The Dominion of Canada was constituted by the British North America Act in 1867. The object of this statute was neither to weld the provinces into one nor to subordinate the provinces to a central authority, but to create a Federal Government in which they should all be interested entrusted with the exclusive administration of affairs in which they had a common interest. Each province retained its independence and autonomy. This was accomplished by distributing between the Dominion and the Provinces all the powers executive and legislative and all public properties and revenues, which had previously belonged to the provinces, so that the Dominion Government should be vested with such of those powers, properties and revenues, as were necessary for the performance of those constitutional functions, and the remainder should be vested in the provinces for the purpose of Provincial Government.

§ 91 of the British North America Act assigned to the Dominion Parliament the power to legislate upon the subject matters therein enumerated, viz.: trade and commerce, postal service, banking, etc.

§ 92 assigned to the provinces the power to legislate upon all subjects therein enumerated, viz.: "property and civil rights in the province" etc., and "generally all matters of a merely local or private nature in the province."

The right to legislate upon bankruptcy and insolvency was vested in the Dominion Parliament under § 91.

In the early stages of confederation, the Dominion ParParliament enacted an insolvency law but this was repealed in 1880, and from that time until the coming into force of the present Bankruptcy Act (1920) the only insol. vency legislation in force in Canada was that contained in The Winding-Up Act, now R.S.C. (1927) Ch. 213, pertaining to the winding-up of insolvent companies carrying on business in Canada wherever incorporated, as well as to voluntary winding-up of companies incorporated under the Dominion Companies Act.

With a self-governing constitution founded upon a written organic instrument, such as the British North America Act, it is inevitable that conflicts should arise as to which legislative authority has the power to pass certain enactments. The British North America Act has worked

harmoniously. Numerous cases have been adjudicated upon by the courts. Once the court, whether provincial or the Supreme Court of Canada, or the Privy Council in England, has rendered a decision upon a questioned enactment, the decision is accepted, and the enactment either amended or repealed by the proper authority.

COURTS OF BANKRUPTCY AND THEIR JURISDICTION (a) Territorial Limits of Jurisdiction:

For the purposes of the Act, each province of Canada constitutes one Bankruptcy District which District is divided into two or more Bankruptcy Divisions.

An Official Receiver is appointed for each Bankruptcy District by the Governor-in-Council.

A Registrar is appointed for each Bankruptcy District (province) by the Chief Justice of the Province. He is a judicial officer, with limited powers, conferred on him by the Act, (§ 159).

By § 170, any Order made by a court exercising jurisdiction in bankruptcy shall be enforced in the courts exercising bankruptcy jurisdiction elsewhere in Canada. All the courts and officers of such courts "shall severally act in aid of and be auxiliary to each other in all matters of bankruptcy" and an Order of the court seeking aid with a request to another of the said courts shall be deemed sufficient to enable the latter court to exercise such jurisdiction as the court which made the request could itself have exercised. (b) Nature and Status of Courts:

All Judges and Court Officials in Canada are appointed for life, and are only removeable for cause.

The Bankruptcy Act did not create a new court. By § 152, the Superior Courts of each of the provinces were "invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy.”

The Chief Justice in each province may, if he deems it advisable, nominate or assign a Judge to exercise bankruptcy jurisdiction, and the decision or Order of such Judge is deemed an Order of the court. The appointment of a "Bankruptcy Judge" however, does not diminish or affect the powers of the court or of the other Judges not so nominated to exercise jurisdiction in bankruptcy.

An appeal lies from the Registrar to a Judge, and from a Judge of the Supreme Court to the Court of Appeal, if the

(a) question to be raised on the appeal involves future rights; or (b) order or decision is likely to affect other cases of a similar nature in the bankruptcy or authorized assignment proceedings: or (c) amount involved in the appeal exceeds five hundred dollars; or (d) appeal is from the grant or refusal to grant a discharge and the aggregate of the unpaid claims of creditors exceeds five hundred dollars.

The decision of the Appeal Court is final and conclusive, unless special leave to appeal therefrom to the Supreme Court of Canada is obtained from a Judge of the Supreme Court of Canada. The decision of the Supreme Court of Canada is final, and no further appeal lies.

The powers and jurisdiction of the Registrars of the Court in each of the provinces is limited by §159:

(a) to hear bankruptcy petitions and to make receiving orders and adjudications thereon, where they are not opposed; (b) to hold examinations of debtors; (c) to grant orders of discharge where the application is not opposed; (d) to approve compositions, extensions or schemes of arrangement where they are not opposed; (e) to make interim orders in cases of urgency; (f) to make order any or exercise any jurisdiction which by any rule in that behalf is prescribed as proper to be made or exercised in chambers; (g) to hear and determine any unopposed or ex parte application; (h) to summon and examine any

person known or suspected to have in his possession effects of the debtor or to be indebted to him, or capable of giving information respecting the debtor, his dealings or porperty; (i) to hear and determine appeals from the decision of a trustee allowing or disallowing a creditor's claim where such claim does not exceed five hundred dollars.

The Official Receiver is an executive officer. His duties, briefly, are as follows, he receives the authorized assignment for filing; he appoints the Custodian from the most interested creditors, fixes his bond, and the Custodian may, under the direction of the Official Receiver, take conservatory measures and dispose of perishable goods, prior to the first meeting of creditors; he examines the bankrupt or assignor as to the causes of the insolvency and disposition of assets; he receives the statement of affairs in the prescribed form from the bankrupt or assignor; he fixes the amount of the Trustee's bond. After the first meeting of creditors, at which the trustee is appointed, the Official Receiver transmits the assignment and all papers, including the minutes of the first meeting of creditors, to the Registrar to be deposited as documents of record in the Court. in that particular bankruptcy matter.

In the case of a Receiving Order, the Custodian is appointed by the Court and the bond fixed. A certified copy of the Receiving Order is then filed with the Official Receiver who then proceeds from that point as in the case of an assignment.

DEBTOR AND INSOLVENT

The Act, by § 2 (p) defines a debtor as follows: 'Debtor' includes any person, whether a British subject or not, who, at the time when any act of bankruptcy was done or suffered by him, or any authorized assignment was made by him,

(1) was personally present in Canada, or

(2) ordinarily resided or had a place of residence in Canada, or

(3) was carrying on business in Canada presonally or by means of an agent or manager, or

(4) was a corporation or a member of a firm or partnership which carried on business in Canada;

and by § 2 (u) an insolvent is defined as follows: 'insolvent person' and 'insolvent' includes a person, whether or not he had done or suffered an act of bankruptcy.

(1) who is for any reason unable to meet his obligations as they generally become due, or

(2) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or

(3) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due thereout.

VOLUNTARY PROCEEDINGS

The provisions as to voluntary assignments or authorized assignments are fully contained in § 9 of the Act, which is as follows:

(1) Any insolvent debtor whose liabilities to creditors, provable as debts under this Act, exceed five hundred dollars, may, at any time prior to the making of a receiving order against him, make an assignment of all his property for the general benefit of his creditors.

(2) Such assignment shall be accompanied by a sworn statement in the prescribed form showing the property of the debtor divisible among his creditors, the names and addresses of all his creditors and the amounts of their respective claims and the nature of each, whether privileged, secured or otherwise.

(3) The assignment shall be offered to the Official Receiver in the locality of the debtor to be filed and it shall be inoperative until accepted and filed by such Official Receiver, who shall refuse to accept the same unless it is in the form prescribed by the General Rules or to the like effect, and accompanied by the sworn statement required by the preceding subsection.

(4) If the Official Receiver accepts the assignment, he shall file the same, whereupon the property of the debtor shall be deemed to be under the authority of the court and the debtor shall cease to have any capacity to dispose of or otherwise deal with such property.

(5) Immediately after the acceptance of the authorized assignment, the Official Receiver shall appoint a custodian whom he shall, as far as possible, select from the most interested creditors, if ascertainable at the time of the assignment.

(6) Upon the appointment of the trustee by the creditors, the Official Receiver shall complete the authorized assignment by inserting therein as grantee the name of such trustee, and such assignment shall thereupon subject to the rights of secured creditors vest, as of the date of the acceptance and filing of the said assignment, in the trustee, all the property of the debtor.

(7) Every assignment of his property other than an authorized assignment made by an insolvent debtor for the general benefit of his creditors shall be null and void. INVOLUNTARY PROCEEDINGS:

Acts of Bankruptcy:

What constitutes an act of bankruptcy is defined by §3 of the Act. A debtor commits an act of bankruptcy in each of the following cases:

(a) If, in Canada or elsewhere, he makes an assignment for the benefit of his creditors generally, whether it is an assignment authorized by this Act or not; (b) If he makes a fraudulent conveyance, gift, delivery or transfer of his property, or any part thereof;

(c) If he makes any conveyance or transfer, or creates any charge on his property which would, under the Act, be void as a fraudulent preference if he were adjudged bankrupt;

(d) If, with intent to defeat or delay his creditors he departs out of Canada or absconds;

(e) If he permits any execution, or other process issued against him, under which any of his goods are seized, to remain unsatisfied for fourteen days after the seizure or to within four days of the time fixed by the Sheriff for the sale thereof;

(f) If he exhibits to any meeting of his creditors a written admission of his inability to pay his creditors or any statement of assets and liabilities which shows that he is insolvent;

(g) If he assigns, removes, secretes or disposes of, or attempts so to do, any of his goods with intent to defraud, defeat or delay his creditors or any of them;

(h) If he makes any bulk sale of his goods without complying with the provisions of any Bulk Sales Act applicable to such goods in force in the province within which he carries on business or within which such goods are at the time of such bulk sale;

(i) If he gives notice to any of his creditors that he has suspended or that he is about to suspend payment of his debts;

(j) If he ceases to meet his liabilities generally as they become due.

Who May Be Adjudged Involuntary Bankrupt:

If a "debtor" commits an act of bankruptcy, any creditor may present to the court a bankruptcy petition. In order to enable a creditor to file a bankruptcy petition, the debt owing by the debtor to the petitioning creditor, or if two or more creditors join in the petition the aggregate amount of the debts owing, must amount to not less than $500. and the act of bankruptcy on which the petition is grounded must have occurred within six months prior to the presentation of the petition. A petition cannot be presented against wage earners or farmers, who are expressly excepted by the Act.

The form of the petition is very simple. It merely sets forth the grounds upon which the creditor relies, the dates of the alleged acts of bankruptcy and the basis of the creditor's claim. In the petition, the creditor nominates a qualified person to act as custodian. The petition is verified by affidavit and is filed with the Registrar, who seals the same with the seal of the court. A true copy of the petition, together with a notice of hearing, is served upon the debtor at least 8 clear days prior to the return of the petition. If the debtor intends to dispute the debt, or the

act of bankruptcy' he must serve the petitioning creditor,

or his solicitor, with a notice of intention to dispute the petitioner's claim, and file same with the Registrar, at least two days prior to the date set for the hearing.

Upon the return of the petition, if unopposed, the Registrar has jurisdiction and, upon satisfactory proof of the debt and the act of bankruptcy, will grant a Receiving Order and appoint (usually) the person nominated in the petition custodian until the first meeting of creditors. The Registrar is not bound to appoint the person nominated in the creditor's petition.

If the debtor disputes the petition, the Registrar has no jurisdiction and must adjourn the hearing of the petition to the Judge at his next sitting, when the Judge will hear the evidence, including viva voce evidence as well as by affidavit, or fix a day for the trial of the issue.

If the petitioning creditor's debt is disputed and is one which the Bankruptcy Court considers should have been established in another court, the Judge may either stay the petition pending the establishment of the debt in such other court, or dismiss the petition.

CUSTODIAN:

The custodian is a qualified person appointed in voluntary proceedings by the Official Receiver, and in involuntary proceedings by the court when granting a Receiving Order. Upon his appointment, the custodian is deemed an officer of the Court and until the trustee is appointed, at the first meeting of creditors, the assets of the debtor are in his custody as such officer. The person named as custodian is usually, but not always, appointed trustee by

the creditors.

The duties of the custodian briefly are, as follows:

(a) Publishes in the Canada Gazette a notice of the assignment or Receiving Order and notice of the first meeting of creditors; he also causes a notice of the first meeting of creditors to be published in a local paper. (b) Registers the assignment or Receiving Order in all Counties in which the debtor owns real property. (c) Takes immediate possession of the books and all property of the debtor liable to seizure.

(d) Takes conservatory measures and disposes of perishable goods under the direction of the Official Receiver. He may apply to the Court for leave to carry on the debtor's business until the inspectors are appointed, if it is shown to be necessary or beneficial to the general body of creditors.

(e) Verifies the debtor's statement of affairs and prepares an inventory of the assets of the debtor. (f) Ascertains from the debtor's records the names and addresses of all creditors, and within five days from the date of the assignment or Receiving Order, sends out a notice calling the first meeting of creditors to be held at the office of the Official Receiver not later than fifteen days after the mailing of the notice. With the notice is sent a list of creditors and the amount of their respective claims, together with a proof of claim and proxy, but the Act explicitly provides that no name shall be inserted in the proxy.

INTERIM RECEIVER:

An Interim Receiver is sometimes appointed in involuntary proceedings. After the petition is filed and served on the debtor, there is a period of at least eight days before the return of the petition, during which time the debtor is in full control of his assets. When filing the petition, an

application may be made on behalf of the petitioning creditor for the appointment of an Interim Receiver to take immediate possession. The Court will only grant such an Order in extreme cases. The affidavit in support of the application must satisfy the Registrar that it is necessary for the protection of the estate and that irreparable loss and damage may accrue if an Interim Receiver is not appointed to take immediate possession.

The form of the Order appointing an Interim Receiver contains an undertaking on behalf of the petitioning creditor to abide by any Order as to damages which the debtor may sustain by reason of the making of the Order. The person named in a petition to be appointed custodian is usually the person appointed Interim Receiver. The Interim Receiver takes immediate possession of the assets. He acts as a watchman only and, pursuant to the Order, controls the receipts and disbursements, but otherwise is directed not to interfere with the conduct of the business by the debtor in the usual course, unless especially authorized by the Court.

PREFERENCES AND PRIORITIES:

§64 of the Act dealing with avoidance of preferential transactions in favour of one creditor over the others provides, briefly; that every conveyance or transfer of property, or charge thereon, or payment made to any creditor (or a surety or guarantor for the debt due to such creditor) or to any person in trust for a creditor with a view of giving such creditor a preference over the other creditors, shall be deemed fraudulent and void as against the trustee,

if bankruptcy ensues within three months from the date of the conveyance, transfer or payment. If such conveyance, transfer or payment has the effect of giving any creditor a preference over other creditors, it is presumed prima facie to have been given or paid with such view as aforesaid, whether or not it was made voluntarily or under pressure.

The provisions contained in the group of sections dealing with the avoidance of settlements and preferences are the means of carrying into effect the principle of the Act.