Velensky v. Canadian Credit Men's Trust Association Ltd.

Velensky v. Canadian Credit Men's Trust Association Ltd.

The trustee's sole remedy under s.64(1) is to have the payment declared void and recover the payment; because the payment had already been judicially declared valid as between the bank and the trustee (no appeal taken), that determination was res judicata and it was too late to void the payment or order the guarantors to pay the trustee, so the appeal by the guarantors succeeds and the action is dismissed against them.

Citation
[1960] SCR 385
Parties
Appellant (guarantor): Bernard Velensky; Appellant (guarantor): Harry Velensky; Appellant (guarantor): Jake Budovitch; Respondent (trustee in Bankruptcy): The Canadian Credit Men's Trust Association Limited
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
18 March 1960
Procedural Posture
Bankruptcy and Insolvency Appeal / Appeal to the Supreme Court of Canada From New Brunswick Appeal Division
Outcome
Appeal allowed; order of the Appeal Division set aside as to the appellants; judgment of trial judge (Anglin J.) restored as to the appellants; action dismissed against the appellants.
Legal Topics
Fraudulent Preference, Voidability of Payments, Trustee Remedies, Guarantor Liability, Res Judicata
Source Language
English
Bankruptcy and Insolvency Civil Procedure Fraudulent Preference Voidability of Payments Trustee Remedies Guarantor Liability Res Judicata

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Parties

Bernard Velensky

Appellant (guarantor)

Harry Velensky

Appellant (guarantor)

Jake Budovitch

Appellant (guarantor)

The Canadian Credit Men's Trust Association Limited

Respondent (trustee in Bankruptcy)

Procedural Posture

Bankruptcy and Insolvency Appeal / Appeal to the Supreme Court of Canada From New Brunswick Appeal Division

Legal Issues

  1. 1 Whether s.64(1) of the Bankruptcy Act rendered a payment by an insolvent company void as against the trustee as a fraudulent preference
  2. 2 Whether a court may order guarantors to pay the trustee directly where a preferential payment has been made to the creditor
  3. 3 Whether a payment can be valid as between creditor and trustee yet void as between guarantors and trustee (res judicata consequences)

Ratio Decidendi

The trustee's sole remedy under s.64(1) is to have the payment declared void and recover the payment; because the payment had already been judicially declared valid as between the bank and the trustee (no appeal taken), that determination was res judicata and it was too late to void the payment or order the guarantors to pay the trustee, so the appeal by the guarantors succeeds and the action is dismissed against them.

Court Disposition

Appeal allowed; order of the Appeal Division set aside as to the appellants; judgment of trial judge (Anglin J.) restored as to the appellants; action dismissed against the appellants.

Orders

  • Appeal allowed
  • Order of the Appeal Division set aside as against Bernard Velensky, Harry Velensky and Jake Budovitch