Employer’s Liability Assurance Corp. Ltd. v. Ideal Petroleum (1959) Ltd.

Employer’s Liability Assurance Corp. Ltd. v. Ideal Petroleum (1959) Ltd.

The five-year commercial prescription under the Bankruptcy Act applied but was suspended because it was 'absolutely impossible' for the creditor to act while the debtor complied with an accepted proposal; the applicable bankruptcy date for s.64 purposes is the date of the assignment (October 6, 1961) because the 1958 petition did not result in a receiving order and an approved proposal under the 1952 Act is not an act of bankruptcy; therefore the 1957-58 payments fell outside s.64's three‑month avoidance period and could not be annulled, but dividends paid under the proposal to which respondent had no entitlement must be returned, leading to a partial allowance of the appeal.

Citation
[1978] 1 SCR 230
Parties
Appellant / Plaintiff: Employer’s Liability Assurance Corporation Limited; Respondent / Defendant: Ideal Petroleum (1959) Ltd.
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
7 December 1976
Procedural Posture
Bankruptcy Appeal / Appeal to the Supreme Court of Canada From the Court of Appeal for Québec; Judgment Delivered December 7, 1976
Outcome
Appeal allowed in part; Quebec Court of Appeal judgment amended; respondent ordered to pay specified sums to appellant
Legal Topics
Preferential Payments, Prescription (statute of Limitations), Suspension of Prescription (contra Non Valentem), Composition Proposal / Proposal to Creditors, Relation Back of Bankruptcy, Paulian Action
Source Language
English
Bankruptcy and Insolvency Preferential Payments Prescription (statute of Limitations) Suspension of Prescription (contra Non Valentem) Composition Proposal / Proposal to Creditors Relation Back of Bankruptcy Paulian Action

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Parties

Employer’s Liability Assurance Corporation Limited

Appellant / Plaintiff

Ideal Petroleum (1959) Ltd.

Respondent / Defendant

Procedural Posture

Bankruptcy Appeal / Appeal to the Supreme Court of Canada From the Court of Appeal for Québec; Judgment Delivered December 7, 1976

Legal Issues

  1. 1 Whether the action was barred by prescription under the Civil Code and Bankruptcy Act
  2. 2 Whether prescription was suspended by impossibility to act (art. 2232 Civil Code) until the proposal/assignment
  3. 3 Whether the date of bankruptcy for s.64 purposes could be related back to the 1958 petition or the 1958 proposal

Ratio Decidendi

The five-year commercial prescription under the Bankruptcy Act applied but was suspended because it was 'absolutely impossible' for the creditor to act while the debtor complied with an accepted proposal; the applicable bankruptcy date for s.64 purposes is the date of the assignment (October 6, 1961) because the 1958 petition did not result in a receiving order and an approved proposal under the 1952 Act is not an act of bankruptcy; therefore the 1957-58 payments fell outside s.64's three‑month avoidance period and could not be annulled, but dividends paid under the proposal to which respondent had no entitlement must be returned, leading to a partial allowance of the appeal.

Court Disposition

Appeal allowed in part; Quebec Court of Appeal judgment amended; respondent ordered to pay specified sums to appellant

Orders

  • Respondent to pay appellant the sum of 2,806.10 CAD
  • Interest at the legal rate from the date of notice of the action on the sum awarded