Standard

Title of Trustee in Bankruptcy

Migration

A lawyer who files an application for registration under the Land Registration Act in which the chain of title includes a trustee of the estate of a bankrupt must ensure that the property was vested1 in the trustee and that such vesting is evidenced by sufficient registered or recorded documentation.2

The lawyer must also determine whether, as required by the Bankruptcy and Insolvency Act , the consents of inspectors have been given, or a court order approving the sale has issued.3

If title vests with the trustee at the time of such registration, then the trustee should be shown as the registered interest holder.4

Transactions

A lawyer who acts on behalf of any party accepting title from a trustee of a bankrupt estate, or otherwise certifies the legal effect of an instrument of conveyance from a trustee of a bankrupt estate, must ensure that the trustee is shown in the parcel register as a registered interest holder.5

The lawyer must also determine whether, as required by the Bankruptcy and Insolvency Act, the consents of inspectors have been given, or a court order approving the sale has issued.6

Title of Bankrupt

A lawyer who a) files an application for registration under the Land Registration Act in which the chain of title includes a party known by the lawyer7 to have been bankrupt,8  b) acts on behalf of any party accepting title from a party known by the lawyer to have been bankrupt, or c) otherwise certifies the legal effect of an instrument of conveyance from a party known by the lawyer to have been bankrupt, must ensure that the bankruptcy either did not vest title to the property in the trustee in bankruptcy, or that the title was re-vested in the bankrupt.9

Receivership

A lawyer who files an application for registration under the Land Registration Act in which the chain of title includes a receiver, or acts on behalf of any party accepting title from a receiver, or otherwise certifies the legal effect of an instrument of conveyance from a receiver, must ensure that a vesting order or an order approving the sale is registered.10

Legacy Judgments

A lawyer may rely on registered evidence of a bankruptcy,11 including a discharge of the bankrupt or the trustee, to conclude that a prior judgment recorded against an owner of a parcel or a predecessor in title does not attach to the parcel, unless the judgment results from a security under the Bankruptcy and Insolvency Act, such as a statutory crown lien.12

Footnotes

  1. Land Registration Act, S.N.S. 2001, c.6, para.37(9)(b). Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss.70 & 74. Note that a bankruptcy severs a joint tenancy in cases where one joint owner becomes bankrupt but another joint owner does not, see White, Re., 8 C.B.R. 544, 33 O.W.N. 255, [1928] 1 D.L.R. 846 (S.C.).
  2. Land Registration Act, S.N.S. 2001, c.6, para.37(9)(b). Although a registered assignment in bankruptcy is likely preferable, a bankruptcy may also be sufficiently evidenced by a registered discharge of either the bankrupt or the trustee, caveat issued under the BIA, instrument registered in the judgment roll only, recital, affidavit or declaration. Note Vendors and Purchasers Act, R.S.N.S. 1989, c.487, para.2(a) re. recitals and declarations over twenty years old.
  3. Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, ss.30 & 34, para.155(e), requiring consents of inspectors or court order where the bankruptcy is ordinary administration. Consents or court orders are not required for summary administration bankruptcies.
  4. Property Online Client Material Updates, December, 2007. There is an exception where the bankrupt had a recorded interest and not a registered interest at the time of the bankruptcy. The materials also allow the lawyer to include a qualification on the trustee’s title arising from the instrument. Lawyers should consider whether vesting is absolute before making such a qualification.
  5. Land Registration Act, S.N.S. 2001, c. 6, s.30. See also note 4, supra. The lawyer should also record the petition, receiving order or assignment in bankruptcy in the judgment roll for the land registration district in which the document is submitted. See Property Online Client Material Updates, December, 2007.
  6. See note 3, supra.
  7. Based on either unregistered evidence or the lawyer’s own knowledge, see LeBlanc (Re), 250 N.S.R. (2d) 225; 2007 NSSC 18; S556/23 and Tim Hill, “LeBlanc (Re)”, Case Comment, (2007) 32 Nova Scotia Law News, or based on registered documentation which the lawyer determines did not vest title in the trustee.
  8. Can be by assignment in bankruptcy, petition in bankruptcy, or depending on the nature of a proposal, by the operation of or by the failure of the proposal.
  9. Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, s. 20 of the BIA. A discharge from bankruptcy of either the bankrupt or the trustee does not re-vest the property in the bankrupt. See W. Mark Penfound, “Bankruptcy in the Chain of Title” (Presented in Practical Property 1984) [unpublished], p.5. Note that para.67(1)(c) of the Bankruptcy and Insolvency Act includes all property acquired by the bankrupt prior to the bankrupt’s discharge. See also note 1, supra, re. severance of joint tenancies.
  10. Houlden, Lloyd W., Geoffrey B. Morawetz and Janis P. Sarra, Annotated Bankruptcy and Insolvency Act, (Toronto: Carswell, 2009), L§6.2A.
  11. Graves v. Hughes, (2001) 194 N.S.R. (2d) 51, 606 A.P.R. 51 (S.C.), para.8-9.
  12. Bankruptcy and Insolvency Act, ss.86 to 87, and subs.178(1); Starratt v. Turner (1989), 78 C.B.R. (N.S.) 83 (N.S.C.A.); Income Tax Act, subs.223(11.1); Excise Tax Act, subs.316(10.1). See also Robert G. MacKeigan & Paul E. Radford, “Nova Scotia Real Estate Lawyers Association – Conveyancing Standards of Practice 3.11 and 3.14” (Presented at the Real Estate Practice Seminar Series, Continuing Professional Development, Nova Scotia Barristers’ Society, 7 February 2003) [unpublished], p.4, which cautions lawyers concerning judgments protected by subs.178(1). But see also W. Mark Penfound, “Bankruptcy in the Chain of Title” (Presented in Practical Property 1984) [unpublished], which states that even protected unsecured judgments cease to attach to pre-acquired property in a bankruptcy.

Additional Resources

  • Effect of an order or assignment prior to registration: Land Registration Act, S.N.S. 2001, c. 6, s. 45, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, s. 75
  • Garth C. Gordon, “Notes on Bankruptcy & Land Registration in Nova Scotia” (Presented at the Joint Dinner Meeting of the Real Property and Bankruptcy & Insolvency Sections of the Canadian Bar Association – Nova Scotia, 18 October 2007) [NSBS Library, KB 170 G662 2007].
  • D. Bruce Clarke, “Land Registration in Nova Scotia, Registering and Recording Bankruptcy Interests,” October, 2008 [Unpublished.]

Practice Notes

re: Proposals

When a lawyer is acting in a migration or transaction where the lawyer knows an owner has made a proposal under the Bankruptcy and Insolvency Act, the lawyer should take reasonable steps to ensure that the effects upon title, if any, of the proposal or its failure have been considered. Where property vests in trustee, accepted practice would be to require registered evidence of vesting. Where property does not vest in trustee, accepted practice would require written acknowledgment from trustee that title has not vested.

re: Title of bankrupt

Section 20 of the BIA sets out a process which allows a trustee to divest itself of property by way of notice of quit claim or renunciation. This requires the permission of inspectors. Subsection (2) sets out that registration of such a notice acts as a discharge or release of any previously registered documents. A lawyer should require registered evidence of divesting or revesting when relying on the bankrupt’s title, but may rely on unregistered documentation where the bankruptcy is not registered.

Amended by Council on April 20, 2012