QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2006 SKQB 399 Date: 2006 08 25 Docket: Bankruptcy No. 13803 Estate No.: 22-031205 Judicial Centre: REGINA, IN BANKRUPTCY AND INSOLVENCY IN THE MATTER OF THE BANKRUPTCY OF THE PROPOSAL OF SHANE PAUL SABOURIN BETWEEN: PIONEER GRAIN COMPANY LIMITED and SULLIVAN ASSOCIATES INC. Counsel: Carson Demmans for Pioneer Grain Company Limited Robert C. Magnusson and for the Trustee, Sullivan Associates Inc. Jillian M. Drennan, Student-at-Law FIAT ALLBRIGHT J. August 25, 2006 [1] The applicant, Pioneer Grain Company Limited, seeks from the Court an order pursuant to Rule 30(1) of the general rules under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 setting aside the decision of the registrar dated July 20, 2006, upholding the disallowance of the claim of Pioneer Grain Company Limited, as a secured creditor in the proposal of Shane Paul Sabourin. Additionally, the applicant seeks an order pursuant to Rule 30(2) of the general rules under the Bankruptcy and Insolvency Act under s. 187(11) of The Bankruptcy and Insolvency Act extending the time for the bringing of this appeal. [2] On the occasion of the hearing, counsel for the respondent, Sullivan Associates Inc., consented to the extension of the time for the bringing of the appeal, and accordingly the issue relates to whether the applicant has demonstrated basis for the order sought under Rule 30(1) of the Bankruptcy and Insolvency Act. [3] By way of background, on February 3, 2004, Shane Paul Sabourin granted Pioneer Grain Company Limited security interest in all of his present and after acquired property. Pioneer Grain Company Limited then filed proof of claim in the proposal of Shane Paul Sabourin setting forth their position as secured creditor based on security agreement dated February 3, 2004. [4] Thereupon, Sullivan Associates Inc., in their capacity as the Trustee of the proposal of Shane Paul Sabourin disallowed the claim of Pioneer Grain Company Limited as secured creditor in Notice of Disallowance of Claim, Right to Priority or Security dated June 7, 2006. [5] On July 20, 2006, the registrar issued decision upholding the disallowance of the claim of Pioneer Grain Company Limited as secured creditor in the proposal of Shane Paul Sabourin. [6] It is the position of the applicant that in doing so, the registrar erred in law by holding that the unperfected security interest of Pioneer Grain Company Limited did not qualify Pioneer Grain Company Limited as secured creditor in the proposal. [7] The registrar in bankruptcy issued formal judgment dated July 20, 2006, and the eight page judgment sets forth in detail the background to the disputed issue, and canvasses the submissions of the applicant and the Trustee, and then provides an analysis leading to the registrar’s conclusion. [8] The registrar defines the issue in the following terms: “Should the applicant be permitted to make claim as secured creditor under the debtor’s proposal?” Under the registrar’s background assessment, the following facts are relevant: [3] The debtor filed proposal on May 18, 2006. The proposal has been approved by the debtor’s creditors. [4] The debtor executed security agreement with the applicant on February 3, 2004. The security agreement was not registered until May 30, 2006. [5] The trustee, after conducting the necessary property searches with the applicable registries, disallowed the applicant’s claim for the following reason: The security agreement dated February 3, 2004 in all of the debtor’s past and after acquired property was not registered pursuant to The Personal Property Security Act prior to the date of the debtor’s Proposal on May 18, 2006. [8] The trustee is of the opinion that the proposal will not be viable if the applicant’s claim is allowed to rank as secured claim. Court approval of the proposal has been adjourned pending the outcome of this appeal. [9] The registrar identifies the appropriate provisions of the Bankruptcy and Insolvency Act and of The Personal Property Security Act, 1993, S.S. 1993, c. P-6.2. As noted, the judgment then canvasses the submissions of the applicant and the Trustee. The registrar’s judgment under the heading “Discussion and Analysis” concludes as follows: [19] find myself in agreement with the majority of the submissions of the trustee. Proposals should be encouraged as an alternative to bankruptcy. In order to do so certainty must be part of the equation. Certainty can only be achieved if there is definitive date to determine the claims of creditors. To permit otherwise and endorse what the applicant has done in this situation would basically spell disaster for the efficacy of the proposal process. It would be virtually impossible for trustee to make recommendations and for creditors to make reasoned decisions if the ranking of creditors’ claims could change post filing date. For this reason prefer to utilize section 62.(1.1) as the basis for upholding the trustee’s decision. On May 18, 2006 the trustee had confirmed that the claim of the applicant was not perfected. The trustee’s only choice at this point was to permit the applicant’s claim as unsecured. The applicant’s contention that the debtor knew it had secured claim is not compelling. The trustee is statutorily charged to determine the claims of creditors. This can only be accomplished by the trustee performing various registry searches relevant to fixed date to determine the ranking of creditors. The proposal is developed based upon the trustee’s due diligence in this regard and recommendations are made to the creditors concerning the viability of the proposal. [20] am also of the view that the registration of the security agreement by the applicant subsequent to the date the proposal was filed was contrary to the statutory stay provision as set out in section 69(1)(a) of the BIA. It is undisputed that leave was not obtained for this purpose. [21] word about the trustee’s primary argument that section 20(2)(a) of the PPSA should be utilized to uphold the trustee’s decision. [22] agree that section 66.(1) of the BIA can and should be used when required to make efficient use of the proposal process. also agree that the application of this provision would permit the trustee to utilize both sections 135 and 72(1) of the BIA to efficiently complete the trustee’s duties when determining the claims of creditors. respectfully depart from the trustee’s analysis on the utilization of this provision to permit court to read into section 20(2)(a) of the PPSA that it applies to proposals. would submit that this goes beyond the scope of section 66.(1). In short, the trustee’s analysis that permits court to get to the PPSA is correct but the submission that section 20(2)(a) of the PPSA is applicable to proposals is not supported by the legislation. This can only be accomplished by an amendment to that section. [23] In conclusion, the applicant’s appeal of the disallowance of its claim as secured is dismissed. The trustee did not request costs and none will be awarded. [10] In reviewing the registrar’s judgment, it is clear that he succinctly and accurately sets forth the facts of the matter and to that end there has been no complaint regarding the judgment. [11] Further, I have considered the registrar’s analysis in this matter and can find no fault with his reasoning. The registrar’s interpretation is supported by the legislation and based upon the undisputed facts which he found, the interpretation is reasonable. [12] Accordingly, there has been no reason demonstrated to set aside the adjudication of the registrar and accordingly decline to do so. As he had done, make no order as to costs. J. G. N. Allbright
FIAT: The applicant applies for an order pursuant to Rule 30(1) of the general rules under the Bankruptcy and Insolvency Act setting aside the decision of the registrar upholding the disallowance of the applicant's claim as a secured creditor in the proposal. HELD: In reviewing the registrar's judgment, it is clear that he succinctly and accurately set forth the facts of the matter and that to that end there has been no complaint regarding the judgment. The court considered the registrar's analysis in this matter and can find no fault with his reasoning. The registrar's interpretation is supported by the legislation and, based upon the undisputed facts which he found, the interpretation is reasonable. The application is dismissed.