COURT FILE NUMBER : BK-24-224-33 DATE : 2025/02/25 ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY AND INSOLVENCY IN THE MATTER OF THE BANKRUPTCY OF NUVOOLA INC. OF THE CITY OF OTTAWA, IN THE PROVINCE OF ONTARIO BEFORE: Justice Stanley J. Kershman COUNSEL : Roger Jaipargas and Douglas Smith, for the Royal Bank of Canada Marie-Andree Mallette, for the Nuvoola Inc. on October 28, 2024 Kevin Zhou, for the Debtor on February 3, 4, and 10, 2025 Falon Milligan, for Export Development Canada on October 28, 2024 HEARD: October 28, 2024, February 3, 4, and 10, 2025 in Ottawa REASONS FOR DECISION Kershman J. Introduction [ 1 ] An application for a bankruptcy order was brought by the Royal Bank of Canada (“Bank”) against Nuvoola Inc. (“Nuvoola” or “Debtor”). It was issued on July 9, 2024 and a dispute was filed by the Debtor. [ 2 ] Cross-examinations were held of both Mr. Tsao on behalf of the Bank and Mr. Reniere on behalf of the Debtor. [ 3 ] At the commencement of the proceedings on August 20, 2024, the Debtor raised the issue of jurisdiction regarding the hearing of the bankruptcy application. At a case conference held on September 13, 2024, the issue of jurisdiction was raised again. The court, in its endorsement dated September 13, 2024, stated that it would deal with the jurisdictional issue at trial. [ 4 ] After hearing the matter, the court delivered an oral decision and indicated more complete written reasons would follow. These are the written reasons. Factual Background [ 5 ] Nuvoola Inc. is an information technology company dealing in artificial intelligence that was incorporated under the Canada Business Corporations Act , R.S.C., 1985, c. C-44 (“CBCA”). [ 6 ] The Bank has a commercial branch at 90 Sparks Street, Ottawa, Ontario, which did business with the Debtor. The Debtor began a relationship with the Bank in or around 2013 when it was first issued a credit card. [ 7 ] On November 14, 2017, Nuvoola Inc. signed a General Security Agreement (“GSA”) in favour of the Bank, whose address was listed at 90 Sparks Street, 2 nd Floor, Ottawa, Ontario, K1P 5P6. The GSA secured all of the Debtor’s assets. A financing statement was registered under the Personal Property Security Act , R.S.O. 1990, c. P.10. [ 8 ] A cash collateral agreement, dated July 30, 2019, was entered into between the Debtor and the Bank. The collateral held was a GIC for $20,000. The address listed for the Debtor is 560 Lacolle Way, Ottawa, Ontario. [ 9 ] Paragraph 18 of the Cash Collateral Agreement reads as follows: “This agreement shall be governed by and construed in accordance with the laws of the Province in which the branch of the Bank referred to in this agreement is located.” [ 10 ] A Commitment Letter dated October 11, 2022 was entered into between the Debtor and the Bank for $500,000. The address listed for the Debtor is Suite 101, 560 Lacolle Way, Ottawa, Ontario, K4A 0N9. Page 4 of the Commitment Letter says that the governing law jurisdiction will be the Province of Ontario. [ 11 ] In addition, the Commitment Letter contains a series of Terms and Conditions. At page 4 of the Terms and Conditions, there is a paragraph called “Governing Law”, which reads as follows: This Agreement shall be constructed in accordance with and governed by the laws of the Province identified in the Governing Law Jurisdiction section of this Agreement and the laws of Canada applicable therein. The Borrower irrevocably submits to the non-exclusive jurisdiction of the courts of such Province and acknowledges the competence of such courts and irrevocably agrees to be bound by a judgment of any such court. [ 12 ] A superseding Commitment Letter dated December 14, 2022, for the amount of $500,000 was entered into. The address for the Debtor is shown as Suite 101, 560 Lacolle Way, Ottawa, Ontario, K4A 0N9. The reason for the superseding Commitment Letter was to acknowledge the change in a lender who lent for tax credits. Page 4 of this Commitment Letter says that the governing law jurisdiction is the Province of Ontario. [ 13 ] The same governing law paragraph and the same Terms and Conditions of the October 11, 2022 Commitment Letter are also included in the December 14, 2022 Commitment Letter together with the governing law jurisdiction to be the Province of Ontario. [ 14 ] A letter from the Bank to Nuvoola Inc. dated January 19, 2023 indicated that the December 14, 2022 Commitment Letter superseded the October 11, 2022 Commitment Letter. The address of the Debtor was Suite 101, 560 Lacolle Way, Ottawa, Ontario, K4A 0N9. [ 15 ] A credit card limit increase dated December 10, 2019 increased Mr. Reniere’s credit card to $15,000. The document was signed by Mr. Reniere and the address on the document is Suite 101, 560 Lacolle Way, Ottawa, Ontario, K4A 0N9. [ 16 ] A second credit card limit increase dated August 28, 2023 increased Mr. Jean-Marc Taillon’s credit card to $37,500. The address for the Debtor in this document is 1819 Heatherstone Crescent, Ottawa, Ontario, K4A 4P2. [ 17 ] A Visa credit card statement from June 4, 2024 to July 3, 2024 was also included as part of the evidence which showed the address for the Debtor and Mr. Reniere at 1819 Heatherstone Crescent, Ottawa, Ontario, K4A 4P2. [ 18 ] A series of bank statements for account number 00666-100-475-3 for the Debtor from December 2023 to July 2024 were produced which showed the address of the Debtor at 1819 Heatherstone Crescent, Ottawa, Ontario, K4A 4P2. [ 19 ] A bank statement showed the balance owing by the Debtor to the Bank as of July 31, 2024, at zero because the amount had been transferred to the Special Loans Department. The account was closed out. The balance transferred to the special loans department was -$24,606.71. Issues: [ 20 ] The following are the issues in this matter:
- What is the locality of the Debtor?
- Has the Debtor committed an act of bankruptcy as defined by s. 43 of the BIA?
- Was the bankruptcy application commenced for an improper purpose?
- Is there a reason why the bankruptcy order should not be made forthwith? Issue #1 - What is the locality of the Debtor? Bank’s Position [ 21 ] The Bank argues that, under s. 43(5) of the BIA, the application for a bankruptcy order must be filed in the court with jurisdiction over the locality of the Debtor. It further submits that the application was properly filed in Ottawa, notwithstanding the Debtor’s claim that its head office moved to Quebec in 2018 and that some of its business operations have been based there since that time. [ 22 ] The Bank argues that the statutory definition of the “locality of the Debtor” as set out in s. 2(1) of the BIA mandates a broader assessment of the Debtor’s ties to a location, beyond the current location or activities of its registered office. The Bank relies on Flax Investment Ltd. (Re) (1979), 32 C.B.R. (N.S.) 65 (Ont. Sup. Ct.) , at p. 69 . [ 23 ] In Flax Investment Ltd. (Re) , the court, at p. 70, dealt with the residency of the company. The court said: A corporation is resident where its seat of management is located, and a corporation may be resident in more than one place. In this case, the head office of the company was at all times in Toronto. The accounting books and records were moved to Toronto in the Fall of 1978. Mr. Hunter, the president of the company and one of its beneficial shareholders resided in Toronto, had his office in Toronto and did business in Toronto on behalf of the company, although he also spent a substantial part of the year in Florida and some time in Manitoba. Mr. Procter, the other director and secretary of the company, resided in Manitoba, and, as I have said, there is no evidence that he was ever in Toronto during the year. The company was registered to do business in Manitoba, and it leased land and equipment in Manitoba for its farming operations which were managed by Square One. [ 24 ] The Bank argues that the Debtor carried on business in the Ottawa area sometime during the year prior to the bankruptcy. It argues that the location of the Debtor’s principal (Mr. Reniere), the company banking activities, and the place where the banking documents were executed are all relevant indicators of business activity in Ottawa: see Statham v. 1414695 Alberta Ltd. , 2017 SKQB 193 , at para. 10 . [ 25 ] It also claims that the Debtor has irrevocably attorned to the jurisdiction of the courts based on the Commitment Letter dated December 14, 2022, and the various paragraphs contained therein. [ 26 ] The Bank contends that the locality of the Debtor and the proper jurisdiction for hearing of this matter is Ottawa for the following reasons: i. Mr. Reniere admitted during his evidence that Nuvoola’s website listed an Ontario office in order to facilitate business meetings and meetings with potential financiers; ii. Mr. Reniere’s email template shows that Nuvoola has an office in Ontario; iii. Mr. Reniere admitted that the “internal accounting records” of Nuvoola are with the accounting firm of Turner Moore in Ottawa; iv. The RBC credit card statements and account statements of Nuvoola were addressed to Nuvoola at Mr. Reniere’s address in Ottawa; v. The Business Development Bank of Canada (“BDC”) took proceedings against Nuvoola in Ottawa and obtained a judgment on September 3, 2024 for over $424,000 plus costs of $7,500 against Nuvoola in Ottawa, and there is no evidence to suggest that Nuvoola contested jurisdiction in that proceedings; vi. The founder and CEO, Martin Reniere, lives in the greater Ottawa area; vii. The Debtor does business with the Bank in Ottawa; viii. The Debtor has an office in Ottawa; ix. In the GSA, the Debtor warranted on a continuous basis that the location of its collateral, records and business operations are all in Ottawa; x. By virtue of term 16 of the terms and conditions to the GSA and term 22 of the Cash Collateral Agreement, the Debtor warranted that its address was in Ottawa; xi. The Canadian Government’s list of artificial intelligence suppliers has the headquarters of the Debtor as Ottawa; xii. The October 11, 2022, and the December 14, 2022, Commitment Letters provide that any notice or demand to be given by the Bank shall be given in writing to the Debtor as its Ottawa address and that the Debtor is required to advise the Bank immediately about any change to its address; xiii. The Demand letters were sent to the Debtor at its Ottawa address and the within application was served on the Debtor in Ottawa; and, xiv. All the loan and security documents with the Bank were signed by the Debtor in Ottawa and list the address of the Debtor as being in Ottawa. The Bank argues that the Defendant has attorned to the jurisdiction by its conduct and by the jurisdiction/forum selection clauses in the various documents. Debtor’s Position [ 27 ] The Debtor argues that its locality is based in Richelieu, Quebec and, accordingly, the bankruptcy application should be heard in Montreal, Quebec. [ 28 ] The Debtor lists the following reasons why the jurisdiction should be in Montreal: a. Mr. Reniere travels to Quebec to work; b. The Debtor had communicated a change of address to the Bank as early as 2019, informing it of the change in the location of its head office; c. The Debtor has made the appropriate federal filings to reflect changes to its registered head office address; and, d. The Debtor shuttered its Ottawa satellite office at the beginning of the COVID-19 pandemic. [ 29 ] The Debtor argues that while it originally had its head office in the Province of Ontario, it subsequently moved to the Province of Quebec. It submits that the Certificate of Amendment under the CBCA dated January 8, 2018, changes the head office to the Province of Quebec. Therefore, it argues that based on the change of the head office location from Ontario to Quebec, that Ontario has no jurisdiction to determine whether the debtor is insolvent or not. [ 30 ] The Debtor relies on case law, including the Sam Levy & Associes Inc v. Azco Mining Inc. , 2001 SCC 92 , [2001] 3 S.C.R. 978 , at paras. 63-67 , to support its position. Analysis [ 31 ] Section 43(5) of the BIA defines the place of filing of the application, which reads as follows: 43(5) The application shall be filed in the court having jurisdiction in the judicial district of the locality of the debtor. [ 32 ] Section 2(1) of the BIA defines locality of the debtor as meaning the principal place (a) where the debtor has carried on business during the year immediately proceeding his or her bankruptcy; (b) where the debtor has resided during such year; or, (c) in cases not coming within (a) or (b) where the greater portion of the property of the debtor is situated. [ 33 ] In Bankruptcy and Insolvency Law of Canada, 4th ed. (Toronto: Thomson Reuters, 2009), it states, at pp. 3-20: “because of the way in which ‘locality of a debtor’ is defined, it is possible to have an application filed in the province where the debtor carried on business, and an application also filed in the province where he or she resided, or if he or she carried on business in two provinces, an application could be filed in both provinces.” The court finds that this means that it could be filed in either province as opposed to both provinces at the same time. [ 34 ] In Re Flax Investment Ltd. , the Supreme Court of Ontario held that there was nothing in the definition of “locality of a debtor” to give the place of business primacy over the place of residence. The judge was of the opinion that an applicant could choose to present his or her application for a bankruptcy order on the basis of either place of business or place of residence. In Re Flax Investment Ltd., the company had its head office in Toronto, Ontario, its books and records were kept in Toronto, the president of the company resided in Toronto, but the business carried on in Manitoba, Canada. Saunders J. found that the principal place where the debtor resided in the year immediately preceding the bankruptcy was Ontario and made the receiving order on that basis. [ 35 ] In the case of Statham v. 1414695 Alberta Ltd. , the court dealt with the issue of the locality of the debtor. At para. 10, the court said as follows: I agree that the land owned by Liberty is in Alberta. However, its shareholder and director, Spence, resides in Saskatoon, Saskatchewan. Liberty operates its own bank accounts and the bank accounts for the Phase I Development Fund in Saskatoon, Saskatchewan. And, Liberty has held shareholder and investor annual meetings in Saskatoon. Furthermore, the time for Liberty to raise the issue of jurisdiction was at the first return date of this application on June 8, 2017. In short, I find that the applicants have complied with the provisions of s. 43(5) of the BIA. [ 36 ] The court has reviewed the Certificate of Amendment, which indicates that the Debtor changed its head office to the Province of Quebec. Nowhere in the document does it provide for the giving of a street address for the Debtor in the Province of Quebec. The document is signed by Jean Carrière and is dated January 8, 2018. [ 37 ] The evidence of Mr. Reniere is that he sent an email to Francois Carrière, an RBC account manager dated March 25, 2019. Francois Carrière is not the same person as Jean Carrière. [ 38 ] In that email, Mr. Reniere says that the head office has been changed to 500 Saint Jacques, Suite 600, Montreal, Quebec, H2Y 1S1. Below his signature, it reads “Montreal, Chambly, Ottawa. 500 Saint Jacques, Suite 600, Montreal, Quebec, H2Y 1S1”. [ 39 ] Mr. Reniere sent another email to Francois Carrière on March 25, 2019. At the end of the email, it gives his name and title. Below that, it reads “Ottawa - Montreal - Chambly 560 Lacolle Way Suite 101, Ottawa, Ontario, K4A 0N9”. [ 40 ] The court finds that the Certificate of Amendment of January 8, 2018 was not sent to the Bank until March 25, 2019, over 14 months after the occurrence of the event. No explanation was provided for the delay. [ 41 ] At the same time when the notice of change of head office was sent by the Debtor to the Bank, the email states that Ottawa is included as a place of business for the Debtor. [ 42 ] Furthermore, after that date, the Debtor took no positive steps to correct any documents for the Bank to reflect its Quebec address. The Debtor continued to reinforce the idea that it was still in Ontario, as evidenced by the Commitment Letters of October and December 2022, as well as the letter from the Bank to the Debtor in January 2023, listing the Debtor’s address at Suite 101, 560 Lacolle Way, Ottawa, Ontario, K4A 0N9. The court makes a finding to this effect. [ 43 ] In the “Terms and Conditions” of each Commitment Letter at page 4, under the heading “Notices” it reads as follows, “The Borrower must advise the bank at once about any changes in the Borrower’s address.” There was no evidence that Nuvoola complied with this term about notifying the Bank of the change of address. The court makes a finding to this effect. [ 44 ] At page 10 of the GSA, the location of the Debtor’s business operations, the location of the records relating to the collateral, and the location of the collateral are shown as 134 St. Paul Street, Suite 200, Ottawa, Ontario, K1L 6A3. [ 45 ] Paragraph 3(d), 16, and Schedule B of the GSA state that the Debtor represents and warrants that the business debtor, the location of the debtor’s business operations, the location of the records relating to the collateral, and the location of the collateral are accurate and complete, including the address of the debtor. The GSA also states that it is to be construed in accordance with the laws of Ontario. [ 46 ] Paragraph 14(s) of the GSA reads as follows: This Security Agreement and the transactions evidenced hereby shall be governed by and construed in accordance with the laws of the province in which the herein branch of RBC is located, as those laws may from time to time be in effect, except if such branch of RBC is located in Quebec then, this Security Agreement and the transactions evidenced hereby shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. [ 47 ] The court is aware that the Debtor has given evidence that it closed its office at Lacolle Way during the pandemic. Notwithstanding the closure of the office, documents from the Bank continued to reach the Debtor. The court makes a finding to this effect. [ 48 ] The court is aware that the head office moved to the Province of Quebec and that the head office address was initially given as 500 Saint Jacques Street, Suite 600, Montreal, Quebec. Further evidence shows that the address changed to 127 Rue de Richelieu, Richelieu, Quebec. There is no evidence that the Debtor gave the new address to the Bank. The court makes a finding to this effect. [ 49 ] The evidence of Mr. Reniere is that the company has 18 full-time employees and two part-time employees. These employees work from home approximately four days per week and are required to be in the office one day per week. He also testified that the Richelieu office shared space with two or three other companies. [ 50 ] The post-COVID reality, particularly in the Information Technology industry, is that many people, including Mr. Reniere, now work from home. The court finds that determining the Debtor’s ties to a jurisdiction now requires a broader assessment beyond the current location and activities of the registered head office. [ 51 ] The Debtor argues that attornment to jurisdiction and forum selection clauses are not the sole controlling factors in the consideration of proper jurisdiction under the BIA. They should be taken into consideration but are not ultimately binding. The Debtor relies on the Sam Levy case which specifically contemplates where there is a conflict between public interest in the administration of the BIA and private forum selection clauses. The Court concluded that private contractual agreements cannot prevail over the exercise of bankruptcy jurisdiction. In that case, Sam Lévy & Associés Inc. was appointed as a Trustee to administer the Bankrupt Estate of Eagle River Exchange and Financial Services Inc. The bankruptcy order was made in Quebec where Eagle River Exchange and Financial Services Inc. was domiciled. Prior to being adjudged bankrupt, Eagle River Exchange and Financial Services Inc. had a financing agreement with Azco Mining Inc., a Delaware company with offices in British Columbia. The financing agreement between Azco Mining Inc. and Eagle River Exchange and Financial Services Inc. had a choice of law provision that provided that British Columbia law applied. [ 52 ] During the course of the bankruptcy, the Trustee brought a motion in the Quebec court to attempt to repatriate certain assets of Eagle River Exchange and Financial Services Inc. that were being held by Azco Mining Inc. Azco Mining Inc. applied in the Superior Court of Quebec pursuant to s. 187(7) of the BIA to have the Trustee’s application motion transferred to British Columbia on the basis that its agreement with Eagle River Exchange and Financial Services Inc. provided that British Columbia law applied. [ 53 ] In that case, the court found: a) a choice of law provision does not have the same effect as a forum selection provision and the Quebec Court could apply British Columbia law; and b) where there is a forum selection clause, it ought to be taken into careful consideration by a motions Court on a motion under s. 187(7) of the BIA, but it is not binding. [ 54 ] The Bank argues that the test applicable to the determination of whether this court has jurisdiction over Nuvoola for the purposes of s. 43(5) of the BIA is different than the test under s. 187(7) of the BIA, where the court was asked to determine, on satisfactory proof, that the affairs of the bankrupt can be more economically administered within a separate bankruptcy district. The court agrees that the test under s. 43(5) is different than the test under s. 187(7). [ 55 ] In this instance, Nuvoola obtained a credit facility from the Bank in December 2022. In signing the Letters of Commitment, it agreed to accept the jurisdiction of the laws of the Province of Ontario and its courts. [ 56 ] The Cash Collateral Agreement dated July 30, 2019, states at page 5, “IN WITNESS WHEREOF, this agreement has been executed at 560 Lacolle Way, Ottawa, Ontario, this 07/30/2019”. The evidence at trial by Mr. Reniere was that the handwritten part being the address was completed by him. The court finds that this document was executed approximately 18 months after the head office address had changed and Nuvoola was doing business from the Lacolle Way address. The court finds that the Bank relied on this address as being the place where the Debtor did business from at that time. [ 57 ] In the case of Expedition Helicopters Inc. v. Honeywell Inc. , 2010 ONCA 351 , 100 O.R. (3d) 241 , the court says at paras. 23-24: [23] In this case, there is no reason to depart from the presumption that Expedition should be held to the bargain that it made. A departure is only justified in "exceptional circumstances", as Bastarache J. stressed in Pompey [at para. 21]. There is nothing exceptional about this case. As discussed above, the analysis of whether there is "strong cause" to decline to enforce a forum selection clause is not an analysis of the forum conveniens in the conventional sense. In this case, Expedition may have established that it will experience some inconvenience in the conventional sense in having to assert its claim in Arizona. That inconvenience does not justify permitting it to resile from its agreement in this commercial contract to tolerate that inconvenience. [24] A forum selection clause in a commercial contract should be given effect. The factors that may justify departure from that general principle are few. The few factors that might be considered include the plaintiff was induced to agree to the clause by fraud or improper inducement or the contract is otherwise unenforceable, the court in the selected forum does not accept jurisdiction or otherwise is unable to deal with the claim, the claim or the circumstances that have arisen are outside of what was reasonably contemplated by the parties when they agreed to the clause, the plaintiff can no longer expect a fair trial in the selected forum due to subsequent events that could not have been reasonably anticipated, or enforcing the clause in the particular case would frustrate some clear public policy. Apart from circumstances such as these, a forum selection clause in a commercial contract should be enforced. [ 58 ] Both parties have presented various factors that they believe determine where the locality of the debtor should be. Those factors are listed earlier in this decision under the positions of the parties. [ 59 ] The court has evidence that the head office of the company changed from the Province of Ontario to the Province of Quebec on January 8, 2018. The evidence is that the Bank was not notified until March 2019. When that change of address was provided, it indicated that the head office address was at 500 Saint Jacques, Suite 600, Montreal, Quebec, H2Y 1S1. When questioned about that office during trial, Mr. Reniere indicated that it was now closed and that the office had moved to 127 Rue de Richelieu, Richelieu, Quebec. No information was provided as to when that occurred. [ 60 ] There was no evidence given by the Debtor that the change in address was communicated to the Bank. The court makes a finding that no information was provided to the Bank that the Debtor’s head office had moved from Montreal to Richelieu, Quebec. This is not a defining factor in this case, but does show a lack of communication with the Bank. [ 61 ] In this case, Mr. Reniere resides in the Province of Ontario and has done so for a number of years. According to his testimony, he is the president and founder of Nuvoola. He works out of his home in the Province of Ontario. In his dealings with the bank, including the Commitment Letters of October and December 2022, he never mentions the fact that the Lacolle address is no longer a business address for the company. [ 62 ] Furthermore, page 5 of 5 of the Commitment Letter indicates that the “Governing Law Jurisdiction” is the “Province of Ontario”. [ 63 ] In addition, on page 4 of 7 of the “Terms and Conditions,” under the heading “Notices” the last sentence reads, “The borrower must advise the bank at once about any changes in the borrower’s address.” No evidence was given that the change of address was ever given after that date. Therefore, the court finds that the Debtor was in breach of the Terms and Conditions by not providing the change of address. [ 64 ] The GSA at page 6 of 7 says, “This Agreement and any documents or instruments, referred to therein, or delivered pursuant to, or in connection with, this Agreement constitute the whole entire agreement between the Borrower and the Bank with respect to the Credit Facilities.” [ 65 ] In addition, Mr. Reniere admitted that the “internal accounting records” of Nuvoola were with the accounting firm of Turner Moore in Ottawa, Ontario. No financial statements were ever produced at trial. He also testified that the company had a part-time Chief Financial Officer who worked at 501 Lacolle Way, Orleans, Ontario. [ 66 ] Furthermore, the BDC started an action against Nuvoola in Ottawa, claiming liquidated damages in excess of $424,000 and obtained a judgement against Nuvoola there. It lists the addresses for the Debtor and Mr. Reniere at 1819 Heatherstone Crescent, Orleans, Ontario, K4A 4P2. [ 67 ] All of the Bank’s statements were delivered to Nuvoola at either the Lacolle address or the Heatherstone address, the latter of which is Mr. Reniere’s residence. [ 68 ] In the GSA, the Debtor warranted on a continuous basis that the location of its collateral, records, and business operations were all in Ottawa. [ 69 ] As late as August 28, 2023, Mr. Reniere signed a credit limit increase for a credit card for Jean-Marc Taillon with a business address at 1819 Heatherstone Crescent, Ottawa, Ontario. Mr. Reniere never advised the Bank that this was not the correct address. [ 70 ] The court finds that the Commitment Letter dated December 14, 2022, sufficiently establishes that the locality of the Debtor was Ottawa. [ 71 ] In the present case, the GSA, the Commitment Letters, and the Cash Collateral Agreement all have reference to the choice of law and jurisdiction selection. All of these documents provide that Ontario law is applicable to any dispute arising between the Debtor and the Bank. [ 72 ] Therefore, in this case, there is both a choice of law provision and a jurisdiction selection clause. This is to be distinguished from Sam Levy , which only had a choice of law provision. The court makes a finding to this effect. The court concludes that based on the facts of this case, Sam Levy is distinct, in that the Debtor has agreed to submit to the jurisdiction of Ontario courts. [ 73 ] Based on the evidence at trial: (1) Mr. Reniere resides in the Ottawa area and works from home, though the court acknowledges that he travels via train and vehicle to meet with his employees; (2) he is the president and founder of the Debtor, and the court finds that this means that the corporate seat of management is located in Ottawa; (3) the Debtor’s internal accounting records are held in Ottawa offices of Turner Moore; (4) the Debtor does business in Ontario, Quebec, Nova Scotia, and New Brunswick; and, (5) the Debtor has a part-time Chief Financial Officer, whose office is located at 501 Lacolle Way, Orleans, Ontario. [ 74 ] Considering all of the factors involved in this case in relation to the jurisdiction issue, including the: i. The governing law paragraphs in the Commitment Letters, the Cash Collateral Agreement, together with other documents; ii. The choice of jurisdiction paragraphs in the various documents; iii. Location of the seat of management of the Debtor; and, iv. The stated locations of the collateral, the business records, and where the Debtor represented to the Bank that its business operations were located. These factors, along with others set out in the analysis, clearly indicate to the court that the Debtor’s locality is Ottawa. The court makes a finding to that effect, notwithstanding the head office being located in the Province of Quebec and the presence of employees in that province. Attornment to Jurisdiction by Conduct [ 75 ] The Bank argues that the Superior Court of Justice has jurisdiction because Nuvoola attorned to its jurisdiction through its conduct in the litigation. [ 76 ] With respect to the conduct of the Debtor in the litigation, the court notes that Nuvoola originally raised the issue of jurisdiction at both the first and second appearances in court. In its written endorsement of September 13, 2024, this court decided that it would deal with the jurisdictional issue at trial. Therefore, while the Bank argued that the Debtor had attorned by conduct in filing a dispute, attending cross-examinations and trial, the court finds that the issue of jurisdiction was a live issue, notwithstanding the aforesaid steps taken by the Debtor in Ottawa. [ 77 ] Therefore, the court finds that the Bank’s argument with respect to attornment by conduct, fails. Issue #2 - Has the Debtor ceased to meet its liabilities generally as they became due? Bank’s Position [ 78 ] The Bank argues that it is owed in excess of $1,000 from the Debtor on account of the various loan documents signed by the Debtor. [ 79 ] According to the evidence of the Bank representative, Mr. Tsao, the Bank is owed in excess of $600,000. The further evidence is that the Bank has sent a letter of demand and a notice pursuant to s. 244 of the BIA to the Debtor and there has been no payment of the debt. [ 80 ] There was also evidence that the BDC obtained judgment against the Debtor for over $424,000 in September 2024 and that there remains an outstanding balance of at least $63,000. Debtor’s Position [ 81 ] The Debtor conceded in its factum that it had committed an act of bankruptcy and that it ceased to meet its liabilities generally as they became due pursuant to s. 42(1)(j) of the BIA. [ 82 ] The Debtor, at one point in the trial, argued that there was an agreement between the Bank and Export Development Canada (“EDC”) under which EDC would guarantee a certain portion of the debt to the Bank, if there was a default by the Debtor. [ 83 ] The Debtor argues that until such time as the Bank files a claim with EDC that it is not appropriate to attempt to collect the monies from the Debtor and to seek a declaration that it is insolvent. [ 84 ] In addition, it argues that it should be allowed to examine a representative of the EDC to determine what attempts have been made by the EDC and/or the Bank to collect on the EDC guarantee that was given in relation to this loan. Analysis EDC Guarantee [ 85 ] The court made a ruling either prior to or during the trial that the Debtor could not examine a representative of the EDC. [ 86 ] The court has reviewed the EDC documentation as relates to the guarantee. The document requires the Bank to collect the debt from the Debtor before making any claim under the guarantee and show what efforts were made to collect the debt. By the terms of the EDC guarantee, the maximum amount that the EDC would guarantee is 75% of the loan, meaning that 25% of the loan would remain outstanding even after payment of the guarantee by the EDC. [ 87 ] The court finds that this insolvency proceeding is an effort by the Bank to collect what it is owed by the Debtor. [ 88 ] The court determines that, even if the guarantee could be paid the way the Debtor claims it should be, there would still be an excess of $150,000 owing to the Bank. [ 89 ] The court rejects the position taken by the Debtor with respect to the EDC guarantee. The court finds that the guarantee could only be collected from the EDC once the Bank has exhausted all of its remedies against the Debtor. The court holds that the insolvency proceeding is the Bank’s attempt to collect the monies owing from the Debtor. [ 90 ] Therefore, the court concludes that Debtor’s argument, that the Bank must collect from EDC first and then seek repayment from the Debtor company, fails. Ceasing to Meet its Liabilities Generally as they Became Due [ 91 ] The Debtor’s counsel at trial acknowledged that the Debtor had committed an act of bankruptcy pursuant to s. 42(1)(j) of the BIA. [ 92 ] The court finds that the Debtor has debts in excess of $1,000 and that they have generally ceased to meet their liabilities generally as they became due. [ 93 ] In the event that this acknowledgement of ceasing to meet its liabilities as they became due had not been made, the court would find that the Debtor did owe more than $1,000, based on the debt owing to BDC of at least $63,000 and the debt owing to the Bank of over $600,000. On that basis, the court concludes that the Debtor has ceased to meet its liabilities generally as they became due. Issue #3 - Was the application commenced for an improper purpose? Bank’s Position [ 94 ] The Bank argues that once the creditor demonstrates that the bankruptcy application has been validly commenced, the onus shifts to the Debtor to show “good and sufficient cause why the bankruptcy order should not be made”: Re Bankruptcy of Sydney Cappe (1993), 18 C.B.R. (3rd) 229 (Ont. C.J.) , at para. 8 . [ 95 ] The court should only withhold the bankruptcy order with the Debtor has demonstrated exceptional circumstances justifying such refusal: Cappe , at para. 29. [ 96 ] The Bank argues that the Debtor has failed to provide specific and concrete evidence of improper conduct or demonstrated a compelling reason why the bankruptcy order should not be granted. [ 97 ] The Debtor suggests that the Bank’s use of the bankruptcy process is improper because, instead of commencing an action to collect the debt, it has only commenced a bankruptcy application. According to the Bank, there is no common law or statutory obligation for an applicant creditor to exhaust all remedies available before commencing an application for a bankruptcy order. It argues that bankruptcy is a legitimate remedy to creditors once insolvency is established, and it is not confined to being a remedy of last resort: see S.C.M. Farms Ltd. v. W-4 Holdings Ltd. , 2007 MBQB 268 , 221 Man. R. (2d) 196 , at para. 37 ; Ristimaki (Re) (2000), 2000 22486 (ON SC) , 18 C.B.R. (4th) 246 (Ont. S.C.) , at para. 20 . [ 98 ] The Bank puts forward that there is case law affirming that it is not an improper or abuse of process for a creditor to commence a bankruptcy application for debt recovery purposes. Courts have consistently held that using a bankruptcy application as a means to collect a debt is legitimate, provided that the debtor is insolvent: see Four Twenty-Seven Investments Ltd. (Re) (1985), 55 C.B.R. (N.S.) 183 (Ont. Sup. Ct.) , at p. 188, aff’d [1985] 58 C.B.R. (N.S.) 266 (Ont. C.A.) ; Re 518494 Ontario Ltd. (Petrochem) (1986), 58 C.B.R. (N.S.) 203 (Ont. Sup. Ct.) , at pp. 207-8 . Debtor’s Position [ 99 ] The Debtor argues that the court will not grant an application for a bankruptcy order which is made for an improper purpose: see 3004876 Nova Scotia Ltd v. Laserworks Computer Services Inc. , 1998 NSCA 42 , 165 N.S.R. (2d) 297 . [ 100 ] It argues that the BIA has two primary purposes: (1) the equitable distribution of the bankrupt assets among its creditors, and (2) the bankrupt’s financial rehabilitation: Alberta (Attorney General) v. Moloney , 2015 SCC 51 , [2015] 3 S.C.R. 327 , at paras. 32-33 . [ 101 ] It further asserts that using the BIA is intended by Parliament for the benefit of the creditors as a class and not an individual creditor enforcing their claim through bankruptcy: Beach (Re) , 2022 ONSC 6474 , 4 C.B.R. (7th) 168 , at para. 56 . [ 102 ] The Debtor argues that the BDC has received numerous payments towards its judgement to date, and that any prospect of future payments is prejudiced by the granting of a bankruptcy order. [ 103 ] It says that the Bank is the sole creditor to which there is an identifiable benefit in bankruptcy. [ 104 ] The Debtor submits that where the application for the bankruptcy order does not benefit all of the creditors, that it is improper. [ 105 ] Lastly, it contends that the court should draw a line where the BIA is employed as a collection agency by the only creditor actively attempting to collect on its debt, where a bankruptcy order would not in someway protect the public interest and where the only immediate interest served is that of the applicant: see Murphy (Syndic de) , 2006 QCCS 989 , at paras. 20-25 . Analysis [ 106 ] The court agrees that an application for a bankruptcy order should not be made if it is for an improper purpose. However, the court does not see what the improper purpose is here. The Bank is seeking to collect on its debt and is applying for a bankruptcy order. As set out in Four Twenty-Seven Investments Ltd. (Re) , at p.188, the court says: I also reject the debtors’ submission based on the alleged improper or ulterior motive of the petitioning creditor. It is not an abuse of process or an improper purpose to commence a petition for the collection of a debt. It is not improper to petition, to gain remedies not available outside of bankruptcy, including a thoroughgoing investigation of the bankrupt’s affairs. [ 107 ] The court rejects the Debtor’s submission on this point and finds that the bankruptcy application in this case is a proper way to collect the Bank’s debt. [ 108 ] The court agrees that the purpose of the BIA is the equal distribution of the debtor’s assets among its creditors and the BIA sets out in detail how that division is to be made. In this case, there are several classes of creditors, including secured creditors and unsecured creditors. The division of the assets amongst the creditors will depend on whose security is valid and the priority of that security. If valid, the secured assets will be distributed in accordance with the rankings of the securities. For those securities which are held to be invalid, those creditors will rank as unsecured creditors, and will share pro rata with all other unsecured creditors. [ 109 ] In this particular case, subject to the security being vetted, the Bank is a secured creditor, although it may not have the highest ranking security over all of the assets. [ 110 ] The court understands that Capital RDC I Inc. (“RDC”) has security over the various Scientific Research and Experimental Development tax credits (“SR&ED”), including both the Canada and Quebec tax credits. [ 111 ] The argument made by the Debtor that if the bankruptcy order is made, such tax credits will be lost, is rejected by the court. Those tax credits have been secured by RDC, subject to their security being valid, and in priority to any other secured creditors. RDC presumably will have the right to collect the tax credits. If it is found that no one holds security over the tax credits, they will be collected by the Licensed Insolvency Trustee for the benefit of all unsecured creditors who have proven their claims. [ 112 ] Therefore, the court finds that the Debtor’s argument that the tax credits will be lost in a bankruptcy, fails. [ 113 ] The Debtor claims that one of the purposes of the BIA is to rehabilitate the Debtor. The court finds that this cannot happen in a corporate bankruptcy because once the corporation is bankrupt, it is not in a position to rehabilitate itself. The only way that it possibly could rehabilitate itself would be to file a proposal in the bankruptcy. Issue #4 - Is there a reason why the bankruptcy order should not be made forthwith? Bank’s Position [ 114 ] The Bank submits that even if all of the facts are established that would justify making a bankruptcy order, the court still has discretion under s. 43(7) to refuse to make the order. [ 115 ] The Bank submits that there is no other reason why the bankruptcy order ought not to be made. It also argues that the court should only exercise its discretion under s. 43(7) to decline to make a bankruptcy order where the Debtor has shown, on its onus, why the bankruptcy order should not be made. The Debtor has not met this onus: see Kenwood Hills Development Inc. (Re) (1995), 1995 7364 (ON SC) , 30 C.B.R. (3d) 44 (Ont. Gen. Div.) , at para. 3 . Debtor’s Position [ 116 ] The Debtor argues that the court has discretion under s. 43(7) to refuse to make an order and dismiss the application for compelling reasons or where it is satisfied that the debtor is able to pay their debts. [ 117 ] The Debtor contends that it would be prejudiced if a bankruptcy order was granted and would jeopardize its chances of being paid the SR&ED tax credits from the Governments of Canada and Quebec. Furthermore, the bankruptcy order would jeopardize any prospective buyout of the Bank’s indebtedness by RDC. The court notes that there was no evidence provided with respect to the buyout of the Bank’s indebtedness by RDC. [ 118 ] The Debtor claims that it has successfully identified co-investors for the financing of the corporation that would allow it to pay its obligations to its creditors. The Debtor also argues that it is actively participating in a due diligence process with a potential purchaser as identified by Mr. Reniere. A bankruptcy order would eliminate this opportunity. [ 119 ] Lastly, it argues that the Debtor is a party to a number of material contracts and other agreements which will generate future revenues to continue to operations. In addition, it has major partnerships in an artificial intelligence project with a major corporation in Eastern Canada and resale and supply agreements with another large company and its conglomerated businesses. Analysis [ 120 ] As set out previously in this decision, the SR&ED tax credits will not be jeopardized if a bankruptcy order is made. RDC has priority security over these tax credits, assuming their security is valid. If their security is invalid, then the second-ranking secured creditor may have a security interest in these assets, subject to the vetting of the security. In any event, the tax credits will be paid. The only question is, to whom. [ 121 ] Regarding the argument that the Debtor has successfully identified investors for financing of the corporation, which would allow it to meet its obligations to creditors, and is participating in a due diligence process to identify a potential purchaser, the court finds that no documentation has been provided with respect to any investors or financing of the corporation since July 2024, approximately six months ago. At that time, there was a short email indicating that there was a potential investor or financier for the corporation. Other than that, the only evidence is the testimony of Mr. Reniere, without any documentation to back up these assertions. [ 122 ] With respect to the claim that there is a potential buyer, which Mr. Reniere was meeting on February 5, 2025, there was no documentation to back up this evidence. [ 123 ] As to the argument that the Debtor has a number of material contracts or agreements, which will generate future revenues to continue the operations, no documents have been placed in evidence that would confirm these contracts and the court makes a finding to this effect. [ 124 ] The cross-examination of Mr. Reniere was held on October 24, 2024. At that time, Mr. Reniere gave approximately eight undertakings, most of which were to deal with the production of financial records. According to the Bank’s counsel, little, if any, of the information was produced. When asked if the documentation had been provided, Mr. Reniere said that he gave some of the information to his prior counsel but could specify what was given. The trial counsel did not have any information related to the provision of the undertakings. On the balance of probabilities, the court finds that Mr. Reniere did not satisfy the undertakings given, particularly in relation to the financial information. [ 125 ] Based on the aforesaid analysis, the court finds that the Debtor has not met the onus as to why a bankruptcy order should not be made. Bankruptcy Order [ 126 ] In light of the evidence before the court and the findings made, the court finds that Ontario is the proper jurisdiction to hear this insolvency matter and determine the issue of the company’s solvency. The court also determines that the company ceased to meet its liabilities generally as they became due. [ 127 ] Therefore, the court finds that a bankruptcy order shall be issued. [ 128 ] The court orders that MNP Inc. will be the Licensed Insolvency Trustee. All creditors and inspectors’ meetings shall be held by video conference. Costs [ 129 ] The Bank shall be entitled to its costs out of the Estate after assessment. [ 130 ] Order accordingly. Mr. Justice Stanley J. Kershman Date : February 25, 2025 COURT FILE NUMBER : BK-24-224-33 DATE : 2025/02/25 ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY AND INSOLVENCY IN THE MATTER OF THE BANKRUPTCY OF NUVOOLA INC. OF THE CITY OF OTTAWA, IN THE PROVINCE OF ONTARIO BEFORE: Justice Stanley J. Kershman COUNSEL : Roger Jaipargas and Douglas Smith, for the Royal Bank of Canada Marie-Andree Mallette, for the Nuvoola Inc. on October 28, 2024 Kevin Zhou, for the Debtor on February 3, 4, and 10, 2025 Falon Milligan, for Export Development Canada on October 28, 2024 HEARD: October 28, 2024, February 3, 4, and 10, 2025 in Ottawa Reasons for decision Kershman J. Released : February 25, 2025