David Jackson

The applicant trustee in bankruptcy sought a declaration of entitlement to settlement funds held by a solicitor.

The funds resulted from a fraudulent conveyance action commenced by a judgment creditor against the bankrupt and his wife after the assignment in bankruptcy, without leave of the court.

The court held that the action was subject to the stay of proceedings under s. 69.3 of the Bankruptcy and Insolvency Act and that the settlement funds represented the proceeds of the bankrupt's interest in the property.

The trustee was granted the balance of the funds after accounting for a valid solicitor's lien.

In a supplementary endorsement following an oral judgment, the Court of Appeal for Ontario addressed the allocation of proceeds of realization under the respondent bank's debt instruments.

The parties agreed that the proceeds should be allocated first to expenses, second to interest, and third to principal, which the court ordered.

The court declined to consider the balance of the appellants' supplementary submissions as they went beyond the scope of the court's invitation.

The moving party, 2205305 Ontario Inc., was unsuccessful on an urgent motion to stay an order approving a receiver's sale of properties.

The respondents sought costs against the moving party's parent corporation, Romspen Investment Corporation, arguing it was the real moving party and the moving party was a shell corporation.

The Court of Appeal dismissed the request for costs against the non-party, finding no fraud or abuse of process to justify lifting the corporate veil, and fixed costs against the moving party on a partial indemnity scale.

KJS took an assignment of National Bank's debt and security and realized on the portions provided by the appellants.

The trial judge awarded judgment to KJS for the shortfall.

On appeal, the Court of Appeal upheld the trial judge's interpretation of the share purchase agreement, finding that the appellants breached their obligations and could not claim the benefit of the KJS security.

However, the Court allowed the appeal in part to vary the damage calculation, finding that KJS was not entitled to mitigate its damages by taking an assignment of the debt instruments.

The cross-appeal was dismissed.