Sherry Kettle

The appellant appealed a motion judge's order requiring it to return a pre-authorized debit payment of $83,734.05 made post-NOI (Notice of Intention to file a proposal) to the respondent, less amounts owing for post-NOI fuel purchases.

The motion judge found the payment constituted a prohibited remedy under section 69(1) of the Bankruptcy and Insolvency Act.

The Court of Appeal allowed the appeal, finding the motion judge erred by failing to consider whether the parties had entered into a legitimate agreement to pay past debts in order to secure future fuel supply.

The matter was remitted for a new hearing.

The debtor company filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act.

Three days later, a fuel supplier processed a pre-authorized debit for pre-NOI arrears.

The debtor sought the return of the funds, arguing the payment violated the stay of proceedings under s. 69(1)(a) of the BIA.

The court held that processing the pre-authorized debit constituted a 'remedy' captured by the stay, as it gave the supplier an advantage over other creditors.

The supplier was ordered to return the funds, less a set-off for fuel supplied post-NOI.