Court of Appeal for Ontario

CITATION: Edwards Estate v. Food Family Credit Union, 2011 ONCA 497

DATE: 20110706

DOCKET: C53449

BEFORE: Moldaver, MacPherson and Epstein JJ.A.

BETWEEN

In the matter of the Bankruptcy of Rodney Patrice Edwards, of the City of Toronto in the Province of Ontario (Summary Administration)

and

Rusinek & Associates Inc. Trustee of the Estate of Rodney Patrice Edwards, Bankrupt

Applicant (Respondent)

and

Food Family Credit Union

Respondent (Appellant)

COUNSEL:

Robert G. Tanner, for the appellant

Frank Bennett, for the respondent, Rusinek & Associates Inc.

Sean Hanley, for the intervenor, Attorney General of Ontario

Heard and released orally: July 4, 2011

On appeal from the judgment of Justice Frank N. Marrocco of the Superior Court of Justice, dated March 11, 2011, overturning the order of Registrar Scott W. Nettie dated October 15, 2010.

ENDORSEMENT

[1] The appellant Food Family Credit Union (FFCU) appeals from the judgment of Marrocco J. of the Superior Court of Justice dated March 11, 2011 in which he allowed an appeal from the order of Registrar Nettie dated October 15, 2010.

[2] Registrar Nettie had dismissed the Trustee’s motion pursuant to s. 95 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”) seeking the return of certain payments from the bankrupt Rodney Edwards to FFCU on the basis that they were a fraudulent preference. Registrar Nettie held that the Trustee’s claim fell outside the two year limitation period prescribed in s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24 (“LA”). In reaching this conclusion, the Registrar determined that the provincial limitation period applied to the federal BIA.

[3] Justice Marrocco disagreed and allowed the appeal. He concluded:

In my view, the absence of a specific limitation period for commencement of proceedings pursuant to s. 95 represents a determination by Parliament that a trustee, acting solely under that section, is temporarily restrained only by the section itself; namely, that arm’s-length transfers of property by the bankrupt within three months of the date of the initial bankruptcy event are void against the bankruptcy trustee.

The application of a provincial limitation period would, thus, trigger a conflict of laws and, in accordance with the doctrine of paramountcy, render the Limitations Act inoperative.

[4] With respect, we do not agree with this conclusion. In Gingras v. General Motors, [1975] 1 S.C.R. and Employers Liability Assurance Corp. v. Ideal Petroleum, 1976 CanLII 142 (SCC), [1978] 1 S.C.R. 230, the Supreme Court of Canada held that general limitation periods in provincial statutes apply to bankruptcy proceedings.

[5] Nothing in the development of conflict/paramountcy doctrine since these decisions calls into question their continuing validity. In recent years, the Supreme Court of Canada has consistently emphasized that provincial laws should be rendered constitutionally inoperative in relation to federal subject matters in only limited circumstances, namely where (1) the provincial law is in an operational conflict with a federal law, such that there is an impossibility of dual compliance or (2) the operation of the provincial law would frustrate the purpose of the federal law: see Canadian Western Bank v. Alberta, 2007 SCC 22, [2007] 2 S.C.R. 3 at paras. 74-75. The relationship between s. 4 of the LA and s. 95 of the BIA does not fall afoul of either of these categories.

[6] Accordingly, Registrar Nettie was correct to conclude that there was no conflict between s. 4 of the LA and s. 95 of the BIA. He reasoned:

In s. 95 BIA, there is no stated limitation period to commence the proceeding contemplated therein. Neither is there a general catch all section of the BIA which provides for a limitation if the BIA is otherwise silent. As there are provisions of the BIA which provide for limitation periods, one must assume that Parliament was alive to the issue of prescribing time periods within which certain proceedings under the BIA, such as appeals, must be launched, and did not simply omit a limitation period for s. 95 BIA.

[7] We agree with this analysis and conclusion.

[8] In light of our view of the constitutional issue, it is necessary to consider the Trustee’s two additional arguments: (1) the Registrar erred by holding that the Trustee discovered the preference issue by May 15, 2006 for the purposes of the two year limitation period, and (2) the Registrar erred by concluding that there was not an implied agreement between counsel tolling the operation of the limitation period.

[9] These submissions challenge the findings of the Registrar that involve mixed fact and law. In our view, the Registrar’s factual findings are supported by the record and we see no error in his legal analysis.

[10] The appeal is allowed, the order of Marrocco J. is set aside, and the order of Registrar Nettie is reinstated. The respondent is entitled to its costs of the appeal fixed at $8,000, inclusive of disbursements and HST payable forthwith by the Trustee personally in its corporate capacity. Registrar Nettie’s costs order is reinstated. We would not interfere with Justice Marrocco’s costs order.

[11] The intervenor Attorney General of Ontario does not seek costs and therefore should neither pay nor receive costs.

“Moldaver J.A.”

“J.C. MacPherson J.A.”

“G.J. Epstein J.A.”