DATE: 20010315

DOCKET: C33944

COURT OF APPEAL FOR ONTARIO

RE: PAUL R. OULAHEN (Appellant) v. RICHARD D. WILLIAMS (Respondent)

BEFORE: FINLAYSON, LABROSSE and MacPHERSON JJ.A.

COUNSEL: David R. Wingfield and M. Kate Stephenson, for the appellant Ronald Carr, for the respondent

HEARD: March 12, 2001

On appeal from the judgment of Justice James M. Farley dated March 17, 2000

O R A L E N D O R S E M E N T

[1] This is an appeal from the decision of the motions judge refusing to approve the proposal in bankruptcy of the appellant Oulahen. The respondent Williams opposed the proposal.

[2] Williams, Oulahen and one Letros invested in Mercana Industries Limited. The investment was secured by way of a debenture in favour of 722412 Ontario Inc. (“722”), a company owned and controlled by Oulahen. In time, the debenture was paid out and 722 repaid Letros the full amount of his investment. The balance was paid to Oulahen and no moneys were paid to Williams.

[3] It is clear from the evidence that Williams became a creditor of Oulahen only through the misappropriation by Oulahen of moneys owing to Williams by 722. The other three creditors of Oulahen were connected by blood relationship or marriage and could not have voted in favour of Oulahen’s proposal. See s. 54(3) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “Act”). Each of the assignees of these obligations acknowledged that they took an assignment of the debts as a favour to the Oulahen family. Two of them undertook to vote in favour of the proposal. In each case, the assignment took place after the date of filing of the Notice of Intention by Oulahen.

[4] In these circumstances, it was reasonable for the motions judge to conclude that the assignments were entered into for the specific purpose of circumventing the Act and the motions judge properly refused to approve the proposal made by Oulahen.

[5] The appeal is dismissed with costs.

(signed) “G. D. Finlayson J.A.”

(signed) “J. M. Labrosse J.A.”

(signed) “J. C. MacPherson J.A.”