2019 QCCA 78, 2019 QCCA 78

Instrubel c. Republic of Iraq 2019 QCCA 78 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-025993-163 (500-17-076323-131) DATE: January 22, 2019 CORAM: THE HONOURABLE LOUIS ROCHETTE, J.A. MARK SCHRAGER, J.A. PATRICK HEALY, J.A. INSTRUBEL, N.V. APPELLANT – Plaintiff v.

THE REPUBLIC OF IRAQ THE MINISTRY OF INDUSTRY OF THE REPUBLIC OF IRAQ THE MINISTRY OF DEFENCE OF THE REPUBLIC OF IRAQ THE SALAH ALDIN STATE ESTABLISHMENT RESPONDENTS – Defendants and INTERNATIONAL AIR TRANSPORT ASSOCIATION IMPLEADED PARTY – Impleaded party/Garnishee JUDGMENT [ 1 ] On appeal from the judgment rendered on March 21, 2016 by the Superior Court, District of Montreal (the Honourable Stephen W.

Hamilton), granting in part Respondents’ amended motion to quash a writ of seizure before judgment by garnishment. [ 2 ] For the reasons of Justice Schrager, with which Justices Rochette and Healy concur, THE COURT : [ 3 ] ALLOWS the appeal; [ 4 ] SETS aside the judgment of the Superior Court; [ 5 ] DISMISSES the amended motion to quash the writ of seizure before judgment by garnishment; [ 6 ] The whole with legal costs against Respondents in first instance and appeal. LOUIS ROCHETTE, J.A. MARK SCHRAGER, J.A. PATRICK HEALY, J.A.

Mtre Audrey Boctor Mtre François Goyer IMK For Appellant Mtre Patrick Ferland Mtre Nicolas Roche LCM AVOCATS INC. For Respondents

Mtre Éric Vaillières McMILLAN For Impleaded party Date of hearing: August 29, 2018 REASONS OF SCHRAGER, J.A. I. FACTS [ 7 ] The Appellant, a Dutch company, concluded contracts more than 30 years ago with the Republic of Iraq (“Iraq”). On March 12, 2003, the Chamber of Commerce of the International Court of Arbitration (Paris) issued a final award condemning Iraq to pay the Appellant nearly $32 million CA plus interest.

Iraq has failed to pay the money due to the Appellant. [ 8 ] On March 11, 2013, the Appellant filed an application in the Superior Court, District of Montreal, for the homologation of the arbitration award and for a solidary condemnation of the Respondents to pay their due. It alleges that Iraq has significant assets in Quebec. [ 9 ] Believing that the recovery of its debt was at risk, on July 30, 2013, the Appellant requested the issuance of a writ of seizure before judgment in the hands of the impleaded party (“IATA”).

The solemn declaration in support of the application explains that aerodrome and air navigation fees are imposed by Iraq through its Iraqi Civil Aviation Authority (“ICAA”) on airlines flying over the country and using its aerodromes. In virtue of the contract between ICAA and IATA, the latter manages the billing and collection of these fees through its head office, located in Montreal, or through its other global branches.

The Appellant required the seizure of: …the sums or moveable property belonging to Defendants and held by the Garnishee (…) …namely: All aerodrome charges and air navigation charges of the Republic of Iraq billed and/or collected and/or otherwise already held by the International Air Transport Association, either at its head office in Montréal or at any of its worldwide branches, on behalf of the Republic of Iraq. (Emphasis added) [ 10 ] The Superior Court authorized the seizure before judgment and ordered IATA to appear in court to declare “the amounts of money, securities or movables belonging to Defendants ...” it holds for the benefit of Iraq. [ 11 ] On August 5, 2013, the Respondents filed a motion to set aside the seizure before judgment on various grounds.

On August 12, 2013, a representative of IATA filed a negative declaration regarding the garnishment stating as follows: 13. IATA does not currently have in its possession any sums of money, securities or movable property that is marked as belonging to the Defendants. 14. However, as of 31 July 2013, IATA had in its possession an amount of USD166,652,878.55 that according to the books of IATA is held in trust for the benefit of the Iraqi Civil Aviation Authority (“ICAA”) (the “ICAA Funds”). 15. IATA collected the ICAA Funds as part of the E&F Services. 16.

Until further directions and orders from the Court, IATA is not in a position to pay this money out to the Plaintiff, and this for the following reasons: (…) (Emphasis added) [ 12 ] On November 14, 2013, the Appellant contested IATA’s negative declaration.

On December 11, 2013, the Superior Court granted an application by IATA, reduced the amount seized to $90 million CA and allowed it to transfer the funds to the trust account of its lawyers, without prejudice to the parties’ rights to invoke any argument in response to the Appellant’s challenge to IATA’s negative declaration. [1] On February 9, 2015, $90 million CA was transferred to Quebec from an IATA Swiss bank account. [ 13 ] On November 30, 2015, the Superior Court allowed the Respondents to amend their motion to quash the seizure before judgment, to add a new ground invoking the Superior Court’s lack of jurisdiction to authorize a seizure before judgment because the property concerned was outside Quebec. [2] II.

JUDGMENT OF THE SUPERIOR COURT [ 14 ] On March 21, 2016, the judgment of the Superior Court [3] partly upheld the motion to set aside the seizure before judgment and concluded as follows:

GRANTS in part the Defendants’ Amended Motion to Quash a Writ of Seizure before Judgment by Garnishment based on ground E; STRIKES the words “either … or at any of its worldwide branches” from the Writ of Seizure before Judgment by Garnishment issued on July 30, 2013; ORDERS the International Air Transport Association to file a new declaration within thirty (30) days of the present judgment with respect to all aerodrome charges and air navigation charges of the Republic of Iraq billed and/or collected and/or otherwise already held by the International Air Transport Association, at its head office in Montréal, on behalf of the Republic of Iraq as of July 31, 2013; WITH COSTS TO FOLLOW . [ 15 ] The trial judge found that the Superior Court did not have jurisdiction to authorize the seizure, as the property concerned was located in Switzerland (i.e. outside Quebec) when the writ was issued. [ 16 ] The judge correctly articulated the issue as an inquiry as to whether IATA owed a debt to ICAA or held property (the money) on its behalf in Switzerland.

The judge concluded in virtue of the agreement between them that IATA acts as the mandatary of ICAA and, as such, the funds in dispute do not constitute a debt. Rather the monies are property that has always belonged to Iraq albeit not in its possession. [ 17 ] The judge added: [60] If the Court had concluded that IATA owed a debt to Iraq, then the jurisdiction issue would be much easier : IATA would be a party domiciled in Québec which owed a debt to Iraq. The fact that IATA had deposited the funds which gave rise to the debt in a bank account in Switzerland would not be relevant.

The Québec courts would have jurisdiction to issue a writ of seizure by garnishment against IATA, because all that is being seized is the debt and not the bank account . The fact that contractually the debt is payable in New York also would not be relevant, because IATA is in Québec. IATA would be ordered not to pay its debt to Iraq pending the final judgment, and might ultimately be ordered to pay the debt to Instrubel if Instrubel is successful on the merits.

None of this would have any impact on the bank account, which IATA would be free to do with as it pleased, provided that it did not pay its debt to Iraq. [4] (Emphasis added) [ 18 ] The judge held that a Quebec court cannot order or effect the seizure of property outside Quebec. Even though IATA’s head office is in Quebec, the funds seized were in Switzerland.

He concluded that the Superior Court did not have jurisdiction to authorize the seizure before judgment. [5] [ 19 ] Given his view on jurisdiction and since the requisition for the writ of seizure required the seizure of aerodrome and navigation charges billed, collected or held by IATA, either at its head office in Montreal or at one of its worldwide branches, the judge considered that the words “or at any of its worldwide branches” should be omitted. [6] He therefore did not annul the entire seizure, but ordered IATA to make a new declaration regarding the assets that would be held for the benefit of Iraq at its head office in Montreal only. [7] [ 20 ] Finally, the judge considered that, even if IATA transferred funds from the Swiss bank account to the trust account of its lawyers opened in Quebec, this did not retroactively validate the writ of seizure since the jurisdiction of the Court must exist on the day of the initiation of the seizure before judgment. [8] III.

ISSUE IN APPEAL [ 21 ] The Appellant argues, amongst other things, that the judge erred in deciding that:

a) ICAA could seek the quashing of the seizure before judgment on a question of jurisdiction more than two years after its authorization;

b) IATA was not a debtor but a mandatary of ICAA holding its property and thus, concluding that a Quebec court is not competent to order a seizure before judgment when the property concerned is located outside Quebec. There is also an issue stemming from the wording of the writ of garnishment and whether it was adequate to effect the seizure. IV. DISCUSSION

a) Delay [ 22 ] The insufficiency or falsity of the solemn declaration allegations on the basis of which a writ of seizure before judgment is issued [9] are not the only grounds that may justify the quashing of a seizure before judgment. In Deloitte & Touche inc. v. Laurentian Bank of Canada , Chamberland J.A. pointed out that “(TRANSLATION) (

t) here is no impediment to a court quashing the seizure on a ground of law other than the two instances referred to in

Article 738 f. C.C.P .” [10] [ 23 ] The lack of jurisdiction, as a ground for quashing a seizure before judgment, has indeed been raised on several occasions on declinatory exceptions. [11] [ 24 ] A ground to annul a seizure before judgment must, in principle, be raised within the five-day period laid down in

Article 738 f. C.C.P. [12] However, this period is not mandatory and may be extended where justified. [13] Moreover, lack of jurisdiction over the subject matter of a dispute can be raised at any time by the parties and even independently by the court. [14] This is a matter of public order. [15] [ 25 ] Nothing prevented the Respondents from raising the lack of jurisdiction of the Superior Court with respect to the seizure of

property outside Quebec.

Even if the parties expressed their desire to be judged by a Quebec court, the latter would have no choice but to decline jurisdiction, if it lacked jurisdiction over the subject matter. [16] [ 26 ] The judge also correctly held that the subsequent transfer of funds from Switzerland to Quebec could not, in the circumstances, constitute a tacit waiver of the jurisdiction argument. [17] The fact that the funds were transferred to Quebec after the issuance of the writ cannot retroactively validate the seizure before judgment since only the facts existing at the date of the signing of the solemn declaration in support of the seizure are relevant. [18] [ 27 ] The judge did not err in deciding that the Respondents could challenge the validity of the writ of seizure before judgment on a question of jurisdiction two years after its issue.

b) Wording of the writ [ 28 ] The form of writ of garnishment provided by the government states: We order you, Garnishee , to appear before the Court at the courthouse of Montreal located at 1, Notre-Dame Street on August 13, 2013, in room 1.110, at 9:00 a.m. to declare under oath the amounts of money, securities or movables belonging to Defendants which are in your possession for whatever purpose or grounds, and to hold them until the Court has ruled upon the matter. (Emphasis added) The relevant provisions of the C.C.P. applicable at the time provides as follows: 625.

Seizure by garnishment is effected by the service on the garnishee and on the judgment debtor of a writ of seizure by garnishment. The writ orders the garnishee to appear on the day and at the hour fixed to declare under oath what sums of money he owes to the debtor or will have to pay him and what movable property he has in his possession belonging to him , and not to dispossess himself thereof until the court has pronounced upon the matter. The writ also summons the debtor to appear on the day fixed and show cause why the seizure should not be declared valid. (…) 625.

La saisie en main tierce est pratiquée en signifiant au tiers-saisi et au débiteur un bref de saisie-arrêt. Ce bref enjoint au tiers-saisi de comparaître, à la date et à l’heure indiquées, pour déclarer sous serment les sommes qu’il doit au débiteur ou qu’il aura à lui payer, ainsi que les meubles, appartenant à ce dernier et qu’il détient , et de ne pas s’en dessaisir avant que le tribunal n’ait décidé de leur destination. Le bref assigne aussi le débiteur à comparaître au jour fixé, pour faire valoir les motifs pour lesquels la saisie-arrêt ne serait pas valable. […] 630.

The garnishee must declare the amount, cause and conditions of his indebtedness to the debtor at the time of the service of the writ upon him and of any indebtedness that has since accrued. He must if necessary furnish a detailed statement of the movable property in his possession belonging to the debtor , and declare by what title he holds it. He must in all cases declare any other seizures made in his hands. 630.

Le tiers-saisi doit déclarer le montant, la cause et les modalités de la dette qu’il avait envers le saisi au moment où le bref lui a été signifié, et de celle qui a pu naître depuis; le cas échéant, il doit fournir un état détaillé des meubles du saisi qu’il a en sa possession , et indiquer en vertu de quel

titre il les détient. Dans tous les cas, il doit dénoncer les saisies- arrêts pratiquées entre ses mains. (Emphasis added) It is the provisions of the Code of Civil Procedure , which are controlling and not the wording of the form of the writ so that service of the form of writ was effective to accomplish the garnishment order over a debt owed by IATA to ICAA. The Respondents’ argument to the contrary is unfounded.

c) Jurisdiction of the Quebec Courts [ 29 ] At the risk of repetition, here are the skeletal facts pertinent to the central issue in this case: IATA collects landing and similar fees as “agent” of ICAA, and other such entities around the world. IATA’s head office is in Montreal. The account where the sums are ultimately deposited (at the time of the seizure) is with a bank located in Switzerland. [ 30 ] The Appellant claimed money owed to it by Iraq, or ICAA. It issued a writ of garnishment in Montreal to seize before judgment in the hands of IATA the debt it owed to ICAA.

The Appellant contended that the debt IATA owed to ICAA was located at IATA’s domicile in Montreal and thus, subject to garnishment in proceedings issued by a court of this jurisdiction. [ 31 ] No proof was made of Swiss law and so, the judge correctly applied the law of the forum (Quebec) to characterize the agency

agreement between IATA and ICAA. He concluded that the relationship was a mandate and then continued as follows: [57] (…) This means that the funds collected by IATA on behalf of Iraq belong to Iraq and IATA has an obligation to remit them toIraq, as opposed to the funds belonging to IATA and IATA having a debt to Iraq: (…) The judge relied on the Supreme Court of Canada in Victuni v. Minister of Revenue of Quebec:[19] Under the general principles of the law of mandate, it is clear that the obligation of a mandatary towards the mandator is not a debt.

Theperson who has bought property on behalf of a third party who wishes to remain unknown is no more indebted for the price paid than heis the owner of the property. The true owner is the mandator, and the obligation of the mandatary nominee is to render an account to themandator and deliver over what he has received on his behalf (C.C., art. 1713).

What he receives, even if it is money, does not belong tohim: he is obliged to keep it separate from his own property. (Emphasis added) The judge continued: [58] The ownership of the funds does not change merely because IATA deposits the funds in a bank account: Le dépôt de sommes d’argent dans un compte en fiducie ne modifie pas les droits de propriété de la personne au bénéfice de qui cessommes sont conservées ni les droits d’appropriation qu’elle peut avoir et qui persistent soit entre les mains de la banque, soit entre lesmains du syndic.

Le Tribunal ne voit pas pourquoi le véritable propriétaire, la réclamante, ne pourrait pas faire valoir ses droits sur lesfonds qui sont présentement en possession du syndic.[20] [32] These obiter dicta quoted by the judge are, with respect, taken out of context and have no bearing on the relationship betweenIATA and ICAA. Nor do they impact the rights of a third party (i.e. – the Appellant) nor the in personam jurisdiction of the Quebeccourts, the whole for the reasons which follow. [33] Victuni was a tax case.

Real estate was held by a “prête-nom” corporation (Victuni) created for such purpose by two othercorporations, the beneficial owners of the immovable property in question. The Supreme Court decided that the “prête-nom” should notbe taxed on paid-up capital of $ 11 million dollars since such sum rightfully “belonged” to the true owners of the real estate – i.e.Victuni’s mandators. It is in that context that the aforementioned passage cited by the trial judge was uttered.

The Supreme Courtdecided that the funds should be reflected in the mandator’s financial statements as “belonging to it” even though they were held ondeposit in a bank account standing in the name of the mandatary, the nominal owner of the property appearing on the title. There was noconsideration of whether the mandator possessed a real right on the deposit. There is accordingly no statement of the law of mandateapplicable to the facts or legal issue in the present case to be found in that dictum. [34] Funds in a bank account held by a mandatary for the mandator do not give rise to real rights.

This is illustrated by the SupremeCourt itself when it distinguished Victuni in Quebec v. Caisse populaire Desjardins de Montmagny.[21] The sale taxes payable under theExcise Tax Act[22] (GST) and the Act respecting the Québec sales tax[23] (QST) are collected by suppliers of goods and services asmandataries of the tax authorities. The Supreme Court held that when such a supplier goes bankrupt, the tax authorities do not own theGST and PST that was collected but not remitted. Rather, the tax authorities have a claim or a debt owed to them by the suppliers andnow the trustee in bankruptcy.

The Supreme Court grappled with arguments surrounding the survival after bankruptcy of deemed trustscreated by the language of the applicable statutes. For present purposes, I note the Supreme Court’s legal characterization of the Crown’srights: [27] The statutory mandate imposed on the supplier to collect the GST and the QST differs from the mandate in issue in Victuni,which related to the acquisition and development of an immovable.

The mandate with respect to the two taxes involves the performanceof obligations to collect and then to remit, not the amounts collected, but a balance resulting from offsetting claims of the Crown and thesupplier. The existence of these offsetting claims confirms that claims for the amounts collected by suppliers are fungible, as this Courtin fact pointed out in British Columbia v.

Henfrey Samson Belair Ltd., (SCC), [1989] 2 S.C.R. 24, at pp. 34-35.[24] I underline that in the present case IATA deducts its fees and remits the remaining balance of funds to ICAA from a bank account whereall similar sums collected for the accounts of other mandators are deposited and subject to similar operations. [35] While the current facts are not identical to the situation in Montmagny, the judge’s paragraph 58 quoted above is ultimatelyaimed at addressing the “ownership problem” of the dollars collected and deposited in an account with many other dollars collected fromothers (i.e. airlines) and for still other parties (i.e. entities of other countries performing functions similar to ICAA).

There can be no issuethat money is fungible and that IATA had no obligation to keep the dollars collected segregated rather than deposit them in a bankaccount.[25] The issue of identifying the deposit is commonly referred to as “tracing”. Here is what the judge said on this aspect of thecase: [59] However, the comingling of funds in a bank account can affect ownership rights. In the present matter, the funds were comingled(sic) in the bank account with funds belonging to other countries.

The parties filed a joint stipulation specifying that the bank account inSwitzerland contained only funds collected by IATA on behalf of its clients, that the management fees payable to IATA by its clientswere at times debited from the funds held in the account, and that IATA maintained records of the amounts collected on behalf of eachof its clients. The Court concludes that the funds belonging to Iraq were readily identifiable, and therefore that they continued to belongto Iraq. [36] I disagree with this analysis.

The only evidence on record, in this regard, is a solemn declaration and a joint statementdemonstrating that from IATA’s point of view it had an accurate accounting of the sums it collected from each of its clients from whichthe judge extrapolated that it had an accurate record of all ICAA money going into the Swiss account. One is left to assume that the same

was the case with all other clients whose money was on deposit in that account. However, there is no information on the claims against the fund. For example, if any client (including ICAA) disputed the amount due to it by IATA, then the claims against the fund could potentially exceed the aggregate funds on deposit so that it would not be possible to earmark any one mandator’s “property”. Moreover, the monies collected by IATA for ICAA would emanate from a number of airlines who overflew Iraq or used airport facilities there.

From the discussion of tracing in the judgment and the record it is not possible to discern whether IATA made bulk collections from airlines which it then divided in its accounting amongst the various agencies like ICAA that it represented, or whether IATA collected individually from each airline for each national agency.

Though I highly doubt that it is the latter, there is no evidence that sums received by IATA for ICAA were ever segregated (other than by accounting calculation) let alone that once funds were deposited in Switzerland, the sums due to ICAA were identifiable. [ 37 ] In order to be traceable, funds must be identified and not merely quantified. [26] If funds cannot be quantified and identified (i.e. traced), there can be no claim to ownership at Common Law and I would hazard to say in Civil Law. [27] In Jetsgo , this Court made it abundantly clear that given that money is fungible, once funds are co-mingled, they cannot be traced.

Speaking through Rochon, J.A., the Court subscribed to case law of the Ontario Court of Appeal [28] and the British Columbia Court of Appeal. [29] The Court validated the position of the trustee in bankruptcy who maintained that sums deducted from payroll according to the agreement with employees to defray part of the group insurance premiums fell into the mass and were not the property of the (mandator) insurance company. [ 38 ] This Court stated categorically in Norbourg , [30] that funds deposited in a bank account lose their identity.

As such, the Court distinguished a long line of cases on tracing from the specific facts before it in Norbourg , which concerned the manner in which different accounts of the bankrupt investment firm were set up. The issue was the tracing of monies remitted to it for investment since certain funds had greater liquidation values than others. The ultimate issue was whether on liquidation there should be one mass or several, corresponding to the different funds. [ 39 ] While all tracing cases ultimately turn on their own facts, the principles enunciated in the case law do not support the reasons of the trial judge.

Briefly stated, on the issue of tracing, the judge confused quantification of the amounts due by IATA to ICAA with their identification in IATA’s bank account. This constitutes reversible error. [ 40 ] I would add that in some instances, the discussion of identification of funds, or tracing, in such body of case law revolves around specific statutory enactments (e.g. – Section 67(1) (

a) of the Bankruptcy and Insolvency Act [31] ), trust provisions or simply the analysis of the rights of parties inter se i.e. – the trustee stepping into the shoes of the holder of funds (like IATA) versus the creditor (like ICAA). Such was the case in Harp (relied upon by the judge) where the Superior Court, based on the provisions of the BIA and Victuni , held that vis-à-vis the claimant, the bankruptcy trustee had no better right to the funds on deposit than the debtor. [32] It must be pointed out, at this juncture, that in Victuni there was no tracing issue apparent on the facts.

There was one bank account where the proceeds generated from the real estate owned beneficially by the mandator and nominally by the mandatary or prête-nom were deposited. The mandatary did not represent several mandators as is the situation of IATA. It was thus that the Supreme Court in Victuni held that for balance sheet or tax purposes the mandator “owned” the funds on deposit. Tracing was not an issue. The present case deals with the rights of a third party (the Appellant) and the jurisdiction of the courts in personam and is only tangentially connected to the rights of IATA and ICAA inter se .

However, I have no hesitation to say that a judgment ( Harp ) applying Victuni and the proposition (aside from any tracing issue) that a third party (ICAA) possessed real rights on (or “owned” funds on deposit in) the bank account of another person (IATA) was wrongly decided. [ 41 ] Most significantly in this case, tracing should not be a live issue since there is no ownership of or real right to the funds as I have previously mentioned. Rather, there is a creditor/debtor relationship between ICAA and IATA.

Accordingly, the case law dealing with the identification of the property of others arising in insolvency cases is not applicable to this case. [ 42 ] IATA is domiciled in Montreal, subject to the jurisdiction of the Quebec courts.

It owes money to ICAA and that account receivable or debt is for purposes of private international law located at the place where it is collectible, which is ordinarily the domicile or principal place of business of the account debtor (IATA) – i.e. in Montreal. [33] Any contractual stipulation between ICAA and IATA that sums were payable in New York is res inter alios acta and does not bind Appellant or have any bearing on its rights.

This is not a case of enforcement against a foreign asset; [34] the property seized is the debt due by IATA to ICAA, which is situated in Montreal. [ 43 ] IATA owes ICAA a sum of money corresponding to sums collected on its behalf from various airlines less the fees earned by IATA in doing so. This obligation is, based on basic legal principles, a debt, and this is so irrespective of the characterization of the contract between IATA and ICAA as a mandate or some sui generis relationship. ICAA never owned the debts due it by various airlines in consideration of landing at Iraqi airports.

It does not now own the funds collected in satisfaction of those debts and deposited by IATA in its bank account. IATA’s obligation is to pay a sum of money not to give the dollar bills received from third parties. [35] It would be otherwise if IATA had collected some tangible asset on behalf of and owned by ICAA. The latter would have a real right in the object.

A seizure of the asset would need to be effected in the place and before the courts where the piece of property was physically situated. [ 44 ] Oddly, through his real right analysis of the ownership of ICAA’s share of the bank account, the judge ascribes in effect the attributes of a trust or, in Quebec civil law, a patrimony by appropriation. I dare say that had ICAA taken such position, it would not have succeeded. [ 45 ] In Groupe Sutton-Royal inc. (Syndic de) , [36] this Court was tasked with the characterization of title to funds held by a bankrupt real estate agency in one of its bank accounts.

In the normal course of business, the agency would receive (from notaries) its share of the purchase price of houses representing the commission due to it. The sums were deposited in a bank account that, while not formally established as a trust, was separate and distinct from the agency’s current account and served to segregate the sums received on account of commissions. A large part of the funds relating to any such commission earned on transactions belonged to the individual broker who negotiated the sale transaction.

Upon the bankruptcy of the agency, a dispute arose between the brokers and the trustee as to the ownership of the funds in this account. Speaking through Kasirer, J.A., the Court confirmed the trial judgment and dismissed the broker’s arguments. Kasirer, J.A., rejected the plea that the bank account (or the funds deposited in it) were a patrimony by appropriation within the meaning of Articles 1260 & fol. C.C.Q. and this for a variety of reasons.

Of particular relevance to the case at bar is that he observed that the deposit of funds in the segregated account did not establish that “the agency had divested itself of the property such that

the funds no longer belong to it and transferred it to a new patrimony appropriate to the purpose of benefiting the brokers”. [37] Equally here, the so-called owner or titleholder of the Swiss bank account is IATA.

No one suggests that it could not withdraw funds from the account or otherwise have full power and control over the account even though it is said that as between IATA and ICAA (and the multitude of other beneficiaries of monies on deposit in the account) the funds “belonged” to ICAA. [ 46 ] More significantly, in Groupe Sutton-Royal , the brokers’ argument that the funds in the account “belonged” to them as mandators was rejected.

While it is true that Kasirer, J.A., confirmed the trial judge’s analysis that it was the individual brokers who acted as mandataries for the agency, and not vice versa and that once the commissions were deposited in the segregated bank account, the agency had a “claim against the bank in its own right and, at the same time, owed a debt to the brokers”. [38] As such, the brokers’ contention, that the agency held the funds as property of “others” as the term is used in the second paragraph of

Article 911 C.C.Q. , was rejected. [ 47 ] The guidance I take from Groupe Sutton-Royal is that irrespective of the legal doctrine applied, it is not a possible outcome to characterize the right of a party (such as ICAA) having no contract with a bank nor title or authority to a bank account, as a holder of a real right in the funds or part of the funds in such account absent a trust or a patrimony by appropriation. [39] [ 48 ] Even though the Swiss bank account of IATA was referred to as a “trust account”, it is nowhere suggested that IATA was a trustee or that the account was a trust or patrimony by appropriation as understood within the meaning of Articles 1260 & fol. of the C.C.Q. [ 49 ] As a final word on the issue, I find that the conclusion of the Superior Court leads to an incongruous result.

Amounts on deposit in a bank constitute in law a loan from the depositor to the bank. [40] Accordingly, the rights of IATA as against the Swiss bank are personal rights but the judge would have it that the rights of ICAA as against the bank (or the account) are real rights. The other mandators would have equivalent rights. Is each one of them a divided co-owner of a share in a bank account?

Clearly, the only “owner” of the sums on deposit is the Swiss bank. [41] This lack of equilibrium signals to me a weakness in the reasoning leading to such incongruous result. [42] [ 50 ] More significantly it seems that the Appellant and others in similar positions which seek to execute an unsatisfied claim would be forced into an international “shell game” of somehow discovering (or guessing) where the mandatary/garnishee (IATA), deposited the money – a virtually impossible task. The law, correctly applied, should not lead, in my view, to such unworkable results.

As the in personam debtor of ICAA, it matters not whether IATA deposited the money it collected and giving rise to such indebtedness in a bank account in Geneva, New York or Montreal. The situs of its bank account does not change the situs of the debt IATA owes to its creditor. As such, that funds were initially collected in Montreal or at an IATA branch office in another country is inconsequential.

Thus, the judge should not have struck the words “either… or at any of its [IATA’s] worldwide branches” from the writ of garnishment. [ 51 ] To conclude, IATA is a debtor of a personal right owed to ICAA, which can be the subject of a garnishment issued by the courts of Quebec where IATA is domiciled. Accordingly, I propose to allow the appeal, set aside the judgment in first instance and to dismiss the amended motion to quash the writ of seizure before judgment by garnishment, the whole with legal costs against Respondents in both courts. MARK SCHRAGER, J.A.