Court and Parties

COURT OF APPEAL FOR ONTARIO DATE: 20201027 DOCKET: M51800

Tulloch J.A. (Motion Judge)

In the Matter of section 243(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, C. B-3, as amended, section 101 of the Courts of Justice Act, R.S.O. 1990 c. C.43, as amended, and section 68 of the Construction Act, R.S.O. 1990, C.30

BETWEEN

C & K Mortgage Services Inc. Applicant (Responding Party)

and

Camilla Court Homes Inc. and Elite Homes Inc. Respondents

Counsel: Maureen Whelton and Neil Wilson, for the moving party Jereemy Tan David Preger and David Seifer, for the responding party C & K Mortgage Services Inc. Eric Golden, for the responding party Rosen Goldberg Inc. in its capacity as court-appointed Receiver Tara Vasdani, for the responding parties Janak Bhawnani and Sharmila Bhawnani

Heard: October 8, 2020 by video conference

Reasons for Decision

[1] This is a motion brought by Jereemy Tan (the “moving party”) seeking, amongst other things, an extension of time to file a notice of appeal of the decision of Dietrich J., of the Ontario Superior Court, authorizing the appointed Receiver in Bankruptcy (the “Receiver”) to proceed to disclaim an agreement of purchase and sale for the property known municipally as 180 Mateo Place, Mississauga, Ontario (the “property”). The responding party, C & K Mortgages Inc. (the “mortgagee”), has a mortgage over the property.

[2] The moving party had entered into an agreement to purchase the property, with a closing date of June 26, 2020. He paid a deposit of $500,000. $100,000 of this deposit was paid to the real estate broker in trust. $400,000 was paid directly to the vendor and subsequently invested into the property.

[3] At the hearing for this matter, both the moving party and the mortgagee were represented by counsel who delivered written and oral submissions. The Receiver was also represented at the hearing and opposed the motion, offering oral submissions in response. Finally, the individuals who entered into a new agreement of purchase and sale for the property, subsequent to the Receiver’s disclaiming of the original agreement, were represented at the hearing and offered oral responding submissions.

[4] The underlying decision that is the subject of this motion was rendered on August 27, 2020.

[5] Pursuant to s. 31(1) of the Bankruptcy and Insolvency General Rules, C.R.C., c. 368 (the “rules”), a notice of appeal was to be delivered within ten days following the rendering of the decision. Due to inadvertence on the part of the moving party’s lawyer, this was not done. The lawyer operated on the basis that the moving party had 30 days to deliver a notice of appeal.

[6] Under the rules, ten days from August 27, 2020 was September 6, a Sunday and non-juridical day. The Monday, September 7, was Labour Day, a holiday and non-juridical day. Therefore, the notice of appeal was due on September 8, 2020.

[7] On Monday, September 14, 2020 the moving party’s counsel notified the other parties to the proceedings (the mortgagee and the Receiver) of the moving party’s intention to appeal. On September 17, 2020 the moving party’s counsel served the notice of motion to extend time.

[8] The moving party’s counsel have now been advised that the property has been sold, subject to court approval, to a new purchaser. The closing date is on November 5, 2020.

[9] All parties agree on the applicable legal principles and test to be applied to determine whether this court should exercise its discretion and grant the order to extend the time. However, the parties differ as to whether the moving party has met the test.

[10] For the reasons below, the motion for an extension of time to file the appeal is hereby granted.

[11] While r. 3.02(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, permits a party to bring a motion to extend or abridge any time prescribed by those rules or an order, the court has no independent authority to extend a statutory time limit. The authority for extending a statutory time limit must be found in the relevant statute.

[12] Section 187(11) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, establishes the statutory jurisdiction for the court to extend time:

Where by this Act the time for doing any act or thing is limited, the court may extend the time either before or after the expiration thereof on such terms, if any, as it thinks fit to impose.

[13] The applicable test for this court to consider in determining whether to exercise its discretion to grant an order extending the time to file a notice of appeal is well settled. The following factors are relevant:

i. whether the appellant formed an intention to appeal within the relevant period; ii. the length of the delay and explanation for the delay; iii. any prejudice to the respondents; iv. the merits of the appeal; and v. whether the “justice of the case” requires it.

See e.g., Kefeli v. Centennial College of Applied Arts and Technology (2002), 23 C.P.C. (5th) 35 (C.A.), at para. 14; Rizzi v. Mavros, 2007 ONCA 350, 85 O.R. (3d) 401, at para. 16; for the similar test in the bankruptcy context, see e.g., Ontario Wealth Management Corporation v. Sica Masonry and General Contracting Ltd., 2014 ONCA 500, 17 C.B.R. (6th) 91, at para. 26; Forjay Management Ltd. v. 625536 B.C. Ltd., 2019 BCCA 368, 28 B.C.L.R. (6th) 213, at para. 33.

[14] While all factors are important, and each must be considered and weighed, the overarching principle is that an extension should be granted if the “justice of the case” requires: Frey v. MacDonald (1989), 33 C.P.C. (2d) 13 (Ont. C.A.); Sica Masonry, at para. 26.

[15] In this case, I am satisfied that the moving party did form an intention to appeal shortly after receiving the decision of the court. The evidence is that counsel for the moving party inadvertently assumed that the 30-day period for delivery of a notice of appeal applied, instead of the ten-day period as stipulated by the rules. The period that elapsed between the ten-day deadline and the date when counsel for the mortgagee and the Receiver were notified was only six days.

[16] Once counsel realized that the deadline for filing the notice of appeal had passed, he acted with dispatch, while acknowledging that it was through his own inadvertence that the deadline for filing the notice of appeal had elapsed beyond the ten days.

[17] The mortgagee submits that if the motion for extension of time is granted, then the responding parties will suffer real and significant prejudice. They point to how the property was sold on September 11, 2020 to a new purchaser, with a closing date of November 5, 2020. This new purchase and sale agreement is unconditional.

[18] Notwithstanding the position taken by the responding parties, I am not persuaded that they will suffer significant prejudice if the moving party’s motion for an extension of time to appeal is granted.

[19] As pointed out by counsel for the moving party, the new agreement of purchase and sale was entered into subject to court approval. The new purchasers would therefore be fully aware of the uncertainties in the process.

[20] Furthermore, the moving party has indicated that they would be prepared to have an expedited appeal should the motion be granted. And, alternatively, the moving party would be content for the new agreement of purchase and sale to proceed, provided $500,000 of the proceeds are held back by the Receiver, pending the results of these proceedings.

[21] In these circumstances, I am satisfied that the explanation for the delay in filing the notice is reasonable, that the time period beyond the stipulated deadline was relatively short, and that any resulting prejudice to the responding parties is negligible.

[22] The main argument put forward by the responding parties is that the proposed appeal lacks merit and the extension motion should accordingly not be granted.

[23] First, the mortgagee’s argument is based in part on the fact that the moving party was properly notified of the initial appointment of the Receiver, yet he did not apply to vary or appeal the order appointing the Receiver.

[24] Second, the responding parties observe that the Receiver notified the moving party of its intention to disclaim the agreement of purchase and sale for the property. The Receiver confirmed that the moving party could make an offer and compete with any other purchaser, but that he would not get credit for his original deposit. Upon learning of the Receiver’s decision to disclaim the original agreement of purchase and sale, the moving party brought a motion before the Ontario Superior Court to compel the Receiver to complete the agreement. The motion was heard and dismissed on August 27, 2020, and the moving party failed to appeal within the ten-day stipulated time period.

[25] The moving party submits that there is merit to the proposed appeal. He advances three main arguments.

[26] First, that the motion judge misapprehended the court’s role on the motion for directions; second, that the motion judge misapprehended the law on the application of the No Registration/Exclusion Clause in the agreement of purchase and sale; and third, that the motion judge incorrectly turned a broader equities analysis into a strict analysis of priorities.

[27] Without addressing the merits arguments, it suffices to say that when a court considers the merits of an appeal within the context of a motion seeking an extension of time to appeal, it is not with a view to determining whether the appeal will succeed. Instead, a court must consider only whether there is so little merit in the proposed appeal that the court could reasonably deny the important right of appeal: Issai v. Rosenzweig, 2011 ONCA 112, 277 O.A.C. 391, at para. 10; Duca Community Credit Union Ltd. v. Giovannoli (2001), 142 O.A.C. 146 (C.A.), at paras. 14-15.

[28] In this case, I am satisfied that the proposed appeal meets the threshold-merit requirement, which is a relatively low one.

[29] On balance, I am also satisfied that the justice of the case militates in favour of granting the requested motion to extend time to file the notice of appeal.

[30] Having decided that the motion for an extension of time to file the appeal ought to be granted, I now turn to the issue of whether the appeal of the motion judge’s order is “of right”, or “with leave” of the court.

[31] Section 193 of the Bankruptcy and Insolvency Act reads as follows:

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:

(a) if the point at issue involves future rights; (b) if the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings; (c) if the property involved in the appeal exceeds in value ten thousand dollars; (d) from the grant of or refusal to grant a discharge if the aggregate unpaid claims of creditors exceed five hundred dollars; and (e) in any other case by leave of a judge of the Court of Appeal.

[32] I am satisfied that pursuant to both ss. 193 (b) and (c) of the Bankruptcy and Insolvency Act, the moving party has an appeal as of right.

[33] Section 193(b) provides an appeal as of right, since the decision may impact the Receiver’s choice to disclaim other property subject to their authority. The Receiver was appointed to take possession and control of two properties subject to the mortgagee: the property at issue and one other. This other property was subject to an agreement of purchase and sale, entered into prior to the receivership, that the Receiver subsequently disclaimed. While I understand that the Receiver has since negotiated a new agreement to sell this other property, it stands that the outcome of the appeal in the instant case will likely impact the Receiver’s conduct concerning the other property. In reaching this conclusion, I am persuaded by the reasoning of Willcock J.A. in Forjay Management Ltd. v. Peeverconn Properties Inc., 2018 BCCA 188, 61 C.B.R. (6th) 221, at paras. 40-44.

[34] I am satisfied that s. 193(c) applies as well, as the property involved exceeds $10,000.

[35] First, the order sought to be appealed from is not procedural in nature. The order permitting the Receiver to disclaim the agreement increased the value of the assets in the hands of the Receiver and was made, in part, for that purpose: Forjay, at paras. 48-50; 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 396 D.L.R. (4th) 635, at paras. 54-58.

[36] Second, the order “brought into play” the value of the property. The motion judge specifically observed that the Receiver’s marketing and selling of the property would yield a higher recovery than if the original agreement were completed. Thus, the court “was called upon to consider something more than the monetization of an asset”: Forjay, at paras. 51-52; Bending Lake, at paras. 59-60.

[37] Third, the order resulted in a loss. It purported to finally determine the moving party’s lack of entitlement to the property. In doing so, the order materially increased the value of the property in the hands of the Receiver. If the moving party succeeds in their appeal, the mortgagee will effectively suffer from a loss as reflected by the deposit shortfall and the difference between the price of the property under the pre-receivership agreement and the price to be paid under the post-receivership agreement. This difference easily exceeds $10,000: Forjay, at paras. 53-54; Bending Lake, at paras. 61-62.

[38] Finally, it is worth noting that the court in Forjay analyzed whether s. 193 (c) applied in that case with reference to the narrow analysis of that section undertaken by this court in Bending Lake: Forjay, at para. 47.

[39] Accordingly, pursuant to s. 195 of the Bankruptcy and Insolvency Act, the underlying proceedings are stayed, pending disposition of the proposed appeal.

“M. Tulloch J.A.”