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THE BULK SALES ACT

Law Rei<Y C)mm1ssicn Saskatchewnn

Saskatoon, Saskatchewan

Rep:::;n t:-; the Minister of Justice

June, 1990

T Law RefrJr Comrniss1cn of Saskatchewan was estab! ed by An l\ct Establish Law Reform Commission proclaimed in r�ovember,

and functi : g in Febt"uary of 1974.

e G. L nn, , LL.B., Chairman.

adam .Justi Mar jone Gen ... ing

Mr. Gordort J. f<uski,

Mr. r.enneth P.R. Hodges, B . .A., L is Directcr of Researcr1 .

Mr. Mi ael J.W. Fi ley, B.A., LL.B. is the Legal Research OF r. The

secretary is Mr'. Kate Rozdi ky.

Sherida was the consultant to th Cornmissi ·n this project.

* * * * * * * * * * * * * *

The aw Reform Commission Act.

6. The cornmission s 1 take ar ci 1-<.::-ep nder r·evJe\.•J all the law of the province, inc! 1ng stat aw, commm· law and judicial ,lecislons, �·11 a v ew to .ts systematic dev;";opment anJ t·efor·m, i ncl udl ng the codification, e! imi nation cf anomalies, repeal of obsol and unnE:CicSsar enactment:::, reduction the nu ber of separ :"\te enactments and generad y the si 1 f1cation n modernization the :

* * * * * * * * * *

Law Reform

Commission of

Saskatchewan

The H'Jn ou le v� Cary Lane, M1nister of Justice Pt-ovi nee of Saskat:: hew �n REGI Sa::;katch an

Dear rv'r. r-1inister·

Provinciai Office Building 1 22 Third ��venue North Sast<,atoor, anada S7K 2H6

33-6127 �e:-:n

The Bul k Sal es A.ct h as long been s ubject to critici sm b y mem bers of the l egal profession and business comm unity. Even t h e name of t h e l egis l ation i s m i s l ead i n g - it i not concev-ned .,., !t h the sale goods i n bu! k, but wit h t h e sal of reta i l businesses as gom g concern s.

The Cum mi ion u d ertcx.;k a rev "'" of e l e g ation 1 respo n se to c r i t i sms of specific provision s of t h e Act from a member of t h e p ract i si n g b ar. As research prc)g ressed, however, it became cie ar t h at t h e e ntire Act i s out of step w it h conternporar bu ness tE?a! i ties,

Ad opted in 191 1, at a time w h en secured cred•t w as rarel y ad v a nced to merc h ants, t he l eg1s l ati p l aces o n er�ou s d e s p urc h asers of b s ! n esses to protect trade creditors. Particul ar l y sin ce mod ernization of secured c r edit law b y T he Persona l Property Sec ur ity Act, The B u l k Sa l e s Act h as become an i mpediment rat h r t h an a faci1 tator good bus i ness practice. It h as bee n repea l ed i n B s h Col u bia, d repeal has recent l y been recomme n i n A berta as w e l l .

Pursuan t to Section 9 of T he Law Refo r m Commiss i o n Act , t h e Comm i ss i 6 n now submits t his report recom m e n d n g rep ea l of T h e Bulk Sal es Act.

Respectfu l ly s ubmitted t his 12th d ay of June, A.D. 1990.

-����::� .-:.::..---·- ....

Dale G. L i n n , C h ai r m an.. -·

1 /

·.�;,�-Justice Mar jor l e A. Gerwi ng, � ·

�-�.· /'" .-.-r.

L "'

-

(_./

II.

III.

IV.

liJTR(C) U CT IOt�

BACKGROUND TO THE ACT

1 •

') .:....

The Origin of the Legislation

Evolution of the Saskatchewan Act

REVIEW OF THE LEGISLATION

1.

2.

4.

5.

6.

7.

8.

9.

The Ap plication of the Act - Sections 3 and 4

The Definition Section - Section 2

(a) Sale in BUlk

(b)

(c)

(i) Partial Sale

(ii) The Entire Stock-in-Trade (iii) An Interest in the Business

or Trade

Stock

The Vendor and the Purchaser - Section 2(e)

The Duties of the Purchaser - Section 5

(a)

(b)

(c)

(d)

Use of the Defined Terms

Partial Payment of Purchase Price

The Statutory Declaration

Who are Creditors?

Waivers - Section 6( 1)

Notice to Creditors - Section 7

Distribution of Sale Proceeds - Section 6

The Trust Company Provisions - Sections 7 to 30

The Penalty Provision - Section 31

The Limitation Period - Section 39

CONCL USION

3

3

5

8

8

13

14

15

17

17

.:18

19

20

21

22

23

26

29

31

32

34

35

37

39

I. INTRODU CTION

"The most poorly d rafted art i cle in the Cod e" w e re t h e wor d s used by William

D. Haw k i and to descnbe the bulk sales prov i s i o n s i n A rt i c l e 6 of the American

Uniform Commercial Code.1 Haw klan d 's strong i n dictmen t appli es e q u a l l y w e l l to t h e

Saskatc h e wan cou n t e r p art of Art i c l e 6, The But k Sales Act. 2

Even the name "bulk sa l es " --used i n both the Act and its American model-

-is ur�satisfacto,�y. The legislation reg ulates sales of b u s i n esses (stock in tr ad e an d

other assets sold "in bulk" outside the norma l cou rse of b u s i n ess), n ot (as the

u ninitiated mig h t s us pect ) w ho l esa l e of commodities. Mor�e importantly, the pol i cy

of the Act, first adopted 1n 1911, i s no longe r i n step with commerctal reali ty .

Sporadic amendments to the Act ove r t h e years h av e con t r i buted to t h e

problem, complicating the leg i s l at i on and obsc u r i ng its poiic y. W h e n the provincial

Assignments Act was repealed in 1 919, for example, amen d ments to The Bulk Sales

Act we;re required. Unfortunately, the drafters of the amendments did n ot

1 William D. Hawldand, "Proposed Revisions to C.C.C. Article 6," ( 1982/83) 38 Busiw�s>' La\\' :.· 1729.

2 R.S.S. 1978, c. B-9.

1

THE B U LK SALES ACT

accurately assess the effect of repeal of provincral ban kruptc y l egislation on the

icy of The Bu!J..: Sales A properly cornpensate for

At the root of the problems with the Act, however, is a change in the

commercial context 1n which it operates. The legrsiat1on was des1gned to protect

tors when usiness r·ise is sol ut the 1nc ngl y soph ::ated an d

less personal re l ation betw creditor d debtor, the ad ve ott1er

legislation such as The Personal Property Security Act to regulate theIr

rei ationshi ps, h placed i

9er clear. It a disjoi

am biguity .

ty in question. The

ece of I at i on frau

1cy goal s it se ves are no

+ .. th incon sten.:;y and

In the Commission ' s opinion, The Bulk Sales Act has out i ived its usefulness,

should be ed. H1 report exam1nes the prob ems plagu i ng tr1 �,ct and

the shiftin g policy goals it has attempted to serv e in order to j ustif y that

conclusion. In the course of its research, the Commission considered model bulk

es legislation and the lk Sales Acts of other jur' !Sdictions. Of cuiar

assistance in this regard was a report of the British Columbia Law Reform

Commission in 1983 that also recommended repeal of bul k sales legislation. 3 The

B i tish Columbia Sale of Goods m Bulk Act was subsequent! repealed. T repeal

was welcomed y the legal d commercial communities in 1t sh Columbia, and has

created no unexpected difficul ties in the province.

"Report r)n Bulk Legislation., 1 Law Refnnll Cummissiorc of British Columbia, t>Hn str of the y Gene1·ai) 983. More tly, the l'la Law Refcn'm Institu has also recr>mnH�nded ,_ see "T}u,, Bulk Sales ,\ct", Heport

56, Januat'Y, 19:]0.

4 R.S.B.C. 1979, c. 371.

2

II. BACKGROUND TO THE ACT

1. The Origin of the Legislation

Bulk sales iegislation first came into force in Saskatchewan in March, 1911.5

It was tntended "to regulate the purchase, sale and transfer ot stock of goods tn

bulk". Like bulk sales legislation in other jurisdictions, its purpose is to prevent

an unscrupulous vendor from disposing of his business enterprise on the sly and

abscon ing with the sale proceeds, leavin;;� the claims of his creditors unpaid. The

Act achieves thi end by putting the respons1bii ty for ensur ng that the Act s

complied wi h the purchaser, w he fails to do so, s vulnerable to a

multitude of rather harsh penal es. Uniess the creditors otherwise agree, the

statute :�equi res that the proceeds of the sale be handed over to a trust company

for distr�ibution betv;een vendor and creditors. It is the vendor's duty to provide

the pw�chaser with a list of creditors; in turn, the purchaser has an implied duty

to pass this list on to the trust company along with the sale pr�oceeds. The trust

company acts as a watchdog for the intet-ests of the creditors, notifying them

the impending sale and ensuring that the sale proceeds are applied to their claims

before paying the surplus to the vendor.

Bulk sales legtslation in other jurisdiction similarly places the legal obligation

to protect creditors on the purchaser. The Saskatchewan Act differs from its

5 s.s. 1910-11, c. 38.

3

THE ULK SALES ACT

counterparts in er ju r i sdi howe er, i n also en l i sll trust corn p an1

protectors of creditor:,' right:=�,

Bulk Eli s l eg! ati on was adopTtcd ea ri y i n t h s tury 1 response to t

as

of c redi to r's O' qaniz :tH to sec u re ''e adeq uate p rot�:,ctior � their

interests as t h ::'

ln-trad an -J

red i t g

se of su : ing 900ds on credit bc,,ame mon;,

to retailers at th'lt tim e

by s uppl: the foc u s

usual l y 1n reE ect of stoc

�!·,:oditor co ncern was t

tran sfGr of tnve n tory h e n e b·:3iness w as so�d T h e rnodel fer Saskat.o; h ewan

Act was the b u ! k. s ales Art i clE: ul t h e A m er i can U;uform Cor:"mercia' whic h

vwn the su p port ot c redi+or s' or-gan i z atio n s in t h e 'J n !ted States.

Tila re were two mwn :,easons credit granter.:. sou g h t legis l at;;.:, n to regulate

s!'lles of b usiness stoc k "in bulk :

(a) whi l e t h e actJJn s of:::. rogt;e ven dor :: u l d come witrlin tne defl t i on of

rovin g the fraud u l e n t nte n t require'j y fr du!ent t ra n sfe:

l Ji ation was ve y ifficult. F u rt h e<, sue egislat i o n cou d be i n voke d

on l y after hE� transfer h acj bt::en comp leted. Often, rogu e cou l d be

focl ci or, t h e p rocG'�'ds had been d 1 ssipa-ced the t i m e credi tor-s

discov<Hed the sale h ad occurrecJ;

b) at com m o n la�,'l', assu i ng t h e pure as€,:r h ad acted i n good t h , the

creditors had no remedy ain st the p u r c h aser, h o w as entltl to

of the ham's stock. shoul be noted that 1t w as n ot the

p ractice at the time ulk sales legislat:on was evised for· s u p iers to take

a secu ty interest in goods su p ied.

6 i'v'fost r1otably, the Natior1al A.ssclciation of Credit ��-1c�rl 1n tt1e Uitited StatE'S

and, in Canada, the Association of Canadian Credit Men.

4

THE BULK SALES ACT

Cl earl y, i abs enc''-' effectiv .�:)mr;\on law or any !jon on

the es to notl creditors of a sale before ts completion , creditors were"

vulnerable. Since rely i g on the vendor to give such notice would be much I ke

' to guaru hie ken another of had

to oe found. Placing the legal obligation on the purchaser was the novel, but

effective solution to the problem mposed by bulk sales legislation.

') 1-. E' · · tion of t katchew

The ori ginal Saskatchewan Act was much shor-ter than the-; present vers ion,

containing only eight brief sections . Contr i buting to its brevi ty was the fact that

:: e ·trust compan " provi ( ss. 7 to 30 i ay's leg! ) were not contained

in the A.ct; raU·;er , they werE. ,ncorporated by reference fr·om The Assignments

Act.7

era! gave men t tem pon'ir I vacated t

to fill

eld of ban

d created en the

ptcy an solvency

legislation. In an effort to provide some regulation in the area of bankruptcy, the

Saskatchewan g0vern me n t, 11ke those of many other· provinces, enacted its own

bank ru tors. The gnments eluded

provisions for appo i ntment of a trustee (referred to at that time as the "Official

Assi gnee " ) , notice to creditors, and the distribution of the estate of the bankrupt.

When fede,. bank ru legislation as n:::-enacted in 919, the gnments

Act became unnecessary and 1ndeed ultra v;res the powers of the provincial

atune. e Off i ci al A g!!e,;; provi�;fon ::; ere sal an d dump nto the

newly revised bulk sales statute. But only the crudest attempt was made to revise

s.s. 1906, 64.

5

THE BULK SALES ACT

language the fo rme r bankruptcy iegi ation to : n rate it i ntc The Bulk

Sales Act. This accounts for the undefined terms and mconsistent wording riddling

sections· 7 to 30 of the present Act. For example, s. 7 refers to the ·d isposal of the

, ter;n y gene th bank r-u y legislatic . In the

context of bulk sales legislation, the reference ought to be to "the distribution of

the purchase monies from the sale in bulk". In s.21, reference 1 s made to the

rnent of d i

the wor

E:Hids" to

pro rata

tors. To consistent

chase

::;.6 of The Bul '< Sales

" should been

substituted for this undefined term. Si milarly, in s.30, the word "d ebtor ·, aiso

defined, is

There

when w

been no

meant i s

revision

dor" [s. e

the Act s i 920. In the y rs that

followed , however, there were sporadic amend ments. Some of the more significant

additions include:

(a) 913, the pen provision (which ori gi as I imited allowing

the creditors to claim against the goods purchased) was shored up to make

the purchaser personally liable for the vendor's debts to his suppiier·s,

imposi g the rather onerous duty on t purchaser r<ol ding th ur·chased

goods in trust for U1e benefit of the cred itors;

( b ) in 1 930, a limitation period and a lim i ted priority for the claims of the

vendor's i andlord over those of hi other cred i to r were added to the Act;

( c ) in 1 a provision r-eating a pr·eferential I e

ranked ab ove the I andi d's claims was enacted; an

munici ties which

(d) i n 1953, a third pt·ior·ity category ranking above the other two for claims

for wages made by the em ployees of the vendor was added.

None of the amendments focused on the basic f l aw in the legislation. The

6

THE BULK SALES ACT

standard seemed to have been set by the slip-shod revision of 1920. Nor

did Saskatchewan take advantage of the o pportunity presented by the

development of model bui k sales legislation. In 1950, after much

consideration, the Canadian Un1form Law Conference adopted the Uniform

Bulk Sales Act'! (referred to herein as the " UBSA " ) . With the model act to

assist them, every p rovl nee In Canada (except Quebec and Saskatchewan) has

revised its legislation; the but k sales stat utes of AI berta9, British Col um bia 10,

Manito ba, New Brunswick, Newfoundland, Nova Scotia, Ontario, Prince Edward

Island, the Yukon and the North West Territories 11

essential ! y adopted the

provisions of the UBSA, although Ontario and, to a lesser extent, AI berta,

made what are descri bed by J.J. Catzman, one of the drafters of the new

Ontario act, as " ... many innovations and changes in policy and draftsmanship

8 Proceedings of the Uniform Law Conference of Canada, 1950.

9 H.S.A. 1980, c. B- 13; currently under review by the Law Reform Commission

of Albt:>rta.

10 R.S.B. C. 1978, c. 371; repealed May 17, 1985.

11 H.S.M. 1970, c. BlOO; R.S.N.B. 1973, c. B-9; R.S. Nfld. 1970, c.28; R.S.N.S. 1967, c.2B; R.S.O. 1980, c.52; R.S.P.E.I. 1974, c. B-6.

12 J.J. Catzman, "Bulk Sales in Ontario", (1960) 3 Can. Bar J., pp. 28 - 38 at p.28.

7

III. REVIEW OF THE LEGISLAT ION

1. THE A PPLICAT ION OF THE ACT Sections 3 and

The

businesses:

Sales Act i imited In its ap I cation to t sale of ce,eta! types of

3. This Act applies only to sales, barters and exchanges by traders and merchants, defined as follows: (a) persons who, as their ostensible pation or, thereof, b and sell goods, wares and merchand ise ordinar y the subject of trade and commerce; (b) commission merchants; (c) manufacturers.

Section 4, however, excludes sales by executors, receivers, judicial officers and

wholesalers.

Section 3 varies only slightly from the form in which it appeared in the 1911

legislation; the term " barters and exchanges" was added n 1913. The definition

of "traders and merchants" is similar to that found in the UBSA, the Uniform

Commercial Code, and most Canadian legislation. 13 Nevertheless, the section is not

we!!-d rafted. For instance, why is it necessary to list "commission merchants" as

a separate category when

13 See s.2; R.S.M.,

would appear to come within the general d nition?

R.S.N.B., R.S.Nfld., s.

8

The exc! on from b

THE BULK SALES A C T

sales statc1tes of sales d ucted by "executors,

administrators, receivers or any publ c official acting under judicial process" is

reasonably explica ble. Such an exemption was li kely considered necessary as sales

stoc k macj the in ivl als com ng w thin the excluded y would

generally be " . . . out of the usual course of business or trade ••. " of the vendor. The

exclusion was probably in tended to remove any ambiguity which might otherwise

se. Other of the eflnition d o t1owever, appear to rest on such clear

policy foundations.

Wholesalers are not excluded from Article 6 of the UCC14 or the Ontario and

Nov'a Scotia Bulk Sales Acts.1 It may be that when the act was originally drafted,

esalers d d not present the same threat to commercial harmony as their

colleagues in retai I . At the present time, however, it would seem that the

tmsecured creditors of a wholesaler are as vulnerable as those of the retailer.

"Manufacturers" have been included in the d efinition of "trade rs and

merchants " since the Act first appeared . There is, however, no definition of the

term. Black's Law Dictionary d efines a "manufacturer" as "[O]ne who by labor,

or skill transforms raw material into some kind of a finished p roduct or article

of trade. " Using this definition, a wide range of businesses - everything from

ma kers of farm machinery to chocolatiers or potters - would be caught by the Act.

However, it is unli kely that the d rafters intended the Act to have such wide scope.

I John Martin Paper Co. td. American Foundry Co. [1924] 3 D.L.R. 1080

(Alta. App. Div.), the Court had this to say on the scope of the term "manufacturer"

14

15

See Art.6-103, ''Transfers Excepted from this Article".

R. S.O. 1970, c. 52, H.S.N.S. 1967, c. 28, s.7.

9

THE BULK SA LES ACT

i n t h e ana l a g o u s p rov i s i o n of t h e A l b e rta Act:

It i s p e rfect l y o b v i o u s t h at the Leg i s l at u re d i d not i n te n d to i n c l ud e a l l b u.s i n ess occ u pat i on s . A b u i l d i n g con t ractor , fo r exam p l e , ce rta i n l y tur n s a mass of d i ffe ren t m ate r i al i nto a h o u se or a s h o p b u i l d i ng. And he m i gh t h ave a m ass of m ater i a l a n d p l an t o n h an d w h i ch h e cou l d se l l o u t i n b ul k . S o a l so w i t h a b r i d g e o r p av i n g con t ractor. Yet n o one wou l d , I t h i n k , se r i ou s l y a r g u e t h at s u c h p e rsons wou l d come w i t h i n t h e category of ··man u fact u rers " .

W h i l e i t may b e " p e rfect l y o b v i ou s " t h at n ot a l l b us i n esses we re i n tend e d to be

inc l u de d , i t i s not so o b v i o u s w h i c h o n es we re .

Som e j u r i sd i ct i o n s h ave attem p te d to c l a r i fy the sco p e of the l e gis l at i on by

s p ec i fy i n g , i n ad d i t i on to t h e g e n e ra l cate g o r i es, a l ist of b u si n esses w h i ch a re

cau g ht b y t h e stat ute. Sect i o n 2( d ) of t h e UBSA, for exampl e, l i sts " . .. h ote l s ,

mote l s, autocou rts , room i n g h o uses, resta u rants, motor v e h i c l e ser v i ce stat i ons , o i l

or g asol i ne stat i o n s , o r m ac h i n e s h ops. " 16 T he b us i n esses l i sted a r e g e n e ra l l y

refer re d to as " se r v i ce i n d u st r i es " . I n t h e absence of a p rov i s i o n s p ec i fi ca l l y

i nc l u d i n g t h em , e n te r p r i ses e n g ag e d exc l u s i v e l y i n t h e sa l e of serv i ces are exc l u ded

by t h e d ef i n i t i on of "trad e rs an d m e rch ants " . A rt i c l e 6 of t h e UCC a l so exc l u des

ser v i ce b us i n esses b y d ef i n i n g the " en te rp r i ses " to w h i c h i t ap p l i es to i n c l u d e on l y

ones w hose " pr i n cipa l bus i n ess is t h e sal e of m e rc h an d i se from stock". T he Off i c i al

Com m e n t to t h e Code exp l ai n s t h at t h i s def i n i t i o n i s i n ten d e d to exc l u d e " . . . s u c h

t h i n g s a s c l ean i n g s h o p s , b a r b e r s h o p s, poo l h al l s, h ote l s , restau ran ts an d t h e ! i k e

w hose p r i ncipal b u s i n ess i s t he sal e , not o f merc h an d i se , b u t of serv i ces .. .''17

T h e o b v i ou s d rawb ac k to n am i n g i n d i v i d ua l b u s i n esses i n t h e b od y of t h e

16 Manitoba, New Brunswick and Newfoundland have adopted similar provisions in their statutes.

17 Thomas M. Quinn, Quinn's Uniform Commercial Code Commentary and La•�· Digest, 1986 Cummulative Supplement No. 2, ed. Barry Zaretsky (Boston-New York:

Warren, Gorham & Lamont, 1986), p. 6-102[A](6].

10

THE BULK SALES ACT

statute is that, in today's fast-changing world, constant amendment is required to

keep up with the new types of businesses being established in the commercial

community.

Adding to th s problem is the g rowing number of "mixed" businesses offering

both services and goods for sale. A typical "mixed business" is the hairdressing

salon. While at one time salons simply provided the service of hair grooming, most

of them are now actively involved in the sale of hair dressing and cosmetic

products, usually marketed exclusively through salons. These items surely come

within the meaning of " ... goods, wares and merchandise ..... and a re being sold as

" ... part of [the salon owner's] ostensible occupation •.. " Still, the business is one

which traditionally has been seen as one of "service". Another example of a mixed

business is the now u biquitous "autolube" shop where the owner, in addition to

providing service to vehicles, also sells some automotive p roducts and, in some

cases, a small inventory of cigarettes and snack food for the convenience of waiting

customers.

Under legislation modelled on The Uniform Bulk Sales Act, the hair salon would

be clearly beyond the scope of the statute because it cannot be characterized as

a purely "sales" type of business as contemplated by the general definitions.

Furthermore, it does not appear in the list of specifically included businesses.

Since section 3 of the Saskatchewan Act does not contain a list of specifically

included business, the question of whether a mixed sales/service business such as

the hair salon or the autolube operation comes within the scope of the Act would

depend upon the construction put on s.3 of the statute.

1 1

THE BULK SALES ACT

In a Saskatchew an case, Barthels, Shewan & Co. v.Sioane18, hea r d sho r t l y

after the l egi s l at i on f i rst came into effect, the Court touc h e d on the t reatment to

b e given to a m i xed busi n ess. The v end o r was sel l i ng hi s hot e l b u s i n ess; the

c red i tors impugned the sale on the ground s of non-com p l i ance wi th t h e Act.

Because no part of the purchase money had b een pai d to the Off i cial Assi g nee

( pred ecessor of the "t rust com p any" i n tod ay ' s Act ), the Court hel d t h at t h e

creditors w ere p remat u re i n thei r act i on and the sal e coul d n ot b e chal l enged . The

judge did, how eve r , comment on the app l i cati on of the Act, hol d ing that whi l e the

hote l b ui l d i ng and furniture ( not b e i n g "good s, w a res o r merchand i se") would not

come w i t h i n the scope of the A ct , m i scel l aneou s items such as can d y and cigarettes

sold at the hotel d es k w ou l d be considered "stoc k " 19• Therefore, the sal e of the

hotel w ou l d b e governed b y the Act.

Some ten y ea r s l ater i n John Martin Paper Co. L td. v. American Type Foundry

Co.20, t he issue of the Act ' s applicati on t o a "m i xed" b usin ess sal e was squ are l y

b efore the A l b erta Appe l l ate D i v i si on . In that case, i t w as he l d that where a

b usin ess car ries on more than one t y pe of act i v i t y , i t i s the " l ine of regu l a r

b us i n ess" w hi ch ought to b e consid e red t o d etermi ne w hether the sal e fal l s w i thin

the scope of the Act . The company i n t h e Martin case w as a "j ob-p rin ter" engaged

primari l y i n the b us i n ess of print i n g stationer y , envelopes, posters an d the l i k e.

But f rom t i me to t i me, the company also sol d envel opes and copying paper w i th out

hav i n g "pr i nted " them. The Court rejecte d the suggestion that thi s al tered the

18 (1914), 19 D.L.R. 547 (Sask. S.C.).

19 Also included was the hotel's liquor licence which, at ::hat time, was specifically defined in s. 6 of the Act as "stock".

20 Op. Cit., p. 9.

12

THE BULK SALES ACT

c h aracte r of t h e d efen d ant's b us i n ess, ho ld i n g t h at:

... the evidence also s ho w s t h at t h i s w as qui te o u t of the fine of t h e company's reg u l ar b us i n ess. And it is w i t h respect to its regular business, to the business or occupation w hich w as its substantial purpose and in its usual course, t h at w e m u st decide whether it could prope r l y be called a man u fact u rer or a t rad e r or merchant.

G i ven t h e state of t h e author i t i es, t h e p robl em fac i n g the parties in the sal e

of a " m i xed " b u s i n ess i s t h at t h e y h ave no w ay of k nowing at t h e t i m e of t he

t ra n sact i on w heth e r t h ey ou g ht to comply w i t h the stat ute. I t is on l y afte r the sale

is challenged and a Cou rt h as r u l ed t h at t he y w i l l know for s u re. I n view of t h e

h ars h p e n al t i es t h at may be imposed for non-compliance, the parties ought to be

e n t i t l ed to g reate r certainty .

2. THE DEFINITION SECTION - Section 2

A sep arate def i nit i on section w as first included in the Act in the 1920

revision. The section was not w e l l integ rated into the body of the Act.

Nev e rt h e l ess, i t h as not been significantly amended since it became part of the Act.

T h e secti on con ta i n s o n l y six defined terms. T h e first three terms- " court ",

"ju d ge " an d "municipality" - are st raig h t-fo r w a rd. The same cannot be said of t he

remai n i n g t hree, "sa l e i n bulk", " stock", an d " ven dor " - a l l terms whose meanings

are p i votal to t h e proper intrepretation of t h e Act. E ac h is fl aw ed w it h

inconsistencies, ambig uities an d omi ssio n s.

13

THE BULK SALES ACT

(a) Sale in Bulk

S.2( c ) " sa l e i n b u l k " i nc l u d es a sa l e , t ra n sfe r o r con veyan ce of a stoc k , o r p a rt t h ereof, o u t of t h e u s u a l cou rse of b us i n ess or t rad e of t h e v e n dor, a sale, t ransfer or con v eyance of t h e e n t i re stock-i n-t rade of the v e n dor an d a sal e , transfe r o r con v e y a n ce o r attem pted sa l e, t ra n sfe r or con ve y a n ce of an i n te rest i n t h e v e n d o r ' s b us i ness or t r ad e;

T h i s s u bsect i on p u rports to d ef i n e t h e n ot i on of a b u l k sale. T here are

several p ro b l ems w i t h t h e d ef i n i t i o n , however . Some are s i m p l y exam p l es of b ad

d raftsman s h i p . Cons i d e r, for exam p l e, t h e u se of t h e wor d " i nc l u d es". When t his

ter m i s u se d i n a stat u te i t norma l l y i mp l i es t h at t h e d ef i n e d t e rm h as a ran g e of

mean i ngs beyon d t hose s p ec i f i ca l l y ap p ear i n g i n t h e d ef i n i t i o n . Bot h "mea n s " and

" i nc l u d es " are u se d i n s .2; i t m u st t h erefore b e ass um e d t h at " i n clu d es" w as

i nten d e d to con note som et h i ng d i fferent f rom " means" . I t may be t h at " i n c l u d es"

w as u sed w i t h t h e i nten t i o n of b r i n g i n g t h e con ce p t of " ba rters a n d excha n g es",

f i rst ment ioned i n s .3 of t h e Act, w i t h i n t h e mean i n g of "sa l e i n b u l k " . T h i s seems,

however, a rat h e r i ne l egant approach to a fai r l y s i m p l e d raft i n g p ro b l em . Su rely

i t w ou l d h av e been eas i e r to i nc l u d e " barters an d exc h a n ges" i n t h e s .2 d ef i n i t i on

of "sa l e i n b u l k", t h e re b y avoi d i n g t h e use of t h e am b i g uo u s " i n c l u d es".

Anot h e r p ro b l em w i th s.2( c ) i s i ts wor d i n ess - i .e . , t h e repeated use of the

word s "sa l e, transfer o r con veyance " to d esc r i b e t h e k i n d s of sal es comi n g w i th in

t h e d ef i n i t i o n . T h e terms " t ransfer an d con ve y a nce" are norma l ly associ ated w i th

real p roperty to w h i c h The Bulk Sales Act h as n o ap p l i cat i on. Nor i s t h e i r

i nc l u s i o n n ecessar y to u n de rstan d t h e con ce p t of " sa l e " , w h i ch a l read y app ears i n

t h e defi n i t i o n . Ontari o, whose o r i gi n al bu l k sal es l e g i s l at i on w as mod ell ed on t h at

of Sas k atc h e wan , revam ped t h e Act i n 1960 rep l ac i n g i ts e q u al l y w o rdy defi n i t i o n

1 4

T H E BULK S A L E S ACT

of "sale n bulk" with twc sim p ly drafted sub�·sections:

s.1(f) "sale', whether used alone or in the e> ression "sale in bulk , in cludes a transfer, convey an ce, barter or exchange, but d oes not include a p led ge, charge or mortgage;

s.1(g) sale in bu!k" means a sale of stock out of the usual course of business of tr1e seller.

But ean in g up the language used in the def: ition would n ot resolve basic

concep tual p roblems. Whether a sale of any p articular enterprise comes within the

mean ing of "sale in bulk" depen s on the n ature of the items and the manner in

which the tran s action is comp leted. The tran sfer will constitute a sale in bulk if:

(a) he tran saction is a s ale, barter or exchange; and

( b) it involves:

1. a stock or Ql!C:t thereof out of the usual course of business of the vendor;

2. the entire stock-in -trade of the vend or; or

3. an int�r::est in the vendor's business or trade or an attempt to sell an interest in the business. 21

The concepts underlined above a re vague and ill-defined.

( i ) The Partial Sale

The Act is t riggered even if the vendor is d isposing of only a portion of his

business or trade, provid ed the sale takes place out of the ord inary course of his

busin ess. There Is no quantitative threshold restrictin g the operation of the term

" p art thereof". The combined effect of the lack of a de minimis provision and the

mandatory nature of the statute forces the p arties to comply with the Act

regard less of the size of the partial sale "out of the ord inary course of business."

21 �ote that "attempted" sales are not included within the meaning of the first

two kinds of sales in bulk.

THE BULK SALES ACT

For exampl e, ass u me a book store dec i d e d to se l l some of i ts d i s p l ay shel ves,

h av i n g repl aced t h em w i t h n e w o n es. T h e Act wou l d be tr i g g ered . Cl early, the

d i sp l ay·

s h e l ves ("f i xt u res o r d i n a r i l y u sed i n con n ection w i t h a b u s i n ess") would

b e " pa rt of" t h e "stoc "; fu rt h er, t h e sale of d l ay s h e l v es wou l d be outs i d e t h

o rdi n ary cou rse o f t h e b u s i n es s o f se l l i n g b oo k s. T h e nui sa n ce an d expe n se of

h av i n g to com p l y w i th t h e Act for s u c h a t r i f! n t ransact i o n w o u d o u t w e i g h an

b e n ef i t t h e boo k se l l e r m i g ht d e r i v e f rom t h e sa l e of t h e o l d s hel v es.

Exte n d in g t h e sco p e of t h e A ct to p ar t i a l sa l es may h ave bee n i nte n d e d to

p re v e n t u n sc r u p u l o u s v e n do r s f rom t h w art i n g t h e Act by d i s posi n g of bu sinesses

i n a ser i es of smal l sa l es22 or b y sel l i n g a l l b ut a part of it. W h i l e, p ract i ca l l y,

the re mig h t not be an y real d an g e r of c re d i tors ' c h al l e n g i n g t h e sa l e should t h e

p arties r i s k comp l et i n g a t r i v a l sa l e w i t h o u t com p l y i n g w i t h t h e Act, t h e i nc l u sion

of t h e w o r d s "o r p a rt the reof" w ould seem to a l l o w for absur d resul ts i f a

cha l l enge i s actua l l y made.

Oth e r j u r i sd i ct i o n s h av e t r i ed , w i t h on l y l i mited su ccess, to avo i d t h e

p robl ems c reated b y t h e w o rd i n g i n t h e Sas k atc h e w an Act b y inc l u d ing a

q uanti tat i ve test i n t h e i r l e g i s l at i on. I n the b u l k sa l es l eg i slat i on of Albe rta,

Ne w found l a n d an d O n tar i o, the w o r d s "s ubsta n t i a l ly a l l " are u se d to des c r i be how

muc h of the stock m u st be sol d b efore the Act w ou l d ap p l y. Ame r ican bul k sal es

l eg i sl at i o n a l so u ses a quan t i tat i v e n orm. Art i c l e 6-102(1) of t h e Uniform

Commercial Code stipu l ates t h at Its p rovis ions appl y onl y to sa l es not i n the

o rd i n a ry cou rse of b u s i n ess I n vol v ing a " .. . majo r p a rt of the materia l s, s u ppl i es ,

merchandi se o r i nve n to r y ".

----·---

zz w'ebber v. Hall, (1921) 56 D.L.R. 253 (Nova Scotia S.C.).

16

T H E B U L K S A L ES ACT

The "substantially all" or "major part" tests are not without their own

difficulties. It may be difficult to assess w th any certainty what proportion of the

stock business will fulfill th1s requirement. Further, the legisiation does not

indicate how the valuation is to be made i.e., on the basis of the dollar value of the

stock sold, the volume thereof, or some combination the two.

(ii) The Entire Stock-in Trade

The term "stock-in-trade" is not defined nor is it clear what the drafters of

the legislation intended by using this term in addition to the defined term "stock",

which appears to mean the same thing. In any event, a sale of the "entire stock­

in-trade" would seem to be no more than a special case of general proposition set

out in the first part of the definition, i.e. the sale of " ... the stock, or part thereof,

out of the ordinary course of business of the vendor ... ".

It might also be noted that the sale of "stock" is qualified as being "out of the

usual course of business", while the sale of "the entire stock-in-trade" is not. It

was probably considered unnecessary to add this qualifier to the second head as

normally a sale of the "entire stock-in-trade" would be, by definition, "out of the

usual course of the business". Thus the reference to entire stock-in-trade is

probably redundent. On the other hand, if "stock" is not equivalent to stock-in­

trade", rather peculiar results might follow. A vendor fortunate enough to find a

customer who wants "all you have in stock" might have to comply with the Act.

(iii) An Interest In the Business or Trade

The third head of the definition of "sale in bulk" is the sale, transfer or

conveyance or attempted sale, transfer or conveyance of an _ ___in_t�rest in the

vendor's business or trade.

17

THE B U LK SALES ACT

The Act does not define the term nterest" nor s there any textual

information in the statute from which its meaning may be inferred. The leading

(and apparently on!y) Canadian case dealing with this issue of interpretation is an

early one from Ontario, deci t'::d just four ears after at province acted its

bulk sales legislation. In McLennan v. Fulton (1921 ), 64 D.LR. 5S8, the Ontario

Court of Appeal held that a partner's share in a business was not an "interest' in

business w i n the mean i g of The Sales Act T Court zed

the partner's share in the busmess as a right to share in the surplus of the

proceeds of the sale of the partnership assets after all of the debts of the business

had been paid. Hence, the Act did not ap y

As a result of the McLennan interpretation, the term "interest in a business"

was deleted from the revamped Ontario legislation23• The term has also been

omitted from the UBSA and most of the provincial legislatlon24 modelled on !t.

(b) Stock

S.2(d) "stock" means any stock of goods, wares and merchandise ordinarily the subject of trade and commerce and the fixtures ordinarily used in connection with a business;

Apart from the failure (discussed above) to include the phrase "stock-in-

trade" within this definition, the principal problem created by this definition

relates to the inclusion of xtures" as "stock".

While the word '"fixtures·· ha.s the 1echnical legal meaning of personal

23 Op.Cit., note 11.

24 The Bulk Sales Act of Newfoundland has retained it in its definition of a "sale in bulk"; R.S.Nfld. 1970, c.B-9, s.(f)(iii).

18

THE BULK SALES ACT

p roperty which by virt u e of its attachment t h e reto h as taken on the c h aracte r of

real p rope rty, 1t h as a d i ffer ent mean i n g i n the comm e r cial wor l d to w h i ch t h e Act

p l i es. To a storekeepe r, t h e w or " fixture " o r 't rade f i xture " p ro b ab l y suggests

she l ves, coole r s, displ ay cases and s i m i l ar items u sed to e n h ance t h e sal e of h i s

me r c h and i se. Whethe r o r not t h ey a re attac h ed to the f l oo r, w al l s or cei l ing of h i s

stor e d oes not I i k e l y infl u e n ce h pe rcept i on of t h em as xtu res " .

T h e r e i s some support withi n t he statute for adopt i ng the storekee p e r's

terpretat i on of "E><,t u res . T h e q u a l i fying p hrase " or d i nanly used i n connect i on

w i th a b us i ness " seems to sug gest that w hat the Leg i s l at u re inten d ed was not

"f ixt u res " per se as a l aw ye r wou!d u nd e rstand t he te r m , b ut rat h er " t rad e

xt ures" as common l y u nde rstood i n the b u s i ness wor l d . Aiso m i l i tat i ng a g a i nst

the noti on t h at " f i xt u res " is i ntend ed to be i nte r p reted i n t h e st r i ct l eg a l sense i s

inc l u s i on of t h e te r m w i t h " good s , wares and m e r c h an d i se " , a class of Items t h at

are c l ea r l y c h atte l s. " T r u e " f i xtures do n ot be l ong i n t h i s c l ass. Real p ro p e rt y i s

not ot h e rw i se caught b y the A ct;25 m ak i ng a n exc e p t i on to inc l u d e f i xtures wou l d

be anomolo u s.

(c) The Vendor and the Purchaser - Section 2(e)

Alt h o u g h t h i s ent r y i n t h e d efin i t i on section b ears t h e h ead i n g "vendor ,

s .2(e) a l so contains a d efin i t i on of t h e term " pu rc h ase r " :

s.2(e) " ve n do r " i nc l u d es a p e rson w h o bart e rs o r exch anges a stock i n bulk for oth e r p rope rt y , real or p e rsonal , and " pu rc h as er " i n cludes the p erson w ho g i v es suc h oth e r p ro p e rt y i n b a rte r or exc h an ge. "

L i ke many of th e d ef i n e d te r m s i n t h e Act, " ve n d or " a n d " pu rc h as er " enjoy

25 Barthels, Shewan & Co. v. Sloane (1914), 19 D.L.R. 547.

19

THE B U L K SA L E S ACT

o n l y l i m i te d u se i n t h e mai n bod y of t h e l e g i s l at i o n . For examp l e, al t h o u g h t cou l d

h av e b e e n u se d to ad v an ta g e i n s . 5 , " D u t i es t h e P u rc h ase r " , t h e te rm

" p u rch ase r " i s n ot u se d to d esc r i b e the p e r son acq u i r i n g t h e stoc k sol d i n b u l k ;

rat h e r, t h e r e ap p ears t h i s l on g - w i n d ed an d r e d u n d an t d esc r i p t i on :

[ E ] ve r y p e rson w ho b ar g ai n s fo r , b u y s o r p u rc h ases a stoc k of good s,

w a res, m e rc h an d i se o r f i x t u res for cas h o r o n c re d i t o r w ho b ar g ai n s for t h e

b arter o r exc h a n g e o f a stoc k of good s , w ares, m e r c h a n d i se o r f i xt u res i n

b u l k for an y ot h e r p rop e rt y , real o r p e rson al . . . "

A p p are n t l y , t h e d rafte rs of t h e Act h ad more fai t h i n t h e te r m " ve n d o r " ; i t ap p ears

i n s. 5 w i t h o u t f u rt h e r e l aborat i o n .

3. T H E D U TI E S O F T H E P U RCHASE R - Section 5

T h e s u b stant i v e n u b of t h e Act l i es i n sect i o n s 5 an d 6, b ot h of w h i c h are

aff l i cted w i t h t h e same sort of poor d raftsman s h i p as t h e d efi n i ti o n sect i o n .

T h e r e i s, i n fact, n o m o r e e l oq u e n t test i mo n y t o t h e o b sc u r i t i es of t h e Act

t h an sect i o n 5. It i s o n e b reat h l ess sente n ce of D i c k e n s i an p roport i o n s :

5 E ve ry p e rson w ho b a r g a i n s for , b u y s o r p u rc h ases a stoc k of good s, w ares, m erc h an d i se o r f i xtu res i n b u l k for cas h o r o n c re d i t , o r w ho b a r g a i n s for t h e b a rte r o r exc h a n g e of a stoc k of good s , w ares, m e r c h a n d i se o r f i x t u res i n b u l k for an y ot h e r p rope rty , real o r p er so n al s h a l l , before c l os i n g the p u r c h ase, b a rte r o r exc h an g e , a n d b efore p ay i n g to the v e n d o r a n y p a rt o f t h e p u rc h ase p ri ce o r g i v i n g a n y p romi ssor y note o r notes o r an y secu r i ty for t h e p u rc h ase p r i ce o r part t h e reof, o r b efore e x ec u t i n g a n y t r a n sfer, con v ey an ce o r e n c u m b r a n ce of s u c h oth e r p ro p e rt y , d eman d an d rece i v e f rom t h e v e n d o r , an d t h e v e n d o r s h al l f u r n i s h to t h e p u rc h ase r , a w r i tten statemen t ( fo r m A ) v e r i f i ed b y t h e stat utor y d ec l a r at i o n of t h e v e n d o r o r h i s a u t ho r i z e d a g e n t o r , i f t h e v e n d o r i s a corporat i o n , b y t h e stat u to r y d ec l arat i o n of i ts p resi d en t , v i ce - p res i d en t , sec retar y t reasu re r o r m a n a g e r , con ta i n i n g t h e n ames o f a l l t h e c red i tors o f t h e v e n do r tog et h e r w i t h t h e amou n t of t h e i n d e bt e d n ess o r l i a b l i t y d ue , o w i n g , p ay a b l e o r acc ru i n g d ue b y t h e v e n d o r t o eac h of h i s c re d i to rs.

T h e p ro b l em s c reated b y t h i s l i n g u i st i c t r i u m p h are v a r i o u s.

20

TH E BULK SA L E S A CT

( a) Use of Defi ned Terms

Sect i o n 5 i s a j u m b l e of d ef i n e d an d u n d ef i n ed terms, red u nd an t an d

am b i g uo u s wor d s. T he fol lo w i n g are exam p l es of som e of t h e more tro u b l esome

i tems :

" good s, wares, m e rc h an d i se or f i xtu res " -

T h e u se of t h ese wor d s i n ad d i t i o n to t h e wor d " stoc k " i s comp l ete l y

su p e rf l u o u s as " stoc k " means " good s , wares, m e rc h an d i se an d f i x t u res " [s .2( d ) ] .

" b u ys or p u rc h ases . . . i n b u l k " -

Had t h e y u se d t h e term " sa l e i n b ul k " to d esc r i b e t h e t ransact i on b et w een

t h e v e n d o r an d p u rc h as e r i n s. S , t h e d rafters of t h e l eg i s l ati o n cou l d h ave

s i g n i f i can t l y red u ce d t h e wor d i ness of t h e sect i o n . T h e oth e r con seque n ce o f not

u s i n g t h e d ef i n e d term i s t h at t h e d rafte rs i n ad verte n t l y ( i t seems ) exc l u d ed t h e

n ot i o n o f t h e sa l e o f an i nte rest i n a b us i n ess o r t rad e f rom s.5 , d es p i te t h e fact

t h at t h i s t y p e of b u l k sale i s d ef i n e d u n d e r " sa l e i n b u l k " . As s . 5 refe rs on l y to

t h e sa l e of " stoc k " , t h e re d oes n ot ap p ea r to b e a n y i nter p ret i ve aven u e b y w h i c h

" a n i nte r est i n b u s i n ess " may b e broug h t w i t h i n t h i s sect i o n .

" fo r cas h o r o n cred i t " -

B y rest r i ct i n g b u l k sal es to o n e o r t h e oth e r of t h e above k i n d s, s.5 may

o p e r ate to exc l u d e f rom t h e sco p e of t h e Act a sa l e p a rtly o n cash terms an d p art l y

o n c re d i t. T h i s i ss u e was con si d e red d u r i n g t h e revam p i ng of t h e Ontar i o Act an d

t h e wor d s " fo r cash o r o n c re d i t " were d e l eted . 26

2 6 Op. C it. , note 1 1 .

21

T H E B U L K SA L E S ACT

{ b ) Parti al Payment of Pu rchase Pr ice

Because t h e d i sc l os u res req u i red b y t h e Act m u st b e mad e " before p ay i n g

to t h e ven do r an y p art of t h e p u r c h ase p r i ce , o r g i v i n g an y p rom i sso r y note . . . " ,

a p u rch ase r i s p ro h i b i te d f rom m a k i n g paym e n t of an y k i n d p r i o r to t h e v e n d o r ' s

f u r n i s h i n g o f part i c u l ars o f h i s i n d e bted n ess i n t h e form p resc r i b e d b y t h e

stat u te. T h i s t i me-con s u m i n g req u i remen t cou l d j eop ar d i se t h e sal e . It a l so

i g nores t h e common b u s i n ess p ract i ce of secu r i n g t h e p u r c h ase r ' s offe r w i t h a

d epos i t to b e h e l d i n t r u st p en d i n g t h e com p l et i on of t h e sa l e .

T h i s p ro b l em is n ot u n i q ue to t h e Sas k atc h e w an l e g i s l at i o n . A rt i c l e 6- 1 05 i s

s i m i l ar l y f l a w e d . I t p rov i d es t h at at l east 1 0 d ay s b efore t h e t ra n sfe ree p ay s for

t h e goods, n ot i ce of t h e t ran sfe r m u st b e g i v e n as req u i red b y t h e A rt i c l e. W i l l i am

D. H a w k l an d , C h a i rman of t h e S u b comm i ttee o n A rt i c l e 6 of t h e U n i fo r m Comme rc i al

Cod e of t h e Amer i can Bar Assoc i at i on , a g ro u p w h i c h h as b ee n l ob b y i n g for

rev i s i on , recommen d ed t h at A rt .6- 1 05 b e red rafted to p e rm i t p ay me n t of not more

t h an o n e- hal f of t h e p u r c h ase p r i ce . 27 T he Can ad i an Uniform Bulk Sales A ct h as

a l so been d rafted w i t h t h i s comme rc i al p ract i ce i n m i n d . Sect i o n 6 of t h e UBSA

p e rm i ts p ay me n t of n ot more t h an ten p e r cen t of t h e p u rch ase p r i ce to b e h e l d i n

t rust b y t h e se l l e r p en d i n g com p l i an ce w i t h t h e ot h e r p rov i s i o n s of t h e Act. T h i s

p rov i s i on h as been i nc l u d e d i n The Bulk Sales Act of O n ta r i o, an d i nco r porated i n

t h e l e g i s l at i o n of ot h e r p rov i n ces fol l ow i n g t h e UBSA mod e l , a l th o u g h t h e amo u nt

of t h e p a rt i al p ay ment h as been red u ce d b y some j u r i sd i ct i on s. 28

2 7 O p . C it. , note 1 , p . 1 7 4 3 .

2 8 Manito ba, R. S . M . 1 9 7 0 , c . B l OO, s . 5 ( 4 ) ; Alberta, R. S . A. 1 98 0 , c . B- 1 3 , s. 4 { 1 ) ( a ) ; New B r u n sw ic k , R. S. N.B. 1 97 3 , c . B- 9 , s . 4 - 5 - $50; Newfo u n d lan d , R. S . Nfl d .

1 97 0 , c . 28, s. 5 ( 5 ) - $ 500 or 5 % .

22

TH E B U L K SA LES ACT

(c ) The Statutory Declaration

T h e l i st of c r e d i to r s i s to b e p rov i d e d i n a w ri tt e n statem e n t v e r i f i e d b y a

statu to r y d ec l arat i o n of t h e v e n dor . T he p u rc h aser m u st " d eman d a n d rece i v e " t h e

d oc u me n t f rom t h e v e n d o r a n d t h e v e n d or i s req u i red t o " fu r n i s h " t h e names an d

ad d resses of a l l of t h e c r e d i to r s of t h e v e n d o r as w e l l as t h e amou n t of t h e

i n d e bted n ess t o eac h . T h e Act p resc r i bes t h e for m o f t h e stat u to r y d ec l a rat i o n

[ Fo r m A ] .

T h e l eg i s l at i o n i s p rem i se d u pon t h e n ot i o n t h at t h e v e n dor , t ho u g h a rog u e

at h eart , w i l l fee l com p e l l ed t o m a k e a t r u t h f u l d i sc l os u re i n h i s s w o r n statemen t.

T h e w ea k n ess of t h i s s u p pos i t i o n i s t h at a v e n d o r w ho i s p r i me d to l eav e h i s t r ad e

c re d i tors i n t h e l u rc h i s, i n a l l l i k el i hood , e q u al l y p repared t o sw ear a fal se

d e c l arat i o n .

H u man f ra i l t i es n ot w i t h stan d i n g , e v e r y j u r i sd i ct i on i n North Amer i ca h as

d rafte d i ts l e g i s l at i o n i n a s i m i l ar fas h i o n to p e rm i t t h e p u rc h aser to r e l y o n t h e

i nfo r m at i o n a s i t ap p ears i n t h e s w o r n statement , t h i s d oc ument b e i n g , b y

defi n i t i o n , " t r u e " at l aw . T h e cou rts i n bot h Canada an d t h e U n i ted States29 h ave

con s i ste nt l y h e l d t h at w he re , o n i ts face, t h e l i st of cred i tors ap pears to con fo rm

to t h e req u i rements of t h e l e g i s l at i on , t h e p u rch aser i s n ot req u i red to v e r i fy the

contents o r to make i n q u i r y i nto t h e ex i ste n ce of ot h e r p ossi b l e cred i tors. T h i s

ap p roac h mak es sen se b ecau se i t i s t h e p u rc h aser w ho i s p e n al i ze d i n t h e event of

non -com p l i an ce, b ut i t ser i ou s l y com p romi ses t h e effect i ve n ess of t h e l eg i s l at i on .

------ ------ ----

2 9 The leadi n g American case on this point i s A drian Tabin Corp. v. Climax Bou tiq ue Inc. , 34 N. Y . 2 d 2 1 0 , 356 N . Y . S . 2 d 606.

23

THE B U LK SA LE S ACT

An early Que b ec cas e , Mon treal A b batofr v. Picotte h eld t h at a d eclar ation in

prop e r for m , t hough p e r j u r i ous, w i l l not void " une v ente en b loc" 30• In Warner

v. Graham, the B r i t i sh Colum b i a Supreme Cou rt held that t h e v e n d o r ' s fail u r e to

d i sclose all of his c redito r s w as not fatal to the sale in bul k b ecause the v e n do r

had complied w i th t h e for m al requirements.3 1 T h e Alb e rta Cou r t of Appeal came to

the same conclus i on i n Thomson v. Richardson.3 2

T h e most i nte rest i ng recent d ec i s i on i n thi s r espect i s a recen t M an itob a

case, A . G. o f Canada v. Bulletin Pub lica tions33• Afte r revie wi n g seve ral o f the

cases, t h e Cou rt applied the reasoning i n Warner. W hile t h e d ec i s i on i s I n k eepi n g

w i th C anadian j u rispru d e n ce, i t i s nonetheless surprisi ng i n v i e w o f t h e pec u li a r

facts upon w hic h i t w as d ec i de d : t h e parties to t h e b ul k sal e w e re corporat i o n s ; the

soli c i to r for the v endor corpo ration acted for t h e purchase r as w ell , and w as a

d i rector of each of t h e compan i es. A statuto r y declaration w as prepar e d b y t h e

vendor and g i ven to the pu rchas e r . U nfortunately , one of the v endo r ' s c re d itor s,

Revenue C anad a, w as m i ssed. Rev enue Canad a d i d not look kind ly o n t his omission

and c halleng ed t h e sale on t h e ground t h at i t h ad not b een completed in com p liance

w i t h the A ct . The Court h eld t h at e v en t houg h t h e v endo r h ad fai le d to nam e

R e venue Canad a i n i ts l i st of c re dito r s , the statutor y d eclaration conformed to the

Act on i ts face. A ccor din g ly , t h e sale could not be set as i de.

W hile t h ese autho r i ties a r e p ro b a b ly a pplicab l e in Sas k atc h e w an, b ecause of

30 ( 19 17 ) 52 Que.S. C. 3 7 3 .

3 1 ( 1946 ) 2 D. L . R. 277 ( B.C.S.C. ).

32 ( 1967 ) 58 W . W . R. 743.

33 (1980 ) 3 M an. R. ( 2 d ) 1 4 ( M an. Cou n t y Ct. )

24

THE BU LK SA LES ACT

the u ni q u e " tr u st com p an y . , provision s i n the leg islatio n , the p u rc h aser a n d the

tru st com p a n y a r e u n de r sli g htly differen t o b l i g atio n s than their oth er North

Ameri can coun terparts, at least in cases in w h i ch the A ct is not w aive d . Section

7 states t h at w he n a tru st com pan y i s ap pointed to s u p ervi se the sale , it " . . . shal l

i mmediately i n form i tself b y refere n ce to the ven dor a n d his records an d boo k s of

accou n t of the n ames a n d res i de n ces of the v e n dor' s credi tors . . . " . T he u se of the

w ord " shall" s u g gestes that the trust com pan y i s u n der a d u t y to i n fo r m itself

from this source i n add i t i on to t h e i nformation i n the d eclaration .

Amon g the rev i sions to Article 6 - 1 04( 3)of the vee recomm e n d ed b y Haw k la n d34

w as o n e w h i c h wou ld put the tra n sferee u n der similar, but l ess rigorou s,

o b li g at i on s to those of a tru st com p an y p u rsua n t to s. 7 of the S as k atche w an Act.

U n de r H a w k la n d ' s p roposed amen dment, the r e would b e an onus o n the t ran sferee

to ver i f y the i n fo r mation prov i ded b y the tran sferor i n certain limited

circ u m stan ces, i . e. , w here a n y errors or om i ssio n s are k no w n or disclosed to him

or are reason a b ly d i scove r a b le b y h i m . H a w k la n d an d his committee con cl u ded t hat

ex p ect i n g the tran sferee to m a k e i n qu i ries or to exami n e the book s of the

tran sferor con cern i n g h i s creditors w ould n ot be " u n d uly b urde n some " .

W hile it is possi ble that s i milar reasonin g may acco u n t for the the trust

com pa n y ' s d u t y to i nform itself as set out i n s. 7 of the S as k atche w an Act, it seems

more li k ely t h at thi s provision is n ot the resu lt of thoug htful le g i slati v e drafti ng

but rather y et another piece of u n d i gested detrit u s p lu n d e re d from The

A ssignments A ct duri n g the 1 920 revision . W hen con s i dered i n i ts p rope r con text

as part of the former provin cia! b a n k ru ptcy legislation , the d u ty imposed on the

34 Op. C it. , Note 1 .

25

THE B U L K SA LE S ACT

t r u st com p an y b y s . 7 m a k es sen se. I t m a k es m u c h l ess sense , however , w h e n t h e

same sect i on ap p ears i n a stat u te t h at h as a l read y d ef i n e d t h e means b y w h i c h t h e

v e n d or's c re d i tors a n d t h e amou n t of t h e i r c l a i ms are t o b e d ete rm i n e d .

( d ) W ho A re C red i tors?

To p a ra p h r ase Ge rt r u d e Ste i n , a c re d i to r i s a c re d i to r i s a c red i tor . Sect ion

5 of t h e Act req u i res t h e v e n d o r to d i sc lose t h e n ames a n d ad d resses of £li of h i s

c re d i to rs. No d i st i n c t i o n i s mad e b et w ee n sec u red an d u nsecu re d c red i to rs; nor

is i t s i g n i f i ca n t w het h e r or not t h e c re d i t w as g i ve n i n r e l at i o n to t h e b u s i n ess or

t rad e t h at i s _he s u b j ect of t h e sal e .

T h e re are h i sto r i ca l reaso n s w h y t h i s wou l d be so. W he n b u l k sal es

l e g i s l at i o n f i r st came i nto b e i n g , t h e n ot i o n of acq u i r i n g i tems on c re d i t d i d not

e n j oy i ts p resen t pop u l ar i t y . I n most cases, t h e merc h a n t 's on l y l i k e l y c re d i tors

w e re t h e s u p p l i ers of h i s stoc k . Accor d i n g to the p ract i ce of t h e d ay , t h e c re d i t

exte n d e d w as u nsec u red , t h e s u p p l i e rs re l y i n g i nstead o n t h e m e rc h an t to u se t h e

p roceed s g e n erated f rom t h e sa l e o f t h e good s to p a y h i s d ebts to t h em . I t w as

b ecau se of t h e c re d i to rs ' u n p rotected p os i t i on t h at t h ey b e g an to fee l b u l k sal es

l eg i s l at i o n w as n ecessa r y .

Tod ay , how e v e r , com m e r c i a l p ract i ce i s v ast l y d i fferen t. V e r y few b u s i n esses

or t ra d es are a b l e to o p er ate w i t h o u t mor e forma l c re d i t a r ran g em e n ts. U n sec u red

c r e d i t i s b ecom i n g l ess com mo n . W h e re i t d oes occ u r , h o w e v e r , it i s g e n e ral l y

s u p p l i e rs w ho con t i n u e to t ransact t h e i r b us i n ess w i t h m e r c h a n ts o n t h i s bas i s.

T h e n e w p l ay e r i n t h e f i e l d , o n e not con tem p l ated b y t h e o r i g i n al p ropon e n ts of

b u l k sa l es l e g i s l at i o n , i s t h e l ar g e l en d i n g i nst i tu t i on w h i c h f i n an ces t h e o p e r at i o n

o f t h e b u s i n ess o r t rad e. T h e b a n k p rotects i ts i n v estm e n t b y tak i n g a sec u r i ty

26

TH E BULK SA L E S ACT

i n te rest , not o n l y i n t h e stoc k p u rchased w i t h t h e mon i es ad van ced to t h e

merc h a n t, b ut i n e v e r y ot h e r asp ect of t h e b u s i n ess as w e l l - acco u n ts vab

p rocee d s , i n ve n to ry , and e qu i p me n t. Ofte n , t h e merc h a n t i s a l so req u i red to

p ro\l i d e a p e rso n a l g u aran tee. U n d e r t h e p rov i s i on s The Personal Property

Security Acf5 , t h e b an k may perfect i ts sec u r i t y i nte rest i n a l i of t h e m e r c hant 's

p rese n t o r afte r acq u i re d p ro p e rty. B y d oi n g so, t h e ban k , as a sec u r e d p arty ,

w i l l ran k i n p r i o r i t y to t h e m e rc h ant 's u n sec u re d s u p p l i e rs .

T h ere is anot h e r asp ect of mod e r n com m e rc i al p ract i ce w h i c h I s at o d d s w i t h

ass u m pt i o n s of Act. I t i s n o l o n g e r u n common for o n e me rchant t o h a v e seve ral

b u s i n esses, eac h i n d e p e n d e n t of t h e ot h e r a n d a l l f i nan ced to some extent . A

p ro b l em ar i ses w h e n t h e m e r c h a n t se l l s o n e of h i s b u s i n esses. A n y o n e u nfam i l i a r

w i t h t h e arcan e p rov i s i o n s con ta i n e d In t h e Bulk Sales A ct w ou l d p robab l y assu m e

t h at " a l l t h e c red i to r s " mean s a l l t h e c red i to rs n re l at i o n o n l y to t h e b u s i n ess

b e i n g sol d . W h i l e t h i s may have b ee n w h at w as o r i g i n a l l y i nten d ed , t h e re i s

not h i n g i n t h e wor d i n g o f t h e Act to s u p po rt t h i s i nte r p retat ion. I n Warner v.

Grahanr6 t h e B r i t i s h Col u m b i a S u p reme Cou rt h e l d t h at " al l of t h e c red i tors " cou l d

not be con st r u ed to mean o n l y those r e l ate d to t h e ven dor 's b u s i n ess.

Con seq u e n t l y , as w e l l as p rov i d i n g t h e n ames a n d ad d resses of t hose to w hom h e

i s i n d e bted i n r e l at i o n to t h e b us i n ess b e i n g sol d , d i sc l os u res of p e rsona l d e b ts

u n re l ated to bu s i n ess , as d ebts of ot h e r b u s i n esses i n w h i c h t h e v e n dor h as a n

i nte rest m u st b e mad e.

Sas k atc h e w an i s n ot a lone i n i ts g l o b a l ap p roach to cred i to rs . W h i l e A rt i c l e

3 5 S . S. 1 97 9-801 c . P- 6. 1 .

36 Op. cit. , note 3 1 .

27

1 -201

a rticle

T H E B U L K S A L E S A C T

o f the U n i form Commerctal c:ode I rnits the protect km

u red creditors, no nct i on is made bet w een t

b ulk transfe r

w ho h ave

g ranted cred i t connection w i t b usiness and those w ave not.

At first g lance, the Canadian U n i form Bulk Sales A c t appears to h av e taken

a more p rogressive a p proach, categoriz ing those extending credit in one of three

classes: " creditor" , " secured trade credito r" and " unsecu red trade c reditor " 37 • A

" creditor" means an_::t cred ito r ; a " secured trade creditor" and an "unsecured

t ra d e reditor" have a s pecial status, t he feature common to both bei n g that the

deb t owed to t h em is for stock, money or services " ... furnished fo r the p u r p ose of

enab i ng the seller to car ry on a business . . . " . Included in the definition of secured

trade creditor I s the p erson to whom the seller is indebted tor rental of b usiness

p remises. The key issue is whether the credit has been advanced in furtherance

of the business that is the subject of the bulk sale.

To this point, the UBSA has done an admirab le j ob. A p roblem, howeve r, arises

in the p rovisions governing the circumstances under w hich " creditors" are entitled

to be consu lted about the sale and to par ticipate in the distribution of t he sale

p roceeds. T he UBSA p rovides that, initially, the seller is required to fur n ish the

buyer with p a rticulars of his inde b tedness to the secured and unsecured t r ade

creditors [s .4( 2 ) ] , thoug h p ursuant to s.7, the p urchaser must also deliver

particulars of the sale to a ny " creditor" upon demand. Where the amount of

i ndebtedness is $5,000. 00 o r l ess or where claims of the secu red and un secured

trade c reditors hav e been o r will be p aid i n full, the sale can be comp leted without

notice or p ayment of t h e sale p roceeds to the n on-trade creditors. Where t h is

3 7 S s. 2 ( c ) , ( h ) an d ( k ) , respectively.

28

T H E B U L K SA L E S ACT

c r i te r i a can not be met, h o w e v e r , a t r u stee m u st be ap poi n te d to h an d l e t h e

p rocee d s o f t h e sal e . I t i s at t h i s po i n t t h at t h e d i st i n ct i on betw een t h e c re d i tors

d i sap p ears. T he se l l e r i s req u i re d to p rov i d e a seco n d statem en t , t h i s one to t h e

t r u stee, s how i n g " al l o f t h e c red i to rs " . P u r s u an t to s. 1 3, a l l of t h e c red i tors are

e n t i t l ed to s h are I n t h e p roceed s d i st r i b u te d b y t h e t r ustee. It Is n ot c l ear w h y ,

w he n t h e sa l e p rocee d s are not s u ff i c i e n t to cove r t h e se l l er ' s i n d e b ted n ess to h i s

t rad e c red i tors , t h e i r p ro rata s h ares s ho u l d b e f u rt h e r red u ce d b y p e rm i tt i n g t h e

non -t rad e c re d i tors to p a rt i c i p ate i n the d i st r i b u t i o n .

4. WAIV E RS - Sect i on 6( 1 )

T he fai l u re of t h e Act to d i st i n g u i s h b et w een d i ffer e n t t y p es of c red i tors

s u b stan t i a l l y red u ces t h e ad vanta g e w h i c h m i g ht oth e r w i se b e g ai n e d b y resort i n g

to t h e w ai v e r p rov i s i o n s conta i n e d i n s .6 ( 1 ) . T h e g e n e ra l ru l e i s t h at w he r e t h e·

v e n d o r i s a b l e to obta i n a w r i tten w ai v e r f rom t h e cred i tors rep resent i n g n ot l ess

t h an 60 p e r cen t i n n u m be r an d amo u n t of t h e c l a i m s s h ow n i n t h e statutory

d ec l arat i o n , the p art i es n ee d n ot com p l y w i t h the Act . In o r d e r to sat i sfy t h i s

, req u i remen t , h o w e v e r , i t i s st i l l n ecessar y t o p re pare t h e stat u to r y d ec l arat i on as

I t i s from t h i s d oc u m e n t t h at t h e v al i d i ty of t h e w ai v e rs m u st be d ete rm i n e d .

F u rt h e r , eac h of t h e c red i tors m u st b e con t acted an d t h e i r w r i tten w ai ve r obta i n e d ,

a t i me-co ns u m i n g tas k i f t he r e are man y c re d i tors i n vo l v e d .

T he w a i v e r req u i remen ts are fu rt h e r com p l i cated b y s .6(3) . W he re t h e actu a l

cas h t o b e p a i d i n a sal e ( as o p posed t o a b arte r o r exc h an g e ) i s l ess t h an t h e total

i n d e bted n ess of t h e v e n d o r , an d even i f t h e c re d i tors h ave w ai ved t h e p rotecti o n

of t h e Act, t h e p u rc h ase r i s req u i red to " dou b l e c h ec k " t h e i r i nten t i on s. P u rsuant

to t h i s s u b sect i o n , t h e sal e w i l l be v u l n e ra b l e to attac k b y t h e c red i tors u n l ess t h e

29

TH E BULK SALES ACT

purc h aser o b ta i ns, i n a d d i t i on to t h e w r i tten w ai v e r , t h e w r i tten consent of 60 p er

ce n t of t h e cre d i to r s i n n u m b e r and amo u n t.

C l ea r l y , t h e w aive r o p t i on i s som et h i ng i n t h e nat u re of a H o b son's c hoi c e ; i t

may b e as m u c h of a h a r d s h i p to f u l f i l l t h e p re re q uis i tes to w ai v e t h e stat u t e as

i t i s to com p l ete t h e sal e as req u i r e d b y t h e Act. T he req u i r em e n t t h at t h e

p rotect i on of t h e stat u t e b e exten d e d to " al l t h e cre d i to r s of t h e v e n d o r " i s

l arg e l y respons i b l e for t h e i m p a i r e d efficacy of the w aiver.

T h e Act a l so p l aces d i ffer ent o b l i g ations on t h e p u rc h ase r d ep en d in g o n

w het h e r t h e sal e i s cas h or o n e i nv o l v i ng t h e b arter o r exchan g e o f p ro p e rt y .

Where the sal e i s b y b a rt e r or exchan ge t h e p u r c h ase r must, i n al l cases, o btai n

the con se n t f rom t h e cre d i tors r eg ard l es s of t h e a d e q u ac y of the v a l u e of b artered

prope rty i n re l at i on to the vendor's i nd e bted ness.

U n d e r s. 7 of t h e S as k atc h e w an Act, t h e t rust com p any must con ve n e a

meeting of t h e cred i tors w i th i n 10 d a y s of recei v i n g t h e purchase p r i ce. T h u s , t h e

Act provides a rel i a b l e mecha n i sm b y w h i c h the v al i d i ty of v e n dor-acqu i red

w ai v e rs cou l d b e d eterm i ned a n d necessa r y con se n ts cou l d b e o b tai n e d . Su r e l y ,

I t is red u n d an t t o h av e the purch aser assume t h e rol e of w atch dog as w el l . Ot h er

j u r i s d i ct i o n s d o n ot h av e prov i s i o n s w h i ch empow e r a t r u stee to i nt e r v e n e i n t h e

w ay t h e t rust com pa n y can u n d e r t h e S as k atche w an Act . T he se l l e r pl ay s a more

act i v e rol e i n acqui r i n g t h e n ecessar y w ai v e rs a n d cons e n ts. U n d er the UBSA ( and

a l l of t h e l eg i s l at i on b ased u pon it ) , it Is t h e sel l e r w ho must o b ta i n con se n ts an d

p rovid e t he m to t h e pur c h aser o r, w he r e one h as b e e n appoi n t e d , to t h e t rustee.

T he S as k atc h e w an Act i s u n i q ue i n t h e onero u s b urd en it p l aces on the pu r c h as e r

t o safeguard t h e i nte r ests of t h e v e n d or ' s cred i tors. Thi s is al l t h e more

extrao r d i n ar y g i v e n t h e w i d e-reac h i ng pow e rs of the tru st com p an y to pe r fo r m t h e

30

T H E B U L K SAL E S ACT

same f u n ct i o n .

5. NOT I C E T O C R E DITORS - Sect i on 7

O n ce t h e t r u st com p a n y h as rece i ve d t h e sa l e p roceed s u n d e r s .6 , i t m u st

com p l y w 1 t h t h e n ot i ce req u i rem e n ts set o u t i n s . 7 of t h e Act. W i t h i n 1 0 d ay s , t h e

t r u st com p a n y n ot i f i es t h e c r e d i tors t h at a meet i n g w i l l b e h e l d t o sett l e t h e

d i st r i b ut i o n o f t h e sa l e p roceed s. T h e t r u st com pan y m u st a ! so p u b l i s h a n ot i ce of

t h e m eet i n g i n t h e Sas k atc h e w an Gazett e , i n t h i s w ay p resumab l y p rotect i n g

c r e d i tors w hose i d e n t i t i es h av e not y et b e e n d i scove re d .

T h e i m portan ce of t h e Act ' s not i ce- g i v i n g f u n ct i o n i s c l ear from t h ese

req u i reme n ts . T h e Off i c i a l Com m e n t to t h e UCC d esc r i bes the n ot i ce m ec h an i sm

con ta i n e d i n A rt . 6 - 1 05 as " t h e h eart of t h e A rt i c l e ; > . I n s p i te of t h ese sen t i m e n ts

( an d u n i i k e t h e Sas k atc h e w an l eg i s l at i on ) , how e v e r , A rt . 6- 1 05 m a k es no p rov i s i on

fo r p u b l i c n ot i ce to b e g i ve n . T h e tran sfe ree n eed on l y i nform the c re d i tors

w hose n am es ap p ea r i n t h e l i st p re pared by the t ran sfe ror.

A l i Can ad i an j u r i s d i ct i o n s r eq u i re p u b l i c n ot i ce t o c re d i to rs. Some, i nc i u d i n g

O n ta r i o38 an d P r i n ce E d w a r d I s l an d 39 w hose l eg i s l at i o n h as i n co r po rate d s . 1 3 of

t h e UBSA i n t h i s r e g a r d , p rov i d e t h at t h e i m p en d i n g sa l e m u st be ad vert i s e d i n t h e

l oca l n e w sp a p e r. T h i s i s p robab l y a more effect i v e method of g i v i n g n ot i ce to

c r e d i tors t h an p l ac i n g a not i ce i n t h e p rov i n c i a l g az ette ( w h i c h i s h ar d l y l i ke l y to

e n j oy a l ar g e c i rc u l at i o n amo n g t rad e rs an d m e rc h ants ) .

3 '>

3 9

R. S . O. 1 9 7 0 , c . 5 2 , s . 1 2 ( 2 ) .

R. S . P . E . I . 1 9 7 4 , c . B- 6 , s . 7 ( 4 ) .

31

THE B U LK SALES ACT

6. D IS T RI B U T ION OF P ROCE Section

Once noti ce has b een given, th trust com pany i s cha r p urs u a n t to s.

w i th the dutv of distributing tire pur-ch ase mon ies on a o ro rata s amon g t h e

i tors of vendor. T udes cr ed who hav ed cla i ms e i r ow n

as wei ! as those named in the statu to ry declarat i on.

S u bsect i on 6( 1 ) ( states that t h e d i st ribution i s t o b e m ade " . . . s u b j ect to

p referen prov i d ed t o r prev contract, in order m a i nta i n

a level p laying f 1 e i d among tr1 e creditors , s. 3G( 2) states that once the statutory

declaration has been furni shed, " . . . no p reference or priority shall be o b tain able b y

creditor attachmen , ishee p o r othe

Pursuant the schemE· of p refereP set out i n UH.:? Act, the t r· ust company

must pay out the follow i ng in pr i ori to the clai ms the other creditors :

(a) u nd er s .34( 1 ) , the claims of certa i n E,mp l oyees for vJages, es ..

commissions or compensation fo r- se rendered i t t!e three-mon

period prio r to the payment, de! i very or t ransfe r to the t r u st compan y

up to a maximum of $500.00. This figure is very l o w b y today 's

standar"d and would hard begin to

employee for three mon ths' wor k;

oensate t e rage full me

(b ) Under s.35( 2 ) , cla i ms for m u nic i pal taxes that are not a i en on

land. thi is not

in the municipali ty )

however, th stock ( wher-ever I t is d

eemed to be sub j ect to a refe rential l i en for

'40 As t h r' t subse quen provides i ts own prio r i t y eme w h ic u l d fal l within the meanin g of "otherwise " , it is s u g g e s te d the wo rd s " as othe rvvise p rovided in thi s Act" should have been added to s. 3 0 ( 2 ) . With o u t t h i s prov iso, there is conflic t b e tween s s . 34 , 3 5 and 3 6 which purport to give spe c i al priority status to cer tain c lnsses of c r e d i tors and the clear wo r d i n g of s. 3 0 ( 2 ).

32

T H E B U L K S A L E S A C T

t h e v a l u e o f t h e taxes i n t h e y ea r o f t he s a l e a n d the y ea r i m m e d i ate l y

t h e stc<; k , w i n

n a n d s of t h e p u rc h ase r o r a b o n a f i d e t h 1 r d p a rt y , w ou l d b e

v u l n e: r::::t::d e to d ' st ress t:: t h e m u n i c i p a l i t \' "

( c ) U n u e r s . 3 6 , � · a i m s b :r t h e v e n d o r' s l an d l o r d foi r e n t acc r u i n g u p

to t r1 r e e mon t h s p r i o r t o t h e p a y me n t , d e l i ve r y o r t ra n sfe r to t h e t r ust

:om p an / . U n l t h e e p r i ty p s i o n , Ac' p oser;; n :J

mo n eta r y c e i ! i n g o n t h e v a l u e of t h e r e n t . I t i s poss i b l e t h at t h e

I an d i < a l :·) r a n ) t h i ' m a y beth! r t h an ven rJo r s

e m p l o y ees.

T h esE' r i o r i t y p n:w i s i c n a re u ' e i n : m a d a. C;t h e r j u cti o n ave

i n c l u d e d a n y s p ec i al p r i o r i t i es fo r b u l k s a l es c re d i to r s , re l y i n g i n stead o n the

d i st u ti o n sc h e m e s e d i n fed e ra: Ban k ru tcy

T h e S as k atc h e w an Personal Property Secu ri ty A ct w i l l o p e r ate to e l e v ate t h e

c l ai of s ec u r e d p a r t r ,:s w h o ave a p t:; r fected s e c u r i n te rest I n the e n d o r ' s

stoc k a n d p rocee d s a b o ve t h ose o f u n se c u re d i to rs. A l thou g h t h e b road

d ef i o n o'!' · · c r e d i " u s c� d : n th BSA e s Sf�c u re d c r· tor s to rece i v e

not i ce of t h e i m p e n d i n g b u l k s a l e , n ot i c e i s o f i m porta n ce to t he sec u re d c re d i to r s

on ! ' f f u rt t� act ! i s n:::q u r e d pe rfect sec u r i i n te n,osts. A p e rfecte d

sec u n t y i n te rest w i l l s u r v i v e t h e b u l K s a l e , l eav 1 n g t he secu re d c r e d i to r w i t h h 1 s

s ec u r i t y i n te rest i n t h e p rope rt y d i s p osed o f b y t h e sal e. I t i s u n l i k e l y i n a n y

The Dan k r u pLc y Act, fL S . C . B- 3 . Althou g h , Ontario has ad d e d to th i s a provision whi c h purports to g ive m u n icipaliitie s a "le g up

"; R. S.O.

1 9 7 0 , c . 5 2 , s. 1 3 .

33

T H E B U L K S A L E S A C T

event that a r chaser w ou l d roceed w i th the p urchase a bus iness w i t hout

f i rst du n g a search of t h e property reg i ster. T h searc h wou l d

reveal the ex sten ce of any secu

the assets of t h e b usi ness.

creditor who may cla i m a securi i nte rest i n

7. T H E T R U ST COM PANY P ROVIS IONS - Sections 7 to 30

It i s the i nc l u s i on of sections 7 to 30 t h at ma k e the S askatchew an Act

substant i a fiy ger and si gni f i

juri i ct i ons. As d i scussed i n deta i l

d i fferen t from the s i at i on of oth e r

hav i ng bee n haned b y the d em i se

of the A ts A ct, secti ons 7 to 30 nd a new horne n t BSA. No effort

was made to i nt<O:grate them i n to he bul k sal es Act.

The p owers i nvested i n the trust com p any for the p ur poses of bankr u p tcy

l egi slat i o n w ere not revi sed to b r i ng them i n l i ne w i th the rol e normal l y assumed

b y a trustee i n the contex t of b u l k sal es. For thi s reason, the trust com p a n y

charg ed w i th the duty of regulating a b ulk sal e i n S askatchew an h as some

extraordi nary p o w ers:

( a ) der s. 23, the trust comp any may w i t ho u t an o rder exam the ven d or

under oath to determ i ne w h at means h e may have of ischar g in g h i s debts

or to d i scover what debts may be o w ed to h i m. T h i s sect i on also p erm i ts the

trust com p a n y to examine " .. . any p erson w ho i s or h as been an a gent, c l erk,

servant, offi cer or emp lo y ee of any k i nd of the vend or • . . " ;

b ) under s. 25, if the vendor fal l s to attend such an exami nat i on or attends,

but does not d i sc l ose his property or " . . . does n ot make sati sfactor y

[whatever that means] a nswers repecting h i s pro p erty • . . " , the vend or may

be committed to j ai l for u p t o 1 2 months; and

34

TH E B U L K SA L E S ACT

e s . 28 , t h e t ru st com p an y i e m po w e re d to t h e atte n d an ce of

i n d i v i d u a l s n s . 23 a n d to com p e l t he m p rod u ce boo k s

rn e n t s " . . . s u b j to s a m e r u l es of e x am i n at i o n a n d t h e same

co n se q u e n ce s of n e g l ect i n g to att e n d o r n g t o d i sc l ose t h e m atte r s i n

r e s p ect of w h i c h h e may b e e x am i n e d as i f h e w e re a w i t n ess i n a n act ion i n

cou rt . " ;

W h i l e t h e re d o n ot a p p ea r to b e a n y reco r d e d cases i n vol v i n g t r u st

com w ho. h ea d y w i t h pmv av e a b u se d t h e author red b y t h ese

sec t i h a l i s t h e re as ! o n t h e y r ema i n A n i n fo r ma l

s u r 1 of t h e S as k atc h e w an r e v e a l s that e x c e p t fo r s. 7 , t h ese sect i on s a r e

se l d om , i f e v e r , u se d .

8. T H E P E NA LT Y P ROVI SION - Section 31

T h e p e n al t i e s for n o n - com p l i an c e w i t h t h e Act are set o u t i n s. 31 . R e g a r d l ess

of w act or o m i ss i on h as c a u s e d t h e reac h of t h e stau t e , i t s t h e p u r c h ase r

a l o n w I I e a r t h e con se q u e n ce s , a n a p p roach consistent with the un d erlying

p h i t h e A c t t h at p l aces o n u rc h as e r ' s s ho u l d e rs t h e b u r d e n of safe-

g u a r d i g t h e n t e rests of t h e i to r s .

P u rs u an t to s . 3 1 , t h e v e n d o r ' s c re d i to r s h av e a r i g ht of act i on a g a i nst t h e

p u r c h as e r to i m p u g n t h e s a l e o n t h e g ro u n d s of no n - com p l i an ce w i t h t h e Act.

F u r t h e r , s . 32 r e v e r s e s t h e o n u s o f p roof; t h e p l a i n t i ff c r e d i to r n eed o n l y a l l eg e

t h at e stat u te h as b e e n b re ac r, e d , w h e r e u po n t h e p u rc h as e r h as t h e o b l ig ation

of p rov i n g com p l i an ce . If h e f a i l s to d o so, t h e p u rc h as e r m a y s u ffer o n e o r mor e

o f t h e fol l o w i n g p e n al t i e s :

( a ) as b e t w e e n t h e p u rc h as e r a n d t h e c re d i to r s , t h e b u l k sal e s h al l b e

T H E B U L K S A L E S ACT

d to b e f r au d u l e n t a n d

b t h e p u r c h as e r s h al l b t? e em e d t o b e i n d e b t e d to t e n d o r fo r t h e f u l l

amou n t t h e p u rc h as e p n ce s o h at t h e d e b t m a y b e attac h e d b y t h e

c re d i to r s ;

( c ) t h e stoc k acq u i r e d b y t h e p u rc h as e r m a y b e se i z e d t o s at i sf y t h e c l a i ms

of t h e p u rc h ase r s ; a n d

( d ) t h e p u r c h as e r s h al l b e d ee m e d to b e a t r u st e e of t h e stoc k fo r t h e

b e n ef i t t h e c r e d i to r s a n d s h a! I b e l i a b l e to acco u n t to h em fo r a n y

a mo u n t s r e a l i z e d i n t h e d i t i on of t h e stoc k .

G i v e n t h e r e v e r s e o n u s p ro v i s i o n a n d t h e se v e r 1 of t h e p e n al t i e s , t h e

p u rc h as e r o u g h t not t o t a k e l i g h t l y h s d u t y o f e n s u r i n g com p i i an w i t h t h e Act.

T h e i m pos i t i o n of s u c h p e n al t i e s cou l d s e r i ou s l y j eop a r d i ze t h e v i a b i I i t y of t h e

p u r c h as e r ' s n e w l y acq u i r e d b u s i n es s . I n effect, h e cou l d e n d u p p ay i n g t h e

p u rc h as e p r i ce t w i ce . M o r eo v e r , b e i n g h e l d l i ab l e for s u c h a p ay m e n t w ou l d

con t ra v e n e t h e stan d ar d fo r m sec u r i t y ag r e em e n ts favo u r e d b y most l e n d m g

i n st i t u t i o n s , p u tt i n g h i s f i n a n c i n g a t r i s k .

L es s c l e a r a r e t h e con se q u e n ces t h at w ou l d fo l l o w s h ou l d t h e t r u st com p a n y

f a i l to p e rfo r m some o f i ts d u t i es - for i n st a n c e , t h e d ut y 1 n s . 7 t o , . i mmed i ate l y

[ u p o n p ay m e n t of t h e p u rc h as e p r i ce ] i n fo r m i ts e l f b y r e fe r e n ce to t h e v e n d or a n d

h i s r e co r d s a n d b oo k s of acco u n t of t h e n am e s a n d r e s i d e n ce s of t h e v e n d o r ' s

c re d i to r s . . . " , T h i s I s a r i g o ro u s a n d t i m e - co n s u m i n g d u t y , e s p e c i a l l y s i n ee

( p u r s u a n t to s . 30 ( 1 ) ) t h e fees c h a r g ea b l e b y t h e t r u st com p an y s h a l l n ot e x c e e d

t h r e e p e r c e n t o f t h e c l a i m s p ai d to t h e c re d i to r s .

N o t s u r p r i s i n g l y , t h e re d o n ot ap p e a r to b e a n y reco r d e d cases assess i n g t h e

exte n t o f t h e t r u st com p an y ' s d u t y t o " i n fo r m i ts e i f " . A c co r d i n g t o t h e c l ear

36

T H E B U L K S A L E S A C T

l a n g u a g e of t h e stat u te , h o w e v e r, i t w ou l d s e e m t h at h e t r u st com p an y m u st

m o r e t h an m e r e ! y r e l y o n t h e stat u to r y ec l a rat i o n w h e n n g t h e ve n d o r ' s

i n d e P E)SS. A n d b ec a u s e s . 3 1 d oe s n ot con c e r n i tsel f w i t w hose act i s

res p o n s i b ! e for t h e n o n p l i an ce , i f t h e r u st

stat u to r y d u t 1 es , t h e

cred i tors .

r·c h as e r cou l d con c e i v ab l

com p a n y f a i l s to o b s e r v e i ts

n d h i m se l f a n s w e ra b e to t h e

A l l of t h e ot h e r m an d ato r y p cov i s l o n s of t h e A ct a p p l y t o e i t h e r t h e

p u r c h as e r t h e t r u st com p an y . B reac h o f a n y of t h e m m i g ht amo u n t to n o n ­

com p l i ca n c e , t r i g g e r i n g t h e p e n a l t y p ro v i s i o n . T h e d u t i e s p l ac e d o n t h e p u r c h as e r

t h at f a l l i n to t h i s cate g o r- y i n c l u d e :

( a ) to w i t h ho l d p a y m e n t of a n y p o rt i o n t h e p u rc h as e p r i ce t o t h e v e n d o r ;

( b ) to p ay t h e p u r c h as e p 1 ce o r t r an sf e r b a rt e r e d p ro p e rt y to t h e t r u st

com p an y ;

( c ) to p rov i d e t h e t r u st com p a n y w i t h F o r m A ;

( d ) to o b ta i n t h e s e n t of t h e c re d i to r s i n c e rtai n c i r c u m s t a n ces; a n d

T h e d u t i es of t h e t r u st com p a n y i n c l u d e:

to i n fo r- m i ts e l f f ro m F o r m A a n d t h e v e n d o r a n d h i s r e co r d s o f t h e

v e n d o r· ' i n d e bt e d n es s ;

( b ) to fol l o w t h e n ot i ce- g i v i n g p roced u res;

( c ) to d i st r� i b u t e t h e p u r c h as e m o n i es o n a p ro rata b as i s amo n g t he k no w

c red i to rs.

9. T H E L I M I T A T ION P E RIOD - Section 39

3 ec t i o n 3 9 of The B u l k Sales A ct p rov i d es :

s . 39 No act i o n ! b e h ad o r p roce e d i n g s t a k e n t o set as i d e o r h av e

37

T H E B ULK SALE S A C T

d ec l ared d a n y sal e i n b u i for fa1 r e to com p l y W i t h i s Act u n l ess t h e

act i o n i s b g ht o r t h e p roceed i n g s a r e tak e n w i th i n d a y s f rom t h e d ate of t h e sa l e or w i t h i n 60 f rom t h e d ate w h e n t h e c r e d i to r attac n g t h e sal e f i rst h a d n ot i ce t h e

A l t ho u g h d esc r i b e d i n t h e marg 1 n a l n otes as L i m i tat i o n Act ron " , h <� t r u e

effect o f s. 39 i s to exte n d i n d ef i n i y t h e c re d i tors ' r i g h t to comme n ce an act 1 o n

t o voi d t b u l k sal e.

U nt i l a cr,ed i to r h as act u a l k no w ! g e t h at t h e sal e h as occ u r re d , h e i s not

b a r re d f rom c h al l e n g i n g t h e t r·an sact i o n a s l on as h e b r i n g s t h e act i o n w i t h i n 60

d ay s of d i scove r i n g t h e sal e. T h i s l eaves t h e p u rc h ase r i n a p e rman e n t state of

u n ce rtai n t y as i t i s h e w ho w i l l s u ffe r t h e con seq u e n ces i f a sa l e I s set as i d e.

No ot h e r j u r i sd i ct i o n h as taken t h e Sas k atc h e w an ap p roac h . I n Can ad a, most

j u r i sd i ct i o n s h av e d u p l i cated t h e UBSA l i m i tat i o n p e r i od of s i x mont h s f rom t h e

d ate of sa l e. I n Onta r i o an d Nova Scot i a, t h e l eg i s l at i on a l so i nc l u d es a reg i st r y

m ec h an i sm as set out i n s .12( 1 ) of t h e UBSA. T h e f i l i n g of ce rtai n sal e d oc u m e n ts

w i th t h e ap p rop r i ate j u d i c i al off i ce i s con st r u ct i v e not i ce ; t h e s i x - mon t h p e r i od

b e g i n s to r u n at t h e t i m e of f l l i n g .

I n ot h e r p arts of t h e cou n t r y , i t h as been con s i d e re d ap p rop r i ate to

ar b i t ra r i l y c u t off t h e c re d i tors' r i g hts to see k red ress after a p e r i od of a fe w

mon t h s f rom t h e occ u rre n ce of a s p ec i f i e d e v e n t42 t h e r e b y avoi d i n g t h e u n ce rta i nty

cau sed i n Sas k atc h e w an by s. 31 . I t s ho u l d be remem b e red , h o w e v e r , t h at i n ot h e r

j u r i sd i ct i o n s, t h e l e g i s l at i o n p l aces a g reater o n u s to car ry o u t stat u to r y d ut i es on

t h e v e n dor w hose acts a n d om i ss i o n s are b e y o n d the con t ro l of the p u r c h ase r .

4 2 S ix months : R. S . A . c . B - 1 3 , s . 1 2 ; H. S . M . 1 9 7 0 , e. B lOO , s . 1 2 ; I"?. S . N . B . 1 9 7 3 , c . B - 9 , s . l l ; R. Nfl d . 1 9 7 0 , c . 2 8 , s . 1 3 ; R. S . O . 1 97 0 , c . 52, s . 1 9 ; R. O.N.W. T . 1 9 7 4 , c . B-3 , s . 1 2 . Four months : R. S . P. E . I . 1 97 4 , c . B- 6 , s . l l .

38

I V . CON C L U S ION

' h e E " Sa les c t carncc' n to t a n ee ; to e q z e t

! at i o n s lv p b et w ee n t h e m e r c h an t w i t h nJg u e p ote n t i a l an d t h e c r e d i to t- w h o

p ro . d o r f i c i n g o u t se:: ,� i t y . h e fact p re rn : u po n i c h t

l e 9 1 s l at i o n w as o n 9 n a l l y b ase d , h o v-; e v e r , i s n o l on ge r a t r u e r ef l e ct i o n of t h e

ay ' s c

i n 1 9 1 1 ; t h e y d o l'r C t r e i y ,) n

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, t g r a t e rs a n"' more so f: : st i cat e d t h an h t: y w e r e

t h ;2 Act to p ro v i d e s ec u r i t y fo r e x t e n d i n g c r e d i t.

p e r s + h \� I I p roc·ess of p u h as i g b u s n e ss t h

e n d o r s a n u p u r- c h ase r s oft e n see k w ay s to avoi d I t , o r i g n o r e i t a l to g et h e r ,

p i· e f e "' r i ;: g to r i s � t h e h "J. r s h p e n a l t i e s f o r n o n -com p l i a n ce.

he mcs t s i g n i . , c a n t c h a n g e i n t h e com m e r c 1 a i w o r l d s i n ce Tfw Bulk. Sales A c t

�i s a d o p t e d i n 1 <1 1 1 i s t h e g ro ·w t h of s e c u red c r e d i t to f i n a n c e ac q u i s i t i o n s of

stoc t ra d e y r e t i : n e t· c r: s. W 1 e a s u p p i e r of s may' st i l l occ as i o n a l ! :/

p i ac e g oo cJ s w i t h ii m e r c h a n t w i t h o u t t a k i n g a s ec u n t y i n t e r es t i n t h em , i t i s n o w

m u c h n ,o r e cc:;': mon t h e r·c h an t t::J e i t ,- g i v E? h 1 s w h o l esal e s u p p l i e r a

:c,ec u r i t y ' n t e r est i n t h e s h e 1· e c e i v e s , o r t o f i n an c e h i s e n t i re o p e r at i o n w t h

;:, b a n k c r c;t h e t- i e n d i n g I n st i t u t i on w h i c h 01 o u l d r n v a r i a b l y i n s i st u po n ta k i n g a

s e c r ! t n ot i l i n t q ood s

ot h e r b u s ; n e ss ass e t s a s ltJ e i I .

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(C h asecJ w i t h t h e i oa n tJt i n t h e v e n d o r '

A c t p i d es '1 i m p l e , i n e x p en s : v e a n d

39

effE<::t i

p ay

can be

TH E B U L K SA L E S ACT

fo r c re d i t g r a n to r·s

s u p p l i e d . T

t h e meet t h e n ee d

r e r e p ay m e n t ad v a n ce d fo r

g r e e m e n t c r eat1 sec u r i ty i n t e rest

i n d i v i d u a l c re d i to r I Ca l l y , i t w i l l

i el u d e c l a u ses t h at w i i ! acce l e rate p a y m e n t of t h e e n t i l- e d e b t i n t h e e v e n t o f a

b u l k s a l e , c l au se s w h i h w i l l p rov i d e fo r f u t u r-e s e c u i n te rests i n stoc k , as d

w h e n acq u i r e d , a n d w h i c h w i l l e x t e n d to t h e p rocee d s of a n y s a l e of stoc k .

T h e con t e m p o r a r y a p p roac h t o b u s i n es s f i n an c i n g , a n d t h e p rotec t i o n fo r

s ec u r· e d to r s p rov i d e d b y p m i n i s h es t h e e of t : acon i a n Bulk

Sales I t r e rn a i n s t h e case, h at u n se c u r e d e n j o y n o n e of

t h e r· 1 g p d ed to sec u r e d c T h e y m u st y e :x v e l y o n t h e

m e r c h a n t ' s w i l l i n g n ess to repay h i s d e b t s . E ve n t h ou g h u n sec u r e d b u s i n e s s

c re d i to r s are n o w fe w i n n u m b e r , i t m i g h t s e e m t r1 at at l east som et h i n g of t h e

p o l i cy of t h e B S A s h o u l d b e s a l v a g e d t o p rov i d e t h em w i t h som e p rote ct i o n i n

c i r c u m s t a n c e s w h e re a b u s i n ess i s so l d a n d t h e p roce e d s are n ot s u ff i c i e n t to

cov e r� t h e

s i t u at :

tota l i n d e bt e d n ess. r�on i ca ! l y , h o w e v e , 1 t i s i j u st s u c h a

h at t h e B S A w i l l b e ! ,;;,ast u se to t h e u n se c u r e d i to rs . H av i n g

r e ce i v e d n ot i ce o f t h e i m p e n d i g sal e u r, r t h e B S A , i t m a y e col d comfo r t , i f , i n

t h e f i n a l y s i s , t h e s ec u r e d c re d tor s h av e scoo p e d a l l t h e m o n e y as a r e s u l t of

t h e i r p r i o r i t y stat u s u n d e r t h e P P S A .

T he real i t y i s t h at t h e B S A i s n o l o n g e r a b l e to p rov i d e t h e p rotect i o n i t o n c e

d i d beca u s e t h e r u l es ( an d p e r h a p s t h e g am e ) u po n w h i c h i t w as p rem i s e d h av e

c h an g e d d ramat i cal l y . T h e P PS A p rov i d es a l es s com p l i c at e d a n d mor e effect i v e

mean s o f p rotect i n g c re d i to r s i n t e rests. W h at j u s t i f i cat i o n i s t h e re for con t i n u i n g

to p rov i d e an ad d i t i on a l , t ho u g h n ot p a rt i c u l ar l y r e l i a b l e , s afet y n et fo r s p ec i f i c

c l ass of c r e d i to rs w ho c h ose to r ema i n u n sec u re d ?

40

T H E B U L K SA L E S ACT

T h e r e v i e v1 of t h e BSA i n t h i s r e p o r t d e mo n st rat es t h at t h e l eg i s l at i on i s

co n ce p t u a l i f l a w e d , p oo r l y d r afte d , an d oft e n I n e q u i ta b l e i n i ts ap p l i cat i o n . W h i l e

t m i g h t b e p o s s i b l e to s a l v a g e t h e b as i c a p p roac h o f t h e l e g i s l at i o n , an y attempt

to d o s o w o u l d p ro b a b l y c r eate as m a n y p ro b l em s a n d con t rovers i es as are

g e n e rate d b y t h e ex i st i n g Act. I t i s w o rt h n ot i n g t h at ! n t h e U n it e d States, t h e

A m e r· i c a n B a r A ssoc i at i o n ' s cor- p o r at i o n s , B an k i n g an d B u s i n ess l a w Sect i o n

est a b l i s h e d a s u b --com m i tt e e to recom me n d r ev i s i o n s to a rt i c l e 6 , t h e b u l k sa l es

p r-ov i s i o n of t h e U n i fo r m Com m e rc i a l T h e c h an g es p roposed b y t h e s u b -

com m i ttee g e n e rate d a i ot o f co n t rov e r s y , an d more t h an o n e com m e n t at or

co n e I u d e d t h at i f acc e p t a b l e r e v i s i o n s cou l d n ot b e m a d e to t h e l e g is l at i on , i t

s h ou l d b e r e p e a l e d . 4 4 C e r t a i n l y , t h e l e g i s l at i o n c a n n ot b ea r an y mo re h a p h az a r d

�� ev i s i o n s. A s o n e A m e r- i ca n com m e n t ato r n ote d , " . . . i f t h e j o b c a n n ot b e d o n e r i g h t ,

t h e n i t s h o u l d n ot b e d o n e a t a l l . " 4 5

T h e Com m i s s i o n h as co n c l u d e d t h at t h e S as k at c h e w a n Bulk Sales A ct s i m p l y

c a n n ot b e c o n v e r te d i n to a v i a b l e m ec h a n i s m fo r t h e p rotect i o n of c re d i to r s '

i n t e r e s t s i n t h e co n t ext o f c o n t e m p o r· a r y c r e d i t p ract i ces. I t i s l e g i s l at i on t h at h as

o u t l i v e d i ts u s e f u l n es s , a n d b ecome a n i m p e d i me n t rat h e r t h an a fac i l i tato r of g oo d

b u s i n es s p ra ct i c e . I n t h e Com m i ss i o n o p n i o n , The Bulk Sales A ct s h o u l d be

ed .

P u b l i shed by i ts C h a i rman , W i l l i am D . Hawk l an d , ' ' P ro po s e d R ev i s i on s t o

L . C . C . ,\ l' t i c l e 6 " , ( 1 9 8 2 / 8 3 ) 3 8 Bu s i n e s s L aw y e r 1 7 2 9 .

H Do n a l d .J . R a p son , " U . C . C . A r t i c l e 6 : Shou l d I t B e R e v i sed o r ' Deep­

S i xed ' '? " , ( 1 9 8 2 / 8 3 ) 38 Bu s i n e s s L awye r 1 7 5 3 a t p . 1 7 5 4 ; Don L . Bake r , " Bu l k

T r an s f e r s A c t - P a t c h , Bu r y o r Reno v a t e ? " , ( 1 9 8 2 / 8 3 ) 3 8 Bus i n e s s L awye r 1 7 7 1 at

p . 1 7 7 2 .

4 5 I b i d . , p . 1 7 7 1 .

41