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Insolvency - BIA - Standing

. YG Limited Partnership and YSL Residences Inc. (Re) [2]

In YG Limited Partnership and YSL Residences Inc. (Re) (Ont CA, 2023) the Court of Appeal considered standing, here with a focus in a BIA 'proof of claim' case:
[13] Second, and in any event, we are persuaded that the general standing principles that the Limited Partners invoke do not apply during proof of claim appeals under s. 135(4) of the BIA. Although the BIA does not speak explicitly to “standing” at proof of claim appeals, s. 135(4) is explicit in granting the authority to appeal the disallowance of a “claim” to “the person to whom the notice was provided.” Subsection 135(3) stipulates, in material part, that the notice of disallowance contemplated by s. 135(4) is provided to “the person whose claim …was disallowed” by the trustee. Under the terms of s. 135(4) it is therefore CBRE that has standing to address the disallowance of its claim, not the Limited Partners.

[14] We are not persuaded by the Limited Partners’ argument that s. 135(4) is relevant only to who can bring an appeal. We are satisfied that the Legislature intended that equity owners of the debtor, such as limited partners, would not have a right of standing, for two reasons.

[15] First, as the Proposal Trustee argued before us, by design, the BIA processes, including the process for appealing proof of claim decisions, are “between the trustee, the creditor claimant and the debtor.” This not only reflects the relevant direct interests at stake in the material claim it also safeguards the mission of “the BIA to provide summary and expeditious procedures to determine the questions that arise in bankruptcy with a minimum cost”: Re McEwen, 2021 ONCA 566, at para. 1; Romspen Investments Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301, 138 O.R. (3d) 373, at para. 70, leave to appeal refused, [2018] S.C.C.A. No. 37636; Canada (A.G.) v. Rassell, 1999 ABCA 232, 237 A.R. 137. If equity owners had automatic rights of standing in creditor claim appeals, it would impose notice requirements and have time implications that are contrary to the interest in the prompt and effective disposition of BIA claims.

[16] Second, when the BIA is read as a whole, it becomes clear that the right of standing the Limited Partners claim was not intended. Section 135(5), addressing the right of appeal where a proof of claim is allowed, limits the right of appeal to “the creditor or the debtor”, in other words, the parties to the debt, which, as the motion judge found, would exclude the Limited Partners. If equity owners of a debtor nonetheless had a right of standing to participate in such appeals, it would be an irrationally fickle right. They could not appeal a trustee’s decision approving a creditor’s claim because of s. 135(5) but could, fortuitously, join in an appeal by another if that appeal happens to be launched.

[17] When considering the statute as a whole, s. 37 of the BIA is also important. To the extent that the BIA contemplates conferring standing on others to participate in the processes between the trustee, debtors and creditors, s. 37 provides the mechanism, limiting the right to apply to a person “aggrieved by any act or decision of the trustee”. Section 37 is therefore the legislative provision available to fulfil the function of the common law standing principles the Limited Partners seek to invoke, by providing a statutory mechanism for interested persons to participate. Given that the statute sets out the parameters for such participation, the common law principles cannot be used in preference to the statutory regime that has been created. It bears repeating in this regard, that “as is often observed, the BIA is a complete code governing the bankruptcy process”: Re McEwen, at para. 1.


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Last modified: 21-07-23
By: admin