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.

The plaintiff insurance broker sought an interlocutory injunction to prevent the defendant mutual insurance company from communicating with policyholders after the termination of their brokerage agreement.

The plaintiff alleged breach of contract and breach of confidence.

The court dismissed the motion, finding that while there was a serious issue to be tried, the plaintiff failed to demonstrate irreparable harm, as any losses could be quantified and alleged reputational harm was speculative.

The balance of convenience favoured the defendant, given its regulatory obligations to communicate with its member policyholders.

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 applicant, acting as receiver for the primary secured creditor, sought the appointment of a receiver and manager over the debtor company.

The debtor company's interim receiver concurrently sought an extension of time to file a proposal under the Bankruptcy and Insolvency Act and approval of its activities.

The court lifted the existing stays of proceedings, appointed the receiver, granted a 45-day extension to file a proposal to avoid automatic bankruptcy, and approved the interim receiver's activities, finding the relief to be just, convenient, and unopposed.

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 moving parties, a syndicate of six banks, sought to partially lift an automatic stay of a bankruptcy order pending appeal under s. 195 of the Bankruptcy and Insolvency Act.

The banks argued that the appellant was frustrating the bankruptcy process and might dissipate her assets.

The court found that the appellant's grounds of appeal were extremely weak and that maintaining the stay would prejudice the banks by preventing the trustee from identifying and preserving assets.

The court granted the motion, partially lifting the stay to allow the trustee to exercise specific powers under the BIA.

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.

Following the dismissal of the plaintiffs' summary judgment motion and the granting of the defendants' summary judgment motion, the court determined the quantum of costs.

The defendants sought a combined total of approximately $150,000 in partial indemnity costs, while the plaintiffs argued for a significantly reduced amount of $60,000.

Applying the overriding principle of reasonableness, the court ordered the plaintiffs to pay $65,000 to the lead defendant and $30,000 to the remaining defendants.

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.

The plaintiff's representative refused to proceed with an examination for discovery because the defendant brought two corporate representatives, including the president's wife, which the plaintiff found intimidating.

The plaintiff moved for an order limiting the defendant to one representative at the examination.

The court granted the motion, holding that the onus is on the party seeking to have multiple representatives present to establish necessity, which the defendant failed to do.

The appellant, an unsecured business creditor, sought a constructive trust over funds held by the Receiver of a bankrupt company, arguing the bankrupt was unjustly enriched by the unauthorized sale of the appellant's shipping containers.

The motion judge dismissed the claim, finding no direct connection between the proceeds of the sales and the funds held by the Receiver.

On appeal, the Court of Appeal upheld the dismissal for the majority of the funds, confirming that a constructive trust requires a direct link between the property and the unjust enrichment.

However, the Court allowed the appeal in part, imposing a constructive trust over $27,244 that was directly traceable to the unauthorized sale of five containers shortly before the receivership.

The Receiver brought an unopposed motion seeking approval of three asset purchase agreements to sell substantially all of the debtors' assets as a going concern in a 'quick flip' transaction.

The court applied the Soundair principles, finding that the sales process was fair, the market was sufficiently canvassed, and the transaction was the best available option to maximize recovery for the senior secured creditor.

The court also approved the use of a credit bid for partial payment and granted a sealing order for the purchase agreements and valuation reports to protect sensitive commercial information.

The applicant sought an order appointing Grant Thornton Limited as receiver of the respondents pursuant to section 243 of the Bankruptcy and Insolvency Act and section 101 of the Courts of Justice Act.

The respondents, operating a travel agency business, were insolvent and in default of their credit facilities.

The application was unopposed.

The court found it just and convenient to appoint the receiver to facilitate a going concern sale of the business, preserving consumer confidence and employee jobs.

The applicant law firm, Thomas Gold Pettingill LLP, applied for a declaration regarding $61,351.64 held in trust from a settlement, which was claimed by both the respondent former client, Ani-Wall, and the respondent former law firm, Cassels Brock.

The funds represented an unpaid legal account.

The court found that while the applicant lawyer breached a personal undertaking and could not unilaterally bind the client to an equitable assignment, the former law firm was entitled to a charging lien over the funds.

The court held that the charging lien was not subject to a limitation period, unlike the underlying contract claim.

The court ordered the funds to be subject to the charging lien but allowed the former client to seek an assessment of the accounts due to special circumstances.

The applicants, comprising the First Leaside group of companies, sought an Initial Order under the Companies' Creditors Arrangement Act (CCAA) to conduct an orderly wind-down of their operations.

The court found that the applicants, viewed as a group, were insolvent and that the CCAA could be appropriately used for a liquidating proceeding.

The court also granted super-priority Administration and D&O Charges, dismissing arguments from secured creditors that provincial paramountcy issues precluded such priorities without further notice.

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.

The appellant appealed a trial judgment regarding the prudence of ending a tax appeal and the fairness of a purchase price.

The Court of Appeal found the trial judge's conclusions reasonable and noted the appellant led no contrary evidence.

The failure to deduct net proceeds of sale from the judgment was deemed a technicality correctable under rule 59.06(1).

The appeal was dismissed with costs.

The appellant appealed an order striking without leave to amend certain paragraphs and causes of action in a draft fresh as amended statement of claim.

The appellant argued a jurisdictional issue because the motion was brought under Rule 26 for leave to amend, but the motion judge used language suggestive of a motion to strike.

The Court of Appeal dismissed the appeal, finding the distinction immaterial, as the result—that the proposed pleading and causes of action were unavailable—was the same.

The moving party sought leave to appeal two interlocutory orders: one temporarily staying the action pending the resolution of related tax proceedings, and another striking claims of conspiracy and misfeasance in public office with leave to amend.

The Divisional Court found no reason to doubt the correctness of the motion judge's decisions and no conflicting decisions warranting leave.

The motion for leave to appeal was dismissed.