Court of Appeal for Ontario

CITATION: Sally Creek Environs Corporation (Re), 2013 ONCA 329

DATE: 20130521

DOCKET: C55472

Simmons, Hoy and Strathy JJ.A.

In the Matter of the Bankruptcy of Sally Creek Environs Corporation of the City of Brantford in the County of Brant in the Province of Ontario

Bobby H. Sachdeva and Wojtek Jaskiewicz for A. Robert Murphy, A. Robert Murphy Architect Incorporated and Gray Wave Resources Inc.

Liz Tinker for The Superintendent of Bankruptcy

Heard: May 13, 2013

On appeal from the order of Justice Peter A. Cumming of the Superior Court of Justice, dated April 30, 2012.

ENDORSEMENT

[1] The appellants, A. Robert Murphy, A. Robert Murphy Architect Incorporated and Gray Wave Resources Inc., creditors of the bankrupt Sally Creek Environs Corporation (“Sally Creek”), appeal an order dismissing their motion for leave pursuant to s. 215 of the Bankruptcy and Insolvency Act (the “BIA”) to commence an action against the Office of the Superintendent of Bankruptcy (the “OSB”) and two of its employees (collectively, the “OSB Defendants”).

[2] The background, briefly, is as follows.

[3] Sally Creek was assigned into bankruptcy on January 10, 2003. In 2004 and 2005, the appellants filed complaints with the OSB regarding perceived misconduct of the Trustee in bankruptcy of the Estate of Sally Creek. The OSB investigated and responded to the complaints.

[4] The appellants also challenged the Trustee’s Statement of Receipts and Disbursements over the course of a fourteen day taxation hearing before the Registrar in Bankruptcy, held between June of 2007 and March of 2008. In his decision of June 23, 2008, the Registrar made findings of serious misconduct on the part of the Trustee and reduced the Trustee’s fees to the nominal sum of one dollar and disallowed a significant amount of the Trustee’s disbursements for legal fees. The effect of this was to require the Trustee to repay a significant amount to the Estate. The Registrar’s decision was appealed first to Mesbur J. of the Superior Court of Justice, and then to this court. Ultimately, the Trustee’s fees and disbursements were reduced from the amount sought, but not as drastically as had been done by the Registrar.

[5] Subsequently, the appellants sought to commence a negligence action against the OSB Defendants, on their own behalf and on behalf of the Estate. They assert that creditors would have received a larger dividend, but for the Trustee’s mismanagement of the Estate, and that the OSB Defendants are responsible for not correcting the Trustee’s mismanagement. They also assert that the OSB breached a duty it owed to them when, after the Registrar’s decision, it failed to require the Trustee to increase the amount of its bond.

[6] Section 215 of the BIA provides that no action lies against the Superintendent of Bankruptcy except by leave of the court. The appellants accordingly brought a motion for leave in April of 2012. The motion judge concluded that the negligence claims that the appellants sought to assert against the OSB Defendants were not sustainable at law because they were barred by the operation of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. He accordingly dismissed their motion.

[7] Before the motion judge, counsel for the appellants conceded that the limitation period in respect of their proposed actions against the OSB Defendants would have begun to run by no later than June 23, 2008 – the date that the Registrar made his finding of serious misconduct on the part of the Trustee and required the Trustee to pay a significant amount to the Estate – but for the appeal of the Registrar’s decision to Mesbur J., and the subsequent appeal of her decision to this court. The only issue before the motion judge was the effect of those appeals on the limitation period. The motion judge concluded that all material facts with respect to the asserted causes of action against the OSB Defendants were known by June 23, 2008, and neither appellate decision affected the calculation of the limitation period.

[8] On this appeal, the appellants argue that the motion judge made two errors.

[9] The first is that the motion judge did not consider what the appellants allege was the effect of Mesbur J.’s decision, namely that the Trustee did not have to pay the Estate any money. They argue that the effect of her decision was that damage, such as required for a cause of action based on the OSB’s failure to require the Trustee to increase the amount of its bond to accrue, had not occurred.

[10] Their reasoning is as follows. After the Registrar rendered his decision requiring the Trustee to pay significant amounts to the Estate, the appellants were concerned that the Trustee would be unable to pay the amounts ordered and cautioned the OSB Defendants that the OSB should increase the amount of the bond the Trustee was required to post. The OSB did not. The appellants argue that if the Trustee did not have to pay any amount to the Estate, there would have been no need to have recourse to any security, and they would therefore not have suffered damages as a result of the OSB Defendants’ failure to require the Trustee to post additional security.

[11] This first argument has no merit. Whether the effect of Mesbur J.’s order was that the Trustee was not required to pay monies to the Estate is in our view of no moment. As the motion judge concluded, all of the material facts with respect to the asserted causes of action set out in s. 5(1)(a) of the Limitations Act, 2002 – including that damage had occurred – were known by no later than June 23, 2008. The appellants provided no authority for their argument that Mesbur J.’s decision, in effect, tolled the limitation period that they concede had already begun to run.

[12] The appellants’ second argument arises out of a comment made by Mesbur J. in the course of her reasons of February 19, 2009. In her view, certain findings made by the Registrar were improper because they had been the subject of the OSB’s investigations, in response to the appellants’ complaints. She wrote that the appellants “presumably could have applied for judicial review of the findings of the regulatory bodies. It did not.” The appellants acknowledge that Mesbur J.’s conclusion that the findings were not open to the Registrar was overturned on appeal to this court. However, they argue that commencing an action following the decision of Mesbur J. and prior to the decision of this court would have been an impermissible collateral attack on her decision.

[13] This second argument similarly has no merit. It does not address the core finding of the motion judge, with which we agree, namely that all material facts with respect to the asserted causes of action were known by no later than June 23, 2008. The subsequent comment of Mesbur J. does not affect this.

[14] The appeal is accordingly dismissed.

[15] The OSB is entitled to costs of this appeal and motion for leave to bring this appeal, fixed in the agreed amount of $9,500, inclusive of disbursements and applicable taxes.

“Janet Simmons J.A.”

“Alexandra Hoy J.A.”

“G.R. Strathy J.A.”