A creditor moved under s. 69.4 of the Bankruptcy and Insolvency Act to lift the automatic stay and continue a pre-bankruptcy civil action alleging fraud, misrepresentation, conversion, and breach of trust arising from a residential property renovation and resale venture.
The court held that a contingent creditor has standing to seek leave, that the pleaded facts met the low threshold for showing sound reasons to lift the stay, and that the action raised credibility-driven and complex issues unsuitable for summary determination within the bankruptcy process.
The court found material prejudice because the creditor would otherwise be deprived of discovery, viva voce evidence, and a forum to determine whether the alleged debt falls within s. 178(1)(d) and (e).
The stay was lifted to permit the action to continue against the bankrupt.
The court also held that the bankrupt's motion materials were improper and misleading, and determined that costs should be awarded on a substantial indemnity basis, with quantum to be fixed later.
