The appellants appealed an order dismissing their motion to set aside an order granted under s. 38(1) of the Bankruptcy and Insolvency Act, which authorized a creditor to pursue a fraudulent conveyance action in the trustee's stead.
The appellants argued the creditor lacked standing because it had settled its claims against the bankrupt.
The Court of Appeal held that the appellants had standing to challenge the s. 38 order due to allegations of abuse of process.
However, the Court found the creditor was a valid creditor at the date of bankruptcy and no binding settlement had been concluded with the bankrupt estate.
The appeal was allowed in part only to set aside a costs provision and stay the trustee's original motion, but otherwise dismissed.
