Canadian Law

Please use LRAC (legal issue, rule, application and conclusion)

Milton Stevenson, a local entrepreneur, decides to start a new business delivering water in a cargo van that he already owns. He incorporates the business in Ontario under the name Milton's Water Delivery Inc. and then took out two loans in the corporation's name to help him get started: a loan of $5,000 from the New Business Bank on April 12, 2021, and another loan of $3,000 from the Little Companies Bank on April 14, 2021. Both of these loans were secured against Milton's cargo van; while the loan from Little Companies Bank was perfected under the Personal Property Security Act (PPSA) on April 16, 2021, New Business Bank forgot to perfect their interest and never completed their PPSA registration. A friend of Milton's, Bonnie Dogoode, also agreed to loan the company $1,000 as an unsecured creditor as a favour to Milton. A few months after he opened, his van broke down and needed to be repaired by a mechanic.

A) Upon finding out the cost of the repairs, Milton refused to pay for the work the mechanic had performed and insisted that the van be returned to him immediately. Advise Milton on what his rights are as against the mechanic. (3 marks)

B) Assume Milton changes his mind and pays the mechanic for the repairs, but has no more money left in his corporate account and decides to stop operating the business and declare bankruptcy. If the van has a value of $4,000 at the time of the bankruptcy and the corporation has no other assets, what priority do each of the corporation's creditors have and how much money can they expect to recover? (5 marks)

C) Can Milton expect to have to personally pay anything to the corporation's creditors as the result of the bankruptcy? Why or why not? (2 marks)