JTL INDUSTRIES LTD. (BANKRUPTCY), 2020 SKQB 225

Mere Requesting for Payment of Dues by Trustee cannot be comprehended as affirmation.

Evergreen Co-Operative Association (applicant) brought a matter before the Queen’s Bench of Saskatchewan against The Bowra Group Inc. (respondent), who was appointed as a trustee of JTL Industries Ltd. after the bankruptcy of the JTL. The applicant made a contract on November 1, 2017 with the JTL to purchase 50 smooth wall grain bins between November 1, 2017 to October 30, 2018 in return for JTL entering into an exclusive relationship with the applicant. Consequently, the applicant was to pay $1,000 per bin in advance and remaining within 15 days after the notice of the manufacture of bins will be given.

The matter of conflict is regarding six bins which were delivered on December 10, 2018 and lacked substantial components that are essential to further resell it. Consequently, applicant filed application against the respondent to pay the sum to make the bins a finished good as per the contracts and further to grant leave to bring an action against the respondent through their trustee pursuant to s. 215 of the Bankruptcy and Insolvency Act, RSC 1985 (BIA).

Applicant contended that the respondent should be held liable for the breach of contract for delivering unfurnished bins since it had affirmed the contract by asking for the payment of the last unpaid bin and further approving the dispatch of the goods. On the contrary, the respondent alleged that there is no scope for any affirmation since the contract had already been elapsed at the time of bankruptcy. The respondent has relied on the New Skeena Forest Products Inc., Re v. Don Hull & Sons Contracting Ltd., 251 DLR (4th) 328, where it was held that the affirmation shall be done before the end of the contract. Further, the respondent alleged that when the respondent took control of JTL, the payment of five out of six bins was already made. Thus, the respondent could only be said to affirm the last bins in case if the court views the action of the respondent as an affirmation.

The primary question of law before the court was whether the action of the respondent could be said to be an affirmation. The court discussed In Re Thompson Knitting Co., [1925] 385 (ONCA), where it was held that trustee has two options, either to affirm the contract or to disclaim the contracts. It also acknowledged that the same view has been expressly quoted by Prof. Wood in Bankruptcy & Insolvency Law, 2d ed (Toronto: Irwin Law Inc., 2015). New Skeena was also referred which held that trustee could affirm or disclaim the contract after knowing the contractual obligations.

After perusal of these judgments, the court held that in this case, mere requesting for payment and approval of disposal of bins couldn’t prove that the trustee was acquainted with the contractual obligations and has affirmed the contract. In court’s view, the trustee had only performed his statuary obligation to take the bankrupt’s receivables and thus, such action can’t be taken as an affirmation. Further, Court reasoned that the affirmation should be for the obligations prior to the end of the contract while in this case the contract had already expired at the time of bankruptcy. Hence, there is no question of affirmation. Consequently, application is dismissed.