2013 MBCA 41, 2013 MBCA 41

IN THE COURT OF APPEAL OF MANITOBA Coram: Chief Justice Richard J. Scott Madam Justice Holly C. Beard Madam Justice Diana M. Cameron BETWEEN : GREGORY-MARC CHARTIER ) R. W. Schwartz and ) K. L. Hall (Plaintiff) Respondent ) for the Appellants ) ) G. G. Zazelenchuk - and - ) for the Respondent ) MNP LTD. and GORDON V. NEUDORF ) Appeal heard: ) November 28, 2012 (Defendants) Appellants ) ) Judgment delivered: ) May 23, 2013 CAMERON J.A. I. INTRODUCTION 1 This appeal deals with the relationship between The Homesteads Act , C.C.S.M., c.

H80 (the Act ), and the Bankruptcy and Insolvency Act (the BIA ) in circumstances where a non-owner spouse has become bankrupt while the owner spouse has not. 2 The basic issues are whether the right of a non-owner spouse to withhold consent to a disposition of the homestead (the veto right) vests in his or her trustee in bankruptcy and, if so, whether it is exercisable by the trustee during the period of time the non-owner spouse remains an undischarged bankrupt. II. FACTS 3 In May 2007, Lucy Garlicki (now Mrs. Chartier) declared bankruptcy.

Initially, PricewaterhouseCoopers Inc. was appointed trustee of her estate. In July 2010, the Registrar made an order substituting the appellant MNP Ltd., then known as Meyers Norris Penny Limited, as trustee (the trustee). Mrs. Chartier remains an undischarged bankrupt 4 Also in May 2007, the respondent, Gregory-Marc Chartier (Mr. Chartier), purchased a home located at 750 Wellington Crescent, Winnipeg, Manitoba (the property). In September 2009, he married Mrs. Chartier and the property became their homestead property within the meaning of the Act . 5 In the late spring of 2011, Mr.

Chartier listed the property for sale. In his affidavit sworn October 20, 2011, Mr. Chartier maintained that it was his intention to purchase another home once the property sold. Mrs. Chartier agreed with this decision and did not wish to exercise her veto right. 6 In June 2011, the trustee learned of Mrs. Chartier’s homestead interest in the property. In July 2011, the trustee registered a homestead notice against the title pursuant to the Act , maintaining that because Mrs.

Chartier was an undischarged bankrupt at the time she acquired the homestead interest, the veto right constituted after-acquired property that vested in the trustee. 7 On August 16, 2011, Mr. Chartier accepted an offer to purchase the property. The closing date for the transaction was in September 2011. 8 Rather than seeking the consent of the trustee to the sale, Mr. Chartier filed a statement of claim against the trustee on August 18, 2011. In essence, the claim seeks a declaration that the trustee has no interest in the property and a declaration that Mr.

Chartier be allowed to sell the property without the consent of the trustee. The same day, Mr. Chartier filed a notice of motion seeking a declaration for fundamentally the same relief. 9 In September 2011, the prospective purchaser of the property offered the trustee $20,000 for its consent to the sale and a discharge of the homestead notice, which would allow the purchaser to complete the transaction. While the offer was acceptable to the trustee, it was not acceptable to Mr. Chartier. As a result, the sale of the property did not proceed. 10 Regarding the motion filed by Mr.

Chartier, the motion judge determined that Mrs. Chartier’s veto right did not vest in

the trustee and that it had no value. Therefore, Mr. Chartier was free to deal with his property, unencumbered by the registration filed bythe trustee. It is from this decision that the trustee appeals. III. ISSUES 11 While the trustee raises 12 grounds of appeal, para. 2 of its factum acknowledges that “[t]he appeal concerns thedetermination of whether the Bankrupt’s Homestead interest vested in her trustee as a result of her making an assignment for the generalbenefit of her creditors pursuant to the Bankruptcy and Insolvency Act.” The 12 grounds can be neatly condensed into the two followinggrounds: 1.

Did the motion judge err in law in finding that the veto right of a non-owner spouse does not vest in his or her trustee in bankruptcyunder the BIA? 2. Did the motion judge err in law in finding that the trustee in bankruptcy of a non-owner spouse cannot exercise that spouse’s vetoright during the period of time the spouse remains an undischarged bankrupt? IV. DECISION OF THE MOTION JUDGE 12 In determining that Mrs. Chartier’s veto right did not vest in her trustee, the motion judge addressed a number ofarguments put forward by the trustee.

She rejected the trustee’s assertion that the veto right and the right to a life estate interest in thehomestead were one and the same. She held that the case of Saulnier v. Royal Bank of Canada, 2008 SCC 58, [2008] 3 S.C.R. 166,relied on by the trustee, was distinguishable on its facts because the veto right did not have value and could not be transferred.

In supportof her decision, she relied on a body of case law which held that a non-owner spouse has no interest in the homestead during the owner’slifetime and that a judgment creditor has no right to enforce a judgment against the non-owner’s dower interest in the homesteadproperty. 13 Further, the motion judge determined that the veto right did not constitute one of the “powers” conferred on the trusteeby s. 67(1)(

d) of the BIA. In her view, the power of a person to veto the disposition of a homestead was a personal right that did not vestin the trustee. 14 She concluded that the impact on the family is a proper consideration in interpreting the BIA. In her opinion, tointerpret the BIA in the manner suggested by the trustee would be contrary to the intent of the homestead legislation, which was toprotect the family through the provision of a life estate interest in the homestead. For this proposition she relied on the decision inMarzetti v. Marzetti, (SCC), [1994] 2 S.C.R. 765. V.

POSITIONS OF THE PARTIES The Appellants’ Position 15 The core argument of the trustee is that a bankrupt’s veto right pursuant to the Act constitutes property as is definedunder s. 2 of the BIA and vests in the trustee upon the declaration of bankruptcy, pursuant to s. 71 of the BIA, as does any other propertyof the bankrupt.

In support of this position, the trustee argues that the right to a life estate granted pursuant to s. 21(1) of the Act is sointertwined with the veto right granted pursuant to s. 4 that the two should be viewed as one and the same because the disposition of thehomestead will result in the loss of an opportunity to obtain the life estate. 16 Next, the trustee encourages an analysis of the issue similar to the one undertaken by the Supreme Court of Canada inSaulnier.

In that case, the Supreme Court held that the “bundle of rights” conveyed to the holder of a fishing licence was sufficient tosatisfy the definition of property found in the BIA. 17 The trustee further contends that the homestead interest of the bankrupt vested in the trustee and it had the right toregister a homestead notice against the title to protect that interest.

The trustee agrees that the interest is contingent and generallyunrealizable, but may become realizable for the benefit of the creditors should a triggering event occur, such as the sale of thehomestead, as happened in this case. 18 Finally, the trustee says that, rather than bring this motion for a declaration, Mr. Chartier should have sought reliefpursuant to ss. 19 and 24 of The Law of Property Act, C.C.S.M., c. L90 (the LPA), which would allow for sale of the property,dispensation of the requirement for consent and a valuation of the homestead interest of Mrs. Chartier. The Respondent’s Position 19 Mr.

Chartier contends that the property belongs to him, and because Mrs. Chartier consented to the sale, he is at libertyto sell it without obtaining the consent of the trustee. He contends that the

interpretation of the BIA suggested by the trustee is incorrectand contrary to the policy underlying the Act. Further, he maintains that the right to veto is a personal right that has no value and cannotvest in the trustee. VI. STANDARD OF REVIEW 20 The parties agree, as do I, that the determination of both issues involves a matter of statutory

interpretation and bothraise questions of law. Therefore, the standard of review is correctness. See Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235. VII. THE LEGISLATION

21 With respect to the Act , the relevant legislation is:

Definitions 1. In this Act , … “ disposition ” means a disposition of land by the owner and includes (

a) a grant, transfer, sale, agreement for sale , grant of an option to purchase or a right of first refusal to purchase, lease for more than three years, or other disposition during the owner’s lifetime, …. [emphasis added] Disposition prohibited without consent 4 No owner shall, during his or her lifetime, make a disposition of his or her homestead unless, subject to sections 2.1 and 2.2 (

a) the owner’s spouse or common-law partner consents in writing to the disposition; … (

e) the court has made an order dispensing with the consent of the owner’s spouse or common-law partner under

section 10. [emphasis added] 22

Section 10 of the Act authorizes the court to dispense with consent in limited circumstances, none of which are applicable in this case. 23

Section 21 of the Act provides for a life estate as follows: Life estate on death of owner 21(1) Subject to sections 2.1 and 2.2, when an owner dies leaving a surviving spouse or common-law partner who has homestead rights in the property, that person is entitled to a life estate in the homestead as fully and effectually as if the owner had by will left that spouse or common-law partner a life estate in the homestead. Disposition subject to life estate 21(2) Any disposition of a homestead by the owner’s will is subject to the spouse’s or common-law partner’s entitlement to a life estate in that homestead under subsection (1). 24 With respect to the BIA , the relevant provisions are:

Definitions 2. In this Act , …

“property” means any type of property, whether situated in Canada or elsewhere, and includes money, goods, things in action, land and every description of property, whether real or person​al, legal or equitable, as well as obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, in, arising out of or incident to property; …. Property of bankrupt 67.

(1) The property of a bankrupt divisible among his creditors shall not comprise … (

b) any property that as against any bankrupt is exempt from execution or seizure under any laws applicable in the province within which the property is situated and within which the bankrupt resides; … but it shall comprise … (

d) such powers in or over or in respect of the property as might have been exercised by the bankrupt for his own benefit. Vesting of property in trustee 71. On a bankruptcy order being made or an assignment being filed with an official receiver, a bankrupt ceases to have any capacity to dispose of or otherwise deal with their property, which shall, subject to this Act and to the rights of secured creditors, immediately pass to and vest in the trustee named in the bankruptcy order or assignment, and in any case of change of trustee the property shall pass from trustee to trustee without any assignment or transfer.

VIII. THE LAW The History and Purpose of Homestead Rights 25 The Act is historically rooted in the common law concept of dower and, later, in various versions of The Dower Act , C.C.S.M., c. D100. In 1984, the Manitoba Law Reform Commission issued the Report on an Examination of “The Dower Act” (19 November 1984, Report No. 60) (the Report), wherein it concluded that statutory homestead protections, although rooted in the common law of dower, differed from those common law dower rights in that homestead legislation included provisions for protection of the family home.

The Commission explained (at p. 160): Without a doubt the homestead protections differed from common law dower. The principal difference was that the former stemmed from a much broader public policy standpoint. Homestead legislation addressed more than simply the concern of providing a form of maintenance to the widow; it sought to ensure that the homes of the nation were beyond the reach of financial misfortune.

This served to encourage home ownership and to attract settlers. …. 26 Following this broader purpose, the Report indicated that homestead rights were not just to provide a form of maintenance to the wife, they were also intended to protect her during the life of the husband. It described the distinction (at p. 161): The second important distinction between homestead and dower concepts is actually related to the first.

Although dower and homestead rights were both aimed at protecting the wife after the death of her husband, homestead rights were also directed at protecting the wife during the life of her husband. 27 John Williams, “The Homesteads Act : Reflections on its Purpose and Operation in Saskatchewan” (1983-84) 48 Sask. L. Rev. 57, explained the distinction as follows (at p. 61):

…. That difference [between homestead and dower] pertains to the fact that dower rights were aimed at protecting the wife after thedeath of her husband whereas spousal rights in the homestead are aimed at protecting the wife during the life of her husband as well. …. 28 One of the protections afforded the non-owner spouse (during the lifetime of the owner spouse) is the veto right. Thisright serves two purposes.

The first purpose, as properly identified by the motion judge, is to protect and preserve the life estate. 29 However, contrary to the trustee’s assertion that the right to a life estate and the veto right are one and the same, there isa second purpose to the veto right. Specifically, the veto right can have a real and practical effect on a non-owner spouse’s right to live inthe homestead before death. Bruce Ziff, in his

article “Whatever Happened to the Law of Dower? It’s Alive and Unwell and Living onthe Prairies” (1994), 40 R.P.R. (2d) 44, explained (at p. 45): This law of dower continues to perform an important function: the right of a spouse to remain in the house serves as a fall-back supportmechanism for a widowed spouse. Allowing the house to be preserved for the life of the survivor recognizes the special place of thehome in the lives of many families. Today, dower has another use: by controlling dispositions of the home, the law also preservesspousal rights of occupancy before death. (Those rights are conferred in

Part 2 of the Matrimonial Property Act [R.S.A. 1980, c. M-9].) …. [emphasis added] 30 Similar to the Alberta legislation referred to by Ziff, in Manitoba, occupancy rights are conferred by s. 6(2) of TheFamily Property Act, C.C.S.M., c. F25. 31 The value of living in the home before death and the veto right were also touched upon by the Law ReformCommission in the Report (at p. 200): …. Reference has earlier been made to the fact that the home is the shelter and focal point of the family, deserving of special treatmentand status.

To secure the spouse’s entitlement to possession and enjoyment of the home and to protect the home from arbitrarydisposition or encumbrance by one of the parties to the marriage, the Commission has concluded that the requirement of written consentby the non-owning spouse should be maintained. …. [emphasis added] 32 Thus, the veto right and the life estate interest are related rights, but nonetheless separate. They are related in that theveto right is bound up with the life estate interest and helps to ensure preservation of that life estate interest.

As noted by the trustee in itsfactum, consent to a disposition can (and would in this case) result in the loss of the opportunity to obtain a life estate in that property. The Legal Nature of the Veto Right 33 Jurisprudence has historically held that the veto right is not a vested interest in the homestead. The main authoritydealing with the legal nature of the veto right is Crichton v. Zelenitsky (1946), (MB CA), 54 Man.R. 79 (C.A.), a casedealing with the rights of creditors.

In that case, Bergman J.A. was of the view that the veto right, as it was then formulated in TheDower Act, R.S.M. 1940, c. 55, did not vest any interest in the property. He stated (at p. 108): During the lifetime of the husband the Act imposes no restriction on his right to deal with his property as he sees fit, except in the case ofthe homestead, as defined by sec. 2 (c). By sec. 3 he is forbidden to make any disposition by act inter vivos of any interest in thehomestead, unless his wife consents thereto in writing. The expression “disposition” as used in the Act is defined by sec. 2 (a).

Thisprovision gives the wife no vested interest in the homestead during the husband’s lifetime. It merely gives her what the Americanauthorities have aptly termed a “veto power,” that is to say, the right to forbid any disposition of an interest in the homestead by act intervivos. In 21 Cyc. 460-461, this view is stated as follows: The wife and children of the owner of a homestead have no estate or vested interest in the property during his lifetime.

And lawsforbidding a husband to sell or encumber the homestead without the wife joining do not give her an estate but a mere veto power over hisright to convey or mortgage.

[emphasis added] 34 Crichton has been cited, with approval, in a number of subsequent decisions. In Mennig v. St. Andrews (R.M.) (1952), (MB KB), 60 Man.R. 24 (K.B.), the wife lived with her husband on their homestead farm. The municipality sold theproperty for back-taxes.

The wife then sought to redeem the property by demanding an assignment of the tax-sale certificate pursuant tos. 1189(1) of The Municipal Act, R.S.M. 1940, c. 141, which allowed any person with “an interest in or charge on the land” to take suchaction. 35 DuVal J. rejected the wife’s argument that her dower interest in the property qualified as an interest or charge on theland, stating (at p. 26): In support of the applicant’s right to an assignment of the tax-sale certificate herein, counsel for the applicant relies upon secs. 3, 5, 6,10, and 27 of The Dower Act.

But, in my opinion, not one of these sections is an authority for giving the applicant any greater powerthan a power of veto, and does not confer upon the applicant any estate in or charge on the homestead of her husband during his lifetime. In support of his position, he cited Crichton with approval. 36 Other Manitoba decisions, again dealing with the predecessor of the current dower legislation, also support the viewthat the veto right does not create an estate in land or a vested right in land: see Ceicko v. Ceicko (1969), (MB KB), 5D.L.R. (3d) 360 at 363 (Q.B.), Royal Bank of Canada v.

Lycar et al. (1983), (MB KB), 21 Man.R. (2d) 188 at para. 4(Q.B.), and Daly v. Daly (1980), (MB CA), 4 Man.R. (2d) 63 at para. 43 (C.A.). 37 More recently, in Coates (Bankrupt), Re, 2007 MBQB 10, 210 Man.R. (2d) 269, Jewers J. accepted the reasoning inCrichton that the veto right in the Act does not vest an interest in the property (at paras. 28, 32): Counsel for the trustee submits that the matter may be governed by the decision of the Manitoba Court of Appeal in Crichton v.Zelenitsky, (MB CA), [1946] 2 W.W.R. 209 (Man. C.A.).

In that case the Court considered provisions of the formerDower Act, R.S.M., 1940, ch. 55, which were very similar to the above cited provisions of the Homesteads Act. The court [in Crichton] pointed out that the prohibition on “disposition” gives the wife no vested interest in the homestead during thehusband’s lifetime but merely a “veto power”. 38 However, Jewers J. distinguished Crichton because, on the facts of the case before him, the husband was deceased;therefore, the life estate in the homestead vested in the wife. 39 Thus, a veto right is not an estate in land or a vested interest in the homestead.

Rather, it has been characterized as bothan inchoate and personal right. (See Manitoba Agricultural Credit Corp. v. Kars (1992), (MB CA), 76 Man.R. (2d)155 (C.A.).) 40 In this case, the motion judge concluded that the veto right was a personal right. She stated (at para. 33): In my view, the power of a person to veto the sale of the homestead is a personal right, akin to other legislated rights which have beenrecognized as personal and which do not, therefore, pass to the trustee (see e.g. Toronto-Dominion Bank v. Mulatz, (SK CA), [1994] S.J.

No. 77; 120 Sask.R. 134; 68 W.A.C. 134; 111 D.L.R. (4th) 601 (C.A.)). 41 In so far as the veto right is intended to be exercised only by a non-owner spouse and cannot be assigned to his or herchildren or a third party, it is a personal right. Similarly, a non-owner spouse cannot sell the veto right (with the exception of disposingof that right to the owner spouse). 42 Holy Spirit Credit Union Ltd. v. Brown and Brown (1987), (MB KB), 52 Man.R. (2d) 208 (Q.B.),aff’d. without substantive comment, (MB CA), [1988] 6 W.W.R. 480 (Man.

C.A.), was a case dealing with TheDower Act and judgment debts, in which Jewers J. held that it was not the intent of the legislature for the non-owner spouse to have anyinterest in the homestead during the owner’s lifetime. He stated (at para. 17): Section 14(1) of the Dower Act provides that the spouse is entitled to a life estate “as fully and effectually, and to the same effect, andunder the same conditions”, as if she had been left the life estate by will.

The Court of Appeal has said that she is to be regarded as a“mere devisee”. (See the comments of Bergman, J.A., above.) A beneficiary under a will has no property interest - not even a future

interest - in the estate of the testator until the testator’s death. …. [emphasis added] 43 However, in making the above statement, Jewers J. did not consider the fact that a beneficiary under a will has noability to control any disposition by the testator prior to his or her death.

In contrast, and in the context of the Act, the non-owner spousehas the ability to control the disposition of the homestead and to preserve that homestead, by the use of the veto right. 44 Therefore, while the veto right is a personal right, it is unlike other personal rights (such as the right to sue fordefamation) in that it is directly related to, or interconnected with, the preservation of another right, that being the homestead right. Asnoted earlier, consent to a disposition can result in the loss of an opportunity to obtain a life estate.

More importantly, thecharacterization of the veto right as personal does not answer the question of whether the veto right constitutes property and vests in thetrustee pursuant to the BIA. “Property” Under the BIA 45 In the leading case of Husky Oil Operations Ltd. v. Minister of National Revenue, (SCC), [1995] 3S.C.R. 453 at paras. 7-8, Gonthier J., writing for a majority of the Supreme Court of Canada, described the two goals of bankruptcylegislation. The first goal is to ensure the equitable distribution of a bankrupt debtor’s assets among the estate’s creditors.

The secondgoal is the financial rehabilitation of the bankrupt. 46 Regarding the goal to ensure equitable distribution, he stated (at para. 8): It has long been accepted that the first goal of ensuring an equitable distribution of a debtor’s assets is to be pursued in accordance withthe federal system of bankruptcy priorities. In the seminal case of Royal Bank of Canada v.

Larue, (UK JCPC), [1928]A.C. 187, affirming (SCC), [1926] S.C.R. 218, Viscount Cave L.C. confirmed that the exclusive federal power overbankruptcy and insolvency in s. 91(21) of the Constitution Act, 1867 enables Parliament to provide for the ranking of creditors inbankruptcy. …. [emphasis added] 47 Importantly, he went on to conclude that the exercise of the above power may require that bankruptcy legislation dealwith matters which would constitutionally otherwise be within the powers granted to the provinces. (See also, Sun Indalex Finance, LLCv.

United Steelworkers, 2013 SCC 6 at para. 8, and Caisse populaire Desjardins de l’Est de Drummond v. Canada, 2009 SCC 29 at para.11, [2009] 2 S.C.R. 94.) 48 Indeed, in Husky Oil, the majority of the Supreme Court of Canada held that, despite the fact that certain provisions ofthe Saskatchewan workers’ compensation legislation intended to confer priority on the Workers’ Compensation Board in situationswhere the contractor was bankrupt, it was inoperative in so far as it conflicted with the priority of creditors as set out in the bankruptcylegislation then in effect.

While Husky Oil was a constitutional law case and this is a case concerning statutory

interpretation, it isillustrative of the significance the Supreme Court has attributed to bankruptcy legislation. 49 Appellate jurisprudence has endorsed a broad definition of property under s. 2 of the BIA. For example, inPricewaterhouseCoopers Inc. v. Manulife Financing et al, 2003 NBCA 9, 256 N.B.R. (2d) 27, Drapeau J.A. (as he then was) wrote (atpara. 21):

Section 2 of the Bankruptcy and Insolvency Act provides that “property” includes “every description of property, whether real orpersonal, legal or equitable ... and includes ... every description of ... interest ..., present or future, vested or contingent, in, arising out ofor incident to property”. Having regard to that wording, it is difficult to imagine how Parliament could have cast a wider net. In BristolAirport plc v.

Powdrill, [1990] Ch. 744 (C.A.), the broad wording of the definition of “property” found in the English statute led SirBrowne-Wilkinson V.-C. to observe, at p. 759D, that it was “hard to think of a wider definition of property”. The equally broad wordingof s. 2 of the Bankruptcy and Insolvency Act evinces a clear legislative intention to catch every conceivable type of property right andinterest. …. [emphasis added] 50 The breadth of s. 2 is described by Yoine J. Goldstein, “Property of the Bankrupt,” Halsbury’s Laws of Canada -

Bankruptcy and Insolvency , online: LexisNexis <http://www.lexisnexis.ca> (at HBI-62): HBI-62 Wide definition. The Bankruptcy and Insolvency Act (“BIA”) provides a wide definition of the term “property”, which transcends the traditional categories established in property and trust law that distinguish between personal and real rights, equitable and legal interests . …. [emphasis added] 51 More recently, the expansive nature of property in s. 2 was considered by the Supreme Court of Canada in Saulnier .

That case concerned a commercial fishing licence which enabled a fisher to engage in a regulated industry where participation was otherwise prohibited. One of the issues before the court was whether that licence constituted “property” pursuant to the BIA and the Personal Property Security Act , S.N.S. 1995-96, c. 13 . 52 Binnie J. began by confirming that the issue of what constitutes property was a question of statutory

interpretation. He stated (at para. 16): The questions before the Court essentially raise a dispute about statutory

interpretation. We are not concerned with the concept of “property” in the abstract. The notion of “property” is, in any event, a term of some elasticity that takes its meaning from the context. The task is to interpret the

definitions in the BIA and PPSA in a purposeful way having regard to “their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act , the object of the Act, and the intention of Parliament” (R. Sullivan, Sullivan and Driedger on the Construction of Statutes (4th ed. 2002), at p. 1). Because a fishing licence may not qualify as “property” for the general purposes of the common law does not mean that it is also excluded from the reach of the statutes. For particular purposes Parliament can and does create its own lexicon. [emphasis added] 53 He continued (at para. 27): ….

Even in the “regulatory cases” the courts now adopt a more purposeful approach to the

definitions in the BIA and in personal property security legislation, and consider traditional common law notions of property as less of a stumbling block to recognition of licences and quotas as “property” for statutory purposes. I agree with this evolution. 54 Binnie J. then reviewed what he called the “preferred approach,” which looked at various rights conferred by the licence. On the facts before him, these included the right to engage in an exclusive fishery and a proprietary right in the fish harvested.

He concluded that, while the above rights “[did] not wholly correspond to the full range of rights necessary to characterize something as ‘property’ at common law,” the question was whether this “bundle of rights” nevertheless constituted property for the purpose of the statutes (at para. 43). 55 In the result, Binnie J. concluded that the above bundle of rights was property and, in so doing, he observed (at para. 44): …. The terms of the definition are very wide. Parliament unambiguously signalled an intention to sweep up a variety of assets of the bankrupt not normally considered “property” at common law.

This intention should be respected if the purposes of the BIA are to be achieved. 56 Binnie J.’s approach of looking at whether a bundle of rights constitutes property has been cited in subsequent cases. For example, in Tucows.com Co. v. Lojas Renner S.A. , 2011 ONCA 548 , 106 O.R. (3d) 561 , the issue was whether a domain name was personal property pursuant to the Ontario Rules of Civil Procedure . Weiler J.A., in examining the bundle of rights associated with a domain name, cited Bruce H.

Ziff, Principles of Property Law , 5th ed. (Toronto: Carswell, 2010), and his view that the bundle of rights associated with property includes rights that are “enforceable against others.” Specifically, Ziff stated (at p. 2): …. Property is sometimes referred to as a bundle of rights. That characterization means that property is not in fact a thing, but rather a right, or better, a collection of rights (over things) enforceable against others . ….

[emphasis added] 57 Weiler J.A. continued to observe that rights that are enforceable against others should be exclusive rights. She referredto the following extract written by Sharlow J.A. in Manrell v. Canada, 2003 FCA 128 at para. 25, [2003] 3 F.C. 727 (at para. 58): It is implicit in this notion of “property” that “property” must have or entail some exclusive right to make a claim against someone else.

A general right to do something that anyone can do, or a right that belongs to everyone, is not the “property” of anyone. …. 58 In applying the above principle to the facts before her, and noting that Saulnier “emphasize[d] exclusivity of a right asan essential aspect of property” (at para. 64), she concluded (at para. 62): The bundle of rights associated with the domain name <renner.com> that Tucows has (as purchaser and registrant) satisfies the attributesof property as described by Harris and Ziff in that at present Tucows can enforce those rights against all others. 59 In consideration of the above, Mrs.

Chartier’s veto right fits within the wide definition of property under the BIA. Thatis, she has certain rights (part of a bundle) as against others, arising out of or incidental to property, and these rights are both enforceableagainst others, and exclusive to her. 60 However, because the veto right also has many attributes of a personal right, a more detailed analysis of personal rightsand the BIA is required to determine whether the veto right constitutes property that vests in a trustee. Personal Rights and the BIA 61 Historically, the view has been that certain personal rights do not vest in a trustee.

Some of these personal rights wereidentified in Wallace v. United Grain Growers Ltd., (SCC), [1997] 3 S.C.R. 701, where Iacobucci J., for the majority ofthe court, stated (at para. 38): The parties agreed that the claim for mental distress, loss of reputation and punitive damages is one that is personal in nature. Such acause of action does not become the property of the trustee in bankruptcy and thus may be pursued by Wallace in his own right: ReHolley (1986), (ON CA), 59 C.B.R. (N.S.) 17 (Ont.

C.A.). …. 62 More recently, in Bre-X Minerals Ltd. (Bankrupt), Re, 2001 ABCA 255, 293 A.R. 73, Conrad J.A. considered whethersolicitor-client privilege was a personal right that did not vest in a trustee. Writing for the majority, she indicated (at para. 31): Notably, personal property and personal rights are very different and the cases interpreting the BIA distinguish the two. For example,“things in action”, such as a cause of action for custody or divorce, are matters personal to the bankrupt and are not captured by s. 2(1) ofthe BIA: Gano v.

Alberta Motor Association Insurance Co. (1997), (AB KB), 202 A.R. 118 (Q.B. Master). Taxrefunds for the support of disabled person are the “property of the bankrupt”: Neufeld (Bankrupt), Re (1993), (ABKB), 144 A.R. 182 (Q.B.). Nor does a cause of action for damage to the reputation of a bankrupt vest in a trustee: Egan v. Grayson(1956), (AB KB), 8 D.L.R. (2d) 125 (Alta. T.D.); Rahall et al. v. McLennan et al. (1996), (ABKB), 190 A.R. 183 (Q.B.).

In my view, solicitor-client privilege is a personal right, at least as fundamental and individual as damages toreputation, which falls into a category of interests which are not transferred to or conferred upon a trustee by the BIA. …. 63 In oral argument, the trustee suggested that every interest or right the bankrupt owns, including personal rights, vests inthe trustee at the property-vesting stage. I disagree.

Contrary to that assertion, it is only property which meets the s. 2 definition thatvests in the trustee. 64 In Ronald (Bankrupt), Re, 2008 MBCA 104, 231 Man.R. (2d) 87, Freedman J.A., in a unanimous decision, confirmedthat not all interests fit within the definition (at para. 18): The definition of “property” in s. 2 of the Act (see para. 12 (1) above) is extremely broad (see Marzetti v. Marzetti (Bankrupt), (SCC), [1994] 2 S.C.R. 765; 169 N.R. 161; 155 A.R. 340; 73 W.A.C. 340, at 783), although it will not capture every interest. ….

[emphasis added] (And also see Direct Rental Centre (West) Ltd. v. Waring (A.C.) & Associates Inc., 2001 ABCA 233, 299 A.R. 39.) 65 Therefore, the veto right must be examined in the context of the BIA to determine whether it vests with the trustee. The Veto Right and the BIA 66 While the Wallace and Bre-X Minerals decisions outlined some personal rights that will not vest in the trustee, such ascertain causes of action, other rights that involve a personal element have been held to vest. For example, in Chetty v.

BurlinghamAssociates Inc. et al. (1995), (SK CA), 125 Sask.R. 249 (C.A.), leave to appeal to S.C.C. refused, [1995] S.C.C.A.No. 82 (QL), Wakeling J.A., for the court, considered whether a contingency agreement, which he labelled as a contract for personalservices, constituted property. He stated (at para. 10): …. This [definition in s. 2] is a very broad description designed to catch every conceivable type of asset.

Indeed, the general scheme ofthe Act is to include virtually all assets and then to exclude certain specific assets from distribution to the creditors as is provided ins. 67(1) .... 67 After citing some trial decisions which held that a contract for personal services did not constitute property within theBIA, he stated (at para. 14): However, none of these cases contain an explanation of how a contract for personal services escapes inclusion in the definition ofproperty which is so all inclusive under the Act that it is hard to conceive of an interest that has been left out.

True, the definition doesnot specifically include a contract to pay professional fees, but surely that contract is caught up by a phrase such as “every description ofproperty, whether real or personal, legal or equitable”. And if that phrase doesn’t cover such a contract, then s. 67(1) seems to take upany slack when it includes “any property wherever situated” and “such powers ... in respect of the property as might have been exercisedby the bankrupt for his own benefit”.

The definition of property is so complete you would expect that if a contract for personal serviceswas intended to be excluded, you would find it mentioned in s. 67(1) where the exclusions are specifically identified. The breadth of thedefinition of “property” in the Act has been recently commented upon by the Supreme Court of Canada in Marzetti v. Marzetti,(Bankrupt), (SCC), [1994] 7 W.W.R. 623; 169 N.R. 161; 155 A.R. 340; 73 W.A.C. 340, at pp. 635 and 636 W.W.R. 68 As regard to s. 67(1) seeming “to take up any slack,” I note that s. 67(1)(

d) of the BIA describes property of thebankrupt divisible among his creditors as comprising: (

d) such powers in or over or in respect of the property as might have been exercised by the bankrupt for his own benefit. 69 The expansive nature of s. 67(1)(d), and the conclusion that it can be viewed as supplementing the s. 2 definition ofproperty, was touched upon in Quest Capital Corp. v. Longpre, 2012 BCCA 49, 320 B.C.A.C. 5. In that case, Chiasson J.A. made thefollowing comments (at para. 36): In my view, the fact that Parliament considered it necessary to provide an expanded definition of property in s. 67[(1)](

d) of the BIAreflects the fact that at common law, “powers” are not property. This is consistent with the comment of Mr. Justice Binnie in Saulnier v.Royal Bank of Canada, 2008 SCC 58, [2008] 3 S.C.R. 166 at para. 44, as quoted by M.T. Moreau J. in Stout & Co. LP v.

Chez OutdoorsLtd., 2009 ABQB 444, 56 C.B.R. (5th) 250 at para. 43: “[p]arliament unambiguously signalled an intention to sweep up a variety ofassets of the bankrupt not normally considered ‘property’ at common law”. 70 In this case, the motion judge concluded that the veto right did not vest in the trustee because it was a personal rightwhich did not have value. In reaching her conclusion, she relied on the case of Toronto Dominion Bank v.

Mulatz (1994), (SK CA), 120 Sask.R. 134 (C.A.). 71 In Mulatz, the court had to determine whether the right of a bankrupt farmer to the renewal of a lease pursuant to theSaskatchewan Farm Security Act, S.S. 1988-89, c. S-17.1, was a personal and/or statutory right which did not vest in the trustee. Indiscussing the issue, the court noted that, in a normal case, a personal right will not vest in a trustee. It stated (at para. 15): …. The respondent [Mulatz] however points out the right to a lease is a very restricted right created by legislation for a specific class of

person and it could not be exercised by any one other than Mulatz. To support this position, he refers to the Czerwonka v. Paslawski(1989), (SK KB), 77 Sask.R. 206 (Q.B.) and (1989), 8 R.P.R. (2d) 80 (Sask. C.A.), case in which this court agreedwith McLellan, J., that the right of first refusal as provided to a farmer by s. 27(1) of the Saskatchewan Farm Security Act before itsamendment was not assignable by the farmer for whose benefit it was created. …. 72 Despite the argument that the renewal right was not assignable, the court held that it did, in fact, vest in the trustee.

This was because the legislation in question was amended to allow for the farmer to assign or transfer, by devise, the right to renew thelease to a limited group of family members. The court reasoned (at paras. 19-20): The concern is that by this extension of the right to a lease, the legislature has created a group of people who are entitled to receive thebenefit of that right.

Since Mulatz could assign this right to members of his family it is quite conceivable that they could compete amongthemselves for an assignment of that right which would give it a commercial value in that it would be assigned to that eligible personwho was prepared to pay the most to obtain it. It is very hard to say that a right which is assignable does not have some commercialvalue as it has to be assumed the legislature has seen it appropriate to retain that right within the farmer’s family because it had somevalue.

It is illogical to conclude they would go to such trouble to create a valueless right, or to assure the retention of a valueless rightwithin the family. In the result, the right to have a lease is no longer such an exclusive and personal right as was the right of first refusal when it wasconsidered in Czerwonka v. Paslawski. Nor is it a right such as was dealt with in the English cases earlier referred to. In those cases,the exclusive nature of the right was fundamental to the conclusion that it was not property which passed to the trustee.

As a result ofthis amendment, what is now being considered, is a right which could have a commercial value. While it is true that it is a right whichcould not be exercised directly by the trustee because he is not a farmer, yet there is nothing to suggest it could not be assigned by thetrustee to the one of the limited class of persons who could benefit from such an assignment. 73 In Mulatz, the finding that the right to a lease was property within the meaning of the BIA was based on the value of theright of a bankrupt to assign or transfer the lease to a very limited group.

In this case, while the non-owner spouse cannot gift the vetoright by will to her children, giving it up by way of consent and thereby divesting her life estate for the benefit of a limited group (i.e., theowner spouse) leads to the conclusion that it is a right that can have value. The Impact on the Family and the BIA 74 The motion judge determined, based on Marzetti, that the impact on the family is a proper consideration in interpretingthe BIA.

In that case, the Supreme Court of Canada held that a tax refund owed to the bankrupt should go to the Director ofMaintenance Enforcement, who was collecting support payments for the bankrupt’s former wife, instead of to the trustee. 75 The decision was based on the wording of the BIA as it then was (the Bankruptcy Act) and, in particular, s. 68, whichrelated exclusively to the bankrupt’s remuneration from employment.

Specifically, the s. 68 application in Marzetti was “for an orderdirecting the payment to the trustee of such part of the salary, wages or other remuneration as the court may determine, having regard tothe family responsibilities and personal situation of the bankrupt” (emphasis added). This provision was stated to apply“[n]otwithstanding

section 67,” which was the provision that directed which property was included and which was excluded from thebankrupt’s estate. The limited application of s. 68 was clear from the following conclusion by the court (at p. 794): To summarize briefly, it is my opinion that the language of s. 68, the inferred purpose of the provision, and that decision of this Court inVachon, [ (SCC), [1985] 2 S.C.R. 417], all support the conclusion that s. 68 is a substantive provision, one which isintended to operate as a complete code in respect of a bankrupt’s salary, wages or other remuneration. These forms of property cannotfall within s. 67(

c) of the Bankruptcy Act as a bankrupt’s after-acquired “property,” and they cannot be considered “property of abankrupt divisible among his creditors” for the purpose of s. 67. They do not vest in the trustee through the simple operation of law. 76 Not only did s. 68 not state that the impact on the family was a proper consideration under the Bankruptcy Act, as awhole, but its effect is the opposite. The provision in s. 68 was limited to the remuneration of the bankrupt. It did not apply to otherproperty. That

section stated that the impact on the family was to be considered in regard to the bankrupt’s remuneration fromemployment. If Parliament had intended that the impact on the family is to be considered in relation to other property, it could have saidso, as it did for the bankrupt’s remuneration. The fact that it did not do so suggests that that consideration does not apply to otherproperty. The Value of the Veto Right 77 The value in giving up a life estate is evidenced in s. 11(1) of the Act, which provides:

Spouse or common-law partner may release rights 11(1) Subject to sections 2.1 and 2.2, an owner’s spouse or common-law partner may, in writing in the prescribed form and for valuableconsideration, release in favour of the owner all rights under this Act in respect of the homestead. 78 It is further reinforced by s. 28 of the Act, which states: Contracting out 28 Nothing in this Act prohibits a person, for valuable consideration, from releasing or contracting out of his or her rights under this Act,either before or after marriage or before or after commencement of a common-law relationship. [emphasis added] 79 In this case, the purchaser of the subject property was prepared to pay $20,000 to have the transaction close.

This$20,000 is additional evidence that the personal right has value, which, in this case, vests in the trustee upon the bankruptcy of Mrs.Chartier. 80 The potential for value in a release was considered in Dowse v. Dowse et al., 2003 MBQB 8, 171 Man.R. (2d) 129. Inthat case, the court heard evidence regarding the tactical value of the right to veto in domestic litigation, including evidence that “clientsregularly release or accept releases of homestead rights for other valuable consideration” (at para. 19).

The court accepted that the lossof the veto in that circumstance amounted to a loss of “tactical advantage” and awarded damages in the amount of $1,000. 81 As earlier stated, the veto right preserves and protects the life estate interest. The value in the life estate interest isfurther confirmed by s. 16 of the Act, which provides for a court to determine damages when there is a fraudulent or wrongful dispositionby the owner spouse. Notably, s. 16(1.1) defines a wrongful disposition as one where the owner spouse fails to obtain the “consent” ofthe spouse who has homestead rights.

The Law of Property Act 82 The notion that there is value in homestead rights is also evidenced in ss. 19(1), 19(2), 20(1) and 24 of the LPA. 83 Section 19(1) of the LPA provides for the court to order partition or sale of land of “all persons interested in, to or out ofany land in Manitoba” (emphasis added).

Section 19(2) states that, where s. 19(1) applies to a married person or a common-law partner,an action for partition or sale may be brought by or against him or her and the court may order partition or sale without the consent ofany party to the action and without the consent of the spouse or common-law partner who has a homestead interest in the land. Section 20(1) of the LPA provides that any person interested in land in Manitoba may apply to the court for partition or sale.

Regardingcompensation for homestead rights, s. 24 provides: Value of inchoate homestead right and payment thereof 24 Where a person is a party to the action, the court shall, in case of sale, determine the value of any rights under The Homesteads Act ofhis or her spouse or common-law partner according to the principles applicable to deferred annuities and survivorships, and shall orderthe amount of that value to be paid out of the share of the purchase money to which the person is entitled, or shall order the payment tothe spouse or common-law partner of the person out of the share of the purchase money to which the person is entitled, of an annualsum, or of such income or interest as is provided in

section 23; and the payment shall be a bar to any right or claim under TheHomesteads Act. 84 In her reasons, the motion judge was of the view that s. 24 was wholly inapplicable to the facts before her. She wrote(at para. 30): But s. 24 only applies where an action has been brought under s. 19 of the LPA for partition or sale of land by a co-owner. …. Theability of the court to compensate a spouse for loss of homestead rights under s. 24 applies only where the other spouse has brought anaction for sale. …. 85 However, in the case of Mitchelson v.

Mitchelson (1953), (MB KB), 9 W.W.R. (N.S.) 316 (Man.Q.B.), the wife sought a declaration that she was the owner of a one-half interest in the family home and an order that the property besold. DuVal J. agreed that, through her efforts, the wife was entitled to a one-half interest in the property. In ordering the property to besold, DuVal J. stated (at p. 321):

As the property to be sold was the “homestead” of the parties within the terms of The Dower Act it might appear that the value of suchrights should be determined pursuant to sec. 24 of The Law of Property Act, RSM, 1940, ch. 114, as amended by 1949, ch. 32, and 1950,ch. 33; but as the parties have equal rights in the homestead such calculations are unnecessary. 86 Doubtless, even if DuVal J. had made the determination that the wife was not a co-owner of the land, he would haveassigned a value to the property pursuant to s. 24. 87 For the purpose of this case, it is not necessary to decide whether or not Mr.

Chartier could have applied for partitionand sale. The point is that both the Act and the LPA contemplate, at least in certain circumstances, the assignment of value to the rightsof a non-owner spouse under the Act before the death of the owner spouse. The Disposition of Property Under the BIA 88 In Royal Bank of Canada v. North American Life Assurance Co., (SCC), [1996] 1 S.C.R. 325(Ramgotra), the Supreme Court of Canada underscored the importance of recognizing the two distinct stages of bankruptcy, being theproperty-vesting stage and the estate-administration stage.

Writing on behalf of the court, Gonthier J. described them as follows (atparas. 44-45): … [I]t is important to remember that the general scheme through which a bankrupt’s estate is divided by the trustee among creditorsinvolves two distinct stages. First, the Act provides that an insolvent person “may make an assignment of all his property for the generalbenefit of his creditors” (s. 49(1)), or that creditors “may file in court a petition for a receiving order against a debtor” (s. 43(1)).

At thetime of the assignment or receiving order, the trustee in bankruptcy is obligated to take possession of the assets forming the estate of thebankrupt. Thus, by operation of s. 71(2), the bankrupt’s property passes to and vests in the trustee …. …. Once the bankrupt’s property has passed into the possession of the trustee, the Act provides the trustee with the power to administer theestate.

For example, the trustee may, with the permission of the estate inspectors, sell or dispose of assets (s. 30(1)(a)), lease realproperty (s. 30(1)(b)), carry on the business of the bankrupt (s. 30(1)(c)), or divide certain property among the creditors (s. 30(1)(j)). Theultimate purpose of these administrative powers is to manage the estate, in order to provide equitable satisfaction of the creditor’sclaims.

This, then, is the estate-administration stage of bankruptcy, one distinct aspect of which is the distribution of the estate amongcreditors. 89 In consideration of the above, the court held that assets which are made exempt under provincial laws vest in the trusteeat the time of bankruptcy pursuant to s. 67(1)(

b) of the BIA. The s. 67(1)(

b) exemption is only operative at the estate-administrationstage, to bar the trustee from distributing exempt items to the creditors. 90 The facts in Ramgotra are that the bankrupt designated his wife as beneficiary of his registered retirement income fund(RRIF) two years prior to declaring bankruptcy. The court held that the wife’s future contingent interest in the RRIF vested in thetrustee because, pursuant to s. 91(2), the transfer was void as against the trustee.

Despite the fact that the interest vested in the trustee, itwas not realizable by the trustee because it was an exempt asset pursuant to provincial legislation, and therefore exempt from distributionby s. 67(1)(b). Due to s. 40(1) of the BIA, the trustee was obliged to return it to the bankrupt prior to applying for his discharge. IX. ANALYSIS 1. Did the motion judge err in law in finding that the veto right of a non-owner spouse does not vest in his or her trustee inbankruptcy under the BIA? 91 The motion judge correctly concluded that the veto right and the right to a life estate are not one in the same rights.

However, she erred in law in finding that, in so far as the right to veto is a personal right, it could not be considered property within s. 2of the BIA. 92 While the veto right has many of the characteristics of a personal right, consideration of the wide

interpretation of ss. 2and 67(1)(

d) of the BIA, and the description of property in cases such as Saulnier, leads to the conclusion that the veto right is propertythat vests in the trustee under the BIA. 93 As earlier mentioned, Saulnier endorsed the “bundle of rights” approach to the determination of property for thepurpose of the BIA. In this case, consideration of the veto right as part of a “bundle of rights,” including:

a) the right to register thehomestead interest;

b) the right to claim for damages in the event of a disposition without consent;

c) the right to release homestead rightsto the owner spouse for valuable consideration;

d) the right to a life estate; and

e) the right to valuation in certain circumstances under theLPA, leads to the conclusion that the veto right does fall within the definition of “every description of property, whether real or personal,legal or equitable, as well as obligations, easements and every description of estate, interest and profit, present or future, vested orcontingent, in, arising out of or incident to property” found in s. 2 of the BIA and may have value, depending on the circumstances.

94 In this case, it is clear that Mrs. Chartier’s consent could be exchanged for valuable consideration to Mr. Chartier and, therefore, had value. Further, the veto right had value to the prospective purchaser, who was willing to pay $20,000 for Mrs. Chartier’s consent to the sale. 95 This

interpretation is consistent with s. 67(1) (

d) of the BIA , in so far as that

section conveys to the trustee “such powers in or over or in respect of the property as might have been exercised by the bankrupt for his own benefit.” 96 Because the veto right is property as defined in s. 2 of the BIA , s. 71 operates to vest the right to veto in the trustee. 2.

Did the motion judge err in law in finding that the trustee in bankruptcy of a non-owner spouse cannot exercise that spouse’s veto right during the period of time the spouse remains an undischarged bankrupt? 97 As was stated in Ramgotra , it is important to draw a distinction between property that vests in the trustee and the administration of that property.

Any number of rights or powers may vest in the trustee at the property-vesting stage that are not realizable because they are exempt or because an event required to trigger the right or power does not occur before the trustee applies for a discharge of the bankrupt. 98 In this case, the property in question is not exempt from distribution pursuant to either the BIA or provincial law. Therefore, the veto right, and all of the powers associated with it, vested in the trustee, who exercised the veto right by registering a homestead notice against the title.

In doing so, the trustee was exercising a power over the property as provided for in s. 67(1) (

d) of the BIA . That was the extent of the power that the trustee could exercise at that time. If Mr. Chartier had not sold the homestead (the triggering event) before the trustee applied to discharge Mrs. Chartier, the trustee would have been obliged to return the property and remove the homestead notice from the title prior to applying for Mrs. Chartier’s discharge. 99 However, Mr. Chartier did enter into an agreement for the sale of the property before Mrs. Chartier was discharged.

Pursuant to s. 4 of the Act , an agreement for sale constitutes a disposition which requires the consent of the non-owner spouse or, in this case, the trustee. The agreement for sale was a triggering event which gave value to the veto right. It must be remembered that the trustee could only obtain the same rights as were held by Mrs. Chartier. Mrs. Chartier could not have sold her consent to the prospective purchaser. Nonetheless, she could have released her homestead rights for valuable consideration to Mr. Chartier pursuant to s. 11(1) of the Act . If Mr.

Chartier had chosen to accept the additional $20,000 for the property, as offered by the prospective purchaser, and then offered the money to the trustee for a full release of homestead rights, the trustee’s property right in the veto would have been realized for the benefit of the creditors. In

summary, the veto right passed to the trustee, who would not have been able to realize on it except for the fact that Mr. Chartier sold the property. X. DECISION 100 In response to the two grounds of appeal, I would find that the motion judge erred in finding that the veto right of the non-owner spouse under the Act does not vest in his or her trustee in bankruptcy and that the trustee could not exercise the non-owner veto right while that spouse remains an undischarged bankrupt in circumstances such as these.

Rather, I would find that the veto right falls within the definition of property found in s. 2 of the BIA and that it vests in the trustee upon an assignment in bankruptcy. In this instance, the agreement to sell the property constituted a triggering event that gave it value and rendered it realizable for the benefit of the creditors. 101 Therefore, I would allow the appeal with costs to the appellants. J.A. I agree: C.J.M. I agree: J.A.