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Insolvency - BIA - Appeals (3). Cardillo v. Medcap Real Estate Holdings Inc.
In Cardillo v. Medcap Real Estate Holdings Inc. (Ont CA, 2023) the Court of Appeal considers the jurisdiction of single judges of the court (as opposed to panels) to resolve BIA s.193 appeal routes (particularly, whether leave to appeal is required under s.193(e)).
The court's extensive discussion considers the much-litigated issue of the BIA s.193 appeal route 'categorizations', and the (apparently) important practice point of the composition of panel. The case is essential reading for anyone involved in such BIA-appeal issues:[1] This motion raises the issue of the authority of a single judge of this court hearing motions to determine the availability of appeal rights under s. 193 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.
[2] B. Riley Farber Inc., the trustee in bankruptcy of Medcap Real Estate Holdings Inc., moves for orders that the appellants, John Cardillo, 2503866 Ontario Inc., 1869541 Ontario Inc., and Bodypro Gym Inc., all of whom are related in some fashion to Medcap: (i) do not enjoy an automatic right of appeal under BIA ss. 193(a) or (c) from the October 30, 2023 order of the Commercial List motions judge (the “Order”), (ii) require leave to appeal that Order, and (iii) should be denied such leave.
[3] The Trustee submits that as a single judge of an appellate court, I have the authority to grant the orders sought.
[4] The appellants disagree. They argue, in essence, that I cannot make any order that prejudices their notice of appeal which relies on BIA ss. 193(a) and (c) to appeal the Order. According to the appellants, were I to grant the Trustee the relief it seeks, I would, in effect, “finally determine” their appeal. That I cannot do, they say; only a panel of three judges has the authority to “finally determine” an appeal. In support of that proposition, they cite r. 61.16(2.2) of the Ontario Rules of Civil Procedure, which states:A motion in the Court of Appeal for an order that finally determines an appeal, other than an order dismissing the appeal on consent, shall be heard and determined by a panel consisting of not fewer than three judges sitting together, and always of an uneven number of judges. ....
[21] The jurisprudence is quite clear:. While BIA s. 193(a) creates a statutory right of appeal “if the point at issue involves future rights”, future rights do not include present rights, including procedural rights: Re Ravelston Corp. (2005), 2005 CanLII 63802 (ON CA), 24 C.B.R. (5th) 256 (Ont. C.A.); Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at paras. 15, 18; and 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 369 D.L.R. (4th) 635, at paras. 20-23;
• While BIA s. 193(c) creates a statutory right of appeal “if the property involved in the appeal exceeds in value ten thousand dollars”, the case law holds that s. 193(c) does not apply to decisions or orders that are procedural in nature: Bending Lake, at paras. 54-58; Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228, at paras. 25 and 39. The subsection concerns orders or decisions that bring into play the value of the debtor’s property or that result in a loss: Hillmount, at para. 25. [22] The motions judge granted the Trustee’s motion in part and dismissed the appellants’ cross-motion. Her disposition of those motions resulted in directions regarding “how, where and when the 250 Mortgage Dispute underlying both the Foreclosure Action and the TUV Motion should be adjudicated”. Her directions were purely procedural in nature. Consequently, the appellants do not have a right of appeal under either BIA s. 193(a) or (c).
[23] Although that conclusion could not be clearer, the appellants contend that sitting as a single judge I can do nothing about it. In their submission, only a panel of three judges of this court could give relief based upon an assessment that the appellants’ appeal does not fall within BIA ss. 193(a) or (c).
....
THE PRACTICE OF SINGLE JUDGES DEALING WITH APPEAL ROUTE ISSUES UNDER BIA S. 193.
[25] The jurisprudence of this court establishes a well-accepted practice that a single judge dealing with motions involving orders made under the BIA has the authority to determine whether a party has a right of appeal under BIA ss. 193(a)‑(d) or whether the party requires leave to appeal under BIA s. 193(e) and, if leave is required, whether leave should be granted.
[26] The decision of Blair J.A., sitting as a single judge in Pine Tree Resorts Inc., is most often cited for its summary of the factors courts should consider when determining whether to grant leave to appeal under BIA s. 193(e). However, the reasons in Pine Tree Resorts also reveal how an experienced commercial judge understood the powers of a single appellate judge when considering issues involving BIA s. 193 as well as s. 195, the stay provision.
[27] In Pine Tree Resorts, the judge below had granted an order appointing a receiver over the assets of a mortgagor, Pine Tree Resorts. The debtor and a second mortgagee, Romspen Investment Corporation, appealed the appointment order and then moved before Blair J.A., sitting as a single judge, for relief. A secured creditor, BDC, brought some sort of cross-motion. Although the reasons do not set out the precise relief sought, Blair J.A. described the core issue on the motions as follows:At the heart of this motion is whether the order should be stayed pending the appeal if there is an appeal. Collateral issues include whether the appeal is as of right under s. 193 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 ("BIA"). If the answer to that question is yes, should the automatic stay be lifted? If leave to appeal is required, should it be granted and, if so, should the order be stayed pending the disposition of the appeal? [28] Blair J.A. then proceeded to conclude that: (i) there was no automatic right to appeal from an order appointing a receiver either under BIA s. 193(a) or (c); leave to appeal under BIA s. 193(e) was required in the circumstances of the case; and (iii) leave to appeal should be declined. Blair J.A. disposed of the motions as follows:There is no appeal as of right from the receivership order granted by Mesbur J. under s. 193 of the BIA. Leave to appeal is required, but Romspen and Pine Tree have not met the test for leave to be granted in these circumstances. The motions of Romspen and Pine Tree are therefore dismissed. It follows that the receivership order is not stayed and that BDC's motion, to the extent it is necessary to deal with it, is successful. [29] The reasons in Pine Tree Resorts do not contain any suggestion that the parties questioned the authority of a single judge of this court sitting in chambers to dispose of the motions in the way Blair J.A. did.
[30] About 20 years before the Pine Tree Resorts decision, Catzman J.A., sitting as a single judge, queried in TFP Investments Inc. (Trustee of) v. Singhal (1991), 3 C.B.R. (3d) 225 (Ont. C.A.) whether he could determine if an appeal lay under BIA s. 193 without leave. He stated, at para. 11:I therefore strongly incline to the view that no appeal lies to this Court from the order of Bell J. without leave granted pursuant to s.193(e) of the Act. I put it no higher than that because, in deciding this motion, it is not necessary or appropriate that I form or express any concluded view, for the determination whether this appeal lies without leave is ultimately the province of a full panel of this Court, either on a motion to quash or on the hearing of the appeal itself. In any event, even if the appeal is properly constituted, I am not persuaded that an order for directions respecting its perfection or its hearing on an expedited basis in advance of other appeals already on the list is warranted. The motion for directions is therefore dismissed. [31] However, ten years later, in Robson (Re) (2002), 2002 CanLII 53241 (ON CA), 33 C.B.R. (4th) 86 (Ont. C.A.), Feldman J.A., sitting as a single judge, expressed no reservation about her authority to determine on a motion whether a right to appeal without leave existed. She regarded the earlier decision in TFP Investments as determining the applicability of BIA ss. 193(a) and (c) in the circumstances of that case. The decision in Robson (Re) was later followed by Strathy C.J.O. in Global Royalties Limited v. Brook, 2016 ONCA 50, 344 O.A.C. 49, where he wrote, at para. 17, that: “A judge of this court has jurisdiction to make an order directing that the appellant does not have a right to appeal pursuant to s. 193(b) of the BIA: see [Robson (Re)]”.
[32] Since the release of the Pine Tree Resorts decision in 2013, the approach applied by Blair J.A. has been employed by single judges hearing BIA s. 193 motions. I summarized some of the jurisprudence that emerged up until 2020 in a short article, Insolvency Routes of Appeal: A Quick Primer (2020), 76 C.B.R. (6th) 197, at pp. 202-03:Where a party dissatisfied with an order made under the BIA files a notice of appeal to the OCA, the respondent sometimes brings a motion to "quash" the appeal on the ground that the appellant's appeal does not fall within any of the rights of appeal found in s. 193(a)‑(d) of the BIA. In the OCA, only a panel of three judges has the jurisdiction to "quash" an appeal, so a motion to "quash" must be brought before a panel.
However, respondents faced with a notice of appeal often bring motions before single judges of the OCA sitting in our motions court seeking, in effect, directions as to whether the appellant requires leave to appeal under s. 193(e) of the BIA.
In recent years, single judges of our court have decided several such motions: Bending Lake Iron Group; IceGen Inc., Re, 2016 ONCA 902, 42 C.B.R. (6th) 183 (Ont. C.A.); Downing Street Financial Inc. v. Harmony Village-Sheppard Inc., 2017 ONCA 611, 49 C.B.R. (6th) 173 (Ont. C.A.); B&M Handelman Investments Limited v. Drotos, 2018 ONCA 581, 61 C.B.R. (6th) 208 (Ont. C.A.); Comfort Capital Inc. v. Yeretsian, 2019 ONCA 1017 (Ont. C.A.)
. The results on such motions are influenced heavily by the specific relief requested by the parties. Often the parties ask for a determination whether an appeal lies as of right from the order below and, if it does not, whether leave to appeal should be granted: see, for example, the relief sought described in Comfort Capital Inc. at paras. 1 and 2:[1] Rosen Goldberg Inc. is the court appointed receiver (the "receiver") of the assets, undertaking, and property of the three corporations and two individuals named as respondents in the court below (the "debtors in receivership"). The receiver moves for certain relief in connection with an appeal brought by Canada Investment Corporation ("CIC") from an order made in the receivership proceedings by Penny J. dated September 13, 2019. The order resolved certain claims in respect of the proceeds of sale of one of the properties subject to the receivership.
[2] The specific questions raised by the receiver's motion, and CIC's response to it, are: (i) whether the CIC appeal is as of right or requires leave under s. 193 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the "BIA"); and (ii) if the CIC appeal requires leave under s. 193 of the BIA whether CIC should be granted leave. Although the receiver also asked that any stay of Penny J.'s order effected by the CIC appeal be lifted, it withdrew that request during oral argument. . In some cases, single judges have determined both whether an appeal as of right lies and, if it does not, whether leave to appeal should be granted: Downing Street Financial; B&M Handelman Investments Limited.
. In others, the single judge has determined that no appeal as of right lies and has directed a further hearing on the applicant's request for leave to appeal: Bending Lake Iron Group; IceGen Inc.
. In Comfort Capital Inc., the single judge decided that an appeal lay as of right.[2] [33] Since the publication of that article, there have been further decisions in which single judges of this court, sitting in chambers, considered requests for directions as to whether a right to appeal an order made under the BIA existed or whether leave was required: Royal Bank of Canada v. Bodanis, 2020 ONCA 185, 78 C.B.R. (6th) 165; Cosa Nova Fashions Ltd. v. The Midas Investment Corporation, 2021 ONCA 581, 95 C.B.R. (6th) 240; and Shaver-Kudell Manufacturing Inc. v. Knight Manufacturing Inc., 2021 ONCA 202, 88 C.B.R. (6th) 1.
[34] As well, there have been two decisions of this court in which panels have been requested to review orders made by single judges that determined whether BIA s. 193 rights of appeal existed in the circumstances of the particular cases:. In McEwen (Re), 2020 ONCA 511, 452 D.L.R. (4th) 248, a panel of this court reviewed the decision of a single judge that denied leave to appeal. Although the panel reversed the decision to deny leave to appeal, it made no adverse comment about the single judge’s other determinations that rights of appeal did not lie under s. 193;
. In Hillmount, the panel dismissed a review motion that sought to set aside the order of a single judge determining no right of appeal existed in the circumstances under BIA s. 193(c) and denying leave to appeal. In dismissing the motion to set aside the single judge’s decision, the panel concluded that the single judge had identified the applicable legal principles, had not committed an error in principle, and had not reached an unreasonable result. There was no suggestion that the single judge had lacked the authority to make the decision. [35] As the jurisprudence of this court reveals, it is a well-accepted practice that a single judge of this court dealing with a motion regarding an order made under the BIA can determine whether a party has a right of appeal under BIA ss. 193(a)‑(d) or requires leave to appeal under BIA s. 193(e) and, if leave is required, decide whether leave should be granted.
APPELLANTS’ ARGUMENT THAT A SINGLE JUDGE LACKS THE AUTHORITY TO GRANT THE TRUSTEE THE RELIEF IT SEEKS
[36] The appellants ignore that body of case law and the established practice of this court. As well, they do not point to any cases of this court that have held a single judge lacks such authority. Instead, they contend their argument is supported by a body of case law regarding who can decide issues about the jurisdiction of this court, as well as r. 61.16(2.2) of the Rules of Civil Procedure.
[37] Dealing first with the case law, the appellants point to two cases for the proposition that only a panel of three judges can decide whether an appeal is within the jurisdiction of this court: Dal Bianco v. Deem Management Services Limited, 2020 ONCA 488; Ontario (Provincial Police) v. Assessment Direct Inc., 2017 ONCA 986. Neither case involved an appeal from an order made under the BIA.
[38] The Dal Bianco and Ontario Provincial Police cases are not relevant to the issue on this motion as they involved questions as to whether the Court of Appeal or some other court had the jurisdiction to hear the appeals from certain orders. By contrast, this motion does not concern whether the Court of Appeal has jurisdiction to hear an appeal from the Order, which was made by a judge of a superior court of justice in a bankruptcy proceeding. This court obviously has jurisdiction to hear such an appeal; BIA s. 193 clearly says so: “Unless otherwise expressly provided, an appeal lies to the Court of Appeal from any order or decision of a judge of the court in the following cases ...”.
[39] As to the Rules of Civil Procedure, the appellants submit that r. 61.16(2.2) precludes a single judge of this court from determining the availability of appeal rights under BIA s. 193. To repeat, r. 61.16(2.2) states:
(2.2) A motion in the Court of Appeal for an order that finally determines an appeal, other than an order dismissing the appeal on consent, shall be heard and determined by a panel consisting of not fewer than three judges sitting together, and always of an uneven number of judges.
[40] My consideration of the appellants’ submission regarding r. 61.16(2.2) can be broken down into two parts.
First part
[41] I start my analysis with a proposition the appellants do not dispute: BIA s. 193(e) expressly authorizes a single judge of an appellate court to determine whether leave to appeal should be granted, where leave to appeal is required. Accordingly, if a motion only asks a single judge to determine whether to grant leave under BIA s. 193(e), the appellants do not dispute the judge’s authority to do so.
[42] If the single judge does not grant leave, in a certain colloquial sense the judge has put an end to a party’s attempt to appeal an order. But, speaking more precisely, by denying leave the judge does not “finally determine” an appeal within the meaning of r. 61.16(2.2); instead, the judge determines that the party has no appeal from the order or decision of the judge below. Put another way, under BIA s. 193(e) a single judge determines whether a party should be permitted to initiate an appeal; the judge does not determine an extant appeal. For that reason, an order denying leave to appeal would not fall within the language of r. 61.16(2.2) as the single judge does not “finally determine an appeal”.
[43] But there is a more important reason why r. 61.16(2.2) cannot affect the authority of a single judge under BIA s. 193: the constitutional doctrine of paramountcy. As a federal statute, the BIA relies on the network of provincial superior courts of justice and courts of appeal for its operation and enforcement. Two provisions of the BIA and its Rules refer to such reliance on provincial rules of procedure:(i) Rule 3 of the Bankruptcy and Insolvency General Rules states that “[i]n cases not provided for in the Act or these Rules, the courts shall apply, within their respective jurisdictions, their ordinary procedure to the extent that procedure is not inconsistent with the Act or these Rules; and
(ii) BIA s. 183(2) states that “[s]ubject to subsection (2.1), the courts of appeal throughout Canada, within their respective jurisdictions, are invested with power and jurisdiction at law and in equity, according to their ordinary procedures, except as varied by this Act or the General Rules, to hear and determine appeals from the courts vested with original jurisdiction under this Act.” [Emphasis added.] [44] The upshot of those two provisions is that the ordinary rules of procedure for provincial superior courts of justice and appeal courts must be understood, interpreted, and applied to appeals from orders made under the BIA in a way that is not inconsistent with the BIA and the Bankruptcy and Insolvency General Rules. That result is required by the constitutional doctrine of paramountcy. As explained by this court in McEwen, at para. 57:[T]he authority for a single judge to hear a motion for leave to appeal an order made under the BIA does not flow from CJA s. 7(2), but from BIA s. 193(e). That section specifically provides that where an appeal does not lie as of right under BIA ss. 193(a)-(d), an appeal lies to the Court of Appeal "by leave of a judge of the Court of Appeal". BIA s. 193(e) specifically varies the requirements set out in CJA ss. 7(2) and (3) regarding the composition of the court hearing a motion for leave to appeal: BIA s. 183(2); General Rules r. 3. Under the doctrine of federal paramountcy, the conflict between BIA s. 193(e) — a single judge hears a leave motion — and CJA s. 7(3) — a panel hears a leave motion — is resolved in favour of the federal provision: Alberta (Attorney General) v. Moloney, 2015 SCC 51, [2015] 3 S.C.R. 327, at paras. 18‑19; Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, 69 C.B.R. (6th) 13, at paras. 67‑68. [45] Just as any conflict between BIA s. 193(e) and CJA s. 7(3) must be resolved in favour of the federal provision, so too must any conflict between BIA s. 193(e) and r. 61.16(2.2) of the Ontario Rules of Civil Procedure. Rule 61.16(2.2) could not affect the authority of a single judge to hear and determine a motion for leave to appeal under BIA s. 193(e) because that section of the BIA expressly vests such authority in a single judge.
Second part
[46] That conclusion feeds the second part of my analysis of the appellants’ submission. While on occasion a single judge of this court is presented with a motion that asks only for the determination of whether leave to appeal should be granted under BIA s. 193(e), more often the moving party seeks directions that would require the single judge, as part of the decision-making exercise as to whether to grant leave, to consider whether a right of appeal exists under BIA ss. 193(a)-(d). As I understand the appellants’ submission, r. 61.16(2.2) would prevent a single judge from considering the availability of any such right of appeal.
[47] In my view, such an application of r. 61.16(2.2) would conflict with the operation of BIA s. 193 and, as a result, would offend the doctrine of paramountcy. Section 193 states in its entirety:193 Unless otherwise expressly provided, an appeal lies to the Court of Appeal from any order or decision of a judge of the court in the following cases:
(a) if the point at issue involves future rights;
(b) if the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings;
(c) if the property involved in the appeal exceeds in value ten thousand dollars;
(d) from the grant of or refusal to grant a discharge if the aggregate unpaid claims of creditors exceed five hundred dollars; and
(e) in any other case by leave of a judge of the Court of Appeal. [Emphasis added.] [48] Since BIA s. 193(e) authorizes a single judge to grant leave to appeal “in any other case”, for a single judge to decide whether to grant leave, the judge must first determine whether the order or decision of the court below concerns “any other case” than those enumerated in BIA ss. 193(a)-(d).[3] If the order or decision falls into one of the cases identified in ss. 193(a)-(d), then no leave is required as no “other case” exists in respect of which the single judge could exercise the leave power conferred by BIA s. 193(e). It follows that determining whether a party has a right of appeal under BIA ss. 193(a)-(d) is a necessary preliminary step in the judicial process of deciding whether to exercise the statutory authority conferred by BIA s. 193(e) on a single judge to grant leave. Consequently, even if the issue of the availability of appeal rights might fall within the ambit of r. 61.16(2.2) for non‑bankruptcy cases, in cases where a party seeks to appeal an order or decision made under the BIA the rule’s requirement for a three-person panel must give way, as a matter of paramountcy, to the operation of the decision-making process embedded in BIA s. 193, which cloaks a single appellate judge with the power to make the determination.
Conclusion
[49] For those reasons, I am not persuaded by the appellants’ submission that I lack the authority to hear and determine the Trustee’s motion. Since I have concluded that the Order the appellants seek to appeal clearly does not fall within either BIA s. 193(a) or (c), I must consider whether the appellants should be granted leave to appeal pursuant to BIA s. 193(e).
SHOULD LEAVE TO APPEAL BE GRANTED UNDER BIA S. 193(e)?
[50] In my view, the appellants should not be granted leave to appeal under BIA s. 193(e) as they have not satisfied the criteria set out in Pine Tree Resorts:(i) Their proposed appeal does not raise any issue of general importance to the practice in bankruptcy or insolvency matters. The Order is a run‑of-the-mill procedural order designed to move a specific dispute along to a final adjudication on the merits in the most expeditious and least expensive manner;
(ii) The proposed appeal lacks merit. The motions judge’s reasons disclose that through her Order she sought to allocate judicial resources to secure the just, most expeditious, and least expensive determination of the disputes between the parties. As a judge of the Superior Court of Justice, the motions judge was far better positioned than this court to understand the availability of judicial resources in the Superior Court of Justice and their most proportionate allocation to specific disputes. Therefore, the motions judge’s discretionary procedural decision is entitled to great deference. Her reasons do not display any obvious error in principle or misapprehension of the evidence. I see no merit in the appellants’ appeal; and
(iii) Finally, the proposed appeal most certainly would hinder the progress of the bankruptcy proceedings, as the motions judge explains in her reasons: at paras. 64 to 72. DISPOSITION
[51] Accordingly, the trustee’s motion for directions is granted. The appellants require leave to appeal the Order under BIA s. 193(e). Leave to appeal is denied.
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