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ADMINISTRATIVE LAW | SPPA / Fairness (Administrative)

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Civil and Administrative
Litigation Opinions
for Self-Reppers


Insolvency - BIA - Property-Vesting

. Rusinek & Associates Inc. v. Arachchilage

In Rusinek & Associates Inc. v. Arachchilage (Ont CA, 2021) the Court of Appeal considered the vesting, as opposed to the distribution, stages of a bankruptcy:
[47] As explained by Gonthier J. in Royal Bank of Canada v. North American Life Assurance Co., 1996 CanLII 219 (SCC), [1996] 1 S.C.R. 325, at paras. 44-49, the Supreme Court of Canada recognized two distinct stages in a bankruptcy: the property-vesting stage, or the “property-passing stage”; and the estate-administration stage. At the time of the assignment in bankruptcy, by operation of s. 71 of the BIA, the trustee in bankruptcy is obligated to take possession of the bankrupt’s assets, and the bankrupt’s property passes to and vests in the trustee in bankruptcy. Once the bankrupt’s property has passed into the possession of the trustee in bankruptcy, the BIA provides the trustee in bankruptcy with the power to administer the estate. In Royal Bank of Canada, at para. 47, the Supreme Court gave the example of assets that are made exempt from execution or seizure under provincial laws, specifically citing life insurance annuities under ss. 2(kk)(vii) and 158(2) of The Saskatchewan Insurance Act, R.S.S. 1978, c. S-26, as repealed by The Insurance Act, S.S. 2015, c. I-9.11, s. 11-1. Such assets vest in the trustee at the time of bankruptcy at the property-vesting stage. However, the exemption under s. 67(1)(b) of the BIA then operates at the estate-administration stage to bar the trustee from distributing exempt items to the creditors. Section 40(1) of the BIA then requires the trustee in bankruptcy to return unrealizable property to the bankrupt prior to the trustee in bankruptcy’s application for discharge.


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Last modified: 10-01-23
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