COURT OF APPEAL FOR ONTARIO

CITATION: Enroute Imports Inc. (Re) 2016 ONCA 247

DATE: 20160405

DOCKET: C60594

Weiler, Hourigan and Huscroft JJ.A.

BETWEEN

IN THE MATTER OF THE PROPOSAL OF ENROUTE IMPORTS INC. of the City of Mississauga in the Province of Ontario

J. Dannial E.S. Baker, for the appellants, unsecured creditors, Frank Santaguida and Victor Santaguida

Craig A. Mills, for the respondent Enroute Imports Inc.

R. Graham Phoenix, for the Proposal Trustee

Heard: March 29, 2016

On appeal from the order of Justice Thomas J. McEwen of the Superior Court of Justice, dated April 23, 2015.

ENDORSEMENT

[1] The appellants were awarded a judgment against Enroute Imports (“Enroute”) in 2003 in the amount of $65,000 plus interest and costs. They recovered 52.3% of their claim just prior to Enroute filing a notice of intention to make a proposal under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”). The proposal was subsequently filed, amended, and accepted by 92% of the creditors representing 87% of the value of the outstanding debt more than the required majority of creditors (the “Amended Proposal”).

[2] The appellants, who are unsecured creditors, objected to the Amended Proposal and conducted an out of court examination of Vincent Pileggi, the president of Enroute. They sought to adjourn the approval motion to compel answers to undertakings, refusals, and questions taken under advisement, and to continue the examination of Mr. Pileggi. The motion judge declined to adjourn the motion, approved the Amended Proposal, and terminated the appellants’ notices of garnishment.

[3] In his factum, the appellant raises numerous grounds of appeal related to the motion judge’s refusal to adjourn the approval motion. He further submits that as a result of the motion judge’s refusal to adjourn the approval proceedings, he was denied the opportunity to establish that the officers and directors of Enroute had engaged in wrongful conduct, a consideration relevant to whether the proposal was reasonable and made in good faith and, ultimately, to whether approval should be granted.

[4] A preliminary issue is whether leave to appeal the motion judge’s order is required under s. 193 of the BIA. The appellants submit that leave is not required, relying on s. 193(c) of the BIA, which states: “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: (c) if the property involved in the appeal exceeds in value ten thousand dollars”. The respondent submits that there is no right of appeal because the primary remedy sought, continuation of the examination of Mr. Pileggi, is not quantifiable in money.

[5] The case law considering s. 193(c) from this court makes clear that, given the broad nature of the stay imposed by s. 195 of the BIA, the right of appeal without leave under s. 193(c) must be narrowly construed. In addition, the appeal must directly involve property exceeding $10,000 in value: Crate Marine Sales Limited (Re), 2016 ONCA 140, Robson Estate v. Robson(2002), 2002 CanLII 53241 (ON CA), 33 C.B.R. (4th) 86 (Ont. C.A.), Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, and Ontario Wealth Management Corporation v. Sica Masonry and General Contracting Ltd., 2014 ONCA 500, 17 C.B.R. (6th) 91.

[6] In our view, the appellants require leave to appeal. The right to conduct an examination is procedural and does not directly involve property. Similarly, the appellants’ central argument regarding the correctness of the approval order is that the motion judge erred in finding that the proposal was reasonable and made in good faith. Again this is not a situation where property is directly in issue.

[7] In considering whether leave to appeal under s. 193 (e) of the BIA should be granted, a court will look to whether the proposed appeal: (i) raises an issue that is of general importance to the practice in bankruptcy/insolvency matters or the administration of justice as a whole; (ii) is prima facie meritorious; and (iii) would unduly hinder the progress of the bankruptcy/insolvency proceedings: Business Development Bank of Canada, at para. 29. In our view, the appellants have not established that leave to appeal should be granted under s. 193 of the BIA.

[8] We are not satisfied that the issues raised on the proposed appeal are of significance beyond the interests of the parties. The appeal is focused on fact-specific issues of procedural fairness and the reasonableness and good faith of the Amended Proposal. The discretionary considerations of the motion judge do not give rise to any matters of general significance to bankruptcy/insolvency matters or to the administration of justice as a whole.

[9] We are also of the view that there is no merit to the proposed appeal. The decision of the motion judge not to grant an adjournment is highly discretionary and will not be lightly interfered with by this court. Moreover, there were ample grounds to refuse the adjournment, including the timing of the request, the fact that the appellants had failed to respond to the proposal trustee’s offers to provide information and access to documents, the speculative and disproportionate nature of the ongoing information sought, and the fact that any further delay would impact Enroute’s ability to operate its business.

[10] The motion judge’s conclusion that the Amended Proposal was reasonable is also unassailable. He carefully reviewed the Amended Proposal and concluded that it had the strong support of the creditors and its terms were calculated to benefit the general body of creditors. The motion judge also found that the proposal trustee had conducted a reasonable review and determined that there was no realistic possibility that the unsecured creditors would receive any money in a bankruptcy.

[11] Further, there is no basis to interfere with the motion judge’s finding that the Amended Proposal was made in good faith. He considered the appellants’ concerns regarding the Amended Proposal, which were raised both on the approval motion and repeated on appeal, and dismissed them, finding that they “[were] largely based on speculation and ignore[d] the real and legitimate basis for Enroute’s difficulties.”

[12] With respect to whether the appeal would unduly hinder the progress of the bankruptcy/insolvency proceedings, this is an artificial analysis in the circumstances since the appellants did not first move to obtain leave to appeal before a single judge of this court. Instead, they took the position that leave was not required and argued the issue of leave as part of the appeal. Thus, it cannot be said that granting leave at this stage will unduly delay the proceedings.

[13] Finally, we note that the parties filed fresh evidence on consent that Enroute failed to disclose prior to the approval of the Amended Proposal a partially subrogated lawsuit, in which it and a related company sued various parties as result of an olive oil spill. The lawsuit was eventually disclosed to all creditors by the proposal trustee. Because Enroute does not have the resources to fund the litigation, it offered to assign its claim to any creditor. No creditor expressed an interest in participating in the lawsuit. We are of the view that the existence of this lawsuit (which was commenced at the behest of Enroute's insurer, is unvalued, and has not progressed beyond the pleading stage) does not change the analysis above.

[14] Leave to appeal is denied. Enroute, as the successful party, is entitled to its costs of the appeal, fixed at $14,500, inclusive of fees, disbursements and applicable taxes. The proposal trustee did not file materials or make submissions. In these circumstances, we decline to make a cost award in its favour.

“K.M. Weiler J.A.”

“C.W. Hourigan J.A.”

“Grant Huscroft J.A.”