BANKRUPTCY
& INSOLVENCY LAW
PROPERTY OF BANKRUPT –
Exempt assets – Motor vehicle.
Appeal by the bankrupt from the dismissal of his application for a $5,000
exemption in respect of his motor vehicle
pursuant to the Court Order Enforcement Act (“COEA”). In March 2011, the
appellant made an assignment into bankruptcy. At the time of assignment, the
appellant owned a motor vehicle worth
$5,800. There was no security registered
against the vehicle. The trustee advised
the appellant, via letter, that the appellant was not entitled to the exemption on
the basis that the value of the vehicle
exceeded $5,000. The letter cited the
Thow decision in support of its position.
The appellant’s application was heard by
the same judge who decided the Thow
decision. The judge concluded that the
$5,000 exemption was not available to
the appellant on a different basis than his
reasoning in Thow. The judge differentiated between property sold by a trustee
under the Bankruptcy and Insolvency Act
(“BIA”) and property seized and sold pursuant to the COEA. Under s. 67 of the
BIA, a trustee was only able to sell property divisible amongst a bankrupt’s creditors, subject to an exemption under s.
71(1)(c) of the COEA for vehicles valued
less than $5,000. Thus the only vehicle
that could be sold under the BIA was a
vehicle over $5,000, precluding any voluntary sale of such vehicle under the
COEA by the debtor.
HELD: Appeal allowed. The judge’s
reasoning was at odds with his reasoning
in Thow and related jurisprudence. All of
the appellant’s assets, subject to the
applicable exemptions, vested in his
bankruptcy trustee at the moment of the
bankruptcy. There was no principled
basis upon which to distinguish a bankruptcy from an impending foreclosure
under the COEA for the purposes of the
application of the statutory exemptions
thereunder to the benefit of a debtor. An
exemption for a vehicle under s. 71(1)(c)
of the COEA, when considered in the
statutory scheme, which included ss. 37
and 67(1)(b) of the BIA, was available to
the bankrupt regardless of whether there
was a sale of the vehicle. The order below
was set aside and the appellant was
granted a personal exemption of $5,000
for his automobile.
Atwal (Re), [2012] B.C.J. No. 177,
British Columbia Court of Appeal,
L.S.G. Finch C.J.B.C., J.E. Hall and
C.E. Hinkson JJ.A., January 31, 2012.
CIVIL LITIGATION
CIVIL PROCEDURE – Procedure –
Pleadings – Institution of proceedings
– Writ of summons – Renewal – Parties
– Class or representative actions.
Appeal by the defendants from the dis-
missal of their application to set aside an
order renewing the unexpired writ of sum-
mons filed by the plaintiff. In July 2009,
the plaintiff filed a writ of summons against
the defendants. The writ contemplated
certification of the action as a class pro-
ceeding. No statement of claim was filed,
but the writ contained an endorsement
stating that the claim was for damages for
breach of fiduciary duty and negligence in
respect of changes to an employee pension
plan made in 1992 and 1993. The plaintiff
did not serve the writ. In June 2010, just
prior to the writ’s expiration, the plaintiff
applied ex parte to renew it. In support of
the application, the plaintiff filed an affi-
davit from counsel describing the difficul-
ties in obtaining financial information and
sufficient data to determine whether the
litigation was viable. The renewal order
was granted. In December 2010, the writ
was served on the defendants. In March
2011, the defendants applied to have the
renewal order set aside on the basis that
the supporting affidavit contained material
misinformation, that the action was stat-
ute-barred, and that the extreme delay in
commencing the action had caused preju-
dice. The chambers judge found that the
period between the writ’s initial expiration
date and the date on which it was served
was relevant for the assessment of preju-
dice, and no prejudice was alleged during
that timeframe. The judge rejected the
contention that counsel’s affidavit con-
tained misrepresentations and omissions.
Any tactical advantage in delay of service
was not a relevant consideration. The judge
ruled that the limited inquiry into the
merits on an application for renewal was
not the appropriate time to consider
whether the action was statute-barred. The
defendants appealed on the basis that the
limitation period clearly commenced in
1993 and thus the action was bound to fail,
as it was statute-barred.
COMMERCIAL LAW
UNFAIR TRADE PRACTICES –
Legislation – Provincial legislation – Con-
stitutional validity of legislation – False,
misleading or deceptive representation.
Application by the defendant airlines
for a declaration that the Business Practice and Consumer Protection Act
(“BPCPA”) was constitutionally inapplicable and the plaintiff’s action had no
chance of success as a result. The plaintiff
in the proposed class action alleged that
the defendants engaged in deceptive
practices by including international fuel
surcharges within the tax portion of airline tickets. The plaintiff argued that this
action misrepresented the surcharge as
something that was collected for the government when it was, in fact, collected for
the airlines themselves. The defendants
argued that they were federally regulated
so the BPCPA was constitutionally
inapplicable by the doctrine of paramountcy or interjurisdictional immunity,
and that the plaintiff’s complaint was
within the exclusive jurisdiction of the
Canadian Transportation Agency. In the
action, the plaintiff was seeking a declaration that the defendants violated the
BPCPA, a permanent injunction and a
refund of fuel surcharges. The plaintiff
and the Attorney General both opposed
the defendants’ application.
HELD: Application dismissed. It was
in the interests of efficiency and judicial
economy to have the constitutional questions determined before the action proceeded. The federal government’s jurisdiction over air travel was well-established
but the government did not support the
application. There was no operational conflict between the BPCPA and federal law.
It would be absurd to suggest that federal
law required the defendants to use deceptive practices. Section 86.1( 2) of the Canada Transportation Act expressly contained separate references to “fees”
“charges” and “taxes” and the Canadian
Transportation Agency had not directed
the defendants to bill the fuel surcharges
under taxes, nor had it approved the practice. The plaintiff was not disputing the
fuel surcharges themselves, just the manner in which they were presented on tickets. The plaintiff’s complaint did not challenge anything within the Agency’s
mandate. The plaintiff would be unable to
obtain the relief sought in the action under
federal legislation. There was no precedent to support the defendants’ interjurisdictional immunity claim and the impact
of the BPCPA on federal powers was not
serious enough to attract such protection.
Unlu v. Air Canada, [2012] B.C.J.
No. 86, British Columbia Supreme
Court, E.J. Adair J., January 18, 2012.
CORPORATIONS,
PARTNERSHIPS
& ASSOCIATIONS LAW
CORPORATIONS – Directors and
officers – Officers – Duties – Standard
of care of directors and officers – Hon-
esty and good faith.
Appeal by Rossetto, a former senior
officer with Mady Contract Division Ltd,
from a decision allowing the appeal by
Mady Development Corp, D Mady Invest-
ments Inc and Mady Contract Division
Ltd (collectively “Mady”) from an arbitra-
tion award which awarded Rossetto dam-
ages for an unpaid bonus. Rossetto was
employed as vice-president in charge of
construction projects with Mady from
July 1999 to December 2008. His com-
pensation package entitled him to an
annual fixed salary of $100,000, plus a
bonus of 30 per cent of profits. Mady dis-
covered that Rossetto had been taking
advantage of his position since Septem-
ber 3, 2007 by diverting company resour-
ces and funds to his own home renova-
tions. Rossetto was fired on December 12,
2008. Mady commenced a claim against
Rossetto for damages for conversion,
breach of contract, unjust enrichment
and breach of fiduciary duty. Rossetto
counterclaimed in respect of his unpaid
bonuses for 2007 and 2008, and for dam-
ages for wrongful dismissal. Both claims
proceeded to arbitration. The arbitrator
found that Rossetto was a member of
Mady’s executive group and was a trusted
individual within the organization. He
ordered Rossetto to pay to Mady $546,452
in damages, including $315,452 for mis-
appropriated assets and $231,000 for
consequential damage for delays caused
by Rossetto’s wrongful activities. Ros-
setto’s wrongful dismissal action was dis-
missed, but the arbitrator nonetheless
found that Rossetto was entitled to the
unpaid bonus for work performed during
the period of his wrongdoing because
Mady gained a benefit from Rossetto’s
work during that time. Mady appealed
from the arbitrator’s award of the unpaid
bonus. The court allowed the appeal, con-
cluding that as a senior officer of Mady,
Rossetto was expected to act honestly and
in good faith in undertaking his duties
and was not entitled to profit from gains
earned through his dishonest conduct.
The court found that the arbitrator erred
in concluding that Rossetto was entitled
to his unpaid bonus during the period of
wrongdoing, notwithstanding that a fidu-
ciary relationship existed between Ros-
setto and Mady. The arbitrator erred in
treating Rossetto like a terminated
employee rather than as a fiduciary. Ros-
setto sought to appeal from the court
order on the basis that the appeal judge
erred in holding that there was an over-
riding principle which disentitled a fidu-
ciary employee to any bonus in respect of
a period of time in which he acted in
breach of his fiduciary duty.
