Sean N. Zeitz

This corrigendum amends a previous decision regarding the proposal of Innovative Coating Systems Inc. The original decision did not approve the proposal but granted leave for the debtor to file an amended proposal within ten days, specifically removing a deemed release clause.

It also adds a sentence concerning the trustee's costs.

The debtor brought an application for court approval of its proposal under the Bankruptcy and Insolvency Act.

Two secured creditors opposed the proposal because it contained a clause releasing the debtor's principal from his personal guarantees.

The court refused to approve the proposal, finding that the release of the guarantor was not necessary for the restructuring and did not benefit the general body of creditors.

The court also found that the proposal lacked good faith as the release clause was not prominently disclosed.

The trustee in bankruptcy appealed a motion judge's decision declining to find the bankrupt in contempt for refusing to execute a power of attorney regarding her interest in Croatian property.

The motion judge instead granted the trustee authority to sign the power of attorney on behalf of the bankrupt, with a minor redaction preventing assignment of powers to third parties.

The Court of Appeal upheld the motion judge's discretionary decision, finding no error in prioritizing a practical remedy over a contempt finding, while emphasizing the seriousness of disobeying court orders.

The bankrupts moved for an order to schedule their discharge hearing, notwithstanding an ongoing fraudulent conveyance action by the Royal Bank of Canada (RBC) against them.

The court dismissed the motion, exercising its discretion to adjourn the discharge hearing.

The court found that the outcome of the fraudulent conveyance action could bear on the discharge hearing, there was no evidence of delay by RBC, and the interests of all parties, including creditors and the integrity of the system, needed to be balanced.

The bankrupts were granted leave to reapply if delays or other factors changed the circumstances.

The bankrupt brought a motion to quash the trustee's appeal from the dismissal of a contempt motion, arguing the order was interlocutory and should be appealed to the Divisional Court.

The Court of Appeal dismissed the motion to quash, finding that under s. 193 of the Bankruptcy and Insolvency Act, an appeal from an order of a bankruptcy judge lies to the Court of Appeal regardless of whether it is final or interlocutory.

The Court also granted leave to appeal under s. 193(e) if required, given the serious allegations and issues of general importance to bankruptcy practice.

Following a successful motion for summary judgment, the plaintiff sought costs on a partial indemnity scale.

The defendant objected to the inclusion of costs related to an earlier interpleader motion, arguing that costs should have been sought at the time of that motion.

The court agreed with the defendant, finding it unfair to claim those costs retroactively, and deducted the associated amount.

The court further reduced the claim to align with the reasonable expectations of the parties, awarding the plaintiff a total of $70,173.14 inclusive of disbursements and taxes.

This supplementary costs endorsement addresses the quantum of costs for earlier supplementary submissions.

The court clarified its previous position, acknowledging the defendants' submissions, though ultimately disagreeing with their objection.

The plaintiff was awarded modest costs of $1,000, less than sought but more than proposed by the defendants, reflecting the effort expended and the plaintiff's successful position on the issue.

The court issued a second supplementary endorsement addressing the defendants' objections to paragraph 11 of a draft order.

The defendants, primarily Robert Symons, objected to the requirement to provide detailed financial statements and transaction records for Gerald Gordon Symons dating back to 2000, citing lack of records, formal authority as executor, and relevance.

The court dismissed these objections, affirming that the order reflected its original endorsement and that Robert Symons was expected to use best efforts to acquire the information.

This supplementary endorsement addresses the defendants' objections to the draft order following a previous motion that vacated a stay, appointed an investigative receiver, and awarded costs to the plaintiff.

The defendants' counsel raised concerns about access to records and the quantum and allocation of costs, framing these as issues with the form of the order.

The court found these objections related to the substance of the prior ruling, not its form, and that the draft order accurately reflected the endorsement.

The court signed the plaintiff's draft order and awarded the plaintiff further costs for the necessity of this supplementary exercise, inviting submissions on quantum.

The plaintiff, a judgment creditor, moved to lift a stay of execution on an Ontario judgment recognizing a USD $44 million U.S. judgment, and to appoint an investigative receiver.

The U.S. court had found the defendants engaged in fraudulent transfers and held a defendant in contempt for non-compliance with disclosure orders.

The court lifted the stay, finding the defendants' history of asset disposal and non-compliance constituted special circumstances warranting an investigative receiver, despite the defendants' argument that ordinary remedies had not been exhausted due to the stay.

The appellants appealed a summary judgment holding them liable on a guarantee.

The motion judge found that the primary debtor made a preferential payment to the respondent while insolvent, based on a misrepresentation by the guarantor.

The respondent's return of the improper payment revived the guarantor's obligation.

The Court of Appeal dismissed the appeal, finding no error in the motion judge's factual findings or his conclusion that any failure to make a formal demand on the guarantee caused no prejudice.

The moving parties sought a review of an order by a single judge of the Court of Appeal denying leave to appeal under s. 193(e) of the Bankruptcy and Insolvency Act and ordering security for costs.

The Court of Appeal held that it does not have jurisdiction to review a decision of a single judge granting or denying leave to appeal under the Act.

The motion for review was dismissed, and the appeal was quashed.

In a court-appointed receivership, the spouse of the debtor's principal sought leave to appeal an order extending a Mareva injunction and repatriating a misappropriated HST refund.

A third party claiming an interest in the funds also appealed the order.

The Court of Appeal dismissed the spouse's motion for leave to appeal, finding no arguable merit to her procedural complaints about the ex parte Mareva order.

The Court granted the Receiver and a secured creditor's motions for security for costs against the third party, finding his appeal appeared frivolous and he lacked assets in Ontario.

The court-appointed Receiver brought a motion to extend an ex parte Mareva injunction against the spouse of the debtors' principal and to repatriate misappropriated HST funds.

The debtors had concealed a $986,594.96 HST refund and diverted it to an account controlled by the spouse.

An intervenor claimed the funds were repayment for a loan, but the court dismissed this as a fraudulent attempt to divert the funds.

The court found the Receiver made full and frank disclosure, was not required to commence an action against the spouse first, and did not need to provide an undertaking as to damages due to the Receivership Order.

The motion was granted, the injunction extended, and immediate repatriation of the funds ordered.

The plaintiff moved for a Mareva injunction to freeze approximately $1.1 million held in a custody account belonging to the defendant, alleging the funds were mistakenly paid.

The court dismissed the motion, finding the plaintiff failed to establish a strong prima facie case, a real risk of asset dissipation for an improper purpose, or irreparable harm.

The defendant's intention to withdraw the funds was deemed a legitimate part of its corporate wind-down process.

The defendant sought leave to appeal an order dismissing her appeal from a Master's decision.

The Master had set aside a registrar's order dismissing the plaintiff's fraudulent conveyance action for delay.

The Divisional Court found no good reason to doubt the correctness of the lower courts' decisions, which held that the plaintiff provided a reasonable explanation for the delay due to inadvertent error and that the defendant suffered no non-compensable prejudice.

The motion for leave to appeal was dismissed.

A lender brought a motion for summary judgment against personal guarantors after the principal debtor repaid the loan but the lender later returned the funds following a bankruptcy preference claim under s. 95 of the Bankruptcy and Insolvency Act.

The guarantors argued that the debt had been extinguished by payment, that the payment had not been set aside by a bankruptcy court, and that no proper demand had been made.

The court held that preferential payments are void as against the trustee under s. 95 and that the debt and related guarantees were revived when the lender repaid the funds to another secured creditor.

The court also found the debtor was insolvent at the time of payment and that the presumption of intention to prefer applied.

Summary judgment was granted against the guarantors.

The moving party sought summary judgment recognizing and enforcing a United States District Court judgment from Indiana exceeding US$46 million.

The responding parties argued the judgment was not final because an appeal was pending and alleged a denial of natural justice based on the alleged mental incompetence of one defendant during the foreign trial.

The court held that a foreign judgment is final for enforcement purposes when the foreign court has no power to vary or rescind it, even if an appeal is pending and no stay of enforcement exists.

The court further held that the enforcing court’s role is limited to assessing procedural fairness rather than re‑litigating substantive issues such as competence at trial.

The Indiana judgment was recognized and enforced in Ontario, subject to an interim stay of enforcement pending developments in the foreign appeal.

The plaintiff bank brought a motion for summary judgment against the defendants for fraudulent misrepresentation.

The defendants had applied for a line of credit on behalf of their company and signed a personal financial statement indicating they owned their home, which supported their personal guarantee.

After the company went bankrupt, the defendants claimed they held the home in a bare trust for their children and transferred it to their son.

The court found that oral evidence was not required to decide the motion and held that the defendants knowingly or recklessly made a false representation about their beneficial ownership of the home, which induced the bank to grant the line of credit.

Summary judgment was granted in favour of the bank.

The defendant appealed an order of a Master setting aside a Registrar’s administrative dismissal of an action for delay under Rule 48.14 of the Rules of Civil Procedure.

The underlying action alleged a fraudulent conveyance of property by a judgment debtor to his spouse in order to defeat creditors.

The court reviewed the discretionary standard governing motions under Rule 37.14 and the contextual test for reinstating actions dismissed for delay, including considerations of explanation for delay, inadvertence, promptness of the motion, and prejudice.

The court held that a plaintiff is not required to provide extensive affirmative evidence of absence of prejudice where the defendant offers none and the surrounding circumstances indicate no non-compensable prejudice.

The appeal was dismissed and the Master’s order reinstating the action was upheld.