DATE: 20010404

DOCKET: C34958

COURT OF APPEAL FOR ONTARIO

IN THE MATTER OF THE BANKRUPTCY OF JAMES HOI-PANG MA, OF THE CITY OF MISSISSAUGA, IN THE REGIONAL MUNCIPALITY OF PEEL, IN THE PROVINCE OF ONTARIO

RE: JAMES HOI-PANG MA (Bankrupt (Appellant)) and TORONTO DOMINION BANK (Applicant (Respondent))

BEFORE: ABELLA, CHARRON and SHARPE JJ.A.

COUNSEL: Chi-Kun Shi For the appellant

Bruce S. Batist For the respondent

William J. Meyer, Q.C. For the Trustee in Bankruptcy

HEARD: March 23, 2001

E N D O R S E M E N T

Released orally March 23, 2001

[1] The appellant argues that when considering an application to lift a stay under s. 69.4 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, the applicant is required to establish a prima facie case for the proposed action. Bowles v. Barber (1985), 60 C.B.R. 311 (Man. C.A.) is cited in support of this proposition. It is argued that to the extent Ontario cases such as Arrojo Investments v. Cardamone (1995), 33 C.B.R. (3d) 46 (Ont. Gen. Div.) apply a more lenient standard, they are inconsistent with decisions from other provinces.

[2] In our view there is no requirement to establish a prima facie case and no inconsistency in the case law. We do not agree that Bowles v. Barber imposes a prima facie case requirement. More importantly, that requirement is not imposed by the statute. Under s. 69.4 the court may make a declaration lifting the automatic stay if it is satisfied (a) that the creditor is “likely to be materially prejudiced by [its] continued operation” or (b) “that it is equitable on other grounds to make such a declaration.” The approach to be taken on s. 69.4 application was considered by Adams J. in Re Francisco (1995), 32 C.B.R. (3d) 29 at 29-30 (Ont. Gen. Div.), a decision affirmed by this court (1996), 40 C.B.R. (3d) 77 ( Ont. C.A.):

In considering an application for leave, the function of a bankruptcy court is not to inquire into the merits of the action sought to be commenced or continued. Instead, the role is one of ensuring that sound reasons, consistent with the scheme of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, exist for relieving against the otherwise automatic stay of proceedings.

[3] As this passage makes clear, lifting the automatic stay is far from a routine matter. There is an onus on the applicant to establish a basis for the order within the meaning of s. 69.4. As stated in Re Francisco, the role of the court is to ensure that there are "sound reasons, consistent with the scheme of the Bankruptcy and Insolvency Act" to relieve against the automatic stay. While the test is not whether there is a prima facie case, that does not, in our view, preclude any consideration of the merits of the proposed action where relevant to the issue of whether there are "sound reasons" for lifting the stay. For example, if it were apparent that the proposed action had little prospect of success, it would be difficult to find that there were sound reasons for lifting the stay.

[4] In the case before us, Justice Lane found that the Deputy Registrar was correct in finding that the applicant would suffer sufficient prejudice to justify an order lifting the stay. This finding accords with s. 69.4 and is supported by the record. We see no basis for interfering with his conclusion. The appeal is therefore dismissed with costs.

“R. S. Abella J.A.”

“Louise Charron J.A.”

“Robert J. Sharpe J.A.”