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Insolvency - BIA - Appeals (2). Grillone (Re)
In Grillone (Re) (Ont CA, 2023) the Court of Appeal considered a motion to lift a automatic stay pending pending, here in an insolvency [BIA 195] context:III. REQUEST TO LIFT THE BIA S. 195 STAY
The applicable considerations for lifting the automatic stay
[34] Bluecore moves to lift the stay of the Bankruptcy Order under BIA s. 195, the relevant parts of which provide as follows:[A]ll 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 ... 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. [Emphasis added.] [35] An applicant that seeks to cancel a BIA s. 195 stay bears the burden of establishing compelling reasons to support a cancellation: After Eight Interiors Inc. v. Glenwood Homes Inc., 2006 ABCA 121, 391 A.R. 202, at para. 5. The BIA s. 195 jurisprudence identifies several factors courts should consider when dealing with a request to lift an automatic stay:. The appellant’s litigation conduct, including whether the appellant is diligently prosecuting the appeal;
. The merits of the appeal;
. The relative prejudice to the parties of cancelling the stay. This typically involves applying a variation of the tripartite test in RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 applied on stay applications, specifically whether: (i) there is a serious issue to be appealed; (ii) the applicants would suffer irreparable harm if the stay is not lifted; and (iii) the applicants would suffer greater harm than the respondents if the stay is not lifted;
. However, while all or part of the tripartite test may be relevant, the discretion granted by BIA s. 195 is broader. Accordingly, a contextual approach is appropriate that considers all the facts of the case, not merely those that engage the tripartite test, and the interests of justice generally. See: After Eight, at paras. 5-6; Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228, at para. 44; Royal Bank of Canada v. Bodanis, 2020 ONCA 185, 78 C.B.R. (6th) 165, at para. 11; and Toronto Dominion Bank v. Amex Bank of Canada, 1996 ABCA 128, 181 A.R. 279, at paras. 10-11. . 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 considers in detail the test for leave to appeal under BIA 193(e):II. ANALYSIS
[4] The exercise of granting leave to appeal under BIA s. 193(e) is discretionary and must be exercised in a flexible and contextual way. The [SS: three] prevailing considerations for a court to take into account are summarized in Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at para. 29. I shall consider each.
A. Merits of the proposed appeal
[5] I start by considering the merits of the Debtors’ proposed appeal. In their notice of motion for leave to appeal, the Debtors identify four grounds on which they intend to appeal.
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B. Issue of general importance to insolvency practice or the administration of justice
[20] Since the record does not disclose any merit in the first two grounds of appeal, they cannot raise issues of general importance. The third and fourth grounds of appeal are rooted in the application of established principles to the specific facts of the case before the application judge; they do not give rise to issues of general importance.
C. Effect of granting leave on the specific insolvency proceeding
[21] I accept RBC’s submission that granting leave to appeal would unduly hinder the progress of the administration of the receivership. The consequent automatic stay under BIA s. 195 would halt the receivership. Given the level of indebtedness of the Debtors to RBC, their default, and the absence of firm replacement financing, the interests of justice would not be served by granting leave. . Comfort Capital Inc. v. Yeretsian
In Comfort Capital Inc. v. Yeretsian (Ont CA, 2023) the Court of Appeal, on a motion to extend time to appeal, considered where to locate on appeal under BIA 193, either as 'as-of-right' [193(c): "property involved in the appeal exceeds in value ten thousand dollars"] or as requiring leave to appeal [193(e): "in any other case by leave of a judge of the Court of Appeal"]:[1] This is a motion by Money Gate Corporation (“MGC”) for an extension of time to file its notice of appeal and for a declaration that it has an appeal as of right under s. 193(c) of the Bankruptcy and Insolvency Act, R.S.C., 1985 c. B-3 (the “BIA”), or alternatively for leave to appeal under s. 193(e).
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[19] The proper scope and interpretation of s. 193(c) has been the subject of numerous reported decisions of this court and the courts of other provinces. It is unnecessary for the purpose of this motion to engage in any detailed review of the cases. I note however the approach outlined in 2403177 Ontario Inc. v. Bending Lake Iron Group Ltd., 2016 ONCA 225, that has been consistently followed in this province. In Bending Lake Brown J.A. concluded that s. 193(c) of the BIA does not provide a right of appeal from orders that: (i) are procedural in nature; (ii) do not bring into play the value of the debtor’s property; or (iii) do not result in a gain or loss (in the sense of involving “some element of a final determination of the economic interests of a claimant in the debtor”): at paras. 53, 61.
[20] In a more recent decision, Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, at para. 35, Brown J.A., writing for a panel of this court, endorsed the statement in MNP Ltd. v. Wilkes, 2020 SKCA 66, 449 D.L.R. (4th) 439, at para. 61, that the primary task when examining whether an automatic right of appeal exists under s. 193(c) is to “determine whether the property involved in the appeal exceeds $10,000”, which may be determined by comparing the order appealed against the remedy sought in the notice of appeal. The focus of the inquiry is the amount of money at stake. In describing the approach to be taken in determining whether s. 193(c) applies to an appeal, Brown J.A. stated, at para. 42:What is required … is a critical examination of the effect of the order sought to be appealed. Such an examination requires scrutinizing the grounds of appeal that are advanced in respect of the order made below, the reasons the lower court gave for the order, and the record that was before it. The inquiry into the effect of the order under appeal therefore is a fact-specific one; it is also an evidence-based inquiry, which involves more than merely accepting any bald allegations asserted in a notice of appeal. [21] Justice Brown went on to say, at para. 45, that although the cases under s. 193(c) explain the interpretative task using differing language, “at their core [they] share common ground in attempting to discern the operative effect of the order sought to be appealed: does the order result in a loss or gain, or put in jeopardy value of property, in excess of $10,000?” (emphasis added).
[22] The responding parties seek to characterize the motion judge’s decision in this case as the determination of a priorities dispute, that would not fall under s. 193(c) of the BIA. The case most often cited as authority for the principle that an order that determines priorities does not fall under s. 193(c) is Ontario Wealth Management Corp. v. Sica Masonry and General Contracting Ltd., 2014 ONCA 500, 17 C.B.R. (6th) 91. In that case, Strathy J.A. (as he then was) was dealing with an attempt to appeal an order respecting competing claims to the proceeds of sale of a property by a receiver, resulting in a payment to a mortgagee in priority to a construction lien claimant. The order was appealed on the basis that the motion judge incorrectly interpreted the priority scheme in s. 78 of the Construction Lien Act, R.S.O. 1990, c. C.30. In concluding that s. 193(c) did not provide a right of appeal, Strathy J.A. determined that, at its core, this was a priority dispute: the issue before the motion judge was only a matter of which claim should be paid first. There was no issue as to the value of the claims or their validity: at paras. 41-42.
[23] An argument similar to the one made by the responding parties in this case was rejected in an earlier decision in this receivership, Comfort Capital Inc. v. Yeretsian, 2019 ONCA 1017, 75 C.B.R. (6th) 217 (“Comfort Capital ONCA 2019”). The order under appeal in that case determined competing claims to certain proceeds of sale of a property (the “Caldwell property”) by a mortgagee (“CIC”) and certain creditors of CIC who were entitled, through a claims process, to establish a claim to monies owed to CIC. The creditor claimants were successful in obtaining an order directing that they be paid the funds that would otherwise be payable to CIC from the proceeds of sale of the Caldwell property.
[24] In rejecting the receiver’s argument that the order did not involve a loss because it was no different than an order that settles a priority dispute between creditors of an insolvent, Zarnett J.A. stated at para. 19:In my view, this case is not a priority dispute, the resolution of which does not give rise to an appeal as of right in the sense used in [Ontario Wealth]. In Ontario Wealth, the priority contest was between two creditors of the debtor with valid claims against the debtor’s assets … The order did not cause a loss to either party as the inability to pay both creditors flowed not from the order but from the “reality that there [were] insufficient funds in the estate to repay both creditors”: at para. 41. The decision in that priority contest was not appealable as of right. [25] By contrast, Zarnett J.A. observed that the reason CIC was not receiving the payment was due to the order under appeal, and not because of an insufficiency of assets. The core issue was whether the claimants had the claim they alleged, and if so, its value. Zarnett J.A. concluded that “[t]he order finally determined the economic interests of CIC in the assets of the debtors in receivership resulting from the sale of the Caldwell property”: at para. 20. . KingSett Mortgage Corporation v. 30 Roe Investments Corp.
In KingSett Mortgage Corporation v. 30 Roe Investments Corp. (Ont CA, 2023) the Court of Appeal carefully walks through a bankruptcy Notice of Appeal to determine whether the appeal was 'as of right' [BIA 193(a-c) were relied on by the appellant], or required leave [as in BIA 193(e)] - which was not sought nor obtained, though the court did subsequently considered it:[28] The Notice of Appeal states that 30 Roe has an appeal as of right pursuant to BIA ss. 193(a)-(c). We shall consider each provision.
[29] As to BIA s. 193(a), 30 Roe’s Notice of Appeal from the Approval Orders does not raise any “point in issue [that] involves future rights”. The narrow scope of the concept of future rights was described in Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at para. 15: “‘Future rights’ are future legal rights, not procedural rights or commercial advantages or disadvantages that may accrue from the order challenged on appeal. They do not include rights that presently exist but that may be exercised in the future”.
[30] In the present case, the Notice of Appeal challenges the Approval Orders on the basis of the methodology, or procedure, followed by the Receiver for the unit sale process and alleged commercial disadvantages caused by that process. 30 Roe’s appeal concerns rights that presently exist, not ones that may be exercised in the future. Consequently, the appeal of the Approval Orders does not engage BIA s. 193(a).
[31] Under BIA s. 193(c), an appeal as of right lies “if the property involved in the appeal exceeds in value ten thousand dollars.” There is no dispute that the sale price for both units exceeds $10,000. However, the jurisprudence on BIA s. 193(c), as summarized by this court in Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228, at paras. 36-39, identifies three types of orders that do not fall within the ambit of that section:. an order that does not result in a loss or does not “directly involve” property exceeding $10,000 in value;
. an order that does not bring into play the value of the debtor’s property; or
. an order that is procedural in nature. [32] To determine whether an order sought to be appealed falls within BIA s. 193(c), a court must analyze the economic effect of the order: Hillmount, at para. 41. As stated in Hillmount, at para. 42:What is required in any consideration of whether the appeal of an order falls within BIA s. 193(c) is a critical examination of the effect of the order sought to be appealed. Such an examination requires scrutinizing the grounds of appeal that are advanced in respect of the order made below, the reasons the lower court gave for the order, and the record that was before it. The inquiry into the effect of the order under appeal therefore is a fact-specific one; it is also an evidence-based inquiry, which involves more than merely accepting any bald allegations asserted in a notice of appeal: Bending Lake [infra], at para. 64. [MNP Ltd. v. Wilkes, 2020 SKCA 66, 449 D.L.R. (4th) 439] concurs on this point, holding, at para. 64, that the loss claimed must be “sufficiently grounded in the evidence to the satisfaction of the Court determining whether there is a right of appeal,” a point repeated in the subsequent chambers decision in Re Harmon International Industries [Inc., 2020 SKCA 95, 81 C.B.R. (6th) 1], at para. 32. [33] In the present case, the Approval Orders authorized the Receiver to proceed with sale transactions for two units. Section 4.0 of the Receiver’s Third Report detailed the listing history (including listing prices) for both units. Unredacted copies of the negotiated agreements of purchase and sale were provided to the debtor and were before the motion judge. No evidence was put before the motion judge that the sale prices for both transactions were unreasonable or not reflective of prevailing market conditions. Accordingly, there was no basis to suggest that approval of the two transactions would result in a “loss” of value for the properties when compared to available market prices.
[34] Instead, 30 Roe sought to oppose the sale transactions by repeating the “en bloc sale” argument it had made at the time of the July Sales Order but which McEwen J. had rejected. On its face, the evidence 30 Roe filed before Steele J. carried virtually no weight, consisting as it did of a bald assertion by Mr. Zar about the possible value of an en bloc transaction that was not supported by an independent valuation and was advanced against a history of 30 Roe refusing requests by the Receiver for financial information about the “Enterprise”.
[35] Moreover, the position taken by 30 Roe before Steele J. amounted to a collateral attack on the July and December Sales Orders, which it had not appealed. 30 Roe repeated its en bloc arguments before McEwen J. in December and then before Steele J., taking the position that it had “reserved” its right to object to future sales on the basis that an en bloc sale would generate more value. That unilateral reservation of rights did not alter the legal effect of the July and December Sales Orders under which the court authorized the Receiver to market and sell the units individually, which the Receiver did.
[36] By failing to appeal and set aside the July and December Sales Orders, 30 Roe lost the legal basis to advance an argument that the Approval Orders would create a loss of value by reason of the individual-unit marketing and sales methodology used by the Receiver as compared to an “en bloc” sales process. It was the July Sales Order, not the Approval Orders, that put in jeopardy any difference in value of the property that might arise from an “individual-unit” sales approach as compared to an “en bloc” sales approach. Given that 30 Roe’s Notice of Appeal asserts no other basis on which to reverse the Approval Orders, in the circumstances of this case its appeal from the Approval Orders does not fall within the ambit of BIA s. 193(c).
[37] Finally, 30 Roe’s appeal does not fall within the ambit of BIA s. 193(b), which provides an appeal as of right “if the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings.” The jurisprudence has consistently interpreted BIA s. 193(b) as meaning that a right of appeal will lie where “the decision in question will likely affect another case raising the same or similar issues in the same bankruptcy proceedings” as the provision concerns “real disputes” likely to affect other cases raising the same or similar issues in the same bankruptcy or receivership proceedings: see 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 396 D.L.R. (4th) 635, at para. 32.
[38] As mentioned, by failing to appeal and set aside the July and December Sales Orders, 30 Roe lost the legal basis to advance an argument that the Approval Orders – or subsequent approval orders for other individual units – would create a loss of value by reason of the individual-unit marketing and sales methodology used by the Receiver. Further, subsequent motions by the Receiver for the approval of sale transactions for other units will be decided upon the evidence related to those sale transactions, not the transactions for PH04 and PH09 authorized by the Approval Orders.
[39] For these reasons, we conclude that 30 Roe’s appeal does not fall within the ambit of BIA ss. 193(a)-(c). Accordingly, we quash its appeal.
Leave to appeal
[40] Although 30 Roe did not file a notice of motion seeking leave to appeal the Approval Orders pursuant to BIA s. 193(e), it did seek such alternative relief in its Notice of Appeal. As well, several of the submissions made by Mr. Zar during the hearing dealt with elements of the leave to appeal test. Accordingly, we will consider whether leave should be granted to 30 Roe to appeal the Approval Orders.
[41] In considering whether to grant leave to appeal an order under BIA s. 193(e) a court will look to whether the proposed appeal: (i) raises an issue that is of general importance to the practice in bankruptcy/insolvency matters or to the administration of justice as a whole, and is one that this court should therefore consider and address; (ii) is prima facie meritorious; and (iii) would unduly hinder the progress of the bankruptcy/insolvency proceedings: Pine Tree Resorts, at para. 29; Impact Tool & Mould Inc. v. Impact Tool & Mould Inc. Estate, 2013 ONCA 697, at para. 3.
[42] 30 Roe’s proposed appeal does not raise an issue of general importance, based as it is on the fact-specific sales process approved in its receivership. Its proposed appeal is not prima facie meritorious: as discussed, it amounts to nothing more than a collateral attack on the July and December Sales Orders. Finally, its appeal would unduly hinder the progress of the receivership. Granting leave to appeal probably would put in jeopardy the pending closings of the sales of PH04 and PH09. 30 Roe has not filed any evidence of equivalent or superior offers for those two units or of its present ability to satisfy the claims of its creditors. One therefore is left with the distinct impression that its attempt to appeal the Approval Orders is nothing more than a delay tactic.
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