In his decision in Global Royalties Limited v. Brook, Chief Justice Strathy of the Ontario Court of Appeal explained that the Bankruptcy and Insolvency Act (“BIA”) does not provide a bankrupt with a right to appeal an order lifting a stay of proceedings against him. Despite there being a multi-party bankruptcy, he rejected the submission that “the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings”.
Introduction
In Walchuk Estate v. Houghton, the Ontario Court of Appeal dismissed a motion to quash an appeal on the basis that the lower court’s adjournment of a contempt motion was a final order. The decision also provides guidance, yet again, on the proper test for distinguishing between final and interlocutory orders.
Background
The media have been paying considerable attention to the current financial distress of the energy industry in Alberta, focusing primarily on the impact a company’s financial condition can have on its stakeholders, including its employees, shareholders and creditors. But there is another group that is also being affected: counterparties to commercial arrangements with insolvent companies. Increasingly, financially strong companies are having to deal with insolvent joint venture partners, financially distressed operators, and bankrupt lessees.
Under the Bankruptcy Ordinance (Cap. 6) (“BO”), a person who has been adjudged bankrupt will be entitled to be discharged from bankruptcy four years after the making of the bankruptcy order, unless it is a second bankruptcy or the period is extended by the Court. The maximum extension is an additional four year period.
In a proceeding under the Companies’ Creditors Arrangement Act (“CCAA”), a judge has discretionary powers to, among other things, order debtor companies into bankruptcy and thereby resolve priority disputes. What should be the standard of review of such discretionary decisions? Historically, the standard has been high.
Following the Supreme Court of Canada decision in Sun Indalex Finance, LLC v. United Steelworkers, [2013] 1 S.C.R. 271 (Indalex), creditors and their advisors have been closely following jurisprudence which considers the scope of the decision.
Section 42 of the Bankruptcy Ordinance (Cap. 6) (“BO”) provides that where a person is adjudged bankrupt, any disposition of property made by that person from the date of presentation of the bankruptcy petition is void unless made with the consent of the Court or unless subsequently ratified by the Court. The purpose of this section is to prevent the improper dissipation of the bankrupt’s assets once a bankruptcy petition is filed and to protect the principle of pari passu distribution.
In his November 20, 2014 decision in CanaSea PetroGas Group Holdings Limited (Re), Sharpe J.A. of the Ontario Court of Appeal did not accept the respondents’ submissions that he should decline to hear an application for leave to appeal a CCAA decision because only a three-judge panel should hear such an application.
Section 30A(1) of the Bankruptcy Ordinance (Cap. 6) (the “BO”), provides that the bankruptcy period, for a person who has been adjudged bankrupt for the first time, runs for four years. However, section 30A(4) of the BO provides eight grounds upon which the Court, on the application of the trustee in bankruptcy or a creditor, can order the suspension of a bankruptcy period – in effect lengthening the period of bankruptcy.