| Overview: Purchase and sale under the Bulk Sales Act |
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| Areas of Practice - Purchase and sale under the Bulk Sales Act | |
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Overview of the Bulk Sales Act
Legislation regulating the sale of bulk goods was first introduced in the United States around the turn of the 20th century. These laws were the product of an initiative by creditors to combat commercial fraud, which was prevalent at that time. See T. C. Billig, “Bulk Sales Laws: A Study in Economic Adjustment” (1928), 77 U. Pa. L. Rev. 72, at p. 81. Bulk sales laws were in place in 45 U.S. jurisdictions and in all Canadian jurisdictions by 1922. See R. M. Forbes, Handbook: Ontario Bulk Sales Act (1990). From the outset, bulk sales legislation has been judicially recognized as protecting the interests of creditors whose merchant debtors had disposed of all or substantially all of the inventory, chattels and fixtures by which they carry on business. See McLennan v. Fulton (1921), 50 O.L.R. 572 (C.A.), at p. 577; Re St. Thomas Cabinets, Ltd. (1921), 61 D.L.R. 487 (Ont. S.C.), at p. 491; and Garson v. Canadian Credit Men’s Trust Association, [1929] S.C.R. 282, at pp. 285-86. However, such laws were recently repealed in Alberta, British Columbia, Manitoba, Saskatchewan, Yukon and the Northwest Territories, following reports of law reform commissions in those jurisdictions that the goal of protecting creditors, to the extent that it is achieved by bulk sales legislation, is realized only at the cost of significant commercial inconvenience, disruption and expense. More importantly, these laws were largely seen as unnecessary in light of the availability of remedies under the general law of fraudulent conveyance. See Law Reform Commission of British Columbia, Report on Bulk Sales Legislation (1983), at p. 1; Manitoba Law Reform Commission, Report No. 71, Report on the Bulk Sales Act (1988); Northwest Territories Committee on Law Reform, Working Paper No. 3, The Bulk Sales Act (1990); Law Reform Commission of Saskatchewan, The Bulk Sales Act: Report to the Minister of Justice (1990); R. Bowes, Alberta Law Reform Institute, Report No. 56, The Bulk Sales Act (1990). In Ontario, the Bulk Sales Act was originally enacted in 1917 (S.O. 1917, c. 33). After minor amendments in 1933, a new Act came into force in 1959 (S.O. 1959, c. 9). The major change in the 1959 legislation was in relation to the consequences of non-compliance with the Act by the buyer of the stock in bulk, which is the issue in this appeal. What are now s. 16(1) and s. 16(2) were introduced as s. 17 to provide unpaid creditors of the seller with a remedy against the buyer. Under the former legislation, the only penalty imposed on a buyer for non-compliance was to render the transaction voidable if it was attacked by the seller’s creditors within the statutory limitation period. More information about the Bulk Sales Act. |
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