Judgments

[1996] 1 F.C. 725

A-1221-92

Gilbert Forest (Sheriff/Appellant)

v.

Hancor Inc. and United Extrusions Ltd. (Judgment Creditors/Respondents)

and

Les systèmes de drainage modernes Inc. (Judgment Debtor/Respondent)

and

Caron Bélanger Ernst & Young Inc. (Trustee for the Judgment Debtor/Respondent)

and

Laurentian Bank of Canada and Laurentian Trust of Canada (Creditors/Respondents)

and

118353 Canada Ltée and 167899 Canada Inc. (Purchasers/Mises en cause)

and

Registrar of the Vaudreuil Registry Office (Mis en cause)

A-1259-92

118353 Canada Ltd. and 167899 Canada Ltd. (Purchasers/Appellants)

and

Hancor Inc. and United Extrusions Ltd. (Plaintiffs/Respondents)

v.

Les systèmes de drainage modernes Inc. (Defendant/ Respondent)

and

Caron Bélanger Ernst & Young Inc. (Trustee/ Respondent)

and

Laurentian Bank of Canada and Laurentian Trust of Canada Inc. (Creditors/Respondents)

and

Gilbert Forest (Sheriff/Mis en cause)

and

Registrar of the Vaudreuil Registry Office (Mis en cause/Mis en cause)

Indexed as: Forest v. Hancor Inc. (C.A.)

Court of Appeal, Hugessen and Décary JJ.A. and Chevalier D.J.A.—Montréal, October 3; Ottawa, October 24, 1995.

Practice — Judgments and orders — Enforcement — Appeal from order vacating sale of seized immovable — Bailiff seizing immovable on sheriff’s instructions — Motions Judge erred in holding sheriff lacked power to act through bailiffs — “Provincial” sheriffs acting as sheriffs of Federal Court may, unless otherwise provided by Rules, execute writs of execution in same manner as writs executed in performance of usual duties — Motions Judge erred in relying on Federal Court Act, s. 55(5), Federal Court Rule 360 as apply only when writ cannot be directed to sheriff or sheriff unwilling to act — Federal and provincial laws complementary — No implied delegation of power — Bailiffs carrying out seizure, sale as officers of sheriff.

Creditors and debtors — Immovable seized by bailiff on sheriff’s instructions — After seizure creditors accepting proposal approved by Superior Court of Quebec — Notice of stay of proceedings served on seizing bailiff — Immovable sold in judicial sale to purchaser in good faith — Neither sheriff nor purchasers notified of proposal before sale — Code of Civil Procedure requiring notice concerning execution of writ be served on sheriff — Seizing bailiff ceasing to be sheriff’s officer once seizure completed — Sheriff’s sale set aside only in exceptional, limited circumstances — Seizure, judgment valid — Immovable belonging to judgment debtor — Purchaser acting in good faith — Sheriff’s conduct beyond reproach — Alleged irregularity existing long before sale, and due to misunderstanding between judgment creditor, secured creditor, judgment debtor and trustee — Filing of proposal not stripping purchaser in good faith of title in immovable purchased in judicial sale if nobody notified sheriff of proposal before sale by sending him certified true copy.

Civil Code — Code requiring any notice concerning execution of writ must be sent to sheriff himself — Service of notice of stay on bailiff acting for sheriff in seizure of immovable not equivalent to service on sheriff — Bailiff authorized to act only in respect of seizure — Although art. 673 providing for consent to suspension of sale by parties to seizure, must inform sheriff of consent for it to be effective.

Bankruptcy — Bankruptcy Act, s. 69(1) providing on filing proposal, no creditor shall continue execution for recovery of claim provable in bankruptcy until proposal refused — S. 69 applying to both proposal and bankruptcy — S. 73, applying only to bankruptcy, providing if judgment executed anyway and sheriff not receiving certified true copy of assignment at time of sale, purchaser in good faith retaining title — S. 66(1) providing all provisions of Act, in so far as applicable, apply with such modification as circumstances require to proposals — Possible to adapt s. 73 to proposals — Filing of proposal not stripping purchaser in good faith of title in immovable purchased in judicial sale if sheriff not notified of proposal before sale by service of certified true copy.

These were appeals from an order to vacate the sale of a seized immovable. After obtaining judgment in the Federal Court against Les systèmes de drainage modernes Inc., Hancor Inc. and United Extrusions Ltd. obtained a writ of fieri facias. On the instructions of the sheriff of the District of Beauharnois (Forest), bailiff Trudel seized the immovable. After the seizure, SDM lodged a proposal with its creditors and appointed a trustee. The creditors accepted the proposal, which was approved by the Superior Court of Quebec. The Trustee served a “notice of stay of proceedings” pursuant to Bankruptcy Act, section 69 on the Registry and bailiff Trudel. On the sheriff’s instructions another bailiff, de Repentigny, sold the immovable in a judicial sale. The Motions Judge relied on Federal Court Act, subsection 55(5) and Federal Court Rules, Rule 360 in concluding that although the writ was directed to the sheriff, he asked bailiffs to act for him thus usurping a power of delegation which is conferred on sheriffs by Quebec law, but which they do not possess when acting as officers of the Federal Court under the Federal Court Rules. Federal Court Act, subsection 55(5) provides that where a sheriff is unable or unwilling to act, the process of the Court shall be directed to a deputy sheriff. Federal Court Rules, paragraph 360(1)(b) provides that where the sheriff or marshal in Quebec is unable or unwilling to act, any process may be issued to a bailiff duly authorized to act as such for the purposes of the Code of Civil Procedure.

The issues were: (1) whether the seizure and judicial sale of the immovable were carried out by a person with the authority to do so under the Federal Court Act and Federal Court Rules; (2) where an immovable is the subject of a proposal after seizure, must a judicial sale thereof to a purchaser in good faith be vacated?

Held, the appeal should be allowed.

(1) The Motions Judge erred in concluding that the sheriff lacked the power to act through bailiffs. “Provincial” sheriffs who act as sheriffs of the Federal Court may, unless otherwise provided by the Rules, execute writs of execution in the same manner as the writs they execute in performing their usual duties. The writ was directed to the sheriff of the District of Beauharnois. He executed the writ in the same manner as he executes any writ directed to him, by asking a bailiff to act for him. That constituted both execution of the writ by the sheriff to whom it was directed within the meaning of subsection 55(4) of the Act (requiring a sheriff to execute the process of the Court that is directed to him), and execution in the manner permitted by subsection 56(3), i.e., in the same manner as similar writs are required to be executed by the law of Quebec.

The Motions Judge could not rely on subsection 55(5) and Rule 360 to find that the sheriff lacked the power to act in the circumstances since those provisions concern cases in which the writ cannot be directed to a sheriff or where the sheriff is unwilling to act, which was not the case herein. Once subsection 55(4) applies, subsection 55(5) and Rule 360 no longer apply.

The purpose of Federal Court Act, subsections 13(2) and 56(3) and Rule 5 is to ensure that federal and provincial schemes of execution are complementary and fill any possible gaps by resorting, where necessary, to the provincial schemes. The Court must adopt the interpretation that best facilitates the integration of the two schemes. Reasons of administrative convenience as much as of certainty in civil rights matters have led the federal authorities to rely for all practical purposes on provincial practices.

There was no implied delegation of power. According to subsection 13(2), the provincial sheriff is a sheriff of the Court. According to the Sheriffs’ Act, section 2, the bailiff acts for the sheriff and not in his place. The seizure was made by bailiff Trudel in his capacity as an officer of the sheriff. The sale was carried out by bailiff de Repentigny in his capacity as an officer of the sheriff. In both cases, the power exercised was that of the sheriff even though it was exercised by a bailiff.

(2) (a) Neither the sheriff nor the purchasers were told before the sale of the existence of a proposal. Although notice of stay had been served on the seizing bailiff Trudel, the Quebec Code of Civil Procedure provides that any notice concerning execution of a writ must be sent to the sheriff himself. Furthermore, bailiff Trudel was authorized to act for the sheriff only in respect of the seizure. Once the seizure was completed, he ceased to be a sheriff’s officer. He was not a sheriff’s officer for the purposes of the judicial sale.

(b) Once a sheriff’s sale has taken place, it is only exceptionally and on very limited grounds that it can be set aside. This was not an exceptional case. The seizure and the judgment pursuant to which it was made were valid. The immovable sold by judicial authority belonged to the judgment debtor. The purchaser acted in good faith, the sheriff’s conduct was beyond reproach and the alleged irregularity existed long before the date fixed for the sale and was due solely to the misunderstanding that arose between the judgment creditor, the secured creditor, the judgment debtor and the trustee.

(c) Bankruptcy Act, subsection 69(1) provides that on the filing of a proposal, no creditor shall continue execution for the recovery of a claim provable in bankruptcy until the proposal has been refused. Subsection 69(1) applies to both a proposal and a bankruptcy. Section 73, which applies only to bankruptcy, moderates substantially the scope of the stay under subsection 69(1). If in spite of the prohibition imposed by subsection 69(1), a creditor nevertheless proceeds to execute the judgment and if the officiating sheriff has not at the time of the sale received a certified true copy of the assignment, the judicial sale will be valid, the purchaser in good faith will retain title and the sheriff may only, to the detriment of the judgment creditor, deliver the proceeds of the sale to the trustee. Subsection 66(1) provides that “All the provisions of this Act in so far as they are applicable, apply with such modifications as the circumstances require to proposals”. In order to avoid inconsistencies concerning when a purchaser’s title would be valid, subsection 66(1) should be given a more liberal interpretation than that proposed in the past. It is possible to adapt section 73 to proposals. The filing of a proposal, even one accepted by the creditors and approved by the Court, does not strip a purchaser in good faith of title in an immovable purchased in a judicial sale if nobody notified the sheriff of the proposal before the sale by sending him a certified true copy thereof. Such notice could, as in the case of bankruptcy, have been sent to the sheriff by the debtor personally, by one of the creditors or by the trustee.

STATUTES AND REGULATIONS JUDICIALLY CONSIDERED

Bailiffs Act, R.S.Q. 1977, c. H-4, s. 1 (as am. by S.Q. 1989, c. 57, s. 3).

Bankruptcy Act, R.S.C., 1985, c. B-3, ss. 42(1)i), 57(1), 60(2), 63, 66(1), 69, 72(1), 73, 75.

Code of Civil Procedure, R.S.Q. 1977, c. C-25, arts. 596, 660, 673, 674, 679, 698.

Federal Court Act, R.S.C., 1985, c. F-7, ss. 13(1),(2), 55(4),(5), 56(3).

Federal Court Rules, C.R.C., c. 663, RR. 5, 360 (as enacted by SOR/79-58, s. 2).

Sheriffs’ Act, R.S.Q. 1977, c. S-7, s. 2.

CASES JUDICIALLY CONSIDERED

Applied:

Garcia Transport Ltée v. Royal Trust Co., [1992] 2 S.C.R. 499; McGregor v. Canada Investment and Agency Co. (1892), 21 S.C.R. 499; affg Canada Investment and Agency Co. & McGregor (1892), 1 Que. Q.B. 197; Anjou (Town of) v. C.A.C. Realty Ltd. et al., [1978] 1 S.C.R. 819; (1978), 18 N.R. 301; Motor Transport Board of Manitoba v. Purolator Courier Ltd., [1981] 2 S.C.R. 364; (1981), 126 D.L.R. (3d) 385; 12 Man. R. (2d) 61; 38 N.R. 465.

DISTINGUISHED:

Rossie c. Gosselin, [1979] C.S. 273; Blanchette c. Vertu (January 13, 1983), St-François 450-05-000562-815 (Sup. Ct), SOQUIJ No. 83-217; Stebenne c. Banque de commerce canadienne impériale, [1982] C.S. 884; Sauvegarde (La), Cie d’assurance sur la vie c. Tapis Laberge Inc., [1983] C.S. 835.

REFERRED TO:

Stephens v. R. (1982), 26 C.P.R. 1; [1982] CTC 138; 82 DTC 6132; 40 N.R. 620 (F.C.A.); Roynat Inc. c. Grenier, [1985] R.D.J. 89 (C.A.); Vachon v. Canada Employment and Immigration Commission, [1985] 2 S.C.R. 417; (1985), 23 D.L.R. (4th) 641; 57 C.B.R. (N.S.) 113; 63 N.R. 81; R. v. Fitzgibbon, [1990] 1 S.C.R. 1005; 78 C.B.R. (N.S.) 193; 55 C.C.C. (3d) 449; 76 C.R. (3d) 378; 107 N.R. 281; 40 O.A.C. 81; Gobeil v. Cie H. Fortier et al., [1982] 1 S.C.R. 988; 138 D.L.R. (3d) 50; 42 C.B.R. (N.S.) 209; 44 N.R. 384; Hudson (trustee in bankruptcy) v. Brisebois Bros. Construction Ltd. (1982), 37 A.R. 48; 135 D.L.R. (3d) 166; [1982] 4 W.W.R. 84; 19 Alta. L.R. (2d) 276; 42 C.B.R. (N.S.) 97 (C.A.); Amanda Designs Boutique Ltd. v. Charisma Fashions Ltd., [1972] 3 O.R. 68; (1972), 27 D.L.R. (3d) 392; 17 C.B.R. (N.S.) 16 (C.A.); In re Hanna (W.) & Company Ltd. (1961), 2 C.B.R. (N.S.) 40 (Ont. S.C.); In re Coupal et Frères Ltée: Vibrapipe Concrete Products Ltd. et Ville de Chambly, [1968] C.S. 91; (1967), 12 C.B.R. (N.S.) 28.

AUTHORS CITED

Bohémier, Albert. Faillite et Insolvabilité, tome 1, Montréal (Qué.): Éditions Thémis, 1992.

APPEALS from order vacating a judicial sale of a seized immovable on the ground that the method of carrying out the seizure and sale, although recognized under Quebec law, was not authorized by the Federal Court Act and Federal Court Rules (Hancor Inc. et al. v. 118353 Canada Ltd. et al. (1993), 56 F.T.R. 82 (F.C.T.D.)). Appeal allowed.

COUNSEL:

Marcus Spivock for sheriff/appellant in A-1221-92, sheriff/mis en cause in A-1259-92.

Martin Bernard and Claude Morency for Hancor Inc. and United Extrusions Ltd., judgment creditors/respondents in A-1221-92, plaintiffs/respondents in A-1259-92.

Michel Morissette for Les systèmes de drainage modernes Inc., judgment debtor/respondent in A-1221-92, defendant/respondent in A-1259-92.

Alain Robichaud for Laurentian Bank of Canada and Laurentian Trust of Canada (Inc.), creditors/ respondents in A-1221-92 and A-1259-92.

Michel La Roche and Jean-François Gauvin for 118353 Canada Ltd. and 167899 Canada Inc./Ltd., purchasers/mises en cause in A-1221-92, purchasers/appellants in A-1259-92.

SOLICITORS:

Bernard, Roy and Associates, Montréal, for sheriff/appellant in A-1221-92, sheriff/mis en cause in A-1259-92.

Byers, Casgrain, Montréal, for Hancor Inc. and United Extrusions Ltd., judgment creditors/ respondents in A-1221-92, plaintiffs/respondents in A-1259-92.

Morissette, Downs, Montréal, for Les systèmes de drainage modernes Inc., judgment debtor/ respondent in A-1221-92, defendant/respondent in A-1259-92.

de Grandpré, Godin, Montréal, for Laurentian Bank of Canada and Laurentian Trust of Canada (Inc.), creditors/respondents in A-1221-92 and A-1259-92.

Michel La Roche, Montréal, for 118353 Canada Ltd. and 167899 Canada Inc./Ltd., purchasers/ mises en cause in A-1221-92, purchasers/appellants in A-1259-92.

The following is the English version of the reasons for judgment rendered by

Décary J.A.: What, according to the Federal Court Act [R.S.C., 1985, c. F-7] and Federal Court Rules [C.R.C., c. 663], are the powers of a sheriff appointed by the Quebec authorities when seizing and selling an immovable by judicial authority in his or her capacity as sheriff of the Federal Court? Where an immovable is the subject of a proposal after being seized, must a judicial sale thereof be vacated to the detriment of a purchaser in good faith even though no notice of stay appears to have been served on the sheriff before the sale? These are the basic questions raised by these two appeals from the decision of a motions judge reported at (1993), 56 F.T.R. 82.

Background

On the strength of a favourable judgment of the Federal Court (the Court) in a patent case against Les systèmes de drainage modernes Inc. (SDM), Hancor Inc. and United Extrusions Ltd. (Hancor) obtained a writ of fieri facias (the writ) from the Court and seized an immovable belonging to SDM.

After the seizure, SDM lodged a proposal with the trustee Caron Bélanger Ernst & Young Inc. (the trustee) and the said proposal was accepted by the creditors, including the judgment creditor Hancor and the secured creditors Laurentian Bank of Canada and Laurentian Trust of Canada (Laurentian), and approved by the Superior Court of Quebec.

Due to a host of errors and misunderstandings that are outside the scope of the case before the Court,[1] the immovable under seizure was subsequently sold by the sheriff Gilbert Forest (the sheriff) in a judicial sale and awarded to purchasers, namely 118353 Canada Ltd. and 167899 Canada Inc./Ltd. (purchasers), whose good faith was not challenged in this Court.

Essentially on the basis that the judicial sale had been conducted in a manner contrary to the Bankruptcy Act[2] as it read prior to the 1992 amendments[3] and in contravention of the essential conditions and formalities prescribed by the Quebec Code of Civil Procedure [R.S.Q. 1977, c. C-25], three motions to vacate the sheriff’s sale were filed, one by SDM and the trustee, a second by Hancor and a third by Laurentian. The Motions Judge allowed the three motions, not on the grounds alleged therein, which he dismissed, but on the ground, raised for the first time at the hearing, that the method chosen by the sheriff to carry out the seizure and sale, which is recognized under Quebec law, is not authorized by the Federal Court Act[4] and Federal Court Rules. The sheriff and the purchasers each appealed the decision and the two appeals were joined for the purposes of hearing and judgment.

The argument in this Court was limited to the two questions I asked at the outset of these reasons and to questions incidental thereto.

Question 1: Were the seizure and judicial sale of the immovable carried out by a person with the authority to do so under the Federal Court Act and Federal Court Rules?

The facts relevant to this part of the case are not in dispute. On October 10, 1991, at Hancor’s request, a writ of fieri facias was issued by the Court in Toronto to the “Sheriff of the District of Beauharnois”. On November 7, 1991 Hancor’s Montréal counsel sent a copy of the writ to his usual bailiffs, Villeneuve et associés, to have them seize the immovable. On November 11, 1991 the bailiff Sylvain Trudel, a member of Villeneuve et associés, visited the sheriff of the district of Beauharnois, Gilbert Forest, and gave him the writ. The sheriff then instructed the bailiff Trudel to seize the immovable, writing the following words on the back of the writ:

[translation] Valleyfield, November 11, 1991

Instructions to bailiff Sylvain Trudel

To seize and sell

(signed) Gilbert Forest, Sheriff

[N.B.: the words “and sell” on this standard form were crossed out by hand.]

On November 14, 1991 the bailiff Trudel seized the immovable.

On January 11, 1992 the sheriff inserted a notice of public sale in the Gazette officielle du Québec. On January 27, 1992 he sent the said notice to the Vaudreuil registry office. On February 2, 1992 he inserted the notice in a local newspaper.

On March 10, 1992 the sheriff instructed another bailiff, Jacques de Repentigny, to sell the immovable in a judicial sale, which he did that very day. After the sale, the bailiff gave the sheriff the minutes of the sale, his report and the cheque issued by the purchasers. On March 30, 1992 the sheriff completed his own report, in which he certified that he had seized the immovable and that on March 10, 1992 he had offered it for sale by auction and awarded it to the two purchasers jointly and severally.

According to the evidence, this procedure (with the probable exception of the delay in preparing the sheriff’s report) is that ordinarily followed by counsel, bailiffs and the sheriff in the district of Beauharnois and is in all ways consistent with the requirements of Quebec law.

The trustee and Laurentian argued before the Motions Judge that the said procedure was contrary to the requirements of the Federal Court Act (“the Act” in this first part) and Federal Court Rules (the Rules). The Motions Judge agreed with them.

The Motions Judge relied basically on subsection 55(5)[5] of the Act and Rule 360[6] [as enacted by SOR/79-58, s. 2] in concluding that although the writ had been directed to the sheriff of the district of Beauharnois, the said sheriff, though there was no evidence that he was unwilling to act, instead decided to instruct the bailiff Trudel to seize the immovable and the bailiff de Repentigny to sell it in a judicial sale. In asking a bailiff to act for him, the sheriff is alleged to have usurped a power of delegation which is conferred on sheriffs by Quebec law but which they do not possess when acting as officers of the Federal Court under the Rules of this Court. Thus, the seizure and judicial sale are alleged to have been carried out by a bailiff to whom the writ was not directed and who was not authorized under federal law to carry out a seizure and judicial sale.

In my opinion, the Motions Judge was on the wrong track in his interpretation of the facts, the applicable provisions and the intent underlying those provisions.

It can be seen from a joint reading of subsections 13(1) and (2) of the Act[7] that if no sheriff of the Federal Court has been appointed by the Governor in Council for the district of Beauharnois—which is the case—the sheriff appointed by the provincial authorities in the said district becomes ex officio the sheriff of the Court.[8] Thus, in the case at bar, the responsibilities of a sheriff of the Court were conferred on the sheriff Forest in addition to those already incumbent on him under provincial law.

One of the responsibilities he inherited in his capacity as sheriff of the Court is that, provided for in subsection 55(4),[9] of executing the process of the Court that is directed to him.

According to subsection 56(3),[10] unless otherwise provided by the Rules, the sheriff is to execute all writs of execution “as nearly as possible in the same manner as similar writs or process, issued out of the superior courts of the province in which the property to be seized is situated, are, by the law of that province, required to be executed.”

Article 660 of Quebec Code of Civil Procedure provides that a writ of seizure of immovables “is executed by the sheriff himself or by one of his officers”. Furthermore, section 2 of the Sheriffs’ Act[11] confers on every sheriff “the selection of the bailiffs to be employed by and to act for him in the several districts of Québec,” and section 1 of the Bailiffs Act[12] provides that a bailiff is an officer “empowered to serve written proceedings issuing out of any court, carry out judicial decisions that are executory and perform any other duty devolving upon him by law.”

It unquestionably follows that “provincial” sheriffs who act as sheriffs of the Federal Court may, unless otherwise provided by the Rules of this Court, execute writs of execution in the same manner as the writs they execute in performing their usual duties.

It has been established in the instant case that the writ was directed to the sheriff of the district of Beauharnois. It was adduced in evidence that the sheriff executed the writ in the same manner as he executes any writ directed to him, that is, by asking a bailiff to act for him. In my view, that constitutes both execution of the writ by the sheriff to whom it was directed within the meaning of subsection 55(4) of the Act and execution in the manner permitted by subsection 56(3), that is, in the same manner as similar writs are required to be executed by the law of Quebec. Thus, the Motions Judge committed his first error in concluding that the sheriff lacked the power to act through bailiffs. That error led to a second, which we will now discuss.

Once subsection 55(4) comes into play, subsection 55(5) and its complement, Rule 360, are no longer applicable. Those two provisions concern cases in which the writ cannot be directed to a sheriff or where the sheriff is unwilling to act. Since that is not the case here, the Motions Judge could not rely on subsection 55(5) and Rule 360 to find that the sheriff lacked the power to act in the circumstances.

If there were any doubt, and in my view there is none, it would still be necessary to interpret the word “execute” in subsection 55(4) in a manner that reflects the acknowledged intention of the federal authorities. The clear purpose of subsections 13(2) and 56(3) of the Act and Rule 5[13] is to ensure that the federal and provincial schemes of execution are complementary and to fill any possible gaps by resorting where necessary to the provincial schemes. These provisions are all invitations to the Court to refrain from inflexibility and adopt the interpretation that best facilitates the integration of the two schemes.

The reasons for this are easy to explain. The Federal Court is in a way a court of exception that was grafted onto the existing network of superior courts. Its judgments have significant civil implications and it is essential, if they are to be understandable to litigants and if these implications are to be at all uniform, for execution procedures to be as similar as possible to those of the superior courts. This is all the more essential in that the Court as a general rule uses officers of the court appointed, and the seizure and judicial sale machinery established by, provincial authorities. Thus, reasons of administrative convenience as much as of certainty in civil rights matters have led the federal authorities to rely for all practical purposes on provincial practices.

The arguments revolved, wrongly in my view, around the concept of implied delegation of power. There was strictly speaking no such delegation in the case at bar. According to subsection 13(2) of the Act, the provincial sheriff is a sheriff of the Court. According to the very words of section 2 of the Sheriffs’ Act, the bailiff acts for the sheriff and not in his or her place. The seizure was made by the bailiff Trudel in his capacity as an officer of the sheriff. The sale was carried out by the bailiff de Repentigny in his capacity as an officer of the sheriff. In both cases, the power exercised was that of the sheriff even though it was exercised by the bailiff.

Finally, the solution adopted by the Motions Judge, which was proposed by the respondents, is impracticable. It places obligations—those of personally seizing everything and selling everything in a judicial sale—on Quebec sheriffs, the very persons to whom subsection 13(2) of the Act entrusts the task of executing such writs, obligations that they do not perform in the course of their everyday duties. At the same time, it places constraints on the machinery established by provincial authorities, which the federal authorities are employing, that the provincial authorities cannot be assumed to have intended to apply thereto. I cannot adopt an interpretation that might paralyze the system. Thus, I consider the following comments by Monnin J.A., which Dickson J. (as he then was) adopted in Motor Transport Board of Manitoba v. Purolator Courier Ltd.,[14] to be relevant even though made in a different context:

I must assume that this federal legislation which was purely a delegation of federal powers to the various provincial transport boards, expects these boards to operate in their usual manner and no more. If such were not the case, it would lead to ridiculous situations and I am not prepared to find that Parliament of necessity desired ridiculous situations.

I accordingly conclude that in the case at bar the provincial law and federal law are complementary rather than inconsistent and that the Motions Judge erred in holding that a judicial sale carried out by the sheriff in conformity with the requirements of Quebec law and federal law was invalid.

This argument of the respondents was accordingly unfounded.

Question 2: Where an immovable is the subject of a proposal after being seized, must a judicial sale thereof to a purchaser in good faith be vacated?

The respondents relied on both the Quebec Code of Civil Procedure and the Bankruptcy Act (“the Act” in this second part). They submitted, in short, that the sheriff had been informed of the settlement in progress or of the settlement between the parties, that the parties had reached an agreement and the debt had been extinguished at the time of the judicial sale and that, however that may be, the filing of a proposal resulted automatically in a stay of the execution proceedings, and they argued that these were all grounds for vacating the sheriff’s sale.

Les intimés se fondent à la fois sur le Code de procédure civile du Québec et sur la Loi sur la faillite (“la Loi” dans cette deuxième partie). Ils soutiennent grosso modo que le shérif avait été informé du règlement en cours ou du règlement intervenu entre les parties, qu’il y avait entente entre les parties et extinction de la dette au moment de la vente en justice, et que, quoi qu’il en soit, le dépôt d’une proposition concordataire amenait d’office l’arrêt des procédures d’exécution, autant de motifs, selon eux, d’annulation du décret. The seizure was made on November 11, 1991 by the sheriff Forest acting through the bailiff Trudel. On December 3, 1991 Laurentian registered at the Vaudreuil registry office [translation] “a notice of default and declaration of payment due which have the effect of rendering all securities created under the deed of trust enforceable” in respect of the immovable under seizure. On December 4, 1991 Laurentian filed in the Registry of this Court in Montréal a “motion for a stay of execution by writ of fieri facias” and an “opposition to seizure in execution”, which were to be presented on December 9, 1991.

On December 6, 1991 SDM made a proposal to its creditors under Part III of the Bankruptcy Act and appointed Caron et associés trustee therefor. That same day, the trustee served a “notice of stay of proceedings” pursuant to section 69 of the Bankruptcy Act on counsel for SDM, the Registry of the Federal Court and the bailiff Trudel.

On December 9, 1991 Laurentian withdrew its motion to stay and opposition in view of the filing of SDM’s proposal.

On January 20, 1992 SDM filed an amended proposal, which was duly accepted by the creditors that same day on the condition, inter alia, that SDM and Hancor enter into an agreement and that Hancor [translation] “release all seizures of SDM’s assets”. Hancor and Laurentian were represented at that meeting.

As agreed on January 20, 1992, Hancor and SDM discharged each other on February 26, 1992 in respect of all past, present or future claims resulting from the events related in the record of the Court and Hancor released all its seizures of SDM’s assets. On February 28, 1992 the Superior Court of the district of Beauharnois approved the amended proposal of January 20, 1992.

Then, on March 10, 1992 the sheriff sold the immovable in a judicial sale.

(a)       Knowledge of the agreement by the sheriff

It is clear from the evidence, and the finding of fact by the Motions Judge in this respect is unassailable, that neither the sheriff nor the purchasers

were told before the sale of the existence of a proposal, that a notice to stay was sent to them or even that an agreement signed by all the parties had been definitely concluded ending the matter.[15]

It can of course be seen from the evidence that the corporation’s president, Mr. Kohen, had contacted the sheriff’s office on February 3, 1992 to complain about the notice of sale; however, Mr. Kohen did not mention the existence of a proposal but merely asked that the sale be halted on the ground that [translation] “everything had been settled”. The sheriff’s deputy with whom he spoke simply said that she [translation] “had nothing in the file indicating that it was settled” and asked him to [translation] “contact his lawyers to have them send us a release, or else the sale would take place”.

Similarly, one of Hancor’s counsel testified that he too had telephoned Ms. Veillette in early February 1992 to inform her of the proposal, but Ms. Veillette denied taking part in any conversation whatsoever with counsel concerned. The finding by the Motions Judge that the sheriff had not been informed of the existence of a proposal suggests that the Judge did not accept counsel’s testimony.

In view of the evidence, which I must say is overwhelming, that the trustee and the counsel for SDM, Hancor and Laurentian quite simply, due to a misunderstanding, failed to tell the sheriff what was going on and in particular to serve any document whatsoever on him, the respondents fell back in desperation on the fact that the notice of stay of December 6, 1991 had been served on the seizing bailiff Trudel.

If, they submitted at the hearing, the Court were to conclude (which it did in the first part) that the bailiff Trudel had seized the immovable in his capacity as a sheriff’s officer, it would follow that the service on that officer of the notice of stay on December 6, 1991 was equivalent to service on the sheriff himself.

I do not find this argument convincing. It is the sheriff who is responsible for executing the writ and the Quebec Code of Civil Procedure provides that any notice concerning its execution must be sent to the sheriff himself. A party may not confer on a bailiff a mandate to represent the sheriff that only the sheriff himself may confer. Furthermore, in the case at bar the bailiff Trudel had been authorized by the sheriff to act for him only in respect of the seizure (moreover, Hancor’s counsel had asked the bailiff only to seize the immovable). Once the seizure had been completed, he ceased to be a sheriff’s officer. At any rate, he was definitely not a sheriff’s officer for the purposes of the judicial sale.

Furthermore, that is what Hancor, SDM and the trustee themselves understood to be the case. It was to the office of the sheriff that the president of SDM complained by fax and telephone on February 3, 1992. It was from the sheriff’s office that Hancor’s counsel received the notice of sale and it was that office that he claims to have telephoned. Another of Hancor’s counsel attributes the publication of the notice to [translation] “a clerical error by the sheriff”. SDM’s Montréal counsel was also aware of this, since the draft release he prepared on January 24, 1992 contained a notice to the sheriff of Beauharnois.[16]

The trustee was also aware of this since, even though it had served the notice of stay on the bailiff Trudel, it can be seen from the testimony of its administrator, Ms. Vincent, that the notice of stay had intentionally not been given to the sheriff for two reasons: the first was that the proposal did not confer possession of the seized assets on the trustee, which was merely an intermediary between SDM and its creditors, and the second was that [translation] “[Hancor’s] counsel had already been told to halt the proceedings and it had in fact been agreed that [counsel concerned] would terminate those proceedings”.

In short, nobody ever thought that the notice of stay had been served on the sheriff and that the sale had accordingly been suspended. On the contrary, it can be seen without a shadow of a doubt from the evidence that everyone was aware that the sheriff was preparing to hold the sale and that it was he who had to be contacted to prevent it. No such action was taken and the sheriff was never told.

(b)       The agreement between the parties and vacating of the sale

The Supreme Court of Canada recently noted that:[17]

… while it remains possible, it is only exceptionally that the vacating of sales at law will be permitted and then, only on limited and enumerated grounds. Those exceptions are found in arts. 698 and 699 C.C.P.

…

This rule suffers few exceptions. A sale based upon a judgment or a seizure which is null may be vacated …. Similarly, a sale made super non domino, that is, of property which does not belong to the debtor but to a third party, may be vacated ….

In summary, then, once a sheriff’s sale has taken place, it is only exceptionally and on very limited grounds that it can be set aside.

A comparison of the grounds for opposition, annulment and vacation in respect of seizures in execution of immovable property is especially revealing of the National Assembly’s intention: there are more grounds for annulling a seizure than there are for vacating a sale. Moreover, the further one gets from the seizure and the closer to the sale, the fewer the possibilities of stopping the process and the smaller the number of persons who may do so.

Thus, a judgment debtor and a third party with a sufficient interest may oppose and ask for the annulment of the seizure of an immovable on the following grounds:[18]¹⁸

1. on the ground of an irregularity in the seizure, which causes him a serious prejudice … ;

2. on the ground of the property being exempt from seizure;

3. on the ground of the extinction of the debt;

4. on any other ground of a nature to affect the judgment sought to be executed.

However, and in my view this is a decisive indication of the National Assembly’s intention, such an opposition must be served at least ten days before the date fixed for the sale or else it cannot stop the sale “except upon the order of the prothonotary … for sufficient cause.”[19]

A sheriff’s sale may be vacated at the instance of any interested person:[20]

698. …

(1) If, with the knowledge of the purchaser, fraud was employed to keep persons from bidding;

(2) If the essential conditions and formalities prescribed for the sale have not been observed; but the seizing creditor cannot vacate the sale for any irregularity attributable to himself or his attorney.

Thus, where the grounds for annulment are known prior to the sale and are unrelated to the sale as such, the lateness of the opposing parties may be fatal to them: if they fail to come forward at least ten days before the sale they are taking a great risk; if they come forward after the sale, it is generally too late. Furthermore L’Heureux-Dubé J. stated the following in Garcia:[21]

The requirement that the party who opposes a sale must do so before the sale takes place is very well established in Quebec …

She also made an impressive inventory of judgments in which opposing parties had lost their rights by failing to act and repeated the following comment by Taschereau J. in McGregor v. Canada Investment and Agency Co.:[22]

Assuming that he had rights to this property the appellant has lost them by the sheriff’s sale. Vigilantibus non dormientibus subvenit lex.

The respondents asked this Court to follow, as a “trend in the case law”, certain Quebec court judgments that allowed motions to vacate a sheriff’s sale on the ground that there was an agreement between the parties at the time of the sale and that the debt was extinguished. The judgments to which they referred the Court are: Rossie c. Gosselin, [1979] C.S. 273; Blanchette c. Vertu, unreported, St-François Sup. Ct., No. 450-05-000562-815, January 13, 1983, SOQUIJ No. 83-217; Stebenne c. Banque de commerce canadienne impériale, [1982] C.S. 884; and Sauvegarde (La), Cie d’assurance sur la vie c. Tapis Laberge Inc., [1983] C.S. 835.

I note at the outset that none of them were mentioned by L’Heureux-Dubé J. in Garcia as examples of exceptional cases on the vacating of sheriff’s sales. I am not sure, therefore, that they constitute a “trend in the case law” with precedential value. However that may be, the circumstances of those cases are not really comparable to those of the case at bar.

In Rossie and Stebenne, the sale was suspended by the sheriff at the request of the parties, but the judgment creditor then unilaterally ordered the sheriff to continue the execution proceedings. In Blanchette, the purchaser knew about the agreement between the parties. In La Sauvegarde, the sheriff held the sale after announcing that it was being vacated.

In the case at bar, however, various avenues were open to the respondents well before the sale.

Thus, the parties to the seizure, namely Hancor and SDM, could under article 673 C.C.P. have consented to the suspension of the sale. While it is true that they wanted to do so, they did not do what was necessary to give effect to their consent. As the Motions Judge held, it is not enough that the parties consent, as the sheriff still has to be informed of their consent, and it can be seen from the evidence that he was not. It must not be forgotten that the sheriff is ordered by the Court to sell the immovable (“[t]he writ … orders the sheriff” (C.C.P., art. 660)). I cannot conceive that article 673 C.C.P. provides for the automatic suspension of a sale where the parties consent without the sheriff’s knowledge. A party could probably ask for a sheriff’s sale to be vacated on the ground that the sheriff wrongly refused to suspend the sale,[23] but I do not see how a sheriff could wrongly refuse to suspend if the parties have not asked him to do so. Article 673 C.C.P. does not require that the sheriff take the initiative to suspend a sale he or she is required to hold by Court order: quite the contrary.

Similarly, SDM and its creditors could on the strength of a duly approved proposal have opposed the sale ten days before it took place or, with leave, within a shorter period before it took place. They did not do so.

I make no secret of the fact that it would be tempting from the point of view of equity to give one more chance to parties each of whom believed in good faith that the sale would not take place because there was no longer any reason for it and who failed, as a result of confusion and blundering, to take the necessary action to stop it. But the law is there, and it seeks to protect a person, the purchaser, who also acted in good faith and, above and beyond the interests of the parties to the case, to preserve what Pigeon J., in Anjou (Town of) v. C.A.C. Realty Ltd. et al.,[24] called the “principle of the inviolability of judicial sales”.

I do not think that this is an exceptional case of the type to which L’Heureux-Dubé J. alluded in Garcia. The seizure was valid. The judgment pursuant to which the seizure was made was valid. The immovable sold by judicial authority belonged to the judgment debtor. Furthermore, the purchaser acted in good faith, the sheriff’s conduct was beyond reproach and the alleged irregularity, if it is an irregularity, existed long before the date fixed for the sale and was due solely to the misunderstanding that arose between the judgment creditor, the secured creditor, the judgment debtor and the trustee. I note that, where the judgment creditor is concerned, I could not have allowed its motion even if I had found that there was an irregularity, as article 698 C.C.P. bars it from availing itself of an irregularity attributable to itself.

This second argument must fail in so far as it is based on the provisions of the Quebec Code of Civil Procedure. The respondents have only one other chance: the Bankruptcy Act.

(c)        The stay of proceedings and section 69 of the Bankruptcy Act

Subsection 69(1) of the Bankruptcy Act reads as follows:

69. (1) On the filing of a proposal made by an insolvent person or on the bankruptcy of any debtor, no creditor with a claim provable in bankruptcy shall have any remedy against the debtor or his property or shall commence or continue any action, execution or other proceedings for the recovery of a claim provable in bankruptcy until the trustee has been discharged or until the proposal has been refused, unless with the leave of the court and on such terms as the court may impose.

The respondents argued that a proposal results in an automatic stay of proceedings, that this stay bars a judgment creditor from having property belonging to the debtor sold in a judicial sale and that any judicial sale of such property is null regardless of whether or not the sheriff has been told about the proposal.

The purchaser countered this by arguing that subsection 69(1) does not provide for an automatic stay or that at the very least the stay cannot be set up against a purchaser. It added on the basis of subsection 66(1)[25] of the Act that the protection granted by section 73[26] to purchasers in good faith in respect of a bankruptcy should also be granted to them in respect of a proposal.

Thus, the resolution of a case in which a judicial sale takes place in respect not of a bankruptcy but of a proposal depends on the interpretation of subsections 66(1), 69(1) and section 73 of the Act.

The substance of the debate is quite simple.

Subsection 69(1) applies, by its very wording, to both a proposal and a bankruptcy. The generality of the stay of proceedings under this subsection is established; the courts do not allow a creditor, by enforcing an individual remedy, to frustrate the Bankruptcy Act and for his or her own benefit unjustly reduce a debtor’s estate by continuing execution proceedings without leave of the court.[27]

Section 73, which according to its wording applies only to bankruptcy, moderates substantially the scope of the stay under subsection 69(1). If, in spite of the prohibition imposed on him or her by subsection 69(1), a creditor nevertheless proceeds to execute the judgment and if the officiating sheriff has not at the time of the sale received a copy of the assignment certified by the trustee as a true copy thereof, the judicial sale will nevertheless be valid, the purchaser in good faith will retain his or her title and the sheriff may only, to the detriment of the judgment creditor, deliver the proceeds of the sale to the trustee.[28]

It was in my view quite unnecessary for certain courts to expatiate upon the absolute or relative nature of the stay of proceedings under subsection 69(1). The question is fine in theory but is in practice resolved less by quashing execution proceedings unlawfully undertaken by a creditor than by delivering the proceeds of those proceedings to the trustee or the general body of creditors.[29]

In view of section 73, it should be pointed out that: (1) it is not the fact of bankruptcy that bars the sheriff from holding the sale or, if the sale has been held, requires him or her to deliver the proceeds of the sale to the trustee, but the notice the sheriff receives; as long as the sheriff is not notified in the prescribed manner, he or she is not only under no obligation to suspend the sale but has no right to do so;[30] (2) it is not necessary that the trustee give the prescribed notice personally, as subsection 73(2) merely requires that a copy of the assignment certified by the trustee as a true copy thereof be sent to the sheriff without specifying who must send it; and (3) the only obligation imposed by subsections 73(2) and (3) is the requirement that the sheriff deliver the property to the trustee if he or she receives the notice before the sale or deliver the proceeds of the sale to the trustee if the notice is received after the sale.[31]

Since section 73, unlike section 69, refers only to “property of the bankrupt” and “an act of bankruptcy”, it remains to be determined whether the scheme of subsection 66(1) protects the rights of a purchaser in good faith where, unknown to the sheriff, a proposal is filed before the sale in the same way as if there were a bankruptcy and assignment of the property to the trustee.

The wording of subsection 66(1) has rightly been criticized by Professor Albert Bohémier in Faillite et Insolvabilité.[32] Parliament should, in so far as is possible, indicate in a statute what provisions apply to a given situation. By leaving it up to the courts to decide what provisions of the Bankruptcy Act apply in the case not of a bankruptcy but of a proposal, Parliament opened the door to uncertainties inconsistent with the economic stability that the Bankruptcy Act is nevertheless intended to promote.

According to a common interpretation discussed by Professor Bohémier, it is necessary to start from the idea that the fundamental distinction between a bankruptcy and a proposal lies in the fact that the debtor loses possession of his or her property in a bankruptcy but generally retains it in the case of a proposal, and accordingly to interpret subsection 66(1) to mean that only those provisions of the Act that may apply regardless of whether or not the debtor loses possession are applicable mutatis mutandis to a proposal.

However, this approach causes a problem in the case of section 73. As Professor Bohémier noted:

[translation] There are cases involving a composition, which are clearly debatable, in which the courts have refused to apply sections 70 and 73 B.A. mutatis mutandis to a proposal other than a proposal-assignment expressly authorizing the trustee to act. To circumvent this problem, it is advisable to appoint an interim receiver (s. 47 B.A.) and to confer on him or her the right to take possession of the seized property.[33]

It is enough to note that a proposal leads directly to a bankruptcy in the event of a refusal by the creditors (subsection 57(1) of the Act), a default in performance (paragraph 42(1)(i) of the Act) or an annulment (subsection 63(4)) to wonder about the fate of a judicial sale that takes place before the refusal, default or annulment or is itself the cause of the default or annulment. Would the purchaser’s title be valid in the case of a bankruptcy, invalid in the case of a proposal and valid in the case of a proposal that has become a bankruptcy? Such a result would to say the least be inconsistent.

It is in my view possible to avoid such inconsistency by giving subsection 66(1) an interpretation that is more liberal than the one proposed in the past and that corresponds more closely to the particularly general wording of that subsection.

The words used by Parliament are significant: “All the provisions”, “in so far as they are applicable” and “with such modifications as the circumstances require”. Parliament was aware of the theoretical and practical differences between the scheme of bankruptcy and that of proposals. Whether due to indolence or economy, it did not consider it necessary for the provisions it had passed in respect of bankruptcy to be repeated in or adapted to the case of proposals. At the same time, however, it was very careful to say—at least that is how I understand the words it used—that all the provisions of the Act apply to proposals in so far as they can be applied. In other words, it wanted the courts to find a way, above and beyond their obvious differences, to harmonize the rules applicable to bankruptcy with those applicable to proposals in so far as is possible. It did not say that this must be done at any price: there are cases in which it will not be possible. However, it did say that an attempt must be made to do so on a case-by-case basis and that those involved in this harmonization effort must not hesitate to use their imaginations. Parliament has invited the courts to participate in a process of intelligent harmonization and adaptation, not one of blindly literal application.

The adoption of this approach sheds considerable light on the situation. In section 69, Parliament was concerned solely with the interests of creditors and debtors. In section 73 (and in section 75,[34] which is irrelevant here), it was concerned primarily with the interests of purchasers in good faith, while at the same time conferring on creditors, debtors and trustees the right to block the seizure and sale. Parliament clearly intended to protect purchasers where, unknown to themselves and to the sheriff, they venture into the minefield of bankruptcy and insolvency.

I see nothing in this protection accorded to the purchaser in good faith that depends on whether the debtor or the trustee was in possession of the property sold. In other words, the debtor not being in possession of the property does not change the fact that the intention was to protect the purchaser’s title. Indeed, it would be surprising if the judicial sale were valid where the debtor is not in possession of the property sold and invalid where he or she is in possession. It is true that, since this section was drafted in terms of bankruptcy, the obligations it imposes on the sheriff are expressed in a context in which it is a trustee who is in lawful possession of the bankrupt’s property and the proceeds of the sale must be delivered to the trustee. However, that is the very challenge faced by the courts under subsection 66(1): is it possible to disregard these concepts proper to a bankruptcy and adapt them to a proposal?

I am all the more comfortable in believing that there is no objection in theory to applying section 73 to a proposal in that the Act itself, in subsection 63(2) on the annulment of a proposal, confirms the validity of a sale made in pursuance of the proposal.

Furthermore, this interest displayed by Parliament in purchasers in good faith is very much in line with its policy, as defined in subsection 72(1) of the Act, not to:

… abrogate or supersede the substantive provisions of any other law or statute relating to property and civil rights that are not in conflict with this Act ….

It can be seen from my analysis in the preceding section that my decision to apply section 73 to proposals also ensures compliance with the principle of the inviolability of judicial sales that is so profoundly rooted in Quebec civil law.

In my view, it is entirely possible to adapt section 73 to proposals, as subsection 66(1) permits and encourages us to do. It is enough to conclude, by making “such modifications as the circumstances require”, that the filing of a proposal, even one accepted by the creditors and approved by the court, does not strip a purchaser in good faith of his or her title in an immovable purchased in a judicial sale if nobody notified the sheriff of the proposal, composition or approval before the sale by sending him or her a certified true copy of the proposal, composition or judgment of approval. Such notice could, as in a case of bankruptcy, have been sent to the sheriff by the debtor personally, by one of the creditors or by the trustee.

To whom, therefore, must the sheriff deliver the proceeds of the judicial sale, as he or she is required to do by subsection 73(3)? Maybe to the trustee for distribution or delivery to whomsoever is entitled thereto, since subsection 60(2) of the Act provides that all moneys payable under the proposal are to be paid to the trustee and section 63 provides that the trustee is not functus where a proposal is annulled due to a default in performance. I do not need to answer this question for the purposes of the case at bar.

It is possible that upholding the validity of the judicial sale will result in annulment of the proposal due to the debtor’s failure to respect its undertaking to obtain the release of the seizure. However, I do not have to concern myself with the possible ramifications of the Court’s decision in this respect. Parliament laid down the consequences of a default in performance in section 63 and paragraph 42(1)(i)[35] and it does not matter whether this default results from an intentional act or from a simple mistake made in good faith. Parliament chose to respect the rights of a purchaser in good faith and the debtor, its creditors and the trustee have only themselves to blame if a mistake made by one or more of them made it impossible to perform the proposal.

This third argument must be rejected.

DISPOSITION

I would allow the appeals, reverse the decision of the Motions Judge and dismiss the three motions to vacate the sheriff’s sale.

The appellant purchasers shall have their costs at trial and on appeal against each of the respondents in file No. A-1259-92; the appellant sheriff shall have his costs at trial and on appeal against each of the respondents in file No. A-1221-92.

Hugessen J.A.: I agree.

Chevalier D.J.: I agree.

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