Date: 20000510
Docket: T-1108-94
Between:
JAMES D. NOLAN,
Plaintiff,
- and -
SILEX INTERNATIONAL CHEMICAL SYSTEMS INC.
- and -
RENÉ ST-PIERRE,
Defendants.
REASONS FOR JUDGMENT
LEMIEUX J.
INTRODUCTION
[1] The Business Development Bank of Canada (hereinafter "BDB") is hereby appealing the order made by Roger R. Lafrenière, prothonotary, on December 2, 1999 dismissing the motion to quash distribution of the proceeds of the Court sale of the movable property of the debtor Silex International Chemical Systems Inc. (hereinafter "Silex"), defendant in the principal action, filed by the BDB.
[2] As laid down in Rule 51 of the Federal Court Rules, 1998, an order of a prothonotary of the Court may be appealed by motion to a judge of the Trial Division of the Court.
[3] The standard of review applicable to orders made by prothonotaries under their discretionary powers was described by the Federal Court of Appeal in Canada v. Aqua-Gem Investments Ltd., [1993] 2 F.C. 425.
[4] Accordingly, I note that in the context of the appeal at bar the BDB is not a party to the principal action and has only intervened as creditor of the defendant at bar, Silex. In view of this situation, I have to conclude that the order by the prothonotary Lafrenière, whether he was exercising a discretionary power or not, dealt with questions having a conclusive effect on the outcome of the principal action, since the BDB will no longer be able to assert its rights as a creditor over the said distribution of the proceeds of sale: the order will thus be final so far as the BDB"s rights are concerned. In these circumstances, therefore, I must review the matter from the beginning.
FACTS
[5] As I have heard the parties and read the record, I will only briefly summarize the facts already set out by the prothonotary Lafrenière in his order.
[6] On October 21, 1998, this Court delivered a judgment awarding the plaintiff Nolan the sum of $96,000 against the defendants Silex and René St-Pierre. Following that judgment a writ of seizure in execution was issued by this Court on February 25, 1999 against the movable and immovable property of Silex.
[7] On March 2, 1999 at the request of Nolan, the plaintiff, the bailiff Jacques Bothillier proceeded to seize the movable property of Silex and one week later served on the plaintiff Nolan a certified statement of the rights entered in Register of Personal and Movable Real Rights (hereinafter "the Register") on the said property seized from Silex. It appeared from the said certified statement that it included two conventional hypothecs without delivery: the first in the amount of $115,000 recorded in the name of the Royal Bank of Canada (hereinafter "RBC") and the second in the amount of $96,000 in the name of the BDB.
[8] Pursuant to art. 592.3 of the Code of Civil Procedure, R.S.Q., c. C-25 (hereinafter "the C.C.P."), the bailiff on March 16, 1999 served the notice of a court sale and minutes of seizure on the BDB since the latter was the holder of a right over the said property. On March 17, 1999 a notice of court sale of the property of Silex was published pursuant to art. 594 of the C.C.P.: the said sale was fixed for the following March 31.
[9] On March 23, 1999, the BDB filed a motion pursuant to art. 592.4 of the C.C.P. to fix a minimum reserve price on the movable property seized and served a copy thereof on the plaintiff Nolan. With that motion, the BDB filed a copy of its hypothecary deed and proof of entry of its right in the Register.
[10] On March 29, 1999 this Court proceeded to issue an order setting at $13,000 the total reserve price for the said movable property of Silex to be sold and directing the seizing bailiff to again publish the notice of sale, including the reserve price. The new notice of sale was published on April 12, 1999; the date of the sale was set for April 27, 1999 in the town of Blainville, province of Quebec.
[11 At the court sale conducted by the bailiff a majority of the movable property of Silex was sold, for a total gross amount of $72,000. It appeared that the BDB did not urge any of its representatives to attend the said sale, despite the fact that it was fully informed of the date of the sale. However, on or about April 30, 1999 the BDB inquired through one of its counsel how the said court sale had proceeded. At that time it was indicated that the proceeds of the sale were some $73,000.
[12] In accordance with the rule laid down in art. 604 of the C.C.P., the hypothecary creditors of Silex had until May 7, 1999 to file with the seizing officer a statement of their claim, supported by an affidavit and the necessary vouchers. On May 7, 1999 it appeared that the BDB had still not filed the necessary vouchers with the officer or served them on Silex
[13] On May 25, 1999, the BDB was told that the proceeds of the court sale of the movable property of Silex had been turned over to the plaintiff Nolan. On May 27, 1999 the BDB
served on Nolan a motion to quash the distribution of the proceeds of the court sale of the debtor Silex"s movable property which is the subject of the appeal at bar.
[14] On December 2, 1999 the prothonotary Lafrenière made an order dismissing the said motion by the BDB on the ground that since the BDB had not complied with the requirements stated in the C.C.P., the seizing officer properly handed over the proceeds the sale of the said property of the seizing creditor Nolan, as laid down in art. 613 of the C.C.P.
[15] The question before the prothonotary Lafrenière was the following:
| [TRANSLATION] |
| In view of the failure by the hypothecary creditor BDB to file with the seizing officer a statement of its claim within ten days of the court sale of the debtor Silex"s movable property, was the seizing officer authorized to pay to the plaintiff Nolan, an unsecured creditor, the proceeds of the court sale of the said movable property, after deducting tax costs, without preparing a scheme of collocation? |
[16] After listening to the parties" arguments and carefully reading the arguments raised on either side, I will proceed directly to analysis of the right in question without further delay.
APPLICABLE LAW
[17] As set out in Rule 448 of the Federal Court Rules, 1998, when compulsory execution of a Federal Court order involves the seizure and sale of property, movable or immovable, the applicable procedure is that of province in which the said seizure was made. In the case at bar there is no question that the applicable procedure is that of the C.C.P., since Silex"s movable property was seized in the province of Quebec.
[18] Consulting the C.C.P., the articles applicable here are those in Division 2 of Book IV of the C.C.P., under the heading "seizure of movable property". This block of articles includes arts. 580 to 616.1. The articles which concern us here are the following:
| 592.2 Lorsque les biens saisis sont ceux d"une entreprise et qu"il se trouve parmi les biens saisis, un bien ou un ensemble de biens dont l"officier saisissant estime la valeur marchande à 6 000 $ ou plus, suivant son évaluation, celui-ci doit obtenir de l"officier de la publicité des droits un état certifié des droits consentis par le débiteur sur ce bien ou cet ensemble de biens et inscrits sur le registre des droits personnels et réels mobiliers. |
592.2 Where the property seized is the property of an enterprise and includes a property or a group of properties of which the market value is estimated to be $6 000 or more according to the valuation of the seizing officer must obtain from the registrar a certified statement of the rights granted by the debtor on the property or group of properties and registered in the register of personal and movable real rights. |
| 592.3 Lorsque l"officier saisissant constate que des droits ont été consentis par le débiteur sur des biens saisis, il doit signifier avec diligence, sous peine de tous dommages-intérêts, aux titulaires des droits publiés, à l"adresse inscrite au registre des droits personnels et réels mobiliers, une copie certifiée de son procès-verbal de saisie et de l"avis de vente ; il doit aussi informer le créancier saisissant de l"existence des droits consentis par le débiteur. |
592.3 Where the seizing officer ascertains that rights have been granted by the debtor in the seized property, he must, under penalty of all damages, promptly serve on the holders of published rights, at the adress registered in the register of personal and movable real rights, a certified copy of his minutes of seizure and the notice of sale; he must also inform the seizing creditor of the existence of the rights granted by the debtor. |
| 604. Les créanciers du saisi ne peuvent s"opposer à la saisie ni à la vente. Toutefois, les créanciers prioritaires ou hypothécaires peuvent exercer leurs droits sur le produit de la vente; en ce cas, ils produisent entre les mains de l"officier saisissant, au plus tard dix jours après la vente, un état de leur créance, appuyé d"un affidavit et des pièces justificatives nécessaires, lesquels doivent en outre être signifiés au saisi. Dans les dix jours de la signification de l"état d"une créance prioritaire ou hypothécaire, le saisi peut s"adresser au tribunal ou au juge pour la contester. |
| 604. The creditors of the debtor cannot oppose the seizure of the sale. However, prior and hypothecary creditors may exercise their rights upon the proceeds of the sale; for that purpose, they file with the seizing officer, within ten days after the sale, a statement of their claim, supported by an affidavit and the necessary vouchers, which documents must also be served on the debtor. Within ten days of service of a statement of a prior or hypothecary claim, the debtor may apply to the court or to the judge to contest the claim. |
| 613. Dans les dix jours qui suivent l"expiration du délai de production d"un état de leur créance par les créanciers prioritaires ou hypothécaires, l"officier saisissant, entre les mains duquel aucun état n"a été produit, paie au créancier saisissant les sommes d"argent saisies ou prélevées, après déduction des frais taxés et il rapporte au greffe ses procès-verbaux de saisie et de vente. |
613. Within ten days after expiry of the time allowed prior or hypothecary crebitors to file a statement of their claim, the seizing officer, if no statement has been filed with him, pays to the seizing creditor the moneys seized or levied, after deducting the taxed costs, and files his minutes of seizure and sale at the office of the court. |
| 614. Si l"officier saisissant a constaté que des droits ont été consentis sur les biens saisis, il dresse un état de collocation dont il signifie une copie certifiée au débiteur et aux créanciers. Si, dans les dix jours de la signification de l"état, le débiteur ou aucun créancier ne l"a contesté, l"officier saisissant procède à la distribution des sommes d"argent. Au cas contraire, il les rapporte pour qu"elles soient adjugées à qui de droit par le tribunal; il en est de même lorsqu"il y a déconfiture du saisi. Cependant, l"officier saisissant n"est pas tenu de dresser un état de collocation lorsque les sommes d"argent prélevées n"excèdent pas les frais de justice. Après la distribution, l"officier saisissant rapporte au greffe ses procès-verbaux de saisie et de vente, ainsi que l"état de collocation. |
614. If the seizing officer has ascertained that rights have been granted in the seized property, he prepares a scheme of collocation and serves a certified copy on the debtor and the creditors. If the scheme is not contested by the debtor or any creditor within ten days after its service, the seizing officer distributes the moneys. Otherwise, he returns the moneys to be adjudged by the court to those entitled thereto; the same applies in the case of insolvency of the debtor. However, the seizing officer is not required to prepare a scheme of collocation where the moneys levied do not exceed the legal costs. After the distribution, the seizing officer files his minutes of seizure and sale and the scheme of collocation at the office of the court. |
| 615. La distribution des sommes d"argent provenant de la vente s"effectue dans l"ordre suivant:
2) Les réclamations des créanciers prioritaires, ou hypothécaires, s"ils ont produit un état de leur créance appuyé d"un affidavit et des pièces justificatives nécessaires; 3) La réclamation du créancier saisissant, s"il est chirographaire. S"il y a déconfiture du saisi, la distribution entre les créanciers chirographaires s"effectue conformément à l"article 578. |
615. The distribution of the proceeds of the sale is made in the following order: 1) Legal costs 2) The claims of the prior or hypothecary creditors, if they have filed a statement of their claim supported by an affidavit and the necessary vouchers; 3) The claim of the seizing creditor, if unsecured. In the case of insolvency of the debtor, the distribution among unsecured creditors is made in accordance with article 578. |
ANALYSIS
Learned commentary
[19] The parties filed on either side the opinions of various Quebec writers as to the interrelationship of arts. 604, 613 and 614 of the C.C.P. Inter alia I note that the prothonotary Lafrenière went to some lengths to describe the two arguments put forward by the said writers about the application of these articles. I have reviewed these learned articles and do not intend to discuss them in extenso in these reasons.
[20] However, the difference of opinion in Quebec law as to the application of these C.C.P. articles, which is the point at issue here, lies not in the statement of rules of interpretation but i determining how these articles relate to each other.
[21] I note that in his text titled Procédures et stratégies pour une exécution efficace du jugement, in Service de la formation permanente, Barreau du Québec, Congrès annuel du Barreau du Québec (1994), at p. 963, François Bousquet suggests that the scheme of collocation required in art. 614 should contain only the claims of hypothecary or prior creditors who have filed statements of their claims pursuant to art. 604. Charles Belleau, on the other hand, argues in his volume Précis de procédure civile au Québec, Ferland and Emery, vol. 2, 3d ed., that art. 613 of the C.C.P., which provides that monies resulting from the sale of the seized property shall be paid directly to the seizing creditor when no statement of claim has been filed, applies only when no right over the said property has been granted before the said seizure.
Rules of statutory construction
[22] Since in accordance with the Federal Court of Appeal judgment Aqua-Gem Investments Ltd., supra, I must review the prothonotary Lafrenière"s order de novo , I feel it is essential to consider the articles at issue by applying the rules of statutory construction expounded by the Supreme Court of Canada in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, and repeated in Canadian Oxy Chemicals Ltd. v. Canada (Attorney General), [1999] 1 S.C.R. 743.
[23] In Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, Iacobucci J. indicated at paras. 21-22:
| Although much has been written about the interpretation of legislation (see, e.g. , Ruth Sullivan, Statutory Interpretation (1997); Ruth Sullivan, Driedger on the Construction of Statutes (3rd ed. 1994) (hereinafter "Construction of Statutes"); Pierre-André Côté, The Interpretation of Legislation in Canada (2nd ed. 1991)), Elmer Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach upon which I prefer to rely. He recognizes that statutory interpretation cannot be founded on the wording of the legislation alone. At p. 87 he states: |
| Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. |
. . . . .
| I also rely upon s. 10 of the Interpretation Act, R.S.O. 1980, c. 219, which provides that every Act "shall be deemed to be remedial" and directs that every Act shall "receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit". |
[24] These rules of construction, based on the consistency of the law, apply in Quebec civil law. Prof. Pierre-André Côté indicated in his text The Interpretation of Legislation in Canada, 2nd ed., 1991, Les Éditions Yvon Blais Inc., pp. 288-89 and 259:
| INTERNAL COHERENCE |
| As the product of a rational and logical legislator, the law is considered to form a system. Every component contributes to the meaning as a whole, and the whole gives meaning to its parts: "each legal provision should be considered in relation to other provisions, as parts of a whole", wrote François Gény. |
. . . . .
THE GENERAL PRINCIPLE AND ITS APPLICATION
| That the law is coherent and systematic has long been recognized by the authorities. In the Lincoln College Case, Lord Coke wrote: |
| . . . the office of a good expositor of an Act of Parliament is to make construction on [sic] all the parts together, and not of one part only by itself; nemo enim aliquam partem recte intelligere potest antequam totum iterim atque iterum perlegerit. . . |
. . . . .
| And Justice Kellock, in R. v. Assessor of the Town of Sunny Brae, stated the principle this way: |
| A statute is to be construed, if at all possible, "so that there may be no repugnancy or inconsistency between its members". |
| Finally in R. v. Nabis, Beetz J. recalled that ". . . legal interpretation must tend to integrate various enactments into a coherent system rather than towards their discontinuity". |
. . . . .
| It must also be assumed that each term, each sentence and each paragraph have been deliberately drafted with a specific result in mind. Parliament chooses its words carefully: it does not speak gratuitously. |
[25] I note that only one decision has been rendered by the Quebec Superior Court on the application of these articles, following major amendments as part of the revision of Quebec civil law. Cleary v. Côté (S.C. Bedford, No. 460-17-000024-976, March 4, 1999, 99BE-502) deserves attention since it has to do with the major changes made regarding the exercise by hypothecary creditors of their rights when the property of one of their debtors is the subject of seizure by another creditor. I therefore adopt certain passages of that judgment, which was considered by the prothonotary Lafrenière. He cited in full Fréchette J. in Cleary, supra, as follows at 11-12:
| [TRANSLATION] |
| In the circumstances, the Court does not hesitate to conclude that art. 604 as approved has removed all ambiguity in interpretation. It is now clear that a prior or hypothecary creditor cannot claim property over which he holds a lien which has previously been seized by another creditor: that is the actual wording of the law. Such creditors can only assert their rights over the proceeds of sale. |
| Further, if there were still any doubt about this, the comments of the Minister of Justice help to confirm the clarity of the provision and the purpose sought by the legislature. |
| Comments |
| This article confirms the rule that creditors of the garnishee cannot object to the seizure or sale, but abolishes the objection to conserve and simplifies the procedure that allows prior or hypothecary creditors to assert their rights to the proceeds of sale. In view of the new provisions regarding publicity of rights, it does not really seem necessary to require hypothecary creditors to file an objection to conserve in order to protect their rights, since the latter are already the subject of an entry in the Real Estate Register or the Register of Personal and Movable Real Rights, as the case may be. At the same time, art. 2655 C.C.Q. provides that prior claims may be set up against other creditors without being published. This being the case, it will suffice for such creditors to file with the seizing officer within ten days after the sale a statement of their claim, supported by an affidavit and the necessary vouchers. Within ten days of service of the statement of a prior or hypothecary claim, the garnishee may apply to the court or judge to challenge it. |
| It will undoubtedly be noted that these comments of the Minister are only made to clarify the position: prior or hypothecary creditors can only submit statements of their claims and be collocated on the proceeds of the sale. |
| At the same time, we should note the provisions of art. 678, which establishes a correspondence between oppositions to seizures of movable property and seizures of immovable property: |
| 678. Subject to the provisions which follow, the rules of articles 596 to 604 as to oppositions to the seizure of moveable property also apply to oppositions to the seizure of immoveables. |
| Accordingly, it will be clear that immovable hypothecary creditors to whom the debtor is in default can only submit their claims to the seizing officer if they have themselves taken the initiative of exercising the rights which the law permits before another creditor proceeds to seize the property. In that case no objection or claim will be possible. [Emphasis mine.] |
[26] I note that in fact the seizing officer did observe the procedure laid down in arts. 592.2 and 592.3 of the C.C.P., and indeed neither party raised objections in this respect.
[27] However, the BDB objected to the fact that the seizing officer did not prepare a scheme of collocation as provided in the first paragraph of art. 614 of the C.C.P., despite the fact that he was fully aware of the existence of other hypothecary creditors since he had obtained a certified statement of the rights granted by Silex over the property in question and entered in the Register, pursuant to the obligation contained in art. 592.2 of the C.C.P.
[28] I fully understand the BDB"s argument, which noted the wording used by the legislature in the first paragraph of art. 614 of the C.C.P.: "If the seizing officer has ascertained that rights have been granted", wording which suggests the existence of a duty imposed on the officer to prepare a scheme of collocation as soon as he finds that rights have been granted to the seized property. I therefore take the opportunity presented here to note the genuine confusion created by use of the aforementioned words. However, I must dispose of the case before the Court in accordance with the rules of construction already indicated.
[29] Accordingly, I note that in propounding such reasoning the BDB appears to have overlooked the existence of arts. 604, 613 and 615 of the C.C.P. The Supreme Court of Canada undoubtedly indicated in Rizzo, supra, that the sections of a statute should be interpreted in accordance with the ordinary meaning of words. However, the interpretation of the said words must be undertaken in the entire context of the legislation and in keeping with the object and scheme of the Act and harmoniously with the intention of the legislature. Further, as the
legislature is deemed never to have spoken in vain, it is thus essential to determine the interrelationship of these articles to others, in an analysis of the scheme of the Act.
Article 604 C.C.P.
[30] Accordingly, I conclude that accepting the interpretation suggested by the BDB would amount to disregarding the existence of art. 604 of the C.C.P. It seems clear from that article that a duty is imposed on hypothecary and preferred creditors who have rights over the said property seized and put up for sale to file with the seizing officer within ten days of the sale a statement of their claims, supported by an affidavit and the necessary vouchers.
[31] This duty imposed on creditors is all the more logical as under the law of sureties and hypothecs it is standard practice for a hypothecary or prior claim to be paid over a more or less lengthy period of time by the regular payment of a specific amount of money, depending of course on the payment terms contained in the loan contract. It is thus essential for the proper administration of the proceeds of a court sale of seized property that a precise statement of the amounts actually due on the date of the seizure, not merely the theoretical amount that appears in its entirety in the deed containing the rights granted by the debtor, be given to the seizing officer responsible for preparing the scheme of collocation and distributing the said proceeds of the sale. The primary purpose of the provisions is the distribution of the proceeds of sale, not determining whether the hypothecary security is valid. Otherwise, how could he proceed to actual distribution of the proceeds of the sale in accordance with the amounts actually owed to each creditor?
[32] Additionally, I note that the existence of such a duty to hypothecary or prior creditors is confirmed by paragraph 2 of art. 615 of the C.C.P., which repeats that the latter must file a statement of their claims supported by an affidavit and the necessary vouchers so that the distribution of the proceeds of sale can be made. In short, I conclude that the existence of a duty to file the statement of claim and other documents is confirmed by the interrelationship of arts. 604 and 615 of the C.C.P.
Articles 603 et seq.
[33] Further, I note that adopting the interpretation suggested by the BDB would have the effect of overturning the entire procedure for distributing the proceeds of a court sale of the seized property laid down in arts. 613 et seq.
[34] In view of arts. 613 et seq. it is clear that the legislature anticipated two situations, that in which no prior or hypothecary creditor files a statement of a claim and the other necessary documents, and that in which such creditors filed statements of their claims and other related documents within the specified deadline.
[35] In the first scenario art. 613 authorized the seizing officer to pay the seizing creditor the amounts of money seized after deducting taxed costs. As to the second scenario, reference must then be made to art. 614 of the C.C.P., which requires the seizing officer to prepare a scheme of
collocation so that the proceeds of sale of the seized property may be fairly distributed.
[36] In short, for arts. 613 et seq. to be consistently applied it is absolutely necessary to interpret 604 as imposing on hypothecary creditors a duty to file statements of their claims.
[37] After analysing the applicable law, I conclude that the seizing officer properly decided to pay the unsecured creditor, the plaintiff Nolan, the proceeds of the sale of the seized property pursuant to the C.C.P., after deducting court costs, without preparing a scheme of collocation. Under art. 604, the BDB had a duty to provide a statement of its claim supported by an affidavit and the necessary vouchers within the specified deadline if it wished to be collocated as a creditor in the distribution and receive part of the proceeds of sale of the seized property.
[38] I therefore also conclude that the fact that a hypothecary or prior creditor does not observe the requirements contained in the C.C.P. results in the latter"s exclusion from distribution of the proceeds of a court sale of the seized property. Further, this omission by a creditor also relieves the seizing officer of his duty to prepare a statement of collocation.
[39] In my opinion, the prothonotary Lafrenière correctly interpreted the legislative provisions in the C.C.P. as a whole.
CONCLUSION
[40] For all these reasons, the BDB"s appeal is dismissed with costs.
| François Lemieux JUDGE |
Ottawa, Ontario
May 10, 2000
Certified true translation
Martine Brunet, LL. B.
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
| COURT No.: T-1108-94 |
| STYLE OF CAUSE: JAMES D. NOLAN v. SILEX INTERNATIONAL CHEMICAL SYSTEMS INC. and RENÉ ST-PIERRE |
| PLACE OF HEARING: MONTRÉAL, QUEBEC |
| DATE OF HEARING: DECEMBER 20, 1999 |
| REASONS FOR JUDGMENT BY: LEMIEUX J. |
| DATED: MAY 10, 2000 |
APPEARANCES:
| CHRISTIAN BOLDUC and FOR THE PLAINTIFF |
EKATERINA TSIMBERIS
| ANDRÉ BARIL and FOR THE BUSINESS DEVELOPMENT BANK |
| NANCY BOYLE OF CANADA |
SOLICITORS OF RECORD:
SMART & BIGGAR FOR THE PLAINTIFF
MONTRÉAL, QUEBEC
| LÉGER, ROBIC, RICHARD FOR THE DEDENDANT |
MONTRÉAL, QUEBEC
| DANCOSSE, BRISEBOIS FOR THE BUSINESS DEVELOPMENT BANK |
| MONTRÉAL, QUEBEC OF CANADA |