Court of Appeal for Ontario

Date: September 30, 2019

Docket: M50799 (C66547)

Motion Judge: Brown J.A.

In the Matter of the Bankruptcy and Insolvency Act

R.S.C. 1985, c. B-3, as Amended

And in the Matter of a Proceeding in the Hong Kong Special Administrative Region Re: James Henry Ting (in Bankruptcy)

Application of Cosimo Borrelli and Jacqueline Walsh of Borrelli Walsh Limited Under Section 269 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as Amended

Counsel

For the moving party Andrew Henry Ting: Robert Rastorp and Arash Jazayeri

For the responding party Cosimo Borrelli and Jacqueline Walsh, the Foreign Representatives and trustees in bankruptcy of James Henry Ting: Ilan Ishai

Heard: September 26, 2019

Reasons for Decision

Overview

[1] The moving party, Andrew Henry Ting, is the son of James Henry Ting, who has been adjudged bankrupt by a Hong Kong court. Earlier this year, a judge of the Commercial List enforced letters of request from the Hong Kong court and ordered Andrew to produce documents relating to his father's bankruptcy estate and attend for examination. This court quashed an appeal from that order. Andrew has applied for leave to appeal to the Supreme Court of Canada from the order of this court. He now moves for a stay of the production and examination order pending the determination of his leave application.

Background

[2] James was adjudged bankrupt by order of the High Court of the Hong Kong Special Administrative Region dated November 29, 2016 (the "Bankruptcy Order").

[3] The record strongly suggests that James did not appeal the Bankruptcy Order.

[4] By order dated October 6, 2017, Conway J., sitting on the Commercial List, granted an Initial Recognition Order pursuant to s. 269 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"), recognizing the Hong Kong bankruptcy proceeding against James as a foreign main proceeding (the "Initial Recognition Order").

[5] James did not appeal the Initial Recognition Order, nor has he moved to set it aside on any basis.

[6] On June 14, 2018, the Hong Kong court issued a letter of request seeking the assistance of the Ontario courts to order Andrew to produce certain documents relating to his father's assets and affairs and to attend for examination. In August 2018, the trustees in bankruptcy of James' estate, Cosimo Borrelli and Jacqueline Walsh (the "Trustees"), moved on the Commercial List for an order to enforce the letter of request.

[7] Andrew opposed the order.

[8] By order dated January 15, 2019, Penny J. recognized and enforced the letter of request, ordered Andrew to produce the stipulated documents, and required him to attend for examination (the "January 15 Order").

[9] On January 25, 2019 Andrew launched two challenges in this court to the January 15 Order. First, he filed a motion for leave to appeal under BIA s. 193(e). At the same time, he filed a notice of appeal that contended he could appeal as of right to this court pursuant to BIA s. 193(b) because the "order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings."

[10] By order dated May 30, 2019, a panel of this court dismissed Andrew's motion for leave to appeal. Andrew was ordered to pay costs of $1,500. Although Andrew had not paid those costs as of the date of the hearing of this motion, his counsel undertook that the respondent would be paid within 48 hours.

[11] By order dated June 21, 2019, a different panel of this court quashed Andrew's appeal (the "Order to Quash"), writing:

No appeal as of right lies to this court under s. 193 (b). Leave to appeal has been refused under s. 193 (e). The motion to quash is granted. The appeal is quashed. Costs are fixed in the amount of $10,000 all inclusive.

[12] On September 18, 2019 Andrew filed with the Supreme Court of Canada his application for leave to appeal materials.

[13] Andrew now moves for two forms of relief. First, he seeks leave to transcribe the digital audio recording of the June 21, 2019 hearing before this court: "Practice Direction Concerning Civil Appeals at the Court of Appeal for Ontario", (March 1, 2017), at 17.3. Andrew wishes to file the transcript on his application for leave to appeal. At the hearing, I granted Andrew leave to prepare a transcript of the hearing.

[14] Second, Andrew moves under s. 65.1(1) of the Supreme Court Act, R.S.C. 1985, c. S-26, for an order staying the January 15 Order and this court's Order to Quash, pending the determination of his application for leave to appeal.

Governing Principles

[15] The test for granting a stay pending an application for leave to appeal to the Supreme Court of Canada is well-established. The moving party must demonstrate that: (i) there is a serious issue to be adjudicated on its proposed appeal, including that the appeal raises an issue of public or national importance; (ii) it will suffer irreparable harm if the stay is not granted; and (iii) the balance of convenience favours granting the stay. These three components are interrelated in that the overriding question is whether the moving party has shown that it is in the interests of justice that the court grant a stay: Iroquois Falls Power Corporation v. Ontario Electricity Financial Corporation, 2016 ONCA 616, at paras. 14 and 15; Livent Inc. v. Deloitte & Touche, 2016 ONCA 395, 131 O.R. (3d) 784, at para. 7.

Analysis

Serious Issue to be Adjudicated

[16] Andrew submits that his application for leave to appeal raises a serious issue of public importance that merits consideration by the Supreme Court of Canada. He argues that the Initial Recognition Order was obtained on an improper basis because the Trustees did not give James notice of their application to seek that order. It follows, Andrew contends, that the defective Initial Recognition Order could not provide a proper basis for Penny J. to make his January 15 Order enforcing the letters of request. As well, that defect taints this court's Order to Quash.

[17] Central to Andrew's argument is his contention that neither Penny J. nor this court gave proper consideration to BIA s. 284(1), which is found in Part XIII of the BIA dealing with Cross-Border Insolvencies, and states:

Nothing in this Part prevents the court, on the application of a foreign representative or any other interested person, from applying any legal or equitable rules governing the recognition of foreign insolvency orders and assistance to foreign representatives that are not inconsistent with the provisions of this Act.

[18] Andrew contends that there is a legal or equitable rule that a person affected by an order must be given notice of the proceeding brought before a court to seek the order. James was not given notice of the application to seek the Initial Recognition Order as the Trustees did not serve him.

[19] In their August 2017 affidavit in support of that application, the Trustees stated they were unaware of "the current whereabouts of [James] Ting." Andrew argues that statement was misleading. He points to a June 1, 2019 letter from the Trustees that demonstrates they knew about several addresses at which they could have attempted to serve James with the application for the Initial Recognition Order. As a result, Andrew submits, the Initial Recognition Order was not based on a proper foundation as it failed the basic Canadian tests of correctness and fairness. Andrew also argues that this court erred in failing to give proper consideration to the Trustees' June 1, 2019 letter at the June motion to quash hearing.

[20] In my assessment, the grounds for leave to appeal advanced by Andrew are very weak.

[21] First, I have strong doubts that the ground of appeal articulated by Andrew amounts to a question of public or national importance. Although the orders he challenges were made in a proceeding under a federal statute, his complaint focuses on fact-specific aspects of the proceeding, in particular the adequacy of the notice given for the application seeking the Initial Recognition Order.

[22] Second, while a party affected by a request for an order generally is entitled to notice through service of the originating documents, the court has the discretion to dispense with service: Bankruptcy and Insolvency General Rules, C.R.C., c. 368, r. 3; Ontario Rules of Civil Procedure, r. 16.04(1). Conway J., who granted the Initial Recognition Order, expressly dispensed with service: at para. 1.

[23] Third, I agree with the conclusion of Penny J. that Andrew's challenge to the procedural regularity of the Initial Recognition Order constitutes an impermissible collateral attack on that order.

[24] Fourth, the conclusion of this court in its Order to Quash endorsement that no appeal as of right lies under BIA s. 193(b) in the circumstances of this case reflects the prevailing jurisprudence. As stated in 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 396 D.L.R. (4th) 635, at para. 32:

The jurisprudence under s. 193 (b) of the BIA has consistently interpreted the section as meaning that a right of appeal will lie where "the decision in question will likely affect another case raising the same or similar issues in the same bankruptcy proceedings." The cases have expressed different views on whether the decisions covered by s. 193 (b) can only concern rights asserted against the bankrupt by parties other than the bankrupt, or whether the issue may concern rights asserted by multiple persons against the bankrupt, rather than one person's rights arising in multiple contexts. Regardless, s. 193(b) must concern "real disputes" likely to affect other cases raising the same or similar issues in the same bankruptcy or receivership proceedings.

[25] Finally, I query whether it was open to Andrew to pursue an appeal as of right after this court had denied him leave to appeal under BIA s. 193(e).

[26] These very significant weaknesses in Andrew's grounds for leave to appeal weigh strongly against granting a stay order.

Irreparable Harm

[27] Andrew submits that if a stay is not granted, he will suffer irreparable harm of two sorts. First, he will be subjected to compelled examination and production pursuant to an order that he contends was improperly obtained. For all practical purposes, that would render his leave to appeal application moot. Second, Andrew notes that the Trustees have brought a motion to find Andrew in contempt of the January 15 Order, which is scheduled to be heard on October 4, 2019. Absent a stay, Andrew argues that his liberty interest would be placed at risk before the Supreme Court of Canada deals with his leave to appeal application.

[28] I accept Andrew's submission. In The Queen v. O'Connor, 2001 NSCA 47, 193 N.S.R. (2d) 8, Cromwell J.A., sitting as a Chambers judge of the Nova Scotia Court of Appeal, recognized that irreparable harm can result from the wrongful release of information, in the event that a stay is not granted pending appeal, but the appeal later succeeds: at para. 14. As he stated, in part, at paras. 16 and 17:

[O]nce access to information is granted, it cannot be undone if the order for access is subsequently reversed on appeal. The harm is irreparable in the sense that a legal wrong has been committed which cannot be compensated or reversed. In some cases, the injury resulting from disclosure will be minimal, but that does not detract, in my view, from the proper characterization of the wrongful disclosure as constituting irreparable harm. As Cory and Sopinka, JJ. said in RJR–MacDonald, [1994] 1 S.C.R. 311, irreparable refers to the nature of the harm rather than its magnitude. The essence of the concept is a wrong which cannot be undone or cured. The unlawful disclosure of information, even where it does not injure anyone, is a wrong which cannot be undone or cured and is, therefore, capable of being "irreparable" for the purposes of a stay pending appeal.

[T]he disclosure of the contested information will generally render the effects of a successful appeal nugatory. There is ample authority for the proposition that where that is the result of the refusal of a stay pending appeal or judicial review, irreparable harm has been shown. [Citations omitted.]

See also: White v. E.B.F. Manufacturing Ltd., 2005 NSCA 17, 229 N.S.R. (2d) 375, at para. 24.

[29] In the present case, to refuse a stay would render Andrew's appeal moot: he would have to produce documents to the Trustees and attend for examination, all the while challenging the validity of the order compelling him to do so. This prospect of irreparable harm weighs in favour of granting a stay. It is not adequately mitigated by the Trustees' proffer of an undertaking to apply the deemed undertaking rule to the documents produced and the transcript of the examination.

Balance of Convenience and the Overall Interests of Justice

[30] The Trustees point out that the amount the bankrupt, James, owes his creditors exceeds US$1 billion. They submit that the delay caused by granting a stay would frustrate their efforts to realize upon the bankrupt's assets and decrease the likelihood that the bankrupt's creditors are properly compensated.

[31] The Supreme Court of Canada most likely will deal with Andrew's leave application within the next four or five months. Given that the Initial Recognition Order was made almost two years ago, one could regard the passage of a further four or five months as not constituting an unduly long delay in the administration of this aspect of this bankrupt's estate.

[32] However, in considering the balance of convenience, I must take into account another perspective. On June 21, 2019, Andrew became subject to the full force of the obligations imposed by the January 15 Order. Andrew did not comply with the order, which required the production of documents within 14 days. Instead, he did nothing. He waited two and one-half months before initiating this stay motion on September 6, 2019. As well, he did not commence his application for leave to appeal until towards the end of the 60-day appeal period (which excluded July). Those delays, combined with Andrew's refusal to comply with the January 15 Order, lead me to concur with the observation made by McEwen J. in his September 12, 2019 endorsement that Andrew "has moved too slowly in bringing his motion before the [Court of Appeal]."

[33] While Andrew's dilatory conduct is not sufficient, in and of itself, to deny Andrew a stay, it does point to the need to find a proper balance between his request for further appellate consideration of his complaint about a defective enforcement process and the Trustees' duties to move ahead with the administration of his bankrupt father's estate. The need for such balance is especially acute given the very weak grounds for leave to appeal advanced by Andrew.

[34] I conclude that such a balance can be achieved by granting a stay, but on terms which ensure that while Andrew's appeal is not rendered moot, some effect is given to a valid request for assistance by the Hong Kong court. Consequently, I will grant a stay of the order of this court dated June 21, 2019 pending disposition of Andrew's application for leave to appeal to the Supreme Court of Canada but, pursuant to s. 65.1(1) of the Supreme Court Act, I grant that stay on the following terms, which I deem appropriate:

(i) Term 1: On or before Wednesday, October 9, 2019, Andrew shall file with the Commercial List Office in proceeding CV-17-581645 CL, in a sealed envelope:

a. Copies of all documents specified in paras. 1 and 2 of Schedule 1 to the Letter of Request, which is attached to the January 15 Order as Schedule A; and

b. A sworn or affirmed affidavit from Andrew deposing that he has made full production of all documents within his possession, custody or power specified in paras. 1 and 2 of Schedule 1 to the Letter of Request;

(ii) Term 2: On or before Wednesday, October 9, 2019, Andrew, through his counsel of record, shall inform counsel for the Trustees that he has complied with the above Term 1;

(iii) Term 3: If Andrew does not comply with Terms 1 and 2 by 5 p.m. on Wednesday, October 9, 2019, then this stay of the Order to Quash and January 15 Order shall expire and be of no further force or effect;

(iv) Term 4: If Andrew complies with Terms 1 and 2 by 5 p.m. on Wednesday, October 9, 2019, then the sealed documents and affidavit filed with the Commercial List Office shall remain sealed until the disposition by the Supreme Court of Canada of Andrew's application for leave to appeal. If the Supreme Court of Canada grants leave to appeal, the sealed documents and affidavit shall remain sealed until the disposition of that appeal. Upon the dismissal of the leave to appeal application or, if leave is granted, upon the disposition of the appeal, either party may apply to a judge of the Commercial List for the return or release of the documents in accordance with the disposition made by the Supreme Court of Canada of Andrew's proceeding before that court.

Disposition

[35] For the reasons set out above, I grant Andrew leave to prepare a transcript of the June 21, 2019 hearing before this court. In addition, I grant Andrew's motion for a stay but on the terms set out in para. 34 above.

[36] Each party shall bear their own costs of this motion.

"David Brown J.A."