Whose Tractor Is It Anyway? Quebec Decision Clarifies Ownership Claims in Receivership

A recent Quebec Court of Appeal’s decision in Séquestre de Bois BSL inc. / BSL Wood Products Inc., 2025 QCCA 993, builds on the Superior Court’s ruling¹ and revisits the dissenting opinion in Maschinenfabrik Rieter AG c. Canadian Fidelity Mills Ltd., 2005 QCCA 1033. It clarifies the legal treatment of ownership claims in the context of receivership and the consequences of late registration of security under Quebec law.

Background

On September 16, 2024, Bois BSL Inc. and Investissement BDG BSL Inc. (collectively, the Debtor) were placed under receivership, and FTI Consulting Canada Inc. was appointed as receiver (the Receiver). Brandt Tractor Ltd. (Brandt) filed a proof of claim asserting ownership over a piece of equipment, a John Deere loader worth $285,900 and subject to a conditional sale agreement between Brandt and the Debtor, arguing that the sale never took place or, alternatively, was conditional upon full payment, which was never received. The piece of equipment was on the Debtor’s premises at the time of the Receiver’s appointment and the Toronto-Dominion Bank (TD) had a hypothec on the universality of the Debtor's movable property since 2018.

Brandt’s claim was rejected by the Receiver and TD when considering Brandt as a secured creditor under the Bankruptcy and Insolvency Act² (the BIA) and Brandt's failure to register the reservation of ownership at the Register of Personal and Movable Real Rights (Québec) in accordance with Article 1745 of the Civil Code of Québec (the CCQ)³. Brandt appealed this decision before the Superior Court⁴, arguing that the dissenting opinion of Justice Nuss in Maschinenfabrik should apply, and that the equipment never entered the Debtor’s patrimony. The Superior Court rejected this argument, affirming that the majority in Maschinenfabrik remains a binding precedent. Brandt then appealed to the Court of Appeal. Before diving into the conclusions of the recent Court of Appeal decision, a review of the Maschinenfabrik decision is in order.

Revisiting Maschinenfabrik Rieter AG c. Canadian Fidelity Mills Ltd.

In Maschinenfabrik, the Quebec Court of Appeal addressed whether, in the context of bankruptcy, a vendor under an instalment sale contract could repossess industrial equipment notwithstanding that its reservation of ownership had been published late. The vendor, Maschinenfabrik Rieter AG (Maschinenfabrik", had sold machinery to Canadian Fidelity Mills Ltd. (Canadian Fidelity Mills) under contracts reserving ownership until full payment. However, the reservation was not published within the delay required by Article 1745 of the CCQ.

After Canadian Fidelity Mills went bankrupt, La Financière du Québec (La Financière), a secured creditor with a previously registered hypothec on the universality of Canadian Fidelity Mills' movable property, sought to enforce its rights over the equipment, but was challenged by Maschinenfabrik.

The majority of the Court held that the late publication rendered Maschinenfabrik’s reservation of ownership unopposable to La Financière. The Court emphasized that, following amendments introduced by the Federal Law–Civil Law Harmonization Act, No. 1⁵(the Harmonization Act), in the context of a bankruptcy, a reservation of ownership in an instalment sale is of no effect against the trustee if not published.

Justice Nuss dissented, arguing that the said machinery never entered the debtor’s patrimony and therefore could not be hypothecated. He relied on the Supreme Court’s decision in Ouellet (Trustee of)⁶, which recognized that a vendor retains ownership despite late publication, provided the property remains in the buyer’s possession and is not encumbered by third-party rights. In his view, the Harmonization Act should not override the civil law principle that ownership remains with the seller until full payment.

The majority rejected this interpretation, distinguishing Maschinenfabrik from Ouellet on the basis that the bankruptcy in Maschinenfabrik occurred after the Harmonization Act came into force. The Court concluded that Maschinenfabrik’s failure to publish its reservation within the prescribed delay meant its rights ranked after those of La Financière, and it could not repossess the equipment without complying with Article 1749 of the CCQ.

Court of Appeal's Conclusion

Brandt relied on Justice Nuss’s dissent to argue that its piece of equipment had never entered the Debtor’s patrimony and therefore could not have been hypothecated. It claimed that, as in Maschinenfabrik, ownership remained with the vendor and the equipment should be returned. However, the Court of Appeal rejected this argument, emphasizing that the dissenting view has not been adopted in Quebec jurisprudence and that the legal framework established by the majority in Maschinenfabrik remains binding. As such, Brandt’s appeal had to be assessed under the prevailing interpretation of the CCQ and the BIA.

Key Takeaways

This decision provides several practical takeaways for secured parties, vendors under instalment sale contracts and debtors in Quebec:

• Receivership or bankruptcy triggers federal rules: Once receivership or bankruptcy is declared, federal insolvency law applies, and vendors under installment sales are treated as secured creditors.
• Late registration invalidates ownership claims: Under Articles 1745 and 1749 CCQ, a reservation of ownership must be registered within seven days to be enforceable against third parties.
• Maschinenfabrik’s majority prevails: Despite the compelling logic of Justice Nuss’s dissent, Quebec courts continue to apply the majority’s interpretation.

To discuss any aspects of this decision and what steps your organization can be taking, please contact one of the authors or any member of our Financial Services group.