Bankruptcy and Insolvency Law - OCA

The appellant, Canada Investment Corporation (CIC), appealed an order directing that surplus proceeds held for CIC from a receivership sale be paid to the respondent creditors.

The respondents had successfully challenged the validity of CIC's pre-assignment expenses in a related action.

The Court of Appeal dismissed the appeal, finding that the claims process did not require a statement of claim, the onus correctly shifted to CIC to dispute the Receiver's recommendation, and issue estoppel precluded CIC from re-litigating the quantification of pre-assignment expenses already decided in the related action.

The appellant entered into an agreement of purchase and sale for a residential unit in a condominium project and paid a $500,000 deposit, mostly directly to the developer.

The developer was subsequently placed into receivership by the first mortgagee.

The receiver disclaimed the appellant's agreement of purchase and sale.

The appellant sought an order requiring the receiver to complete the sale, arguing he had an equitable interest in the property.

The Court of Appeal upheld the motion judge's dismissal, finding that the agreement explicitly subordinated the purchaser's interest to any mortgages and that the appellant's equitable claims could not defeat the mortgagee's prior secured legal interest.

The Ontario Securities Commission appointed a receiver over Money Gate Mortgage Investment Corporation.

The appellant, a shareholder in a company that granted a second mortgage to Money Gate, challenged the validity of the mortgage on a motion for advice and directions brought by the receiver.

The motion judge summarily determined that the mortgage was valid and ordered the sale proceeds paid to the receiver.

The Court of Appeal dismissed the appeal, holding that the motion judge had the authority to decide the matter summarily by analogy to summary judgment rules, and correctly found no genuine issue requiring a trial.

The appellant, an undischarged bankrupt, commenced an action against the respondent for damages for solicitor's negligence.

The motion judge struck out the claim for lack of legal capacity.

The Court of Appeal dismissed the appeal, confirming that under s. 71 of the Bankruptcy and Insolvency Act, a bankrupt's property, including causes of action, vests in the trustee in bankruptcy, depriving the bankrupt of the capacity to initiate the action.

The receiver brought a motion for directions to determine whether an appeal from a priority dispute order in a receivership lies to the Court of Appeal under the Bankruptcy and Insolvency Act or to the Divisional Court under the Construction Act.

The Court of Appeal held that because the motion judge's order was granted in reliance on jurisdiction under the Bankruptcy and Insolvency Act, specifically a receiver's application for directions under s. 249, the appeal route is to the Court of Appeal.

The moving party sought leave to appeal an order requiring it to pay $874,107.08 to the responding party.

The funds had been mistakenly paid to the moving party by a third-party customer of the responding party.

The moving party argued it was entitled to retain the funds as a set-off against debts owed by the responding party, who was under CCAA protection.

The Court of Appeal refused leave to appeal, finding the proposed appeal was not prima facie meritorious because set-off did not constitute a juristic reason to retain mistakenly paid funds under the unjust enrichment framework.

The appellant appealed an order adjudging him bankrupt.

The respondent law firm, to whom the appellant owed debts from matrimonial litigation, had issued an application for a bankruptcy order after the appellant's consumer proposal was rejected.

The bankruptcy judge found the appellant owed debts exceeding one thousand dollars and had committed an act of bankruptcy by failing to meet his liabilities as they became due.

The Court of Appeal found no error in the bankruptcy judge's conclusions and dismissed the appeal.

Traders General Insurance Company moved to review a single judge's decision denying it leave to appeal an order under the Bankruptcy and Insolvency Act.

The underlying dispute involved a bad faith claim assigned to the respondents by a discharged bankruptcy trustee following a motor vehicle accident judgment.

The Court of Appeal held that it had jurisdiction to review the single judge's decision because the judge had mistakenly declined jurisdiction by failing to address the merits of the leave motion.

Applying the Pine Tree Resorts test, the Court granted leave to appeal, finding that the proposed appeal raised prima facie meritorious issues of general importance to bankruptcy practice.

The Receiver brought a motion for directions to determine whether the Court of Appeal or the Divisional Court has jurisdiction over an appeal concerning a priority dispute between registered lien claimants and a registered mortgage in a receivership.

The motions judge held that a single judge of the Court of Appeal lacks jurisdiction to decide whether an appeal lies within the court's jurisdiction, as this must be decided by a three-judge panel.

The motion was adjourned to be heard by a panel.

The appellant, a secured creditor of a bankrupt renewable energy company, appealed the dismissal of its action against the Independent Electricity System Operator (IESO).

The appellant argued that the IESO wrongfully treated a renewable energy contract as terminated upon the debtor's bankruptcy, thwarting the appellant's attempt to assign the contract to a third party.

The Court of Appeal dismissed the appeal, affirming that the contract automatically terminated upon bankruptcy, that this termination did not violate the Bankruptcy and Insolvency Act stay of proceedings or the common law anti-deprivation rule, and that the IESO did not breach its contractual obligations or act negligently.

The commercial tenant made an assignment in bankruptcy and the trustee disclaimed the lease.

The landlord filed a proof of claim for three months' accelerated rent as a preferred claim, and an unsecured claim for the balance of the unexpired term, including unpaid tenant inducements.

The trustee disallowed the unsecured claims.

The Court of Appeal held that under Ontario law, the disclaimer of a commercial lease by a trustee in bankruptcy ends the tenant's obligations, precluding the landlord from claiming damages for the unexpired term.

However, the landlord was entitled to claim the unrecovered balance of its preferred claim for accelerated rent as an unsecured creditor under the Bankruptcy and Insolvency Act.

The appellant appealed an order regarding cross-examination on his affidavit in a bankruptcy proceeding.

The respondent confirmed it would not attempt to cross-examine the appellant before the disposition of the bankruptcy trial, rendering the appeal moot.

The Court of Appeal declined to exercise its discretion to hear the moot appeal and dismissed it, awarding costs to the respondent.

The respondent, an undischarged bankrupt, discovered a potential professional negligence claim against his deceased wife's insurance agent.

He commenced an action after his discharge, but the cause of action had vested in his trustee in bankruptcy.

The motion judge granted an order nunc pro tunc regularizing the proceeding.

On appeal, the Court of Appeal held that the motion judge lacked authority to grant a nunc pro tunc order because it was sought after the expiry of the applicable limitation period.

The appeal was allowed and the action dismissed.

In a court-appointed receivership, the spouse of the debtor's principal sought leave to appeal an order extending a Mareva injunction and repatriating a misappropriated HST refund.

A third party claiming an interest in the funds also appealed the order.

The Court of Appeal dismissed the spouse's motion for leave to appeal, finding no arguable merit to her procedural complaints about the ex parte Mareva order.

The Court granted the Receiver and a secured creditor's motions for security for costs against the third party, finding his appeal appeared frivolous and he lacked assets in Ontario.

The moving party, United Steelworkers Union Local 2251, sought a stay of a CCAA judge's order establishing a summary process with condensed timelines for the resolution of grievance-related claims, pending its motion for leave to appeal.

The union argued the process altered the collective agreement contrary to s. 33 of the CCAA and that it would suffer irreparable harm due to the workload and deadlines.

The Court of Appeal dismissed the motion, finding no serious question to be determined as leave to appeal was unlikely to be granted, no irreparable harm as avenues for assistance existed, and the balance of convenience favoured the applicants' restructuring efforts.

The appellants, unsecured creditors, sought to appeal a motion judge's order approving an amended proposal under the Bankruptcy and Insolvency Act and refusing to adjourn the approval motion to allow further examination of the debtor's president.

The Court of Appeal held that leave to appeal was required because the issues were procedural and did not directly involve property exceeding $10,000.

The Court denied leave, finding the proposed appeal lacked merit, raised no issues of general importance, and the motion judge's conclusions on the reasonableness and good faith of the proposal were unassailable.

The appellants, a second mortgagee and a tenant of a commercial property, appealed a motion judge's order regarding the distribution of a holdback from a receiver's sale.

The appellants argued that rent arrears owed by the tenant merged in a prior judgment and did not vest in the purchaser, that the second mortgagee had priority over the purchaser's claim for rent arrears, and that the tenant was entitled to a credit for a payment made under a side agreement.

The Court of Appeal dismissed the appeal, finding that the vesting order explicitly transferred the lease and rent arrears to the purchaser, that the motion judge properly adjusted the accounts between the parties, and that the purchaser was not bound by the side agreement.

In a CCAA restructuring proceeding, stakeholders sought disclosure of a settlement agreement between U.S. Steel, its Canadian subsidiary, and the Attorney General of Canada regarding undertakings under the Investment Canada Act.

The CCAA judge held that the agreement was entirely privileged under s. 36 of the ICA.

On appeal, the Court of Appeal found that while s. 36(5) protects the Crown from being compelled to disclose the agreement, this protection does not extend to the private corporations.

The appeal was allowed, and the issue of whether common law settlement privilege barred disclosure was remitted to the CCAA judge.

The appellant, an undischarged bankrupt, sought to appeal an order lifting a stay of proceedings under the Bankruptcy and Insolvency Act that allowed the respondents to pursue claims for pre-bankruptcy breaches of fiduciary duty.

The respondents brought a motion declaring the appellant had no right of appeal under s. 193(b), while the appellant sought leave to appeal under s. 193(e).

The Court of Appeal held that the appellant had no appeal as of right because the order was not likely to affect other cases in the bankruptcy proceeding.

The court also denied leave to appeal, finding that the proposed appeal did not raise an issue of general importance and lacked prima facie merit, as settled law does not require a court to scrutinize the merits of an action when lifting a bankruptcy stay.

The Attorney General appealed a decision discharging the bankrupt, arguing that the bankrupt's personal income tax debt exceeded the threshold under s. 172.1 of the Bankruptcy and Insolvency Act.

At the time of the discharge hearing, the bankrupt had unpaid income tax assessments totalling approximately $4.478 million, of which $4.424 million was subject to outstanding appeals to the Tax Court of Canada.

The Court of Appeal held that assessed amounts of personal income tax under appeal are contingent claims that the trustee can refuse to admit as proven claims.

Therefore, these amounts are not included in calculating the bankrupt's personal income tax debt under s. 172.1(1).

The appeal was dismissed.