January 2009


By Alexandre McCormack

Last month we explained the rights of unpaid suppliers who sold and delivered goods with a reserve of right of ownership to a purchaser who subsequently declared bankruptcy.

But what happens when goods are sold and delivered without reserving ownership rights? What recourse does an unpaid supplier have when a purchaser declares bankruptcy?

Besides providing the purchaser's trustee with a provable claim for the unpaid balance, the supplier has the right to repossess the goods it delivered to a purchaser in the past 30 days.

According to An Act Respecting Bankruptcy and Insolvency the supplier has this right upon certain conditions, notably:

1) The goods are for use in relation to the purchaser's business;2) The goods are in the possession of the purchaser, the trustee or the receiver;3) The goods are identifiable and are in the same state as they were on delivery.

To exercise the right to repossess, it is essential that suppliers meet all the conditions specified in An Act Respecting Bankruptcy and Insolvency. Recently, in the matter of Viandes Kamouraska (Faillite de), EYB 2008-146906, the Superior Court refused the supplier the right to repossess delivered goods because the goods were no longer in the same state as they were on delivery.

Along with this, you must remember that the supplier's right to repossess only exists within a period of thirty days after the delivery of the goods to the purchaser without regard as to when the purchaser declared bankruptcy. Therefore it is important to act quickly and this is certainly a matter for your attorney!