Court of Appeal for Ontario

Date: 2020-03-06 Docket: M51328 (C67467) M51356 (C67464)

Nordheimer J.A. (Motions Judge)

Between:

Royal Bank of Canada Moving Party (Respondent)

and

David Bodanis Responding Party (Appellant)

And Between:

Royal Bank of Canada Moving Party (Respondent)

and

Irenka Bodanis Responding Party (Appellant)

Counsel: Rachel Moses, for the moving party Scott Rosen, for the responding parties

Heard: March 2, 2020

Reasons for Decision

[1] There are companion motions in these two bankruptcy proceedings that seek directions. The moving party asserts that the appellants in these matters do not have an appeal as of right but rather must seek leave to appeal. In the alternative, the moving party says that the automatic stay that would result from an appeal as of right ought to be cancelled.

[2] Both appellants owe monies to the moving party and others pursuant to various judgments and costs awards totalling in the hundreds of thousands of dollars. They have owed these monies, in some cases, for many years. In November 2018, the moving party commenced bankruptcy applications against the appellants. A trial was held on these applications and, at its conclusion, on August 12, 2019, the trial judge granted bankruptcy orders. The appellants then filed appeals from those orders.

[3] The first issue is whether there is an appeal as of right. The conclusion on that issue turns on the wording of s. 193 of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, which reads:

Unless otherwise expressly provided, an appeal lies to the Court of Appeal from any order or decision of a judge of the court in the following cases:

(a) if the point at issue involves future rights;

(b) if the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings;

(c) if the property involved in the appeal exceeds in value ten thousand dollars;

(d) from the grant of or refusal to grant a discharge if the aggregate unpaid claims of creditors exceed five hundred dollars; and

(e) in any other case by leave of a judge of the Court of Appeal.

[4] Each of ss. 193(a), (b) and (c) are invoked in this case. I agree that neither ss. 193(a) nor (b) apply. Based on the analysis contained in Ravelston Corp (Re) (2005), 2005 ONCA 63802, 24 C.B.R. (5th) 256 (Ont. C.A.), I conclude that a bankruptcy order does not involve future rights. Similarly, there is no evidence in this case that the bankruptcy orders will likely affect another case raising the same or similar issues in the same bankruptcy proceedings, unlike the situation in Wong v. Luu, 2013 BCCA 547, 55 B.C.L.R. (5th) 129, at para. 21. Consequently, s. 193(b) does not apply.

[5] However, in my view, s. 193(c) does apply to this case. Clearly, the value of the property involved in this appeal exceeds $10,000. Indeed, there is no dispute that that is the case. However, the moving party submits that the bankruptcy orders, which appoint a Trustee in Bankruptcy, simply preserve the assets of the bankrupt and therefore do not “involve” property of more than $10,000. The moving party relies on observations made in certain other cases including Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, 2403117 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 369 D.L.R. (4th) 635, and Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2019 ONCA 588, 72 C.B.R. (6th) 245.

[6] Each of those decisions is distinguishable from the case at hand. In all three of those cases, the order being appealed was an order appointing a Receiver over certain properties. It was not a bankruptcy order as is the case here. There are distinctions between orders appointing a Receiver and bankruptcy orders appointing a Trustee in Bankruptcy. Among those distinctions is the fact that, unlike a Receiver, the Trustee in Bankruptcy does not require court approval in order to monetize the bankrupt’s assets (except in limited circumstances). Instead, the Trustee has a duty to dispose of the bankrupt’s assets and distribute the proceeds amongst the creditors, subject to the inspectors’ approval.

[7] In relying on these decisions, the moving party points out the commentary that has been made in them that s. 193(c) ought to be narrowly construed in order to avoid conflict with other statutes, particularly the Companies’ Creditors Arrangement Act, R.S.C., 1985, c. C-36. As laudable a goal as that may be, it cannot be used to, in effect, read the subsection out of the statute. On that point, counsel for the moving party fairly concedes that, if the interpretation of s. 193(c) that she urges in this case were to be adopted, the subsection would not apply to any bankruptcy proceeding, since all of them will realistically involve assets totalling more than $10,000.

[8] While I appreciate the concerns that are used to justify the narrow approach, I do not see how a court can invoke those concerns in order to avoid the plain wording of the statute. The basic principle of statutory interpretation is that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Rizzo & Rizzo Shoes Ltd (Re), 1998 SCC 837, [1998] 1 S.C.R. 27, at para. 21. If there is a pressing concern on this issue, it is one that Parliament must address.

[9] While the facts of each case may determine whether s. 193(c) properly applies, in my view, it clearly applies here where the appellant’s entire property have been taken out of their control and placed into the hands of a Trustee in Bankruptcy, who has the right to dispose of that property and distribute it among the creditors, without further court intervention. The orders here are more akin to the type of orders that were considered in Crate Marine Sales Ltd (Re), 2016 ONCA 140, 33 C.B.R. (6th) 169, and Comfort Capital Inc v. Yeretsian, 2019 ONCA 1017, where an appeal as of right was found to exist. Consequently, I conclude that the appellants have an appeal as of right.

[10] That conclusion then raises the second issue: should this court cancel the automatic stay that results from an appeal? Section 195 of the Bankruptcy and Insolvency Act reads:

Except to the extent that an order or judgment appealed from is subject to provisional execution notwithstanding any appeal therefrom, all proceedings under an order or judgment appealed from shall be stayed until the appeal is disposed of, but the Court of Appeal or a judge thereof may vary or cancel the stay or the order for provisional execution if it appears that the appeal is not being prosecuted diligently, or for such other reason as the Court of Appeal or a judge thereof may deem proper.

[11] In considering whether the automatic stay should be cancelled, the court will principally consider two factors: (1) the merits of the appeal and (2) the relative prejudice to the parties: First National Financial GP Corp. v. Golden Dragon HO 10 Inc., 2019 ONCA 873, 74 C.B.R. (6th) 1, at para. 40; Yewdale v. Campbell, Saunders Ltd. (1995), 9 B.C.L.R. (3d) 252 (C.A.), at para. 15.

[12] In this case, while the appeals may not be entirely meritless, they are ones that appear to only challenge either the trial judge’s exercise of discretion in refusing an adjournment, or his factual findings that an act of bankruptcy had been committed. Their chances of success cannot be seen as being very high.

[13] In addition, I fail to see any prejudice to the responding parties if the automatic stay is cancelled. Their sole significant asset appears to be their residence and it is already the subject of mortgage proceedings by the Toronto-Dominion Bank. Another factor is, as the trial judge noted, that the responding parties have a history of delay. Further, there is some evidence of the responding parties’ improper dealings with their property, as evidenced by a fraudulent conveyance action that was commenced in 2014.

[14] All of these considerations favour the moving party. Consequently, I conclude that the automatic stay under s. 195 should be cancelled.

[15] The moving party is entitled to its costs of these motions fixed at $5,000, inclusive of disbursements and HST.

“I.V.B. Nordheimer J.A.”