Frank Bennett

The trustee in bankruptcy appealed an order restricting it from providing the bankrupt estate's inspectors and creditors with access to the bankrupt's documents.

The restriction was initially imposed due to concerns that an inspector, representing a competitor creditor, would use the information for collateral purposes.

The Court of Appeal allowed the appeal, holding that inspectors require access to documents to fulfill their statutory supervisory duties.

The court ruled that the proper remedy for concerns about misuse of information is to restrain the collateral use of the documents or remove the inspector, rather than denying access entirely.

The appellant trustee in bankruptcy retained the respondent law firm as estate solicitor to collect funds held in trust.

After the respondent performed significant work laying the foundation for recovery, the appellant terminated the retainer without cause, settled the matter, and sought to use its statutory priority under s. 136 of the Bankruptcy and Insolvency Act to pay its own fees, which would exhaust the estate and leave the respondent unpaid.

The Court of Appeal dismissed the trustee's appeal, holding that while unjust enrichment did not apply, the trustee's conduct amounted to equitable fraud.

Equity will not permit a statute to be used as an instrument of fraud, and it would be unconscionable to allow the trustee to take unfair advantage of its legal rights in these circumstances.

In an addendum on costs following an appeal, the Court of Appeal for Ontario awarded costs on a partial indemnity scale.

Finding the hours sought by the successful party to be excessive, the court fixed costs at $12,500, payable without delay.

The appellant, a franchisor, obtained foreign default judgments against the respondent franchisees after terminating their franchise agreements and seizing their assets without accounting for the value of the seized inventory.

The appellant then filed petitions in bankruptcy in Ontario based on the foreign judgments.

The trial judge dismissed the petitions under s. 43(7) of the Bankruptcy and Insolvency Act, finding that the appellant's attempt to obtain double recovery by failing to account for the seized assets constituted 'sufficient cause' to deny the petitions.

The Court of Appeal upheld the decision, confirming that the trial judge properly exercised his discretion to dismiss the petitions due to the appellant's unconscionable conduct.

The sole surviving executor of an estate improperly loaned estate money to his own company and executed a debenture that was not registered.

After the executor died, the new administrators applied for late registration of the debenture under the Corporation Securities Registration Act.

However, a petition in bankruptcy had already been filed against the debtor company.

The Supreme Court of Canada held that while the executor's misconduct constituted 'sufficient cause' for late registration, the bankruptcy petition vested the company's assets in the trustee.

Section 75 of the Bankruptcy Act did not operate to elevate the estate's unsecured claim to a secured claim after the bankruptcy commenced.

The appeal was dismissed.