Re Organic Garage (Canada) Ltd, 2026 ONSC 1129

minicounsel

COURT FILE NO.: Court No. 31-3051650

DATE: February 23, 2026

IN BANKRUPTCY AND INSOLVENCY

IN THE MATTER OF THE BANKRUPTCY OF

ORGANIC GARAGE (CANADA) LTD.

BEFORE: Associate Justice Ilchenko, Registrar in Bankruptcy

Miranda Spence (“Spence”) and Adrienne Ho (“Ho”) and Pritesh Patel, LIT (“Patel”) for the Respondent Trustee KPMG Inc., the Trustee in Bankruptcy (“KPMG” or the “Trustee”) of Organic Garage (Canada) Inc. (an Ontario Corporation formerly known as “Organic Garage Ltd.”)(“Organic Garage (Canada)” or the “Bankrupt”)

Colby Linthwaite (“Linthwaite”) and Fred Tayar (“Tayar”) and Alan Rutman, LIT (“Rutman”) and Sudhanshu Marwaha, LIT (“Marwaha”) for the Creditor Appellant, Zeifman Partners Inc., (“Zeifman”) Trustee in Bankruptcy of Oragin Foods Inc. (a British Columbia Corporation formerly known as “Organic Garage Ltd.”)(“Oragin”) as well as counsel to Tobias Ihde, the Applicant Creditor that brought the Bankruptcy Application for Oragin (“Ihde”)

Eric Peterson (“Peterson”) for Department of Justice, Counsel to the Office of the Superintendent of Bankruptcy (the “OSB”)

HEARD: Appeal heard on first issue of Appeal from Trustee’s disallowance of Oragin Proof of Claim (the “Disallowance Appeal”) on April 23, 2025, reasons released as Re Organic Garage, 2025 ONSC 2476(the “Disallowance Appeal Reasons”)

Second portion of Appeal on Chair’s decision at meeting of creditors heard on November 20, 2025, as well as Cross-Appeal by Trustee to confirm meeting votes, and prevent Rutman from voting on inspectors (the “Cross Appeal”) after issuance of the Disallowance Appeal Reasons.

endorsement

1This Appeal and Cross-Appeal deals with another unusual situation arsing out of meetings of Creditors in this Bankruptcy and the Disallowance by KPMG, the Trustee of the Bankrupt, the wholly owned subsidiary Organic Garage (Canada), of the Proof of Claim filed by Zeifman, as Trustee in Bankruptcy of the parent company creditor Oragin (the “Oragin Proof of Claim”).

2In my Disallowance Appeal Reasons I allowed the Appeal by Zeifman, in part, and ordered:

(a) the appeal by Zeifman of the Disallowance by KPMG of the Current Liability Component of the Proof of Claim of Oragin dated May 30th, 2024 (the “Oragin Proof of Claim”) was allowed and ordered that the Current Liability Component of the Oragin Proof of Claim in the amount of $2,917,423.11 to be admitted as a proven unsecured claim by Oragin in the Bankruptcy Estate of the Bankrupt.

(b) the appeals by Zeifman of the Disallowance by KPMG of the Long Term Liability Component and the Note Payable Component of the Oragin Proof of Claim were dismissed.

3I also specifically found that, with respect to the Current Liability Component of the Oragin Proof of Claim, that I found to be a Proven Claim (at para.144):

“15) For the above reasons, this transaction cannot be characterized as a transaction:

“Where one of the co-contracting parties is by reason of influence in a position to pervert the ordinary rule of supply and demand and force the other to transact for a consideration that is substantially different than adequate, normal or fair market value, the transaction is not at arm's length”

as the transaction appears to replace dollar for dollar the indebtedness to BDC with the monies raised from the issuance by Oragin of the Convertible Debentures but on more favourable interest terms, and removing a secured guarantee obligation by the Bankrupt to BDC and not replacing it, making the transaction very favourable to the Bankrupt;

As a result, the argument by the Trustee that this is a “non-arms length transaction” that should be subordinated under the provisions of s.4(5) and s.137(1)of the BIA as not being a “proper transaction” or a transaction “that the lender shall receive a rate of interest varying with the profits or shall receive a share of the profits arising from carrying on the trade or business” for the purposes of s.139 of the BIA which were both argued by the Trustee, are not supportable on the evidence for the abovementioned reasons.”

The Meeting Decision Appeal

4As Zeifman was now confirmed by me as having a Proven Claim in the Bankruptcy Estate in the amount of $2,917,423.11, the second appeal (the “Meeting Decision Appeal”) brought by Zeifman to set aside certain decisions of the Official Receiver’s Representative chairing the Meeting of Creditors of the Bankrupt held on June 6, 2024 (the “1st Meeting”), preventing Zeifman as Trustee of Oragin from voting at the meeting of creditors, inter alia, on the basis that Zeifman as Trustee in Bankruptcy of Oragin could not vote, as Oragin was a “related party”, was not moot.

5As I will detail, the Official Receiver’s Representative then reversed her decision and permitted Rutman to vote as a contingent creditor on behalf of Zeifman at a 2nd Meeting of Creditors held on July 10, 2024 (the “2nd Meeting”), after valuing the claim for the purposes of voting, but the reversal of the decision occurred only after the appeal was brought by Zeifman of her decisions at the 1st Meeting.

6Zeifman is continuing the appeal of the Chair’s determination, notwithstanding the change of position by the OSB, on the basis that the decision was reversed only after Zeifman had prepared and served appeal materials, and therefore the issue needs to be determined as to whether the filing of the appeal legally stayed further proceedings for the voting at the Meeting of Creditors, that the decisions made and votes held at the 2nd Meeting were nullities, and that the costs of Zeifman as Trustee of Oragin for the Appeal of the Chair’s rulings at the 1st Meeting, and costs of attendance at the 2nd Meeting, also need to be determined.

7The OSB is opposing the Appeal by Zeifman of the Chair’s rulings at the 1st Meeting, as is the Trustee, and is also opposing the claim for costs by Zeifman against the OSB.

8The Trustee also brought the Cross-Appeal requesting that motions at the 2nd Meeting of Creditors affirming the Trustee, appointing inspectors, and appointing Aird & Berlis as Estate Solicitors, were not nullities, but were properly passed and should be affirmed by the Court.

9In the same Cross-Appeal the Trustee also requested an Order affirming that Zeifman is a creditor who did not deal with Organic Garage (Canada) “at arm’s length” within the meaning of subsection 109(6) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3, as amended (the "BIA"), and therefore cannot vote at the meeting of creditors.

The Bankruptcy of Organic Garage (Canada) and the Bankruptcy of Oragin

10As I stated in the Disallowance Appeal Reasons, Cavanagh, J. made an endorsement (the “Cavanagh, J. Endorsement”) dated May 2, 2024 on a motion to approve a sale by KPMG (the (then) Proposal Trustee of Organic Garage (Canada) in the Proposal Proceedings) (the “Proposal Proceedings”) under the BIA, where he set out the factual circumstances that led up to the Bankruptcy of Organic Garage (Canada), and the filing of the Proof of Claim by Zeifman on behalf of the Bankrupt Oragin:

“[1] On March 5, 2024, Organic Garage (Canada) Ltd. (“Organic Garage”), 2412383 Ontario Inc., 2347018 Ontario Inc., 2507158 Ontario Inc., and 2581751 Ontario Inc. (collectively, the “Debtors”) each filed a Notice of Intention to Make a Proposal pursuant to s. 50.4 of the Bankruptcy and Insolvency Act.

2KPMG Inc. (the “Proposal Trustee”) consented to act as proposal trustee in the NOI proceedings of each of the Debtors. KPMG LLP, an affiliate of the Proposal Trustee, was previously retained on behalf of Oragin Foods Inc. (“Oragin”), the parent company of Organic Garage, to provide certain advisory services to Oragin in respect of its liquidity challenges.

3The Proposal Trustee brings a motion for:

a. three orders each approving a sale transaction and authorizing the Proposal Trustee to complete the transactions;

b. an order approving the sealing of the confidential documents appended to the Proposal Trustee’s Third Report until completion of the transactions or further order of this Court; and

c. an order (the “Ancillary Order”) approving the reports of the Proposal Trustee and the actions and activities of the Proposal Trustee described in each of these reports and approving the fees and disbursements of the Proposal Trustee and its counsel.

4I heard this motion on May 2, 2024. In this endorsement, I address the Proposal Trustee’s motion for the Ancillary Order which I took under reserve. I made a separate endorsement in respect of the other parts of this motion, which were unopposed.

5Organic Garage is an independent, Ontario-based, natural and organic grocery chain which operates four retail stores in the Greater Toronto Area. Organic Garage was formed under the laws of the Province of Ontario, and as noted, is a wholly-owned subsidiary of Oragin. The leases for each of Organic Garage’s stores are held by its wholly-owned subsidiaries, four of which are included in these NOI proceedings

6Matt Lurie is the sole officer and director of the Debtors.

7Oragin is not a debtor in the NOI proceedings.

8The Proposal Trustee’s motion for the Ancillary Order is opposed by Tobias Ihde and by Zeifman Partners Inc., in its capacity as trustee in bankruptcy of Oragin (the “Trustee”).

9Mr. Ihde is the holder of a convertible debenture issued on October 25, 2019 by Oragin in the principal amount of $1,500,000. Leede Jones Gable Inc. is the holder of a second convertible debenture issued by Oragin in October 2019 in the sum of $1,500,000.

10Mr. Ihde made an application for a bankruptcy order against Oragin in November 2023. Oragin opposed the application by a notice of dispute dated December 1, 2023. The trial was scheduled for March 25, 2024.

11Justice Steele heard a motion on March 14, 2024 for, among other things, approval of a sale process and approval of a stalking horse purchase agreement. Mr. Ihde was represented by counsel at this hearing. In her endorsement dated March 14, 2024, Justice Steele described Mr. Ihde and Leede as the “Holders” of unsecured convertible debentures issued by Oragin. Justice Steele addressed as a preliminary matter the Holders’ request for an adjournment of the motion before her to March 25-26, 2024, when the contested bankruptcy application in respect of Oragin was scheduled to be heard. Mr. Ihde was represented by counsel at this hearing and he filed an affidavit in support of his request for an adjournment.

12Justice Steele heard submissions from the parties on the contested adjournment request and determined that the adjournment request would be denied for the following reasons:

a. The bankruptcy application in respect of Oragin is a separate proceeding;

b. The Debenture Holders are creditors of Oragin, not the Debtors;

c. The Debtors, certain stakeholders of the Debtors, and the Proposal Trustee are of the view that it is important to get the sale process started as this provides the best opportunity for the company to find a going concern purchaser and any delay is at the expense of the estate.

13Justice Steele included in her endorsement a statement of the agreement that the Holders’ counsel could cross-examine Mr. Lurie on his affidavit by March 20, 2024. This cross-examination was conducted on March 19, 2024.

14In an endorsement released on March 25, 2024 in the application for a bankruptcy order against Oragin, Wilton-Siegel J. noted that Oragin does not defend the application. The Debtors sought a stay of the application or a bankruptcy order on terms preventing any action by the Trustee that would nullify the sales process approved by Steele J. Justice Wilton-Siegel declined to impose terms and a bankruptcy order issued. The Trustee was named as trustee of the bankrupt’s estate.

15Mr. Ihde and the Trustee oppose approval of the Proposal Trustee’s reports, its actions and activities described in these reports, and the fees and disbursements of the Proposal Trustee and its counsel. Mr. Ihde filed an affidavit sworn May 1, 2024 upon which he and the Trustee rely.

16Mr. Ihde deposes that statements made by the Proposal Trustee in its First Report were either incorrect or so materially incomplete as to be misleading, and created a substantially inaccurate picture of the debtors’ financial condition. Mr. Ihde deposes that the effect of the omissions in the reports to the Court of the Proposal Trustee has been to ensure that the largest creditor and sole shareholder of the debtor companies, Oragin, had no input into the sale of the Debtors’ operating assets.

17Mr. Ihde identifies in his affidavit the following statements made by the Proposal Trustee in its First Report (that was placed before Steele J. on the motion for approval of the sale process) which, he says, were either incorrect or so materially incomplete as to be misleading:

a. that the debtor companies “collectively have unsecured obligations totaling approximately $2.7 million as at the Filing Date”;

b. that Oragin was not among the creditors of those debtor companies (listed at Appendix B);

c. that Oragin’s “primary assets include its equity interest in its subsidiaries, including Organic Garage”; and

d. that “the Debtors are not borrowers or guarantors of the Convertible Debentures. Accordingly, the Holders [Leede and Mr. Ihde] are not included in the Debtors’ creditor listings”.

18Mr. Ihde and the Trustee submit that these statements presented a materially inaccurate view of the Debtors financial situations on the motion for approval of the sale process. This is so, they say, because the actual amount of unsecured obligations of the Debtors was approximately $13.8 million, not $2.7 million, and that Oragin held approximately $11.1 million of that unsecured debt, which is an asset of Oragin. Mr. Ihde deposes that, in his view, a trustee exercising reasonable diligence would have known at the time the First Report was drafted that each of these statements was either incorrect or so materially incomplete as to be misleading. Mr. Ihde deposes that the inaccurate picture was used to obtain Court-approval of a process for the sale of many of the Debtors’ assets without consultation with Oragin of which he and Leede are the largest creditors.

22Mr. Ihde and the Trustee submit that the Proposal Trustee failed to act with reasonable diligence by failing to discover that Mr. Lurie’s statements about the creditors of Organic Garage (which did not include Oragin, the largest creditor of Organic Garage) were incorrect. They submit that the Proposal Trustee was not entitled to simply rely on information provided by Mr. Lurie. They submit that had the Proposal Trustee discovered this fact and disclosed it in its First Report, this would have presented a more accurate and complete evidentiary record of the financial situation of the Debtors than was presented to Justice Steele.

23The substance of the position advanced by Mr. Ihde and the Trustee is that because the Proposal Trustee’s First Report did not disclose in its First Report presented to Steele J. that substantial indebtedness was owed by Organic Garage to Oragin, and that Mr. Ihde (and Leede) were creditors of Oragin under the debentures, Justice Steele was deprived of a full picture of the financial situation of the Debtors when she approved the sale process. But, at the motion heard by Steele J., Mr. Ihde was represented by counsel and he filed an affidavit sworn March 13, 2024. In this affidavit, Mr. Ihde explains that he and Leede hold debentures issued by Oragin that are in default and he states his belief that the proposal proceedings are intended by Oragin and its subsidiaries to prevent him and Leede from recovering on the debentures. Mr. Ihde requested an adjournment of the motion to allow him to cross-examine Mr. Lurie to seek to gather additional information about the relationships among Oragin, Organic Garden, and its subsidiaries. Justice Steele denied the requested adjournment.

24The Proposal Trustee disagrees that it failed to exercise proper diligence. In the First Report of the Proposal Trustee, it states, under the heading “Terms of Reference”, that the Proposal Trustee has relied on information and documents provided by the Debtors and their advisors, including unaudited financial information, the Debtors’ books and records, and discussions with the Debtors’ representatives and their legal counsel. The First Report states that the Proposal Trustee has reviewed the information for reasonableness, internal consistency, and use in the context in which it was provided. The Proposal Trustee reports that it has not audited or otherwise attempted to verify the accuracy or completeness of the information in a manner that would comply with Generally Accepted Auditing Standards and, as such, the Proposal Trustee expresses no opinion or other form of assurance contemplated under these standards in respect of the information.

25In the Second Report, the Proposal Trustee reports that the Debtors’ internal balance sheet as at January 31, 2024 showed current and long term loans totaling approximately $6.7 million owing to “Organic Garage Ltd.”, the predecessor name of both Organic Garage and Oragin. The Proposal Trustee reports that Mr. Lurie was not aware of what these entries relate to, as the accounting records were maintained by the former CFO of Oragin who resigned in November 2022. The Proposal Trustee reports that, as such, the intercompany accounts were not included on the Debtors’ creditors listing filed with the NOI.

26The Proposal Trustee reports that Mr. Ihde executed a Non-Disclosure agreement and participated in the sale process and that the Proposal Trustee has been in communication with the Trustee regarding these proceedings including the sale process.

27The narrow issue before Justice Steele was whether the NOI proceedings should be allowed to continue with approval of a sale process to effect a going concern sale of the business of the Debtors with a view to maximizing value for the benefit of its stakeholders. The sale process approval motion was brought on an urgent basis because of the financial circumstances of the Debtors. Justice Steele, after hearing from counsel for Mr. Ihde, recognized the need to act quickly and declined to grant the requested adjournment. Justice Steele approved the requested sale process.

28Given this narrow issue, knowledge by the Proposal Trustee that Mr. Ihde was a substantial creditor of Oragin, a creditor of Organic Garage, and that indebtedness owed by the Debtors to their creditors exceeded the amount stated in the First Report, if this had been obtained by the Proposal Trustee, would not have changed the fundamental conclusion that the Debtors were in dire financial circumstances and urgently needed to proceed with a sale process. On the motion before Steele J., Oragin was effectively represented by Mr. Lurie, who was its directing mind. The interests of Mr. Ihde were represented at this hearing. The fact that a bankruptcy application by Mr. Ihde against Oragin was pending was known to Justice Steele.

29I do not accept that the record before me justifies a finding that the Proposal Trustee failed to act with reasonable diligence in relation to the subject matter of the NOI proceedings including the motion for approval of the sale process. I do not accept that Mr. Ihde’s evidence of his own view of what a trustee exercising reasonable diligence should have known is relevant or should carry any weight. The First Report discloses the sources of the information upon which the Proposal Trustee relied. Mr. Lurie’s evidence is that he did not know the existence of indebtedness owed by the Debtors to Oragin. In the circumstances, I do not fault the Proposal Trustee for relying on the information provided by Mr. Lurie and proceeding expeditiously with the motion before Steele J. without delaying the process to undertake additional, time consuming, investigations into possible additional unsecured intercompany debt.

30I am satisfied that the Proposal Trustee has reported to the Court and the stakeholders its activities since the beginning of these proceedings in the First Report, the Second Report, and the Third Report. I am satisfied that the activities of the Proposal Trustee were necessary and undertaken in good faith in accordance with the sale process order and with a view to the best interests of the Debtors’ stakeholders generally. Court approval of the Proposal Trustee’s reports and activities serves the purposes identified in Target, at para.23”

11These findings of fact and law continue to be relevant to this Meeting Decision Appeal and the Cross-Appeal.

12In an endorsement dated March 25, 2024 (the “Oragin Bankruptcy Application Endorsement”), Wilton-Siegel, J. stated the following in granting the Bankruptcy Order for Oragin, pursuant to the Bankruptcy Application brought by Ihde (at Exhibit “H” to the Affidavit of Alan Rutman sworn October 15, 2024” (the “Rutman Affidavit)):

“The applicant, Tobias Ihde (the “Applicant”), seeks a bankruptcy order in respect of Oragin Foods Ltd. (the “Debtor”) under s. 43 of the Bankruptcy and Insolvency Act (the “BIA”).

The only asset of the Debtor is its shares in a wholly owned subsidiary, Oragin Garage Ltd. (“Subco”), which is also insolvent. Subco has filed a notice of intention to make a proposal under the BIA (the “NOI Proceedings”).

On March 14, 2024, Steele J. approved a sales process in the NOI Proceedings for the sale of all of the assets of Subco (the “Sales Process”). The final bid deadline under the sales process is April 12, 2024 unless otherwise extended in accordance with the terms of the Sales Process (such deadline being referred to as the “Final Bid Deadline”). The Applicant opposed the Sales Process at the hearing before Steele J. on March 14, 2024 seeking an adjournment of the hearing or an immediate bankruptcy of Subco. Steele J. rejected the requests in granting approval of the Sales Process.

In the present proceeding, the Debtor does not defend the Applicant’s application for a bankruptcy order in respect of the Debtor. Accordingly, a bankruptcy order shall issue in respect of the Debtor without objection.

However, the Debtor, Subco and Subco’s wholly owned subsidiaries (collectively, the “NOI Debtors”) seek either: (1) a temporary stay of the Applicant’s application until the Final Bid Deadline; or (2) a bankruptcy order subject to terms temporarily preventing the trustee in bankruptcy of the Debtor from taking seps that would interfere with, terminate or delay the Sales Process.

The NOI Debtors say that the proposal trustee of Subco demonstrated at the hearing before Steele J. that an immediate bankruptcy would result in nil recovery for unsecured creditors and that a going concern sale provided the only possibility of any recovery for creditors. They say that the Debtor and its creditors have no economic interest in Subco and should not be able to drain financial resources of Subco by litigating over control of the insolvency process of Subco. The NOI Debtors say the balance of prejudice favours either (1) a stay of the bankruptcy application pending the Final Bid Deadline at which time the value, if any, of the assets of Subco will be determined and thereby the parties who have an interest in such assets or (2) a grant of the bankruptcy order on terms preventing any action by the trustee that would nullify the Sales Process.

The parties agree that any proceedings to terminate the NOI Proceedings would require an application before Steele J. in those Proceedings. The NOI Debtors are prepared to address any such claim in the NOI Proceedings.

Their principal concern in the present proceeding is that the purpose of the bankruptcy of the Debtor may be to put the trustee in bankruptcy of the Debtor in a position to assign Subco into bankruptcy utilizing its position as the shareholder of Subco.

I have some sympathy for the NOI Debtors. However, given that the bankruptcy order has issued, a stay of the Applicant’s application is not available to the NOI Debtors. I am also not persuaded that I have the jurisdiction to impose the terms to the bankruptcy order sought by the NOI Debtors. An order containing such terms effectively prevents the trustee of the Debtor from taking steps in the NOI Proceedings as well as taking actions outside of such proceedings.

I do not think that this Court has jurisdiction to impose conditions that directly or indirectly constitute an order in respect of the NOI Proceedings which are being supervised by another judge of the Superior Court. The jurisdiction of the Court to impose conditions with respect to the trustee’s actions outside the NOI Proceedings is more nuanced. As the Applicant’s counsel argues, such action is premature in that the trustee has not proposed to take any particular action at the present time. Any prejudice of the sort contemplated by the NOI Debtors would therefore appear to be speculative.

On the other hand, regardless of the Applicant’s interrelated objections regarding the amount of the Debtor’s debt claim against Subco, the issue of whether such debt was properly disclosed in the NOI Proceedings, and the statements to the Court regarding prior consultation with Subco’s creditors, none of which has been determined, the fundamental fact is that the Debtor has no economic interest in Subco. A trustee in bankruptcy is a court officer. The Court should assume that a trustee would not take any action of the sort feared by the NOI Debtors without a legitimate reason for doing so in its capacity as a creditor of Subco. As was observed in the hearing on the present application, any action of the trustee in its capacity as the shareholder of Subco exhibiting bad faith on the part of the trustee would run the risk of an award against the trustee under section 37 of the BIA or otherwise.

Based on the foregoing, an order shall issue in the form attached.”

The Bankruptcy Estate

13The outcome of the Proposal Proceedings for the Bankrupt is summarized in the First Report of KPMG as the Trustee in Bankruptcy of the Bankrupt:

“4. On March 14, 2024, the Debtors brought a motion to approve a sale process to be carried out by the Proposal Trustee, which contemplated a stalking horse bidder (the “Sale Process”). Tobias Ihde (“Ihde”), in his capacity as a creditor of Organic Garage’s parent company, Oragin, opposed the motion, seeking an adjournment of the hearing or an immediate bankruptcy of the Debtors. The Honourable Justice Steele rejected Ihde’s requests and approved the Sale Process. A copy of the endorsement is attached as Appendix “A”.

The Sale Process ultimately resulted in three separate transactions involving the Debtors. On May 2, 2024, the Proposal Trustee obtained approval and vesting orders for each of the transactions, which closed shortly thereafter.
Organic Garage failed to file a proposal on or before May 17, 2024, and as a result, the Company was deemed to have made an assignment in bankruptcy on May 18, 2024. KPMG Inc. was appointed as Trustee (in such capacity, the “Trustee”) of the Estate of the Bankrupt by the Official Receiver, subject to affirmation by the creditors of the Trustee’s appointment or substitution of another trustee by the creditors.
Each of the subsidiaries, 2412383 Ontario Inc., 2347018 Ontario Inc., 2507158 Ontario Inc. and 2581751 Ontario Inc., also failed to file a proposal, and as a result were all also deemed to have made an assignment in bankruptcy on May 18, 2024. KPMG was also appointed as Trustee of these estates by the Official Receiver.”

14In the Creditors Package sent to Creditors to the Bankruptcy Estate (the “Creditors’ Package”) the Bankrupt, in a Statement of Affairs sworn by Lurie on May 24, 2024 (the “Statement of Affairs”) declared assets of $1,312,658.96 and total liabilities of $9,560,547.98 leaving a $8,247,889.02 deficiency.

15Of the creditors, the secured creditors were declared at $165,805.97, being SIR Solutions, and the Toronto Wholesaler Produce Association (“TWPA”) regarding cash collateral held for produce supplied to the Bankrupt’s Bathurst, Junction, Liberty and Oakville stores.

16Of the unsecured creditors declared by the Bankrupt in the Statement of Affairs, the largest claim declared is for Oragin, care of it’s Trustee in Bankruptcy Zeifman, in the amount of $6,760,280.89 of the $9,394,742.01 in declared unsecured claims, or approx. 72% of the declared claims. The other declared unsecured creditors are mostly trade suppliers with UNFI Canada Inc. at $455,492.65, the Ontario Natural Food Company at $431,350.06 and Instacart at $350,035.84 being the only declared creditors in excess of $100,000.

17After I allowed the Appeal from the Disallowance of the Oragin Proof of Claim, the proven claim of Oragin now constitutes $2,917,423.11 of $5,551,884.23, or approx. 52% of the declared claims. I do not have an updated Claims Register, so I don’t know the current state of claims that have been admitted, beyond Oragin.

18The declared assets of the Bankrupt on the Statement of Affairs consisted of accounts receivable in the amount of $81,132.39 and a promissory note allegedly owing by “Organic Garage Holdings Ltd” in the amount of $154,250 which allegedly was secured by a GSA. This was one of the names of one of the purchasers in the NOI proceedings, on the sales transactions approved by Cavanagh, J. prior to the Bankruptcy.

19Additionally there were declared cash in financial institutions totalling $845,128.01 as well as the valuation of the shares of the now bankrupt subsidiaries estimated at a total of $313,280.95.

20Effectively, this Meeting Decision Appeal will determine whether the Trustee and its counsel were properly appointed and whether the inspectors assisting the Trustee in the administration of the Estate were properly appointed, so that the final distribution can be made in the Bankruptcy Estate.

21The only PPSA registration against the Bankrupt was by BDC Capital Inc. from June 21 2018, over all collateral categories. There was a registration against “Organic Garage Ltd.” by TWPA over all collateral categories, but that is not the proper current legal name of the Bankrupt “Organic Garage (Canada) Inc.” It should be noted that the former legal name of both the Bankrupt and Oragin was “Organic Garage Ltd.” (the Bankrupt being an Ontario Corporation and Oragin a British Columbia Corporation), adding both confusion and a specific legal issue relating to the perfection of PPSA security against this Bankrupt.

22During the NOI process the stores at the various locations were sold to three different purchasers, in three separate Asset Purchase Agreements and Vesting Orders granted by Cavanagh, J. on May 2, 2024. After the closing of the transactions and the payment of the professional costs of KPMG as Proposal Trustee and its counsel, as approved by Cavanagh, J., the remaining funds were retained by KPMG in its capacity as Trustee in Bankruptcy of the Bankrupt, to be distributed in accordance with the BIA, after the final determination of this Meeting Decisions Appeal.

Evidence of the Trustee

23The following paragraphs of the First Report are relevant to the characterization by the Trustee of the intercorporate amounts between the Bankrupt and Oragin:

“2. Organic Garage is a wholly-owned subsidiary of Oragin Foods Inc (“Oragin”), a reporting issuer listed on the NEX (a subsidiary of the TSX-V), the OTC QX, and the Frankfurt stock exchange. Oragin is subject to a cease trade order and is currently suspended from trading on all three exchanges. In addition to Organic Garage, Oragin is the parent company to the Future of Cheese Company Corp., 2664669 Ontario Inc. and 1047023 B.C. Ltd”

24There is no dispute by Zeifman that the Bankrupt is the wholly owned subsidiary corporation of the Bankrupt Parent Company, Oragin.

The Meetings of Creditors

25The factual circumstances of the Meetings of creditors at issue are:

The 1st Meeting was held on June 6, 2024 by video conference;
Emily Beckerman (“Beckerman” or the “Chair”) from the OSB was the Official Receiver (the “OR”) that chaired the 1st Meeting under the provisions of s.105(1) of the BIA;
The Minutes of the June 6, 2024 meeting are at Exhibit “L” to the Rutman Affidavit (the “1st Meeting Minutes”).
At the time of the 1st Meeting Zeifman had filed the Oragin Proof of Claim in the amount of $6,760,280.89 in the Bankruptcy Estate of Organic Garage, its wholly owned subsidiary, but the claim had not been determined or formally disallowed by KPMG;
The portions of the June 6 Minutes relevant to the Meeting Decision Appeal and the Cross Appeal (omitting those portions of the question period relating to general process questions and questions relating to issues dealt with in the Disallowance Appeal Reasons):

“CHAIRPERSON’S OPENING COMMENTS

The Chairperson noted that they object the claim of Oragin Foods Inc. (Oragin Foods) in the amount of $6,760,280.89.

The Chairperson noted that Pritesh Patel (Trustee) would go through the Trustee’s preliminary report (the Report).

Allan Rutman questioned the objection made by the Chairperson. The Chairperson answered that there is a process to be followed regarding questions and that this question could be asked and answered later in the meeting. The Chairperson concluded and asked the Trustee to continue with the Report.

Fred Tayar questioned the terms of the objection regarding Oragin Foods’ claim. Allan Rutman questioned if he would be allowed to vote. The Chairperson confirmed that these questions could be asked and answered later in the meeting during the voting period. The Trustee was advised to continue with reading the Report.

Question from Tao Yan regarding a second meeting of creditors. Will we have another meeting, and vote after those meetings, or will we vote during this meeting?

The Trustee answered that in general, the first meeting will affirm or substitute the Trustee, appoint estate inspectors, and then provide directions to the trustee regarding administration of the bankruptcy. The trustee advised that the first two matters would be subject to a vote at this first meeting of creditors.

Question from Michael Shakespear regarding Oragin Food claim. Will their (Oragin) vote be discounted? The chairperson answered that we have not gotten to voting yet. The Chairperson’s reiterated that any decision of the Chair may be challenged in court by a creditor. Voting will be discussed later in the meeting.

VOTING PERIOD

The Chairperson made note of the proof of claim process and addressed the restriction of related parties to the debtor to voting. The Chairperson also advised that any decision made by the Chairperson could be reviewed by court if a creditor disputed the decision.

The Chairperson is of the opinion that there is a non-arms’ length relationship between Oragin Foods as parent of Organic Garage. The additional reasons provided, that in the twelve months prior to bankruptcy they had a common director and management in Matt Lurie and their tax filing indicated that they were related.

Allan Rutman asked the Chairperson what section of the Bankruptcy and Insolvency Act (the Act) the Chairperson was referring to and did she consider sec. 108(3).The Chairperson confirmed that she was referring to Section 109(6) and Directive 22R2 and not sec.108(3).

The Chairperson states that they were requesting an adjournment of the meeting as the adjournment would permit the creditor to request a court review of the Chairperson’s decision that creditor Oragin Foods could not vote because they were a related party and therefore subject to restrictions under sec. 109(6) and Directive 22R2.

Fred Tayar asked what section of the Act grants the Chairperson the authority to adjourn the meeting. Fred Tayar stated that there are many creditors and it should be decided by the creditors by vote as to whether the meeting be adjourned.

ADJOURNMENT OF MEETING

The Chairperson asked the creditors if they would make a motion to adjourn the meeting. Mike Shakespear moved to adjourn the meeting. Motion seconded by Rory Demetrioff.

Question from Brad Kewalramani regarding the adjourned meeting. If we adjourn the meeting today, will there be another meeting set up? The Trustee answered that there would be a reconvened meeting of creditors at a later date.

Votes to approve the meeting adjournment: 11 (10 hands raised in Microsoft Teams, including Rod Rowe who raised his hand via camera)

Votes to deny the meeting adjournment: 0.

The motion passed to adjourn the First Meeting of Creditors. Meeting Adjourned at 11:48 AM EDT.

Allan Rutman asked when the meeting minutes will be available. The Chair stated they would be available Monday, June 10th, 2024, or as soon as possible before those dates.

Fred Tayar asked the Chairperson if they had counsel that the appeal material could be addressed to. The Chairperson advised they would provide that information to Fred Tayar.”

On June 14, 2024, counsel for Zeifman served an Appeal of the Chairs Decision (the “Notice of Appeal”) that appealed for the following relief:

“An order setting aside the following decisions of the OR, made at the First Meeting:

a. to “object to the claim of Oragin Foods Inc…in the amount of $6,760,280.89” (i.e. the proof of claim filed by the Trustee); and

b. that “Oragin Foods [the Trustee] could not vote because they were a related party and therefore subject to restrictions under sec. 109(6) and Directive 22R.

An order admitting the Trustee’s proof of claim for voting, and declaring that the Trustee may vote at any meeting of creditors of the Bankrupt.
Costs of this motion on a partial indemnity basis.”

The Grounds of the Notice of Appeal (the “Meeting Notice of Appeal”) that are still relevant to this Meeting Decision Appeal, after my prior determination in the Disallowance Appeal that the Current Liability Component of the Oragin Proof of Claim in the amount of $2,917,423.11 was to be admitted as a proven unsecured claim by Oragin, are:

“The First Error: the Unexplained Objection

The First Meeting was held on June 6, 2024. The OR was the Chairperson. Minutes of the First Meeting were prepared by the office of the OR and delivered on June 7, 2024 (the “Minutes”).
After satisfying herself that there was a quorum, the OR made her opening comments, the first of which was as follows. The Chairperson noted that they object [to] the claim of Oragin Foods Inc. (Oragin Foods) in the amount of $6,760,280.89.
The OR then refused to explain this objection, on four occasions. Allan Rutman questioned the objection made by the Chairperson. The Chairperson answered that there is a process to be followed regarding questions and that this question could be asked and answered later in the meeting. The Chairperson concluded and asked the Trustee [of the Bankrupt] to continue with the Report.

Fred Tayar asked why the proof of claim was being objected to by the Chairperson. The Chairperson answered that the question would not be answered at this point in the meeting, as this session was for questions to the Trustee [of the Bankrupt].

(Minutes, page 3, emphasis added)

(Minutes, page 4, emphasis added)

When the “Voting Period” arrived, the OR did not explain why she had objected to the Proof of Claim. Rather, she explained why the Trustee could not vote at the meeting (on which more below).
As a matter of law, the OR’s decision to deny the Trustee a vote was distinct from her objection to the Proof of Claim. The fact of the objection could not preclude the Trustee from voting, as the Bankruptcy and Insolvency Act, RSC 1985, c B-3, (the “BIA”) makes clear:

Chair may admit or reject proof

108 (1) The chair of any meeting of creditors has power to admit or reject a proof of claim for the purpose of voting but his decision is subject to appeal to the court.

Accept as proof

(2) Notwithstanding anything in this Act, the chair may, for the purpose of voting, accept any letter or printed matter transmitted by any form or mode of telecommunication as proof of the claim of a creditor.

In case of doubt

(3) Where the chair is in doubt as to whether a proof of claim should be admitted or rejected, he shall mark the proof as objected to and allow the creditor to vote subject to the vote being declared invalid in the event of the objection being sustained.

(Emphasis added)

As the objection could not preclude voting, the OR’s explanation for the denial of voting rights could not serve as a lawful explanation for the objection (on which more below). The result is that the OR objected to the Proof of Claim without any articulated reason for doing so. This was an error in law.
There is no lawful reason to object to the Proof of Claim, and this Court should order that it is admitted for voting at all meetings of the creditors of the Bankrupt.

The Second Error: the Denial of Voting Rights

The material section of the Minutes is as follows.

VOTING PERIOD

(Minutes, pages 6-7, emphasis added)

The denial of the Trustee’s right to vote was an error of law. The decision is not supported by either section 109(6) of the BIA, or Directive 22R2.
Section 109(6) is as follows.

Vote of creditors not dealing at arm’s length

The redetermined outcome is the outcome of the vote unless a court, on application within 10 days after the day on which the chair redetermined the outcome of the vote, considers it appropriate to include the creditor’s vote and determines another outcome.

Section 109(6) presumes (i) that the non-arm’s length party is a creditor, and (ii) that that creditor has voted. In this case, the OR has (i) denied that the Trustee is a creditor (by her unexplained objection to the Proof of Claim), and (ii) refused to allow the Trustee to vote at all.
By so refusing, the OR acted as if section 109(6) had not been amended in 2009. Before 2009, non-arm’s-length parties were barred from voting unless they obtained court approval to vote prior to the meeting. The amended provision allowed non-arm’s-length parties to vote at the meeting, ensuring that the meeting was not delayed while the party seeks court permission to vote.
The OR appeared to rely upon the pre-2009 procedure when she stated that:

they were requesting an adjournment of the meeting as the adjournment would permit the creditor to request a court review of the Chairperson’s decision that creditor Oragin Foods could not vote…

(Minutes, pages 6-7)

By adjourning the meeting, the OR has caused exactly the mischief the 2009 amendment was drafted to prevent.
Appendix B of Directive 22R2, similarly, states that a related party may (subject to sections 113(3) and 109(6)) vote on a motion, an ordinary resolution, a special resolution, and (against) a proposal.
The OR’s denial of the Trustee’s right to vote is contrary to the BIA and the applicable directive, and should be set aside.”

After the filing of the Appeal by Zeifman there were as series of email communications on July 3, 2024 at Exhibit M to the Rutman Affidavit between Beckerman, the OR who chaired the meeting, and Linthwaite counsel for Zeifman, regarding the scheduling of the initial Special Appointment Case Conference before me on July 31, and whether Beckerman could consent to the hearing date without higher approval.
Significantly for the purposes of the Meeting Decision Appeal, there is the following email (at Exhibit M to the Rutman Affidavit) on July 4, 2024 (the “July 4 Email”) from Linthwaite counsel for Zeifman, to Beckerman, regarding the OSB circulating to creditors a notice reconvening of the meeting of creditors on July 10, 2024 while the Appeal commenced by Zeifman of the decisions made at the June 6 Meeting was pending:

“Dear Emily,

My client received the attached yesterday. The OSB cannot do this.

Your decisions at the first meeting of creditors are subject to a formal appeal. Yesterday, you asked for my agreement that the meeting of creditors “be re-convened ASAP” and the appeal “be either withdrawn or adjourned sine die”. I did not agree. As I wrote yesterday, the pending appeal must be dealt with by a court order before any other steps are taken. My client did not and will not agree to another first meeting of creditors until that order has been made. Further, it is my client, not the OSB, that has endeavoured to move this appeal along. I have spent more than two weeks trying to get the OSB to simply consent to the scheduling of the case conference at which that order might be made. So far, the OSB has not even consented to sign the requisition forms.

This will be raised with the Court.

Apparently, once it received my email, the OSB decided it would just engage in some self-help and do unilaterally what I had refused to agree to.

If the OSB does not withdraw the notice, I will raise the OSB’s conduct with the court at the to-be-scheduled case conference and seek costs.

It is a breach of basic professional courtesy to reschedule a meeting on less than six days notice, including weekends, without first clearing the date with the responding parties and their counsel.

Please reply with an email to the service list withdrawing the attached notice.

Please also provide me with the contact information of the counsel assigned to this file.”

The 2nd Meeting was held by Microsoft Teams on July 10th, 2024. Beckerman was again the Chair of the meeting. The portions of the minutes of the 2nd Meeting (the “2nd Meeting Minutes”) relevant to this Meeting Decision Appeal read:

“CHAIRPERSON’S OPENING COMMENTS

The Chair noted that Fred Tayar, counsel for creditor trustee Zeifman Inc. (Zeifman), requested that his objections on behalf of his client be recorded for the meeting minutes. It was trustee Rutman of Zeifman’s opinion that holding the reconvened first meeting of creditors after the Notice of Appeal was filed on June 14th, 2024 and before the Case Management conference on July 31st, 2024, should not proceed.

Fred Tayar stated that:

“the previous meeting was adjourned by the chair by motion notwithstanding that a notice was given… this notice was sent out…objection was made immediately for the notice on behalf of the client. Emily Beckerman responded that this notice was being forwarded to the OSB and senior counsel – we have heard nothing from that - it is quite clear it is inappropriate to have this meeting - …just for the record – decision by Justice Blair in LeBlanc v. York Catholic District School Board, 2002 CanLII 37923 – para 22 Justice Blair approved the

following statement:

“After service of a notice of motion, as a general rule, any act done by any party affected by the application which affects the rights of the parties on the pending motion will be ignored by the Court ”

That’s the statement I want to put on the record and would urge you all to reconsider having this meeting prior to the hearing of the motion.”

Fred Tayar urged the meeting attendees to consider the above-noted decision and to reconsider having the reconvened first meeting of creditors prior to the Case Management conference on July 31, 2024.

The Chair addressed Mr. Tayar and confirmed that his email had been forwarded to management and management had discussed the content with insolvency counsel. The Chair noted that at the first meeting on June 6, 2024 she had made two decisions: (1) The objection of the claim. She informed that the reasons for the objection would be provided prior to the vote; (2) That the two parties, Oragin as parent and Organic Garage as subsidiary, were related parties pursuant to section 109(6).

The Chair informed the creditors that in the OSB’s opinion the adjournment and subsequent reconvening of a meeting of creditor, where the OR is the Chair, is a standard process. It allows the Chair to consult with management and seek expert advice from counsel. The Chair was advised by the OSB that the reconvened meeting should be held as soon as possible to complete the outstanding agenda items, while the Chair’s decisions are being reviewed by the court. The Chair noted that she was following directions from the OSB.

Mr. Tayar stated that he did not understand the OSB’s directions because no one responded in writing from the OSB when he noted his client’s objection to the reconvened meeting.

Mr. Tayar stated:

“…There are significant costs thrown away for these meetings – the creditors are going to seek to be indemnified for these costs – so it is important to put forth any information you have and put that on the record”

The Chair then stated that she would like to reconvene the meeting and follow a protocol that the OSB has had in place for several years. The Chair noted that she will continue the meeting based on the direction she was given.

The Chair then reminded the creditors that for the FMOC, section 102(5) sets out the purpose and agenda, which is to consider the affairs of the bankrupt, affirm the trustee, appoint estate counsel, appoint inspectors and to give direction to trustee as creditors see fit.

The Chair stated that the first agenda item, to consider the affairs of the bankrupt, was completed at the adjourned meeting on June 6, 2024. She made two decisions at the adjourned meeting which were discussed earlier and are being reviewed by the court.

The Chair informed the creditors that s.106(3) of the BIA permits the chair to request an adjournment of the meeting from time to time. Since the OSB has no counsel at the FMOC, when there are contentious matters that need consultation, the Chair requests the creditors for an adjournment.

When there are outstanding agenda items from the adjourned meeting, the protocol for the reconvened meeting is for the Chair to contact the trustee and request that they send out notices to creditors. The notice period follows the same direction as for any other reconvened meeting, a period that is not less than 5 days.

The Chair stated that often at the FMOC, if a sec. 161 exam is requested by the trustee at the time of filing the bankruptcy with the OSB, then the Chair reads out the exam report at the FMOC. In this estate the request to conduct the sec. 161 examination was received at the June 6th FMOC. The examination of the director/manager Mr. Lurie will be conducted after the reconvened FMOC.

The Chair requested that the creditors please forward all questions to be asked at the sec. 161 exam to KPMG by August 3, 2024. KPMG will forward them to the Chair who in turn will forward it to the Debtor Compliance (DC) team at the OSB.

The Chair noted that since these exams are booked in advance, the exam would probably be scheduled in late September 2024. The sec. 161 exam should assist the trustee KPMG with the review of creditor Oragin’s claim.

The Chair explained that when an OR chairs the FMOC, because of limited access to information and oftentimes, because of several constraints before the FMOC, the decision to accept or object to a claim is premised on form rather than on the merits. It is the trustee who will review the merits and determine if claim should be allowed.

The OSB’s Directive 22R provides a framework for the OR with decision making in the circumstances when the trustee is unable to decide whether to allow or disallow a claim.

The Chair noted that s.135(1) of BIA requires a trustee to examine every proof of claim. Prior to the FMOC the Chair reviews the trustee’s decisions on the claim. If the trustee disallows a claim, then s.108 is not applicable and the Chair doesn’t address the claim.

The Chair noted that in this case, the trustee informed the Chair that the claim filed by Zeifman did not have adequate information for KPMG to decide, at the time of the FMOC. The Chair had to conduct the review in the absence of adequate supporting information.

The adjournment allowed the Chair to request the proof of claim be reviewed by other ORs at the OSB. Three senior ORs and senior management reviewed the claim and agreed that the proof of claim as filed by trustee Zeifman was inadequate. They agreed that the claim be objected for voting at the FMOC. Later, the trustee under 135(1) of the BIA will review and either allow or disallow the claim.

The Chair noted the adjournment period provided an opportunity to consult with management and insolvency counsel. In this case there were two items for consideration, an objected claim and a related party.

The Chair stated that the OSB confirmed that when there is a related party and an objected claim, then the protocol is to conduct two votes. During the first vote the objected claim is not permitted to vote. Then a second vote where the objected claim is asked if they would vote for, against or abstain, and their response is recorded.

The Chair explained that based on the OSB’s standard two vote protocol, the vote for the affirmation of the trustee will be held. The Chair stated that the trustee is appointed by an OR when the bankruptcy is filed. The vote at the FMOC is an opportunity for the creditors to affirm the appointment of the trustee. If there is a trustee substitution the creditors can raise that before the vote.

Trustee Rutman of Zeifman stated that he was not clear how this vote would occur. He enquired that the first vote would be without Zeifman voting as a related party and then a second vote with Zeifman, but without the value of the claim? He asked if the Chair was saying that the claim was valued at $1.

The Chair explained that she was following the voting protocol. First vote without the objected claim, tally the yes and no votes. Then during the second vote the objected claim will be asked whether they vote for or against, a yes or a no will be recorded.

Trustee Rutman stated he was not understanding the vote, he stated that “we need to know the value”. Rutman appeared not to understand how a majority vote could be conducted without a value.

The Chair noted that all that was required by the objected claim is to record if their vote is a yes or no. She requested if the Chair could run the first vote to affirm the trustee. Rutman agreed to proceed

AFFIRMATION OF THE TRUSTEE

Motion to affirm KPMG Inc. as the Trustee

Moved by: Michael Shakespear, representing Seacore Seafood Seconded by: Rod Rowe, representing Rowe Beef Co.

First vote

YES: 19 creditors voted in favour, including proxies to the trustee, for a total value of

$1,223,824.82.

AGAINST: None ABSTAIN: None.

Second vote of the objected claim

The creditor was asked if he votes for, against or abstained. Rutman stated that he would abstain.

With the abstention of the objected claim, the vote to affirm KPMG as trustee passed.

APPOINTMENT OF INSPECTORS

The following is a list of those who volunteered as inspectors and the outcome of the subsequent votes.

Paul Gill

First vote

YES: 19 creditors voted in favour, including proxies to the trustee, for a total value of

$1,223,824.82.

AGAINST: None ABSTAIN: None.

Second vote of the objected claim Rutman voted YES.

The vote passed and the court review of the Chair’s decisions will not impact this appointment.

Thomas Lam

First vote

YES: 18 creditors voted in favour, including proxies to the trustee, for a total value of

$1,190,758.40.

AGAINST: None

ABSTAIN: 1 creditor

Second vote of the objected claim Rutman voted YES

The vote passed and the court review of the Chair’s decisions will not impact this appointment.

Rod Rowe

Rutman suggested that to expedite the voting that the Chair enquire if there were any votes against the appointment.

First vote AGAINST: None

Second vote of the objected claim Rutman voted YES

The vote passed and the court review of the Chair’s decisions will not impact this appointment.

Allan Rutman

First vote

YES: 1 creditor voted in favour. The value of the claim $89,410.67.

AGAINST: 6 creditors voted against with a total value of $98,382.44

ABSTAIN: 12 creditors abstained.

Second vote of the objected claim Rutman voted YES

The appointment of this inspector will be determined after the review by the court of the Chair’s decision whether the parties are related.

APPOINTMENT OF THE ESTATE SOLICITOR – AIRD & BERLIS

All the creditors, including the objected claim, voted for the appointment of the estate solicitor.

The court review of the Chair’s decisions will not impact the appointment of the estate solicitor.

ADJOURNMENT OF MEETING

The Chair requested the creditors to call a motion to adjourn the meeting.

Moved: Michael Shakespear, representing Seacore Seafood. Seconded: Thomas Lam, representing Enviroprise Inc.

As there were no votes against this motion, it passed.”

The Notice of Disallowance by KPMG of the Oragin Proof of Claim was issued November 1, 2024. On the Disallowance Appeal I determined on April 23, 2025 that the Current Liability Component of the Oragin Proof of Claim was a Proven Claim.

26The Minutes of the 1st Meeting and the 2nd Meeting are deemed to be admissible evidence by the provisions of s. 114 of the BIA which read:

Evidence of proceedings at meetings of creditors

114(1) A minute of proceedings at a meeting of creditors under this Act signed at the same or the next ensuing meeting by a person describing himself as or appearing to be chair of the meeting at which the minute is signed shall be admitted in evidence without further proof.

Evidence of regularity

(2) Until the contrary is proved, every meeting of creditors in respect of the proceedings whereof a minute has been signed by the chair shall be deemed to have been duly convened and held and all resolutions passed or proceedings thereat to have been duly convened and held and to have been duly passed or had.”

27To the extent that the parties have filed affidavit evidence, for the purposes of the Meeting Decision Appeal, it does not appear that there is any great factual disagreement or argument that the Minutes of the 1st Meeting and the 2nd Meeting accurately reflect the events of the meetings and the decisions made as I have extracted them, and all of the parties arguing the Meeting Decision Appeal quote extensively from these Minutes in their Facta.

28The Court accepts that for the purposes of s.114 of the BIA, that the Minutes are admissible evidence of the events of the 1st Meeting and the 2nd Meeting.

ISSUES TO BE DETERMINED ON APPEAL AND CROSS APPEAL AND POSITIONS OF PARTIES

29Given the varied issues and arguments, I have summarized the issues that the Court must determine in the Meeting Decision Appeal and the arguments made by the parties in the following chart:

Issues to be Determined in Meeting Decision Appeal

Zeifman Arguments for Appeal and Cross Appeal

KPMG Responding Arguments and Cross Appeal

OSB Responding Arguments

Were decisions made at the 1st Meeting, and were the decisions wrong at law?

Yes, decisions were made and they were wrong at law

Yes, the decision to initially deny voting at all was wrong, but the 1st Meeting was adjourned pending determination and decision was “repaired” at the 2nd Meeting, when the decisions were voted upon

What was the effect of the Appeal by Zeifman of the Chair’s Decisions at the 1st Meeting?

Appeal stayed further meetings until issues on Appeal of 1st meeting are disposed of

Did not stay the convening of the 2nd meeting

Should the 2nd Meeting been called while the Zeifman Appeal of the Chairs Decisions at the First Meeting was pending?

Yes, as the OSB was calling the 2nd Meeting to remedy the issues raised in the Appeal

Was the Zeifman Appeal Moot after the 2nd Meeting?

Yes

What was the effect of Rutman voting at the 2nd Meeting?

Did not affect argument that the meeting itself was a nullity as appeal of 1st meeting was still pending

Further evidence that Zeifman suffered no prejudice by Decisions made at 2nd Meeting that remedied the errors at the 1st Meeting

Voting by Rutman at the 2nd Meeting about the issues under appeal made the Appeal Moot

Are the resolutions passed at the 2nd Meeting a nullity?

Yes

Should the Court Affirm the resolutions approved at the 2nd Meeting?

No, the decisions at the 2nd Meeting were a nullity

Yes, for further certainty and to ensure that the Trustee and its counsel have been properly appointed, Court should confirm.

Not argued

Should the Court Order that Zeifman shall be permitted to vote at all future meetings of creditors?

Yes

Should Rutman be prevented from being appointed as Inspector on behalf of the Oragin Estate?

Yes

Not argued

Who should costs be awarded against?

Against the OSB and KPMG on Cross-Appeal

Against Zeifman

Not against the OSB

LAW AND ANALYSIS

Practical Issues:

30In virtually all Bankruptcies and Division 1 Proposals a meeting of creditors is held. In Summary Administration Bankruptcies and Consumer Proposals a meeting can be requested by the OSB or the requisite Creditors, but many of the same rules for the admission of proofs of claim and voting would apply.

31As a result, the issues raised in the Meeting Decisions Appeal are important for the conduct of meetings and procedures for the review and admission of claims of creditors for voting purposes at those meetings of creditors, whether chaired by Trustees or the Superintendent’s representatives. Counsel for the OSB specifically requested the Court’s guidance in its submissions with respect to these issues.

32In Division 1 Proposal Meetings, given that the failure to secure votes in favour of the Proposal by the requisite majorities can result in a deemed assignment into Bankruptcy, much of the jurisprudence regarding the calculation of votes at a meeting and the valuation for those votes is in the context of a Division 1 Proposal, but the requirements of holding a meeting, and decisions of the chair in allowing creditors to vote at meetings in a Bankruptcy context are equally important.

33The Court has considered all materials and arguments raised by all parties on this Motion. Any failure by the court to refer to specific arguments and materials raised by the Parties does not reflect that the Court has not considered those arguments.

What is the Standard of Review on Appeals of Chair’s decisions?

34Issues regarding the standard of appeal were not specifically raised on this second part of the Appeals, as they were in the Disallowance Appeal of the Zeifman Proof of Claim. However, the tests on appeal of the decision of the Chair have been differently expressed, in differing jurisprudence.

35After much discussion in the Disallowance Appeal I summarized the standard of review on an Appeal of the Disallowance of a Proof of Claim by a Trustee as:

“[76] To synthesize the above jurisprudence, the tests set out in Housen, Galaxy Sports, Charlestown, Broer, DBDC Spadina and De Beers, require the Bankruptcy Court in hearing the appeal from the Trustee’s disallowance to:

assess each subcomponent of the Trustee’s decision making for the disallowance to determine, in each case,
where the specific decision to disallow was the determination of a question of pure law, and applying a correctness standard to the decision made, or
in the case of a question of pure fact, or mixed fact and law, applying the palpable and overriding error standard to the decision made.”

36Sheehan J.C.S. in Re Grimaux's Proposal 2023 CarswellQue 15745, 2023 QCCS 3618, EYB 2023-532338 (“Grimaux”) stated the following regarding the standard of review of the decisions of a chair of a meeting of creditors in admitting and rejecting proofs of claim for voting (English translation from Westlaw Edge):

“32 The following provisions of the BIA deal with the process of analyzing claims and the potential review of a related decision by a court:

Article 37

Appeal to the court against the trustee

Where an act or decision of the trustee adversely affects the bankrupt or any of the creditors or any other person, the person concerned may apply to the court, and the court may confirm, rescind or vary the act or decision that is the subject of the complaint and make such order as the court considers just.

Article 108

The chair may admit or reject evidence

The president of the meeting has the power, for the purposes of voting, to admit or reject a proof of claim; His decision may be appealed to the court.

Acceptable Evidence

Notwithstanding any other provision of this Act, the President may, for the purposes of voting, accept a letter or a printout transmitted by any means of telecommunication as proof of a creditor's claim.

Doubtful cases

Where the President doubts whether evidence of a claim should be admitted or rejected, he shall mark the evidence as disputed and shall allow the creditors to vote, subject to the invalidation of the vote, in the event that the challenge is maintained.

Article 135

Examination of the evidence

The trustee reviews each proof of claim or warranty filed, as well as the reasons for it, and may require new evidence to support it.

Contingent and unliquidated claims

(1.1) The trustee shall decide whether a potential or unliquidated claim is a provable claim and, if so, shall assess the claim; Subject to the other provisions of this article, the claim shall then be deemed to be proven for the amount of the assessment.

Rejection by the trustee

The trustee may dismiss, in whole or in part, any claim, any right to priority in the applicable order of collocation provided for in this Act or any guarantee.

Notice of Decision

If the liquidator decides that a claim is provable or if he rejects, in whole or in part, a claim, a right to a priority ranking or a guarantee, he shall forthwith give a reasoned opinion thereof in the prescribed form.

Effect of the decision

The decision and the dismissal are final and conclusive unless, within thirty days after the notice is served, or within such other period as the court may allow, on application made within the same thirty days, the addressee of the notice appeals to the court, in accordance with the General Rules, from the decision of the trustee.

Rejection of evidence in whole or in part

The court may strike out or reduce a proof of claim or security at the request of a creditor or debtor, if the trustee refuses to intervene in the matter.

33 It follows from the foregoing that the analysis of a proof of claim is sometimes a two-step process.

34 In the first stage, section 108(1) of the BIA allows the chair of a meeting of creditors to admit or reject a proof of claim for the purpose of voting. Such a decision may be appealed to the court.

35 The analysis at the assembly stage is rather sketchy. It is above all a question of inquiring whether the complaint is, on its face, formulated in the prescribed form38 Even if the president retains the discretion to judge the merits at this stage. In the event of a dispute as to the merits of the claim and in the event that there is any doubt as to its validity, the president must allow the creditor to vote while recording the vote under reservation, even if it means cancelling it when the validity of the claim can be determined by the trustee or by the court.

36 Therefore, it is considered that the trustee may continue to consider a proof of claim after it has been initially submitted to determine whether it should be accepted in whole or in part. In light of new facts, the Judge may also review a previous decision to accept a claim. Section 135(1) of the BIA provides that the syndic may, for this purpose, require additional evidence in support of the claim. Thus, a trustee has a discretionary power to request additional evidence and to determine the type of evidence required to better analyze a claim.

37The claim will not be rejected solely on the ground that it is a potential claim and not liquidated. In such a case, the trustee must decide whether the claim is provable and, if so, must assess it.

38After reviewing the claim, the trustee may approve the claim (in whole or in part) or dismiss it. When it accepts, reduces or rejects the complaint, it shall send a reasoned opinion to the creditor concerned who may appeal the reduction or dismissal within thirty days of receiving the notice.

39Where a proof of claim from a creditor is accepted, the debtor or another creditor may ask the trustee to intervene to reduce or dismiss the claim. If the trustee refuses to intervene, the debtor or that other creditor can go to court to ask the court to reduce or reject the proof of claim.

40The granting of an appeal from a decision of the syndic that relates to proof of claim may result in a reassessment of the vote that led to the acceptance or rejection of the proposal.

41The Sections 192(1)(h) and 192(1)(n) of the BIA confer jurisdiction on the Registrar over any application for proofs of claims, including an appeal of a trustee's decision granting or denying a claim. In addition, section 192(6) of the BIA allows the registrar to refer any matter that ordinarily falls within his or her jurisdiction to a judge for disposal.

42In this case, the parties suggested that the Management Notice and the Amended Appeal be heard by a judge. On June 29, 2023, Registrar Gosselin set the hearing of the Notice of Management and the Amended Appeal for August 31 and 1er September 2023.

The standard of intervention

43In view of the text of the Sections 108 and 135 of the BIA that refer to an "appeal" and the teachings of the Supreme Court of Canada in Vavilov which deals with the consequences of the use of such language by the legislature, the standard of intervention applicable to a decision of the presiding officer under the section 108 of the BIA or a decision of the Syndic under the section 135 of the BIA is that of the call :

36[ . . . ] [T]he courts must also give effect to the intention of Parliament, which is manifested in the presence of a mechanism for appealing an administrative decision and which provides for the exercise of an appellate function in respect of such a decision. [ . . . ] In granting parties the opportunity to appeal an administrative decision, as of right or with leave, to a court of law, Parliament is subjecting the administrative scheme to appellate jurisdiction and indicating that it expects the court to carefully review that decision in an appeal process. This express intention necessarily rebuts the general presumption of reasonableness based on an intention to respect Parliament's choice to refer certain issues to a body other than a court. This intention must be given effect.

44 There are certain consequences to identifying the standard of intervention for the appeal. The Supreme Court of Canada conducted a comprehensive review of this standard in Housen v. Nikolaisen. The following principles emerge:

44.1. The appeal is not a new trial.

44.2. The standard for pure questions of law is correctness. Appellate courts may therefore substitute their opinion for that of the trial courts when the latter make a determinative error as to the legal standard to be applied.

44.3. On questions of fact (including factual inferences), an appellate court should not interfere with a trial judge's findings of fact unless there is a "palpable and overriding error". In other words, intervention is only possible when the error "cannot be disputed" and is "obvious". "[I]t is not for appellate courts to question the weight given to the various pieces of evidence." Thus, "an appellate court may not review the trial judge's decision in cases where there was evidence that could support that decision".

44.4. The same standard applies to questions of mixed fact and law. Questions of mixed fact and law "involve the application of a legal standard to a set of facts". "Both questions of mixed fact and law and questions of fact require . . . from the tribunal that he draws inferences; the difference lies in the legal or factual nature of these inferences." This similarity justifies the use of the same standard of review. An appellate tribunal should not intervene on a question of mixed law and fact except where there is a palpable and overriding error.

45 "An error is manifest when it is obvious and it is not necessary to re-examine all the evidence to realize it; it is decisive when it has influenced the decision".

46 This standard of intervention applies to appeals from decisions of the trustee under section 135 of the BIA appeals from the decisions of the president of the assembly under the section 108(1) of the BIA. The Court should only intervene where there is an error of law or a palpable and overriding error of fact.

47 The appellant has the burden of demonstrating such an error.”

37Sheehan, J.C.S.’s reasoning was followed by in Re Bouclin’s Proposal 2024 CarswellQue 17303, 2024 QCCS 4729, EYB 2024-560682 which was affirmed by the Quebec Court of Appeal in 2025 CarswellQue 2589, 2025 QCCA 395, EYB 2025-566957 (“Bouclin”) where Pinsonnault J.C.S. (after quoting Sheehan, J.C.S in Grimaux) stated (English translation from Westlaw Edge):

97 The Tribunal finds from the foregoing that an appeal from a decision of the presiding officer of a meeting of creditors — like that of a trustee under section 135 BIA — does not automatically give rise to a trial de novo. Rather, it is done on the basis of the record in the hands of the decision-maker at the time he was called upon to make the decision now contested, which FPQ's counsel seems to have forgotten with his incessant attempts to introduce into evidence a myriad of facts, old and new, aimed rather at colouring, or even disproportionately complexifying, the debate and the issues at stake, and whose relevance is more than doubtful, given the burden of proof that rests on FPQ in the current context.

98 In fact, FPQ never asked to be allowed to proceed de novo with respect to this Motion on Appeal. Any evidence that was not in the hands of the Presiding Officer at the time the Decisions of the Chairperson was made is not admissible in this appeal, unless the interests of justice so require.

99 Certain post-judgments Vavilov75 recognize the tribunal's limited discretion on appeal under the BIA, to allow the adducing of fresh evidence (which was not in the hands of the decision-maker) if necessary and in the interests of justice.

100 In order for fresh evidence to be adduced, the appellant must show that, despite his or her due diligence, the evidence was not available in a timely manner, that it is credible and, most importantly, that it could have a significant impact on an issue76 .

101 A party who alleges impossibility must necessarily demonstrate his or her own diligence. It is both well established and in the area of restructuring, both under the BIA than the CCAA, creditors must act expeditiously and expeditiously.77

102 However, this is not the case in this case in the context of this Motion for Appeal, as we will see below.

103 Why is this important for the purposes of the following discussion? The BIA provides that decisions of the chair of the meeting are subject to appeal to a court, BIA ss. 51(3) and 108(1). BIA s. 135(3) says that the trustee’s decision is “final and conclusive” unless the aggrieved person appeals. Thus, in the case of the chair’s ruling, this Court need not provide any deference, whereas in the case of a trustee, this Court should accord some deference, based on this partial privative clause, see Stubicar v. Alberta (Office of the Information and Privacy Commissioner), 2008 ABCA 357 at para. 22. This Court will address this issue in more detail later in these reasons. For now, it is worthwhile noting that MNP [le syndic] fulfilled its duties under BIA s. 135 and the chair of the meeting appeared to accept the trustee’s findings when he made his rulings at the first meeting of creditors, rather than undertaking an independent valuation or finding. Thus, for the purposes of this decision, this Court will deal only with the decisions of the trustee pursuant to BIA s. 135.”

38Also, recently in Ontario in Re The Aggressive Good Inc. 2025 ONSC 1419, (“Aggressive”) my Ottawa colleague Associate Justice Perron followed Bouclin in a situation where the issue at the meeting of creditors was whether certain persons were eligible to be elected as inspectors of a Bankrupt corporation, having previously been directors or officers, there being a factual issue as to the date of their resignations, stating:

“8. An issue arose at the outset of the hearing in respect of the standard of review, if any, applicable to the Trustee’s decisions and whether or not this hearing was an appeal or a de novo hearing. The moving parties conceded in reply that they agreed with the Trustee’s submissions that this is an appeal and that the standard of review is reasonableness as the issues relate to questions of mixed fact and law (see Housen v Nikolaisen, 2002 SCC 33, and Proposition de Bouclin (2024 QCCS 4729). Pursuant to the applicable standard, the Court may only intervene today if the trustee made a palpable and overriding error of fact or in applying the law to the facts.”

39In Re Galaxy Sports Inc., Re, 2004 BCCA 284, at paragraph 39 (“Galaxy Sports”) the Court states:

“[39] On a consideration of all the "contextual" factors mandated by the "pragmatic and functional" approach, I see no reason to disagree with the long-standing principle enunciated in Re McCoubrey, supra, which requires the application of a "correctness" standard where compliance with a "mandatory" provision (which I would equate to a question of law or statutory compliance) is involved, and the application of a "reasonableness" standard where the determination of a factual matter or an exercise of true discretion is called for. In the former category, I would place the chair's decision under s. 108 rejecting a proof of claim for voting purposes and the trustee's decision disallowing a proof of claim under ss. 124 and 135(2). In the latter category, I would place the trustee's role in valuing contingent and unliquidated claims under s. 135(1.1). This general approach conforms with the objective, which I see as implicit in the BIA, of enabling debtors to have their proposals voted upon expeditiously and permitting creditors to have their rights and claims determined in a business-like manner, while at the same time providing a meaningful appeal to a court of law on questions that clearly affect legal rights, engage the relative expertise of judges, and set precedents for other cases.”

40As I noted in the Disallowance Appeal Reasons, on the issue of the Standard of Review and deference to the Trustee’s decision, Chief Justice Morawetz succinctly stated in Laurentian University of Sudbury, 2023 ONSC 83 (“Laurentian”), in the context of the appeal from a disallowance issued by a CCAA Monitor:

“[8] With respect to the applicable standard of review, both Thornloe and the Monitor referenced Target Canada Co. (Re), (2017) ONSC 2595 (“Target Canada”). In Target Canada, the court held that the determination of Claims Officers in an insolvency proceeding is subject to the standard of review applicable to ordinary civil appeals. The appropriate standard of review for the appeal of the decision of the Claims Officer is as follows:

(a) Pure questions of law: the standard of review is correctness.

(b) Questions of fact: the standard of review is that such findings are not to be reversed unless it can be established that the decision maker made a palpable and overriding error.

(c) Questions of mixed fact and law: the standard of review, is that, in the absence of an “extricable” legal error or a palpable and overriding error, a finding of the decision maker should not be interfered with.”

41As I synthesized in the Disallowance Appeal Reasons, I will synthesize of these Meeting Decision Appeal Reasons the above jurisprudence, the tests set out in Housen, Galaxy Sports, Laurentian, Grimaux, Bouclin and Aggressive require the Bankruptcy Court in hearing the appeal from the decision of the Chair at a meeting of creditors to:

assess each subcomponent of the Trustee’s decision making for the disallowance to determine, in each case,
where the specific decision to disallow was the determination of a question of pure law, and applying a correctness standard to the decision made, or
in the case of a question of pure fact, or mixed fact and law, applying the palpable and overriding error standard to the decision made,
Rulings of the Chair of the meeting are not entitled to the same deference by the Court as decisions of the Trustee on disallowance of a Proof of Claim (Bouclin at 103).

LEGISLATION

Voting at Meetings of Creditors

42 Sections 106 and 107 of the BIA deal with quorum and how creditors shall vote:

106 (1) One creditor entitled to vote, or the representative of such a creditor, constitutes a quorum for a meeting of creditors.

Where no quorum

(2) Where there is no quorum at the first meeting of creditors,

(a) the appointment of the trustee shall be deemed to be confirmed; and

(b) the chair shall adjourn the meeting

(i) to such time and place as the chair fixes, or

(ii) without fixing a time or place for a future meeting.

Idem

(2.1) Where there is no quorum at any meeting of creditors other than the first meeting, the chair shall adjourn the meeting to such time and place as the chair fixes.

Adjournment with consent of meeting

(3) The chair of any meeting of creditors may with the consent of the meeting adjourn the meeting from time to time.

How creditors shall vote

107 Every class of creditors may express its views and wishes separately from every other class and the effect to be given to those views and wishes shall, in case of any dispute and subject to this Act, be in the discretion of the court.

43 Sections 108 and 109 of the BIA deal with the rejecting of proofs of claim by the chair of a meeting of creditors and the right of a creditor to vote at a meeting of creditors:

Chair may admit or reject proof

108 (1) The chair of any meeting of creditors has power to admit or reject a proof of claim for the purpose of voting but his decision is subject to appeal to the court.

Accept as proof

In case of doubt

Right of creditor to vote

109 (1) A person is not entitled to vote as a creditor at any meeting of creditors unless the person has duly proved a claim provable in bankruptcy and the proof of claim has been duly filed with the trustee before the time appointed for the meeting.

Voting by proxy

(2) A creditor may vote either in person or by proxy.

Form of proxy

(3) A proxy is not invalid merely because it is in the form of a letter or printed matter transmitted by any form or mode of telecommunication.

Debtor may not be proxyholder

(4) A debtor may not be appointed a proxyholder to vote at any meeting of the debtor’s creditors.

Corporation

(5) A corporation may vote by an authorized proxyholder at meetings of creditors.

Vote of creditors not dealing at arm’s length

(6) If the chair is of the opinion that the outcome of a vote was determined by the vote of a creditor who did not deal with the debtor at arm’s length at any time during the period that begins on the day that is one year before the date of the initial bankruptcy event and that ends on the date of the bankruptcy, the chair shall redetermine the outcome by excluding the creditor’s vote. The redetermined outcome is the outcome of the vote unless a court, on application within 10 days after the day on which the chair redetermined the outcome of the vote, considers it appropriate to include the creditor’s vote and determines another outcome.

(7) [Repealed, 2005, c. 47, s. 80]

44Section 113 deals with the Trustee voting and persons not entitled to vote at a meeting of creditors, and for full interpretive context the entire section reads:

Trustee may vote

113 (1) If the trustee is a proxyholder for a creditor, the trustee may vote as a creditor at any meeting of creditors.

Trustee’s vote not to count in respect of certain resolutions

(2) The vote of the trustee — or of the partner, clerk or legal counsel of the trustee, or of the clerk of the legal counsel of the trustee — as proxyholder for a creditor, shall not be counted in respect of any resolution affecting the remuneration or conduct of the trustee.

Persons not entitled to vote

(3) The following persons are not entitled to vote on the appointment of a trustee — and except with the permission of the court and on any condition that the court may impose, the following persons are not entitled to vote on the appointment of inspectors:

(a) the father, mother, child, sister, brother, uncle or aunt, by blood, adoption, marriage or common-law partnership, or the spouse or common-law partner, of the bankrupt;

(b) where the bankrupt is a corporation, any officer, director or employee thereof; and

(c) where the bankrupt is a corporation, any wholly owned subsidiary corporation or any officer, director or employee thereof.

45 Section 116 of the BIA deals with the appointment of inspectors at a meeting of creditors:

Resolution respecting inspectors

116 (1) At the first or a subsequent meeting of creditors, the creditors shall, by resolution, appoint up to five inspectors of the estate of the bankrupt or agree not to appoint any inspectors.

Persons not eligible

(2) No person is eligible to be appointed or to act as an inspector who is a party to any contested action or proceedings by or against the estate of the bankrupt.

Powers

(3) The powers of the inspectors may be exercised by a majority of them.

Filling vacancy

(4) The creditors or inspectors at any meeting may fill any vacancy on the board of inspectors.

Revocation and replacement

(5) The creditors may at any meeting and the court may on the application of the trustee or any creditor revoke the appointment of any inspector and appoint another in his stead.

46What creditors are “related” and the presumption arising from relatedness is determined under s.4 of the BIA:

4(2) Definition of “related persons”

For the purposes of this Act, persons are related to each other and are ”related persons” if they are

(a) individuals connected by blood relationship, marriage, common-law partnership or adoption;

(b) an entity and

(i) a person who controls the entity, if it is controlled by one person,

(ii) a person who is a member of a related group that controls the entity, or

(iii) any person connected in the manner set out in paragraph (a) to a person described in subparagraph (i) or (ii); or

(i) both controlled by the same person or group of persons,

(ii) each of which is controlled by one person and the person who controls one of the entities is related to the person who controls the other entity,

(iii) one of which is controlled by one person and that person is related to any member of a related group that controls the other entity,

(iv) one of which is controlled by one person and that person is related to each member of an unrelated group that controls the other entity,

(v) one of which is controlled by a related group a member of which is related to each member of an unrelated group that controls the other entity, or

(vi) one of which is controlled by an unrelated group each member of which is related to at least one member of an unrelated group that controls the other entity.

4(4)Question of fact

It is a question of fact whether persons not related to one another were at a particular time dealing with each other at arm’s length.

4(5)Presumptions

Persons who are related to each other are deemed not to deal with each other at arm’s length while so related. For the purpose of paragraph 95(1)(b) or 96(1)(b), the persons are, in the absence of evidence to the contrary, deemed not to deal with each other at arm’s length.

47Section 137 deals with the postponement of claims by related parties

137(1) Postponement of claims — creditor not at arm’s length

A creditor who, at any time before the bankruptcy of a debtor, entered into a transaction with the debtor and who was not at arm’s length with the debtor at that time is not entitled to claim a dividend in respect of a claim arising out of that transaction until all claims of the other creditors have been satisfied, unless the transaction was in the opinion of the trustee or of the court a proper transaction.

137(2) [Repealed 2007, c. 36, s. 47.]

48As the history of the legislation is relevant to the confusion by the Chair at the 1st Meeting as to what the current procedure under s.109 should be for dealing with the votes at meetings by apparently related parties, and as counsel for OSB requested guidance to the OSB on this issue, I have (with the assistance of Ms. Geeta Thachil from the Judicial Library) traced the history of sections 109 as well as s.113, s.115 and s.115.1 back to RSC 1985.

49In RSC 1985 this section, as s.109(6) and (7) read:

(6) Except as otherwise provided by this Act, a creditor is not entitled to vote at any meeting of creditors

(a) if the creditor did not, at all times within the twelve months preceding the bankruptcy of the debtor, deal with the debtor at arm's length; or

(b) if the creditor is not, under section 137, entitled to claim a dividend in respect of a claim arising out of any transaction with the debtor.

(7) A creditor who is not entitled to vote at a meeting of creditors by virtue of subsection (6) may with leave of the court vote at the meeting of creditors when all the creditors who have dealt with the debtor at arm's length do not together represent at least twenty per cent in value of the claims against the debtor. R.S., c. B-3, s. 87.

50This section was amended in SC 1992, c.27 s.46 from the RSC 1985 version to read (which included (7)):

“(6) Except as otherwise provided by this Act, a creditor is not entitled to vote at any meeting of creditors if the creditor did not, at all times within the twelve months preceding the bankruptcy of the debtor, deal with the debtor at arm's length.”

51This section was again amended in SC 1997 c.12, s.86 to read:

(6) Except as otherwise provided by this Act, a creditor is not entitled to vote at any meeting of creditors if the creditor did not, at all times within the period beginning on the day that is one year before the date of the initial bankruptcy event in respect of the debtor and ending on the date of the bankruptcy, both dates included, deal with the debtor at arm's length.

52The section 109(6) was amended in SC 2005 c.47, s.80, and (7) was repealed, but these amendments never actually came into force:

(2) Subsections 109(6) and (7) of the Act are replaced by the following:

(6) If, in respect of the vote on any particular matter at a meeting of creditors, the chair is of the opinion that the outcome of the vote was determined by the vote of a person who did not deal with the debtor at arm's length at any time within the period that begins on the day that is one year before the date of the initial bankruptcy event and that ends on the date of the bankruptcy, the chair shall redetermine the outcome of the vote by not including the votes of all such creditors, and that new outcome, as redetermined by the chair, is the outcome of the vote, unless an application is made to the court within 10 days by one of the creditors whose vote was not included and the court, if it decides to include the vote of the applicant, determines another outcome for the vote.

53The current version of 109(6) was amended in SC 2007, c.36, s.45, but the amendments actually came into force only in 2009 and read:

“45. Subsection 109(6) of the Act, as enacted by subsection 80(2) of chapter 47 of the Statutes of Canada, 2005, is replaced by the following:

(6) If the chair is of the opinion that the outcome of a vote was determined by the vote of a creditor who did not deal with the debtor at arm's length at any time during the period that begins on the day that is one year before the date of the initial bankruptcy event and that ends on the date of the bankruptcy, the chair shall redetermine the outcome by excluding the creditor's vote. The redetermined outcome is the outcome of the vote unless a court, on application within 10 days after the day on which the chair redetermined the outcome of the vote, considers it appropriate to include the creditor's vote and determines another outcome.

54It should be noted at the same time in s.46 of SC 2007, c.36, s.115 had added to it the following wording as s.115.1:

“115.1 In an application to revoke or vary a decision that affects or could affect the outcome of a vote, the court may make any order that it considers appropriate, including one that suspends the effect of the vote until the application is determined and one that determines the outcome of the vote.”

55This remains the current wording of s.115 and s.115.1 of the BIA.

“Votes

115 Subject to this Act, all questions at meetings of creditors shall be decided by resolution carried by the majority of votes, and for that purpose the votes of a creditor shall be calculated by counting one vote for each dollar of every claim of the creditor that is not disallowed.

Court order — interlocutory or permanent

115.1 In an application to revoke or vary a decision that affects or could affect the outcome of a vote, the court may make any order that it considers appropriate, including one that suspends the effect of the vote until the application is determined and one that redetermines the outcome of the vote.”

49The sequence of the enactment of these amendments to become the “2009 Amendments” which enacted the current version of s.109 that all parties referred to in argument was properly summarized by counsel for OSB in their factum as follows:

“The change to subsection 109(6) in 2009 was a two-step process. The first step was a 2005 amendment that never came into force (described here Bill C-55: clause by clause analysis (cl00908) at Bill Clause No. 80). Subsequently there was a 2007 “amendment to the amendment” that came into force in 2009 (described here Bill C-12: Clause by Clause Analysis—Clauses 41–50 ). The clause by clause analyses for the two Bills describe the rationale for the change to the subsection”

56S.113(3) of relevance to this Meeting Decisions Appeal has no been amended going back to the RSC 1970 Consolidation.

57From a review of all of these amendments, the legislature appeared to be grappling with the issues of

a. how not to delay meetings of creditors going forward, without decisions at meetings having to be adjourned pending a Court hearing on issues of the validity or ability to vote the claim to be heard in months; while at the same time

b. restricting, in appropriate circumstances, the ability of non-arms length creditors from determining votes relating to the insolvency proceedings of their non-arms length debtors, particularly in the context of Division 1 Proposals.

58As a result the requirement for Court pre-approval and “maximum 20% of proven claims” formula in the RSC 1985 version of s.109(6), to the “no vote at all unless acted at arms length for 1 year” in the SC 2005 version that was not enacted, to the current “2009 Amendments” “two votes method” where the vote is counted twice, once with and once without the alleged “non-arms length” vote, and the second “reconsidered” vote without the alleged “non arms length vote” being counted, and the second “reconsidered” vote being the binding vote unless the alleged “non-arms length” voter successfully appeals the vote, which is what, eventually, is happening here.

Superintendent’s Directive 22R

59In the minutes of the 1st Meeting, Beckerman states that she is relying upon Superintendent’s Directive “No. 22R2 — Proofs of Claim, Proxies, Quorums and Voting at Meetings of Creditors” (the “Meetings Directive”) to make decisions at the 1st Meeting.

60The Meetings Directive states that the purposes of the directive is:

“3. Authority and Purpose — The purpose of this Directive is to clarify the position of the Superintendent with regard to proofs of claim, proxies, quorums and voting at meetings of creditors.”

61The following paragraphs of the Meetings Directive are relevant to the Chair’s decisions from the 1st Meeting that are being appealed:

Review of proofs of claim — The chair, at the first meeting of creditors, has the power to admit or reject a proof of claim for the purpose of voting. Prior to the time appointed for the meeting, the trustee shall review all proofs of claim and advise the chair if they are acceptable for the purpose of voting at a meeting of creditors. Often, proofs of claim are filed just prior to the time appointed for the meeting. In this circumstance, it is recommended that the chair open the meeting and then adjourn it for a brief time for the purpose of reviewing the proofs of claim. A person who has filed a proof of claim after the time appointed for the meeting shall not be permitted to vote at that meeting.
Objection to the proof of claim —

(1) For the purpose of a quorum or voting, when ruling on the admissibility of a proof of claim, or any part thereof, the chair must ensure that the documents are in their prescribed form and available at that time.

(2) Pursuant to subsection 108(3) of the Act, the proof of claim should only be marked as “objected to” when the chair is in doubt as to whether or not a proof of claim should be admitted or rejected. If a proof of claim is marked as “objected to,” the creditor shall be allowed to vote subject to the vote being declared invalid in the event of the objection being sustained.

62The relevant portions of “Appendix B – Types of Creditors and Quorum/Motion” to Directive 22R2 read:

Type of Creditor

Quorum

Motion

Ordinary Resolution Vote

Proposal Vote

Special Resolution Vote

Comments

Creditor with an objected claim

A creditor with an objected claim can vote subject to the vote being declared invalid by the Court (subsection 108(3) of the Act).

Claim of related party

Bankruptcy: Refer to the restrictions in section 113(3) of the Act for some related creditors, regarding the vote on the appointment of the trustee or inspectors.

If the vote of a related party determines the outcome of a vote, the Chair shall note in the Minutes the vote of the related party and shall redetermine the outcome by excluding the related creditor’s vote, in accordance with section 109(6) of the Act.

*Proposal: May vote against but not for a proposal (subsection 54(3) of the Act).

Refer to the restrictions in section 113(3) of the Act for some related creditors, regarding the vote on the appointment of the trustee or inspectors.

Principles of Statutory Interpretation:

63In Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC), 1998 CarswellOnt 1, 1998 CarswellOnt 2, [1998] 1 S.C.R. 27, [1998] A.C.S. No. 2, [1998] S.C.J. No. 2, 106 O.A.C. 1, 154 D.L.R. (4th) 193, 221 N.R. 241, 33 C.C.E.L. (2d) 173, 36 O.R. (3d) 418 (headnote only), 50 C.B.R. (3d) 163, 76 A.C.W.S. (3d) 894, 98 C.L.L.C. 210-006, J.E. 98-20. (“Rizzo”) the Supreme Court set out general tests of statutory interpretation relevant to this appeal:

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.

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

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 It is a well established principle of statutory interpretation that the legislature does not intend to produce absurd consequences. According to Côté, supra, 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.

31 The Court of Appeal found that it was neither necessary nor appropriate to determine the intention of the legislature in enacting this provisional subsection. Nevertheless, the court took the position that the intention of the legislature as evidenced by the introductory words of ss. 40 and 40a was clear, namely, that termination by reason of a bankruptcy will not trigger the severance and termination pay obligations of the ESA. The court held that this intention remained unchanged by the introduction of the transitional provision. With respect, I do not agree with either of these findings. Firstly, in my opinion, the use of legislative history as a tool for determining the intention of the legislature is an entirely appropriate exercise and one which has often been employed by this Court (see, e.g., R. v. Vasil, 1981 CanLII 46 (SCC), [1981] 1 S.C.R. 469 (S.C.C.), at p. 487; R. v. Paul, 1982 CanLII 179 (SCC), [1982] 1 S.C.R. 621 (S.C.C.), at pp. 635, 653 and 660). Secondly, I believe that the transitional provision indicates that the Legislature intended that termination and severance pay obligations should arise upon an employers' bankruptcy.”

64In Re Grillone 2025 CarswellOnt 16051, 2025 ONSC 5554 I dealt (in some detail) with the principles of interpretation of the BIA in the context of discharge, some of which are also relevant to this appeal:

“[78] As stated in Sullivan:

“The court must not only consider one section but all sections of an Act including the relation of one section to the other sections, the relation of a section to the general object intended to be secured by the Act, the importance of the section, the whole scope of the Act and the real intention of the enacting body. (Melnychuk v. Heard, 1963 CanLII 815 (AB KB) quoted at Sullivan 398)

“Avoiding inefficiencies and chaos, and favouring an orderly collective process, maximizes global recovery for all creditors: Husky Oil, at para. 7; R. J. Wood, Bankruptcy and Insolvency Law (2009), at p. 3.” (Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, [2010] 3 S.C.R. 379, at para. 22)

132The interpretation I have set out above is also supported by a purposive interpretation of the scheme of the BIA.

133As stated by Sullivan (at p.395):

“More specifically, it is assumed the legislature is competent and well informed, that language is used consistently, that tautology is avoided, that the provisions of an Act all fit together to form a coherent and workable scheme.”

135As stated by the Alberta Court of Appeal in Rassell, Re, 1999 ABCA 232, 1999 CarswellAlta 718, at paras. 12-13 (cited by AJ Rappos in Blue Mountain) the BIA:

“…puts day-to-day administration into the hands of business people (trustees in bankruptcy and often inspectors). Of course the court has overriding control, and the Superintendent has some oversight, and now a power to issue directives. The point is that the administration is to be practical, not legalistic…the trustee in bankruptcy has a duty to maximize the yield from all assets legally available to the trustee, subject to practicalities and honesty.”

Were decisions made at the 1st Meeting, and were the decisions wrong at law?

65Zeifman appeals from two alleged specific decisions of Chair at the 1st meeting for the following reasons as set out in the Notice of Appeal, as the Minutes of the 1st Meeting do not clearly set out whether there was a first decision in the “Question Period” portion of the 1st Meeting:

“15. When the “Voting Period” arrived, the OR did not explain why she had objected to the Proof of Claim. Rather, she explained why the Trustee could not vote at the meeting (on which more below).

As a matter of law, the OR’s decision to deny the Trustee a vote was distinct from her objection to the Proof of Claim. The fact of the objection could not preclude the Trustee from voting, as the Bankruptcy and Insolvency Act, RSC 1985, c B-3, (the “BIA”) makes clear:

Chair may admit or reject proof

108 (1) The chair of any meeting of creditors has power to admit or reject a proof of claim for the purpose of voting but his decision is subject to appeal to the court.

Accept as proof

In case of doubt

(Emphasis added)

As the objection could not preclude voting, the OR’s explanation for the denial of voting rights could not serve as a lawful explanation for the objection (on which more below). The result is that the OR objected to the Proof of Claim without any articulated reason for doing so. This was an error in law.”

66The second decision of the Chair is as summarized from the Minutes:

67Again, it is not clear from the 1st Meeting Minutes whether the first “decision” in the “Chairperson’s Opening Comments”:

“The Chairperson noted that they object the claim of Oragin Foods Inc. (Oragin Foods) in the amount of $6,760,280.89”

and the Chair then delaying discussion and determination as to whether Zeifman could vote the Oragin Claim, was a preamble to the second decision in the “Voting Period”, was two different decisions as alleged by Zeifman or only one, with the “first decision” prior to the discussion period, then continuing in the “voting period” when the “second decision” is explained.

68The second decision is clear from the Minutes, as set out above:

“The Chairperson states that they were requesting an adjournment of the meeting as the adjournment would permit the creditor to request a court review of the Chairperson’s decision that Oragin Foods could not vote because they were a related party and therefore subject to restrictions under sec. 109(6) and Directive 22R2.”

69So part of the decision was that vote on the adjournment was to specifically allow Zeifman to “request a court review”, which it did.

70In any event, as an appeal was brought of the decisions made at the first meeting, and the appeal was not withdrawn, I must determine the issue.

71Whether the Chair was relying on 109(6) and Directive 22R2 or s.108(3), in each case the right to vote at a meeting is not prevented by the alleged “related party” status of the party proving the claim.

72 S.108(3) of the BIA provides the following procedure for allowing the creditor to vote as objected to, subject to the vote being declared invalid if the objection is sustained:

73 s.109(6) of the BIA provides the following procedure, where it is clear that the creditor may still vote, subject to redetermination of the vote:

74The Voting Directive which the Chair relied on for her decisions at the meeting states:

“(2) Pursuant to subsection 108(3) of the Act, the proof of claim should only be marked as “objected to” when the chair is in doubt as to whether or not a proof of claim should be admitted or rejected. If a proof of claim is marked as “objected to,” the creditor shall be allowed to vote subject to the vote being declared invalid in the event of the objection being sustained”

And

“Bankruptcy: Refer to the restrictions in section 113(3) of the Act for some related creditors, regarding the vote on the appointment of the trustee or inspectors.

Refer to the restrictions in section 113(3) of the Act for some related creditors, regarding the vote on the appointment of the trustee or inspectors.”

75It is clear from the 1st Meeting Minutes that the Chair was not relying on s.113(3) of the BIA with respect to the prevention of Rutman for voting on the inspector votes.

76In none of these sections, which the Chair stated in the 1st Meeting Minutes were the legal reasons supporting her decision for completely preventing the voting by Zeifman, can the Chair actually, completely, prevent the creditor from voting.

77Instead, the sections are clear that the creditor may vote as “objected to” under s.108(3), and then the vote is either declared invalid if the objection is sustained, or under s.109(6) by taking the vote and if the alleged “related party” determines the vote, redetermine the outcome by excluding the alleged “related party”, but in neither case under these sections is the creditor entirely prevented from voting.

78Although not determinative, the wording of the Meetings Directive providing guidance to chairs of meetings of creditors is also consistent with the wording of the above sections of the BIA, namely that creditors are not entirely prevented from voting at a meeting of creditors if their claim is objected to under either s.108(3) or s.109(6).

79Meetings of Creditors can be chaotic, and the meetings are not generally run in strict adherence to Roberts Rules. The Trustee’s or OSB representatives generally do not have legal training and counsel are generally not present, so there should be some latitude given by the Court in evaluating the outcome of events at these meetings.

80However, the OSB has issued the Meetings Directive precisely for this reason, so that Chairs of meetings can have a guide to the legislation, and deal with common issues that arise without having to adjourn the Meetings for legal advice, slowing the Bankruptcy estate administration, or in the case of Division 1 Proposal, delaying votes on the approval of Proposals.

81In this case had the specific provisions of the Meetings Directive been followed by the Chair with respect to decision to refuse to allow Zeifman to vote at the 1st Meeting, many of the issues arising in this Meeting’s Approval Appeal, and the subsequent complexity of the appeal may have been avoided.

82In some cases creditors could use the appeal process tactically, but in this case the largest declared creditor, now found to be the largest Proven Creditor, was denied entirely its right to vote at the First Meeting, and it appears Zeifman’s appeal was of that decision was then circumvented by the 2nd Meeting.

83It is still likely that the disallowance of the Oragin Proof of Claim by KPMG would have occurred, and the complex legal and factual determinations I had to make in the Disallowance Appeal would still have to have been dealt with, along with any appeal of the right to vote by Zeifman on reconsideration under s.109(6) as part of that appeal as part of the “equity claim” and s.137 determinations, but these additional issues relating to voting by Zeifman would not have had to be adjudicated.

84It should be expected that representatives of the OSB assigned to Chair meetings of creditors would be familiar with the Meetings Directive, and the provisions of the BIA, and trained in their use.

85Consequently, all of the decisions of the Chair that had the effect of preventing Zeifman from voting, at all, at the 1st Meeting were not correct at law under the provisions of either s.108(3) or s.109(6), and are errors of law that are set aside under the tests in Galaxy, Grimaux and Laurentian. Alternatively, I also find that they were palpable and overriding errors of mixed fact and law. They also do not follow the recommendations in the Meetings Directive, although this is not determinative of the issue.

86With respect to the lack of an explanation for the decision being provided that Zeifman is also appealing from, those refusals of explanation are not the actual “decision”, but evidence as to why the “decision” was right or wrong, and evidence of the error. So not providing a reason for the “decision” is not the decision being appealed from, which actual “decision” I have decided is incorrect.

87Decision makers should provide reasons why they make decisions, but the decision is what is actually being appealed.

88The errors by the Chair at the 1st Meeting were acknowledged by counsel for the OSB in its Factum and in argument, but this is only the first step in the analysis, given the subsequent events that occurred.

What was the effect of the Appeal by Zeifman of the Chair’s Decisions at the 1st Meeting?

89Had the appeal of the decisions of the Chair at the 1st Meeting simply gone to the Court at that point, the ensuing complex issues may not have arisen. As at the adjournment of the 1st Meeting, the Oragin Proof of Claim had not yet been disallowed by the Trustee, and the 1st Meeting was specifically adjourned on the basis it would allow Zeifman to seek reconsideration of the Chair’s decision that it could not vote under the provisions of s.109(6).

90It appears that the Notice of Appeal of the decisions at the 1st Meeting was issued within the applicable appeal periods, and no party argues it was not.

91It appears from the evidence of Rutman, and from the Notice of Appeal, that between June 6 and July 4 2024 there were a series of communications between counsel for Zeifman and Beckerman attempting to set up a case conference before me on July 31 to schedule the Meeting Decisions Appeal.

92It appears that these efforts to secure that July 31 date were at first stymied by the inability of Beckerman to obtain clearance from her superiors at the OSB to agree to the July 31 date in the period of June 6 and July 5.

93This agreement to the date by both parties was necessary under the provisions of the Toronto Bankruptcy Court Practice Direction to secure the date with the Bankruptcy Court Office. I cannot fathom why internal clearance to provide this simple consent to just a case conference date could not be obtained for a month and no real evidence explaining the problem is provided by the OSB in its materials.

94I am cognizant of the nature of the administrative relationship between OSB and its regular counsel DOJ. If the OSB wishes to participate in litigation in the Bankruptcy Court without DOJ as its counsel, it must follow the provisions of the various practice directions, and must have internal approval processes that allow it to respond to requests from opposing counsel in a timely manner, recognizing that this is “real time litigation”.

95If there was already recognition within OSB that an error was made at the 1st Meeting the appeal could have been disposed of at the Case Conference with a consent Order, and the ensuing complexity of this Meeting Decisions Appeal could have been avoided.

96On July 4th Linthwaite submitted a request form for a Case Conference before me. The on July 5th Beckerman submitted a requested a separate Special Appointment Case Conference request before me, but apparently after receipt of the July 4 Email from Linthwaite.

97From the Court’s records it appears that on July 5th the Bankruptcy Court Office advised Linthwaite that I had approved the scheduling of the July 31 Case Conference date for scheduling the Meeting Decision Appeal on an urgent basis.

98So why was the 2nd Meeting of Creditors still held on July 10, notwithstanding the pending initial Court date that was requested by OSB, with the decisions being made as set out in the 2nd Meeting Minutes?

99At the July 31 Case Conference I made the following endorsement:

Adjourned to a Case Conference before me by Zoom on August 22nd at 9:30 when Ms. Spence and Mr. Peterson are back from vacation and can get some instructions relating to the discussion today.

There seem to be two issues that I raised with the parties.

There is the procedural issue relating to the voting at the first meeting of creditors, and whether the Creditor having on or about June 14, 2024 Appealed the Chair's decision(s) at the June 6, 2024 First Meeting of Creditors under s.108 and 109(6), made the second "First Meeting of Creditors" on July 10, 2024 where the "Two step" (under s.108(3) and 109(6)) process for voting by related creditors was employed, a nullity, as was asserted by Mr. Linthwaite, Oragin having already appealed the chair's decision under s.109(6) from the first meeting.

If Mr. Linthwaite is right, the second meeting where the Creditor did vote on inspectors, but not the confirmation of the Trustee, did not confirm the appointment of the Trustee or the Inspectors.

The second is the Substantive issue as to why the voting for inspectors and confirmation of the Trustee is consequential and why the claim of Oragin was alleged being rejected for voting, other than the 100% ownership of the Bankrupt by the Parent Oragin Foods.

If this is really about the validity, quantification and priority of distribution to Oragin under its claimed approximate $11 Million claim, under s.137 or because of accounting or other quantification and set off issues, or for some other reason, those are substantial issues as it appears at present that Oragin has a claim that approximately 3/4 of all proven claims, and dealing with those issues for both the purposes of the vote AND for the purposes of determining the claim and its priority in payment of dividends through the disallowance process would seem to be a better use of time.

Ms. Quinn-Hogan asserted that the second meeting "fixed" the problem by implementing the s.108(3)/s.109(6) "two-step" voting, but it really didn't because whatever is the enforceability, priority or quantification issue asserted in relation to the Oragin claim, that issue would still have to be finally determined to deal with the outcome of the vote at either meeting on a substantive basis, if the issue is more than the undisputed fact that the Parent was the 100% owner of the Bankrupt sub.

For the purposes of having a hearing date for something to be determined, I have set aside November 21st for the full day for a hearing of either the voting issue, or the allowance/disallowance issue, or a little bit of both, so that there is both a time horizon and Court availability.

At the August 22nd Case Conference we can decide what is to be heard, for how long, and on what materials timetable.”

100Under the provisions of s.114(2):

“Until the contrary is proved, every meeting of creditors in respect of the proceedings whereof a minute has been signed by the chair shall be deemed to have been duly convened and held and all resolutions passed or proceedings thereat to have been duly convened and held and to have been duly passed or had.”

101In the circumstances of the meeting, it would appear to be the decisions made by the Chair at the 1st Meeting were “proceedings thereat” that “have been duly passed or had” and therefore appear to be binding, until the Court sustains the objection under s.108(3) or reconsiders the vote on Appeal under s.109(6).

102Neither counsel or I have not been able find any applicable jurisprudence interpreting the wording of s.114(2).

103However, s. 115.1 of the BIA states:

In an application to revoke or vary a decision that affects or could affect the outcome of a vote, the court may make any order that it considers appropriate, including one that suspends the effect of the vote until the application is determined and one that redetermines the outcome of the vote

104The wording “including” an Order that “suspends the effect of the vote until the application is determined” suggests that unless the Court issues such an Order, the “effect of the vote” is not suspended automatically by the filing of the appeal.

105In other words, from the wording of s.115.1 it would appear that there is no “automatic stay on appeal” of the effect of the vote, unless the Court orders one.

106In Bouclin, the Moving Party appealing the vote specifically sought an order requesting that the “effect of the vote” be suspended. Here Zeifman did not specifically request that relief in the Notice of Appeal.

107The Legislature could have used the same language as is used in s.193 for an appeal to a Court of Appeal:

Stay of proceedings on filing of appeal

195 Except to the extent that an order or judgment appealed from is subject to provisional execution notwithstanding any appeal therefrom, all proceedings under an order or judgment appealed from shall be stayed until the appeal is disposed of, but the Court of Appeal or a judge thereof may vary or cancel the stay or the order for provisional execution if it appears that the appeal is not being prosecuted diligently, or for such other reason as the Court of Appeal or a judge thereof may deem proper.

108Because the Legislature did not do so, and the Legislature included in s.115.1 the specific wording “…including one that suspends the effect of the vote until the application is determined” suggests that the “stay on appeal” is at the discretion of the Court, that this choice by the Legislature that was intentional, and there is no a statutory gap that is need of filling.

109In this case since Zeifman did not request such a stay in its Notice of Appeal, there is an issue whether one would have been granted, but the holding of the 2nd Meeting, with the votes being held, effectively prevented me from determining on July 31 whether a stay should be issued.

110But in any event, no such stay was granted by the Court, and from the wording of s.115.1, in the full context of the entire BIA and in considering the wording of s.193, it appears that under s.115.1 of the BIA there is no automatic stay that “…suspends the effect of the vote until the application is determined” upon an appeal being filed “… to revoke or vary a decision that affects or could affect the outcome of a vote” unless the Court orders one.

111So despite Zeifman filing the Appeal, there was no statutory impediment in the BIA suspending the “effect of the vote”.

112There could be an argument that the Chair deciding not to allow Zeifman to vote was not “an effect of the vote” to be appealed under s.115.1, but in the full context of the Minutes of the First Meeting, it appears to be a distinction without a difference, since the 1st Meeting was (eventually) adjourned by a vote of the Creditors, not including Zeifman, for the following purpose:

“The Chairperson states that they were requesting an adjournment of the meeting as the adjournment would permit the creditor to request a court review of the Chairperson’s decision that creditor Oragin Foods could not vote because they were a related party and therefore subject to restrictions under sec. 109(6) and Directive 22R2”

113Either way, Zeifman was not permitted to vote, at all, and as I have already found, this was not in accordance with the provisions of the current wording of s.109(6) and the Meetings Directive.

114There is a great difference however between whether the BIA automatically stayed any further meeting or “effect of the vote” being implemented, ie. “You cant” and the issue of whether a second meeting should have been convened while the appeal by Zeifman to the Chair’s decision at the 1st Meeting was yet to be determined, ie. “You shouldn’t”.

115Particularly where the OSB had requested on July 5th to hold the July 31 Case Conference before me to deal with these issues, and knew that the request had been approved on July 5th.

116Again, had the Meeting Decisions Appeal had been dealt with prior to the 2nd Meeting, this appeal would have been much less complex.

Should the 2nd Meeting been called while the Zeifman Appeal of the Chairs Decisions at the First Meeting was pending?

117It is unclear from the evidence as to who in fact was the driving force being a 2nd Meeting being called, OSB or KPMG. It matters little.

118The 2nd Meeting was called on July 10, 2024, after the Notice of Appeal was issued, and before the Court could hold the scheduled July 31 Case Conference, which Linthwaite was trying to schedule for the better part of a month.

119There was no mystery in the position of Zeifman.

120At the 2nd Meeting Tayar put into the record the objection of Zeifman to the holding of the 2nd Meeting while the appeal of the Chair’s decision of the 1st Meeting was pending.

121Tayer stated at the meeting the decision of Blair, J. in LeBlanc v. York Catholic District School Board, 2002 CanLII 37923 – para 22 (“LeBlanc”) as supporting the Zeifman position that the meeting should not be held until the Zeifman Appeal was dealt with by the Court.

122The facts of that case relevant to this Meetings Decision Appeal were that defendants to an action brought by a self-represented litigant, after being served with a Statement of Claim, chose to file notices of intent to defend and to serve motions to strike the Claim, rather than filing statements of defence.

123Also, similar to this Meeting Decisions Appeal, the case was subject to case management, and the defendants accordingly attempted to set a date for a case conference with the Case Management Master for the case. A date was set but, in the meantime, the plaintiff noted the defendants in default without notice to them based on their failure to deliver a statement of defence within the time limits prescribed by the rules and obtained default judgment against them.

124To further muddy the fact situation, the defendants' motion to strike the statement of claim was granted in the absence of the plaintiff, who had been advised of the hearing date. The plaintiff had written to the Master telling her that he would not be available on the hearing date, but he did not ask for an adjournment. The defendants brought a motion to set aside their noting in default and to set aside the default judgment. The plaintiff brought a motion to set aside the order striking out his statement of claim and dismissing his action.

125The specific paragraph 22 of LeBlanc cited by Zeifman, along with the ensuing paragraphs for context, read:

“[22] Mr. LeBlanc [the Plaintiff] is mistaken. It is true that the defendants had not delivered their statements of defence, but it is not true that they had not defended the action. It is well accepted that the bringing of a motion before the court to obtain a stay or the dismissal of an action is recognized as a step in the defence of the proceeding: see Cafissi v. Vana, 1973 CanLII 534 (ON SC), [1973] 1 O.R. 654 at p. 655 (Master). In that case, Senior Master Rodger said:

In my opinion, the default judgment here was irregular and the defendants are entitled to have it set aside ex debito justitiae without being required to explain their default or to show that they have a good defence to this action on the merits. [page693]

As Senior Master Marriott pointed out in Bruce v. John Northway & Son Ltd., [1962] O.W.N. 150 at p. 151:

After service of a notice of motion, as a general rule, any act done by any party affected by the application which affects the rights of the parties on the pending motion will be ignored by the Court . . .

In support of that proposition he relied upon two cases, namely, Preston v. Tunbridge Wells Opera House Ltd., [1903] 2 Ch. 323, and Campbell v. Sterling Trust Corp., [1948] O.W.N. 557, and expressed the view that the following statement from Holmested, 5th ed. p. 837, correctly states the practice:

The rights of an appellant [applicant?] cannot be prejudiced by anything done after the notice of motion has been served, but his rights are to be determined as they existed at the date of its service.

23Justice Southey adopted the principles articulated in Cafissi and in Bruce v. John Northway & Son Ltd., [1962] O.W.N. 150 (Master) in Brightman Capital Ventures Inc. v. J.P. Haynes and Associates Inc. (2001), 2001 CanLII 28379 (ON SCDC), 16 B.L.R. (3d) 175, 8 C.P.C. (5th) 318 (Ont. Div. Ct.), at para. 5.

24In this case, the defendants had filed their notice of intention to defend shortly after they were served with Mr. LeBlanc's statement of claim. At the same time, they wrote to Mr. LeBlanc indicating that they were going to defend the action and that they were going to bring a motion to strike his statement of claim. Indeed, they brought such a motion almost immediately. Because of Case Management it was necessary for the parties to appear before the Master in order to establish a timetable and a date for the hearing of the motions before a judge. They were in the course of that process when Mr. LeBlanc, without notice, noted them in default and obtained his default judgment.

25Given these circumstances, it is clear that the defendants have met the first two criteria cited in para. 19 above. They showed an intention to defend the action at all times and they acted accordingly. They brought their motion to set aside the default judgment without delay. Their default, in all the circumstances, is understandable. Mr. LeBlanc never insisted that they deliver their defences. Moreover, I am persuaded that the defendants have at least a reasonable defence and it is their right to present that defence to the court on the merits. In this context, I refer, as examples only, to the Labour Relations Act, S.O. 1995, c. 1, ss. 48(1) and (2), 73, 74, 114 and 116; to the Limitations Act, R.S.O. 1990, c. L.15, s. 45(1)(g); and to the decisions of Gendron v. Supply and Services Union of the Public Service Alliance of Canada, Local 50057, 1990 CanLII 110 (SCC), [1990] 1 S.C.R. 1298, 90 C.L.L.C. 14,020, Weber v. Ontario Hydro, 1995 CanLII 108 (SCC), [1995] 2 S.C.R. 929, 125 D.L.R. (4th) 583, and Seneca College of Applied Arts and Technology (Board of Governors) v. Bhadauria, 1981 CanLII 29 (SCC), [1981] 2 S.C.R. 181, 124 D.L.R. (3d) 193. [page694]

26In any event, it is also well established that if a plaintiff notes a defendant in default and obtains a default judgment while there is a motion before the court to strike a statement of claim, the defendant has the right to set aside the default and the judgment without demonstrating a good defence on the merits: see Cafissi v. Vana, supra, at p. 655 O.R.

126KPMG argued that the rule in LeBlanc was inapplicable to this situation as:

a) LeBlanc was a case dealing with a default Judgment being obtained in the face of a pending Motion to strike the claim and an expressed intention to defend the Claim, and in any event,

b) Zeifman suffered no prejudice by the holding of the 2nd Meeting where the Chair’s errors at the 1st Meeting were “fixed”,

but I believe the principle in LeBlanc may be of broader application.

127In Thibodeau v Thibodeau, 2011 ONCA 110, 104 OR (3d) 161, 331 DLR (4th) 606, 199 ACWS (3d) 1068, 277 OAC 359, [2011] WDFL 1344, 73 CBR (5th) 173, [2011] CarswellOnt 686, [2011] OJ No 573 (QL) (“Thibodeau”) the Court of Appeal cited the principal in LeBlanc in the case where under an arbitrator's award, the wife was entitled to an equalization payment from the husband, to be paid out of his share of the sale proceeds from the parties' matrimonial home. The wife brought a motion for an order pursuant to s. 59.5 (as it then existed) and s. 59.8 of the Family Law Act incorporating the terms of the arbitration award into a court order. The husband made an assignment in bankruptcy. The Bank was granted leave to stand in the place of the trustee for the purpose of realizing on the husband's net equity in the matrimonial home. The motion judge granted the wife's claim for equalization payments priority over the claims of the husband's unsecured creditors of his share of the proceeds of sale of the matrimonial home on the basis that the arbitrator's order created an equitable trust of those proceeds in the wife's favour. She also ordered the transfer of the husband's bankruptcy-exempt RRSP to the wife to defray her claim to costs related to the equalization payment. The Court of Appeal set aside the Transfer stating:

65I question whether the motion judge was correct in stating that s. 196(2) does not fetter the court's jurisdiction to order the transfer of property under s. 9(1)(d) of the Family Law Act. However, it is not necessary to decide this point because I agree with Mr. Klotz that the transfer of the RRSP into an insurance-protected RRSP is of no consequence for purposes of this motion and appeal. Both must be decided on the basis of the facts existing when the motion was launched, and the transfer was not made until after the motion was launched:

see Graystone Properties Ltd. v. Smith (1982), 1982 CanLII 1853 (ON CA), 39 O.R. (2d) 709, [1982] O.J. No. 3569 (C.A.), at p. 712; LeBlanc v. York Catholic District School Board (2002), 2002 CanLII 37923 (ON SC), 61 O.R. (3d) 686, [2002] O.J. No. 4641 (S.C.J.), at paras. 22-23.

66The fundamental problem with the motion judge's disposition of the RRSP issue relates to her order to transfer the asset to Mrs. Thibodeau in the circumstances. She had before her a motion for the enforcement of the arbitrator's award, pursuant to s. 59.5 (since repealed) and s. 59.8 of the Family Law Act. She erred in seeking to engraft a s. 9(1) order onto such a proceeding. [page180]

67As noted above, no claim was asserted for a remedy in specie against the RRSPs. The motion judge granted relief that was not claimed.”

128In the BC Court of Appeal 1127551 B.C. Ltd. v. Prior Properties Inc. 2023 CarswellBC 1493, 2023 BCCA 222, [2023] 7 W.W.R. 557, 2023 A.C.W.S. 2030, 76 B.C.L.R. (6th) 27 (“1127551 B.C.”) gave further, broader explanation regarding the Rule as set out in LeBlanc:

Analysis

15 In my view, the question whether the chambers judge had jurisdiction to make the order is not as straightforward as the appellants suggest. The Ontario jurisprudence recognizing the rule that the parties' rights are determined as of the date of service of the motion, referred to and summarized in Philippine v. Portugal, 2010 ONSC 956, including Bruce; Cafissi v. Vana 1973 CanLII 534 (ON HCJ), 1973 1 O.R. 654 (Master); and Leblanc v. York Catholic District School Board, (2002), 2002 CanLII 37923 (ON SC), 61 O.R. (3d) 686 (S.C.), sets out a reasoned basis for the recognition and continued application of the rule. In Graystone Properties Ltd. v. Smith et al., (1982), 1982 CanLII 1853 (ON CA), 39 O.R. (2d) 709 (C.A.), Justice Blair applies the rule, but does not expressly refer to the rule or the jurisprudence supporting it.

16 I should note that the rule is not consistently stated in the Ontario cases. In Brightman Capital Ventures Inc. v. J.P. Haynes & Associates Inc., (2001) 2001 CanLII 28379 (ON SCDC), 8 C.P.C. (5th) 318(Ont. Div. Ct.) , Justice Southey referred to the general rule "... that motions be decided on the basis of the facts as they existed on the date the motion was commenced ..." (at para. 17). This is the rule rejected by Justice Berger in AML Construction.

17 In other cases, the rule applied is stated in terms that are subtly distinct, as restated in Holmested and Langton on the Judicature Act of Ontario at 837:

The rights of an appellant cannot be prejudiced by anything done after notice of motion has been served, but his rights are to be determined as they existed at the date of its service. [Emphasis added.]

18 In LeBlanc and Bruce, the rule was described in these terms: after service of a notice of motion, as a general rule, any act done by any party affected by the application which affects the rights of the parties on the pending motion will be ignored by the Court.”

19 The rule, stated in those terms, does not effectively freeze the evidentiary record. It does not preclude a party from adducing evidence of events that have occurred subsequent to the filing of the motion. A party who brings an application to have a party held in contempt, for example, does not have a right to a contempt order, simply a right to apply. The rule does not preclude the respondent from purging the contempt in the interim. A party who has a right to bring an application for partial release of a mortgage (as in Greystone) is not precluded from bringing the application because of default in the interval before the application is heard.”

129In the insolvency context, Blair, J.A. in Regal Constellation Hotel Ltd., Re 2004 CanLII 206 (ON CA), 2004 CarswellOnt 2653, [2004] O.J. No. 2744, 132 A.C.W.S. (3d) 215, 188 O.A.C. 97, 23 R.P.R. (4th) 64, 242 D.L.R. (4th) 689, 35 C.L.R. (3d) 31, 50 C.B.R. (4th) 258, 71 O.R. (3d) 355 affirming the decision of Farley, J. in Regal Constellation Hotel Ltd., Re (2004), 2004 CanLII 13502 (ON SC), 2004 CarswellOnt 428, [2004] O.J. No. 365, 128 A.C.W.S. (3d) 646, 37 C.L.R. (3d) 207, 50 C.B.R. (4th) 253 (Ont. S.C.J. [Commercial List]) (“Regal Constellation”) involved a parent company that had appealed Order of Sachs, J. granting a Sale Approval and Vesting Order to sell the hotel owned by its subsidiary, as well as the Order of Farley, J. approving the Receiver’s conduct and approving a distribution to HSBC (the first secured creditor and Applicant for the Receivership Order) of the sale proceeds, on the basis that the sale process lacked integrity. The purchaser brought a Motion to quash the appeal on the basis of mootness. (I was counsel to HSBC on the initial Receivership Application).

130At the time of the hearing before Blair, J.A., the Vesting Order had already been registered on title, the new Mortgagee to the purchaser had registered its mortgage and advanced the closing proceeds to the Purchaser who paid them to the Receiver. Farley, J. had ordered the distribution of the sales proceeds to HSBC which had obtained the appointment of the Receiver.

131Blair, J. in determining mootness on the basis of the legal effect of the registration of the Vesting Order under the Land Titles Act to preserve certainty of title once the Vesting Order is registered stated:

49 I do not mean to suggest by this analysis that a litigant’s legitimate rights of appeal from a vesting order should be prejudiced simply because the successful party is able to run to the land titles office and register faster than the losing party can run to the appeal court, file a notice of appeal and a stay motion and obtain a stay. These matters ought not to be determined on the basis that “the race is to the swiftest”. However, there is no automatic stay of such an order in this province, and a losing party might be well advised to seek a stay pending appeal from the judge granting the order, or at least seek terms that would enable a speedy but proper appeal and motion for a stay to be launched. Whether the provisions of s. 57 of the Land Titles Act (Remedy of person wrongfully deprived of land), or the rules of professional conduct, would provide a remedy in situations where a successful party registers a vesting order immediately and in the face of knowledge that the unsuccessful party is launching an appeal and seeking a timely stay, is something that will require consideration should the occasion arise. It may be that the appropriate authorities should consider whether the Act should be amended to bring its provisions in line with those contained in the Alberta legislation, and referred to in footnote 2 above.

132While the majority of the cases interpreting or considering LeBlanc specifically, and other cases setting out the similar principles such as Thibodeau and Regal Constellation, are usually in the context of parties jockeying for advantage in ordinary civil litigation, the circumstances here are much different.

133Throughout this appeal there has been expressed a narrative that “the 2nd meeting fixed the errors at the 1st meeting- what is the big deal”. This is the “big deal”.

134The Meeting Decisions Appeal was brought by Zeifman fulfilling its obligations as Trustee in Bankruptcy of Oragin, the Decisions being appealed from were of the representative of the OSB, the regulator of the Bankruptcy system, and the KPMG was fulfilling its obligations as the Trustee of the Bankrupt.

135All of these parties have duties imposed upon them by the BIA, the BIA Rules, and the Superintendent Directives. They should all be following those guidelines and fulfilling those duties in accordance what is actually in the BIA.

136The BIA clearly sets out multiple dispute resolution mechanisms and appellate recourse to the Court for issues arising at meetings of creditors in specifically in sections 107, 108(3), 109(6), 113(3) and more generally in section 37. How can these appellate rights be simply avoided by re-running a meeting of creditors until the votes are correctly conducted, particularly in the face of an actual appeal?

137The existence and interrelation of the appellate remedies need to be respected, particularly by LIT’s and the OSB, being the stewards of the proper administration of the BIA, and all of these remedies need to be interpreted together as a cohesive whole, to achieve the purposes of the BIA, as required by Rizzo and Sullivan.

138There is nothing in the BIA that suggests that a solution to decisions at the 1st Meeting appealed from in the Meeting Decisions Appeal was to ignore the appeal and have the 2nd Meeting meeting to “fix” the problems at the first meeting by applying the “correct” s.109(6) procedure, particularly where you already KNOW by the date of the 2nd Meeting that the matter will be before the Court at first instance 21 days later, at your own request.

139An appeal was made to the Court, and 2 years later that appeal has not yet been disposed of. Zeifman has not agreed to withdraw the appeal, and none of the parties have achieved a consensual resolution of the appeal.

140Although not exactly binding on this particular Meeting Decisions Appeal due to the statutory wording of s. 114(2), or merely being very persuasive as a general policy, the LeBlanc/Thibodeau/1127551 B.C. line of cases, and Blair, J.A.s statement in Regal Constellation, is that if a Motion/Appeal is pending, per LeBlanc:

“The rights of an appellant cannot be prejudiced by anything done after notice of motion has been served, but his rights are to be determined as they existed at the date of its service”.

141An argument could be made that since Zeifman did not seek a specific stay of proceedings pending appeal under s.115.1, that there was strictly speaking no statutory impediment to the holding of the 2nd Meeting.

142However, given the further confusion that has ensued, and the parties making the decision to hold the 2nd Meeting having duties to implement the BIA properly, that technicality should not be relied on, where an interim stay under s.115.1 could have been granted by the Court on July 31 2024, pending appeal.

143KPMG also argued that there was no prejudice to Zeifman as the 2nd Meeting “fixed” the admitted errors of the Chair at the 1st meeting, and as a result Zeifman suffered no prejudice as a result of the votes taken at the 2nd Meeting.

144But there was prejudice as a result of the unheard Meeting Decisions Appeal not actually being heard. As Zeifman pointed out:

-they stated at the 1st Meeting that the decision by the Chair preventing Zeifman from voting entirely was wrong,

-Zeifman appealed from that decision, and incurred costs to the Oragin Estate by doing so, and by attending a second meeting on the same issue (although meetings of creditors are regularly adjourned and reconvened for all sorts of reasons),

-there was either an implicit or explicit admission that the Chair used the wrong interpretation of s.109(6) at the 1st Meeting, and certainly acceptance that Zeifman was permitted to vote at the 2nd Meeting , using the two step 109(6) method, albeit not at their total claim amount of $2,917,423.11 as ultimately determined by me in the Disallowance Appeal.

145I note that despite the proper interpretation of 109(6) being used at the 2nd meeting, because of the provisions of s.114(3) “all resolutions passed or proceedings thereat to have been duly convened and held and to have been duly passed or had” the decisions made at the 1st meeting had never been dealt with in the Meeting Decisions Appeal, so paradoxically there were now 2 opposite valid decisions on the same subject arising from two different meetings of creditors that were “duly passed or had”, with the first still being under Appeal by Zeifman, and effectively through the Cross-Appeal by KPMG, the correctness of the second set of decisions and votes at the 2nd Meeting are also sought to be approved by the Court.

146Each set of decisions at the 1st Meeting and the 2nd Meeting were made expressly subject to the approval of the Court, as stated in the Minutes of those meetings.

147This would appear to be the precise situation that the general policy that the Leblanc/Thibodeau/1127551 B.C. line of cases and Blair, J.A.’s statement in Regal Constellation was seeking to avoid.

148So, with respect to the issue who whether the 2nd Meeting should have been called while the Zeifman Appeal of the Chairs Decisions at the First Meeting was pending, and a Case Conference was pending to schedule the Appeal 21 days later, I find that NO the 2nd Meeting should NOT have been called, for the reasons that I have set out.

Was the Zeifman Appeal “Moot” after the 2nd Meeting?

149In this case the alleged “mootness” was not created by some externality, but rather was created by the 2nd Meeting being called and proceeding while the Meetings Notice Appeal was still pending.

150That would be like arguing in the LeBlanc context that the Motions to strike by the Defendants that were pending scheduling at a Case Management Conference were moot as a result of the Default Judgment being obtained by Mr. Leblanc prior to the conference occurring, which would be opposite to the general policy set out in the LeBlanc/Thibodeau/1127551 B.C. line of cases.

151Paradoxically, in this case KPMG and the OSB argue that the Meeting Decisions Appeal is Moot because of the decisions made at the 2nd Meeting, while Zeifman argues the decisions at the 2nd Meeting were a nullity (or moot) as a result of the pending Meeting Decisions Appeal being ignored.

152As stated by the Supreme Court in Borowski v. Canada (Attorney General), 1989 CanLII 123 (SCC), [1989] 1 SCR 342, 57 DLR (4th) 231, 92 NR 110, [1989] 3 WWR 97, AZ-89111035, 75 Sask R 82, 47 CCC (3d) 1, 33 CPC (2d) 105, 38 CRR 232, 7 WCB (2d) 61, [1989] CarswellSask 241, EYB 1989-95668, JE 89-499, [1989] SCJ No 14 (QL), [1989] ACS no 14 (“Borowski”):

“The doctrine of mootness is an aspect of a general policy or practice that a court may decline to decide a case which raises merely a hypothetical or abstract question. The general principle applies when the decision of the court will not have the effect of resolving some controversy which affects or may affect the rights of the parties. If the decision of the court will have no practical effect on such rights, the court will decline to decide the case. This essential ingredient must be present not only when the action or proceeding is commenced but at the time when the court is called upon to reach a decision. Accordingly if, subsequent to the initiation of the action or proceeding, events occur which affect the relationship of the parties so that no present live controversy exists which affects the rights of the parties, the case is said to be moot. The general policy or practice is enforced in moot cases unless the court exercises its discretion to depart from its policy or practice. The relevant factors relating to the exercise of the court's discretion are discussed hereinafter.

The approach in recent cases involves a two-step analysis. First it is necessary to determine whether the required tangible and concrete dispute has disappeared and the issues have become academic. Second, if the response to the first question is affirmative, it is necessary to decide if the court should exercise its discretion to hear the case. The cases do not always make it clear whether the term "moot" applies to cases that do not present a concrete controversy or whether the term applies only to such of those cases as the court declines to hear. In the interest of clarity, I consider that a case is moot if it fails to meet the "live controversy" test. A court may nonetheless elect to address a moot issue if the circumstances warrant.”

153Applying the analysis in Borowski to these facts:

a) The “tangible and concrete dispute” has not disappeared and the issues raised on the Meeting Decisions Appeal have not “become academic.” These issues are not hypothetical. The decisions made at the 2nd Meeting in July of 2024 really didn’t dispose of the underlying issues with the Oragin Proof of Claim, namely the relatedness issue, which was the basis for the refusal of the Chair to allow Zeifman to vote at the 1st Meeting, which relatedness issue, and other issues relating to the validity, quantification and priority of the Oragin Proof of Claim were only dealt with in the Disallowance Appeal decided in April 2025, and were again raised in the Cross-Appeal for this Meeting Decisions Appeal, heard in November 2025;

b) “Live controversies” have continued to the hearing of this Meetings Decision Appeal and the Cross-Appeal, namely the ability of Rutman to be appointed an Inspector, and whether the Court should issue a declaration that Zeifman be permitted to vote at all future meetings, which decisions were explicitly grounds for the adjournment of both meetings pending Court determination of those issues;

c) Under s.114(3) there now appear to be 2 different and opposite “resolutions passed or proceedings thereat to have been duly convened and held and to have been duly passed or had” in the Minutes of the 1st Meeting and the 2nd Meeting, with respect to the ability of Zeifman to vote the Oragin Claim, without the Court having dealt with the Meeting Decisions Appeal arising from the decisions made at the 1st Meeting, and that are still being resolved in the Meeting Decisions Appeal and the Cross Appeal which is now seeking to confirm the opposite decisions at the 2nd Meeting; and

d) the amount of the claim and their voting amount per s.115 of the Oragin Claim has now been determined by my Disallowance Appeal Reasons to be $2,917,423.11, and not the $89,410.67 that Zeifman was permitted by the Chair to vote the Oragin Proof of Claim, at the time of the 2nd Meeting.

154Therefore I find that the Meeting Decisions Appeal is not moot per the Borowski test.

What was the effect of Rutman voting at the 2nd Meeting?

155Given the protest lodged by Tayar in the Minutes at the start of the 2nd Meeting there can be no doubt that Zeifman was participating under protest, and that Zeifman had not acquiesced to the 2nd Meeting vitiating the Meeting Decisions Appeal.

156Zeifman was not an ordinary litigant, but rather fulfilling its duties as Trustee of the Oragin Estate, and was caught in a dilemma created by the decision to call the 2nd Meeting notwithstanding the pending Meeting Decisions Appeal, and the requested and scheduled July 31 Case Conference, that if it did not vote on issues there would be no possibility of an appeal from the decisions at the 2nd meeting, but if Zeifman did vote the argument was created as to acquiescence and making moot the Meeting Decisions Appeal.

157In any event, the decisions being appealed from are those of the Chair at the 1st Meeting, and not Zeifman per s.114(3). KPMG is also seeking to confirm those decisions of the Chair at the 2nd Meeting, and the votes taken, in the Cross-Appeal.

158Therefore I find that the fact that Zeifman voted to preserve its position did not affect the ability of Zeifman to continue to prosecute the Meeting Decisions Appeal.

Are the resolutions passed at the 2nd Meeting a nullity?

159As:

-there is no automatic stay of decisions pending appeal under s.115.1 for the reasons I have set out, and

-there was no Order granted by the Court staying the effect of the decisions pending the 2nd Meeting occurring, and

-because of the wording of s.114(3) it appears that there are two different contradictory binding decisions of the Chair of the 1st Meeting and the 2nd Meeting on the issue of Zeifman voting,

I find that the resolutions passed at the 2nd Meeting are not a nullity as argued by Zeifman, and neither are the decisions at the 1st Meeting a “nullity” (or moot) as argued by KPMG, pending the disposition of this Meeting Decisions Appeal.

160Also, I note that there was not a formal appeal by Zeifman of the decisions of the Chair of the 2nd Meeting or the decision to hold the 2nd Meeting, and consequently no request for a stay of those decisions pending appeal under the provisions of s.115.1 of the BIA, but the Cross-Appeal by KPMG requesting the Court to confirm the correctness of the decisions made and votes taken at the 2nd Meeting is, in effect, an “appeal” of those decisions.

Should the Court Affirm the resolutions approved at the 2nd Meeting?

161In reviewing the votes approving resolutions the following votes appear to be uncontroversial in that they were passed unanimously including the votes of Zeifman, or that Zeifman abstained:

Vote Taken

Votes in favour

Votes against

Abstentions

Position of Zeifman

Motion to Affirm KPMG as Trustee of Estate

None

Abstain (on second vote- minutes not clear on first vote)

Appointment of Aird & Berlis LLP as Estate Solicitors

All creditors

None

For

Appointment of Paul Gill as inspector

None

One on second voted - Zeifman

Abstained on Second vote, unknown on first vote

Appointment of Thomas Lam as inspector

None

One

For

Appointment of Rod Rowe as inspector

All?

None

Second vote for, unknown on first vote

Appointment of Rutman as inspector

One (Zeifman?) with $89,410.67

6 votes totalling $98,382.44

For

162As I have determined:

a) there is no stay of proceedings automatically imposed on the Notice of Appeal being served of a decision under s.109(6), and no such stay was granted by the Court, Zeifman not requesting such a stay in the Notice of Appeal, and the Court having been given no opportunity to issue such a stay under s.115.1; and

b) under s.114(3) the resolutions passed at the second meeting did not automatically render the decisions at the 1st Meeting a nullity, and

c) under s.114(3) the filing of the Notice of Appeal did not render the resolutions passed at the 2nd meeting a nullity;

the proper course of action under the provisions of s.107 and s.109(6) will be that I will exercise my Registrar’s Discretion to affirm the votes on the following Motions where there was no opposition by Zeifman:

a) Appointment of KPMG as Trustee of Estate;

b) Appointment of Aird & Berlis LLP as Estate Solicitors;

c) Appointment of Paul Gill as inspector;

d) Appointment of Thomas Lam as inspector;

e) Appointment of Rod Rowe as inspector.

(collectively, the “Confirmed Resolutions”)

163Counsel for Zeifman urged that the proper course would be to re-do the 2nd Meeting and re-pass the resolutions, but that presents the very real problem that for the last 2 years KPMG has been administering the Bankruptcy Estate, presumably with the assistance of the Inspectors that were elected at the 2nd Meeting.

164Decisions have been made with respect to banking, asset realization, investment of the proceeds of sale of the Sale Process conducted during the Proposal Proceedings, and with respect to this litigation with Oragin for the Disallowance Appeal and the Meeting Decisions Appeal. There may have been interim distributions made.

165If the 3rd Meeting, to re-do the 2nd Meeting, is held after these reasons are issued and effectively the same result is achieved for these uncontested issues (counsel for Zeifman assured the appointment of the Trustee, Aird & Berlis and the other inspectors were not being contested by Zeifman), then who has been running the bankruptcy estate for the last two years, commencing on what day, under what authority, utilizing what estate assets and with what statutory protections under the BIA?

166Under these circumstances, for the reasons set out above, I will exercise my Registrar’s Discretion to make the Orders confirming the Confirmed Resolutions, on a nunc pro tunc basis, under the provisions of s.183(1) and 187(1) to regularize these resolutions, as I cannot find a substantial injustice has been caused to any party, including Zeifman, by the defects of these particular votes on the Confirmed Resolutions that Zeifman either voted for or abstained at the 2nd Meeting.

167This leaves the contested vote over the appointment of Rutman as Inspector.

Should Rutman be prevented from being appointed as Inspector on behalf of the Oragin Estate?

168At the time of the voting at the 2nd Meeting the parties did not have the benefit of the Oragin Proof of Claim being determined in the Disallowance Appeal, because the formal Notice of Disallowance of the Oragin Proof of Claim was issued 4 months after the date of the 2nd Meeting, after a series of documentary exchanges between Zeifman and KPMG.

169In the Disallowance Appeal Reasons I determined that the appeal by Zeifman of the Disallowance by the Trustee of the Current Liability Component of the Oragin Proof of Claim was allowed, and ordered that the Current Liability Component of the Oragin Proof of Claim in the amount of $2,917,423.11 be admitted as a proven unsecured claim by Oragin in the Bankruptcy Estate of the Bankrupt.

170Also, of great significance to the tests under s.109(6), relevant to the Meeting Decisions Appeal, I also found that, in response to the subordination arguments made by KPMG under the provisions of s.137(1) and s.139 of the BIA, subordinating the claims of related parties, that for the purposes of the proven Current Liability Component of the Oragin Proof of Claim in the amount of $2,917,423.11, that despite Oragin being the Parent of the wholly owned subsidiary Bankrupt, that the Current Liability Component was not a “non-arms length transaction” that should be subordinated under the provisions of s.4(5) and s.137(1)of the BIA as not being a “proper transaction”, or a transaction “that the lender shall receive a rate of interest varying with the profits or shall receive a share of the profits arising from carrying on the trade or business” for the purposes of s.139 of the BIA, which were both argued by KPMG as grounds for disallowance.

171It should be noted from the outset that the test under s.109(6) is not whether the creditor voting is “related”, despite how it was characterized by Chair or in the Minutes of the 1st Meeting and the 2nd Meeting. The Bankrupt is the wholly owned subsidiary of Oragin, and there is no contest by any of the Parties that they are “related” corporations for the purposes of s.4 of the BIA. The test is:

“ If the chair is of the opinion that the outcome of a vote was determined by the vote of a creditor who did not deal with the debtor at arm’s length at any time during the period that begins on the day that is one year before the date of the initial bankruptcy event and that ends on the date of the bankruptcy…”

172Also, s.109(6) allows the vote, notwithstanding the “relatedness” to be redetermined if:

“…a court,…considers it appropriate to include the creditor’s vote and determines another outcome”

173 S.4 of the BIA reads:

4(4)Question of fact

It is a question of fact whether persons not related to one another were at a particular time dealing with each other at arm’s length.

4(5)Presumptions

Persons who are related to each other are deemed not to deal with each other at arm’s length while so related…

174With respect to the Current Liability Component of the Oragin Proof of Claim in the amount of $2,917,423.11, I have already found in the Disallowance Appeal Reasons that the transactions comprising the proven Current Liability Component of the Oragin Proof of Claim, were, for the purposes of s.137 of the BIA, “arms length” transactions on the reasoning set out in the Disallowance Appeal Reasons.

175As a result the proven Current Liability Component of the Oragin Proof of Claim in the amount of $2,917,423.11 appears to the largest proven unsecured claim in the estate of the Bankrupt, and I have already found that the claim should not be subordinated as a “non-arms length” claim or treated as an “equity claim” under the provisions of s.137(1) and s.139 of the BIA, respectively.

176Should that claim be entitled to vote for the appointment of Rutman as Inspector under the provisions of s.109(6)?

177Rutman, as an LIT and principal of the Trustee of Oragin has never been an officer or director of the Bankrupt. Neither Rutman nor the Trustee nor Oragin will be “a party to a contested proceeding” with the Bankrupt estate, to the knowledge of the Court, once this Meeting Decisions Appeal is disposed of, so the prohibition in s.116(2) of the BIA will not be applicable to Rutman, even though that was not one of the grounds raised as a ground to prevent Rutman being elected as inspector.

178KPMG cited the decision of Penny, J. in FT ENE Canada Inc. (Re) 2019 CarswellOnt 16581, 2019 ONSC 5793, 311 A.C.W.S. (3d) 25, 74 C.B.R. (6th) 145 (“FT ENE”) as providing the applicable test.

179In that case dealing with voting at the meeting of creditors in a Division 1 Proposal where the Korean Parent Company was seeking to vote down the Proposal of its wholly owned Canadian subsidiary that alleged went “rogue”, and commenced the proposal proceeding, without the permission of the Korean Parent.

180There was also an underlying significant personal conflict between the CEO’s of the Korean and Canadian Corporations.

181The Chair at the Meeting of Creditors disregarded the vote of the Korean Parent corporation at the Meeting of Creditors under s.109(6), and the Proposal was approved.

182At the Motion to approve the Proposal before Penny, J. the Korean Parent corporation opposed the approval and appealed under s.109(6) to allow its opposing vote to be counted in Order to vote down the Proposal. (I was counsel to MN,P the Proposal Trustee, at the Meeting of Creditors, and I also argued the Proposal approval and s.109(6) Motions before Penny, J.)

183In approving the Proposal and rejecting the s.109(6) appeal, Penny, J. applied the “Saargummi Factors”, which KPMG specifically argued at this Appeal:

“[22] The only authority on the issue of the Court’s review of the chair’s decision to disregard a vote is the decision of the Québec Superior Court in Re Saargummi Quebec Inc. (2006), EYB 2006-106495. As noted, the BIA provides that the vote as counted by the chair excluding a related party vote stands unless the court “considers it appropriate to include the creditor’s vote and determines another outcome.” In Saargummi the Québec Superior Court found that there was no established test for the exercise of this discretion. Dumas J., therefore, found that the exercise of the Court’s discretion under s. 109(6) should be based on “the objectives sought by the legislator when drafting” the BIA. This involves a consideration of six factors:

(1) the rehabilitation of the debtor;

(2) rapid and orderly realization of the debtor’s property;

(3) cancellation of preferential payments and revisable transactions;

(4) fair distribution of the debtor’s assets;

(5) effective business reorganization of companies in financial difficulty;

(6) protection of the public interest; and

(7) the person asking for the exercise of judicial discretion must be acting in good faith and have “clean hands.”

No one factor is determinative. Not all factors must be met but they all inform the exercise of judicial discretion.”

184In this Meeting Decisions Appeal, unlike FT ENE, there is no ongoing business to be preserved or rescued or reorganized, the debtor is a Bankrupt corporation so rehabilitation is not an issue, preferential payments are not an issue, all of the debtors property was realized upon in the sales process in the Proposal Proceedings prior to the Bankruptcy, so the only substantive remaining issue is distribution of the remaining sales proceeds, now that the Oragin Proof of Claim has been valued and its priority determined in the Disallowance Appeal Reasons.

185That leaves the factors of “protection of the public interest”; and the person asking for the exercise of judicial discretion must be acting in good faith and have “clean hands.”

186KPMG argued in its factum that:

“Here if the Oragin Trustee’s vote is counted, it will allow the representative of the Oragin Trustee, Mr. Rutman, to serve as an inspector, over the objections of the other creditors who did not vote in favour of appointing a non-arms length creditor”

and

“The Origin Trustee has not presented any compelling reason for the Court to exercise its discretion to allow its vote to be counted”

187Firstly on a strictly factual basis, I am not sure from the Minutes of either the 1st Meeting or the 2nd Meeting who specifically voted against Rutman being appointed as inspector, whether they did so personally, or whether KPMG used proxies, and which 6 creditors totalling $98,382.44 at the 2nd Meeting voted against Rutman being appointed and which 12 abstained.

188It is very hard for the Court to determine the “will of the creditors” in those circumstances, particularly where now Oragin has a proven, arms-length, unsecured claim of $2,917,423.11, comprising (now) 52% of the declared claims. The will of which “Creditors”?

189From the arguments and evidence before me it is not clear what compelling argument there is to exclude Rutman in these circumstances. If this was a case where the ex-CEO Lurie wished to sit as inspector, there would differing considerations, namely the general BIA policy concern that insiders would determine the administration of the estate to their benefit, to the detriment of ordinary creditors, as expressed by Penny, J. in FT ENE.

190But Rutman is an LIT representing the Trustee in Bankruptcy of Oragin, appointed by a Bankruptcy Order of Wilton-Siegel, J. on a Bankruptcy Application commenced by Ihde, who as I described in my Disallowance Appeal, was a third party creditor of the Bankrupt Oragin who was the holder of a convertible unsecured debenture issued by Oragin.

191The following factors cited by Penny, J. in applying the Saargummi Factors in FT ENE are simply not present in this case:

“[31] As the proposal trustee argues at para. 36 of its factum, if the vote of Finetex is counted, triggering a bankruptcy, Finetex would be achieving a result which is precisely what s. 109(6) of the BIA was designed to prevent – a result where the insider determines the acceptance (or rejection) of a proposal to the detriment of ordinary, unrelated creditors. If the vote of Finetex remains excluded and the proposal is approved, all the unrelated, ordinary creditors are paid in full (and will presumably be willing to continue to do business with the post-proposal FTE Canada). By contrast, counting the vote of Finetex results in “another outcome;” the proposal is rejected, triggering a bankruptcy, and the related party is paid the vast majority of the net proceeds of the liquidation of FTE Canada’s assets while the unrelated trade creditors receive but a small fraction of their entitlements.”

192Between the Disallowance Appeal and the Meeting Decisions Appeal before me there was some concerns raised that based on Ihde’s prior behaviour in the Proposal Proceedings, that the appointment of Rutman as inspector could be disruptive in some way to the administration of the estate.

193But similar concerns have already been commented upon and rejected by Wilton-Siegel, J. in the Oragin Bankruptcy Application Endorsement, when the Bankrupt in its Proposal Proceedings sought to stay the Bankruptcy Application brought by Ihde to bankrupt Oragin:

“On the other hand, regardless of the Applicant’s interrelated objections regarding the amount of the Debtor’s debt claim against Subco, the issue of whether such debt was properly disclosed in the NOI Proceedings, and the statements to the Court regarding prior consultation with Subco’s creditors, none of which has been determined, the fundamental fact is that the Debtor has no economic interest in Subco. A trustee in bankruptcy is a court officer. The Court should assume that a trustee would not take any action of the sort feared by the NOI Debtors without a legitimate reason for doing so in its capacity as a creditor of Subco. As was observed in the hearing on the present application, any action of the trustee in its capacity as the shareholder of Subco exhibiting bad faith on the part of the trustee would run the risk of an award against the trustee under section 37 of the BIA or otherwise.”

194I am of a similar view. Both Rutman and Zeifman are licensed LIT’s, individually and corporately, with duties to act in the best interests of the Oragin Estate, but also subject specifically to the provisions of the BIA, the BIA General Rules, the Directives of the Superintendent, all dealing with the conduct of inspectors, the conduct of Trustees, and also with their s.4.2 duties generally.

195The vote in this case does not have the existential implications of the vote in FT ENE where the bankruptcy of the Debtor would have had a much worse outcome for ordinary creditors, and a much better outcome for the Korean Parent, if the Korean Parent was permitted to vote down the proposal.

196If some issue were to arise then KPMG or the other creditors or inspectors can avail themselves of the remedies in s.34, s.116(5) and s.119(2) of the BIA.

197I will make myself available.

198I have no evidence before me that the appointment of Rutman as inspector, under the provisions of 109(6), either under the Zeifman Notice of Appeal, or the relief sought by KPMG in the Cross-Appeal, would in some way fail to “protect the public interest” or that Rutman (or for that matter Oragin or Ihde) are not acting in good faith or do not have “clean hands”, for the purposes of the remaining applicable “Saargummi Factors”.

199I note that Rutman would also be only one of 4 inspectors, and under the provisions of s.116(3) of the BIA votes at a meeting of inspectors are carried by majority vote, by number, not by value of claim of the creditor appointing them, so the large Oragin claim would not swamp the votes of the other, “unrelated”, inspectors.

200It has already been determined, by me, that Oragin has a proven, “arms-length”, unsecured claim of $2,917,423.11 for the purposes of distribution and s.137 and s.139 of the BIA. How is it internally consistent in interpreting s.109(6) and s.113(3) of the BIA, under the rules of interpretation in Rizzo and Sullivan that Oragin having a proven court-determined “arms-length” claim for the purposes of distribution, cannot vote that claim.

201Accordingly, in exercising my Registrar’s Discretion under the provisions of s.109(6), as well as s.107, s.113(c) and s.115.1, I find that there was an error of mixed fact and law by the Chair amounting to a palpable and overriding error of applying the facts to a legal standard, and I Order that the votes taken at the 2nd Meeting be redetermined to appoint Rutman as an Inspector of the estate of the Bankrupt, with the appointment commencing on the date of this Order, rather than nunc-pro tunc, as it is my understanding that Rutman has not been participating in the meetings of inspectors that have been held since 2024.

Should the Court declare that Zeifman shall be permitted to vote at all future meetings of creditors?

202Firstly, on a jurisdictional basis it is dubious whether I, as either Registrar in Bankruptcy (Kalinchuk (Trustee of) v. Martinussen (2000), 2000 CanLII 20645 (MB QB), 2000 CarswellMan 279, 17 C.B.R. (4th) 238, 146 Man. R. (2d) 243 (Man. Q.B.)), or as an Associate Justice (Visual Bible International, Inc. v. Cinemavault Releasing Inc. (2005) 2005 CarswellOnt 1901, [2005] O.J. No. 1910, 139 A.C.W.S. (3d) 55) have the jurisdiction to issue declaratory orders.

203But it appears what is being requested by Zeifman is not really to make “binding declarations of right”, but rather more of a mandatory injunction to the chairs of meetings in this estate going forward that objections will not be raised to the ability of Zeifman to vote at future meetings.

204I have been unable to find any jurisprudence that suggests that I have the jurisdiction under the BIA, and specifically within my powers under s.192, or otherwise, to grant this sort of broad prospective relief, on a s.109(6) motion, or otherwise.

205On a practical level, all of the “voting” sections of the BIA have recourse to the courts for aggrieved parties. To be providing a blanket Order directing the Trustee or Chair of future meetings of creditors, to protect against the possibility of the denial of voting rights, constitutes a request for relief now, to prevent a hypothetical future denial of voting rights, that may or may not arise.

206Having found no jurisprudential support that I have the jurisdiction or the ability to grant such an Order, I will not exercise my Registrar’s discretion to do so.

Costs

207As I advised the parties at the hearing, as KPMG and Zeifman have filed costs submissions arising out the of the Disallowance Appeal, it made little sense to issue independent costs reasons for that decision, when many of the same issues are also being argued by KPMG and Zeifman at this “second half” of the Appeals, the Meeting Decisions Appeal. Accordingly I will deal with the costs of “both halves” of the Appeals, at once, in one decision.

208The OSB did file costs submissions on the Meeting Decisions Appeal, and not the Disallowance Appeal. From the costs submissions filed to date by KPMG and Zeifman it does not appear that those costs submissions and Bills of Costs have time specifically relating to either the 1st Meeting and the 2nd Meeting, or the Meeting Decisions Appeal.

209The OSB raised as a preliminary threshold issue the susceptibility of the OSB to costs awards, citing the solitary case of Re McDermott 2024 CarswellAlta 1252, 2024 ABKB 290, [2024] A.W.L.D. 2331, [2024] A.W.L.D. 2479, 13 C.B.R. (7th) 29, 2024 A.C.W.S. 2651, (“McDermott”) a decision of Lema, J., which in its Factum the OSB states stands for the proposition that:

“The Court will not award costs against an official receiver or the Office of the Superintendent of Bankruptcy unless there is evidence that they acted in Bad Faith or their actions were directed toward an improper purpose”

210That summary does not quite set out the tests in the McDermott case.

211The facts of that decision were that a Trustee had its fees reduced by the Registrar at taxation at the instance of the OSB, and that decision was reversed by Lema, J. Upon the reversal occurring, the Trustee sought to have the costs of the proceedings assessed against the OSB. Lema, J. denied that request, stating:

“11 The OSB did not exercise its para 5(4)(a) BIA right to intervene and effectively become a party here. Per that provision:

[t]he Superintendent may

(a) intervene in any matter or proceeding in court, where the Superintendent considers it expedient to do so, as if the Superintendent were a party thereto[.]

12 To so intervene, the OSB would have had to file a notice of intervention with the Court under Rule 12 of the General Bankruptcy Rules. If it had done so, it may have become exposed (or entitled) to costs in the same way as any party to litigation: Dondale (Re), , 2007 BCSC 1300 (Burnyeat J.) (paras 16-19).

13 Instead, the OSB limited its role to providing a comment letter under ss 152(4) BIA (reproduced below), attending the taxation hearing to address issues raised in the comment letter, and appearing on the trustee's appeal to address those issues. Here is ss. 152(4):

The Superintendent may comment [on the trustee's final statement of receipts and disbursements] as he sees fit and his comments shall be placed by the trustee before the taxing officer for his consideration on the taxation of the trustee's accounts.

14 In so commenting and participating, the OSB was exercising its statutory function i.e. to "supervise the administration of all estates and matters to which the Bankruptcy and Insolvency Act applies" (ss 5(2) and discharging its statutory duty to "examine trustee's accounts of receipts and disbursements and final statements" (para 5(3)(g)), as examined in Societe de gestion Michel Douville inc. v Surintendant des faillites, 1997 CanLII 10758 (QCCA).

15 The trustee did not cite any case featuring a costs award against the OSB acting solely in its supervisory (i.e. non-party) capacity, whether concerning the appropriateness of the trustee's proposed fees or otherwise.

16 The cases go the other way. See, for example, Tychon (Re), , 2018 ABQB 668, where the trustee sought costs against the comment-letter-providing OSB in a taxation-of-fees setting. Per Reg. Schlosser:

. . . The OSB does not enter the fray [here] as if it were a party (s 5(4)(a)). The OSB is exercising its right to comment in the furtherance of its regulatory jurisdiction . . . .

. . . Unlike intervening under section 5(4) where the OSB joins the action as a party, the Superintendent is exercising a supervisory or regulatory role[.] [In these] circumstances, the Court should be reluctant to award costs in the absence of bad faith or [pursuit of] an improper purpose. (eg. Re Terry, 2015 CarswellOnt 21092 per Master Jean at para 10). [paras 18 and 22]

17 And Carde (Re), , 2022 ABQB 154 (Reg. Schlosser):

The OSB is an administrative official appointed by the Governor General in Council pursuant to s 5 of the BIA. Her duties are prescribed in s 3 of the Act. One of her duties is to examine the Trustee's account set out in the FSRD and to comment on these accounts for the purposes of aiding Registrars in the taxation process. The comments of the OSB are not binding on the Court. The OSB's Letters of Comment are not required to be supported by evidence of rates or standards. The OSB is not required to prove a case in the ordinary sense. The only requirement is that letters of comment be reasoned and impartial.

. . . There is no evidence that would support bad faith or improper motives on the part of the OSB. The Trustee's request for costs is denied. [paras 14, 59 and 60]

18 And Rideout (Re), , 2022 ABKB 653 (Reg. Schlosser) at paras 15-18, including "costs against the OSB will not be awarded unless their conduct is shown to be egregious or in bad faith" (part of para 18).

19 Apparently acknowledging the OSB's non-party status, the trustee asserted bad faith ("false narrative") on the part of and pursuit of an improper purpose by the OSB.

212Houlden and Morawetz, Bankruptcy and Insolvency Law of Canada, 4th Edition, has the following summary of a case that may be of relevance:

“The British Columbia Supreme Court held the Superintendent of Bankruptcy responsible for the costs of the trustee in a matter where the Superintendent intervened as a party. The court held that the Superintendent is not merely an intervenor as that word is usually used in litigation; rather, the Superintendent takes on a role as if it were a party and, as a party, the usual provisions should apply as to whether costs will be awarded or not. The court held that costs can be awarded in favour of or against the Superintendent. The intervention of the Superintendent was part of its supervision of the bankruptcy system and it would be unfair to require the creditors to bear the burden of the legal costs caused by the intervention: Re Dondale (2007), 2007 CarswellBC 1988, 2007 BCSC 1300 (B.C. S.C. [In Chambers]).”

213I have been unable to find any case that specifically deals with the issue of whether costs have ever been assessed against the OSB for alleged errors made chairing a meeting of creditors, as is being sought by Zeifman here.

214There are obvious systemic issues inherent with a decision such as this where the OSB has the clear statutory power to chair meetings under s.105(1) of the BIA, with the Trustee being a secondary nominee of the OSB.

215In this case, does the conduct of OSB, taken as a whole, constitute an “intervention” in litigation that could bring costs consequences as “party” absent the formal service of an intervention, or was the OSB acting in its “supervisory” non-party role, as summarized in McDermott and Dondale above?

216Given the thousands of meetings chaired by the OSB every year, the costs submissions and decisions in this matter may have some far ranging and unintended consequences and policy implications. As a result this issue should be fully briefed, particularly by the OSB, if Zeifman is pursuing costs against the OSB (and KPMG?) for the Meeting Decisions Appeal, as well as against KPMG in the Disallowance Appeal.

217It is also unclear what position on costs on this Meeting Decisions Appeal and the Cross-Appeal KPMG is taking, and what time was spent by KPMG and Aird & Berlis on this appeal, as opposed to the Disallowance Appeal.

218I would ask that Zeifman file its written costs submissions and Bill of Costs with respect to Meeting Decisions Appeal by March 28, and the OSB and KPMG may file their responding written costs submissions and Bill of Costs by April 28th. Given the importance of the systemic issues in this case, I will not impose a page limit. The prior costs submissions by KPMG and Zeifman with respect to the Disallowance Appeal do not have to be refiled.

219I will determine the Costs issue based on the written materials filed.

ORDER ON APPEAL

220Considering the relevant provisions of the BIA, my factual findings and analysis that I have set out in these reasons, and the application of the binding and persuasive jurisprudence I have cited, and employing my Registrar’s discretion, I will make the following Orders:

on the specific issues under appeal I will grant an Order that the following decisions of the Official Receiver as Chair, made at the 1st Meeting are set aside:

a. to “object to the claim of Oragin Foods Inc…in the amount of $6,760,280.89” (i.e. the proof of claim filed by the Trustee); and

b. that “Oragin Foods [the Trustee] could not vote because they were a related party and therefore subject to restrictions under sec. 109(6) and Directive 22R.

With respect to the issues raised on the Cross-Appeal, I will make an Order that the following decisions made and resolutions passed at the 2nd Meeting are confirmed, and effective nunc pro tunc from July 10, 2024:

a) Appointment of KPMG as Trustee of Estate;

b) Appointment of Aird & Berlis LLP as Estate Solicitors;

c) Appointment of Paul Gill as inspector;

d) Appointment of Thomas Lam as inspector;

e) Appointment of Rod Rowe as inspector.

With respect to the following decisions made and resolutions passed at the 2nd Meeting, I will make an Order that the votes taken at the 2nd Meeting be redetermined to appoint Rutman as an Inspector of the estate of the Bankrupt, with the appointment commencing on the date of this Order, rather than nunc-pro tunc.

Associate Justice Ilchenko

Registrar in Bankruptcy

Superior Court of Justice