CANADA
PROVINCE OF NOVA SCOTIA
COURT NO: 22808
ESTATE NO: 51-085395
IN THE SUPREME COURT OF NOVA SCOTIA
IN BANKRUPTCY
IN THE MATTER OF THE BANKRUPTCY OF
ROGER ALBERT GERRARD
Cite as: Gerrard (Re), 2000 NSSC 302
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D E C I S I O N
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HEARD BEFORE: Tim Hill,
Registrar in Bankruptcy
DATES HEARD: July 17th, and 31st, 2000
ORAL DECISION: August 4, 2000
WRITTEN REASONS: August 28, 2000
COUNSEL: Roger Gerrard representing himself
Charles Ford representing Credit
Union Atlantic Limited
This is my decision on the application of Roger Gerrard, the Bankrupt, the application being dated June 13, 2000, having been heard by me on July 31st. I will give an oral decision which will be reduced to written reasons in a couple of weeks and provided to both parties.
The application filed by Mr. Gerrard is stated to be an application “in support of exempt property”. Apparently the application was prepared with the assistance of the trustee. The trustee did not appear on the application. In support of the application Mr. Gerrard filed an affidavit. It is clear from that affidavit that Mr. Gerrard is seeking a declaration that a 1992 Ford Ranger truck is exempt property not subject to seizure by Credit Union Atlantic Ltd. (C.U.A.L.), the Respondent, on the application. The affidavit itself refers to s. 67 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (B.I.A.), and s. 59(3) (b) of the Personal Property Security Act, S.N.S. 1995-96, c.13 (P.P.S.A.).
The notice of application is not particularly well phrased, but it is clear from the response of the solicitors for the respondent that C.U.A.L did understand what is being sought by Mr. Gerrard.
The first issue I dealt with on the application was whether I as Registrar (distinct from a judge of the Bankruptcy Court) had jurisdiction to hear the application. I concluded that I did not, as the subject matter of the application is not one of those subjects specifically enumerated in s. 92(1) of the B.I.A. However, the parties did agree at the commencement of the hearing to consent to me dealing with the matter pursuant to s. 192 (1)(j) of the B.I.A. That section allows the Registrar to hear any matter within the jurisdiction of the Bankruptcy Court on the consent of the parties involved. In this regard the parties did undertake to file written consents.
Counsel for C.U.A.L argued on the application that the Bankruptcy Court itself did not have jurisdiction to determine this dispute, and if it did, as the chattel in question has been sold, did not have jurisdiction to grant a remedy. I disagree.
Where a bankruptcy is involved, disputes arising over whether a chattel is exempt from seizure may be resolved in the manner provided for in the provincial statute[ Unger v. Royal Bank (1983), 51 CBR (N.S.) 145, 30 Sask. R. 183 (Q.B.)], or by an application for directions in the Bankruptcy Court [ Re Stratham, 20 C.B.R. 196, [1939] O.W.N. 129 (SC); Re Kreutzweiser (1966), 10 C.B.R. (NS) 217 (Ont. S.C.), aff’d [1967] 2 O.R. 108, 62 D.L.R. (2d) 455 (C.A.)].
Section 34(1) provides that a trustee may apply to the Bankruptcy Court for directions. Where appropriate, the Bankruptcy Court has the inherent jurisdiction to allow bankrupts themselves to apply for directions. Re Promedia Inc. (1984), 51 C.B.R. (NS) 132 (Que. S.C.).
As the subject matter of the dispute is within the jurisdiction of this Court, it seems to me appropriate to exercise my discretion to allow the bankrupt to make this application, and I do so.
As to the Court’s ability to fashion a remedy where the chattel has been sold, there is ample authority to establish the Court’s inherent jurisdiction to fashion a remedy where substantial injustice would otherwise result: Re Laserworks Computer Services Inc. (1998), 165 N.S.R. (2d) 296, 6 C.B.R. (4th) 69 (C.A.). As this chattel has been sold, the obvious remedy in this case would be damages, those damages being equal to the value of the chattel at the time of sale.
I comment now on the nature of the evidence before me, and specifically the affidavit of the C.U.A.L Solicitor. I would note that he did not appear on the application and that another solicitor from his firm argued the matter.
An affidavit should contain a statement of the deponent’s belief as to relevant facts and the source of that belief: Wall v. 679927 Ontario Ltd. (1999), 176 N.S.R .(2d) 96 (C.A.). Mr. LeBlanc’s affidavit does not state its source but merely appends what is presumably a C.U.A.L document. This affidavit is filed in a contested proceeding. In my view it is inappropriate for counsel to file his or her own affidavit in a contested application: R v. SHB (1993), 89 Man. R(2d) 267 (Q.B.); Jaffray v. Sisters of St. Joseph of Sault St. Marie et al, [1996] 2 O.R. 304 (H.C.).
In this case the error is compounded where the solicitor did not appear to be examined on the affidavit. The applicant declined an adjournment to allow the solicitor to appear for cross- examination, and was content to proceed in any event.
In my opinion the affidavit of the solicitor is improper. I accept its contents only to the extent that they are collaborated by either Mr. Gerrard’s affidavit or his answers on cross-examination.
The facts
Mr. Gerrard had a vehicle leased from Yellowknife Motors Ltd. His affidavit says he had purchased it, but on cross-examination he characterized the agreement with respect to the vehicle as a “lease”. That it was a lease is confirmed by his evidence that he took a consolidation loan from C.U.A.L on May 13, 1999, and that a payment was made to Yellowknife Motors in respect to the vehicle by C.U.A.L. C.U.A.L's loan also dealt with the consolidation of several other debts. The total loan was something over $5,000.00, with a sum of $2755.77 applied to the purchase of the vehicle. As security for the loan C.U.A.L had Gerrard execute a purchase money security instrument, which was signed on May 13, 1999.
On April 27, 2000, Mr. Gerrard made an assignment in bankruptcy. On May 16, 2000, the vehicle was seized by C.U.A.L. It seems they had been attempting to make the seizure for a number of days and Mr. Gerrard was aware of these attempts.
A notice was sent to Mr. Gerrard by C.U.A.L on May 24th stating that the vehicle could be redeemed by Mr. Gerrard paying the debt in full. From that I take C.U.A.L to have meant the total amount of the loan and not simply that portion of the loan attributed to the purchase of the vehicle.
The notice was never received by Mr. Gerrard as it was sent to the wrong street address. C.U.A.L had the correct address but simply made an error. The vehicle was sold at auction on June 13, 2000, the same day that the notice of this application was sent to C.U.A.L. The amount realized net of G.S.T. appears to have been $2,762.87 when one takes into account certain costs of the disposition.
Decision
C.U.A.L argues that the Court should not act as Mr. Gerrard was tardy in making his application, and if he had acted promptly the vehicle would not have been sold prior to court determination as to the validity of the security. I don’t accept that argument.
Any delay here was minimal. The notice of sale never reached Mr. Gerrard. There is insufficient evidence to support the contention that Mr. Gerrard did not act with reasonable dispatch.
C.U.A.L argues that they have a purchase money security instrument on the vehicle in question.
A purchase money security instrument is created by the advancing of money to enable the debtor to acquire rights to the particular property subject to the purchase money security instrument. Money advanced must be applied to the acquisition of those rights by the debtor. : Dube v. Bank of Montreal (1986), 5 P.P.S.A.C. 269, 45 Sask. R. 291(C.A.); Rodger v. Bank of Montreal (1986), 6 P.P.S.A.C. 76, 47 Sask. R. 213 (QB).
The purchase money security instrument in question states, in paragraph 2:
“For value received, which has enabled the member to acquire rights in the good described in Schedule “A”........”
The “goods described” in schedule “A” is the truck in question.
That the money advanced enabled Mr. Gerrard to acquire rights in the vehicle is supported by the evidence indicating a pay out of the lease so that ownership would vest in Mr. Gerrard.
A purchase money security instrument can be created where, as here, a creditor loans money to a debtor to pay out a secured party which itself had a purchase money security instrument or other security on the collateral: Saskatchewan Wheat Pool v. Polowide et al, [1994] 4 W.W.R. 128, 117 Sask. R. 231, 6 P.P.S.A.C. (2d) 391 (Q.B.); Battlefords Credit Union v. Ilnicki (1991), 93 Sask. R. 7(C.A.). I do note that the definitions of a purchase money security instrument in the Saskatchewan and Nova Scotia Acts are practically identical.
It should be noted that the mere paying out of a prior debt is not in itself sufficient to create a purchase money security instrument: Unger v. Royal Bank of Canada (1983), 30 Sask. R. 183, 51 C.B.R. (NS) 145 (Q.B.). The debtor must acquire rights in the subject property. A simple substitution of one creditor for another will not do.
I find that C.U.A.L. had a valid purchase money security instrument.
The next question becomes the extent to which the purchase money security instrument secures the debt in question. As noted the debt was over $5,000.00, but the acquisition cost of the vehicle was only some $2,755.77.
Purchase money security instrument is defined in s.2(ai) of the PPSA which states in part:
"Purchase money security instrument" means
(i) a security interest taken in collateral to the extent that it secures all or part of the purchase price of the collateral,
(ii) a security interest taken in collateral by a person who gives value for the purpose of enabling the debtor to acquire rights in the collateral, to the extent that value is applied to acquire the rights...
Based on my understanding of the definition and particularly s.2(ai)(ii) it is my conclusion that C.U.A.L. was secured under its purchase money security instrument only to the extent of the purchase price of the vehicle, that is $2755.77, plus any interest accrued.
This does not end the matter.
There was absolutely no evidence before me as to what amount was due under the purchase money security instrument, or indeed, under the loan itself. Even if I were to accept the solicitor’s affidavit, which I have indicated it is only admitted to the extent that it is corroborated by Mr. Gerrard’s testimony, there is nothing in it which would indicate what amount was due to C.U.A.L., either on the loan generally or in relation to the vehicle specifically. Even the demand for payment, which was never received by Mr. Gerrard, does not specify how much is due.
There is also no evidence that Mr. Gerrard had defaulted in payment under the purchase money security instrument, although from the cross-examination it of Mr. Gerrard it would appear that C.U.A.L. relies on paragraph 5 of the purchase money security instrument which makes bankruptcy or a situation in which C.U.A.L. considers its collateral in jeopardy default occurrences.
To summarize, based on the limited evidence before me it would appear:
(1) C.U.A.L. had a purchase money security instrument which was limited to $2755.77 plus interest;
(2) There is no evidence as to what, if any, monies were due;
(3) C.U.A.L. failed to give Mr. Gerrard notice of enforcement of its security instrument as required under section 68(8) of the P.P.S.A., both in that the notice was never sent to the correct address or received by Mr. Gerrard. The notice was itself deficient. Those deficiencies include:
(i) it was directed to the wrong address;
(ii) it did not disclose a statement of the amount required to satisfy the obligation;
(iii) it did not include a statement of the sum actually in arrears.
In my view, it was incumbent on C.U.A.L. in this proceeding not only to prove the existence of a purchase money security instrument registered against the subject vehicle, but, if it wished to rely on that instrument, to prove the debt due. While I am satisfied that a purchase money security instrument was appropriately registered and that it did secure the vehicle to the extent of $2755.77 plus interest, there is no evidence as to what, if anything, was due.
Mr. Gerrard claims an exemption against seizure under s.59(3)(b) of the P.P.S.A. He states that the vehicle was required in the course of his employment. While his evidence on this point is somewhat sketchy, I do accept that he does require a vehicle in the course of his employment.
Section 59(7) of the Act provides that the exemption against seizure in s.59(3)(b) does not apply where the secured party holds a purchase money security instrument against the goods in question. However, in my view that prohibition obviously only extends to a purchase money security instrument that, in fact, charges the chattel in question and under which some payment is proven to be due. While this purchase money security instrument does appear to charge the chattel in question, there is no evidence that any money remained due to be paid under the instrument.
I therefore find that Mr. Gerrard was entitled to the exemption in s.59(3)(b) of the PPSA.
Obviously, Mr. Gerrard cannot have the vehicle back as title in it has passed. Logically then, he should be entitled to its value. I set that value at the sum of $3,450.00 which is inclusive of H.S.T. I therefore order that C.U.A.L. pay to Mr. Gerrard $3,450.00.
As Mr. Gerrard was not represented, I decline to award costs.
Dated at Halifax, Nova Scotia this 28th day of August, 2000.
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Registrar in Bankruptcy