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Insolvency - BIA - Litigation Stay. Little (Nautilus North Strength and Fitness Centre) v. Bramcan Investments Limited
In Little (Nautilus North Strength and Fitness Centre) v. Bramcan Investments Limited (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, this from a motion order that "dismissed his action pursuant to r. 21.01(3)(b)" [SS: R21.01(3)(b) "the plaintiff is without legal capacity to commence or continue the action or the defendant does not have the legal capacity to be sued"].
The court alludes to grounds of action that may be an exception to the BIA litigation stay, the 'personal' action, here citing as an example a mental distress claim associated with a main lost property claim:[9] The appellant also attempts to avoid the result below by asserting that his claim includes a claim for damages for mental distress which he says is also exempt under the BIA: Meisels v. Lawyers Professional Indemnity Company, 2015 ONCA 406, 126 O.R. (3d) 448, at para. 13. That effort does not avail the appellant. The damages claimed for mental distress do not arise out of a standalone claim. They are directly linked to the claim for damages arising from the lost property. If the action arising out of the lost property falls as a nullity, the related claim for mental distress falls with it. As Perell J. said in Stoneman v. Gladman (2005), 2005 CanLII 63796 (ON SC), 16 C.B.R. (5th) 78 (Ont. S.C.), at para. 29: “The plaintiffs are not advancing a claim that is clearly a personal one; rather, they have threaded a personal claim into the fabric of a cloth of a claim that belongs to the estate in bankruptcy.” . Little (Nautilus North Strength and Fitness Centre) v. Bramcan Investments Limited
In Little (Nautilus North Strength and Fitness Centre) v. Bramcan Investments Limited (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, this from a motion order that "dismissed his action pursuant to r. 21.01(3)(b) [SS: "the plaintiff is without legal capacity to commence or continue the action or the defendant does not have the legal capacity to be sued"].
This issue turned on the litigation stay that applies to undischarged bankrupts:[2] On April 13, 2018, the appellant made an assignment in bankruptcy under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”). BDO Dunwoody Canada Limited (“BDO”) was appointed as the trustee in bankruptcy.
[3] On September 10, 2020, while an undischarged bankrupt, the appellant started this action against his former landlord, Bramcan Investments Limited, and two of Bramcan’s officers and directors, Catherine Spencer and Geoffrey Crawford. In his action, the appellant claims the value of assets disposed of by the respondents, all of which arose out of a fitness and strength building business that the appellant ran. The statement of claim alleges that the value of these assets was approximately $250,000.[1] The appellant had not included these assets in his Statement of Affairs that he filed with BDO.
[4] The respondents discovered the bankruptcy when conducting a cross-examination of the appellant in August 2023 in response to a summary judgment motion that the appellant had brought. The respondents then brought this motion to dismiss the claim under r. 21.01(3)(b).
[5] The motion judge found that the action was a nullity. He said that only the trustee in bankruptcy had the capacity to commence the action as long as the appellant was an undischarged bankrupt. .... . Hutchingame Growth Capital Corporation v. Independent Electricity System Operator
In Hutchingame Growth Capital Corporation v. Independent Electricity System Operator (Ont CA, 2020) the Court of Appeal considered contractual and bankruptcy disputes between an intended electricity generator and the Independent Electricity System Operator (“IESO”), which is the successor to the Ontario Power Authority. One issue was whether the standard contract between the generator and the IESO terminated on the generator's bankruptcy (as the contract held), in light of s.69.3 of the BIA as the appellant argued:[32] Section 69.3 of the Bankruptcy and Insolvency Act provides:69.3(1) Subject to subsections (1.1) and (2) and sections 69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy.
[33] The trial judge rejected HGC’s argument that the automatic termination in the RESOP Contract violated the automatic stay imposed by s. 69.3 of the Bankruptcy and Insolvency Act. He noted that the stay only prevents creditors from pursuing claims against the insolvent person: at para. 105.
[34] HGC argues that because the IESO was a creditor of Greenview Power, s. 69.3(1) stayed “any remedial action by [the] IESO to terminate the RESOP Contract.” On this argument, once the stay was in place, the IESO was required to move in bankruptcy court to lift the stay and to provide the written notice to commence the 30-day cure period “that it was required to provide” under the Waiver and Amendment Agreement; or, alternatively, to move in bankruptcy court to appeal or amend the vesting order. But the true reason for HGC’s approach to the stay issue is found in its assertion: “Had [the] IESO taken any of these steps, the matter could have been put before a bankruptcy court and the anti-deprivation rule considered.”
[35] Professor Roderick J. Wood explains: “the automatic stay of proceedings in bankruptcy has never been interpreted as preventing the exercise of [the] right” of “a contracting party [to] terminat[e] an agreement between it and the debtor”: Bankruptcy and Insolvency Law, 2nd ed. (Toronto: Irwin Law Inc., 2015) at p. 167. He notes that the presence of express provisions having that effect in proceedings under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 and in the restructuring provisions of the Bankruptcy and Insolvency Act “supports the view that the automatic stay of proceedings was not intended to extend to the termination of executory contracts, since the provision would not be needed otherwise”: at p. 167.
[36] Professor Wood’s logic is persuasive, especially in the absence of any contrary authority. I agree with the trial judge that s. 69.3 of the Bankruptcy and Insolvency Act did not invalidate the termination provision in the RESOP Contract. ...
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