directed ,at establishing that “non-profit” bodies
corporate cannot be “companies” as that term is used in the old 223
and new 224 Bankruptcy Acts. For if the argument can be made good
that they are not “companies,” that will clearly be decisive in ex-
cluding them under the present Act from the definition of “corpo-
ration”, hence from the definition of “person”, hence of “debtor”,
and therefore from the Act.2 25 The argument that “non-profit” bodies
218 Appendix One, infra, at pp. 60Z. et seq.
219 Superior Court of the Province of Quebec: In Bankruptcy; District of
Montreal, No. 7714. Judgment rendered by Hon. Mr. Justice Montpetit, February
6, 1968.
220 Appendix Two, infra, pp. 606-607.
221 The petition for annulment of the proceedings on the proposal in Re Centre
Culturel du Vieu Montr6al refers solely to the said case, and the judge’s order
declares this petition “well founded in fact and law”: inf ra, p. 606.
222 [.1060] B.R. 413; affirming a decision of the Superior Court reported as
Appendix One, infra, pp. 606-607.
223 The Bankruptcy Act, 1910, 9-10 Geo. V, S.C. -919, c. 36; see supra, n. 40
as to amendments; revised as R.S.C. 1927, c. 1i.
224R.S.C. 1952, c. 14, consolidating IS Geo. VI, S.C. 1949, 2nd Sess., c. 7;
for amendments, see supra, n. S9.
225 See supra, pp. 532-536.
McoGILL LAW JOURNAL
[Vol. 15
corporate are not “companies” plainly can, if substantiated, lead to
the result desired by its proponents. It is also a defensible argument
though, in the author’s view, a wrong one. This argument is
–
therefore much the most important one –
indeed, it is submitted,
the only important one –
supporting the exclusion of “non-profit”
bodies corporate from bankruptcy jurisdiction at the present time.
Its only serious rival,226 probably valid under the old Act,227 is easily
demolished on the face of the present Act.228
The controversy is resolved into a rather simple issue as to the
meaning of the term “company” as used in the original Act of 1919,229
in the Act as it appeared in the revision of 1927,230 and, perhaps
more important, in the Act of 1949 231 and in the revision of 1952.232
Could the term “company”, at any rate at the most recent dates,23 3
embrace “non-profit!’ bodies corporate? Does it, as used in the
present Bankruptcy legislation, embrace such bodies?
The author’s view is unhesitatingly affirmative. In support of this
view it would have been most desirable to trace the statutory, judicial,
learned, and common usage of the term “company” in English and
Canadian law from earliest days. The very considerable resources
of time required for such a study are far beyond those of the present
author, who must therefore be content with indicating certain
primary and secondary sources which seem to him decisive in favour
of his view.
In 1931, near the beginning of his classic treatise, Wegenast
wrote: 234
In Canada the word “company”, at first employed by way of contraction
for “joint-stock company”, is tending to become synonymous with the word
“corporation”. It still seems to import, however, some of the older signifi-
cance of an organization of “adventurers” for making gain, while the word
“corporation”, except where it is used with a suggestion of opprobrium in
226 That the body be not only a company, but a company which has carried
on (or at least is incorporated to carry on) business.
227 Head (iv) of the ‘definition of “debtor” under the old Act required that,
to be a debtor, a corporation be one “which carried on business in Canada”:
infra, pp. 589-591.
22s Infra, pp. 586-589.
229 The Bankruptcy Act, 19,19, 9-10 Geo. V, S.C. 1919, c. 36; as amended
(supra, n. 40) and revised, R.S.C. 1027, c. 11.
230 R.S.C. 1027, c. 11.
23113 Geo. VI, S.C. 1949, 2nd Sess., c. 7.
232 R.S.C. 1952, c. 14.
233 Whether the meaning of the present Act is to be taken at 1949 or at 1952
is a question which may savour of quibble.
234 F. W. Wegenast, The Law of Canadian Companies, (Toronto, 1931), p. 4.
No. 43
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
581
referring to large aggregations of capital, still retains its broader signifi-
cance of an artificial legal person. Corporations for objects other than gain
are usually called by other names, such as “association”, “society”, etc.
This suggests that while “company” is used primarily in the sense
of bodies corporate created with object of gain, it can include others,
and was at the date of writing tending to become synonymous with
“corporation”. It would seem to be less important that the term was
primarily used for bodies with object of gain, than that it was not
exclusively so used.
Pratte, J., was doubtless right in his observation in Chauss6 v.
L’Association du Bien-Etre de la Jeunesse Inc.235 that our legislation
seems to prefer the term “corporation” to the term “company” when
speaking of “non-profit” bodies corporate:
[L]e l6gislateur a pris soin de substituer le mots “corporation” au mot
“compagnie”, dans toutes les dispositions de la loi la concernant….
The learned judge was there referring to the Quebec Companies
Act; 236 perhaps his remark would have had even more force had
he pointed to a similar preference in the then Companies Act of
Canada,237 since the relevant issue is the meaning of “company”
when used in a Dominion, not a provincial, statute –
the Bankcruptcy
Act.
But the Dominion and provincial statute alike bear title as
Companies Acts; and, while the Quebec statute then in force had
the long title “An Act respecting certain Companies and Corpo-
rations”,238 the Canadian act bore a long title speaking simply of
“An Act respecting Dominion Companies”.239 The term is clearly
comprehensive.
The editor of the more recent collection of Studies in Canadian
Company Law, 240 Professor Jacob S. Ziegel, notes in his own chapter
on “Constitutional Aspect of Canadian Companies”: 241
“Company”
is not a term of art and in the last century the word was
generally understood to mean an association of persons pursuing a common
object. It was not restrited to business enterprises, nor even to private as
distinct from public bodies. But it did invariably imply a grouping of persons
on whom personality was conferred by incorporation.
235 [1960] B.R. 413, at pp. 414-15.
230 R.S.Q. 1941, c. 276; now, R.S.Q. 1064, c. 271.
237 R.S.C. 1952, c. 53; Part II
is entitled “CORPORATIONS WITHOUT
SHARE CAPITAL”, and bodies incorporated thereunder are referred to in
that Part as “corporations”.
23 8 R.S.Q. 1941, c. 276.
239 R.S.C. 1952, c. 53.
240 (Toronto, 1067).
241 Ch. 5, pp. 149 ff., at pp. 154-55.
McGILL LAW JOURNAL
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The learned author is able to support the proposition to which
emphasis has been added in the above quotation, with examples
drawn from the legislative usage of the Legislature of the Province
of Canada,242 of the Parliament of Canada 243 and of the United
Kingdom Parliament in the British Companies Acts of 1862 and
1867.244 It is certainly the present author’s understanding that the
Goldsmiths’ Company and the Worshipful Company of Fishmongers,
bodies corporate of early date, are not themselves incorporated with
object of gain.2 45
Nor does the Manitoba Court of Appeal appear to have experienced
any difficulty in treating a co-operative association as a company
susceptible to jurisdiction under the old Bankruptcy Act when in
Re Winnipeg Co-operative Bakery Company 246 the court (Perdue,
C.J.M., and Fullerton, Denniston, Prendergast and Trueman, JJ. A.)
affirmed without written reasons a judgment of Mathers, C.J.K.B.,
adjudging the debtor a bankrupt. The debtor there contested only pe-
titioner’s status as a creditor, and no question was in fact raised
as to the debtor’s susceptibility to bankruptcy jurisdiction. The case
therefore decides the point only sub silentio, and its authority might
242 27 & 28 Vict., S.C. 1864, c. 2, s. 1(7).
243 32 & 33 Vict., S.C. 1869, c. 13, s. S.
244 The Companies Act, 1862, 25 & 26 Viet., c. 89, of which s. 6 provided:
“Any Seven or more Persons associated for any lawful Purpose may… form an
incorporated Company, with or without limited Liability.” The Companies Act,
1867, 30 & 31 Vict., c. 131, provided by s. 23 that “Where any Association is
about to be formed under the principal Act as a Limited Company, if it proves
to the Board of Trade that it is formed for the Purpose of promoting Commerce,
Art, Science, Religion, Charity, or any other useful Object, and that it is the
Intention of such Association to apply the Profits, if any, or other Income of
the Association, in promoting its Objects, and to prohibit the payment of any
Dividend to the Members of the Association…”, the Board of Trade might
the addition of the word
allow registration with
“Limited” to its name.
limited liability without
245 The Oxford English Dictionarl, Volume II, “C”,
(Oxford, 1933), gives,
as one of the meanings of “company”: “6: A body of persons combined or
incorporated for some common object, or for the joint execution or performance
of anything; esp. a mediaeval trade guild, and hence, a corporation historically
representing such, as in the London ‘City Companies’ “. Amongst the examples
given is a usage in 1600 of the phrase “religious companies”. The dictionary
continues with: “7. Commerce. An association formed to carry on some commercial
or industrial undertaking.”
246 (1924), S4 Man. R. 615; 5 C.B.R. 457; [1925] 1 W.W.R. 79. In re Montreal
Co-Operative Bakery, 1920, 1 C.B.R. 377 (Superior Court of the Province of
Quebec: In Bankruptcy; Bruneau, J.), indicates that a debtor of that name was
administered in bankruptcy, but it is not clear whether it was incorporated nor
whether it was a non-profit body.
No. 4]
COR)O01ATIONS NOT STBJECT TO BANKRUPTCY LAW
588
plausibly be contested on this ground. But St. Jacques, J., for the
Court of Appeal of Quebec in Re Construction Coop6rative de Mont-
real V. Z. Berthiaume & Fils Limite 247 chose also to distinguish it.248
Les intim~es croient trouver un appui dans un arr~t de la Cour d’appel du
Manitoba, In re Winnipeg Co-operative Bakery Co. … i1 n’est pas prudent
de s’en rapporter uniquement au sommaire qui est fait de cet arr~t. fl faut
lire en entier le jugement de la premi~re Cour, confirm6 par la Cour d’appel,
bien que les notes des juges de cette Cour ne soient pas rapportes.
I1 s’agissait bien, en effet, dans cette cause, d’une association coop6rative,
mais r~gie par une doi absolunent diff6rente du chapitre 254 des Statuts
refondus de notre province. Cette loi du Manitoba (The Co-operative Asso-
ciations Act), adopt6e en 1913, et modifi6e en 1921, ch. 10, sec. 8, comporte
l’article suivant:
“3B. All associations subject to this Act shall be subject to the provi-
sions of ‘The Companies Act’ and its amendments, save where such provisions
are inconsistent with this Act.”
Il n’est pas 6tennant qu’en face d’une disposition comme celle-lh, les
tribunaux aient dcid6 que cette association cooperative, qui, en r~alit6, est
une compagnie, soit assujettie A La Loi de Faillite fMd6rale.
Very possibly the Manitoba Co-operative Associations Act 249 as
amended 250 up to the time of the Winnipeg Co-operative Bakery case,
might indeed properly be distinguished, as to the nature of its
creatures, from the Quebec Cooperative Syndicates’ Act 25
1 as it
stood at the time of Re Construction Coop6rative de Montral. 252
Little useful purpose would be served by bothering to refute such a
conclusion by analytical comparisons of the two statutes. For even
if they be distinguishable, as the Court of Appeal of Quebec would
have it, where does that leave the Quebec judges when they come
to deal with a Part III (i.e., “non-profit”) Quebec company? 23
Must they not say that a Part III Quebec Company is, a fortiori
to a Manitoba Co-Operative Association, a “company”? For a Part
III Quebec company is included in the very Companies Act itself,
let alone the application mutatis mutandis of the rules of Part 1.254
St. Jacques J., thus distinguishes In re Winnipeg Co-operative
247 (1939), 66 B.R. 409; 20 C.B.R. 351; reversing (1938), 20 C.B.R. 285 (C.S.).
24s20 C.B.R., at p. 356.
249 R.S.M. 1913, c. 41.
250 11 Geo. V, S.MW. 1021, c. 10.
251 R.S.Q. 1025, c. 254; now the Cooperative Syndicates Act, R.S.Q. 1064, c. 294.
252 21 Geo. V, S.Q. 1930-31, c. 96.
25 Which have been exactly the ones lately involved in the cases at bar:
Chauss6 v. L’Association du Bien-Etre de la Jeunesse, Inc.. reported, infra,
Appendix One, at pp. 602 et seq.; and Re Centre Culturel du Vieux Montrial,
reported, infra, Appendix Two, at pp. 606-607.
254 R.S.Q. 1964, c. 271, s. 220.
McGILL LAW JOURNAL
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Bakery Company 255 on grounds which must force him to admit that
Part III Quebec companies must be subject to the Bankruptcy Act,
every bit as much as was the Winnipeg Co-operative Bakery. Nor
should it be overlooked that the bodies corporate successfully resisting
bankruptcy jurisdiction in Philippe de Gasp6 Beaubien V. L’Union
Economique d’Habitation,256 in Chaussd v. L’Association du Bien-Etre
de la Jeunesse Inc., 257 and In re Centre Culturel de Vieux Montreal,218
were, in all cases, Part III Quebec companies. How are they to be
reconciled with St. Jacques, J.’s rationale for the Winnipeg Co-
operative Bakery case?
The proper conclusion is not very hard at all to draw. Legislative
and learned usage alike prove conclusively that “company” is a term
which is, and has long been, perfectly capable of embracing “non-
profit” bodies corporate. It may, of course, not properly embrace all.
To refer to a municipality or a public school corporation as a
“company”, might well strike the listener as odd. The inaptitude of
the word “company” to describe a fabrique, if inaptitude it be, would
constitute a ground quite sufficient to exclude it from the definition
of “corporation” under the present act, as under the old, with the
ultimate consequence of excluding fabriques from bankruptcy juris-
diction. Furthermore, under the old Act there was the further ground
that to come with the definition of
–
the statute
“debtor” –
required a corporation to “carry on business” in Canada. It is possible
to say also that fabriques have been impliedly excluded from both Acts
as inherently unsuitable subject-matter. 2 0 But to suppose that, merely
because a fabrique or a municipality or, indeed, the Crown,2 1 cannot
properly be described as a “company”, therefore no “non-profit”
body corporate can be a “company”, is without foundation.
though not merely to be a “corporation” –
now non-existent 2 59 –
2 5 5 Supra, n. 246.
256 [1947] C.S. 33, 28 C.B.R. 108.
257 [1960] B.R. 413, affirming a decision of Montpetit J. in the Superior Court,
reported herein as Appendix One, infra.
258 (1968), in the Superior Court of the Province of Quebec sitting in Bank-
ruptcy; reported infra, Appendix Two.
259 Infra, pp. 589-590.
260 Supra, pp. 557 et seq. and n. 122.
2 6 1 The Bankruptcy Act, R.S.C. 1952, c. 14, provides: “172. The provisions of
this Act bind the Crown in right of Canada or of a province.” It is doubtless
intended thereby to eliminate all special rights of the Grown not consistent
with the terms of the Act. See s. 95(1) (h) and (j), and compare In re Silver
Brothers, Limited; A.-G. Que. v. A.-G. Can., [1932] A.C. 5.14. Is s. 172 in
terms broad enough to allow the Government of Canada or of a Province to be
put into bankruptcy? See The Canadian Broadcasting Corporation v. The
Attorney-General for Ontario, [1059] S.C.R. 188.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
585
The term “company” may therefore be inapt to embrace a
considerable variety of bodies corporate, especially bodies juris
publici. But there can be no general principle that it can embrace none
save those incorporated with object of gain.
That the Bankruptcy Act is, historically, “essentially commercial”,
proves little one way or the other about the susceptibility thereto of
corporations, commercial or not, in a state of affairs when any
individual is subject thereto, quite independently of any commercial
character whatsoever. But the inherent unlikelihood that Parliament
has intended to include such bodies as municipalities or fabriques
within the Bankruptcy Act (apart from the inaptitude of the term
“company” to describe them) is, by itself, quite sufficient a ground
for assuming that, at least in the absence of clear language to the
contrary, it has excluded them from the present as from the old Act.
This ground taken by a majority of the Quebec Queen’s Bench in
Paroisse de St-Etienne,262 and by two judges at least in Paroisse de
St-Gabriel de Brandon, 63 appears clearly in, and sufficiently supports,
the judgment of Davis, J., in Chambers refusing leave to appeal to
the Supreme Court of Canada in the last-mentioned case: 2
4
6
I have no doubt that the Bankruptcy Act was never intended to apply to
a parish or church or other religious body. Clear and explicit language would
be necessary to bring ecclesiastical bodies or institutions within the ambit
of a bankruptcy statute essentially designed for the administration of the
property of persons or corporations carrying on business.
If the term “company” is then one which can bear a variety of
meanings, the only question remaining is which it should be given
in the context of the present Bankruptcy Act –
the question being
academic as regards the old.2
5 We have already sufficiently pointed
out the anomalies which flow from the exclusion of bodies corporate
from the Bankruptcy Act on the sole ground that they are in-
corporated without object of gain or not incorporated “to carry on
business”. 2 0 A-part from anything else, such an exclusion imposes a
test in respect of bodies corporate which the Act considers irrelevant
in the case of individuals. And it is obvious that the properties of,
1
202 (1935), 58 B.R. 100; other citations supra, n. 15. The relevant passages
from the judgments are quoted and discussed supra, pp. 558-561.
203 (1085), 58 B.R. 10; other citations supra, n. 15. The relevant passages
from the judgments are quoted and discussed supra, pp. 558-501.
264 [1935] S.C.R. 410; other citations supra, n. 15. The passage quoted
is found in [1935] S.C.R., at p. 421.
20 5 References to the old Act are found supra, nn. 40 and 41. The courts
would presumably interpret words used in the present Act as at its enactment,
18 Geo. VI, S.C. 1949, 2nd Sess., c. 7, or at its revision as R.S.C. 1952, c. 14.
26 Supra, pp. 525-529.
McGILL LAW JOURNAL
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for example, a golf club, are no less apt for liquidation by a trustee
in bankruptcy than are the properties of any commercial corporation,
and a great deal more apt than many.
It
is the author’s view, therefore, that not only is the term
“company” demonstrably capable of including bodies corporate not
incorporated with object of gain or “to carry on business”, but
that, as it appears in the present Act, the word does in law include
a wide range of such bodies.
(b) Can a “non-profit” body corporate, assuming it
is a
“company”, meet the other requisites for qualification as a section
2(f) “corporation”?
Under the present Act. In order to be a “debtor”, and subject
as such to the Bankruptcy Act,2 67 it is necessary, as we have seen,
to be a “person”.26 In the case of a body corporate, it is necessary,
in order to be a “person”, to be a “corporation”. But to be a “corpo-
ration”, as defined by section 2 (f), a body corporate must be within
the following class: 26
9
if
any COMPANY incorporated or authorized to carry on business by or under
an Act of the Parliament of Canada or of any of the provinces of Canada,
INCORPO-
AND ANY INCORPORATED COMPANY WHERESOEVER
RATED that has an office in OR carries on business within Canada…
It is easy enough to see that a body corporate can be pushed
it can be shown not to be a
outside the above-defined class
“company”. As we have seen, a substantial body of judicial opinion
does hold that (at least in the present context) no “non-profit”
body can be a “company”.270 This issue we have already debated
above, and given reasons for suggesting that while perhaps some
such bodies cannot properly be described as “companies”, there is
no general principle that none can be; and that the term “company”,
as used in the Bankruptcy Act, is entirely apt to include such bodies.
But it is obvious that, to come within the above-defined class,
a body corporate must be more than a “company”. It must be a
“company” meeting the additional qualifications set out above. In
particular, it has been said that it must be a company incorporated
to carry on business. Consider, for example, the reasons of Owen, J.,
in Chauss6 v. L’Association du Bien-Etre de la Jeunesse Inc.27 1 for
holding that the respondent body was not a “corporation” as defined.
267 Spra, nn. 3,17-9.
268 As defined by s. 2 (m). Supra, pp. 532-533.
269 All emphasis is added.
270 Supra, pp. 557-579.
271 [1903 B.R. 405.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
587
After quoting the definition of “corporation” in extenso, Owen, J.,
said: 272
Obviously all corporations are not governed by
Bankruptcy Act. Some corporations are specifically excluded.
the provisions of
the
Respondent is subject to the Bankruptcy Act if it is a company incor-
porated or authorized to carry on business by or under an Act of the
Province of Quebec. In my opinion respondent was not so incorporated or
authorized to carry on business and therefore is not a corporation governed
by the provisions of the Bankruptcy Act.
Now these remarks are open to a number of objections. In the
first place they treat half of the definition as if it did not exist.
“Corporation”, if one will trouble to look at the definition of the
term, is not defined to include only “any company incorporated or
authorized to carry on business by or under” a federal or provincial
statute. The definition carries on much further. “Corporation” in-
cludes also “any company wheresoever incorporated that has an office
in OR carries on business within Canada”.2 7 3 No attention whatever
is given by Owen, J., to the effect of the latter part of the definition.
It is dealt with by the rather simple, but scarcely satisfactory, ex-
pedient of ignoring it altogether. The literal terms of the second part
of the definition make it fully sufficient that a company wheresoever
incorporated should have an office in Canada. Nor need anyone
suppose that this objection is satisfactorily answered by restricting
the phrase “any incorporated company WHERESOEVER incorpo-
rated” to embrace only companies incorporated outside Canada. Such
an answer would at best produce only this plainly absurd result,
that a foreign-incorporated “non-profit” company would be subject
to Canadian bankruptcy law provided only that it had an office in
Canada, but that a Canadian-incorporated body of exactly the same
description would not.2 74
So much, then, for the fanciful notion that a “company”, in
order to be a “corporation”, must also be “incorporated or authorized
to carry on business by or under” a federal or provincial Act. The
– which give the definition of
words which follow in section 2 (f)
“corporation” a second branch – which make it enough for a
“company” to have an office in Canada or in fact to carry on business
therein –
speak for themselves.
But even taking the first half of the definition alone –
by what
right can it be assumed that a company must (to be a “corporation”)
be either one INCORPORATED TO CARRY ON BUSINESS or else
272 [1960] B.R. 413, at p. 417.
273 Emphasis added.
274 The jurisdiction should, if anything, be less in the case of the former.
McGILL LAW JOURNAL
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one AUTHORIZED TO CARRY ON BUSINESS? This presupposes
that the phrase “to carry on business” qualifies both the word “in-
corporated” and the word “authorized”. But this cannot be taken
for granted. In the French version it seems not even a possible
construction: 275
“Corporation” comprend toute compagnie constitute en corporation ou auto-
ris~e h poursuivre des affaires en vertu ou sous l’autorit6 d’une loi du
Parlement du Canada, ou de l’une des provinces du Canada…
The two heads in the first branch are clearly compagnie “constitu~e
en corporation” and compagnie “autoris6e 4 poursuivre des affaires”.
In French, “constitude en corporation… A poursuivre des affaires”
does not seem a natural reading at all; if the phrase “A poursuivre
des affaires” had been intended to qualify “constitute en corporation”,
it would have read instead “constitue en corporation afin de pour-
suivre des affaires”. That the two heads are distinctly compagnie
“constituge en corporation” and compagnie “autorise 4 poursuivre des
affaires” emerges perfectly clearly from the judgment of Montpetit,
J., in Chauss6 v. L’Association du Bien-Etre de la Jeunesse Inc. :217
Or, selon
‘article 2(f), une “corporation” doit 6tre soit “une compagnie
constitude en corporation”, soit une compagnie “autoris6e A poursuivre des
afaires… en vertu ou sous l’autorit6 d’une … de l’une des provinces du
Canada.”
Why should it then not be sufficient, as the French text indicates
that it is, that the company be either INCORPORATED by or under
a federal or provincial statute, or else AUTHORIZED TO CARRY
ON BUSINESS by or under a federal or provincial statute?
A moment’s reflection suggests that the probable raison d’6tre
of the words “authorized to carry on business” is to be found in
the history of the federal and provincial legislation requiring licensing
of extra-provincial and extra-Canadian companies as a condition of
their carrying on [all or certain kinds of] business in Canada, or
the province, as the case might be. 27 7 Incorporation in Canada might
thus have been considered only one possible nexus of (at least) 278
two; the other would be authorization in Canada to carry on business.
So to read the Act that Canadian incorporation is understood
as a nexus alternative, to and independent of, any object of carrying
275 This is a case where the English version of s. 2 (f)
is open to two interpre-
tations, but the French, to one only; and the latter must prevail.
276 Reported infra, Appendix One, pp. 602 ff., at p. 605.
277See Wegenast, The Law of Canadian Companies, (Toronto, lM), pp. 33
ff. and Ch. XXXIII, pp. 830 ff.
2 7 There remain furthermore the words: “and any incorporated company,
wheresoever incorporated, that has an office in or carries on business within
Canada”.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
589
on business –
a nexus sufficient of itself to support Canadian juris-
diction –
is, admittedly, to give the first branch of the definition
of “corporation” one of two possible interpretations of the English
text. But even if the French text be not (as it probably is) decisive,
we must again point to the considerations which must be deter-
minative of the policy of the present Act: the implausibility of
making critical for bodies corporate tests which the Act treats as
irrelevant for individuals; the absurdly inconvenient results which
flow from an obviously unintended exclusion of a wide class of bodies
corporate from all Canadian insolvency legislation.
On this view of the matter, which is that of the author, the
qualifying language which follows the words “any company”
in
is sufficiently satisfied by an incorporation by or
section 2(f),
under a federal or provincial statute. An authorization to carry on
business under a federal or provincial statute is merely an alternative
way of satisfying the requirements of the definition. And any such
companies incorporated under Canadian law as may still not satisfy
either of the foregoing requirements can probably qualify for bank-
ruptcy jurisdiction by having an office in Canada.2 7 9
Under the Old Act. It is doubtless desirable to point out specially
that, under the old Act, as distinguished from the present one, the
definition of “debtor”, while admitting a “corporation” as a “debtor”
under the fourth head :280
“debtor” includes any person, whether a British subject or not, who, at the
time when any act of bankruptcy was done or suffered by him…,
(iv) was a corporation or a member of a firm or partnership which
carried on business in Canada…,
also superadded a requirement of carrying on business. THERE IS
NO CORRESPONDING PROVISION IN THE PRESENT ACT.
TO BE A “DEBTOR” IT IS ENOUGH TO HAVE RESIDED OR
CARRIED ON BUSINESS IN CANADA. The judicial remarks on
the old Act (about a requirement of carrying on business) were
therefore in this context alone literally justified by the terms of
279″Wheresoever incorporated”
to
appears wide enough
include bodies
incorporated in Canada as well as outside Canada. It does not appear confined
to the latter, even though companies incorporated in Canada might be supposed
to have been dealt with exhaustively in the preceding words of the definition.
But the preceding words do not appear to cover companies such as pure Royal
Charter corporations. They are probably not to be considered to have been
incorporated “by or under an Act”. Yet the Crown in creating them can arguably
be said to have acted “in right of” Canada or a province. Consider, for example,
the case of McGill University.
280 Emphasis added.
McGILL LAW JOURNAL
[Vol. 15
the Act.28s But, as we have seen, it is not in this context alone –
that they were uttered: a business
the meaning of “debtor” –
object was also, as we have seen, said to be a requisite of existence
as a “company”,28 2 and the definition of “corporation” was also
read (or misread) under the old Act in much the same way as it
has sometimes been judicially under the new: 283 namely, ignoring
the second branch which makes it enough to have an office in
Canada, or to carry on business therein; and failing also to ap-
preciate that bare incorporation in Canada is probably, on a true
reading, alternative to any object of carrying on business or actual
carrying on of business.
(c) Is the character of a body corporate to be tested by its objects,
by its powers, or by its actual activities? What if these are multiple?
If the view prevails that “non-profit” bodies corporate are not
“companies”, or else that they do not satisfy the additional qualifying
it
language in the definition of “corporation” in section 2(f),
becomes essential to determine, precisely, just what bodies are thereby
excluded.
The term “non-profit” bodies corporate, used by the author
throughout this discussion, is a loose one, adopted by the author for
brevity and convenience’s sake. Much of its convenience has con-
sisted in the very looseness of the term, which has enabled us to
postpone to this point a consideration of the extent of the implied
judicial exclusions.
But judicial gloss aside, it remains nevertheless indisputable that
on any view of section 2 (f) some bodies corporate are excluded from
if for no other reason than that
the definition of “corporation” –
the Act says so in express words. The bodies so excluded are building
societies having a capital stock, incorporated banks, savings banks,
insurance companies, trust companies, loan companies and railway
companies.
In respect at least of these bodies, the question is unavoidable:
is their character, in each case, to be tested by their respective corpo-
rate objects? by their powers? by their actual activities? Does it
matter whether their actual activities are beyond the scope of those
which they may lawfully carry on? If so, is the case of a body
corporate which is assimilated to a natural person,2
to be dis-
8
281 See quotations from various judgments, supra, pp. 570 et seq. and n. 176.
2 82 Supra, pp. 567-579.
283 Chaussi v. L’Association du Bien-Etre de la Jeunesse, Inc., [1960] B.R.
41; see discussion supra, pp. 586-587.
284 Bonanza Creek Gold Mining Company, Limited V. The King, [1916] 1
A.C. 566.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
591
tinguished from that of a body corporate which is so literally in-
capable of carrying on the activities in question that they cannot
be imputed to the body corporate itself at all, being thus subject
to the ultra vires rule in the most rigorous form ?285 Can a material
distinction be drawn between “objects” and “powers”? Suppose that
the body is incorporated with two or more objects, or powers, or
carries on two or more activities; one or more of which is within,
and one or more outside, the excluded classes –
is the body then
within the definition or not?
These questions, clearly, are inescapable on any view of the Act.
But they are more numerous and complex if, to the express exclusions,
we add, in deference to the judges, the implied exclusion of “non-
profit” bodies corporate.
The above-mentioned problems of characterisation appear to have
arisen first in Re Inverness Railway and Collieries Ltd.; Royal Bank
of Canada v. The Eastern Trust Company,286 discussed above.28 7 The
appellant bank, it will be recalled, was seeking to sustain the validity
of its assignment of book -debts against the operation of section 30((1)
of the former Act, invalidating in favour of the trustee certain un-
registered assignments. Its legal contentions were alternative; namely,
first, that the insolvent, the Inverness Railway and Collieries Ltd.,
was a “railway company” and so outside the Act altogether, and
therefore not to be affected by any provision of the Act including
section 30(1); and, second, that alternatively the bank itself was
not a “person” within the meaning of section 30(1) and so could
not suffer any invalidation by that section of the book debts which
it had taken.
The appellant bank must have succeeded in the result had it
succeeded on either of these grounds. By a majority, the Supreme
Court of Canada (Davies, C.J., Duff and Anglin, JJ.; Idington and
Brodeur, JJ., dissenting) held that the Inverness Railway and
Collieries Ltd., was not a “railway company”, and so not excepted
285 See receatly the doubts cast upon the scope of the nullity in Bell Houses
Ltd. v. City Wall Properties Ltd., [1966] 2 Q.B. 656, at p. 694. The problem
of activities carried on contrary to the charter of a letters-patent body corporate
arose in the context we are discussing in Chauss6 v. L’Association du Bien-Etre
de la Jeunesse, Inc., [1,960] B.R. 418, and Appendix One.
286 In the Supreme Court of Canada, [1923] S.C.R. 17, 3 C.B.R. 724, [1923]
1 D.L.R. 498, [1923] 1 W.W.R. 937 (Coram: Davies, C.J., Idington, Duff,
Anglin, and Brodeur, JJ.); on appeal from the Supreme Court of Nova Scotia,
55 N.S.R. 306, 3 C.B.R. 271, 65 D.L.R. 19 (Coram: Russell, J., Ritchie, E.J.,
Chisholm, and Mellish, JJ.).
287 Supra, pp. 543-548.
McGILL LAW JOURNAL
[Vol. 15
as such from the definitions of “corporation” and “debtor”.2 8 It
therefore remained within the scope of the Act; and only the judges
in the majority went on to consider, and reject [for reasons, as we
have seen, which are uncertain] 289 the bank’s alternative contention
that it was not a “person” within section 30 (1) of the then Act.
Now, section 2(k) of the 1919 Act in terms excluded from the
definition of “corporation”, and so from the definition of “debtor”,
inter alia a “railway company”. And, equally undoubtedly, Inverness
Railway and Collieries Ltd. had been incorporated under the Nova
Scotia Joint Stock Companies Act for the purpose of carrying on a
mining and railway undertaking; and, apparently, it had in fact
carried on both, the railway having been operated for some six and
one half months, until the entire railway and mining undertaking
which the company operated was repossessed by the vendor in con-
sequence of a default.
The majority of the Supreme Court which held the insolvent was
nevertheless not a “railway company” within section 2(k) simply
adopted the reasons of Mellish, J., below, 20 in the Supreme Court of
Nova Scotia. These were as follows: 291
Was the Inverness Railway and Collieries, Ltd., entitled to make an assign-
ment under the Bankruptcy Act? This road was constructed and operated
under special legislation of the Province. It was subject to the provisions
of the local Railway Act, ch. 99, R.S.N.S. 1900. And that Act, including
secs. 269, 270 and 271, I think contemplates that it should not be otherwise
held or operated except by license as therein provided unless under special
legislation. A company incorporated by letters patent might perhaps not be
subject to the provisions of the Railway Act. But it is, I think, the intention
of that Act that a railway like the one in question when subject to the
provisions of the Act should so remain.
The proper conclusion, as it seems to me, is that the Inverness Railways
and Colieries. Ltd., was not in business as a ‘railway company’ within the
meaning of the Bankruptcy Act. It did not have, and could not have, the
usual powers of a railway company as to acquiring lands, etc., without
special legislation. It was doing what any person could do as agent for
Henderson in the operation of the railway with a view apparently of going
into business after the Legislature met, as a railway company having the
powers and responsibilities of such a company in respect to the particular
road in question; and it was not even doing that when it made the assign-
ment in bankruptcy. Indeed there may be some question as to whether the
term ‘debtor’ as defined in sec. 2(o) of the Bankruptcy Act does not include
288 Quoted in Appendix One, infra, p. 602.
289 Supra, pp. 547-5M8.
29 0 In the Supreme Court, Anglin, J., speaking in [1923] S.C.R., at p. 181
for himself and Davies, C.J., appears to adopt Mellish, J.’s analysis. Duff, J.,
ibid., does so expressly.
291 65 D.L.R. 139, at p. 152.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
593
every sort of ‘corporation’ in view of the restrictions applied to that word
when used in that sub-section in connection with winding-up proceedings. On
this, however, I offer no opinion.
Why, then, was a corporation whose objects included the carrying
on of a railway undertaking, and which had in fact carried one on,
not a “railway company”? It was not suggested that the railway
was merely ancillary to a colliery undertaking: indeed, it clearly
appears that the undertaking included railway passenger and freight
services. 2 2 The reasons quoted above seem to lay emphasis on In-
verness Railway and Collieries Ltd. having, in Mellish, J.’s view,
acted as a mere agent for one Henderson – who had himself acquired
from the predecessor Inverness Railway and Coal Co. (and from the
trustee-mortgagees for the latter’s bondholders). Mellish, J., in fact
describes the relationship as one of agency in more than one part
of his judgment.293 (Yet Chisholm, J., who thought that the insolvent
was a railway company, points out that though Henderson remained
owner of the undertaking, he did so only by agreement and only as
trustee for Inverness Railway and Collieries Ltd., describing himself
as vendor to the latter, and professing to transfer to it all his
rights).-294 Mellish, J.’s reference to powers characteristic of railway
companies is also significant.
It is difficult to draw any very precise conclusions from the
Inverness case. Perhaps all that can be said is that the mere fact
of carrying on an undertaking of a certain kind does not put a body
corporate within one of the types of corporations expressly excluded
from the definition of “corporation” in the Bankruptcy Act.2 95 Even
the fact that a body corporate was incorporated with the object of
carrying on an undertaking of that kind, and that it has carried one
on, may not suffice if it does not itself enjoy the powers regularly
associated with an enterprise of kind in question, and accordingly
acts merely as agent for another.
It is to be noted that it is nowhere suggested that since Inverness
was also a colliery company that alone sufficed to except it from
the (excluded) class of “railway companies”, even should it have
been true that it must in all other respects have been considered a
“railway company”. The point would have seemed too obvious to
overlook. That it was not taken may suggest that a body corporate
292 65 D.L.R., -at p. 148.
293 65 D.L.R., at p. 149, and at p. 152.
294 65 D.L.R., at p. 145.
295 A distinction is perhaps to be drawn between a railway company and
a company which happens to be carrying on a railway.
McGILL LAW JOURNAL
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is excluded from the Bankruptcy Act if, having multiple objects,
powers or undertakings [whichever is relevant], any of them would
bring it within an excluded class of bodies corporate.
Activities carried on in fact. In Beaubien v. L’Union Economique
d’Habitation,2 6 having held that, by reason of its incorporation under
Part III of the Quebec Companies Act 297 without object of gain, the
respondent housing union (whose object was providing its members
with moderate-cost housing) was not subject to the then Bankruptcy
Act,2 8 Boyer, J., rejected, as unproved, allegations that the respondent
had in fact engaged in trade. His Lordship did not however consider
whether these allegations, if proved, would have been relevant in law
to change the character of the respondent for bankruptcy purposes.
The Inverness case 299 seems to suggest that the activities in
fact carried on do not suffice to alter, for the purposes of the Bank-
ruptcy Act, the character of a body corporate as determined by an
examination of its object and its powers. Such an inference from
Inverness is, however, debatable and the case is not in any event
conclusive.
A clearer statement is however to be found in the opinion of
Barclay, J., (with which at least a majority of the Quebec Court
in Feeney v. Lacroix.300 The trial judge had
of Appeal concurred)
found (in the words of the Appeal Court) that a Caisse populaire
(credit union) was, because of the ‘nature of the operations’ it
carried on, excluded expressly from the definition of “corporation” 301
as being “in reality a savings bank and at the same time a loan
company” –
both expressly excluded classes, then as now. Though
Barclay, J., did reach the same result –
that the caisse populaire
fell outside the definition of “corporation” and hence outside the
Bankruptcy Act – his Lordship’s reason was that the caisse populaire
was not a company at all, and not that it was a company of a class
expressly excluded. In the course of rejecting the reasons of the trial
judge, Barclay, J., disapproved the use of the activities in fact
carried on as the test: 30 2
If one could take for granted, as the parties seem to have done, that La
Caisse Populaire is a corporation which comes within the terms of section
2(k) either as being included or excluded, I would be of the opinion that
296 [1947] C.S. 3, 28 C.B.R. 108.
297 R.S.Q. 1041, c. 276; now R.S.Q. 1964, c. 271.
298 R.S.C. 1927, c. 11.
299 Citations supra, n. 286.
300 (1938), 65 B.R. 386, 20 C.B.R. 149.
301 Quoted in Appendix Six, infra, pp. 019-621, esp. 620.
302 (1 938), 65 B.R. 386, at p. 388.
No. 4]
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
595
the judgment was erroneous, because to me it is not the nature of the
operations of the company which must be looked at to ascertain whether a
corporation comes within the exception, but the nature of the company at
the time of its creation. But, in my opinion, the first question to be asked
is whether such a corporation as the one in question comes under the
Bankruptcy Act at all ….
More recently, in Chaussg v. L’Association du Bien-Etre de la
Jeunesse Inc.,303 a case on the present Act, the Quebec Queen’s Bench
indicated reasonably clearly that, in deciding whether the respondent
was a body corporate susceptible to the Bankruptcy Act, regard was
to be had to its incorporating laws and instruments, and not to the
activities which in fact it carried on. The Queen’s Bench, holding that
respondent was a body corporate incorporated without object of
gain, and as such outside the definition of “corporation” in section
2 (f) of the Bankruptcy Act,3 0 4 affirmed a judgment of Montpetit, J.,
in bankruptcy.3 05
in
Montpetit, J., had held it to have been proved that respondent,
contrary to its objects of incorporation, had carried on trade purely
and simply for gain.30 The learned judge considered this irrele-
vant: 3o
the Superior Court dismissing a petition
De 1A, je tire une premiere conclusion: la corporation intime, a me s’il est
absolument exact qu’elle a
td constitude en vertu de la troisibme partie de
la loi des compagnies de Quebec, a pos6 des actes de nature commerciale
qui excddaient ses droits et pouvoirs en tant qu’entit6 sans but lucratif.
Ceci 6tant, y a-t-il lieu de la ddclarer sujette i la loi de faillite? En
d’autres termes, et tel que signal6 plus haut est-elle, ou devient-elle en regard
des transactions commerciales qu’elles a faites, soit une “personne” ou une
“corporation” Wau sens de cette loi? [His Lordship here discussed the various
definitions, and continued:]
Or, selon l’article 2(f), une “corporation” doit 6tre soit “une compagnie
constitude en corporation”, soit une compagnie “autorisge A poursuivre des
affaires … en vertu ou sous l’autorit6 d’une loi … de l’une des provinces
du Canada.”
D’autre part, en me rafdrant h la troisibme partie de la Loi des compa-
gnies de Qudbec, je constate qu’une corporation ainsi constitaze n’est pas
une compagnie, c’est-h-dire qu’elle n’est pas une entit6 ou un “body politic
and corporate” dont le but principal est de rdaliser des profits ou. des
ban6fices grace A un capital quelconque qui y est prdalablement investi.
De plus, et toujours en me basant sur l’article 2(f), l’intime, je l’ai
d6jA dit, nest pas et n’a jamais
td autorisge A poursuivre des affaires “en
vertb ou sous l’autorit” de cette troisibme partie de la Loi des companies
de Quebec.
303 [1960] B.R. 4V affirming the decision reported in Appendix One infra.
304 See supra, pp. 578 and 586-587.
305 See the report below, Appendix One.
306 Infra, p. 604.
307 Infra, pp. 604-605.
McO1LL LAW JOURNAL
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A mon avis, le fait qu’elle a outrepass6 ses droits et pouvoirs et qu’elle
a poursuivi des affaires ne peut rien changer A l’absence d’autorisation de
ce faire.
Je ne crois pas que ces abus commis par l’intim~e ont fait, ou pu faire,
d’elle une “compagnie autoris~e”.
Rinfret, J., in dissent, in the Queen’s Bench, pointed out 30s the
finding of fact by Montpetit, J.:
La Cour sup~rieure a tenu pour av6r6 1’exercice par l’intim~e d’une commerce
pur et simple aux fins de gains personnels et contrairement A son but pri-
mordial et A celui pour lequel elle avait obtenu sa charte.
Rinfret, J., further pointed out that Montpetit, J., had held that,
despite this finding as to the activities in fact carried on by the
respondent, respondent was still not a body corporate within the
statutory definition: 301
l’art. 2(f) de la Loi sur la faillite.
Le premier juge a statu6 que l’intim~e n’6tant pas, d’une part, une com-
pagnie, c’est-A-dire une entit6 corporative on un body politic and corporate
dont le but principal est de r6aliser des profits et ayant, d’autre part, outre-
pass~e les pouvoirs concedes par sa charte, n’6tant pas, par consequent, auto-
ris~e A poursuivre des affaires en vertu ou sous l’autorit6 de la troisi~me
partie de la Loi des compagnies du Quebec, n’est pas incluse dans la d6fini-
tion du “corporation”
The materiality of activities in fact carried on was thus indisputa-
bly before both the Queen’s Bench and the Superior Court. Montpetit,
J., in the Superior Court treated it as irrelevant, and neither the
majority of the Queen’s Bench, Pratte and Owen, JJ., nor Rinfret, J.,
in dissent, suggested otherwise. All, whatever their conclusions,
characterised the respondent by an examination of its laws and
instruments of incorporation. And Owen, J., explicitly considered the
effect of carrying on activities beyond the objects of the charter,
though only for the limited purpose of deciding whether, quoad
–
such activities, respondent must be considered a “person” under the
one rubric of “unincorporated association” : 310
Respondent was incorporated by letters patent under section 214 of the
Quebec Companies Act. The fact that it may have exceeded its corporate
powers would not in my opinion be a justification for considering it to be
“an unincorporated association” insofar as its activities in excess of the
purposes or objects set forth in its charter are concerned. In other words,
it should not be considered a corporation when acting within its powers
and an unincorporated association when acting beyond its powers.
Owen, J., went on, however, to consider the legal character of
respondent without having regard for any purpose to its actual
activities.
308 [160] B.R. 613, at p. 417.
9 Ibid., at p. 418.
310 Ibid., at p. 61q.
No. 4)
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
597
It is submitted, with respect, that the view taken by the courts
is correct; namely, that the character of a body corporate, for the
purposes of deciding whether it is a “company”, and whether it falls
within one of the enumerated excluded classes, is to be determined
by reference to its incorporating laws and instruments. It should not
be supposed, however, that activities in fact carried on may not be
highly relevant for other purposes of the definition of “corporation”
in section 2 (f). Thus, when once a body is found to be a “company”
[whatever that properly includes s”], and not to fall in one of the
expressly excluded classes, it is then the fact of having an office in
Canada, or the fact of carrying on business in Canada, which will
bring it within section 2 (f) .312
Capacity, Objects, and Powers. So far as the character of a body
corporate is, for the purposes of bankruptcy jurisdiction, to be
determined with reference to its incorporating laws and instruments,
it remains to be decided whether it is the capacity conferred, the
objects, or the powers which are material; or whether more than one
must be considered.
These are terms with many possible meanings, and disputes about
their meanings are disputes about the rules which depend upon them.
It is obviously beyond the scope of this paper to subsume, under an
account of Canadian bankruptcy jurisdiction, another analysis of
the basic concepts of company law, and a critique of the judicial
decisions by with its rules have been elaborated. Much might be said
about the ultra vires doctrine. A cheque, for example, is not the more
a statutory instrument for being defined, and having its incidents
regulated, by the Bills of Exchange Act; and if the law of contract
were codified in England, contracts would not for that reason alone
become statutory instruments. While, therefore, the objects or powers
set out in the incorporating Act of those companies created directly
by Act of Parliament can, as a matter of public law, be held limitative
of the bare capacity of these companies – with ultra vires acts “of”
the latter being in consequence wholly void and indeed unimputable
to the statutory body – why must the same necessarily be true of
companies incorporated, not by statute, but rather by instruments
made under the authority of a statute ? 313
311 Supra, pp. 557-586, esp. pp. 579-586.
312 Supra, pp. 586-587.
313Whatever may be said in favour of Ashbury Railway v. Rich6, (1875),
L. R. 7 H. L. 653, that decision does not necessarily follow, as Lord Selborne
appears to have though (pp. ,693-4), from the rule regarding corporations created
directly by statute or by an instrument properly described as a statutory
instrument.
McCILL LAWV JOURNAL
[Vol. 15
Assuming that the ultra vires doctrine of Ashbury Railway V.
Rieh63 14 cannot be disturbed, its effect, where relevant in Canada,
will apparently be to render the ultra vires acts not even imputable
to the company in question, as beyond its bare capacity.31 So a body
which is a company but which, though neither incorporated to carry
on business nor authorized to carry on business, does in fact carry
on business, will not, for that reason alone, come within the second
branch of the definition of ‘corporation”
in section 2(f), since, as
a creature limited by law in its bare capacity, it was literally incapable
of carrying on the business, which can be imputed only to others.
Where the doctrine of Ashbury Railway V. Rich6 31 does not
apply, because excluded by statute, or by common law (as in the case
of “letters-patent” companies such as are assimilated to natural
persons),317 it is necessary to decide how far the susceptibility of a
company
to bankruptcy jurisdiction is affected by the fact that it
may have acted beyond its objects, though within its bare capacity,
or have exceeded its powers, or have violated prohibitions or com-
mands to be found in its incorporating instruments or legislation, or,
indeed, in other laws.
When once it is established that the material facts (unlawful or
not) can, in ‘law, be imputed to the company, the above question is
answered by what has been -said earlier about the relevancy of
activities in fact carried on. The second branch of section 2 (f) makes
it enough for -a body corporate which is a company to have in fact
an office or to carry on business in fact; it will then be a 2(f)
corporation, unless of course it is one of the expressly excluded
classes. On the other hand, it would seem irrelevant to the express
statutory exclusions made by section 2 (f) that a company, incorporat-
ed without either the objects or powers of an insurance, trust, loan,
or railway company [etc.], may have in fact carried on such activities.
It is still not an insurance, trust, loan, or railway company [or as
the case may be], and still not excluded as such from the Act.
It will be observed that we have still the unanswered question as
to how far the character of a body corporate is to be determined with
reference to its objects and how far with reference to its powers.
314 (1875), L. R. 7 H. L. 653.
315 See supra, n. 285 as regards an attempt to limit the nullity to a nullity
quoad certain parties. It is submitted that if the same principle is to be applied
to the bodies incorporated under Companies acts as to bodies created by Act
of Parliament, ultra vires activities are in principle absolutely void erga omnes.
310 (1875), L. R. 7 H. L. 653.
317 Bonanza Creek Gold Mining Company, Limited v. The King, [1016] 1 A.C.
566.
No. 4
CORPORATIONS NOT STBJECT TO BANKRUPTCY LAW
500
Laying down as a general principle under the 1919 Act 318 that
“non-profit” bodies corporate were not subject to bankruptcy juris-
in 1947 in Beaubien V. L’Union Economique
diction, Boyer J.
d’Habitation,319 considering a housing union incorporated without
object of gain under Part III of the Quebec Companies Act 320 with
the object of providing its members with moderate-cost housing, held
that a non-profit corporate body was outside bankruptcy jurisdiction,
nothwithstanding that it might enjoy powers which would be granted
to a trading company. The housing union in the case at bar enjoyed
these powers, his Lordship held, for the objects for which it had
been organized. 321
On the present author’s view of the law, the question need never
have arisen in that case. The Union Economique d’Habitation was
not the less a company for being organized without object of gain.
If it was a company, it was enough, under the second branch of the
definition of section 2 (f), that it did have an office in, or did carry
even leaving aside the author’s further
on business in, Canada –
opinion that incorporation in Canada was a sufficient alternative,
under the first branch of section 2 (f), to authorization in Canada
to carry on business.
But, if the authorities are right in holding that a “non-profit”
body corporate is not a company at all, it is necessary to decide
whether, in that state of the law, what we have briefly called a
“non-profit” body corporate shall be taken as one incorporated
without object of gain or one incorporated without powers of gain.
The authorities, more especially the Chauss6 case,3 22 and in particular
the opinion of Montpetit J., appear to indicate that it is the ultimate
objects rather than the powers which are material.
318 R.S.C. 1927, c. 1.1.
319 [1947] C.S. 33, 28 C.B.R. 108.
320 R.S.Q. 1941, c. 276; now R.S.Q. 1.964, c. 271.
321Per Boyer, J,
[1947] C.S. 30, at p. 35: “Les requ&-ants, toutefois, prdten-
dent que les pouvoirs accordds sont ceux d’une soci6t6 commerciale et que
l’intim6 a de fait fait commerce.
I1 est vrai que F’intim6 a des pouvoirs qui seraient accordds L une compagnie
commerciale, mais elle les a, non pas pour faire un profit, mais dans le but
pour lequel elle a 6t6 organis6e.”
322 [1868] B.R. 413, affirming the decision of the Superior Court reported
infra, Appendix One. See the quotations, supra, pp. 595-596.
McGILL LAW JOURNAL
(Vol. 15
III. Conclusions
Obvious considerations of policy can support the express exclusion
from the Bankruptcy Act of certain classes of corporation, particularly
since Parliament has, in general, made other provision for their
liquidation. It might be thought implausible for the trustee to
locomotives, a
advertise in the press for the sale of fifty diesel
number of railway stations, or the track from Montreal to Toronto.
The policy which leads to the implied exclusion, inferred by the
courts, of municipal and other governmental bodies, is no easier to
quarrel with. It is difficult to envision a City Council chamber where
the trustee sits in the mayor’s seat, surrounded by the inspectors,
passing by-laws to provide for snow removal and to levy enough
taxes to leave a surplus distributable amongst creditors who have
proved their claims.
What is difficult to understand is why a trustee in bankruptcy
is any the less suited to the liquidation of the assets of a private
golf club than to the assets of a commercial corporation. It is hard,
in short, to discern – much less justify –
the policy which has
led the courts to find implied by the Bankruptcy Act an exclusion
of non-profit bodies corporate as such from bankruptcy jurisdiction.
Under the old Bankruptcy Act, the courts could rely on the phrase
which made it necessary, in order to be a “debtor”, and so subject
to the Act, to be, under the single head applicable to a “corporation”,
a corporation “which carried on business in Canada”.
Under the present Act, in order to be a “debtor”, and so subject
to bankruptcy jurisdiction, the relevant requirements –
stated in
language equally applicable to individuals and corporate persons –
axre that one reside or carry on business in Canada. A corporation,
like an individual, can have a residence.
To be a “debtor” as defined in the Act, it is necessary to be a
“person” as therein defined. Amongst the classes of “person” is
“corporation”, itself the subject of a restrictive definition. The
draftsman apparently intended the restrictions on “corporation” to
be carried over onto “person” [forgetting however that “person”
would become too narrow to be applied to most sections of the Act
without producing absurd and impossible results]. The draftsman
similarly intended the restrictions thus put upon “person” to be
carried over onto “debtor” and “insolvent person”, thus indirectly
regulating the scope of bankruptcy jurisdiction by regulating the
definition of “corporation”.
Effect must be given to the Act by carrying the express restrictions
though
on “corporation” over onto “person” and thence to “debtor” –
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
601
in most sections of the Act “person” has then to be understood in an
unrestricted sense.
It is one thing to give effect to express restrictions, and another
to engraft onto the
to imply them. The courts have proceeded
definition of “corporation” the implied restriction that no non-profit
body corporate can be a “corporation”. They have done this in face
of legislation which makes no such distinction in the case of
individuals. Of the reasons which they have offered in support of
their doing so, one, and one only, enjoys any degree of plausibility,
and that is that non-profit bodies corporate cannot be “companies”.
If this were so, such bodies would indeed fall outside the statutory
definition of “corporation”; but it is submitted, with respect, for
the reasons given above, that there is no general rule that non-
profit bodies corporate cannot be “companies”. Some, particularly
of a governmental character, probably cannot. Doubtless they would
in any even be held impliedly excluded from the Act as inherently
unsuitable to its subject-matter. But most non-profit bodies corporate
can, and should, be considered “companies” as that word is used
in the Bankruptcy Act definition of “corporation”, and therefore
susceptible to bankruptcy jurisdiction.
The other argument for excluding non-profit bodies corporate
from the definition of “corporation” is wholly lacking in substance.
It is based on the reference, in that definition, to “business”. But
ignored by the
the latter half of the definition of “corporation” –
courts – makes it enough for an incorporated company to have
“an office in” OR to carry on business within Canada.
For reasons fully set out above –
partly because the French
it is submitted that the definition
text cannot be read otherwise –
of “corporation” in the Bankruptcy Act, must, subject always to the
express exclusions, be read as embracing four alternative possible
classes:
(1) any company incorporated by or under an Act of the Parliament of
Canada or of any of the provinces of Canada;
(2) any company authorized to carry on business by or under an Act
of the Parliament of Canada or of any of the Provinces of Canada;
incorporated, that has an
(3) any incorporated company, wheresoever
office in Canada;
(4) any incorporated company, wheresoever incorporated, that carries on
business within Canada.
To be a “debtor” or an “insolvent person”, and so subject to the
Act, some other requirements must of course be met; inter alia
residing or carrying on business in Canada.
How corporations are to be characterized for purposes of the
above rules is elaborated above in the body of the article.
McGILL LAW JOURNAL
[Vol. 15
To the draftsman of the next revision, the author would commend
the policy of avoiding special definitions as far as possible. If it
is desired to exclude certain classes of corporations from being
subject to bankruptcy jurisdiction, the proper means of doing so is
to insert a provision saying so. Such definitions as “debtor” or
insolvent person” may perhaps be workable as they are; but it is
easy to see what grotesque results flow from trying to apply to all,
or even to most, sections of the Act, the restrictive definitions of
“corporation” and “person”. Even if the draftsman remembers
always that he has specially defined a term, and even if he uses it
consistently on every occasion, his successor a decade later, drafting
an amending Act, is likely to forget.
APPENDIX ONE
CHAUSSE v. L’ASSOCIATION DU BIEN-ETRE DE LA JEUNESSE INC.,
Superior Court of the Province of Quebec: In Bankruptcy; District of Montreal,
No. M40/1956. Judgment rendered by the the Honourable Mr. Justice Andr6
Montpetit, March 12, 1957. Affirmed,
[1,960] B.R. 413.
Mr. Justice Montpetit
La cour, saisie de da requite en faillite, apr~s avoir entendu la preuve et les
procureurs des parties en cause, examin6 les procedures, les exhibits et les
m~moires produits, et, sur le tout, dlib6r6:
I
Attendu que le requ6rant, cr6ancier de Ia corporation intim~e, all~gue que
celle-ci a cess6, au cours des derniers six mois, de faire honneur h ses obligations
an fur et h mesure qu’elles 6taient 6chues, a dispos6 de ses biens et a cherch6
A cacher et & soustraire & ses cr~anciers en g6n6ral le produit de la vente de
ses biens;
Attendu que
intimre conteste les susdites all6gations du
requ~rant et plaide sp~cifiquement que la loi de faillite ne lui est pas opposable;
la corporation
Attendu que la contestation a 60 dfiment li6e;
II
Sans discuter pour l’instant de la preuve concernant les actes de faillite
que la corporation intim~e aurait commis, ou pu commettre, je veux m’arr~ter
d’abord & la question de savoir si elle a raison, ou non, de pr6tendre que la
loi de faillite ne peut lui 6tre oppos~e.
Cette pr~tention est essentiellement bas6e sur le fait que l’intim6e est urw
corporation constita6e selon les dispositions de la troisi~me partie de la Loi des
compagnies de Qu6bec (S.R.Q. 1941, c. 276) et qu’elle n’est ni
C’est en invoquant ces dispositions que la corporation intimde obtint une charte,
le 8 janvier 1927.
Cette charte 6num~re
les objets ou buts de la corporation comme
sum:
a) Succdder, h toutes fins que de droit, i l’Association pour le Bien-Etre
de la Jeunesse, en assumer les fonctions et en accepter toutes les charges
et obligations;
b) S’occuper du d~veloppement de la jeunesse en gdnral, mais en
jeunesse
intellectuel et moral de
particulier du progr~s physique,
canadienne-frangaise et catholique;
la
c) Organiser dans ce but tous genres de runions rcr6atives ou intellec-
tuelles, telles que conf6rences, concerts, voyages, jeux athl6tiques, concours
litt6raires ou autres;
d) Etendre son champ d’action dans toutes les parties de la Province de
Qubec;
e) Acheter, louer, ou autrement acqudrir et poss6der
tous terrains,
bgtisses, ou biens immobiliers quelconques, pourvu que la valeur totale de
tous les biens immobiliers acquis et poss6d~s h titre de propriftaires ne
d~passe, en aucun temps, la somme de $100,000.00;
f) Faire la location de tous ou partie de tels immeubles, les vendre,
6changer ou autrement alidner, en acqunrir d’autres A leur place;
g) Se procurer les fonds ndcessaires A son but, et ce par contribution
impos~e A ses membres, souscription, qu~te publique, kermesse, pourvu
qu’elle se conforme, dans chaque cas, aux lois ou r~glements en vigueur
dans la ou les localitfs oii s’organiseront telles f6tes, quotes publiques ou
kermesses;
h) Fonder et maintenir, h Montr6al ou ailleurs, des maisons ou 6tablisse-
ments secourables, de fagon A pouvoir venir en aide aux orphelins ou
autres enfants que l’Association jugera h propos d’aider;
i) Aider linstruction et l’6tablissement des jeunes gens que l’Association
jugera devoir secourir; stimuler l’amour de l’4tude par l’octroi de rdcom-
pense ou autrement, et g~n~ralement promouvoir le bien-atre physique,
moral et intellectuel de la jeunesse par tous les moyens qu’elle jugera
convenables;
j) Venir en aide. seconder, secourir p6cuniairement ou autrement, toutes
autres associations de bienfaisance qu’elle jugera h propos;
k) Emprunter toutes sommes de deniers jug~es n4cessaires
ses fins,
par billets, obligations ou autrement, et garantir le remboursement de tels
emprunts par nantissement ou hypoth~ques consentis sur les immeubles
de l’Association;
1) Engager
toutes les personnes dont les services peuvent 6tre jugds
n6cessaires ou utiles pour l’administration des affaires de l’Association
et l’accomplissement de ses oeuvres et de ses fonctions;
m) Passer gdn~ralement tous contrats et contracter tous engagements
ou obligations n6cessaires ou utiles A l’administration des affaires de
]’Association et 1’accomplissement de ses oeuvres et de ses fonctions;
McGILL LAW JOURNAL
[Vol. 15
n) Adopter tous les r~glements qu’elle jugera A propos relativement h
l’admission des membres, le nontant de leur contribution, l’lection et la
qualification des directeurs, l’administration g~n6rale de l’Association et
son bon fonctionnement.
II est 6vident qu’aux fins d’atteindre son objectif principal, i savoir: …
(b) cs’occuper du d6veloppement de la jeunesse en g6n6ral, mais en particulier
du progr~s physique, intellectuel et moral de la jeunesse canadienne-frangaise
et catholique,2. la corporation intim6e avait le droit de poser certains actes
d’un caractire plus ou moins commercial, dont, entre autres, ceux indiqu~s
dans les paragraphes e, f, g, k et m ci-dessus cites.
Nul doute cependant que la corporation intim6e, en se pr6valant ainsi de
ce droit, se devait de rechercher non pas un but lucratif personnel ou un gain
p~cuniaire en soi, mais simplement une source de revenus destin6s A lui permettre
d’atteindre son objectif principal.
Or, le requdrant, dans sa r6ponse h la contestation, n’a pas manqu6 de souligner
(1) que la corporation intimde avait outrepass6 ses pouvoirs (paragraphe 3);
(2) que les immeubles 6rig~s sur son terrain, au Bout de
il’e, et la plage
qui s’y trouve … cont servi beaucoup plus et presque exclusivement, en ces
dernibres anndes, A des fins commerciales qu’aux loisirs des jeunes en g~n6ral,
h titre charitablez
:de toute fagon, l’intim~e
n’a pratiqud aucune fin charitable depuis de nombreuses ann6es> (paragraphe
5);
(4) et que… cles revenus de l’intim~e provenaient en majorit6 de la
maison de touristes, de sa plage et des autres commerces qu’elle op6rait:>
(paragraphe 6).
(paragraphe 4);
(3) que…
De l’ensemble de la preuve, et compte
tenu de certaines admissions et
explications fournies par le t6moin Chalifoux et du t~moignage r6ticent et
plus ou moins sincere de Mademoiselle Albertine Tremblay, ]a secr6taire de
la corporation intim6e, qui, manifestement, n’a pas voulu dire toute la v6rit6
et a cherch6 A jouer sur les mots, je suis convaincu que ladite corporation,
au cours des derni~res annes pour le moins, a exc6d6 les pouvoirs que lui
conf6rait sa charte, a fait commerce purement et simplement, a cherch6 h
faire des gains personnels et a perdu de vue, en tout ou en partie, son but
primordial et celui pour lequel elle avait obtenu une charte, h savoir, de
s’occuper de Ia jeunesse en g6n&ral et, en particulier, du progr~s physique,
intellectuel et moral de la jeunesse canadienne-francaise et catholique.
De HL, je tire une premiere conclusion: la corporation
intim~e, mme s’il
est absolument exact qu’elle a 6t6 constitu6e en vertu de la troisi~me partie
de la Loi des compagnies de Qu6bec, a pose des actes de nature commerciale
qui exc&aient ses droits et pouvoirs en tant qu’entit
sans but lucratif.
Ceci 6tant, y a–il lieu de la d&clarer sujette A la loi de faillite? En d’autres
termes, et tel que signal6 plus haut, est-elle, ou devient-elle en regard des
transactions commerciales qu’ell a faites, soit une
L’article 2 (m) dit d’une
:personneD qu’elle <
Mgme s’il est vrai que l’article 2 (mn) en 6nongant que le mot ZpersonneD
comprend une <
l’ancienne loi (article 2cc) … ga corporation as restrictively defined by this
section), il n’en demeure pas moins que la ddfinition (si
‘on pent dire que
cela en est une) du mot rcorporation>> est demeurde restrictive ou limitative
dans ses termes, de telle sorte que la jurisprudence qui m’a
td circe sur ce
(voir In re: l’Union Economique d’Habitation,-, 28
point s’applique toujours
C.B.R. 108 et les jugements mentionn6s au haut de la page 109).
Puisqu’il en est ainsi, je ne vois pas comment je pourrais donner A ce mot un
seas on une porte qui sortirait des cadres fixds par le lgislateur lui-mame.
Or, selon l’article 2 (f), une t corporation>> doit 6tre soit <
D’autre part, en me rdfdrant h la troisi~me partie de la Loi des compagnies
de Quebec, je constate qu’une corporation ainsi constitue n’est pas une
compagnie, c’est-h-dire qu’elle n’est pas une entit6 corporative ou un zbody
politic and corporate) dont le but principal est de rdaliser des profits on des
b6n~fices grice h un capital quelconque qui y est prdalablement investi.
De plus, et toujours en me basant sur Particle 2
(f), l’intim~e, je l’ai
d~jh dit, n’est pas et n’a jamais
td autorisge h poursuivre des affaires cen
vert ou sous l’autorit6D de cette troisi~me partie de la Loi des compagnies
de Qudbec.
A mon avis, le fait qu’elle a outrepass6 ses droits et pouvoirs et qu’elle a
poursuivi des affaires ne peut rien changer h l’absence d’autorisation de ce faire.
Je ne crois pas que ces abus commis par l’intimde ont fait, ou pu faire, d’elle
une c compagnie autoris4o>.
Dans les circonstances, et sans qu’il y ait lieu ici de discuter des autres
moyens soulevds de part et d’autre, je suis d’opinion de rejeter la requ~te.
I
Vu ce que ci-dessus;
Considdrant que la requte est mal fond6e en droit, et ce, pour les motifs
mentionn~s plus haut;
Consid~rant, dans l’opinion du juge soussign6, qu’il s’agit ici d’un cas oii
le requ6rant ne devrait pas 6tre condamn6 b payer A l’intim6 quelques frais
et d6pens que ce soient;
Pour ces raisons:
La Cour rejette la requite, sans frais.
McGILL LAW JOURNAL
[Vol. 15
APPENDIX TWO
IN RE CENTRE CULTUREL DU VIEUX MONTREAL, Superior Court of
the Province of Quebec: In Bankruptcy; Dist~rict of Montreal, No. 7714. Judgment
rendered by the Honourable Mr. Justice Andr6 Montpetit, February 6, 1968.
By proposal filed December 8, 1967, the insolvent Centre Culturel du Vieux
Montr6al submitted for the consideration of its creditors certain terms respecting
the payment of its debts and the supervision and control of its affairs.
A meeting of creditors to consider the proposal was held on January 24, 1968
and adjourned to January 31, 1968, at which time the proposal was refused
for lack of approval by the three-fourths in value of the creditors required
by section 32 B of the Bankruptcy Act,
By petition dated February 1. 1968, and filed on February 6, 1968, R. V.
Barnett, C.A., in his quality as Trustee under the proposal, after reciting facts
to the above effect, alleged as follows:
“4. That since said Proposal was lodged with your Petitioner, your Petitioner
has become aware of the following facts:
“(a) That the Debtor under the corporate name zTh~fttre de
l’Ancienne
Bourse was incorporated by Letters Patent dated January 20, 1966 under
the provisions of Part III of the Companies Act, R.S.Q.
[19164, Chap. 271
for purposes other than pecuniary gain, the whole as appears from Xerox
copy of Letters Patent filed and produced herewith as Petitioner’s Exhibit P-i;
“(b) That by Supplementary Letters Patent bearing date of November 10,
1966, the name of said corporation was changed from zTh6Atre de l’Ancienne
Boursez to gCentre Culturel du Vieux Montr6al2 the whole as appears from
Xerox copy of said Supplementary Letters Patent filed and produced herewith
as Petitioner’s Exhibit P-2;
“(c) That so incorporated and for such purposes,
the Debtor is not a
“corporation” as same is defined under the provisions of Section 2
(f) of
the Bankruptcy Act and said Act does not extend to and the Debtor is not
entitled or qualified to proceed thereunder (Chaussg v. L’Association du Bien-
Etre de la Jeunesse Inc., [1960] B.R. 413).
“5. That in consequence your Petitioner was
in error in allowing such
Proposal to be lodged with him under the provisions of the Bankruptcy Act
and having same received by this Honourable Court;
“6. That seeing the nullity of such proceedings, it is in the interest of the
Debtor and its creditors that such nullity be so declared and that all proceedings
with respect thereto under the provisions of the Bankruptcy Act be forthwith
voided and terminated for all purposes.
“Wherefore your Petitioner prays that by judgment to intervene herein,
it be declared:
“(a) That all proceedings by way of a Proposal under
the provisions
of the Bankruptcy Act initiated by the Debtor herein are null and void ab
initio, same having been
illegally lodged with Petitioner and received by
this Honourable Court;
“(b)
that Petitioner be discharged as Trustee for all purposes the whole
without prejudice to the validity of any act duly done by him under or in
pursuance of the Proposal.
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607
“The whole without costs on the proceedings both on the proceedings under
the said Proposal and on -this Petition.”
The following is an extract from Letters Patent under the Great Seal
of the Province of Quebec bearing date June 20, 1966, incorporating the debtor
rpour les objets suivants: Exploiter et administrer
les salles de th6Atre,
donner pour le public des repr~sentations musicales et dramatiques de toutes
sortes de m~me que des exhibitions et divertissements de toutes sortes.>>
There was filed in the record an acknowledgment by the debtor of receipt
of a copy of the petition in lieu of service, a waiver of delays, and consent
to judgment being granted according to the conclusions.
Broderick, McQuillan and Kennedy, Advocates, appeared for Petitioner.
The debtor did not appear.
The judgment of the Court was rendered on February 6, 1968, by the
Honourable Mr. Justice Andr6 Montpetit, as follows.
Mr. Justice Montpetit
“The Court, seized of the Petition for order declaring Proposal null and
void and discharging trustee:
“Seeing the contents of the Petition and the affidavit in support thereof;
“Seeing the exhibits;
“Seeing default of the Insolvent to appear;
“Considering that the Petition is well founded in fact and law;
“For these reasons:
“Doth grant the said Petition without costs;
“Doth declare null and void ab initio, all proceedings by way of a Proposal
under the provisions of the Bankruptcy Act initiated by the Debtor, same
having been illegally lodged with Petitioner and received by this Honourable
Court;
“Doth discharge the Petitioner as trustee for all purposes the whole without
prejudice to the validity of any act duly done by him under or in pursuance
of the Proposal.”
APPENDIX THREE
BANKRUPTCY AND WINDING-UP ACTS
The Bankruptcy Act, 4 & 5 Geo. 5, 1[914, c. 59 (U.K.) provides by s. 1(2)
that: ‘In this Act, the expression “a debtor,” unless the context otherwise implies,
includes any person, whether a British subject or not, who at the time when
any act of bankruptcy was done or suffered by him –
(a) was personally present in England; or
(b) ordinarily resided or had a place of residence in England; or
(c) was carrying on business in England, personally, or by means of an
agent or manager; or
(d) was a member of a firm or partnership which carried on business in
England.’
McGILL LAW JOURNAL
[Vol. 15
Insolvent companies are in England dealt with under the law relating to
winding-rup, contained in the Companies legislation itself. See L. C. B. Gower,
Modern Company Law, 2nd ed., (London, 1957), p. 578: ‘The process … resembles
bankruptcy and follows its rules closely if the company is insolvent. A company
cannot be made bankrupt; instead it must be wound up under a separate but
not dissimilar procedure. But here the differences are more marked. If a
company is put into liquidation it cannot, like a bankrupt individual, obtain
its discharge and continue freed from the burden of its debts. The liquidation
winds up its affairs and then kills it –
although, under a reconstruction it
may rise like a phoenix from the ashes of its funeral pyre.’
In Canada, the Insolvent Act of 1875, An Act respecting Insolvency, 38 Vict.,
S.C. 1875, c. 16, was by s. 1 declared to apply not only to traders and trading
co-partnerships, but also to “trading companies whether incorporated or not,
except Incorporated Banks, Insurance, Railway, and Telegraph Companies.”
When, forty years after the repeal of this statute (during which time the
only general insolvency legislation in Canada was that respecting the winding-up
(9-10 Geo. V,
of insolvent companies) the Bankruptcy Act, 1919, was enacted
S.C. 1919, c. 36), the definition of “debtor” which it Contained [see Appendix Six,
infra, at pp. 61,9 et seq.] was in all material respects identical with the definition
quoted above from the British Act; except that (d) read “was a corporation or a
member of a firm or partnership which carried on business in Canada”. The, feder-
al Winding-up Act and the Bankruptcy Act thus overlapped; provision was made
for this which, in substance, made the latter Act prevail: s. 2(o); the Court
being later given power to order otherwise: The Bankruptcy Act Amendment
Act, 1920, 10-11 Geo. V, S.C. 1920, c. 34, s. 2; The Bankruptcy Act Amendment
Act, 1922, 12-13 Geo. V, S.C. 1922, c. 8. s. 2; The Bankruptcy Act Amendment
Act, 1923, 13-14 Geo. V, S.C. 1923, c. 31, s. 2(6); the Bankruptcy Act, R.S.C.
1927, c. 11, s. 153. See Argus Adjusters and Appraisers Ltd. V. Assistance Loan
and Finance Corp., [1964] B.R. 375; sub nom., Re Taxi Owners’ Reciprocal
Insurance Association, (1963), 44 D.L.R. (2d) 692.
The federal Winding-up Act, now R.S.C. 1952, c. 296 can, it would seem,
put an end to the corporate state and powers, though (s. 19)
this will not
happen until the winding-up is completed; see Jolioeur v. Boivin et Cie Lte,
[1951] R.P. 369; McCarter v. York County Loan Co., (1907), 14 O.L.R. 420;
Re Clarke and The Union Fire Insurance Company, (1887), 14 O.R. 618,
at p. 620, per Boyd, C.; aff’d. (1889), 16 O.A.R. 161; aff’d. sub nom. Schoolbred
v. Clarke, (1890), 17 S.C.R. 265. However, the Bankruptcy Act, per contra,
has no such effect: Banque Provinciale du Canada V. Ross, [1955] C.S. 292,
35 C.B.R. 198; National Trust Co. v. Ebro Irrigation and Power Co., [1954]
O.R. 463, at p. 481, [1954] 3 D.L.R. 326; Re Canadian Cereal and Flour Mills
Co. Limited, (1921), 51 O.L.R. 316, 67 D.L.R. 234, 2 C.B.R. 158
(Orde,
J.). On the other hand, until July 11, 1966, a corporation might apply for a
discharge under the Bankruptcy Act, but not under the Winding-up Act; see
now the new s. 127 (3a) added to the Bankruptcy Act, R.S.C. 1952, c. 14,
by 14-15 Eliz. II, S.C. 1966-67, c. 32, s. 17: “A corporation may not apply
for a discharge unless it has satisfied the claims of its creditors in full.”
Since July 11, 1966, the Bankruptcy Act has had unequivocal precedence
over the Winding-up Act in all cases where both can apply; and a receiving
order or assignment under the former Act operates the abatement of proceedings
under the latter: Bankruptcy Act, R.S.C. 1952, c. 14, s. 163A, added by 14-15
Eliz. II, S.C. 1966-67, c. 32, s. 20.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
609
It should be borne in mind that the application of the federal winding-up
legislation to provincially-incorporated companies
[foreign companies present
rather more difficult issues] is based primarily on the federal legislative power
in relation to “Bankruptcy and Insolvency”
(21)).
Liquidation for causes other than insolvency would ordinarily be taken under
provincial winding-up acts. See Duncan and Honsberger, op. cit., pp. 25-6;
Can. Abr. (2d), tit. “Corporations”, vol. 8, pp. 690 et seq. The jurisdiction
claimed by the federal Act is ex facie somewhat wider than the above would
suggest: R.S.C. 1952, c. 296, s. 6
(b), quoted supra, n. 17, and authorities
hereinbefore cited, esp. Duncan and Honsberger, op. cit., p. 26, n. 19. See A.-G.
Ontario V. Policyholders of Wentworth Insurance Company, [1969] S.C.R. 779,
162 C.B.R. 265, 6 D.L.R. (Sd) 545.
(B.N.A. Act, 1867, s. 91
the case of corporations: s. 2(i). As
The present Bankruptcy Act, R.S.C. 1952, c. 14, as amended, no longer
makes, as did the 1919 Act, the carrying on of business a condition of being
a “debtor” in
to the definition of
“corporation” itself (s. 2(f)), we shall see that, on its face, it is enough that
a body corporate be a company, and that it have an office in Canada or carry
on business in Canada or be empowered in Canada to carry on business or even
(semble) simply be incorporated in Canada without more: see supra, pp. 554-586.
As to the scope of the term “company” itself, see supra, pp. 557-586.
APPENDIX FOUR
INSOLVENT BUILDING SOCIETIES, BANKS, AND
INSURANCE,
TRUST, LOAN, AND RAILWAY COMPANIES.
The definition of “corporation” in
the Bankruptcy Act, R.S.C. 1952, c. 14,
s. 2(f), expressly provides that it “does not include building societies having
a capital stock, nor incorporated banks, savings banks, insurance companies,
trust companies, loan companies or railway companies” –
tmais ne comprend
pas les soci6ts de construction avec un capital-actions, ni les banques, caisses
d’6pargne, compagnies d’assurance, compagnies de fiducie, compagnies de pr~t
ou compagnies de chemin de fer constitues en corporations[.]>> The English and
French texts cannot mean the same thing unless the terms “incorporated”
and cconstitu~es en corporations > qualify all the listed classes of bodies from
banks to railway companies
the
English text and compagnies de chemin de for in the French. See Argus Adjusters
and Appraisers Ltd. v. Assistance Loan and Finance Corp., [1064], B.R. 375;
sub nom., Re Taxi Owners’ Reciprocal Insurance Association, (106s), 44 D.L.R.
(2d) 62, per Owen, J., at [,1964] B.R. 377, 44 D.L.R. (2d) 698, approving
inter alia the fourth ground of appellant’s argument. Owen, J., spoke for himself
and Bissonette, Montgomery and Rivard, JJ. The D.L.R. report shows the
emphasis added. See also the reasons of Bissonnette, J., [1964] B.R., at p. 279,
speaking of exclusion from the Bankruptcy Act “lorsque toutes ces soci6ts sont
constituaes en corporation (art. 2, para. f.).”
rather than merely banks in
inclusive –
The
foregoing restrictive definition of “corporation”, when applied
conjunction with section 2 (m) which defines “person”, section 2
in
(j) which
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defines “insolvent person”, and section 2 (i) which defines “debtor”, operates
the exclusion from bankruptcy jurisdiction of the above-enumerated classes
of corporation.
“[B]uilding societies having a capital stock”, excluded in those terms from
the English version of the Bankruptcy Act (as above indicated), are included
eodem nomine in the Winding-up Act, R.S.C. 1952, c. 296, s. 6 [considered
in Re People’s Loan and Deposit Co., (1906), 7 O.W.R. 253, at p. 265]. It should
be observed that while the French text of the Bankruptcy Act (Loi sur la
faillite) excludes zles soci~t~s de construction avee un capital-actions2,,
the
French text of the Winding-up Act (Loi sur les liquidations) gs’applique …
aux socit6s de construction qui ont un capital social2.. The French texts
would suggest that while the Bankruptcy Act excludes only such societies as
have a share capital, the Winding-up Act includes such as have a capital of
any kind. This would produce a certain overlap. By s. 2(a), the Winding-up Act
provides that ‘In this Act… “capital stock” includes a capital stock de jure
or de facto’; ‘Dans Ia pr~sente loi, l’expression … a) rcapital social comprend
un capital social de droit ou un capital social de fait[.]’ The same Act goes
on to provide that ‘7. This Act does not apply to building societies that have
not a capital stock.. .’; ‘7. La pr~sente loi ne s’applique pas aux soci6ts de
construction qui n’ont pas de capital social…’. See Beaubien V. L’Union
Economique d’Habitation, [1947] C.S. 33 supra, p. 526, and esp. n. 24. It
is
perhaps desirable to repeat that it is also, speaking roughly, necessary to the
application of the Winding-up Act of Canada that the bodies in question be
either federally-incorporated or else insolvent: s. 6, but compare s. 6(b), and
gee the authorities referred to in Appendix Three, supra, pp. 607-609.
“[Blanks” and “savings banks”, excluded in terms from the Bankruptcy Act,
as above indicated, are in terms included under the Winding-up Act of Canada,
R.S.C. 1952, c. 296, s. 6. By the new Interpretation Act, 16 Eliz. II, S.C. 1967-68,
c. 7, s. 28(2), “bank” or “chartered bank” means a bank to which the Bank
Act applies[.]’ See also the Bank Act, 14-15-16 Eliz. II, S.C. 1966-67, c. 87. ss. 120
to 13. For savings banks, see the Quebec Savings Banks Act, 1415-16 Eliz. II,
S.C. 1966-67, c. 93, and especially ss. 102 to 1,13. As indicated in the first paragraph
of this note, the word “incorporated” must qualify “bank” and apparently also
“savings bank” in the enumeration of institutions excluded from the Bankruptcy
Act. As might be expected, the institutions included in the Winding-up Act (s. 6)
are ‘incorporated banks, savings banks’, translated as ‘banques constitu6es en
corporations, … caisses d’6pargne[.1’ Such restrictions as may be imposed upon
the term “bank”, by the qualifying adjective “incorporated” and by the effect
of the Interpretation Act (if any; the two acts in question antedate it), will
serve to limit the exclusions from the Bankruptcy Act and the inclusions in the
Winding-up Act.
“[I]nsurance companies”; “companies d’assurance” are, as indicated, expressly
excluded from the Bankruptcy Act; as suggested above, in the first paragraph
of this note, these terms are qualified by the adjectives “incorporated” and
“constituies en corporations” respectively. This would be consistent with, and
exactly correlative to, the explicit inclusion under the Winding-up Act (s. 6) of
“incorporated insurance companies”; “companies d’assurance constitu6es en cor-
poration”. See Argus Adjusters, supra, for, inter alia the drastic consequence
on policyholders of an unincorporated insurance association of being under the
Bankruptcy Act rather than the Winding-up Act. Note that the report at
44 D.L.R. (2d), at p. 696, apparently mistranslates “(except… unincorporated
insurance companies)” in the third to last paragraph, for “(sauf… les com-
No. 4]
CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
611
incorporges)”;
[1-964] B.R., at p. 382 which
companies”, or “compagnies de fiducie” –
pagnies d’assurance…
is in
accord with the sense of the judgment. The federal statutes respecting Canadian,
British, and Foreign insurance companies should be referred to for provisions
directly and indirectly concerning Insolvency and Winding-up. Absient federal
incorporation, insolvency is (roughly) a condition of jurisdiction: see supra,
Appendix Three. On the constitutional problem, see now, A.-G. Ont. v. Policy-
holders of Wentworth Insurance Co., [1,969] S.C.R. 779, 12 C.B.R. 265, 6 D.L.R.
(3d) 545.
‘T]rust
or such at least as are
incorporated [see paragraph one of this note] –
are excluded in terms from
the Bankruptcy Act, as indicated above. Such as have been incorporated by, or
have continued since Confederation under the legislative authority (in respect
of their incorporation) of, the Parliament of Canada, are, as such, included in
the Winding-up Act: s. 6. Parliament appears to have made no special provision
to put provincially incorporated trust companies under the Winding-up Act, cor-
relatively
to their exclusion from the Bankruptcy Act. How far provincial
Winding-up legislation would be constitutionally inapplicable by reason only
that the company sought to be wound up was in fact insolvent (at whatever
stage this might be discovered), or by reason only that petitioner desired the
winding-up because of insolvency, is not clear, especially in circumstances where
Parliament has not occupied the field. Quaere whether the provincial legislature
might not provide for the extinction of its own creatures, without regard to the
motive therefor, at least absent valid federal legislation. See authorities indicated
above, Appendix Three. Whatever be the answer, the Quebec Winding-up Act,
R.S.Q. 1664, c. 281, is by its terms restricted to voluntary winding up at the
instance of the directors (s. 1), and judicial winding-up at the suit of a share-
holder “whenever [the Superior Court] …
is of the opinion that, for a reason
other than bankruptcy or insolvency, it is just and equitable that the company
be wound up.” For federally-incorporated trust companies, see the Trust Com-
panies Act, R.S.C. 1052, c. 272 as amended, esp. s. 74(5) (constructive insolvency).
“[L]oan companies” or “compagnies de pr~t” – with the qualification, discussed
in the first paragraph above, that they be “incorporated” or “constitu6es en
corporations” –
are in terms excluded from the Bankruptcy Act, as indicated
above. The Winding-up Act, in terms, includes (s. 6) only “loan companies having
borrowing powers”; “compagnies de prbt qui ont des pouvoirs d’emprunt”. Does
this impliedly exclude even such loan companies without borrowing powers as
are incorporated by, or (in respect of their incorporation) continued since Con-
federation under the
legislative authority of the Parliament of Canada?
“Federal” corporations are in terms all subject to the Winding-up Act in all
cases; other corporations in the classes listed are made subject to the Act in
case of insolvency, etc. Semble loan companies without borrowing powers are, if
federally-incorporated, still subject to the Act, whether the winding-up happens
to be based on insolvency or not. No provision is made for provincially-incorpo-
rated loan companies not having borrowing powers; but this is plainly no over-
sight by Parliament. Those provincially-incorporated
loan companies that do
have borrowing powers are subject to the federal Winding-up Act only, of course,
on the usual additional condition that the petition is founded on insolvency, etc.
“[R]ailway companies” – with the qualification, discussed above, that they be
“incorporated” or “constitu es en corporations” –
are excluded from the Bank-
ruptcy Act, as above indicated. Section 7 of the Winding-up Act provides likewise
that it “does not apply to… railway or telegraph companies”. The Parliament
of Canada has however provided for railways in case of insolvency by the Rail-
way Act, R.S.C. 1952, c. 234, as amended, s. 157 et seq. (schemes of arrangement),
McGILL LAW JOURNAL
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and by the Exchequer Court Act, R.S.C. 195a, c. 98, as amended by 14-15-16 Eliz.
II, S.C. 1966-67, c. 69, s. 94 and Schedule, substituting the Canadian Transport
Commission for the Board of Transport Commissioners for Canada, (sale of
railway, section of railway, rolling stock, equipment, and other accessories). It
will be noted, however, that these provisions, though applicable to railways
regardless of incorporating authority, are confined by the terms of the statutes
in question to railways whose operation is subject to federal legislative authority.
In La Compagnie de Chemin d Fer de la Bale des Chaleurs et al. v. Nantel,
(1896), 5 B.R. 64, the Quebec Queen’s Bench by a 3-2 decision (Baby, Boss6 and
Blanchet, JJ.; Hall and Wurtele, JJ., dissenting) affirmed a decision of Pagnuelo,
J., in the Superior Court, (1896), 9 C.S. 47, upholding the constitutional validity
and application of a provincial statute, authorizing the sequestration and sale
of insolvent railways, to a railway under exclusive federal legislative jurisdiction
as a work declared to be for the general advantage of Canada. The dissenting
judges appear to have accepted its validity quoad provincial railways. Compare,
on the former point, Bourgoin v. La Compagnie du Chemin de Er Montrial,
Ottawa et Occidental, (1880), 5 App. Cas. 381 (P.C.). See Railway Act, R.S.Q.
1964, c. 290, ss. 198 et seq. under the title: “Division XXIII” “Sequestration”;
the jurisdiction is expressly predicated upon, as one of several alternatives, in-
solvency. Consider the application, if any, to the above questions, of the remarks
of Lord Atkin for the Privy Council in Ladore v. Bennett, [1939] A.C. 468,
[1939J 3 D.L.R. 1, 21 C.B.R. 1, [1939] 2 W.W.R. 566, [1939) 3 All E.R. 98,
quoted supra, n. 14. Quaere,.the effect of the recent Supreme Court decision in
A.-G. Ont. v. Policyholders of Wentworth Insurance Co., [1969] S.C.R. 779, 12
C.B.R. 265, 6 D.L.R. (3d) 545.
APPENDIX FIVE
PROVINCIAL LAWS COGNATE TO BANKRUPTCY AND INSOLVENCY.
The following references are offered for convenience’s sake. As the matter
is only incidental to the discussion in this article, the author has not attempted
an exhaustive search of the provincial statute books, and still less a reconstruction
of the statutory history of each provision; nor are the following suggestions
to be taken as a definitive opinion on their meaning, validity, or operation;
nor has any attempt been made to refer to all the relevant judicial decisions.
For a recent consideration of the scope of federal legislative authority on insol-
vency and of the extent to which it precludes provincial legislation, see A.-G.
Ont. v. Policyholders of Wentworth Insurance Company, [1969] S.C.R. 779, 12
C.B.R. 265, 6 D.L.R. (8d) 545.
The author would however stress that, in considering
the constitutional
validity of the rules contained in such statutes, it is absolutely essential to
bear in mind that, insofar as they merely reproduce pre-Confederation law,
they will validly continue to operate as such: B.N.A. Act, 1867, s. 1,29, subject
only to competent repeal, express or implied. Such is the case of the relevant
Civil Code provisions in Quebec (infra). In the common-law provinces, the
Act 13 Eliz. 1, c. 5, against fraudulent conveyances, would seem in like case.
Though, at all events, it would presumably form parcel of the English law
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
613
(infra). Like
rules,
the fraudulent conveyance
introduced with the settlement of a colony, it appears in a rather literal
reproduction in the British Columbia statutes (infra), and its substance
is
found in the statute books of other provinces, sometimes separately enacted
and sometimes not
those
dealing with fraudulent preferences may in some cases at least have a valid
basis in pre-Confederation law. See, for example, Edward Blake, Q.C., arguendo,
in the Voluntary Assignments Case, on the historical antecedents of the Ontario
Assignments and Preferences Act, A.-G. Ont. v. A.-G. Can., [1894] A.C. 189,
at pp. 190-91. A provision avoiding various fraudulent preferences and transfers
in Upper Canada, 22 Vict., c. 96, s. 19 of the statutes of the Province of
Canada, was continued as s. 18 of chapter 26 of the Consolidated Statutes for
Upper Canada (1859), and survived repeal by the Parliament of Canada in the
Revised Statutes of Canada, 1886; see An Act respecting the Revised Statutes
of Canada, 49 Vict., S.C. 186, c. 4, especially s. 5, which should be read
with Schedule B to the Revised Statutes of Canada, 1886, “Acts and Parts
of Acts of a public general nature, which affect Canada, and have relation
to matters not within the legislative authority of Parliament, or in respect
to which the power of legislation is doubtful or has been doubted, and which
have in consequence not been consolidated; and also, Acts of a public general
nature, which, for other reasons, have not been considered proper Acts to
be consolidated.” Under this head is included inter alia the whole of chapter 26
of the Consolidated Statutes for Upper Canada, except sections 14, 19 and 20.
A subsequent federal repeal, if any, would be an implied, and not an express,
repeal, such as could arguably be found in the Bankruptcy Act; but quaere
whether the latter could be held to cover the whole ground of the former.
As regards pre-Confederation legislation, as to which the problem of legislative
jurisdiction does not arise at all, and post-Confederation
legislation in the
several provinces which may be found to be validly enacted, and as to which
the only remaining question in both cases is its continued operation in the
face of inconsistent legislation, or at least occupation of the field, by the
Parliament of Canada, the Quebec cases should not be lost sight of in the
common law provinces. The provisions of the Civil Code are undoubtedly valid
as pre-Confederation
legislation, but their continued operation might have
been denied on the ground that they had been displaced by subsequent legislation
of the Parliament of Canada. That this has not been done (see infra) argues
strongly for the continued operation of any valid post-Confederation provincial
legislation giving wider rights of avoidance.
Quaere whether, where the only objection to provincial legislation is that its
continued operation is made impossible by the occupation of
the field by
Parliament, an argument could be made that, quoad debtors who are for any
reason not subject to the federal insolvency legislation, the field has pro tanto
been left unoccupied by that Parliament.
For Alberta, see The Fraudulent Preferences Act, R.S.A. 1955, c. 120, of
which s. 13 provides that the “Act shall be read and construed subject to the
provisions of the Bankruptcy Act (Canada).” In Re McIntosh-Marshall Equip-
ment Ltd.; Nash V. G celph Engineering Co., (1964), 7 C.B.R. n.s. 92, 48
D.L.R. (2d) 610, 50 W.W.R. 1,15, aff’g 7 C.B.R. n.s. 84, 48 W.W.R. 420, the
Appellate Division of the Supreme Court of Alberta
(Macdonald, Porter,
Johnson, Kane and McDermid, JJ. A.) held ultra vires section 4 of the Act,
which, roughly stated, purported to avoid payments and transfers made by
insolvents or persons knowing themselves
to be on the eve of insolvency,
having the effect of preferences, and which should be attacked within one
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inoperativfe): 7 C.B.R. n.s. 92, at p. 96
legislation was enacted afterwards rendered
year. It conflicted, held the Court, with section 64 of the Bankruptcy Act,
which limited the avoidance of preferential payments to a period within three
months of a bankruptcy, with the result (thought the Court) that, even assuming
that the provincial legislation would have been valid had it been enacted before
the Bankruptcy Act provision in question (on which hypothesis the provincial
legislation would merely have been superseded by the federal), the fact that
it ultra vires
the provincial
in fine, at
(semble, not merely
pp. 98-9, and at p. 101 in fine; but compare the remark that “It may be that
certain sections of the Fraudulent Preferences Act are continued effective
by the amendment to section 41 of the Bankruptcy Act [i.v., the addition of
s. 41(6) preserving provincial laws relating to property and civil rights not
in conflict with the Bankruptcy Act], but because of the conflict between the
section we are considering and s. 64, s. 4 is not one of them”: ibid. How could
s. 41(6) “continue them effective” if they were wholly void from enactment?
Does the Court mean to treat the Revised Statutes of Alberta of 1955 as a
re-enactment after a partial federal withdrawal from the field? Why does
the Bankruptcy Act wholly occupy the field, so as entirely to supersede, or
render entirely ultra vires, provincial legislation giving rights of avoidance
not dependent on whether a bankruptcy occurs? It should be observed that the
Alberta statute is more severe than the federal not merely in making trans-
actions unsafe for a longer period (under the Alberta statute, one year from
the time of the transaction to the time of the attack; under the Bankruptcy
Act, three months before bankruptcy), but also in making the preferential
effect conclusive of the intent to prefer provided that the attack be made within
the year; whilst under the federal Act (s. 64(2)) preferential effect merely
creates a presumption prima facie of intent. Where transfers or payments can
be shown to have been made with actual intent to prefer, indeed, the Alberta
statute appears to go much further: it allows them to be attacked beyond
the year, and indeed without any evident limit of time save such as may result
from the laws relating to the limitation of actions. It may be noted that s. 5
of the Alberta statute expressly makes pressure by a creditor, or his ignorance
of the debtor’s circumstances, irrelevent to the success of an attack under s. 4
aforementioned. But no provision similar to s. 5 is enacted in relation to s. 2
(transfers by insolvents with intent to defeat, hinder, delay or prejudice
creditors), nor (what is more important) is one enacted in relation to s. 3
(transfers or payments made with actual intent to prefer). It may, therefore,
be that s. 3, if it can validly operate at all, remains restricted in its operation
by the doctrine that payments made under pressure of creditors are not made
with the requisite intent to prefer: Molsons Bank v. Halter, (1890), 18 S.C.R.
88; Stephens v. McArthur, (1891), 10 S.C.R. 446; Gibbons v. McDonald, (1891),
20 S.C.R. 587; Adams & Burns v. Bank of Montreal, (1903), 32 S.C.R. 721;
Banque d’Hochelaga v. Jeannotte, (1923), 16 Sask. L. R. 523, [1923] 1 W.W.R.
28; Copp v. Williams, (122), 65 D.L.R. 3-77; Goldman v. Harrison, (1029),
10 C.B.R. 395 (cases applying the doctrine in question to statutes of various
the
provinces against
(2). Similarly, the
Bankruptcy Act, pressure
usefulness of sections 2 and 3 of the Alberta statute is probably limited by
a requirement that the requisite fraudulent intent be concurrent in the debtor
and creditor or payee: Gibbons v. McDonald, (1891), 20 S.C.R. 587 and other
cases cited supra; while under the federal Act the requirement of concurrent
intent is at least an open question, with the better view probably being that
the terms of the Act do not justify any requirement of fraudulent intent on
fraudulent preferences
and conveyances). Under
is made irrelevant by s. 64
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
615
the part of the creditor or payee: see Duncan & Honsberger, Bankruptcy in
Canada, (Toronto, 1961), pp. 485 et seq.; Houlden and Morawetz, Bankruptcy
Law of Canada, (Toronto, 1960), pp. 149 et seq., and Cumulative Supplement,
1966, (Toronto, 1966), p. 53.
For British Columbia, see the Fraudulent Conveyances Act, R.S.B.C. 1960,
c. 155, and the Fraudulent Preferences Act, R.S.B.C. 1960, c. 156. Where the
transfer or payment is not made with preferential intent, but merely has
preferential effect, attack must be made within sixty days of the impugned
transaction, or of the registration by law of the instrument evidencing it, unless
the debtor makes an assignment within the sixty days of the transaction.
What is said above in relation to Alberta concerning pressure and concurrent
intent appears
to apply to British Columbia mutatis mutandis. In Totem
Radio Supply Company Ltd. v. Stone, (1959), 38 C.B.R. 112, Whittaker, J., in
the Supreme Court of British Columbia held s. 64 of the Bankruptcy Act
to apply “only to preferences given within three months prior to the date of
bankruptcy. Where there is no conflict the provincial Act is not superseded.”
His Lordship considered s. 41(6) of the Bankruptcy Act (q.v.) decisive. Compare
Canadian Credit Men’s Trust Association Ltd. v. Hoffar Ltd., [1029] S.C.R.
180, 10 C.B.R. 374, [1929] 2 D.L.R. 10a, refusing leave to appeal from (1929),
40 B.C.R. 454, 10 C.B.R. 369, [1929] 2 D.L.R. 7S, [1929] 1 W.W.R. 557. Here
a conflict was found between the Dominion provision which merely attaches a
presumption prima facie of intent to prefer to transactions with preferential
effect made within three months of bankruptcy, and the provincial legislation
which avoids them altogether within the sixty days above mentioned. It will
be noted that the constitutional validity of the provincial legislation is pre-
supposed. See also Gard v. Yates, [1936] 2 D.L.R. 50, 17 C.B.R. 168, [1936]
1 W.W.R. 212, 50 B.C.R. 353, upholding both validity and operation, in the
absence of conflict.
For Manitoba, see The Assignments Act, R.S.M. 1954, c. 11, and The Fraudulent
(2d) 560, Smith, J., in
Conveyances Act, R.S.M. 1954, c. 91. In Re Mid-West Catering Co. Ltd., (1965),
9 C.B.R. n.s. 72, 53 D.L.R.
the Manitoba Queen’s
Bench held ultra vires s. 38 of the first-mentioned statute, which made
conveyances, transfers, and payments, by insolvents and persons knowing them-
selves on the eve of insolvency, with intent to defeat, hinder, delay or prejudice
one or more creditors, void against the latter. The holding was not however
necessary to the result. The preference provisions make preferential effect
sufficient where there is a challenge, or an assignment for the benefit of
creditors, with sixty days of the impugned transaction; in such cases, pressure
by, or want of notice to, the creditor, is made irrelevant.
For New Brunswick, see the Assignments and Preferences Act, R.S.N.B. 1952,
c. 13. Preferential effect suffices to create a (rebuttable?) presumption of
preferential intent where there is an attack or an assignment for the benefit
of creditors within sixty days of the impugned transaction. In such eases
pressure is made irrelevant. See Re N. B. Tractor and Machinery Co.; Canadian
Credit Men’s Trust Association v. Dominion Bank, (1932), 14 C.B.R. 195,
where it was held that the statute of 13 Elizabeth I, c. 5 (U.K.), was in force
in the province, and that it, and the provincial statute above mentioned, might
operate even if s. 64 of the Bankruptcy Act did not
Owing to Newfoundland’s recent entry into Confederation, the scheme of its
statutory provisions
to those already outlined for the other
provinces. The Judicature Act, R.S.N. 1952, c. 114 contains a Part VII entitled
“Insolvency”, being s. 215 et seq.; see also Schedule A. Of these provisions,
is dissimilar
McGILL LAW JOURNAL
[Vol. 15
s. 254 avoids conveyances, transfers, payments, and so forth, made by an
insolvent with a view of preferring a creditor, within a two month period
before a petition. Even if this could still operate, it would appear to be embraced
in the wider federal statute.
By the Nova Scotia Assignments and Preferences Act, R.S.N.S. 1967, c. 16,
transfers, etc., having preferential effect are (rebuttably?) presumed to be
intented to prefer and as such avoided if attacked within sixty days or if an
assignment for the benefit of creditors
is made within the same period;
pressure being irrelevant in such cases. Otherwise an intent to defeat, hinder,
delay, or prejudice creditors, or to prefer a creditor, is needed.
Ontario retains on its statute books both The Assignments and Preferences
Act, R.S.O. 1960, c. 25, and The Fraudulent Conveyances Act, R.S.O. 1960,
c. 154. It is of course the predecessor of the first-mentioned Act, “An Act
respecting Assignments and Preferences by Insolvent persons”, as it stood
in R.S.O. 1887, c. 124, that gave rise to the famous Voluntary Assignments
Case (see the third paragraph of this note). However, only the postponement
of incomplete executions to an assignee for the benefit of creditors was there
in issue, as the reference sought a ruling on the one section of the Act relating
thereto, and the decision of the Privy Council cannot safely be relied on as
supporting anything else. Since that time (1894), as before, the provisions
of the Ontario Act have been treated as valid in many judicial decisions:
see Can. Abr. (2d) v. 3, pp. 557 et seq., though after the Bankruptcy Act of
191,9 there was doubt as to how far the provincial legislation was superseded.
[1934] 3 D.L.R. 195, 15 C.B.R. 372,
See Re Trenwith, [1934] O.R. 826,
overruling Re Pommier, (1q30), 65 O.L.R. 415, 11 C.B.R. 449, [1930] 4 D.L.R.
118; per Masten, J.A., for a majority of the Court of Appeal for Ontario in
Re Trenwith, [1,934] O.R., at p. 382: “[I]t seems clear to me that the common
field of legislation respecting the distribution of the estates of insolvents having
now become occupied by the Dominion Bankruptcy Act, the provisions of
The Assignments and Preferences Act respecting the preference of one creditor
over another have been thereby superseded and have ceased to have any
operation.” In Re Bozanich, [1942] S.C.R. 130, the Supreme Court of Canada
refused to hold the sections of the Bankruptcy Act avoiding settlements to be
sufficiently broad to embrace all conveyances or transfers of property, and,
particularly, chattel mortgages given to secure indebtedness in the course of
business. As regards a possible application of the Ontario legislation, Duff,
C.J.C., for himself, Davis, and Kerwin, JJ., and apparently without dissent
by Rinfret, J., who spoke for himself and Grocket, J., said (at p. 136): “I may
add that, in my opinion, the provisions of R.S.O. 1927, Chap. 162, in relation to
preferences are superseded by section 64 of the Bankruptcy Act, and that the
authority of the Ontario Legislature to enact such legislation is, in consequence
of the enactment of section 64, suspended in view of the concluding paragraph
of section 91.” Quaere whether this is affected by the reservation contained in
s. 41
(6) of the present Bankruptcy Act (q.v.). See Re Shelly Films Ltd.,
[1963] 1 O.R. 431, 37 D.L.R. (2d) 419, 4 C.B.R. n.s. 186; Vasey V. Kreutzweiger,
(19.65), 8 C.B.R. n.s. 225.
Section 4 avoids conveyances, transfers, payments, etc., made with intent
to defeat, delay, or prejudice creditors, by an insolvent or one who knows
himself to be on the eve of insolvency. Such transactions, made with intent
to prefer a creditor, are avoided by section 5; and where the attack is brought,
or an assignment for the benefit of creditors is made, within sixty days of
the impugned transaction, preferential effect is sufficient to create a presumption
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
617
of intent to prefer, whether the preference be made voluntarily or under
pressure. It is noteworthy, however, that, as in the federal Act, the presumption
of intent to prefer which attaches to preferential effects is a presumption prima
facie only –
a matter which, as we have seen, is unclear in Nova Scotia and
New Brunswick, and definitely otherwise in Alberta, B.C., and Manitoba.
For a recent application of The Fraudulent Conveyances Act, R.S.O. 1060,
c. 154, see Re Dougmor Holdings Ltd.; Fisher v. Wilgorn Investments Ltd.,
(196G), 10 C.B.R. n.s. 141. See also Re Hvcimovic, (.1966), 10 C.B.R. n.s. 229.
The Frauds on Creditors Act, R.S.P.E.I. 1951, c. 65, appears to be closely
similar in substance to the Ontario legislation, on the subject of preferences,
particularly with reference to the sixty-day period in which a prima facie
presumption of intent to prefer is attached to transactions with preferential
effect. An attack must be made within the period, however, as the Act does
not provide for the case of an assignment being made within the same time
limit. It is specially declared by section 2(5) that the preferential intent, or
the intent to defeat, hinder, delay, or prejudice creditors, is the intent of the
assignor or transferor, and that no concurrence therein, or knowledge thereof,
or of insolvency, need be shown.
In Quebec, reference may be had to art. 1031 of the Civil Code (the so-called
“oblique” action) and 1032 C.C. (the “paulian” action), and, generally, arts.
1032 to 1040 of the Civil Code. These are, of course, pre-Confederation statute
law, and the power to repeal the law embodied in them is precisely coextensive
with the respective legislative jurisdictions of Parliament and the provinces
since Confederation: B.N.A. Act, s. 129. (As to attempts to interfere with the
text of a pre-Confederation enactment –
i:e., to repeal otherwise than by
inconsistent legislation which leaves it to the courts to decide to what extent
the old rules lie within what has become one or other jurisdiction –
see the
remarks in A.-G. Ont. v. A.-G. Can., [1896] A.C. 348, at p. 366.) The pr-
Confederation character of the original provisions of the Civil Code is often
overlooked, with serious consequences upon that is said about them; such
oversights, on the part of a judge of the Supreme Court of Canada, cannot
be described as being otherwise than of the utmost gravity: see the remarks
of Locke, J., in Traders Finance Corporation v. Levesque, [1061] S.C.R. 83,
at p. 90 in the final paragraph; particularly unfortunate in so able a judgment.
Article 1037 C.C., and a saving clause at the end of art. 1039 C.C., both
referring to the Insolvent Act of 1864 (Province of Canada), were repealed
by the Parliament of Canada in the revision of 1886; 49 Vict., c. 4, s. 5 and
Schedule A to the Revised Statutes of Canada, 1896.
For authorities on the application of these articles, see Can. Abr. (2d), v. 3,
pp. 564 et seq. Cie de Construction Charlesbourg; Lefaivre v. Demers, [1948]
B.R. 745, 29 C.B.R. 176, clearly supports the view that the relevant articles
of the Civil Code have not been superseded by the Bankruptcy Act, and that
the trustee may avail himself of them. A payment by an insolvent debtor to a
creditor knowing his insolvency is deemed to be made with intent to defraud
and may be recovered by the creditors for their benefit according to their
respective rights: art. 1036. A contract cannot be avoided unless it is made by
the debtor with intent to defraud and will have the effect of injuring the
creditor; but a gratuitous contract is deemed to be made with intent to defraud
if the debtor is then insolvent, and an onerous contract made by an insolvent
with a person who knows him to be such is deemed to be made with intent to
defraud: arts. 1033 to 1035. Art. 1038 provides that “An onerous contract
McGILL LAW JOURNAL
[Vol. 15
made with intent to defraud on the part of the debtor, but in good faith on
the part of the person with whom he contracts is not voidable; saving the
special provisions applicable in the case of insolvency of traders.” Art. 1040
provides that “No contract or payment can be avoided by reason of anything
contained in this section [i.e. Section VI, “Of Avoidance of Contracts and
Payments made in Fraud of Creditors”, arts. 1032 to 1040], at the suit of
any individual creditors, unless such suit is brought within one year from
the time of his obtaining a knowledge thereof. If the suit be by assignees or
other representatives of the creditors collectively, it must be brought within a
year from the time of their appointment.” By art. 1039, a contract or payment
can be avoided under the articles in question only by a creditor anterior to
the impugned transaction, or one subrogated in his rights. In Cie de Construction
Charlesbourg, supra, the Quebec Queen’s Bench held that one year limitations
provided by art. 1040 supra applied even to proceedings taken under s. 64 of
the Bankruptcy Act; this was rejected by Locke, J., in Re Garage Causapscal;
Traders Finance Corporation v. Deveeque, [1901] S.C.R. 52, 26 D.L.R.
(2d)
384; and the opinion of Fauteux, J., for himself and Kerwin, C.J., and
Taschereau and Abbott, JJ., in the same case, avoided deciding the matter
since, in their view, the proceedings, being taken under s. 16 of the Bankruptcy
Act, were taken by plaintiff in his own right and not as successor to the
trustee, so that the one year limitation of 1040 C.C., if applicable at all (which
was not decided), ran from one year of plaintiff’s knowledge, which had not
expired. The majority judgment does contain the implication that the recourses
of arts. 1032, et seq. C.C. and ‘those of the Bankruptcy Act do not cover the
same ground; thus Fauteux, J., [19.1] S.C.R. 52, at p. 87, speaks of “les d6-
ch6ances sp6cifiquement 6tablies en l’art. 1040 du Code Civil pour des recours
qui, s’apparentant & celui qu’autorise l’art. 16, en diffient” (emphasis added).
The erroneous assumption of Locke, J., that the Civil Code was a post-Confedera-
tion Quebec statute is discussed above.
Saskatchewan has on its statute books The Fraudulent Preferences Act,
R.S.S. 1965, c. 397. Preferential effect suffices to avoid payments, transfers,
etc. by insolvents and persons knowing themselves on the eve of insolvency,
provided that the attack is made within 60 days; in such cases pressure by a
creditor, or his want of notice, is made irrelevant. Otherwise a preferential
intent is necessary, or an intent to defeat, hinder, delay or prejudice creditors.
For cases on Saskatchewan legislation, and the doctrine of concurrent intent,
etc., see Can. Abr. (2d), v. 3, pp. 565 et seq.
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
619
APPENDIX SIX
THE DEFINITIONS UNDER THE ,101 ACT
Under The Bankruptcy Act, 1919, 9-10 Geo. V, S.C. 1910, c. 36, the relevant
definitions, so far as material, were as follows:
this Act, unless
requires or
implies, the
“corporation”
the context otherwise
includes any company incorporated or authorized
2. In
expression, –
to
(k)
carry on business by or under an Act of the Parliament of Canada or
of any of the provinces of Canada, and any incorporated company, whereso-
ever incorporated, which has an office in or carries on business within
Canada, but does not include building societies having a capital stock, nor
incorporated banks, savings banks, insurance companies, trust companies,
loan companies or railway companies;
“debtor” includes any person, whether a British subject or not, who,
(o)
at the time when any act of bankruptcy was done or suffered by him,
or any authorized assignment was made by him, (a) was personally present
in Canada, or (b) ordinarily resided or had a place of residence in Canada,
or (c) was carrying on business in Canada personally or by means of an
agent or manager, or (d) was a corporation or a member of a firm or
partnership which carried on business in Canada; …
include a person, whether or not
(t) “insolvent person” and “insolvent”
he has done or suffered an act of bankruptcy, (i) who is for any reason
unable to meet his obligations as they respectively become due, or (ii) who
has ceased paying his current obligations in the ordinary course of business,
or (iii) the aggregate of whose property is not, at a fair valuation, sufficient,
or, if disposed of at a fairly conducted sale under legal process would not
be sufficient, to enable payment of all his obligations, due and accruing
due, thereout;
(aa) “person” includes corporation and partnership [.]
2. En la pr~sente loi, A moins que le contexte n’exige ou n’implique une
interprdtation diff6rente, l’expression:
comprend toute compagnie constitue en corporation
(k) xcorporation
ou autoris~e h exercer un commerce par ou sons l’empire dune loi du
Parlement du Canada, ou de l’une quelconque des provinces du Canada, et
toute compagnie constitute en corporation, en quelque lieu que ce soit,
qui a un bureau au Canada ou qui y poursuit ses op6rations, mais ne
comprend pas les soci6t6s de construction qui ont un capital-actions, ni
les banques, caisses d’6pargne, compagnies d’assurance, compagnies de
fiducie, compagnies de prft ou compagnies de chemin de fer constitudes
en corporation;
(o) &ddbiteur> s’applique 4 quiconque, sujet britannique ou non, h l’6poque
oii un acte de faillite a Wtd commis ou subi par lui, ou A l’dpoque oi une
cession autoris~e a 6t6 faite par lui (a) 6tait personnellement present au
rdsidait h l’ordinaire ou avait un domicile au Canada, ou
Canada, ou (b)
(c) poursuivait des affaires au Canada, soit personnellement ou au moyen
d’n agent ou g6rant, ou (d) 6tait une corporation ou faisait parbie d’une
firme ou soci~t6 qui poursuivait des affaires au Canada,…
cpersonne insolvable et zfailliz comprennent les personnes, qu’elles
(t)
aient ou non fait ou subi un acte de faillite, (i) qui sont, pour une raison
McGILL LAW JOURNAL
[Vol. 15
quelconque, incapables de faire honneur h leurs obligations au fur et A
mesure de leur 6chdance respective ou (ii) qui ont cess6 de payer leurs
obligations courantes dans le cours ordinaire des affaires, ou (iii) dont la
totalit6 des biens n’est pas, d’apr~s une estimation raisonnable, suffisante,
on ne serait pas suffisante, au moyen d’une vente bien conduite par autorit6
de justice, pour permettre le paiement de toutes leurs obligations, 6chues
ou h 6cheoir;
(aa)
By The Bankruptcy Act Amendment Act, 1921, 11-42 Geo. V, S.C. 1921,
tpersonne:. comprend corporation et soci6t6 [
c. 17, it was provided:
5. Paragraph (aa) of section two is repealed and the following substituted
therefor:-
“(aa)
“person” includes a firm or partnership, an unincorporated association
of persons, a corporation as restrictively defined by this section, a body
corporate and politic, the successors of such association, partnership, corpo-
ration, or body corporate and politic, and the heirs, executors, administrators
or other ‘legal representatives of a person, according to the law of that
part of Canada to which the context extends.”
5. Est abrog6
‘alin6a (ac) de l’article deux, et remplac6 par le suivant:
i(aa) cpersonnez comprend une firme ou socit6, une association de per-
sonnes non constitude en corporation, une corporation telle que limitative-
ment ddfinie par le pr6sent article, un corps constitu6 et politique, les
successeurs de cette association, soci4 t, corporation, ou de ce corps constitu6
et politique, et les hritiers, excuteurs tostamentaires, administrateurs ou
autres repr~sentants l~gaux d’une personne, conform6ment A la loi de la
partie du Canada hL laquelle le contexte s’&tend.a
In the Bankruptcy Act, R.S.C. 1927, c. 11, the definitions, so far as material,
were as follows:
implies, the
includes any company incorporated or authorized
2. In this Act, unless the context otherwise requires or
expression
(k) “corporation”
to
carry on business by or under an Act of the Parliament of Canada or of
any of the provinces of Canada, and any incorporated company, wheresoever
incorporated, which has an office in or carries on business within Canada,
but does not include building societies having a capital stock, nor incorpo-
rated banks, savings banks, insurance companies, trust companies,
loan
companies or railway companies;
(p) “debtor” includes any person, whether a British subject or not, who,
at the time when any act of bankruptcy was done or suffered by him, or
any authorized assignment was made by him,
(i) was personally present in Canada, or
(ii) ordinarily resided or had a place of residence in Canada, or
(iii) was carrying on business in Canada personally or by means of an
agent or manager, or
(iv) was a corporation or a member of a firm or partnership which
carried on business in Canada;
(u) “insolvent person” and “insolvent” includes a person, whether or not
he has done or suffered an act of bankruptcy,
(i) who is for any reason unable to meet his obligations as they generally
become due, or
No. 4] CORPORATIONS NOT SUBJECT TO BANKRUPTCY LAW
621
(ii) who has ceased paying his current obligations in the ordinary course
(iii)
of business as they generally become due, or
the aggregate of whose property is not, at a fair valuation, sufficient,
or, if disposed of at a fairly conducted sale under legal process,
would not be sufficient to enable payment of all his obligations, due
and accruing due, thereout;
(cc)
“person” includes a firm or partnership, an unincorporated association
of persons, a corporation as restrictively defined by this section, a body
corporate and politic, the successors of such association, partnership, cor-
poration, or body corporate and politic, and the heirs, executors, adminis-
trators or other legal representative of a person according to the law of
that part of Canada to which the context extends [.]
2. En ]a pr~sente loi, b moins que le contexte n’exige ou n’implique une
interpretation diffdrente, l’expression
k)
acte de faillite a Wt commis ou permis par lui, ou qu’une cession autoris~e
a W faite par lui
6tait personnellement pr6sent au Canada, ou
r~sidait h l’ordinaire ou avait un domicile au Canada, on
(i)
(ii)
(iii) poursuivait des affaires au Canada, soit personnellement soit au
moyen d’un mandataire on g6rant,
z)
gpersonne>> comprend une firme ou socit4, une association de personnes
non constitu6es en corporation, une corporation tedle que ,limitativement d6fi-
nie par le pr6sent article, un corps constitu6 et politique, les successeurs de
cette association, socit , corporation, on de ce corps constitu6 et politique,
et les hdritiers, ex6cuteurs testamentaires, administrateurs on a tres repr-
sentants l6gaux d’une personne, conformdment h la loi de la partie du
Canada A laquelle le contexte s’dtend;
ac)
aient ou non fait ou subi un acte de faillite,
les personnes, qu’elles
tfailliD comprend
qpersonne
insolvable > et
(i)
(ii)
qui sont, pour une raison quelconque, incapables de faire honneur h
leurs obligations au fur et h mesure de ‘leur 6ch~ance respective, ou
qui ont cess6 de payer leurs obligations courantes dans le cours
ordinaire des affaires et au fur et A mesure de leur 6ch6ance res-
pective, on
(iii) dont la totalit6 des biens n’est pas, d’apr~s une estimation raisonnable,
suffisante, ou ne serait pas suffisante, au moyen dune vente bien
conduite par autorito
de justice, pour permettre le paiement de toutes
leurs obligations, dchues et h 6choir [.]
