Consignment refers to an arrangement whereby goods are placed in
the hands of a party that will retain possession of the goods until
they are sold. The party in possession of the goods acts as an
agent for the supplier and is paid to sell them, but at all times
title to the goods remains with the supplier until they are
As with express trusts, the onus of establishing a consignment
arrangement rests with the supplier. If an unpaid supplier can
demonstrate that a consignment of goods exists, it will be entitled
to possession of any goods that can be identified, proceeds from
any of those goods sold by the trustee, or the amounts owing by
customers of the consignee on credit. An unpaid supplier will also
be able to claim proceeds of the sale of consigned goods if the
proceeds have been used by the bankrupt, provided they can be
traced to some identifiable, recoverable form.
To prove that a consignment agreement exists, the supplier must
file a proof of claim that provides particulars of the property and
evidence that the consigned goods belong to it. In addition, it
must establish that the consignee is engaged in the business of
selling goods and that it has possession of the goods and treats
them as consigned goods, and that the relationship between the
parties is such that the supplier is permitted to repossess the
goods and the consignee obliged to return them. In addition to any
written agreements confirming the consignment nature of the
business dealings between the supplier and the purchaser, the
conduct of the parties will also be considered by the court in
determining if a consignment arrangement exists.
Readers are reminded that bankruptcy courts are typically
solutions-oriented and that the application of the above-criteria
is dependent on the facts of each case. It is recommended
that readers consult an insolvency professional.
The Canadian bankruptcy regime was designed with two key purposes in mind – provide options to ‘honest but unfortunate' debtors struggling with an unmanageable financial load and create an orderly means for creditors to recover amounts owed them.
The Court of Queen's Bench of Alberta authorized a disposition of a debtor's assets by a receiver immediately upon appointment and without being forced to conduct a marketing process within the receivership proceedings.
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