COURT OF APPEAL FOR ONTARIO
Huscroft, Dawe and Wilson JJ.A.
In the Matter of the Bankruptcy of Avida 2015 Inc., of the City of Toronto, in the Province of Ontario
David T. Ullmann and Nadav Amar, for the appellant
Christopher J. Staples, for the respondent
Patrick Corney, for the trustee1
Heard: June 5, 2026
On appeal from the order of Justice Jana Steele of the Superior Court of Justice, dated September 22 2025.
REASONS FOR DECISION
1The appellant, David Reale, is a director and officer of Avida 2015 Inc. (“Avida”). Avida is indebted to the respondent, the Bank of Montreal, for over $6 million, and the respondent is Avida’s senior secured creditor. The appellant has guaranteed $4 million of Avida’s indebtedness.
2MSI Spergel Inc. was privately appointed by the respondent as a receiver, in accordance with the respondent’s general security agreement with Avida. That appointment was approved by the court on February 23, 2024. On March 6, 2024, a bankruptcy order was made in respect of Avida upon the respondent’s application, and Spergel was appointed as trustee.
3On November 22, 2024, the appellant requested that the trustee commence an action against the respondent for breach of contract, breach of fiduciary duty, and other causes of action. The trustee declined. The appellant then sought to pursue the proceedings against the respondent in his own name. The respondent requested that it be able to purchase the potential cause of action against itself at an auction by way of a credit bid. The appellant countered that the respondent’s general security agreement did not cover his claim against the respondent, and because the claim was not part of the respondent’s security, the respondent was compelled to bid cash and could not credit-bid for it. The appellant added that because the claim is outside the respondent’s security, the respondent would also have no priority over any funds realized by the sale.
4The trustee sought the court’s advice and directions with respect to these two competing proposals.
5The motion judge held that the appellant’s cause of action is an asset that can be sold in bankruptcy proceedings and that it can be sold to the defendant in that action (the respondent). Accordingly, the motion judge permitted the trustee to initiate the auction sale process. She also held that the appellant would be permitted to bid and the respondent would be permitted to credit-bid up to the face value of its secured debt.
6The appellant asserts he has an appeal as of right under s. 193 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, but he has also sought leave to appeal in case it is required. The respondent denies that there is a right to appeal without leave and argues that leave to appeal should not be granted.
7We are satisfied that there is no appeal as of right in this case. Accordingly, leave to appeal is required pursuant to s. 193(e).
8This is an appropriate case to grant leave. The test set in Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at para. 29, is satisfied. Specifically, although it appears to be well established that credit bidding is permitted, whether a creditor may use a credit bid to acquire an asset that does not attach to its security is not well settled. This is a matter of importance beyond this appeal to bankruptcy proceedings more generally. The proposed appeal is prima facie meritorious, and the respondent confirmed that no harm would be caused by hearing the appeal.
9Accordingly, leave to appeal is granted. Appeal management is available to assist the parties in having the appeal heard expeditiously and to address any requests for intervention that may be made.
10This panel is not seized of the appeal. Costs are reserved to the panel that hears the appeal.
“Grant Huscroft J.A.”
“J. Dawe J.A.”
“D.A. Wilson J.A.”
1 Mr. Corney appeared but made no written or oral submissions on behalf of the trustee.