Court of Appeal for Ontario

Date: 2019-05-14

Docket: M50180 & M50387

Benotto J.A. (In Chambers)

In the Matter of the Bankruptcy of Mark Jack Krawczynski

Between

Mark Jack Krawczynski Moving Party (Applicant)

and

Ralph Culp and Associates Inc. Responding Party (Respondent)

Counsel

R. Klotz, for the applicant Mark Jack Krawczynski

A. Fogul, for the respondent Ralph Culp and Associates Inc., trustee of the estate of Mark Jack Krawczynski

Heard: May 6, 2019

Reasons for Decision

[1] The applicant moves for an order extending the time to perfect his motion seeking leave to appeal the dismissal of an order for security for costs.

Background

(1) Facts

[2] The applicant filed an assignment for the general benefit of his creditors in November 2009. At the date of his bankruptcy, he was the owner of real property at 54 Oakland Drive, Hamilton. The property vested in the respondent Trustee pursuant to ss. 67(1)(c) and 71 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 ("BIA"). At the time the property was listed as "fully encumbered". It has since gone up in value.

[3] The Trustee was discharged on April 17, 2016. Following the discharge, this court released its decision in Lepage (Re), 2016 ONCA 403, 36 C.B.R. (6th) 207. That decision dealt with the increase in equity of property as an after-acquired asset that could be realized for the benefit of creditors. Consequently, the Trustee sought re-appointment and possession of the property so that he could proceed to realize on the current equity of the property for the benefit of creditors. There are no funds in the estate.

(2) Motion for Security for Costs

[4] The applicant moved for security for costs against the Trustee. He argued that the Trustee is akin to a plaintiff in a civil suit and, as a nominal plaintiff or applicant, there is good reason to believe that the Trustee has insufficient assets in Ontario to pay the costs of the defendant or respondent in accordance with r. 56.01(d) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[5] The motion was heard by Chiappetta J. who concluded that r. 56.01(d) did not apply for two reasons. First, the Trustee is not a nominal plaintiff or a corporation acting in a personal capacity. Rather, the Trustee is seeking recovery of the appreciation of an asset for the benefit of others. Second, in any event, the "justice of the case" does not warrant the order.

[6] Chiappetta J. concluded:

In my view, a full hearing on the merits including an assessment of the conduct [of the Trustee] with a full evidentiary record, in the context of the Re Lepage case, is required to determine if the Trustee shall be personally liable for any costs awarded that are not covered by the estate. This assessment is more appropriately conducted at the conclusion of the hearing…To [conduct it] effectively by this motion would not be just.

(3) The Appeal and Request for Extension

[7] The order of Chiappetta J. dismissing the motion for security for costs was dated January 15, 2019. After counsel for the applicant indicated that he had received instructions to seek leave to appeal the order, the Trustee consented to an extension of time for the applicant to file his Notice of Motion for Leave to Appeal. The Notice of Motion was eventually filed on February 8, 2019. Pursuant to r. 61.03.1(6), the applicant was required to perfect his motion for leave to appeal by serving and filing his motion record and factum by March 10, 2019. He did not meet this deadline.

[8] On April 16, 2019, the Registrar of the Court of Appeal for Ontario issued a Notice of Intention to Dismiss for Delay. This Notice indicated that if the applicant did not perfect his motion for leave to appeal by April 26, 2019, it would be dismissed. The applicant again failed to perfect by this deadline. Instead, on April 26, 2019, the applicant filed a motion for an extension of time to perfect his motion for leave to appeal. In support of this motion for an extension of time, the applicant filed an affidavit of a law clerk explaining the delay as follows:

• The applicant had difficulty funding the matter;
• The law clerk was ill on April 25;
• The feeder mechanism on the office copier was malfunctioning;
• Additional research on the law is required and research that has already been done has gone missing.

Discussion

(1) Test on a Motion for an Extension of Time

[9] Pursuant to r. 3.02(1), this court may extend any time limit prescribed by the Rules of Civil Procedure on such terms as are just. In Issai v. Rosenzweig, 2011 ONCA 112, 277 O.A.C. 391, at para. 4, Weiler J.A. identified the following five factors as relevant in determining whether to grant an extension of time to perfect an appeal:

1. whether the appellant formed an intention to appeal within the relevant period;
2. the length of the delay and explanation for the delay;
3. any prejudice to the respondent;
4. the merits of the appeal; and
5. whether the "justice of the case" requires it.

[10] A motion to extend the time for leave to appeal in the bankruptcy context was discussed by Strathy J.A (as he then was) in Ontario Wealth Management Corporation v. Sica Masonry and General Contracting Ltd., 2014 ONCA 500, 17 C.B.R. (6th) 91, at paras. 2 and 26:

Rule 31(1) of the Bankruptcy and Insolvency General Rules, C.R.C., c. 368, provides that a notice of appeal must be filed within ten days after the day of the order appealed from or within such further time as a judge of this court stipulates.

The overarching principle is whether the justice of the case requires that an extension be granted. The relevant factors may include:

(a) whether the applicant had a bona fide intention to appeal before the expiration of the appeal period;

(b) the length of and explanation for the delay in filing;

(c) any prejudice to the responding parties caused by the delay; and

(d) the merits of the proposed appeal.

See Howard v. Martin, 2014 ONCA 309; Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131, 114 O.R. (3d) 636. See also Braich (Re), 2007 BCCA 641.

[11] This approach was adopted by this court in National Telecommunications Inc. v. Stalt Telcom Consulting Inc. (2018), 64 C.B.R. (6th) 169. At para. 17 Simmons J.A. stated:

…the overriding consideration is whether the justice of the case requires an extension and that the enumerated factors are both non-exclusive and may vary in importance depending on the circumstances.

(2) Application of the Test

Intention to Appeal and Explanation for the Delay

[12] Since this is a motion for an extension of time to perfect a motion for leave to appeal, instead of asking whether the appellant formed an intention to appeal, I would ask whether the applicant maintained an intention to seek leave to appeal within the relevant period. I must also consider whether the applicant has provided a reasonable excuse for the delay in perfecting the appeal.

[13] In my view, it is not clear that the applicant maintained an intention to seek leave to appeal within the relevant period. The delay from March 10 (when the motion for leave was due to be perfected) to April 25 (when the law clerk fell ill) is unexplained. In addition, it appears that the applicant took no steps to perfect the appeal until the Registrar issued the Notice of Intention to Dismiss for Delay on April 16, 2019.

Prejudice to the Respondent

[14] The results of the motion for security for costs have no bearing on the merits of the Trustee's application, and only add costs to the estate which will be borne by the creditors. I find there is prejudice to the respondent if the extension of time is granted.

Merits of the Motion for Leave to Appeal

[15] The applicant submits that this is not the time to consider the merits and, to the extent to which the merits of the leave motion are considered, a flexible approach has been adopted by this court and should be followed.

[16] Indeed, there have been two approaches to the test for leave to appeal under s. 193(e) of the BIA. Both were discussed in Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, by Blair J.A. In one, the Power Consolidated test, the court considers whether:

1. the issue is of significance to the practice as a whole;
2. it is of significance to the action itself;
3. the appeal prima facie meritorious; and
4. the appeal unduly hinder the progress of the action?

[17] A second formulation was adopted by this court in R.J. Nicol which seeks to determine whether the decision from which leave to appeal is sought:

1. Appears to be contrary to law;
2. Amounts to an abuse of judicial power; or
3. Involves an obvious error, causing prejudice for which there is no remedy.

[18] Blair J.A. resolves the two approaches at para. 29 and states that:

The court will look to whether the proposed appeal,

a) raises an issue that is of general importance to the practice in bankruptcy/insolvency matters or to the administration of justice as a whole, and is one that this Court should therefore consider and address;

b) is prima facie meritorious, and

c) would unduly hinder the progress of the bankruptcy/insolvency proceedings.

[19] The applicant submits that he has met this test.

[20] I disagree.

[21] The issue of whether an order for security for costs should have been granted in this case is not of general importance to the practice of bankruptcy law. It involves a discretionary interlocutory order which does not prejudice the applicant whose claim for costs is preserved. The proposed motion for leave to appeal would also divert the proceedings away from the real issue – the re-appointment of the Trustee – and thus unduly hinder their progress.

[22] Finally, there is no prima facie merit to the appeal. The decision of Chiappetta J. was discretionary in nature and thus entitled to deference on appeal. In oral submissions, the applicant argued that the decision is clearly wrong because Chiappetta J. considered only r. 56.01, and not the BIA. I reject this submission. The BIA does not outline a specific procedure to apply on motions for security for costs in bankruptcy proceedings. However, s. 3 of the Bankruptcy and Insolvency General Rules, C.R.C., c. 368 states that "[i]n cases not provided for in the [BIA] or these Rules, the courts shall apply, within their respective jurisdictions, their ordinary procedure to the extent that that procedure is not inconsistent with the [BIA] or these Rules." Chiappetta J.'s reliance on r. 56.01 of the Rules of Civil Procedure was therefore entirely appropriate. I note that the same conclusion was reached by Monnin J.A. of the Court of Appeal for Manitoba in Moss (Re), 2005 MBCA 59, 15 C.B.R. (5th) 123, at para. 12.

The "Justice of the Case"

[23] In light of the above, I conclude that the justice of the case does not require granting the applicant an extension of time to perfect his motion for leave to appeal.

Conclusion

[24] The motion for an extension of time is dismissed.

"M.L. Benotto J.A."

Footnotes

[1] Power Consolidated (China) Pulp Inc. v. British Columbia Resources Investment Corp. (1988), 19 C.P.C. (3d) 210.

[2] R.J. Nicol Construction Ltd. (Trustee of) v. Nicol (1995), 77 O.A.C. 395 (C.A.).