County Court

Cite as: Transeastern Properties Ltd. v. Banlar Enterprises Inc., 1992 NSCO 20 , PROVINCE OF NOVA SCOTIA COUNTY OF HALIFAX C.H. No.: 76743 IN THE COUNTY COURT OF DISTRICT NUMBER ONE BETWEEN: TRANSEASTERN PROPERTIES LIMITED Plaintiff - and ­ BANLAR ENTERPRISES INC., and AADLERS CONTRACTING SERVICES LIMITED Defendants D. Bruce Clarke, Esq., and John McKiggan, Esq., Counsel for the Plaintiff. Lyle Sutherland, Esq., and Ms. C. Hodder, articled clerk, Counsel for the Defendants. 1992, February 20th, Palmeter, C.J.C.C.: This matter was heard by way of a special chambers application on February 6th, 1992 and decision was reserved. The application made by the Plaintiff requested determination by this Court, of the following matters, namely: 1. An Order determining the validity of a certain chattel ,

- 2 ­ mortgage granted Enterprises Inc. Contracting Services Limited. 2. An Order interpreting Section 13 of the Tenancies for Rent Act, R.S.N.S. c. 464 and determining a seizure of chattels made pursuant to such section. 3. A Recovery to Civil Procedure Rule 48. The basic facts are and I would summarize them as Inc. (~Banlar~) entered into certain premises owned by Transeastern (~Transeastern~) on the 13th day time the shareholders of Banlar Brian Aalders, who was also the Aalders Contracting Services premises involved were located 5239 Blowers Street, in the City I J by Banlar to Aalders and Distress 1989, whether had been Order pursuant not really in dispute, follows: Banlar Enterprises a written offer, to lease Properties Ltd. of February 1991. At that were Lawrence Foran and principal shareholder of Limited ("Aalders"). The at 1568 Argyle Street and of Halifax. The premi ses

, - 3 were to be occupied by Banlar as name of "Drifter's Pub". On one Michael Casey became a twenty-five in Banlar. Some time after the Transeastern presented a formal lease to Banlar and requested execution. This formal lease was never signed by the parties. There were a number of chattels which were the property of Transeastern, of March, 1991 Banlar and Transeastern entered into a written agreement specifying which of the were owned by Transeastern. In and during the May and June, 1991, Aalders was work for Banlar on the premises to creditors of Banlar, on behalf noted that Michael Casey, one of testified, under oath, that it was any monies paid out by Aalders investment which the partner, in Banlar. In any event, the account of Aalders with Banlar stood at the amount of $33,859.35 1991. ­ a beverage room under the or about March 28th, 1991, percent shareholder Offer to Lease was signed located on the premises and on the 10th chattels on the premises months of February, March, doing some construction and also advanced monies of Banlar. It should be the shareholders of Banlar, his understanding that for Banlar was part of the Brian Aalders, was to have as of the end of June,

- 4 ­ On the 19th day of a chattel mortgage to Aalders covering chattels located in the of the chattels owned by Transeastern the agreement of March 10th, 1991. Banlar's rental for fall into arrears and, on September 20th, sent a notice of default indicating that to be paid, in full, by October Transeastern would exercise its right thereafter Transeastern became the premises, including chattels had been moved to a location at 16 Dentith Road in the City of Halifax. Banlar notice to Transeastern of their chattels. On cross-examination Aalders testified that the chattels Aalders because of breach of admitted that the chattels had been removed early one morning after one 0' clock, during non-working hours. July, 1991, Banlar granted in the amount of $33,859.35 premises, including some and enumerated in the premises began to 1991, Transeastern the arrears were 1st, 1991, otherwise as Landlord. Shortly aware that the chattels on owned by Transeastern, in Spryfield or Aalders had given no intention to remove the of his affidavit, Brian had been removed by the Chattel Mortgage. He Evidence would

- 5 ­ indicate that the chattels were 7th, 1991. On October 8th, a Distress Warrant and Notice and delivered the same to one employed by Stephen Kennedy Bailiff on Banlar. The Distress Warrant $9,216.02, being the full amount payable on account of a lease between Banlar and Transeastern. On October 8th, 1991 Mr. Neumaier Road which he believed to be other premises by Banlar. He discovered a large under a tarp at that location and Warrant upon a carpenter who was the premises at 16 Dentith Road, He took an inventory of the chattels the inventory and the Warrant at the same day, attended at 1568 Argyle Street and Street in the City of Halifax and posted a and inventory at that address. On October 31st, an amended Warrant of Distress Distraint covering some $23,040.05, removed on or about October 1991, Transeastern prepared of Re-Entry and Distraint Renny Neumaier, a Bailiff, Services for service referred to an amount of of rent charged, due and attended at 16 Dentith owned or leased number of chattels stored he served a copy of the in charge of renovating who was employed by Aalders. and posted a copy of 16 Denti th Road. He, on 5239 Blowers copy of the Warrant 1991 ~ranseastern prepared and Notice of Re-Entry and being the original amount

- 6 claimed of $9,216.02, plus three of $13,824.03. The Bailiff, Mr. of the amended Warrant at 16 Dentith Road Street and 4239 Blowers Street 1991. VALIDITY OF CHATTEL MORTGAGE The applicant contests chattel mortgage given by Banlar to Aalders namely: 1. Banlar had the necessary authority the chattel mortgage, to the provisions 87(1) and 102 of Act, R.S.N.S. and 2. The affidavit attached to the Chattel does not meet t~e of Section 9 of Sale Act, R.S.N.S., 39. ­ months accelerated rental Neumaier, posted a copy and at 1568 Argyle on the 31st day of October, the validity of the on two grounds, not obtained to grant pursuant. of Section the Companies 1989, c. 81; of Bona Fides Mortgage requirements the Bills of 1989, c.

, - 7 ­ It is not necessary to enumerate the sections in the Companies Act referable to the granting of than to say that such a mortgage of a special resolution of the that all shareholders of the company the meeting of shareholders resolution. Affidavit evidence passed a special resolution authorizing borrowing and issuing security therefore, in February was filed with the Registrar of Halifax on February 27th, 1991. a general form of special resolution borrowing on the part of Banlar thereof, and authorizes the Directors to exercise such powers. Mr. Casey, one of testifed that he did not receive any notice of the intention of the company to execute the Chattel Mortgage 1991. This was disputed by the A copy of the Shareholders' Agreement Lawrence Foran, Mi chael Ca sey and 1991 was submitted which indicated respecting the company, including asset, would be made without the consent of all shareholders. a Chattel Mortgage, other must have the _authori ty company granting it, and shall have notice of which passes the special adduced shows that Banlar of 1991, a copy of which Joint Stock Companies at This is what is known as which authorizes and to secure the repayment the shareholders in Banlar, on July 19th, witness Brian Aalders. between Brian Aalders, Banlar, dated March 28th, that no major decisions the mortgaging of any

- 8 ­ In my opinion, to consider the Shareholders' between the shareholders. On a properly executed special resolution unable to conclude that Banlar authority to execute the Chattel 1991. Passing on to the attached to the Chattel Mortgage, the mortgage was in consideration being made by the mortgage to or accuring due from the Mortgagor to the Mortgagee." Section 9 of the Bills of Sales Act, 1989, c. 39 states: "9. Where a bill of than a bill of scope of s. 8, is given to secure the payment of amount due or accruing the grantor to or of a present made by the grantee grantor, it shall, for registration by an affidavit or one of the several or his or their that the amount the bill of sale it is not necessary for me Agreement or any argument the face of it, there was on file and I am did not have the corporate Mortgage on July 19th, Affidavit of Bona Fides the affidavit states that for "a present advance the mortgagor is justly due R.S.N.S., sale, other sale wi thin the an ascertained due from the grantee, advance being to the when presented be accompanied of the grantee, grantees, agent, sta~ing set forth in as being the

- 9 ­ consideration therefore is justly due or accuring due grantor to the grantee a . present advance by the grantee to as the case may the bill of sale in good faith and for the purpose of securing to the payment of such not for the mere protecting the chattels mentioned against of the grantor or for the purpose of preventing the f rom recovering any they may have against the grantor" (emphasis mine) , Banlar and Aalders Mortgage was granted to secure due and a present advance, and that the affidavit is merely typographically incorrect. The and Mr. Aalders seem to indicate amount (they both state in their affidavits that the Chattel Mortgage amount was $33,859.85), that and owing and that $10,385.17 was on July 19th, 1991. I do not substantiated by the evidence before basis of the affidavits which convoluted. , A letter dated July the affidavits of both Mr. Snow to Ban1ar, indicates the amount of the end of July, 19_91 was $33,859.35, fram the or is being made the grantor, be, and that was executed grantee the amount, and purpose of therein the creditors creditors claims whi ch argue that the Chattel an amount due or accruing affidavits of Mr. Foran that of the $33,859.35 $23,474.68 was due a present advance made accept thi sand it is not me, certainly on the I find to be extremely 15th, 1991 attached to and Mr. Foran, from Aalders due and accuring due as the exact amount

- 10 ­ of the Chattel Mortgage. There is no question, therefore, that the full sum or accruing due from Banlar 1991, and that no part thereof made." The applicant refers to v. Bauld, (1950) 4 D.L~R. 242 considered the validity of a Chattel Mortgage which contained an affidavit that did not distinguish debt was given to secure a part debt or They determined that the Chattel revoked as against subsequent the Court, Hall, J.A. stated at p. "It is obvious Legislature took to distinguish of sale given debts on the one given to secure present on the other and that an affidavit should contain the two averments is appropriate to the nature of transaction. It consistent with to embody both transaction in provided the affidavit an averment as to the particular consideration given the past debt and advance respectively. and further at p. in my mind, of $33,859.35 was justly due to Aalders as of July 19th, was a "present advance being the case of Jollimore (N.S.S.C.A.D.) where the Court between whether the a present advance. Mortgage in question was purchases. In speaking for 250: that the great care between bills to secure past hand, and those advances to require of bona fides whichever of the particular would be this provision types of one document contained to secure the present 251:

, - 11 ­ "In my view the used fails altogether wi th the provi sions in substance; and in failing as a whole to represent the true character transaction (whatever in respect of which it was given." In the case before Fides did not represent the true character of the transaction. In Jo11imore the Court of Appeal in making a clear distinction in the affidavit. Hall, J.A. states: "I do not think that the express terms of s. 9 should down or that s. 26 an affidavit which fails to give information required but which in its and duplicity is It must be remembered that we are dealing validity of an instrument is declared to void against certa~n of persons unless and the onus of proof an instrument is with the Act is· clearly the party alleging its validity." The solicitors for the Defendants to the case of Re: Miller (bankrupt) 2nd, 395 (N . S . S . C . A. D. ) . Jones, affidavit here to comply of s. 9 in particular of the it was) me the Affidavit of Bona held that it was important At p. 251, be whittled countenances not only the precise by s. 9, very prolixity meaningless. also with the which be absolutely classes registered that such in conformity upon have referred (1986), 72 N.S.R. J.A., in speaking for the

- 12 ­ Court, did not overrule the distinguished it from Miller because, the affidavit of bona fides was money represented a present advance or monies due or accruing due, it was possible to tell f rom itself what the true consideration was. In my opinion this me. The affidavit of bona fides one cannot tell whether the consideration advance or for monies due or opinion, the error is one of by Section 26 of the Bills of Sale Act, which states: "Effect of defect or irregularity 26 No irregularity in or attention of a or renewal statement, irregularity or any affidavit accompanying bill of sale or renewal or filed in connection its registration of a clerical nature immaterial or part of a bill of dale or renewal statements shall or destroy the bill of sale or renewal or the registration unless, in the opinion court or judge decision in Jollimore but in Miller, although silent as to. whether the the face of the document is not the case before is potentially false and was for a present accuring due. Again, in my substance and is not cured defect or the execution bill of sale no defect, omission in a statement with and no error or in the non-essential invalidate effect of the statement thereof, of the before whom a

, - 13 ­ question relating tried, the defect, omission or error misled some person whose interests are affected by sale. R. S., c. 23, s. 25." In my opinion the defect, irregularity, in the Chattel Mortgage has actually whose interest were affected by subsequent creditors of Banlar would document. , In my opinion none transaction. Brian Aalders was and Banlar. He was aware of Transeastern. He was aware that the Chattel Mortgage were owned not be mortgaged by Banlar. Certainly the chattels and removed from the premises, should never have been removed. I have a great Mortgage was executed to defeat in particular, to prevent Transeastern rights as Landlord. (,. thereto is irregularity, has actually the bill of omi ssion or error misled Transeastern, the bill of sale. Also also be misled by this of this was an arms length a principal of both Aalders all the dealings with a number of chattels in by Transeastern and could owned by Transeastern, suspicion that the Chattel creditors of Banlar and, from exercising its

- 14 ­ Accordingly, I find of July 19th, 1991 is invalid Transeastern against Banlar and the chattels. SEIZURE UNDER TENANCIES AND DISTRESS FOR RENT ACT Section 13 of the Rent Act, R.S.N.S. 1989, c. 464 states: "If any lessee of land or tenement, whereof any rent and due, fraudulently clandestinely conveys demise premises his intent to prevent distraining the landlord, by himself servants, may within days then next conveying away, seize such wherever found, for such rent, the same as if distrained upon unless such goods good faith and consideration before such seizure, in which case they be liable to a distress." The Defendants submit that in order to iatisfy Section 13 four requirements must be met, namely: that the Chattel Mortgage as against the rights of Tenancies and Distress for any message, upon the demise is in arrears or from such goods, with the landlord same,· such or his twenty-one ensuing such goods, as a distress and dispose of they had been the premises, are sold in for a valuable shall not