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Insolvency (BIA) - Residential Tenancies. Monterozza v. Matthews
In Monterozza v. Matthews (Ont Divisional Ct, 2025) the Divisional Court allowed a landlord RTA appeal, here where one of three joint tenants went bankrupt, the LTB refused termination and stayed the application until the bankruptcy discharge.
These quotes are useful for illustrating the member's erroneous response to tenant bankruptcy, of which I have seen few appellate cases - and some related BIA law:[11] On March 4, 2024, the Respondent Tenant, Christine Matthews, filed proof of bankruptcy.
[12] On April 9th, 2024 the LTB issued an Order cancelling the verbal decision for eviction and rental arrears made on February 22, 2024, and stayed the Landlord’s Application. The order stated:The proceeding commenced under file LTB-L-091493-23 has been stayed as a result of the Tenant’s bankruptcy filing pursuant to the Bankruptcy and Insolvency Act. That application is stayed until the Court otherwise decides or until the Tenant is discharged from bankruptcy. [13] The order also confirmed that all arrears of rent that came due on February 15, 2024 would be covered in the bankruptcy of the Tenant Christine Matthews.
[14] On April 26, 2024 the Landlord filed a request to review the order, stating that the order ought to have reflected the amount of rental arrears owed to the Landlord by the two non-bankrupt Tenants. The Landlord also submitted that the adjudicator was incorrect in stating that the bankruptcy filing by Ms. Matthews created an automatic stay of the proceedings as against the two non-bankrupt Tenants regarding the claim for rental arrears.
[15] An Amended order was issued on May 7, 2024, which substituted the words “the Tenant” with the words “the Trustee”, but included no other changes. Therefore, the order staying the Application currently remains in place.
[16] At this time, all three Tenants are still in possession of the rental premises and continue not to make any rental payments.
[17] Through an administrative error, the Landlord’s request for a Review was not heard by the LTB until December 4, 2024, when it was heard in writing. The Review decision from Patrick Shea, the Vice-Chair of the LTB, found that there had been no serious error made by the LTB Member in the February 6 and 22, 2024 appearances, and that the Amended May 7, 2024 order will remain in place unchanged. The Landlord seeks to set aside the stay with respect to the rental arrears owed to him by the two non-bankrupt Tenants.
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[28] The LTB has exclusive jurisdiction to determine all applications pursuant to the RTA (RTA, s.168(2)), and authority to hear and determine all questions of law and fact with respect to all matters within its jurisdiction (RTA, s.174).
[29] If a Tenant fails to pay rent under a tenancy agreement, the Landlord may serve a notice to terminate the tenancy under s. 59(1) of the RTA and proceed to apply to the LTB for an order evicting the Tenant if the Tenant does not void the notice, as per s. 59(3) of the RTA.
[30] A second remedy available to the Landlord for non-payment of rent is to apply to the LTB under s. 87 of the RTA for an arrears-only order against a non-bankrupt joint tenant for both pre- and post- bankruptcy rent.
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[33] Section 69.3(1) of the Bankruptcy and Insolvency Act (“the BIA”) requires a stay of all proceedings for the recovery of a claim provable in bankruptcy, which generally includes rent or other amounts owed by a Tenant. However, s. 179 of the BIA does not prevent a landlord from recovering rent or other amounts owed by a non-bankrupt joint tenant:179 An order of discharge does not release a person who at the time of the bankruptcy was a partner or co-trustee with the bankrupt or was jointly bound or had made a joint contract with the bankrupt, or a person who was surety or in the nature of a surety for the bankrupt.
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[38] The Landlord argues that these statements made by the adjudicator to the parties inaccurately state that the entire Application would be stayed by one Tenant’s bankruptcy, when in fact, the Landlord’s claim for rental arrears against the two non-bankrupt Tenants can continue despite the third Tenant’s bankruptcy as per s. 179 of the BIA.
[39] While the adjudicator does reference the Landlord’s ability to try to collect the rental arrears from the two non-bankrupt Tenants, the Landlord argues that the statement is still misleading. In particular, the Landlord argues that the statement from the adjudicator suggests that the stay of the Application must be lifted to enable the claims for the rental arrears against the two non-bankrupt Tenants to proceed.
[40] The Landlord also argues that the statements made by the adjudicator collectively informed the Landlord’s representative that Ms. Matthews’ bankruptcy would suspend his claims against the non-bankrupt Tenants.
[41] The Landlord argues that the law is clear that the non-bankrupts cannot be protected regarding the money they owe to the Landlord for rental arrears, and that the statements by the adjudicator during the hearings created procedural unfairness for the Landlord. The Landlord’s representative, Ms. Colley, raised the issue of the claims for rent arrears continuing against the two non-bankrupt Tenants, and was clearly told by the adjudicator that Ms. Matthews’ bankruptcy dissolves the claims against the other Tenants. The Landlord argues that by making this statement, the adjudicator shut down any further efforts on the part of the Landlord to seek an order for payment of rental arrears from the non-bankrupt Tenants.
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[53] This is not a situation where there is debate about statutory interpretation. The LTB does not dispute that the Landlord’s L1 Application could have been amended during the hearing to a L9 arrears-only Application if the adjudicator deemed it appropriate to do so.
[54] In the LTB Review order, Mr. Shea, Vice-Chair of the LTB, confirms that the fact that the LTB has the authority to make an order for rental arrears against non-bankrupt Tenants does not mean that the LTB will automatically make such an order. Mr. Shea concluded that the LTB adjudicator did not make a serious error in failing to make an arrears-only order against the non-bankrupt Tenants, as he found that the Landlord had not specifically asked the adjudicator to make such an order, and in addition, the non-bankrupt Tenants were not in attendance. Mr. Shea concluded that the Landlord can now: a) bring a fresh stand-alone LTB application against the non-bankrupt Tenants for rental arrears, or b) begin a proceeding in Small Claims Court to recover the arrears from the non-bankrupt Tenants.
[55] The evidence is clear that the Landlord was in financial distress at the time of the hearing in February 2024. In my view, the fact that Ms. Colley asked the adjudicator about the Landlord’s claim continuing against the two non-bankrupt Tenants was an indirect way of asking the adjudicator to make an arrears-only ruling against those Tenants. Had the adjudicator informed Ms. Colley in response to her question that a rental arrears-only order was available against the non-bankrupt Tenants, it is likely that Ms. Colley would have specifically requested the same.
[56] In addition to the transcript evidence, the content of the adjudicator’s final order dated May 7, 2024 makes it clear that he was unaware that the bankruptcy of Christine Matthews did not stay the Application for rental arrears as against non-bankrupt Tenants, Wayne Bradbury and Roberta Matthews.
[57] The LTB adjudicator made an error of law when he stated to the parties that the bankruptcy of one Tenant would stay the entire proceeding against all non-bankrupt Tenants. The comments of the LTB adjudicator which contained a misstatement of the law resulted in procedural unfairness to the Landlord.
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[65] The incorrect information regarding the impact of the BIA on the Landlord’s rights under the RTA communicated by the adjudicator to the parties was a serious error of law, and also created procedural unfairness for the Landlord. This Court respects the specialized function of the LTB. However, in the circumstance when an LTB adjudicator provides incorrect legal information to the parties, it is appropriate for this Court to intervene. The Landlord’s appeal of the May 7, 2024 LTB order is granted.
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