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Insolvency - BIA - Appeals (4). Cardillo v. Medcap Real Estate Holdings Inc.
In Cardillo v. Medcap Real Estate Holdings Inc. (Ont CA, 2024) the Ontario Court of Appeal considered whether the BIA s.193 decision as to whether an appeal was 'as of right' or required leave, could be made by a single Court of Appeal judge or a panel:[1] In this motion, the moving parties/appellants (the “Cardillo Parties”) asked this court to review a decision made by a single judge of this court. The chambers judge allowed the motion brought by the Trustee in Bankruptcy of Medcap Real Estate Holdings (“Medcap”), B. Riley Farber Inc. (the “Trustee”), holding that the Cardillo Parties do not enjoy an automatic right of appeal to this court from the decision of Kimmel J., under ss. 193(a)-(d) of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (“BIA”), and denying leave to appeal pursuant to s. 193(e) of the BIA.
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DECISION BELOW
[11] The chambers judge allowed the Trustee’s motion, finding that there was no automatic right of appeal and denying the Cardillo Parties leave to appeal.
[12] The chambers judge found that Kimmel J. had simply directed where the adjudication of certain rights should take place, and that this was a procedural determination. He found that the case law was clear that there is no right of appeal in s. 193(a) and (c) from procedural determinations: Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at paras. 15, 18; 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 369 D.L.R. (4th) 635, at paras. 20-23, 54-58.
[13] The chambers judge found that there is well-established jurisprudence accepting that a single judge has authority to determine whether a party has a right of appeal under ss. 193(a)-(d) of the BIA or whether leave is required under s. 193(e), and, if leave is required, whether it should be granted: see e.g., Pine Tree Resorts; Robson (Re) (2002), 2002 CanLII 53241 (ON CA), 33 C.B.R. (4th) 86 (Ont. C.A.). He rejected the Cardillo Parties’ assertion that a three-judge panel was required pursuant to r. 61.16(2.2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and s. 7(3) of the Courts of Justice Act, R.S.O. 1990, c. C.43 (“CJA”). Section 193(e) of the BIA explicitly grants a single judge the authority to grant or deny leave to appeal, while r. 61.16(2.2) of the Rules (and s. 7(3) of the CJA) requires that a motion in this court for an order that finally determines an appeal, other than an order dismissing the appeal on consent, must be heard by a three-judge panel. The chambers judge found that the doctrine of paramountcy operates to resolve the conflict between these provisions in favour of the federal BIA.
[14] The chambers judge further found that determining whether there is a right of appeal under ss. 193(a)-(d) of the BIA is a necessary preliminary step in the judicial process of deciding whether to exercise the statutory authority conferred by s. 193(e) on a single judge to grant leave.
[15] Finally, the chambers judge denied leave to appeal. He found that the appeal did not raise any issue of general importance to the practice of bankruptcy or insolvency matters, that the proposed appeal lacked merit, and that it would hinder the progress of the bankruptcy proceedings.
ANALYSIS
[16] The Cardillo Parties raise two main issues on this motion: first, whether the chambers judge was correct that a single judge can make an order that an appeal is not of right but rather requires leave and then go on to deny leave; and second, whether it was procedurally unfair that the chambers judge denied leave to appeal without affording the Cardillo Parties an opportunity to have a leave motion.
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[24] It is well established that, on a panel review of the order of a single judge pursuant to s. 7(5) CJA, the panel may interfere with the order if the chambers judge failed to identify the applicable principles, erred in principle or reached an unreasonable result: DeMarco v. Nicoletti, 2017 ONCA 417, at para. 3; Yaiguaje v. Chevron Corporation, 2017 ONCA 827, 138 O.R. (3d) 1, at para. 21; Struik v. Dixie Lee Food Systems Ltd., 2018 ONCA 22, at paras. 5-6. Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228, at para. 18.
[25] None of these grounds exist here.
[26] In the course of extensive and careful reasons, the chambers judge addressed every ground raised by the Cardillo Parties. He specifically considered whether his decision would “finally determine” the appeal and found that it did not, relying on the clear provisions of s. 193(e) of the BIA. As such, he found that an order denying leave to appeal under s. 193(e) of the BIA would not fall within the language of r. 61.16(2.2). Moreover, as he found, even if it did, r. 61.16(2.2) could not be given effect in the circumstances due to the constitutional doctrine of paramountcy, which he referred to as the “more important reason” that r. 61.16(2.2) cannot affect the authority of a single judge under s. 193 of the BIA. There is no error in principle with these findings.
[27] The fact that the issue of leave was raised via a challenge to the asserted right of appeal, rather than by way of a motion for leave to appeal, does not affect a single judge’s authority to make a determination of whether leave should be granted. That decision is still made pursuant to s. 193(e) of the BIA and therefore any conflict with r. 61.16.(2.2) is resolved in favour of the federal BIA. . Peakhill Capital Inc. v. 1000093910 Ontario Inc.
In Peakhill Capital Inc. v. 1000093910 Ontario Inc. (Ont CA, 2023) the Court of Appeal considers whether a BIA appeal fell under s.193(c) ["the property involved in the appeal exceeds the value of $10,000"], and thus did not require leave to appeal:Discussion
[25] The Debtor’s primary position on this motion is that it is entitled to an automatic right of appeal under s. 193(1)(c) of the BIA. In the alternative, it requests leave to appeal under s. 193(1)(e) and a stay pending appeal under s. 195.
[26] Section 193 of the BIA provides, in relevant part, as follows: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:
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(c) if the property involved in the appeal exceeds the value of $10,000;
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(e) in any other case by leave of a judge of the Court of Appeal. [27] The Debtor acknowledges that decisions from this court have interpreted s. 193(c) narrowly and restricted the automatic right of appeal so that it does not apply to decisions or orders that: are procedural in nature; do not bring the value of the debtor’s property into play; or do not result in a loss of more than $10,000: e.g. Cardillo v. Medcap Real Estate Holdings Inc., 2023 ONCA 852.
[28] The Debtor also acknowledges that, on its face, the Order appears to be procedural in that it simply approves a sale process.
[29] In that respect, because the Order simply approves a sale process, it is similar to the order at issue in Re Harmon International Industries Inc., 2020 SKCA 95, a decision on which the Receiver relies.
[30] In Re Harmon, the order at issue authorized a sale process that included a requirement to list one property for $3,800,000. The Saskatchewan Court of Appeal found that all the order in question did was “establish a process for the sale of the property”, with future transactions still requiring court approval. As a result, the Court found that any claim of loss was without foundation and that the order did not “directly have an impact on the proprietary or monetary interests of Harmon or crystallize any loss at this time.” The order therefore “concern[ed] a matter of procedure only” and was “merely an order as to the manner of sale”. As “no value was in jeopardy”, leave to appeal was required under s. 193(e) of the BIA.
[31] However, the Debtor submits that in assessing whether an automatic right of appeal exists under s. 193(c), the court must “make a critical examination of the effect of the order sought to be appealed.” In doing so, the court must undertake a fact-specific, evidence-based inquiry to “discern the operative effect of the order … does the order result in a loss or gain, or put in jeopardy value of property, in excess of $10,000”: Comfort Capital Inc. v. Yeretsian, 2023 ONCA 282 at paras. 20 and 21, citing Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228 at paras. 35, 42 and 45.
[32] The Debtor asserts that in refusing to hear its cross-motion and also making the Order approving the Bidding Procedures and Stalking Horse APS but failing to terminate the original APS, the motion judge both left the original APS in place and also deprived it of the right to complete, or obtain an order for specific performance of, the original APS that had a fixed value of $31,000,000. The Debtor contends that by adopting the Bidding Procedures and Stalking Horse APS, which sets a floor price of $24,455,000 based on an offer from 255 (the purchaser under the original APS), the Order puts in play, and jeopardizes, the value of the Property for an amount in excess of $10,000. The Order is thus not merely procedural, it also affects substantive rights.
[33] The Receiver responds that the Order had no substantive effect on the original APS. Because of the receivership Order, the Debtor had no ability to complete the APS. As was the case in Re Harmon, the Order did nothing more than establish the sale process for the Property. It did not crystalize any loss and was merely procedural in its effect.
[34] I agree that, on their face, the motion judge’s decision not to entertain the Debtor’s cross-motion (the “refusal decision”) and the Order both appear to be procedural in nature. Nonetheless, I conclude that, in the particular circumstances of this case, at least the refusal decision, although procedural in nature, also had the effect of putting in play, and jeopardizing, the value of property by an amount exceeding $10,000.
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