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Insolvency (BIA) - Appeals (6). North House Foods Ltd. (Re) [BIA 193e leave to appeal]
In North House Foods Ltd. (Re) (Ont CA, 2025) the Ontario Court of Appeal dismissed an insolvency appeal, here relating to the proposed assessed value of security of a secured creditor's claim [BIA 50.1(4)].
Here the court considers the BIA 193e leave to appeal requirement, some Bankruptcy and Insolvency General Rules, and their interaction with the Rules of Civil Procedure:Request for Leave
[33] Having failed to establish the requisite qualifications under s. 193(c), I conclude that the appellant does not have an appeal as of right. I will now turn to the request for leave to appeal under s. 193(e) of the BIA. To be successful, an appellant must address the procedural hurdle presented by Rule 31(2) of the Bankruptcy and Insolvency General Rules, C.R.C, c. 368 (the “BIA Rules”), and satisfy the substantive test for leave.
[34] Motions for leave to appeal under s. 193(e) are to be brought to a single judge in chambers. In some unusual but necessary instances, such a motion may be heard by a panel: see e.g., Peakhill Capital Inc. v. 1000093910 Ontario Inc., 2024 ONCA 558, 14 C.B.R. (7th) 209, at paras. 39-40 (where the motion judge directed the interrelated issues of standing and jurisdiction to a panel); KingSett Mortgage Corporation v. 30 Roe Investments Corp., 2022 ONCA 479, 100 C.B.R. (6th) 218, at paras. 1-3 (where a motion for leave was heard at the same time as a motion to quash); and Crown Capital Private Credit Fund v. Mill Street & Co. Inc., 2022 ONCA 194, at para. 5 (where the appellants asserted there was a right of appeal but sought leave in the alternative). In addition, if an appeal is brought under s. 193(e) of the BIA, the notice of appeal must include the application for leave to appeal: r. 31(2) of the BIA Rules. That Rule states:If an appeal is brought under paragraph 193(e) of the Act, the notice of appeal must include the application for leave to appeal. [Emphasis added]. I will return to this issue.
[35] As for the substantive test for leave to appeal under s. 193(e), in Pine Tree Resorts, at para. 29, Blair J.A. stated:The court will look to whether the proposed appeal
(a) 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;
(b) is prima facie meritorious; and
(c) would unduly hinder the progress of the bankruptcy/insolvency proceedings. These are factors to consider in the exercise of discretion, not hard and fast requirements. Ultimately, granting leave to appeal under s. 193(e) is “discretionary and must be exercised in a flexible and contextual way”: Pine Tree Resorts, at para. 29.
[36] In the past, this court has been inclined to grant leave under s. 193(e) where the appeal raised a matter of statutory interpretation of some importance and where it would be helpful for this court, as an appellate court, to resolve the questions raised by the parties: see BCIMC Construction Fund Corporation v. 33 Yorkville Residences Inc., 2023 ONCA 1, 4 C.B.R. (7th) 253, at para. 10.
[37] I will now turn to the application of these principles to the facts of this case.
[38] Dealing first with the procedural requirements, the appellant did not bring a motion for leave before either a single judge or a panel, and the notice of appeal did not include any such application as required by Rule 31(2) of the BIA Rules. There is little case law on Rule 31(2). In 2003945 Alberta Ltd v. 1951584 Ontario Inc, 2018 ABCA 48, 57 C.B.R. (6th) 272, at paras. 23-24, Greckol J.A. was of the view that Rule 31(2) is mandatory and a notice of appeal is ineffective in the face of a failure to comply. The failure in that case was ultimately not fatal because the appellants, in response to a motion to strike their notice of appeal, brought a cross-application for both an extension of time to file and for leave to appeal, which Greckol J.A. granted. In other words, while the appellants failed to seek leave in their original notice of appeal, they were able to cure the default by bringing a cross-application seeking an extension of time to seek leave and leave itself.
[39] In Ontario Wealth Management Corporation v. Sica Masonry and General Contracting Ltd., 2014 ONCA 500, 17 C.B.R. (6th) 91, at para. 39, in obiter, Strathy J.A. (as he then was) noted that in that case, leave to appeal was required, the appellant had not sought leave in its notice of appeal in accordance with Rule 31(2), and leave was not warranted. Accordingly, while he refused to grant an extension of time based on the justice of the case, he stated that he would not have granted leave to appeal even if the notice of appeal had been served on time.
[40] In Isabelle v. The Royal Bank of Canada, 2008 NBCA 69, 47 C.B.R. (5th) 159, the respondent argued that the appeal should be quashed because the appellant did not have an appeal as of right and had failed to obtain leave prior to the appeal hearing on the merits. The court agreed that the appellant did not have a right of appeal; however, as he had sought leave in his notice of appeal in the event there was no appeal as of right, the court therefore granted him leave nunc pro tunc: at paras. 22-29.
[41] In both Downing Street Financial Inc v. 1000162497 Ontario Inc., 2024 ONCA 639, 49 C.B.R. (6th) 173, at para. 22 and First National, at paras. 35-36, different motion judges declined to address whether leave should be granted under s. 193(e) in the absence of a motion for leave.
[42] However, some cases from this court have granted leave under s. 193(e) when an appellant, facing a motion to quash, responds with a motion for leave. For instance, in Romspen Investment Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301, 138 O.R. (3d) 373, at para. 24, leave to appeal refused, [2017] S.C.C.A. No. 238, this court held that the appellant had no appeal as of right, but granted leave to appeal under s. 193(e) where the appellant brought a cross-motion seeking leave in response to a motion to quash. Similarly, in Kaiser (Re), 2012 ONCA 838, 113 O.R. (3d) 308, at paras. 12-15, this court granted leave under s. 193(e) after holding there was no automatic right of appeal. The court noted that the trustee had brought a motion to quash, prompting the appellant to serve a notice of motion prior to the hearing seeking leave in the event it was needed.
[43] Here, the appellant failed to seek leave to appeal under s. 193(e) before the hearing and only did so at the hearing in response to questions from the panel about whether there was an appeal as of right or whether leave was required. This is not the appropriate procedure. Rule 31(2) of the BIA Rules is mandatory. In general, in these circumstances, leave should be refused.
[44] The BIA Rules do not address what happens if a party fails to comply with Rule 31(2). Rule 3 states:In cases not provided for in the [BIA] or these Rules, the courts shall apply, within their respective jurisdictions, their ordinary procedure to the extent that that procedure is not inconsistent with the [BIA] or these Rules. [45] Rule 61.08(3) of the Rules of Civil Procedure, R.R.O. 1990. Reg. 194 provides that, if a party fails to seek relief in its notice of appeal, then it may not seek that relief at the hearing except with leave of the court hearing the appeal.
[46] Though reliance on r. 61.08(3) should be rare in a bankruptcy context given the unique procedure associated with bankruptcy, it may be that in some instances it is appropriate to have recourse to the combined operation of Rule 3 of the BIA Rules and r. 61.08(3) of the Rules of Civil Procedure to address the sort of scenario that presents itself in this case.[4] All parties were of the view that there was an appeal as of right from the order of the motion judge and were unopposed or content that this court hear the appeal. As mentioned, this will not be determinative, but is a factor to take into account when coupled with consideration of the substantive test for leave to appeal under s. 193(e). Here, I am of the view that reliance on Rule 3 of the BIA Rules and r. 61.08(3) of the Rules of Civil Procedure is warranted. This case appears to represent the first time that the application of s. 50.1(4) of the BIA has been considered by an appellate court. As submitted by counsel for the Proposal Trustee, the appeal does raise an issue that is of general importance to the practice in bankruptcy. While perhaps not prima facie meritorious, the appeal certainly is arguable and there is no suggestion that hearing it at this stage will unduly hinder the progress of the bankruptcy proceedings. I am satisfied that, in the unique circumstances of this case, an order permitting the appellant to amend its notice of appeal to seek leave nunc pro tunc is appropriate and I would grant leave to appeal under s. 193(e) of the BIA. . North House Foods Ltd. (Re)
In North House Foods Ltd. (Re) (Ont CA, 2025) the Ontario Court of Appeal dismissed an insolvency appeal, here relating to the proposed assessed value of security of a secured creditor's claim [BIA 50.1(4)].
Here the court extensively canvasses the much-litigated BIA s.193 appeal provision:[19] Section 193 of the BIA governs jurisdiction over this appeal, not s. 6 of the Courts of Justice Act, R.S.O. 1990, c. C.43. This is because the order under appeal was made by a judge exercising powers conferred by the BIA: Ting (Re), 2021 ONCA 425, 90 C.B.R. (6th) 32, at para. 5, leave to appeal refused, [2021] S.C.C.A. No. 307; Canada (Superintendent of Bankruptcy) v. 407 ETR Concession Company Ltd., 2012 ONCA 569, 354 D.L.R. (4th) 67, at para. 19.
No Appeal as of Right
[20] Section 193 of the BIA provides for appeals as of right in four types of cases: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. [21] This court has taken a narrow approach to the interpretation of appeal rights under ss. 193(a)-(d) due to the broad automatic stay on appeal contained in s. 195[3] of the BIA: Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, 462 D.L.R. (4th) 228, at para. 28. An appeal as of right attracts a stay of proceedings under s. 195 whereas if leave is required, such a stay is not automatic: see e.g., Giardino (Re), 2011 ONCA 312, at para. 12; First National Financial GP Corporation v. Golden Dragon HO 10 Inc., 2019 ONCA 873, 74 C.B.R. (6th) 1, at para. 15.
[22] The appellant relies on ss. 193(a), (b), and (c) of the BIA in support of its position that leave to appeal is not required, with particular emphasis on (b) and (c). In the alternative, in oral argument, it sought leave to appeal under s. 193(e). Both the respondents, North House and the Proposal Trustee, are unopposed to the request for leave, the latter submitting that this court’s guidance on s. 50.1(4) of the BIA would be helpful. They also agree that the appeal falls under ss. 193(b) and (c) and that leave is therefore not required.
[23] It is well established that “[j]urisdiction is not optional, cannot be conferred by consent, cured by attornment, or assumed voluntarily just because there is an interesting and significant issue to be considered”: J.N. v. Durham Regional Police Service, 2012 ONCA 428, 294 O.A.C. 56, at para. 25. Jurisdiction must be present under one of the provisions under ss. 193(a)-(d) of the BIA, or leave must be sought under s. 193(e).
[24] I am not persuaded that this court has jurisdiction to hear the challenge to the motion judge’s order under ss. 193(a), (b) or (c).
[25] Future rights under s. 193(a) mean future legal rights. The phrase has been interpreted to mean “rights which could not at the present time be asserted but which will come into existence at a future time”: Ravelston Corp. (Re) (2005), 2005 CanLII 63802 (ON CA), 24 C.B.R. (5th) 256 (Ont. C.A.), at para. 19, quoting Elias v. Hutchison, 1981 ABCA 31, 121 D.L.R. (3d) 95, at para. 28. The question is whether the rights engaged in an appeal are future rights or presently existing rights that are exercisable in the future: Ting, at para. 10; Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, 115 O.R. (3d) 617, at para. 16. Future rights do not include procedural rights or commercial advantages or disadvantages that may accrue from the order challenged on appeal: Ravelston Corp, at para. 18. For example, in Pine Tree Resorts, at para. 16, the appellant’s right to exercise its power of sale remedy and its right to put a mortgage in good standing were not considered future rights because they crystallized before the order under appeal.
[26] In this case, the rights engaged by this appeal crystallized before the order under appeal. The appellant had already registered a construction lien against North House’s leasehold interest. The point in issue involves existing rights that are exercisable in the future rather than rights which will come into existence in the future. It follows that the appellant does not have a right of appeal under s. 193(a).
[27] Turning to s. 193(b) of the BIA, the order under appeal “must concern ‘real disputes’ likely to affect other cases raising the same or similar issues in the same bankruptcy or receivership proceedings”: 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, 369 D.L.R. (4th) 635, at para. 32. The cases must be in the same proceeding. No other cases raising the same or a similar issue in this proceeding were brought to our attention. This court has held that the “argument that the decision will have precedential value for bankruptcy law generally does not bring the proposed appeal within s. 193(b)”: Flight (Re), 2022 ONCA 526, 162 O.R. (3d) 641, at para. 24. Thus, the argument that this appeal will broadly impact lien claimants in bankruptcy proceedings is insufficient to trigger a right of appeal under s. 193(b). Accordingly, s. 193(b) cannot ground this court’s jurisdiction.
[28] To qualify as an appeal as of right under s. 193(c) of the BIA, the property involved in the appeal must exceed $10,000 in value. This provision has been interpreted narrowly. It could not have been Parliament’s intention to cast a wide net over the $10,000 qualification, as otherwise most cases would meet that description. The limitations on jurisdiction as of right reflect the need to address bankruptcy proceedings expeditiously wherever possible. Accordingly, to qualify for an appeal as of right under s. 193(c), in addition to the $10,000 statutory threshold, based on applicable case law, an appellant must meet three criteria. The order under appeal must be: (i) more than procedural in nature, (ii) involve the value of the debtor’s property, and (iii) result in a loss to the appellant: Bending Lake, at para. 53. All three criteria must be met. The failure of an appellant to establish any one of them is fatal to characterizing the appeal as one as of right under s. 193(c): Downing Street Financial Inc. v. Harmony Village-Sheppard Inc., 2017 ONCA 611, 49 C.B.R. (6th) 173, at para. 22. A critical examination of the effect of the order sought to be appealed is required: Hillmount, at paras. 41-42.
[29] In this case, the appellant cannot establish the third required characteristic: the order under appeal did not result in a loss to the appellant. This alone is fatal to the appellant’s s. 193(c) argument.
[30] To determine whether the order resulted in a loss to the appellant, the court looks at the operative effect of the order sought to be appealed and questions whether it resulted in a loss: Comfort Capital Inc. v. Yeretsian, 2023 ONCA 282, 7 C.B.R. (7th) 17, at para. 21. Instead of looking at the total value of the property involved in the dispute, the court looks at the value of the actual loss that resulted from the order under appeal: Cosa Nova Fashions Ltd. v. The Midas Investment Corporation, 2021 ONCA 581, 95 C.B.R. (6th) 240, at para. 31. A fact-specific inquiry is conducted to determine whether there was a loss: Hillmount, at para. 42. The loss must be based on the evidentiary record: Cosa Nova, at para. 31. When considering whether there was a loss, the question is not whether a higher value for the property or interest could be obtained: First National, at para. 18.
[31] An application under s. 50.1(4) does not decide the assessed value of a security. An application under 50.1(4) asks the court to review a proposed assessed value and decide whether it should be disturbed.
[32] Here, the operative effect of the order under appeal did not result in a loss. The proposed assessed value of the appellant’s security was nil. The motion judge did not disturb the nil valuation, and as such, there was no loss.
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