John Nicholas Birch

The trustee in bankruptcy moved for a phase-one determination that profit payments made by Douglas Grozelle to net winners in a fraudulent Ponzi scheme were void as against creditors and recoverable for the estate.

The court found the hallmarks of a Ponzi scheme, held insolvency and fraudulent intent could be inferred globally, and concluded the payments were void under the Fraudulent Conveyances Act and not saved by good-faith or good-consideration defences.

The court approved a two-stage insolvency process: common liability issues resolved summarily now, with individualized quantum determinations in phase two.

The winners’ cross-motion for broad directions attacking the trustee’s process and authority was dismissed.

This is an appeal from an order of the Commercial List judge concerning insolvency proceedings.

The appellants, Bryton, sought to exercise an option to purchase a property and obtain orders declaring the option valid and immune from challenge by other creditors under various acts (Fraudulent Conveyances Act, Assignments and Preferences Act, Canada Business Corporations Act oppression remedy, and Bankruptcy and Insolvency Act).

The application judge dismissed Bryton's request for a vesting order and declaratory relief, finding that the claims were not res judicata and that declaratory relief was not the appropriate vehicle to pre-emptively bar unadjudicated creditor claims.

The Court of Appeal upheld the application judge's decision, confirming that the validity of the option was not res judicata and that the refusal to grant declaratory relief was a proper exercise of discretion, as the application procedure was not suitable for dismissing unproven claims.

The plaintiff, Shanghai Lianyin Investment Co., Ltd. (SLIC), brought a motion for an interim preservation order under Rule 45.01(1) of the Rules of Civil Procedure concerning two Ontario properties registered in the name of the defendant Lichun Guo, alleging they were held in resulting trust for her husband, Charles Lu, against whom SLIC held a CAD$233 million arbitral award.

Concurrently, Ms. Guo brought a cross-motion for security for costs.

The court dismissed SLIC's preservation order motion, ruling that Rule 45.01 is not the appropriate mechanism for preventing asset dissipation before judgment where the plaintiff does not assert a legal right to the specific assets, but rather seeks to satisfy a general monetary judgment.

Such relief requires meeting the stricter test for a Mareva injunction or a certificate of pending litigation.

The court granted Ms. Guo's motion for security for costs, finding that SLIC, as an out-of-province corporation with insufficient Ontario assets, did not demonstrate a "good chance of success" on the merits of its complex resulting trust claim, particularly given the unsettled legal question in Ontario regarding a creditor's ability to enforce a judgment against property held by a spouse in resulting trust without an allegation of fraudulent conveyance.

The appellant, an undischarged bankrupt, sought an extension of time to file a notice of appeal from a lower court order that declared his debts would survive bankruptcy and lifted a stay of proceedings.

The respondent opposed the extension, arguing there was no right to appeal without leave and that the appeal lacked merit.

The respondent also brought a cross-motion for security for costs.

The Court of Appeal granted the extension of time, finding that the appellant had a right to appeal under sections 193(c) and 193(a) of the Bankruptcy and Insolvency Act, and that the proposed appeal had arguable merit.

The court dismissed the respondent's cross-motion for security for costs, concluding that the "other good reason" test under Rule 61.06(1)(c) of the Rules of Civil Procedure was not met, given the appellant's impecuniosity and the arguable merit of the appeal.

The applicant, NJS Midtown Portfolio Inc., sought a court order directing the respondent, CMLS Financial Ltd., to consent to the sale of a mortgaged property and provide a partial discharge of the mortgage, or alternatively, a full discharge upon payment of the principal and accrued interest.

NJS had entered into an agreement of purchase and sale for one of three properties secured by a closed, 10-year mortgage with CMLS, which was insured by CMHC and part of a Mortgage-Backed Securities program.

CMLS refused consent, citing contractual terms, CMHC policy obligations, and the non-prepayable nature of the mortgage.

The court dismissed NJS's application, finding no contractual, statutory, common law, or equitable basis for the requested discharge, and that CMLS's withholding of consent was reasonable given its commercial interests and obligations to CMHC and MBS investors.

The plaintiffs sought early redemption of their syndicated mortgage investments from Hi-Rise Capital Ltd. (HRC) and 54 Shepherd Road Inc., arguing HRC was contractually obligated to redeem.

HRC and 54 Shepherd Road Inc. brought cross-motions for summary judgment, asserting no such obligation existed and raising issues of standing and res judicata for one plaintiff.

The court dismissed the plaintiffs' motion, finding no unqualified right to early redemption based on a holistic interpretation of the Loan Participation Agreements (LPAs) and mandatory disclosure forms.

The court granted the defendants' cross-motions, dismissing the plaintiffs' action.

In a corporate liquidation proceeding, the inspector moved for declarations approving a second claims bar process and authorizing distribution of funds held by the liquidator.

Several foreign claimants attempted to pursue litigation in a United States court without filing a proof of claim in the liquidation or seeking leave from the Ontario court, despite notice of the claims bar process and an existing stay of proceedings.

The court held that the claimants’ failure to participate in the claims process barred their claims and constituted a breach of the stay of proceedings.

The court approved the second claims bar process, declared the foreign claims extinguished, and authorized distribution of the indemnification fund.

The liquidator was also directed to take no action in response to the foreign proceeding.