COURT OF APPEAL FOR ONTARIO

CITATION: Doyle Salewski Inc. v. BDO Canada Limited, 2016 ONCA 748

DATE: 20161014

DOCKET: C61708

Feldman, Simmons and Lauwers JJ.A.

BETWEEN

Doyle Salewski Inc., in its capacity as court-appointed interim receiver of Impact Tool & Mould Inc. and in its personal capacity

Plaintiff (Respondent)

and

BDO Canada Limited, formerly BDO Dunwoody Limited in its capacity as Trustee in Bankruptcy of Impact Tool & Mould Inc. and in its personal capacity

Defendant (Appellant)

Gerard Chouest and Julia Lefebvre, for the appellant

Dale Denis and Jason Dutrizac, for the respondent

Heard: August 26, 2016

On appeal from the order of Justice Marc A. Garson of the Superior Court of Justice, dated January 4, 2016.

ENDORSEMENT

[1] The appellant, BDO Canada Limited, is the trustee in bankruptcy of Impact Tool & Mould Inc., appointed at the behest of, and funded by a competitor of, Impact in Windsor Ontario, Unique Tool and Gauge Inc. The within action was commenced in London by the respondent, Doyle Salewski Inc. (“DSI”), the interim receiver of Impact, for alleged improprieties by BDO in the conduct of the bankruptcy, which improprieties added significant cost to the administration of the receivership, where there were no funds available in the estate to pay those costs or to justify the trustee’s actions.

[2] The within action is referred to by the motion judge as the “London action”. There is also a long-outstanding “Windsor application” under s. 37 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA), to determine whether DSI is a creditor of the estate of Impact. That application had not proceeded when this motion was heard.

[3] The appellant’s motion for summary judgment under Rule 20 on the basis that the claim was statute barred was dismissed, as was its motion under Rule 21 to strike portions of the claim as an abuse of process on the basis of issue estoppel. The London action was therefore allowed to proceed. On appeal we would not interfere with the conclusions reached by the motion judge.

[4] The London action was commenced on January 18, 2010, with leave granted under s. 215 of the BIA on May 5, 2010. It claims breach of fiduciary duty by BDO between 2003 and 2007 for actions including: making false statements in affidavits, pursuing commercially unreasonable courses of action, making unfounded allegations against the interim receiver, failing to act impartially and in good faith among creditors, and initiating frivolous and vexatious court proceedings.

[5] The motion judge noted that in his cross-examination, Mr. Doyle, the president of DSI, acknowledged that he was aware of the following by the end of 2007: false statements in a BDO in an affidavit, BDO had pursued a commercially unreasonable course of action through 2007, BDO had made serious allegations against DSI as interim receiver, BDO had allowed itself to be used by Unique and did not act in good faith and impartially, and BDO had initiated frivolous and vexatious court proceedings.

[6] However, it was not until 2008 or 2009 that DSI received an un-redacted copy of the “Jackson Report” that was in the possession of BDO. That report disclosed that contrary to BDO’s position alleging an improvident sale by DSI of the assets of Impact, its expert information was that the liquidation values of the Impact assets were low. Further, it was not until December 2009 that DSI received BDO’s final Statement of Receipts and Disbursements, and learned for the first time that significant fees had been paid to the Unique estate inspector, Mr. O’Brien, for special services; the amount of fees paid to BDO; and that significant fees in the amount of $216,548.21 had been paid to the solicitor for the estate directly by Unique.

[7] The motion judge found that “although DSI was suspicious at an earlier time, the material facts contained in the Jackson report and the evidence contained in the [Statement of Receipts and Disbursements] were evidence that Unique had, in some manner, taken over the administration of the Estate from BDO. An earlier request by DSI for a copy of the Jackson Report was denied by BDO.”

[8] The motion judge first concluded that the discoverability of the claim was a genuine issue requiring a trial. However, he then turned to consider the enhanced fact-finding powers of a motion judge to weigh the evidence and make credibility findings. He concluded that he had sufficient evidence to decide the issue.

[9] He found that DSI had suspicions of the malfeasance it alleges against BDO and had made numerous efforts to obtain the information it needed to confirm its suspicions but was “stonewalled” by BDO, which refused to disclose the Jackson report and its receipts and disbursements report. His conclusion is contained in paras. 96 and 97 of his reasons:

BDO’s behaviour in withholding or not distributing pertinent and relevant information to DSI prevented DSI from discovering the material facts upon which this claim is based.

Although DSI was suspicious in 2006 and 2007 that BDO had (i) made false statements and omitted relevant facts in an affidavit; (ii) was pursuing a commercially unreasonable course of action; (iii) had made serious allegations about the behaviour of DSI, and (iv) was being influenced by Unique, these suspicions were unsupported by material facts.

[10] The motion judge noted that breach of a duty of care by a court officer should not be alleged without sufficient facts. We add that that principle is reflected in the statutory requirement in s. 215 of the BIA requiring leave to sue a trustee in bankruptcy.

[11] While we do not agree with the implicit suggestion by the motion judge that the commencement of the limitation period may be assessed differently when officers of the court are involved, we see no error in the motion judge’s finding that “DSI did not have knowledge of sufficient facts prior to January 18, 2008 [two years before the claim was issued] to properly allege a claim for breach of fiduciary obligations against BDO,” and his conclusion that the action is therefore not statute-barred.

[12] The motion judge explained that the appellant’s second motion for abuse of process was based on whether DSI was seeking to claim costs for issues already dealt with in previous orders in this action and in the Windsor application. The motion judge concluded that he could not determine on the record which costs awards in the relevant timeframe were the subject of the London action. He therefore dismissed the motion. There is no basis for this court to interfere with the motion judge’s finding on this issue.

[13] The appeal is therefore dismissed with costs fixed in the agreed amount of $20,000 inclusive of disbursements and HST.

“K. Feldman J.A.”

“Janet Simmons J.A.”

“P. Lauwers J.A.”