HUMAN RIGHTS TRIBUNAL OF ONTARIO
B E T W E E N:
Mohamod Rijal
Applicant
-and-
Distinctive Designs Furniture Inc., Benny Manasseri, Joe Sammut,
and Jim Moore
Respondents
INTERIM DECISION
Adjudicator: Andrew M. Diamond
Indexed as: Rijal v. Distinctive Designs Furniture
INTRODUCTION
[1] In September 2004, the applicant made a complaint to the Ontario Human Rights Commission (the “Commission”) claiming that he was discriminated at his workplace because of his colour, race, and ethnic origin. His complaint to the Commission was abandoned upon filing this Application to the Human Rights Tribunal of Ontario (the “Tribunal”) under section 53(3) of Part VI of the Human Rights Code, R.S.O. 1990, c. H.19 as amended (the “Code”). The applicant alleges that he lost his employment with the corporate respondent, Distinctive Designs Furniture Inc. (“Distinctive”) as a result of this discrimination.
[2] As a preliminary matter Distinctive advised the Tribunal that it has filed a proposal to its creditors under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended, (the “BIA”) and, based on that, made a Request for Order During Proceeding asking that the Tribunal dismiss the Application against Distinctive because, it argues, the Application against Distinctive is stayed by operation of section 69 of the BIA.
[3] The following chronology of events is useful in framing the issue to be decided:
September 22, 2004 the applicant made his original complaint to the Commission.
July 27, 2007 Distinctive made a Division I Proposal to its creditors under Part III of the BIA.
August 16, 2007 the proposal was amended, and subsequently approved by the required majority of Distinctive’s creditors.
September 11, 2007 Mr. Justice Spence of the Ontario Superior Court of Justice in Bankruptcy and Insolvency (the “Bankruptcy Court”) granted an order approving the amended proposal.
October 20, 2008 the applicant filed his Application with the Tribunal and abandoned his complaint to the Commission.
December 3, 2008 counsel for Distinctive advised the Tribunal that it was Distinctive’s position that the complaint to the Commission and therefore this Application to the Tribunal was stayed by operation of section 69.1 of the BIA.
December 10, 2008 the Tribunal issued an Interim Decision setting out a timetable for written submissions for this Request for Order.
[4] The crucial element of the chronology is that the proposal was made and approved before the applicant filed this Application.
LAW AND ANALYSIS
[5] The proposal provisions of the BIA are designed to allow debtor companies and their creditors to come to an arrangement to restructure the business by compromising existing debts. One of the tools in the BIA that helps to facilitate these restructurings is a statutory stay which prevents those with a claim against the debtor company acting outside of the proposal scheme without leave of the Bankruptcy Court.
6In a letter to the Tribunal dated December 3, 2008 counsel for Distinctive argues that “pursuant to section 69 of the BIA there is an automatic stay of proceedings which ends all outstanding legal proceedings, including human rights complaints. Accordingly, this Application should be stayed as against Distinctive.” Counsel goes on to argue that “The Responding Parties take the position that this Application is untimely and should be dismissed…”
7Section 69.1 of the BIA reads:
69.1(1) Subject to subsections (2) to (6) and sections 69.4 and 69.5, on the filing of a proposal under subsection 62(1) in respect of an insolvent person,
(a) no creditor has any remedy against the insolvent person or the insolvent person’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy, until the trustee has been discharged or the insolvent person becomes bankrupt; (emphasis added)
8In response, the applicant argues that his claim is not a “claim provable in bankruptcy,” as defined by the BIA, and, as a result, the BIA statutory stay has no impact on his Application before the Tribunal.
9In the normal course a creditor of an individual who makes a proposal to his creditors under the provisions of the BIA would file a proof of claim with the trustee setting out how much was owed to them by the proponent debtor. It is then the responsibility of the trustee to admit or deny the claim, and if unliquidated, value the claim. Appeals from trustees’ decisions with respect to the value and validity of a claim are heard by the Bankruptcy Court.
10The facts of this case are unusual in that the applicant denies he is a creditor of Distinctive under the proposal and, as a result, his claim is not a “claim provable in the proposal”. Section 121 of the BIA defines provable claims as:
121(1) All debts and liabilities, present or future, to which the bankrupt [or proponent; see Section 66(1) of the BIA] is subject on the day on which the bankrupt becomes bankrupt [or the proponent makes his proposal] or to which the bankrupt may become subject before the bankrupt’s discharge by reason of any obligation incurred before the day on which the bankrupt becomes bankrupt shall be deemed to be claims provable in proceedings under this Act.
The purpose of the subsection is, so far as possible, to include every kind of claim in the definition of ‘provable claim’…” see: 2009 Annotated Bankruptcy and Insolvency Act, L.W. Houlden, G.B. Morawetz and J.P. Sarra editors, Thomson Carswell, 2008 at p. 68. Allowing parties to unilaterally elect whether or not their claim is provable in bankruptcy would defeat the intention of the BIA and its stay provisions.
11The applicant further argues that “the Code takes precedent over every other Act.” Section 47(2) confirms the Code prevails over other Acts and regulations except where there is specific provision to the contrary. In Crystalline Investments Ltd. v. Domgroup Ltd., 2004 SCC 3, [2004] 1 S.C.R. 60, the Supreme Court of Canada held that:
explicit statutory language is required to divest persons of rights they otherwise enjoy at law. . . . [S]o long as the doctrine of paramountcy is not triggered, federally regulated bankruptcy and insolvency proceedings cannot be used to subvert provincially regulated property and civil rights. [para. 43]
In my view the stay provisions of the BIA do not “divest persons of their right” as the stay is not absolute. At its highest the impact of the stay would be to defer the applicant’s ability to seek relief for the breach of his rights, not to divest him of those rights. Therefore it is unnecessary to determine whether the Code takes precedence over the BIA by virtue of section 47(1) of the Code, or whether the BIA, a federal statute, has paramountcy over the Code, a provincial statute.
12The mere fact that the stay may be operative against the applicant’s claim does not end the analysis. Neither the applicant nor the respondents made reference to subsection 69.4 of the BIA which allows:
69.4 A creditor who is affected by the operation of sections 69 to 69.31 or any other person affected by the operation of section 69.31 may apply to the court for a declaration that those sections no longer operate in respect of that creditor or person, and the court may make such a declaration, subject to any qualifications that the court considers proper, if it is satisfied
(a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or
(b) that it is equitable on other grounds to make such a declaration.
13In Jodoin v. Ciro’s Jewellers [1996] O.H.R.B.I.D No. 1 a panel of the then Human Rights Board of Inquiry concluded that “s. 69.1 of the BIA did not stay (human rights) proceedings: see Fitzgibbons v. R. 1990 CanLII 102 (SCC), [1990] 1 S.C.R. 1005.” No further analysis is provided. In my view Fitzgibbons is entirely distinguishable and, consequently, I do not accept the conclusion reached in Jodoin. Mr. Fitzgibbons was a lawyer who had been convicted of fraud and ordered to make restitution. At the time of the conviction and restitution order Mr. Fitzgibbons was an undischarged bankrupt. Mr. Fitzgibbons attempted to argue that as a result of the BIA stay provisions the criminal court did not have the authority to order restitution. Mr. Justice Cory of the Supreme Court found that the stay provisions of the BIA did not act to prevent a court issuing a restitution order. However, even in coming to this conclusion Justice Cory recognized that:
There is a fundamentally important distinction between the original compensation order, which is ordered against the person by which the court recognizes and acknowledges the indebtedness, and the subsequent filing in the Superior Court which can convert that personal order into an order against property of the accused.
Section [69 (1)] of the BIA would preclude the enforcement of the latter. This is because such enforcement would result in the granting of the very priorities which the BIA seeks to avoid.
14As the Supreme Court has said, it is the Bankruptcy Court that has the expertise to manage bankruptcies and proposals under the BIA. In GMAC Commercial Credit Corporation – Canada v. T.C.T. Logistics Inc., 2006 SCC 35, [2006] 2 S.C.R. 123 (“TCT”) the union which represented the employees of the bankrupt T.C.T. Logistics Inc. brought an application to the Bankruptcy Court to lift the stay under section 215 of the BIA. The union wanted to lift the stay to allow it to bring an application before the Ontario Labour Relations Board for a declaration that the company that purchased some of the bankrupt company’s business was a successor employer. While the stay in question was under another section of the BIA there was no issue that the union required the leave of the Bankruptcy Court to bring their application to the Labour Board. At paragraph 65 of TCT the Court held that:
‘[T]ransferring particular disputes elsewhere’ [Sam Lévy & Associés Inc. v. Azco Mining Inc., 2001 SCC 92, [2001] 3 S.C.R. 978], is all that is done when leave under s. 215 is granted. Moreover, I note that the “transfer” in the instant case consists only of permitting the tribunal vested with exclusive jurisdiction over the matter to ultimately decide it. It is one thing to avoid permitting provincial enforcement schemes to defeat legitimate bankruptcy orders, as was held in Sam Lévy, it is another to use the bankruptcy process to defeat legitimate assertions of provincially granted rights…
15In my view, the purpose of the stay is not to “defeat legitimate assertions of provincially granted rights,” but to simply allow for a protocol and management of various claims against those seeking protection under the BIA. The claims process and stay provisions of the BIA provide a protocol to allow for the effective management of insolvent individuals. As the Supreme Court recognized in TCT
Trustees, receivers and the specialized courts by which they are supervised are entitled to a measure of deference consistent with their undisputed expertise in the effective management of a bankruptcy. Flexibility is required to cure the problems in any particular bankruptcy. But guarding that flexibility with boiler plate immunizations that inoculate against the assertion of rights is beyond the therapeutic reach of the Bankruptcy and Insolvency Act.
16Where appropriate, the Bankruptcy Court will lift the statutory stay to allow litigants either in other actions before the court or in other forums to continue those claims. However, it is the Bankruptcy Court that is tasked with the management of litigation against parties who have been granted protection under the BIA.
DECISION
[17] The Tribunal is the proper forum for determining whether the applicant’s rights under the Code have been breached by the respondents. However, having made a proposal to its creditors under the BIA the law establishes a protocol for proceedings against Distinctive. The Tribunal has authority under section 45 of the Code and its Rules of Procedure to defer consideration of an application. In exercising its discretion, the Tribunal has regard to such factors as the nature of the other proceeding, the remedies available in that proceeding, and whether it would be fair to the parties to defer the application pending the conclusion of the other proceeding.
[18] The statutory and case law dictate that the management of monetary claims under the BIA is the exclusive jurisdiction of the Bankruptcy Court. It is for the Bankruptcy Court to make the determination as to whether or not any monetary claim against a party, who has been granted protection under the BIA, is or is not, a claim provable in bankruptcy.
19The procedural difficulty in this case is that neither the original complaint to the Commission nor the Application and subsequent submissions filed with the Tribunal set out the relief sought by the applicant.
20Assuming the applicant does not seek any monetary relief from the respondents, but only wishes a declaration that his rights under the Code have been infringed, it is my view that that would not be a claim “provable in bankruptcy” as the applicant would not be a creditor of Distinctive seeking a remedy. However, if it is the intention of the applicant to seek any monetary relief from any of the respondents (as the individual respondents maybe entitled to contribution or indemnity from Distinctive) the applicant would be a contingent creditor of Distinctive, and, as a result, this Application would be stayed by operation of section 69 of the BIA.
21This analysis is consistent with the Divisional Court’s decisions in Peel Housing Corp. v. Siewnarine, (2008) CarswellOnt 3807(Ont.Div.Ct) and Forestwood Co-operative Homes Inc. v. Pritz, (2002) 31 C.B.R.(4th) 243(Ont.Div.Ct.). In Peel Housing the landlord only sought an eviction order while in Forestwood the landlord sought both an eviction order and an order for unpaid rent. In both cases the tenant had filed for bankruptcy before the hearing. In Forestwood the Divisional Court found the “proceeding included claims provable in the bankruptcy and therefore should be stayed,” however, in Peel the Court held that, as there was no claim for any monetary order, the Ontario Rental Housing Tribunal had erred in finding that that proceeding was stayed by operation of section 69 of the BIA.
22The applicant is therefore directed to:
Advise the Registrar-Transition and the respondents in writing within 30 days of the date of this Interim Decision whether he is seeking any monetary compensation from any of the respondents.
If seeking monetary compensation the applicant must, within 60 days of the date of this Interim Decision, make a motion to the Registrar in Bankruptcy in court file 31-455107 seeking an order under section 69.4 of the BIA lifting the stay to allow
(i) for filing this Application;
(ii) amending the Application to set out the amount claimed from the respondents for the alleged Code breaches; and
(iii) allowing the applicant to continue the Application against the respondents.
• the applicant is to file a copy of the Notice of Motion and any resulting order of the Bankruptcy Court with the Registrar-Transition.
[23] If the applicant confirms that he is not seeking any monetary compensation as part of his Application, the Registrar-Transition shall be in touch with the parties to schedule the next steps.
[24] If the applicant fails to comply with the directions in paragraph 22 above, the Tribunal may deem the Application to be abandoned and close its file.
[25] I am not seized of this matter.
Dated at Toronto, this 13th day of March, 2009.
“Signed By”
Andrew M. Diamond
Member