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Insolvency - Practice. 1461043 Ontario Limited (Nuvo Iron) v. Soldan Fence & Metals (2009) Ltd.
In 1461043 Ontario Limited (Nuvo Iron) v. Soldan Fence & Metals (2009) Ltd. (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal of a denied motion "to vary the [SS: four-year prior] judgment to add the declarations that it had sought in its statement of claim". The earlier judgment was by way of default, and the goal of the motion was to obtain earlier pled declarations that would enable the plaintiff-appellant to avoid the effects of a subsequent bankruptcy discharge [under BIA 178(1)(d) - 'fiduciary fraud, embezzlement, misappropriation or defalcation'].
Here the court agrees with the motion judge that neither a "negligent nor incompetent breach of trust" can invoke BIA 178(1)(d), which requires intentionality.
The case is also useful for the practice point that invoking these BIA 178 ['Debts not released by order of discharge'] provisions can perhaps be best served by plaintiffs seeking declaration/s to that effect from the start:[1] The appellant obtained default judgment against the respondents on May 22, 2019. The default judgment, issued by Pollak J., awarded the appellant $150,235.34 in damages plus interest and costs. In its statement of claim, the appellant sought declarations of an intentional breach of trust and a related declaration under s. 178(1)(d) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”), that the judgment survived the respondents’ discharge from bankruptcy. The default judgment did not contain either of these declarations. In July 2019, the appellant registered the default judgment in Alberta where Mr. Vetro lived. After the appellant obtained default judgment, the respondents made assignments into bankruptcy. That led the appellant to bring the motion that is the subject of this appeal.
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[3] Relying on this court’s decision in Yanic Dufresne Excavation Inc. v. Saint Joseph Developments Ltd., 2022 ONCA 556, 22 C.L.R. (5th) 185, at para. 33, the motion judge observed that neither a negligent nor incompetent breach of trust can support an order under s. 178(1)(d) of the BIA. He found that there was no basis in the record to find the kind of wrongdoing or improper conduct that would support a declaration that the respondents’ debt survived bankruptcy. Accepting the appellant’s arguments would allow the appellant to circumvent the bankruptcy process and would derogate from the finality of the default judgment.
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[8] In any event, we do not agree with the appellant that the facts giving rise to the default judgment are necessarily consistent with a finding that the respondents committed an intentional breach of trust amounting to fraud. As this court clarified in Yanic, at para. 33, “a mere breach of trust, or even a negligent or an incompetent breach of trust, is insufficient to enable an order to be made that the debt survives bankruptcy pursuant to s. 178(1)(d) of the BIA.” We agree with the motion judge’s conclusion that, on the record, there was no basis to establish the type of wrongdoing or improper conduct required to support a declaration that the respondents’ debt survive bankruptcy.
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