Bankruptcy and Insolvency Law - OCA

Following a successful appeal of a procedural ruling regarding a contempt motion, the parties neglected to address the costs of the proceeding before the motion judge.

The appellant requested that the Court of Appeal determine those costs, seeking $20,000.

The respondent argued the matter should be remitted to the motion judge or that no costs should be awarded.

The Court of Appeal declined to remit the issue to avoid further delay and expense, and awarded the appellant costs of the motion below fixed at $15,000 all-inclusive.

The appellant appealed an order staying an action against a court-appointed receiver and refusing leave to sue the receiver.

The appellant argued that the receiver had already consented to the action and that the motion judge erred in finding the test for leave was not met.

The Court of Appeal dismissed the appeal, finding that the prior consent did not encompass the new claim for conversion arising from a subsequent agreement of purchase and sale.

The Court also found no error in the motion judge's discretionary refusal to grant leave, as there was no evidence that the appellant suffered damages.

The appellants appealed a mini-trial judgment and costs order, arguing the trial judge erred by proceeding with the mini-trial before ruling on whether the action against one of the appellants was stayed under s. 69(1) of the Bankruptcy and Insolvency Act.

The Court of Appeal dismissed the main appeal, finding the stay applied only to the bankrupt appellant and did not preclude the stand-alone claims against the others.

The court allowed the costs appeal in part, reducing the trial costs award by $7,500 to account for the appellants' success on a continuance motion.

The appellant appealed a preservation order requiring him to deliver luxury vehicles or their sale proceeds to the respondent trustee in bankruptcy, and freezing his bank accounts.

The appellant argued he only acquired a beneficial interest in the vehicles when a court declared a trust agreement valid, years after his bankruptcy.

The Court of Appeal dismissed the appeal, finding the appellant's beneficial interest existed at the time of his bankruptcy pursuant to the trust agreement, and the motion judge made no error in principle in exercising his discretion to make the preservation order.

Following a successful appeal setting aside a series of ex parte 'investigative receivership' orders, the successful appellants sought costs against both the original applicant and the court-appointed receiver.

The Court of Appeal held that both were liable for costs.

The applicant was liable on a partial indemnity scale because he initiated and supported the proceedings.

The receiver was held personally liable for costs on a substantial indemnity scale because it acted as a 'real litigator' and pursued an impermissibly overreaching roving receivership, losing its objectivity as an officer of the court.

The Court also clarified that substantial indemnity costs are calculated as 1.5 times partial indemnity costs under Rule 1.03, rather than as a percentage of full indemnity costs.

The appellant sought full indemnity costs for his successful appeal and two underlying motions regarding his bankruptcy discharge and the treatment of a personal injury settlement.

The Court of Appeal declined to award full indemnity costs, finding that the Trustee's conduct was not reprehensible and that Rule 49.10 did not apply to grant a defendant substantial indemnity costs.

The court awarded the appellant partial indemnity costs of $5,000 for the motion before Spence J. and $10,000 for the appeal.

The appellants, holding unsecured crossover bonds, appealed a CCAA judge's decision that the common law 'interest stops' rule applies in CCAA proceedings, preventing them from claiming post-filing interest above their principal debt and pre-petition interest.

The Court of Appeal dismissed the appeal, confirming that the 'interest stops' rule is a fundamental tenet of insolvency law that applies to CCAA proceedings to ensure fair treatment of creditors and orderly administration.

The Court clarified that while creditors cannot legally claim post-filing interest, the rule does not preclude a negotiated CCAA plan from providing for such payments.

The appellant sued its former lawyer for negligence after he failed to appeal a bankruptcy trustee's disallowance of its secured claim.

The motion judge granted summary judgment dismissing the action, finding the bankrupt had no rights in the disputed funds, meaning the appellant's security interest never attached and it suffered no damages.

On appeal, the appellant argued the motion judge erred and raised a new 'loss of chance' argument.

The Court of Appeal dismissed the appeal, upholding the motion judge's findings on attachment and refusing to entertain the new loss of chance argument due to unfairness and lack of evidentiary foundation.

The appellants, who held a first mortgage on a commercial property, appealed the dismissal of their motion to vary a receivership order that granted the receiver-manager super-priority charges over their mortgage.

The Court of Appeal dismissed the appeal, agreeing with the motion judge that the appellants failed to move 'forthwith' under Rule 37.14(1) of the Rules of Civil Procedure.

The court found that the appellants had acquiesced to the manager's appointment and taken the benefit of its work before attempting to vary the order months later.

In an ongoing insolvency proceeding, the DeJong appellants appealed a motion judge's order dismissing their cross-motion for a constructive trust and the cancellation of shares, while granting constructive trusts over certain properties to the Bernstein applicants.

The appellants argued the motions judge failed to adjudicate their requested relief, erred in applying tracing principles for constructive trusts, and failed to apply the correct legal test under the Assignments and Preferences Act regarding a proposed settlement agreement.

The Court of Appeal dismissed the appeal, finding no error in the motions judge's tracing analysis, his refusal to grant the requested relief to avoid preferring the appellants over other creditors, or his conclusion that the proposed settlement agreement constituted an unlawful preference.

The appellant Superintendent of Financial Services appealed a CCAA judge's order lifting a stay of proceedings and ordering the debtor companies into bankruptcy.

The appellant argued that a deemed trust arose under the Pension Benefits Act upon the wind up of two pension plans during the CCAA proceedings, and that this trust should have priority over secured creditors.

The Court of Appeal dismissed the appeal, holding that the CCAA judge reasonably exercised his discretion to transition the proceedings to bankruptcy under the BIA, where provincial deemed trusts are rendered inoperative by the doctrine of federal paramountcy.

The applicants sought an extension of time to file a notice of appeal and leave to appeal from an order refusing to grant a charging order for a solicitor's lien and a salvage lien against a bankrupt's estate.

The Court of Appeal granted the extension of time, finding a bona fide intention to appeal and no prejudice.

The Court also granted leave to appeal under s. 193(e) of the Bankruptcy and Insolvency Act, finding that the proposed appeal raised issues of general importance to bankruptcy practice and was prima facie meritorious.

The appellant husband appealed a trial judgment that awarded his bankrupt wife an equalization payment, lump sum spousal support, and costs.

The wife's former lawyers also appealed an order requiring the assessment of their accounts and a personal costs award against them.

The Court of Appeal allowed the appeal in part, setting aside the equalization payment because the wife lacked capacity to assert the claim after her bankruptcy, and setting aside the assessment of the lawyers' accounts.

However, the Court upheld the lump sum spousal support award and the costs awards, including the personal costs award against the wife's former lawyer for acting in bad faith and running up costs without reasonable cause.

The appellant creditor sought a declaration that the bankrupt's judgment debt survived his discharge from bankruptcy under s. 178(1)(d) of the Bankruptcy and Insolvency Act.

The trial judge dismissed the claim, finding that the bankrupt owed no fiduciary duty to the appellant, even though he had breached a fiduciary duty to a third party.

The Court of Appeal dismissed the appeal, confirming that s. 178(1)(d) applies only if the bankrupt owed a fiduciary duty directly to the creditor seeking the declaration.

The moving parties sought leave to appeal an order requiring a private corporation to disclose documents to a bankruptcy trustee and requiring two directors to submit to oral examinations under the Bankruptcy and Insolvency Act.

The trustee required the information to value the bankrupt's shares in the corporation.

The Court of Appeal dismissed the motion for leave to appeal, finding no prima facie merit to the argument that the trustee's powers under s. 164 did not extend to such disclosure, and concluding that an appeal would unduly hinder the progress of the bankruptcy proceedings.

The appellant, a court-appointed receiver, appealed a motion judge's decision refusing to approve the full amount of legal fees requested on behalf of its counsel.

The motion judge had reduced the fees, finding them disproportionate to the size and complexity of the receivership.

The Court of Appeal dismissed the appeal, holding that the court must ensure compensation is fair and reasonable, focusing on the value provided rather than just the mathematical calculation of hours multiplied by hourly rates.

The motion judge's assessment of the fees as excessive was upheld.

The appellants advanced funds to Cash Store, a payday lending company operating under CCAA protection.

They appealed a motion judge's dismissal of their claim that they were the sole legal and beneficial owners of loan payments and accounts receivable from Cash Store's customers.

The motion judge found that the actual practices of the parties, including the payment of interest and commingling of funds, reflected a debtor-creditor relationship rather than the principal-broker relationship set out in their agreements.

The Court of Appeal dismissed the appeal, finding no error in the motion judge's factual determinations.

The moving parties, a group of affiliated companies, sought leave to appeal a judgment setting aside an ex parte CCAA Initial Order.

The respondents, creditors of a Singapore subsidiary, successfully argued before the application judge that the CCAA court lacked jurisdiction over the subsidiary.

A single judge of the Court of Appeal held he had jurisdiction to hear the leave motion but refused leave, finding no error in the application judge's conclusion that the real debtors were Singapore companies with little connection to Canada and that the evidence did not support the initial ex parte findings of insolvency and intertwined finances.

The court-appointed receiver appealed a motion judge's decision denying $30,000 in receiver fees and $20,000 in legal costs.

These fees were incurred when the receiver brought an unsuccessful motion to cancel an approved auction process in favour of a private sale.

The Court of Appeal dismissed the appeal, finding that while a receiver's business decisions are owed deference, the receiver still bears the burden of proving its fees are fair and reasonable.

The motion judge correctly concluded that the receiver's motion to abort the auction was ill-considered and that safeguarding the integrity of the sale process was paramount.

The appellant appealed a Rule 21 motion decision that dismissed her proposed class action claims for constructive and common law fraud against the respondent trustees.

The motion judge found the claims were released by a CCAA settlement and were statute-barred.

The Court of Appeal upheld the decision, finding that the appellant had all material facts necessary to discover her claim when the Monitor's 39th report was issued in February 2010.

Because she issued her notice of action more than two years later in August 2012, the claim was statute-barred under the Limitations Act, 2002.