COURT FILE NO.: 31-1571629

MOTION HEARD: 20120727

ENDORSEMENT RELEASED: 20130603

SUPERIOR COURT OF JUSTICE

IN BANKRUPTCY AND INSOLVENCY

In the Matter of the Proposal of Thomas Albert Botley Bell of the City of Toronto, in the Province of Ontario

APPEARANCES: Sean N. Zeitz

• for the Trustee MSI Spergel Inc.

Arlindo Aragao

• for the appealing party Your Business Partner Inc.

BEFORE: MASTER D. E. SHORT, Registrar in Bankruptcy

HEARD: July 27th, 2012

REASONS FOR DECISION

On Appeal from Disallowance of Proofs of Claim

“What a difference a day makes”

I. Motion

[1] What at first blush appeared to be a straight forward disputed claim disallowance turned out to be out of the ordinary and presented a number of issues which seem not to have been fully resolved by prior case law.

[2] Following my initial meeting with counsel I determined that there were two distinct phases with respect to the dispute before me. The first dealt with whether or not the notice of appeal was filed on a timely basis. The second would address whether or not the disallowance was proper. That issue was intended to be deferred until the final resolution of the “appeal timeliness” issue.

[3] Counsel understandably have been concerned about the delay in delivering these reasons, particularly as at first blush the matter would seem to only involve a question of whether or not the notice of appeal was served in time. In an early email counsel pointed noted “Seeing as the main issue is straightforward (when is service effective?), the Court’s reasons in arriving at its conclusion are important.”

[4] In light of that position and my view that properly doing justice between the parties in this particular case required additional thought and analysis. As a consequence my decision was delayed until this point in time.

[5] That said, I nevertheless regret that my other responsibilities as both Registrar in Bankruptcy and a Master of the Superior Court of Justice have meant that I was not in a position to deliver these reasons until now. Because of that situation, I felt it appropriate to provide counsel with an indication of my preliminary views with respect to the issues originally intended to be resolved in the second phase.

II. Overview

[6] The background to the relationship between the parties is somewhat complex and in my view is relevant to the issues before me.

[7] Dr. Thomas Bell is a plastic surgeon with his own practice in downtown Toronto. A proposal under the Bankruptcy and Insolvency Act was signed by Dr. Bell on February 21, 2012 and sent out by his trustee, msi Spergel inc., by letter dated February 24, 2012.

[8] The covering letter contained an outline of Dr. Bell’s assets and liabilities and, in part, provided the following background information:

“Dr. Bell entered into business and real estate arrangements which he advises were structured by his lawyer. These “investments” included substantial fee payments which drained him of working capital. As well, these investments were highly leveraged and, when wound up and sold, resulted in substantial shortfalls to repay debt. These dispositions of investments and real estate holdings have generated several litigation matters against the debtor.

During the past several years, Dr. Bell advises that he has incurred, and continues to incur, extraordinary legal costs to date of approximately $250,000 related to a very acrimonious marital separation with ongoing litigation. Dr. Bell advises that his former spouse, Ms. Lorie Bell, continuously eroded his personal asset base to fund her lifestyle. On an interim basis, Dr. Bell is subject to court orders require substantial monthly support payments.

As a result of the extreme demands on his available cash, Dr. Bell fell behind in his tax instalments and currently faces an overwhelming debt for personal income taxes, plus other personal debts. He has filed this Proposal with a view to settling these debts in the best manner possible. [my emphasis]

[9] The entity that filed the two proofs of claim which are the subject matter of these motions was Your Legal Business Partner Inc. (“YLBP”). The affidavit filed in support of their claims was sworn by Calin Lawrynowicz, a solicitor and an authorized representative of YLBP. (“Calin”) Apparently Dr. Bell and he were brothers-in-law through their respective marriages to two sisters Nancy Lawrynowicz and Lorie Bell.

[10] In his June 19, 2012 affidavit Calin asserts;

9. Prior to the separation, [from his wife] Dr. Bell sought loans and assistance from YLBP. I agreed on behalf of YLBP to various loans all at the same interest rate of 12% per annum, compounded monthly. After separation, Dr. Bell denied the various loans completely and refused to pay anything more to YLBP. Mrs. Bell does not deny the loans or her liability and seeks indemnity from Dr. Bell for her liability.

10 YLBP was forced to take court action and initiated three separate claims in relation to the loans in 2010. One was already successful and Dr. Bell immediately filed the Proposal.

11. Dr. Bell defended all three claims Dr. Bell cross claimed his wife Mrs. Bell for indemnity in the largest action. In that action, Dr. Bell even named Nancy and I for indemnity on the YLBP loans.”

[11] The affidavit goes on to assert that if YLBP’s remaining two claims are successful “then it would be the single largest creditor of Dr. Bell.”

[12] The two remaining actions were started two years previously in 2010 and were defended by Dr. Bell. The amounts asserted by YLBP in the two challenged proofs of claim, dated March 13, 2012, are $1,237,624.00 and $425,747.20 respectively.

[13] The first meeting of creditors with respect to the Proposal was scheduled and held March 14, 2012.

III. The Notice of Disallowance

[14] The Bankruptcy and Insolvency Act (the “BIA”) addresses the process of reviewing claims against a debtor in Section 121:

(1) All debts and liabilities, present or future, to which the bankrupt is subject on the day on which the bankrupt becomes bankrupt or to which the bankrupt may become subject before the bankrupt’s discharge by reason of any obligation incurred before the day on which the bankrupt becomes bankrupt shall be deemed to be claims provable in proceedings under this Act.

Contingent and Unliquidated Claims

(2) The determination whether a contingent or unliquidated claim is a provable claim and the valuation of such a claim shall be made in accordance with section 135. [my emphasis]

[15] Section 135 provides for the review of claims received. In part that section reads:

135 (1) The trustee shall examine every proof of claim or proof of security and the grounds therefor and may require further evidence in support of the claim or security.

(1.1) The trustee shall determine whether any contingent claim or unliquidated claim is a provable claim, and, if a provable claim, the trustee shall value it, and the claim is thereafter, subject to this section, deemed a proved claim to the amount of its valuation.

(2) The trustee may disallow, in whole or in part,

(a) any claim;

(b) any right to a priority under the applicable order of priority set out in this Act; or

(c) any security.

(3) Where the trustee makes a determination under subsection (1.1) or, pursuant to subsection (2), disallows, in whole or in part, any claim, any right to a priority or any security, the trustee shall forthwith provide, in the prescribed manner, to the person whose claim was subject to a determination under subsection (1.1) or whose claim, right to a priority or security was disallowed under subsection (2), a notice in the prescribed form setting out the reasons for the determination or disallowance.

(4) A determination under subsection (1.1) or a disallowance referred to in subsection (2) is final and conclusive unless, within a thirty day period after the service of the notice referred to in subsection (3) or such further time as the court may on application made within that period allow, the person to whom the notice was provided appeals from the trustee’s decision to the court in accordance with the General Rules. [my emphasis]

[16] Form 77 is a prescribed form. An electronic version of that form is included with Bennett on Bankruptcy Precedents,(2^nd edition) which (with my emphasis added) reads in part:

Notice of Disallowance of Claim, Right to Priority or Security or Notice of Valuation of Claim

(Subsection 135(3) of the Act)

Take notice that:

(A) as trustee acting in the matter of the bankruptcy (or proposal) of ______________, I have disallowed your claim (or your right to a priority or your security on the property) in whole (or to the extent of $), pursuant to subsection 135(2) of the Act, for the following reasons:

(Set out the reasons for the disallowance.)

(or)

(B) as trustee acting in the matter of the bankruptcy (or proposal) of __________, I have determined that your contingent or unliquidated claim is a provable claim and have valued it at $ and therefore, it is deemed a proved claim to this amount pursuant to subsection 135(1.1) of the Act.

And further take notice that if you are dissatisfied with my decision in disallowing your claim in whole or in part (or a right to priority or your security or valuation of your claim), you may appeal to the court within the 30 day period after the day on which this notice is served, or within such other period as the court may, on application made within the same 30 day period, allow.

[17] It should be noted that the form requires reasons and that it is the trustee who personally is to make the determination of disallowance.

[18] The form also outlines the appeal procedure and, in particular, the relevant time constraints. The BIA and Form77 refer to the Day “on which this notice is served”. I observe that the word used is “served” and not “received”.

[19] Before proceeding with my analysis, I need to set out a synopsis of my understanding of the factual matrix surrounding the response to the Notice of Disallowance.

IV. Timing and Other Factual Issues

[20] On March 13, 2012 counsel for Your Legal Business Partner Inc. filed the company’s two proofs of claim with the Trustee. The covering letters advised the Trustee that “if you have any questions or concerns please contact the under signed”. The claimant asserts this conveyed the direction that any correspondence in regard to the claims could be sent to Lawrynowicz and Associates at 2592 Weston Road Toronto (the “LA Offices”). The address issues are highlighted below by my underlining.

[21] A corporate profile report for YLBP indicates that the registered head office is 2596 Weston Rd., Suite 200.

[22] On April 10, 2012, less than a month after the first meeting of creditors, the Trustee prepared the two Notices of Disallowance (the “Notices”) which were addressed to “Your Legal Business Partner Inc.” at “2596 Weston Road, 2nd Floor.”

[23] When a proof of claim provides an address for correspondence regarding a claim, to which address should the trustee direct a Notice of Disallowance?

[24] The Notices delivered follow the prescribed form with respect to setting out the statutory appeal rights. There is no notification in regard to the effective date of service or an explicit date by which the appeal should be served. The notices simply indicate that “you may appeal to the court within the 30-day period after the day on which the notice is served.”

[25] The Notices were sent by registered mail on April 13, 2012. The customer receipt indicates that the letter was delivered to “Your Legal Business Partner Inc.” at “2596 Weston Road, 2nd Floor.”

[26] On cross examination the representative of the Trustee firm acknowledged that Trustee did not receive notification when the letter had been delivered. The Trustee did not rely on the Canada Post Tracking document to establish that service had occurred on April 17, 2012.

[27] The Trustee did not expect an acknowledgment from the creditor of receipt of the Notices. As of April 13, 2012 the Trustee was relying on the Canada Post receipt as proof that the notices had been delivered to the creditor. The Trustee did not diarize the deadline for appeal.

[28] As of April 17th the Trustee did not know the exact date of the deadline to appeal the Notices. The Trustee, at a later time, after the receipt of the appeal Notice of Motion sought advice in regard to the calculation of the deadline. The Trustee after the fact determined the effective date of service.

[29] In its responding materials the Trustee took the position that it attended to delivering the Notices to the solicitors of the creditor as per the proof of claim and so, service had been effected.

[30] Under examination the Trustee admitted that its affidavit did not accurately reflect what occurred and that it did not intend on sending the Notices to the solicitor for the creditor but rather to the creditor at its head office.

[31] However in fact, on April 17, 2012 the Notices actually did arrive at the LA Offices at 2592 Weston Road, Toronto. The notices were within an envelope that was addressed to Your Legal Business Partner Inc. at 2596 Weston Road, Toronto.

[32] That day the law firm’s receptionist, Ms. Ruttan contacted Mr. Aragao, a lawyer at LA in regard to an envelope that “a courier” was attempting to deliver. The envelope was from the Trustee and was addressed to YLBP at 2596 Weston Road. The courier advised that he required a signature confirming receipt. Although it was addressed to YLBP at the 2592 address, Mr. Aragao, advised Ms. Ruttan, as a courtesy to the Trustee, to accept the envelope.

[33] There is nothing before me to indicate that Ms. Ruttan had any authority to sign on behalf of YLBP to accept Registered Mail on the company’s behalf.

[34] On April 23, 2012 Mr. Aragao wrote to the Trustee to confirm that that the firm had received the Notices. Mr. Aragao indicated that the Notices had been received by the firm on April 17, 2012. Mr. Aragao did not indicate that YLBP been served with the notices or that he had accepted service of the notices.

[35] The Trustee did not respond to the April 23rd letter. The Trustee did not indicate that it considered April 17th to be the date of effective service.

[36] On May 18, 2012 Mr. Aragao served the Appeal. On May 18, 2012 the Trustee wrote back to acknowledge receipt of the Appeal. The Trustee did not indicate, at that time, that it considered the Appeal to be late.

[37] On June 8, 2012 counsel for the Trustee wrote to Mr. Aragao and again confirmed receipt of the Appeal but did not advise that it considered the Appeal to be late.

[38] The Appeal was scheduled to be heard on Tuesday June 26, 2012. On June 20, 2012 counsel for the Trustee advised that it would take the position that the Appeal had been served one day too late. It was his position that the effective date of service was April 17, 2012 (the date Mr. Aragao acknowledged he had received the notices). Given this date, counsel for the Trustee took the position that the Notice of Motion should have been served by May 17, 2012 as opposed to May 18, 2012.

[39] Was it one day late? If so, does the court have the power to validate the appeal?

V. Time

[40] In its factum before me the Trustee’s position is enunciated:

10. It is the Trustee’s position that YLBP’s Notice of Motion was served outside of the prescribed 30 day time period as set out in section 135(4) of the BIA and as such, being mindful of the case law in connection with the aforesaid provision, the Trustee takes the position that YLBP’s intended appeal of the Trustee’s Notices of Disallowance has been irreparably prejudiced such that the Trustee’s disallowances are final and conclusive.

11. YLBP failed to move before the Court seeking an extension of the 30 day period within the 30 day period commencing the day after it provided confirmation of receipt of the Trustee’s Notices of Disallowance.

[41] In its factum YLBP asserts the belief that “the effective date of service was April 18, 2012 as per the service rules for registered mail in Ontario” and that the position that the Trustee was taking was untenable given the Rules of Civil Procedure and the Rules of the BIA.

[42] After counsel for the Trustee took the position that the Appeal was not served in time counsel for YLBP took the position that the Notices had not been served as per the BIA Rules.

[43] YLBP argues that registered mail provides an ascertainable date of delivery. My problem is determining the correct approach when the date of actual delivery is prior to the deemed date of receipt under the Rules. Assuming that there was ever an effective date of receipt by the claimant corporation.

[44] It is argued that by virtue of the post mark, a clear start date is established which can be relied on by a creditor to determine the effective date of service and to calculate the deadline for the Appeal.

[45] The Trustee can know when it sent the registered letter and thus both sides have a common, verifiable starting point. That would make practical sense in many respects. However there is jurisprudence on the point to consider.

[46] Does the clock start on the date of mailing, or on the date of actual receipt by mail or on the deemed date of receipt by that mail?

[47] Is a written acknowledgement of the date of delivery, in this case, a sufficient basis to deny the right to challenge these disallowances?

[48] On his examination, the Trustee stated that absent the acknowledgment being given, it would defer to the date of mailing. The YLBP factum asserts that the witness acknowledged, as well that when the Trustee sent the Notices it was not aware of the service rules in Ontario, was not aware of case law in regard to an acknowledgment and was not relying on the receipt of an acknowledgment letter from the creditor.

[49] Was the notice of objection too late?

VI. Service Issues

[50] Houlden and Morawetz in the 2003 Annotated Bankruptcy and Insolvency Act, observed at annotation G 69(3):

“In the 1949 Bankruptcy Act (S.94) the 30 days ran from the day of service or mailing of the notice by registered mail. Under this provision, it was held that the 30days for appealing ran from the day of mailing….but the reference to “mailing” was dropped from s.135 (4) in the 1992 amendments. If service is made by mail or courier, since the Bankruptcy and Insolvency Rules do not provide when service is to be effective, reference must be had to the practice of the court in civil actions or matters: Rule 3…” [my emphasis]

[51] Rule 3 under the BIA directs that the courts shall apply their ordinary procedure to the extent that that procedure is not inconsistent with the BIA. These extract’s from Ontario’s Rules of Civil Procedure deal with service:

Manner of Service

16.06 (1) Where a document is to be served by mail under these rules, a copy of the document shall be served by regular lettermail or by registered mail.

Effective Date

(2) Service of a document by mail, … is effective on the fifth day after the document is mailed but the document may be filed with proof of service before service becomes effective.

Where Document Does Not Reach Person Served

16.07 Even though a person has been served with a document in accordance with these rules, the person may show on a motion to set aside the consequences of default, for an extension of time or in support of a request for an adjournment, that the document,

(a) did not come to the person’s notice; or

(b) came to the person’s notice only at some time later than when it was served or is deemed to have been served. [my emphasis throughout]

[52] My reading of the rules is that regardless of the date the document was actually received, the date of mailing plus five days is the date the rules deem to be the date of service, whether receipt is before or after that date. The above provision of rule 16.06(2) is consistent with this interpretation in providing that “proof of service” can be given before or after service is effective.

[53] Thus, regardless of the actual date of delivery, the Rules direct that for the purpose of computing the date of service, the fifth day after mailing is to be treated as the date of receipt.

[54] Even that date can be extended as the Rules were amended as of January 1^st, 2010 to provide:

3.01 (1) in the computation of time under these rules or an order, except where a contrary intention appears,

(a) where there is a reference to a number of days between two events, they shall be counted by excluding the day on which the first event happens and including the day on which the second event happens, even if they are described as clear days or the words “at least” are used;

(b) where a period of seven days or less is prescribed, holidays shall not be counted;

[55] Under the Rules the meaning of a “holiday” includes “any Saturday or Sunday”.

[56] April 13, 2012, perhaps appropriately, was a Friday the 13^th in 2012. Thus the first day of the five day mail service period, as defined by the rules was the following Monday and the fifth day was Friday the 20^thof April.

[57] That being the case it seems to me that the notice of objection received on May 18^th by the Trustee was well within the thirty day period for objection established by section 135 of the BIA.

[58] However the Trustee argues that since an earlier date was acknowledged as the date of actual receipt, it is not necessary to look to either to the BIA or the Rules when “the actual date of the service can be readily determined.” In support of this position I was referred to Park City Products Ltd. (Re), 2001 MBQB 200; 159 Man.R. (2d) 168; 27 C.BR. (4th) 314. In that case Senior Registrar Goldberg held:

24 Safeway moved for an order extending the time allowed for filing of an appeal of the trustee's disallowance. I find that this motion is not necessary. Rule 113 of the B.I.A. Rules is the specific service rule relating to notices of disallowance. It provides that these documents are to be served, or sent by registered mail or courier, methods which result in an ascertainable and verifiable date of service. It is not necessary to look to either the B.I.A. Rules or to provincial civil procedure rules to determine a deemed or effective date of service when the actual date of the service can be readily determined. Queen's Bench Rule 16.06(2) is therefore not relevant.

[59] The present Rule 113 under the BIA however reads in part :

113. The notice of disallowance …provided by the trustee under sub-section of the Act…must be served, or sent by registered mail or courier.

[60] I do not find that there was actual personal service upon the creditor in this case. BIA Rule 13 while providing service may be by registered mail does not address when such service is effective.

[61] Rule 1.04 under the Ontario Rules provides:

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

[62] Similarly my determination of all such matters as Registrar is to be guided by Section 37 of the BIA:

37. Where the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court and the court may confirm, reverse or modify the act or decision complained of and make such order in the premises as it thinks just.

[63] In my view the most just result in this case would be to modify the decision of the trustee based on a liberal interpretation of the service requirements and to hold that the receipt of the disallowance on April 17th, in the unique circumstances of this case, did not constitute effective service, on that date, upon the creditor. The applicable Ontario rule extends the effective date so as to initiate the 30 day appeal period at a later point in time.

VII. Guidance from the Alberta Court of Appeal

[64] However the Trustee’s counsel submits that I need to consider how such a result can be reconciled with the Alberta Court of Appeal’s decision in Tamglass American Inc. v. Goldray Inc. (Trustee of), 2005 ABCA 341; 259 D.L.R. (4th) 108; 380 A.R. 286; 15 C.B.R. (5th) 98.

[65] There, as here, in a proposal situation, a claim was disallowed and the timeliness of the notice of motion was in issue. A number of approaches were considered with respect to whether the appeal motion ought to be heard.

Estoppel

[66] One ground argued was that, by its conduct, the trustee was precluded from insisting on the strict 30 day period. In addressing estoppel the Court of Appeal observed (my emphasis added):

16. The chambers judge found the trustee to be estopped from asserting the earlier limitation start date. Tamglass argues that the chambers judge properly exercised his discretion in concluding that the circumstances of this case support a finding of estoppel against the trustee. But whether or not the facts would support a finding of estoppel does not address whether, as a matter of law, the equitable principle of estoppel is available to relieve Tamglass from the operation of a statutory time limit.

17. Estoppel is not available if its effect would be to nullify a statutory provision that imposes a positive obligation on a party: Maritime Electric Co. v. General Dairies Ltd., 1937 CanLII 293 (UK JCPC), [1937] 1 D.L.R. 609 (P.C.); Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co-operative Ltd., 1994 CanLII 105 (SCC), [1994] 1 S.C.R. 80; Principal Group Ltd. (trustee of) v. Anderson (1997), 1997 ABCA 199, 147 D.L.R. (4th) 229 (Alta. C.A.); F. Hoffman-La Roche AG v. Canada (Commissioner of Patents), [2004] 2 F.C.R. 405, 2003 FC 1381 (T.D.).

18. In Hoffman-La Roche, supra, the applicant sought to preserve a re-issued patent for a drug which had lapsed for non-payment of the annual maintenance fees. Under the Patent Act, if a fee is not paid in time the patent is deemed to have expired. The non-payment was a result of errors made by both the Commissioner and the applicant, and the applicant argued the court has authority to provide equitable relief where a party loses a property right in part because of a government agency's error. The court disagreed, holding at para. 44 that it could not grant such relief where it would contradict the plain terms of the statute.

19 Subsection 135(4) of the BIA is clear and unambiguous. It provides that a disallowance is final and conclusive unless the trustee's decision is appealed within 30 days or unless an application to extend time is made within the same period. The provision enables the trustee in bankruptcy to conduct the affairs of the bankrupt in an orderly manner. To do so, the trustee must know within a reasonable time whether its decisions are final or whether there are to be further proceedings: Re Computine Canada Ltd., 1974 CanLII 1747 (BC SC), [1974] 3 W.W.R. 61 (B.C.S.C.). Deeming disallowances to be final and conclusive within a limited time period assists in the timely distribution of assets contemplated by the BIA. Estoppel is not available, as a matter of law, to nullify the clear terms of the statute.

[67] In coming to my conclusion here I do not rely upon the evidence lead which suggests that the trustee did not know about or rely upon the expiration on the 30 day period until after this motion was brought.

Relief from Forfeiture

[68] Relief from forfeiture was an additional potential ground to allow the appeal to proceed discussed in Tamglass:

20. The chambers judge would have relied, in the alternative, on his jurisdiction to grant relief from forfeiture to permit the filing of the appeal. Section 10 of the Judicature Act, R.S.A. 2000, c. J-2 provides:

Subject to appeal as in other cases, the Court has power to relieve against all penalties and forfeitures and, in granting relief, to impose any terms as to costs, expenses, damages, compensation and all other matters that the Court sees fit.

21. Tamglass relies on this provision and relies as well on s. 183(1) of the BIA, which provides that the Court of Queen's Bench sitting in bankruptcy is a court of equity. Accordingly, Tamglass says, the court has jurisdiction to grant equitable relief, including relief from forfeiture, in appropriate circumstances. Tamglass argues that the chambers judge properly exercised his equitable and statutory jurisdiction to grant relief from forfeiture in the circumstances of this case.

22. However, the equitable jurisdiction of the court to relieve against penalties and forfeitures is applicable only to contractual penalties and forfeitures. The power does not apply to penalties or forfeitures imposed by statute: R. v. Canadian Northern Railway, 1923 CanLII 444 (UK JCPC), [1923] 3 D.L.R. 719 (P.C.). Further, this Court has interpreted the term "penalty" in the relevant provision of the Judicature Act (the predecessor to s. 10) to mean "contractual penalty"; the provision does not grant a new and extended right to intervene in any case of a forfeiture or penalty: Olympia & York Developments Ltd. v. Calgary (City) (1983), 1983 ABCA 168, 26 Alta. L.R. (2d) 307 (C.A.) at para. 12 (see also Mullen v. Flin Flon (City) (2000), 2000 MBCA 104, 193 D.L.R. (4th) 300 (Man. C.A.) for a similar interpretation of section 35 of the Court of Queen's Bench Act, S.M. 1988-89, c. 4). More recently, this Court has held that the doctrine does not apply to relieve against the mandatory operation of a rule of civil procedure, noting that "courts have no inherent power to do what statutes forbid": Hansraj v. Ao, [2004] A.J. No. 734, 2004 ABCA 223 at para. 62-66.

23. Tamglass relies upon the Supreme Court of Canada decision in Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490 as setting out the test for relief from forfeiture. In that case, one of the questions before the Court of Appeal was whether the doctrine, and specifically s. 10 of the Judicature Act, could apply to insurance contracts that are regulated by statute. The Supreme Court of Canada decided the case on other grounds and did not directly address that issue. In any event, the case before us does not involve a private contract that is subject to statutory regulation; the statutory forfeiture from which Tamglass seeks relief is a mandatory matter of procedure.

24 Subsection 135(4) imposes a clear statutory time limit for the filing of an appeal. Granting relief from that time limit would, in effect, amount to amending the statute to substitute a different deadline for the one selected by the legislature. The court's power to grant relief from forfeiture cannot be used in these circumstances.

[69] I am not totally convinced that a provision requiring an appeal within 30 days and providing that if not appealed the matter is final amounts, in this case, to the statute “forbidding” the granting of an extension where equity would otherwise dictate the courts should still be entitled in appropriate circumstances to exercise their equitable jurisdiction.

[70] However my decision does not, in this case, require me to resort to a resolution of the issue of the extent of this court’s power.

Proof of Service

[71] The Alberta court then addressed the lack of clear proof of when the document was actually received:

25 On the basis of the foregoing discussion the trustee's appeal must succeed, but only if we assume that the notice of disallowance was served more than 30 days before Tamglass filed its appeal. Both the registrar and the chambers judge accepted the trustee's assertion of the January 20th delivery date, notwithstanding the contrary evidence of Tamglass's representative. However, neither seems to have considered the requirements for effective service under the BIA or whether the evidence presented by the trustee was sufficient to prove service.

26 Rule 113 of the Bankruptcy and Insolvency General Rules, C.R.C. 1978, c. 368 requires that a notice of disallowance be "served, or sent by registered mail or courier". The affidavit filed by the trustee deposes that the trustee sent a notice of disallowance by registered mail to Tamglass on January 7, 2004. It further deposes that tracking information from Canada Post's website indicates the notice was successfully delivered to Tamglass at 12:55 p.m. on January 20, 2004. However, the exhibit relied upon, a printout from Canada Post's website, bears no signature as would be expected on proof of delivery by registered mail. Further, Tamglass has filed a conflicting affidavit, wherein an employee of Tamglass deposes that the company received the notice on January 26, 2004. Is this evidence sufficient to establish the date on which Tamglass received the notice of disallowance? The question was not addressed by the chambers judge and may not have been argued before him. It also was not argued before this court on appeal.

27 Accordingly, we direct that this matter be returned for a trial to determine the actual date of delivery of the notice of disallowance.

[72] In my view, while the Court of Appeal directed that the matter go back for trial of the issue of the date of delivery, it does not address how that date will impact the determination of the effective date of “service”.

[73] In Caron v. Canada, [1996] F.C.J. No. 224, the Court considered the deeming provision with respect to service similar to Ontario’s Rule 16.06(2) which provides that service is deemed effective on the 5th day after a document is mailed. The Court held that the Federal legislation that it was interpreting, in particular the Customs Act, contained no such deeming provision with respect to the service of a required document and therefore it reasoned that had Parliament intended to have a similar deeming provision with respect to the service of a document in Federal legislation then Parliament would have included such a section in the legislation.

[74] That decision is distinguishable from the matter before me as the Customs Act has no provision providing for resort to the Ontario Court’s Rules.

[75] While these reasons were being drafted, on March 18, 2013 the Court of Appeal of British Columbia released its decision in Temple Consulting Group Ltd. v. Abakhan & Associates Inc., 2013 BCCA 119. This was a case concerning the timeliness of appeals of disallowances of claims made in the bankruptcies of Steven B. Friedland and Western Liquid Funding Inc.

[76] The following extract from the headnote catchlines provides a quick synopsis of the Court of Appeal’s treatment of this issue:

APPEAL — Re-hearing — Appellant applied for reconsideration — Appellant, creditor of bankrupts, filed notice of claim — Trustee in bankruptcy disallowed claim on July 18, 2011 — Notice of disallowance was delivered by e-mail to appellant's counsel — Appellant filed notice of appeal on August 18, 2011 — Judge declared that appellant failed to appeal trustee's disallowance of its claim within 30-day time-limit imposed by s. 135(4) of Bankruptcy and Insolvency Act (Can.) — On appeal Court of Appeal concluded that appellant was obligated to file application to appeal trustee's disallowance of claim within 30 days according to Supreme Court Civil Rules (B.C.) — Appellant's new counsel then realized that trustee's notice of disallowance was served electronically on appellant's former counsel at 4:07 p.m. on July 18, 2011 — Under Civil Rules material filed after 4:00 p.m. was deemed delivered following business day and if that were case then appellant's appeal would have been filed in time — Application dismissed — Appeal should be re-opened to extent of considering whether to admit fresh evidence — Appellant could not satisfy due diligence criterion — Information was available to it before application was heard in Supreme Court — It was not clear that evidence would be determinative if it was admitted — Even if evidence that that notice was served electronically at 4:07 p.m. on July 18, 2011 was admitted, it would be necessary to consider effect of Bankruptcy and Insolvency General Rules (Can.), and Civil Rules, relationship between them, case law related to service and exchanges between counsel — Admission of fresh evidence was not in interests of justice.

[77] Thus it would appear that at this stage, in this case it is appropriate for this court to address the deeming provisions in determining whether the appeal was filed in time and for me to consider it would be necessary to consider effect of Bankruptcy and Insolvency General Rules (Can.), and Ontario’s Civil Rules, and the relationship between them.

[78] Ultimately the factum filed by counsel for the trustee submits that “given the fact we know with certainty the Notices of Disallowance were received by YLBP on April 17, 2012 there is no reason to defer to any “deeming provisions” with respect to service.”

[79] Based on the above analysis I respectfully disagree with that conclusion. If I am in error in my assessment I still would be inclined to carefully examine whether in any event an effective Notice of Disallowance was ever in fact served.

VIII. “Provable in Bankruptcy”

[80] If the Notice of Objection was late, was the Notice of Disallowance document a document that complied with the BIA requirements so as to be an effective and enforceable document?

[81] Of particular interest to me in the case is the proper understanding of the issue to actually be addressed in making a determination as to whether a claim received is “provable in bankruptcy”.

[82] In considering the appropriate interpretation to be given to that phrase I first turned to the definitions set out in Section 2 of the BIA. There we find these two items:

• “claim provable in bankruptcy” “provable claim” or “claim provable” includes any claim or liability provable in proceedings under the Act by a creditor”

• “creditor” means a person having a claim provable as a claim under this Act;

[83] There is however no statutory definition in the BIA of the word “provable”.

[84] In seeking assistance on approaches to the interpretation of that term I turned to the website of the Insolvency and Trustee Service Australia, which administers and regulates Australia's personal insolvency system. Their analysis can be found at

[https://www.itsa.gov.au/creditors/resources/glossary#Provable debt]:

Provable debt

A debt covered by bankruptcy. This is an amount that a creditor is entitled to claim for in a bankruptcy. If it is accepted by the trustee the creditor will participate in any distribution that may arise by way of a dividend.

Provable debts

Debts that are included in a bankruptcy, debt agreement or personal insolvency agreement (collectively called "administrations") are referred to as "provable debts". While most debts are included in an administration, some are not. This section will explain the differences in the types of debts that can or can’t be considered in an administration.

There are certain classes of debts under the Bankruptcy Act:

Provable debts

Most provable debts are extinguished after the administration ends. This means that when a bankruptcy, debt agreement or personal insolvency agreement ends, a debtor is not required to pay any outstanding amount and the creditor cannot take any further action against the debtor or their property.

• Unsecured debts incurred prior to the administration, such as credit cards, personal loans, and trade debts are examples of provable debts.

• Secured debts, such as a mortgage, are also generally included as provable debts if there is a shortfall following sale (or, if not sold, the value of the security is less than the amount owed). Once the debtor defaults on payments, the creditor has a right to take action in accordance with the security agreement, which might include repossessing and selling the asset. Any shortfall between the sale of the asset and the debt is covered by the Bankruptcy Act and is provable.

Non-provable debts

Non-provable debts are not covered in administrations and the debtor still has an obligation to pay these debts. Creditors owed these debts cannot claim in the administration and cannot participate in dividends that may be paid. However, creditors with non-provable debts may pursue the debtor for payment of the debt even if the debtor is a party to an active administration.

• Non-provable debts are not extinguished after the administration ends and the debtor still has to pay these.

• Non-provable debts are set out in the Bankruptcy Act and include fines and child support debts.

Debts not extinguished by bankruptcy

These are debts that a bankrupt is still liable to pay after discharge from bankruptcy. The debts may or may not be provable – that is:

• some are provable and not extinguished: e.g. child support debts

• some are not provable and not extinguished: e.g. …fines or penalties imposed by a court.

• Provable debts that were incurred by fraud are not extinguished.

IX. Guidance from the Supreme Court of Canada on Provable Claims

[85] An important element of this issue was addressed by the Supreme Court of Canada in Rizzo & Rizzo Shoes Ltd. (Re)., 1998 CanLII 837 (SCC), [1998] 1 S.C.R. 27; 36 O.R. (3d) 418; 154 D.L.R. (4th) 193; 106 O.A.C. 1; 50 C.B.R. (3d) 163. Justice Iacobucci delivered the decision of the Court made up of Justices Gonthier, Cory, McLachlin, Iacobucci and Major.

[86] The headnote outlines the circumstances of that case:

A bankrupt firm's employees lost their jobs when a receiving order was made with respect to the firm's property. All wages, salaries, commissions and vacation pay were paid to the date of the receiving order. The province's Ministry of Labour audited the firm's records to determine if any outstanding termination or severance pay was owing to former employees under the Employment Standards Act ("ESA") and delivered a proof of claim to the Trustee. The Trustee disallowed the claims on the ground that the bankruptcy of an employer does not constitute dismissal from employment and accordingly creates no entitlement to severance, termination or vacation pay under the ESA. The Ministry successfully appealed to the Ontario Court (General Division) but the Ontario Court of Appeal overturned that court's ruling and restored the Trustee's decision. ... At issue here is whether the termination of employment caused by the bankruptcy of an employer gives rise to a claim provable in bankruptcy for termination pay and severance pay in accordance with the provisions of the ESA.

[87] At the heart of this conflict was an issue of statutory interpretation. The Court held that although the plain language of ss. 40 and 40a of the ESA suggests that termination pay and severance pay are payable only when the employer terminates the employment, statutory interpretation cannot be founded on the wording of the legislation alone. The words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

[88] Moreover the Court noted that s. 10 of Ontario's Interpretation Act provided that every Act "shall be deemed to be remedial" and directs that every Act shall "receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit".

[89] The headnote concludes:

As all dismissed employees are equally in need of the protections provided by the ESA, any distinction between employees whose termination resulted from the bankruptcy of their employer and those who have been terminated for some other reason would be arbitrary and inequitable. Such an interpretation would defeat the true meaning, intent and spirit of the ESA. Termination as a result of an employer's bankruptcy therefore does give rise to an unsecured claim provable in bankruptcy pursuant to s. 121 of the Bankruptcy Act for termination and severance pay in accordance with ss. 40 and 40a of the ESA.

[90] At the outset of the Court’s reasons ,Justice Iacobucci outlines the relevant statutory provisions which included:

Bankruptcy Act, R.S.C., 1985, c. B-3

121. (1) All debts and liabilities, present or future, to which the bankrupt is subject at the date of the bankruptcy or to which he may become subject before his discharge by reason of any obligation incurred before the date of the bankruptcy shall be deemed to be claims provable in proceedings under this Act.

Interpretation Act, R.S.O. 1990, c. I.11

10. Every Act shall be deemed to be remedial, whether its immediate purport is to direct the doing of anything that the Legislature deems to be for the public good or to prevent or punish the doing of any thing that it deems to be contrary to the public good, and shall accordingly receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit.

[91] I note as well that the present federal Interpretation Act provides:

Enactments deemed remedial

12. Every enactment is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects. [ R.S., c. I-23, s. 11.]

[92] What would best ensure the attainment of the objects of the BIA in this case?

[93] For my purposes it is necessary to consider the history of Rizzo before the lower courts as described by Justice Iacobucci:

8 In addressing this question, Farley J. began by noting that the object and intent of the ESA is to provide minimum employment standards and to benefit and protect the interests of employees. Thus, he concluded that the ESA is remedial legislation and as such it should be interpreted in a fair, large and liberal manner to ensure that its object is attained according to its true meaning, spirit and intent.

9 Farley J. then held that denying employees in this case the right to claim termination and severance pay would lead to the arbitrary and unfair result that an employee whose employment is terminated just prior to a bankruptcy would be entitled to termination and severance pay, whereas one whose employment is terminated by the bankruptcy itself would not have that right. This result, he stated, would defeat the intended working of the ESA.

10 Farley J. saw no reason why the claims of the employees in the present case would not generally be contemplated as wages or other claims under the BA. He emphasized that the former employees in the case at bar had not alleged that termination pay and severance pay should receive a priority in the distribution of the estate, but merely that they are provable (unsecured and unpreferred) claims in a bankruptcy. For this reason, he found it inappropriate to make reference to authorities whose focus was the interpretation of priority provisions in the BA.

[94] That decision was reversed at the Ontario Court of Appeal. Austin J.A., writing for the court concluded that, because the employment of Rizzo's former employees was terminated by the order of bankruptcy and not by the act of the employer, no liability arose with respect to termination, severance or vacation pay. The order of the trial judge was set aside and the Trustee's disallowance of the claims was restored.

[95] Leave was eventually obtained to have the substance of the issue in Rizzo was heard at the Supreme Court. Justice Iacobucci identifies the key issue which resonates in the matter before me:

20 At the heart of this conflict is an issue of statutory interpretation. Consistent with the findings of the Court of Appeal, the plain meaning of the words of the provisions here in question appears to restrict the obligation to pay termination and severance pay to those employers who have actively terminated the employment of their employees. At first blush, bankruptcy does not fit comfortably into this interpretation. However, with respect, I believe this analysis is incomplete.

21 Although much has been written about the interpretation of legislation (see, e.g., Ruth Sullivan, Statutory Interpretation (1997); Ruth Sullivan, Driedger on the Construction of Statutes (3rd ed. 1994) (hereinafter "Construction of Statutes"); Pierre-André Côté, The Interpretation of Legislation in Canada (2nd ed. 1991)), Elmer Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach upon which I prefer to rely. He recognizes that statutory interpretation cannot be founded on the wording of the legislation alone. At p. 87 he states:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.[my emphasis]

Recent cases which have cited the above passage with approval include: R. v. Hydro-Québec, 1997 CanLII 318 (SCC), [1997] 3 S.C.R. 213; Royal Bank of Canada v. Sparrow Electric Corp., 1997 CanLII 377 (SCC), [1997] 1 S.C.R. 411; Verdun v. Toronto-Dominion Bank, 1996 CanLII 186 (SCC), [1996] 3 S.C.R. 550; Friesen v. Canada, 1995 CanLII 62 (SCC), [1995] 3 S.C.R. 103.

22 I also rely upon s. 10 of the Interpretation Act, R.S.O. 1980, c. 219, which provides that every Act "shall be deemed to be remedial" and directs that every Act shall "receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Act according to its true intent, meaning and spirit".

27 In my opinion, the consequences or effects which result from the Court of Appeal's interpretation of ss. 40 and 40a of the ESA are incompatible with both the object of the Act and with the object of the termination and severance pay provisions themselves. It is a well established principle of statutory interpretation that the legislature does not intend to produce absurd consequences. According to Côté, [The Interpretation of Legislation in Canada, 2nd ed. 1991,] an interpretation can be considered absurd if it leads to ridiculous or frivolous consequences, if it is extremely unreasonable or inequitable, if it is illogical or incoherent, or if it is incompatible with other provisions or with the object of the legislative enactment (at pp. 378-80). Sullivan echoes these comments noting that a label of absurdity can be attached to interpretations which defeat the purpose of a statute or render some aspect of it pointless or futile (Sullivan, Construction of Statutes, supra, at p. 88).

[96] The wording of the conclusion to the judgment is instructive:

“I would allow the appeal and set aside paragraph 1 of the order of the Court of Appeal. In lieu thereof, I would substitute an order declaring that Rizzo's former employees are entitled to make claims for termination pay (including vacation pay due thereon) and severance pay as unsecured creditors…. [my emphasis].

[97] I would interpret this to mean that the parties could submit details of their individual termination claims, as such claims had been found to be properly “provable” in bankruptcy, but had yet to be satisfactorily “proven”.

[98] Having determined that such a distinction is appropriate and apparently has been recognized by the Supreme Court of Canada in Rizzo, I come to examining what happened to date in the matter before me.

[99] In my view statutory interpretation is properly the key element here. If, after a full review of evidence it is determined that no claim was legally possible then the -trustee would be correct in ruling claim was not provable.

X. Was there an effective “Notice of Disallowance”?

[100] The operative portions in each Form 77 sent to YLBP (with my emphasis added throughout) read as follows:

“Take notice that

As trustee acting in the matter of the proposal of Thomas Albert Botly Bell, we have disallowed your claim (or your right to priority or your security on the property) in whole, pursuant to subsection 135 (2) of the Act, for the following reasons:

The debtor has disputed this claim and advises that the amount claimed is not owing to you.

And further take notice that if you are dissatisfied with our decision in disallowing your claim in whole (or a right to rank or your security or valuation of your claim), you may appeal to the court within the 30 day period after the day on which this notice is served or within any other period that the court may, on application made within the same 30 day period, allow.

Dated at the City of Toronto in the province of Ontario, this 10^th day of April 2012.

msi Spergel inc. – trustee

per: Alan Spergel”:

[101] When an incorporated trustee in bankruptcy is involved there is some issue as to who is in fact making the decision. The individual signing the disallowance was Alan Spergel, yet in this case the affidavit filed on behalf of the trustee was filed by Mr. Frank Kisluk. In his affidavit he indicates that the following:

“1. I am a Trustee in bankruptcy and senior vice president with MSI Spergel Inc. trustee in connection with the proposal of Thomas Albert Buckley Bell and as such have personal knowledge of the matters to which I hereinafter deposed….Where I do not have first hand knowledge the information to which I depose I have indicated the source of my information and do verily believe same to be true.”

[102] In a section of his affidavit entitled “The disallowances:” Mr. Kisluk describes his discussions with Dr. Bell, as the Proponent of the Proposal under the BIA. The operative paragraphs of the affidavit read as follows:

26. The Trustee has reviewed YLBP’s of proofs of claim with the Proponent. The Proponent vehemently denies YLBP’s claims and confirmed that the claims are currently being disputed in various Superior Court proceedings.

27. The Trustee attended to obtaining and reviewing a “Legal Proceedings” brief prepared by the Proponent’s solicitor handling the litigation which reveals that the subject matter of YLBP’s claims are complicated and factually complex. …The Court will note that there are crossclaims, third party claims and counterclaims at issue.

28. The Trustee is of the opinion YLBP’s claim is at best a contingent claim however based on the voluminous amount of conflicting material the Trustee reviewed, including the Proponent’s Statements of Defence to the Statements of Claim, the Trustee is not in a position to value YLBP’s claim and has therefore proceeded to implement the procedure provided for in section 121(2) of the BIA by disallowing the two claims.”

[103] At paragraphs 29 and 30 of the affidavit the following appears with respect to the subject claims.

29. With respect to YLBP’s proof of claim for the sum of $1,237,624.00, the Trustee made the following observations:

a. The Proof of Claim begins by referencing a “second mortgage” in the amount of $1,045,999.17 however the schedule annexed thereto reflects allegations of two loans advanced in the sum of $75,000 on August 12, 2008 and $643,350.17 on January 7, 2009 for a total of $718,358.17. The Trustee is advised by the Proponent that no such mortgage exists. The proof of claim is filed as unsecured;

b. Interest is reflected at $137,996.30 accruing at the fixed rate of 12% per annum however no evidence has been adduced in support of the interest rate claimed. Further it would appear that the $137,996.30 interest is already included in the $1,045,999.70 total as per YLBP’s schedule;

c. The Trustee also notes that it appears no payments were made towards the alleged advances made in August 2008 and January 2009 towards either towards principal and/or interest such that the amounts claimed are statute barred in accordance with the Ontario Limitations Act;

d. The Proponent has disputed any of the legal fees claimed by YLBP totalling the sum of $42,444.74.

[104] With regard to the second proof of claim for a lesser sum the affidavit continues:

30. With respect to YLBP’s Proof of Claim for the sum of $425,742.20 the Trustee made the following observations:

a. YLBP claims unspecified “liquidated damages” in the sum of $342,950.60 and $73,125.97. These figures do not total the $425,747.20 claim;

b. The schedule attached begins with an opening balance as at July 30, 2008 in the sum of $224,182.71 and a further balance of the same date of $54,088.41. There is no indication as to what security if any underpins these claims;

c. Further, as is the case with YLBP’s other claim, it appears that no interest and/or principal payments were made from July 30, 2008 be the date of the alleged initial balance to February 21, 2012 being the date of the Proponents filing of his Proposal such that any amounts claimed are also statute barred pursuant to the provisions of the Ontario Limitations Act;

d. There is no indication who advanced the funds and certainly no indication that the funds were advanced by YLBP.

[105] The Trustee’s affidavit also notes ;

31. In undertaking its due diligence, the Trustee attended to obtaining a copy of the complaint filed by the Proponent with the Law Society of Upper Canada ….The Proponent sets out therein his position with respect to the alleged legal fees that YLBP has invoiced him for which include, inter alia, the Proponent’s allegation that at no time did Calin explain to him that he would be personally liable for the costs of any services rendered by YLBP to any of the Proponent’s corporations.

32. The Trustee notes that YLBP’s claim for legal costs totals $52,115.36 and forms the subject matter of the pending litigation.

XI. What is to be Done?

[106] In my view it is not possible to enhance the grounds for disputing the plaintiffs’ claims by way of a supplementary affidavit. Adding new grounds surely ought to extend the time for appealing on the basis of those grounds.

[107] What is to be done is the question. How is the Trustee to deal with “claims that are “complicated and factually complex”?

[108] I am not convinced that section 215 (2) is intended to allow the Trustee to simply reject the claim rather than fully investigating it.

[109] I recognize that a trial of an issue can be expensive and in most bankruptcies a plaintiff is looking at a potentially worthless paper judgment. However the claimant and perhaps other creditors need to evaluate such claims and their economic interests. Creative counsel can come up with methods of abbreviating the process.

[110] I again note the direction of Ontario Rule 1.04 (1.1):

1.04 (1) These rules shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.

(1.1) In applying these rules, the court shall make orders and give directions that are proportionate to the importance and complexity of the issues, and to the amount involved, in the proceeding.

[111] A perfunctory disallowance at this stage, based on the grounds stated, does not accord with my present view of the statutory intent.

[112] I am left to consider what matter to deal with pending litigation of substance which is on-going at the date of filing of a proposal or the date of a bankruptcy.

[113] It is not uncommon for leave to be granted for an action to proceed in the civil courts, particularly where there are a number of other parties and the involvement of the bankrupt is necessary to enable a complete story to be before the court. Terms are often proposed which in effect when state enforcement of any judgment against the bankrupt to allow the results of the litigation to be addressed by the Trustee and the inspectors as appropriate.

[114] Experienced litigation counsel are not surprised when a new client tells them that the other side’s claim is entirely worthless. Experience shows that such a view is rarely accurate and that instead there is often some middle ground established, either in the pretrial process or at trial.

[115] To disallow a claim, in such cases, simply because the amount claimed may not be accurate to the penny seems inappropriate and unjustified. I do not think this falls within the statutory intent of the definition of “not provable in bankruptcy”.

[116] The Trustee can establish a reserve for the potential claims at the time of making any interim distributions. I am not satisfied that a disallowance is appropriate on the basis of the matter is complex and considered by the bankrupt to be worthless.

[117] To take such an approach would encourage all defendants in substantial and complex cases to consider making a proposal with a view to denying any recovery to the plaintiff on a pre-emptory basis.

[118] Conversely, in appropriate cases where it is in the interest of all creditors to resolve the matter relatively promptly, the Trustee will need to come to a determination as to whether or not the claim is “provable”. As outlined above I interpret that term to mean incapable of being proven as recoverable at law. If there is a statutory reason why a claim cannot be made, then the Trustee may come to that determination and disallow the claim. Then, as in Rizzo, the court can review that assessment of the legal position with a view to finalizing the legal question underlying the claim.

[119] It seems to me that a clear limitation period which has expired might be such a circumstance. In that case the Trustees reasons for the discharge would make clear the applicable limitation period and the reason why the claim was being disallowed. In this case that was not done in the notice delivered. The affidavit raises the Limitations Act but does not address the potential applicability of matters such as “discoverability” or an “acknowledgment of liability” extending the limitation period.

[120] Similarly I am without any guidance from the parties at this stage as to the possible applicability of the longer limitation periods found in Real Property Limitations Act R.S.O. 1990, Chapter L.15.

[121] More importantly, I note that the litigation which underlies the disallowed claims was commenced by way of Notices of Action dated July 30, and August 10, 2010. There would appear to be no explanation from the Trustee as to why the commencement of that litigation which not toll any applicable limitation period. Otherwise virtually all pending litigation would be wiped out if defendants could require the proof of claim in the bankruptcy to be filed within two years of the arising of the cause of action notwithstanding that an action against the bankrupt had previously been commenced in time.

[122] Similarly Section 135 could be used to address family law related claims for matters such as child access or custody. Such claims are not claims capable of being determined and “proven in bankruptcy”. Such claims would properly be disallowed as they ought to instead be resolved in a different forum.

[123] More difficult are claims where after a full investigation, the trustee is satisfied the claim is simply not based on credible evidence. In such cases the successful appeal of such a disallowance will be dependent on the claimant meeting the onus of establishing that the trustee’s determination was unfounded.

XII. DISPOSITION

[124] As noted above in extract from the Supreme Court of Canada’s decision in Rizzo, Justice Farley concluded in that case that concluded that the ESA is remedial legislation and as such it should be interpreted in a fair, large and liberal manner to ensure that its object is attained according to its true meaning, spirit and intent.

[125] In my view the Bankruptcy and Insolvency Act of Canada is also a form of remedial legislation and as such it too should be interpreted in a fair, large and liberal manner to ensure that its object is attained according to its true meaning, spirit and intent.

[126] To allow this claim to be stopped dead in its tracks at this stage in the insolvency proceedings relating to Dr. Bell would not accord with my view of the true meaning spirit and intent of the BIA.

[127] As a consequence I am holding that the notice of appeal is to be treated as timely. Because the parties have not been given a full opportunity to make submissions with respect to whether or not the Trustee’s determination ought to be upheld or set aside, I am directing that once my decision with respect to the timeliness of the appeal becomes final, the parties canvas whether or not, having regard to my comments in these reasons, a resolution can be reached between them without the need for further hearing. If no resolution is possible, then the parties schedule a return date for the balance of the motion before me.

[128] I am reserving any determination with respect costs of this portion of the motion until all the matters raised in the initial notice of motion have been addressed.

Registrar D. E. Short

DATE: June 3, 2013

B. 9