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Meubles Poitras (2002) inc. (Syndic de)

2013 QCCS 1131


(Commercial Division)












March 19, 2013




















            Claimant / Appellant













JS 1319

[1]           Les Meubles Poitras (2002) Inc. ("Meubles Poitras") filed an assignment in bankruptcy on April 30, 2010.

[2]           Sears Canada Inc. ("Sears") was an important customer of Meubles Poitras.  According to the books and records of Meubles Poitras, at the date of the bankruptcy, Sears owed approximately $2,000,000.00 for furniture sold and delivered.

[3]           The operations of Meubles Poitras were financed by National Bank of Canada ("National Bank").  In this context, National Bank holds a hypothec on the universality of movable property, including accounts receivable of Meubles Poitras.  As well, Natexport, a division of National Bank, purports to have purchased accounts receivable under the auspices of a factoring agreement entered into with Meubles Poitras.  National Bank claims from Sears $100,526.00 for hypothecated accounts receivable and Natexport claims $1,911,823.00 for purchased accounts receivable.

[4]           Sears asserts various claims against Meubles Poitras based upon which Sears claims set-off (or in civil law terms, compensation) against the Meubles Poitras accounts receivable.

[5]           Incidentally, absent the set-off, Sears appears to acknowledge its indebtedness to Meubles Poitras.

[6]           On November 18, 2010, Sears filed a proof of claim as an unsecured creditor in the bankruptcy of Meubles Poitras in an amount of $510,325.00.  In other words, Sears asserts a claim which exceeds the account payable of Sears to Meubles Poitras by the foregoing amount or, in other words, Sears asserts a claim of approximately $2,500,000.00 against Meubles Poitras.

[7]           Raymond Chabot Inc. (the "Trustee") disallowed Sears' proof of claim in toto on October 14, 2011 and, on January 27, 2012, Sears filed a Motion in Appeal of such disallowance pursuant to the provisions of Section 135 of the Bankruptcy and Insolvency Act [1] ("BIA").  The Trustee consented to an extension of time.

[8]           In May 2011, the Trustee filed a contestation of the appeal by way of a proceeding entitled "Contestation à la requête en appel de l'avis de rejet de la preuve de réclamation de Sears Canada Inc. et requête pour directives afin d'établir le quantum des créances payables".  This proceeding includes an application for a declaratory judgment by way of cross-claim to determine the sums payable by Sears.  National Bank and Natexport are impleded as parties given their interest in the accounts receivable.  Artfully, the Trustee, in its conclusions, asked for a declaration that the sum of $1,292,880.00 for services rendered and goods sold by Meubles Poitras is "due" without requesting a declaration as to whom the sum is due (i.e. National Bank, Natexport, or the Trustee).  Obviously, given the declaratory nature of the proceeding, no condemnation is sought against Sears.  The latter filed an expert report which the Trustee moved to have excluded from the record.  Aside from this motion, the matter appears ready to go to trial and the Trustee testified that the resolution of the Sears' accounts receivable is virtually the last matter to complete the administration of the bankruptcy (other than some deemed trust claims).

[9]           In July 2012, National Bank issued legal proceedings against Sears before the Ontario Superior Court of Justice claiming the unpaid Meubles Poitras' receivables.  This proceeding was served in November 2012.

[10]        The Ontario proceeding alleges, and all the parties agree, that the contract between Meubles Poitras and Sears provides that the Ontario law applies to it and elects the exclusive jurisdiction of the Ontario Courts over any dispute.  Also, germane in the contract and, as mentioned by counsel before the undersigned, is the prohibition against the assignment of amounts due under such contract.

[11]        Faced with the defence of the Ontario action and the lack of any equity for unsecured creditors in the bankruptcy estate, Sears would like to discontinue its appeal from the disallowance of its proof of claim.  However, it fears that the legal result of such discontinuance will be a disallowance of its proof of claim that would be final and binding, and perhaps a bar to the defence of set-off that it intends to raise in the proceedings initiated by National Bank against it before the Ontario Superior Court of Justice.

[12]        Therefore, Sears applies to this Court for an order suspending the matter of the appeal from the Trustee's disallowance of Sears' proof of claim.

[13]        Sears argues that :

13.1.     The outcome of the appeal of the disallowance will be moot since the Trustee and the unsecured creditors have no interest in the account receivable;

13.2.     That there is lis pendens between the Québec and Ontario proceedings;

13.3.     The interest of justice requires a suspension.

[14]        Sears and the Trustee rebut the foregoing as follows:

14.1.     The outcome of the appeal of the disallowance of the proof of claim will not be moot since all the parties (the Trustee, National Bank, Natexport and Sears) will be bound by the declaratory judgment).

14.2.     The three (3) conditions of lis pendens (identity of parties, object and cause) are not met.  However, if the three (3) conditions are met, Article  3137 of the Québec Civil Code ("Q.C.C.") provides that the Québec proceeding should not yield as it was instituted first.

14.3.     The interest of justice requires speedy resolution - the appeal of the disallowance is ready to go to trial, while the Ontario proceeding is in its infancy.

[15]        At the commencement of the hearing before the undersigned, National Bank sought to adduce evidence of one of its representatives by way of an affidavit.  The affidavit sought the production of an e-mail exchange.  The attorney for Sears objected.  This affidavit was clearly not filed in a timely fashion and contains hearsay.  Accordingly, and given the provisions of Article  2870  of the Civil Code of Québec ("C.C.Q."), the objection is maintained.  The written statement must contain facts to which the declarant could otherwise testify (i.e. not hearsay).  Moreover, the notice was inadequate.  Accordingly, the Court has not relied upon contents of this affidavit in the present judgment.

[16]        Similarly, the Trustee's attorney sought to file an affidavit of the Trustee at hearing.  The exhibits filed with the affidavit were not the subject of an objection by Sears' counsel.  Moreover, since the Trustee testified and was available for cross-examination, the objection to the filing of this affidavit is dismissed.


[17]        Unfortunately, the outcome of the appeal of the disallowance cannot result in a condemnation of Sears to pay what it owes, if this is the ultimate conclusion.  Thus, as a proceeding, the Québec appeal of the Trustee's disallowance of Sears' proof of claim and the cross-claim for declaratory judgment are not susceptible of putting an end to the dispute.

[18]        However, the disallowance may not be moot.  If the Ontario proceeding goes forward and results in a judgment that the assignment of book debts by Meubles Poitras was prohibited and thus not opposable to Sears, then there may be equity for the mass of unsecured creditors in the bankruptcy estate because the account receivable due from Sears would revert to the Trustee of Meubles Poitras.

[19]        More significantly, it appears to the undersigned that the three (3) pronged test of lis pendens is met in this case.  The parties, in the two (2) cases, are identical - all parties in the Québec proceeding, except the Trustee, are included in the Ontario proceeding.

[20]        Similarly, the object of the litigation in Québec is included in the Ontario dispute.  Ultimately, the object of the dispute is the validity or availability of the set-off as a defence.  Otherwise stated, the object of the dispute is the question asked as to whether Sears owes the amount of the account receivable on the books of Meubles Poitras without set-off or compensation.  This is the object in both proceedings.

[21]        The cause can be said to be the contractual relationship between Meubles Poitras and Sears superimposed by the rights of the National Bank.

[22]        It is sufficient that the parties, object and cause in one suit be necessarily included in the other.  Absolute identity is not required.[2]

[23]        However, Article 3137  C.C.Q. which recognizes the doctrine of lis pendens on the international level, provides that the foreign proceeding must already be pending when the Québec proceedings are instituted.[3]  Clearly in this case, the Québec proceeding was instituted first.  However, despite the lack of availability of the plea of lis pendens under Article  3137  C.C.Q., the Court of Appeal has recognized that this Court has jurisdiction to stay a proceeding before it.[4]  This discretion arises out of Article  46  of the Code of Civil Procedure ("C.C.P.") and Bankruptcy Rule 3 [5] or otherwise from the Court's inherent jurisdiction to control its process. 

[24]        A stay may be ordered where the interest of justice so requires and specifically where there exists a risk of contradictory judgments concerning issues put before two Courts.  In the present case, since the issues are identical there is certainly a risk of contradictory judgments should both the Québec and Ontario proceedings go forward. 

[25]        It is interesting to note that in the case of Manioli Investments vs. Les Investissements MLC cited with approval by the Québec Court of Appeal, it was noted that no suspension should be ordered where the competing litigation would not put an end to the dispute.  As mentioned above, in the present case, it is the Québec litigation which is not susceptible of putting an end to the dispute because the proceeding cannot result in a condemnation against Sears should Sears' claim of set-off not be upheld by the Court.

[26]        Lastly, this Court has considered the issue of prejudice.  While National Bank is frustrated in not being able to collect and the Trustee is frustrated in not being able to wind up the administration of the bankruptcy estate, there is no real prejudice other than the passage of time.  For this passage of time, National Bank can be compensated by an award of interest and the Trustee holds an informal guarantee of National Bank for its fees.  Accordingly, this Court concludes that any prejudice for National Bank or the Trustee is outweighed by the interest of the administration of justice to avoid the possibility of contradictory judgments. 

[27]        By way of summary, the two (2) lawsuits are identical in that the issues overlap.  There is accordingly a possibility of contradictory judgments should both lawsuits go forward.  The Québec suit may not put an end to the dispute between the parties.  The only prejudice to National Bank and the Trustee is the passage of time.  Consequently, the Québec proceedings will be stayed.

[28]        However, should circumstances change, This Court maintains jurisdiction to vary the order to be made hereunder pursuant to Section 187(5) B.I.A.



[29]        GRANTS the Motion of Sears Canada Inc. entitled "Motion De Bene Esse of Sears Canada Inc. to Suspend its Motion to Appeal a Notice of Disallowance of a Claim by the Trustee", dated January 23, 2013, number 95 on the plumitif; and

[30]        SUSPENDS the litigation in the matter of the appeal of the notice of disallowance of the claim of Sears Canada Inc. in the present bankruptcy until final judgment in the matter of National Bank of Canada versus Sears Canada Inc. in the Ontario Superior Court of Justice, Court File # CV-12-458047, or until further order of this Court;

[31]        THE WHOLE, without costs.










Mtre. Stéphanie La Rocque
De Grandpré Chait s.e.n.c.r.l.

Attorneys for Sears Canada



Mtre. Antoine Leduc

BCF s.e.n.c.r.l.

Attorneys for Trustee



Mtre. Michel Deschamps, Ad.E.

McCarthy Tétrault s.e.n.c.r.l., s.r.l.

Attorneys for National Bank of Canada

And Natexport



Date of Hearing:

February 27, 2013


[1] R.S.C., 1985, CB-3

[2] Rocois Construction vs. Québec Ready-Mix, [1990] 2 S.C.R. 440 .

[3] See Fastwing Investment Holdings Ltd. vs. Bombardier Inc., 2011 QCCA 432

[4] Mulroney vs. Schreiber, 2009 QCCA 116 citing with approval Manioli Investments vs. Les Investissements MLC, 2008 QCCS 3637 (Langlois, G., at para. 29 and 30); Chaoulli vs. Procureur général du Québec, AZ-03019025 , C.A., January 24, 2003.

[5] C.R.C 1978, c. 368

Le lecteur doit s'assurer que les décisions consultées sont finales et sans appel; la consultation du plumitif s'avère une précaution utile.

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