In an insolvency appeal arising from a consumer proposal, the appellant bank challenged an order holding that an approved proposal compromised the unsecured portion of its secured claim and that a side agreement with the debtors was unenforceable.
The court held that, because the bank did not seek revision of the proposed assessment of its security, the approved proposal was binding on all unsecured claims under s.62(2)(a) of the Bankruptcy and Insolvency Act.
The court further held that equality among creditors is a basic insolvency principle and that a secret side agreement violating that equality amounts to a fraud on other creditors and is unenforceable.
The appeal was dismissed, Mr. Farmer was to be removed as an inspector, and the order was amended by consent to remove any reference to misconduct by the trustee.
