Bank of Montreal v. Kiwi Polish Co. (Canada) Ltd. et al.

Bank of Montreal v. Kiwi Polish Co. (Canada) Ltd. et al.

When all partners jointly and severally covenant to pay a debt and charge the partnership assets for its payment, the instrument constitutes a charge on the partnership assets in priority to other interests even if it does not expressly state the covenant is made 'as partners'; thus the debenture charged Geo. M. Fraser & Co.'s assets in priority.

Citation
[1971] SCR 991
Parties
Plaintiff Appellant: Bank of Montreal; Defendants Respondents: Kiwi Polish Company (Canada) Ltd. et al.; Defendants Appellants: Powell Projects Ltd. et al.
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
27 April 1971
Procedural Posture
Collection / Appeal to Supreme Court of Canada From Court of Appeal for British Columbia
Outcome
Appeal allowed
Legal Topics
Debenture, Floating Charge, Partnership Assets, Priority of Security, Joint and Several Covenant, Receiver
Source Language
English
Contract Partnership Security Interests Banking Insolvency Debenture Floating Charge Partnership Assets +3 more

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Parties

Bank of Montreal

Plaintiff Appellant

Kiwi Polish Company (Canada) Ltd. et al.

Defendants Respondents

Powell Projects Ltd. et al.

Defendants Appellants

Procedural Posture

Collection / Appeal to Supreme Court of Canada From Court of Appeal for British Columbia

Legal Issues

  1. 1 Whether the debenture created a valid charge on the partnership assets in priority to trade creditors
  2. 2 Whether the debenture bound only the partners' net interest in firm assets or the whole partnership assets
  3. 3 Whether partners must expressly covenant as partners for a charge on partnership assets to arise

Ratio Decidendi

When all partners jointly and severally covenant to pay a debt and charge the partnership assets for its payment, the instrument constitutes a charge on the partnership assets in priority to other interests even if it does not expressly state the covenant is made 'as partners'; thus the debenture charged Geo. M. Fraser & Co.'s assets in priority.

Court Disposition

Appeal allowed

Orders

  • Debenture constitutes a charge upon the accounts receivable, inventory and other assets of Geo. M. Fraser & Co., or the proceeds thereof in the hands of the receiver, in priority to any other interests represented in this action.
  • Appeal allowed with costs throughout to both appellants.