|
Insolvency - BIA - Receivership. Royal Bank of Canada v. Cutler Forest Products Inc.
In Royal Bank of Canada v. Cutler Forest Products Inc. (Ont CA, 2023) the Court of Appeal considers whether a receiver represents the debtor or the creditor (here, it's the debtor):[32] Second, Paccar appears to misconstrue the Receiver’s role in these proceedings. It is not disputed that the Receiver in this case is not caught by s. 20(1)(b). Unlike a trustee in bankruptcy, as was the case in Giffen (Re), or an assignee for the benefit of creditors, the Receiver is not “a person who represents the creditors of the debtor”. The Receiver, while appointed at the instance of RBC pursuant to s. 243 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, and s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43, stands in the shoes of the debtor and not the creditors. While attempting to satisfy Cutler’s debts, the Receiver quite properly applied to the court for directions as to the question of the trucks. . Royal Bank of Canada v. Ten 4 System Ltd.
In Royal Bank of Canada v. Ten 4 System Ltd. (Ont CA, 2023) the Court of Appeal moved for leave to appeal [under BIA 193(e)] the appointment of a receiver [under BIA s.243(1), and CJA s.101].
In these quotes the court characterizes the role of an insolvency receiver:[14] Second, the Debtors assert the application judge erred in law by incorrectly applying CJA s. 101 notwithstanding the fact that the relief sought in the application was for a final and not an interlocutory order.
[15] I confess I have difficulty following the Debtors’ argument: an initial order appointing a receiver, such as the form of order used in this case, does not finally determine any rights. Instead, it appoints a receiver to preserve a debtor’s assets for distribution to its creditors following a review of their respective rights and determination of a proper allocation. In any event, RBC applied under BIA s. 243(1) as well as CJA s. 101; the final/interlocutory distinction does not play the same role under the BIA as it does for civil litigation under the CJA. The application judge clearly had the authority to make the order that he did. . Dal Bianco v. Deem Management Services Limited
In Dal Bianco v. Deem Management Services Limited (Ont CA, 2020) the Court of Appeal considered the appeal route from orders which involve both a BIA receiver and various provincial statutes (here, the Construction Act - formerly, the Construction Lien Act):[5] The question of how to determine the appeal route when a receiver has been appointed under a combination of s. 243(1) of the Bankruptcy and Insolvency Act and provincial legislation was recently addressed by Zarnett J.A. in Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, 69 C.B.R. (6th) 13. At paras. 29-31 of Astoria, Zarnett J.A. agreed with the reasoning of Groberman J.A. in Industrial Alliance Insurance and Financial Services Inc. v. Wedgemount Power Limited Partnership, 2018 BCCA 283, 61 C.B.R. (6th) 196, at para. 21, that the operative question to determine the appeal route is “whether the order under appeal is one granted in reliance on jurisdiction under the Bankruptcy and Insolvency Act. Where it is, the appeal provisions of that statute are applicable.”
[6] Zarnett J.A. explained that if the Bankruptcy and Insolvency Act is one of the sources of jurisdiction for the order under appeal, “an appeal from an order made under it necessarily implicates a provision sourced in the [Bankruptcy and Insolvency Act]”: at para. 66. The appeal route is then to this court. Even if provincial law is also a source of jurisdiction for the order under appeal and provides for a different appeal route, the principle of federal paramountcy resolves any conflict in favour of the appeal route under the Bankruptcy and Insolvency Act: at para. 67. See also Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, 435 D.L.R. (4th) 416, at paras. 128-131; Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2019 ONCA 588, 72 C.B.R. (6th)245, at paras. 10-11; and Comfort Capital Inc. v. Yeretsian, 2019 ONCA 1017, 75 C.B.R. (6th) 217, at para. 12.
[7] Here, the order of Gilmore J. under appeal was granted at least partly in reliance on jurisdiction under the Bankruptcy and Insolvency Act
[8] The receiver had authority to seek the court’s directions under s. 249 of the Bankruptcy and Insolvency Act and paragraph 34 of the receivership order. Section 249 of the Bankruptcy and Insolvency Act provides as follows:249 A receiver may apply to the court for directions in relation to any provision of this Part, and the court shall give, in writing, such directions, if any, as it considers proper in the circumstances. Paragraph 34 of the receivership order provides as follows:34. THIS COURT ORDERS that the Receiver may from time to time apply to this Court for advice and directions in the discharge of its powers and duties hereunder. [9] Acting under these sources of authority, the receiver moved before Gilmore J. for directions regarding the discharge of its powers and duties as receiver under the Bankruptcy and Insolvency Act. The agreed statement of facts on the motion stated that the receiver had made certain distributions but “has not been able to distribute [the] remaining funds” from the proceeds of sale of the debtor’s property “as a result of the competing priority claims” between the construction lien claimants and the mortgagee.
[10] Gilmore J. provided the court’s directions on the priority dispute. The order under appeal confirms that the motion was brought partly under the Bankruptcy and Insolvency Act — “to determine competing priorities under … the Construction Act … between certain construction liens and a registered real property mortgage”, in an “APPLICATION UNDER Section 243(1) of the Bankruptcy and Insolvency Act and Section 101 of the Courts of Justice Act”.
[11] We agree that the mere act of styling the motion in the receivership does not give “automatic access to the appeal routes under the [Bankruptcy and Insolvency Act]”, because “[t]he jurisdiction of the court is governed by the substance of the order made”: RREF II BHB IV Portofino, LLC v. Portofino Corporation, 2015 ONCA 906, 33 C.B.R. (6th) 9, at para. 12. Here, however, the order under appeal was not just styled in the receivership. The substance of the order was in proceedings authorized by the Bankruptcy and Insolvency Act — it responded to a motion for the court’s directions brought under s. 249 of the Bankruptcy and Insolvency Act to help the receiver distribute the remaining funds in the receivership.
[12] Section 249 of the Bankruptcy and Insolvency Act was thus a source of jurisdiction for the court’s order. To use the language of Astoria, at para. 29, the order under appeal was “granted in reliance on jurisdiction under the Bankruptcy and Insolvency Act”. This establishes that the appeal route is to this court. . KingSett Mortgage Corporation v. 30 Roe Investments Corp.
In KingSett Mortgage Corporation v. 30 Roe Investments Corp. (Ont CA, 2022) the Court of Appeal considered an appeal of a receivership insolvency order:[16] In its jurisprudence regarding the appeals of orders appointing a receiver under BIA s. 243 and CJA s. 101, this court has consistently made two points:(i) Where a receivership order is made pursuant to both BIA s. 243 and CJA s. 101, the more restrictive appeal provisions of BIA s. 193 govern the rights of appeal and appeal routes: Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, 69 C.B.R. (6th) 13, at paras. 66 and 67; Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2019 ONCA 588, 72 C.B.R. (6th) 245, at paras. 10 and 11;
(ii) No appeal as of right exists under BIA ss. 193(a) or (c) from an order appointing a receiver: Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228, at para. 38; Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at paras. 15-17; and Buduchnist, at para. 12. . Buduchnist Credit Union Limited v. 2321197 Ontario Inc.
In Buduchnist Credit Union Limited v. 2321197 Ontario Inc. (Ont CA, 2022) the Court of Appeal considered whether an insolvency receivership order was governed under the BIA 243 or CJA 101:A. Does the BIA or the CJA govern TC’s Appeal?
[19] The BIA governs this appeal, not the CJA.
[20] This court has repeatedly found that “[w]here a receivership order is made pursuant to both BIA s. 243 and CJA s. 101, the more restrictive appeal provisions of BIA s. 193 govern the rights of appeal and appeal routes”: KingSett Mortgage Corporation v. 30 Roe Investments Corp., 2022 ONCA 479, 100 C.B.R. (6th) 218 at para. 16, citing Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, 69 C.B.R. (6th) 13, at paras. 66 and 67; Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2019 ONCA 588, 72 C.B.R. (6th) 245, at paras. 10 and 11. TC submits that this is generally the case, but where the order appealed from “substantively does not engage a BIA receivership”, the BIA appeal routes do not apply. Relying on RREF II BHB IV Portofino, LLC. v. Portofino Corporation, 2015 ONCA 906, 33 C.B.R. (6th) 9, at paras. 11-12, TC argues that “the jurisdiction of the court is governed by the substance of the order made.”
[21] In Astoria, this court addressed the test to be applied to determine jurisdiction where a receiver has been appointed under s. 243(1) of the BIA and under provincial law. The question is “whether the order under appeal is one granted in reliance on the jurisdiction of the Bankruptcy and Insolvency Act”: Astoria, at para. 29, citing Industrial Alliance Insurance and Financial Services Inc. v. Wedgemount Power Limited Partnership, 2018 BCCA 283, 61 C.B.R. (6th) 196, at para. 21. Where there is an appeal route under both the BIA and provincial law, the doctrine of paramountcy applies, such that the BIA governs jurisdiction in the case: Dal Bianco v. Deem Management Services Limited, 2020 ONCA 585, 82 C.B.R. (6th) 161, at para. 6.
[22] I am satisfied that jurisdiction to make the orders that are the subject of this appeal is available under the BIA. As I have indicated, TC seeks to appeal the motion judge’s denial of its request to grant an order requiring the receiver to hold the proceeds of sale as security for the Mareva Order, and the motion judge’s direction to the receiver to pay those proceeds to the sheriff. Those orders purport to direct a receiver, appointed pursuant to the authority of the BIA, in the management of the receivership. It is clear that the orders, to use the language employed by TC, “substantively” engage the receivership. The fact that TC’s purported appeal also addresses orders governing creditors’ rights issues relating to the distribution of the proceeds of sale does not change this. The BIA governs.
|
