



COURT OF APPEAL FOR ONTARIO

CITATION: Luckevich v. Ivany, 2018 ONCA 144

DATE: 20180214

DOCKET: C64299 & C64300

Doherty, Paciocco and Nordheimer JJ.A.

BETWEEN

Lydia Luckevich and Pemberley Investments Ltd.

Plaintiffs (Respondents)

and

Howard Paul Ivany
and Terrence S. Reiber

Defendants (
Appellant
)

AND BETWEEN

Janet Louise Hilson and 1771085 Ontario Limited

Plaintiffs (Respondents)

and

Howard Paul Ivany
and Terrence S. Reiber

Defendants (
Appellant
)

Michael Katzman, for the appellant

Howard W. Reininger, for the respondents

Tim Duncan, for the Trustee in Bankruptcy

Heard: February 5, 2018

On appeal from the orders of Justice Meredith Donohue of the
    Superior Court of Justice, dated August 8, 2017, sitting without a jury.

Nordheimer J.A.:

[1]

These two appeals were heard together as they raise two common issues. First,
    does a claim for contribution and indemnity represent property of the bankrupt
    that vests in the Trustee under s. 71 of the
Bankruptcy and Insolvency Act
,
    R.S.C. 1985, c. B-3 (
BIA
)? Second, if the answer to the first issue
    is Yes, and the Trustee refuses to advance the claim for contribution and
    indemnity, is the bankrupt entitled to advance it where a creditor/plaintiff
    has sought, and obtained, a lifting of the stay of proceedings under s. 69 of
    the
BIA
?

[2]

The background facts that are common to both proceedings are as follows.
    The appellant is a defendant in the within actions initiated by the respondents.
     The actions also originally named Terrence S. Reiber as a defendant.

[3]

The appellant was petitioned into bankruptcy by the respondents after initiating
    these actions. A stay was accordingly imposed upon the actions pursuant to s.
    69 of the
BIA
.

[4]

The actions continued against Reiber and were eventually settled. Further
    to the settlement, the actions against Reiber were dismissed. The respondents
    have yet to disclose the amount paid to them or any other details of the
    settlement.

[5]

The respondents then moved to lift the stay, in order to allow these
    actions to continue against the appellant. The purpose of lifting the stay was
    to permit the respondents to seek declarations that the indebtedness of the
    appellant came within s. 178 of the
BIA
, such that it would survive
    the appellants discharge.

[6]

The stays were lifted by orders of the Registrar in Bankruptcy. However,
    the orders provide that any judgment that may be obtained against the appellant
    will be released unless the debt or liability comes under the exemption
    provisions of s. 178 of the
BIA
. The respondents subsequently obtained
    orders amending the statements of claim to seek a declaration that the
    indebtedness comes within s. 178 of the
BIA
. The amended statements of
    claim were served upon the appellant, who filed statements of defence.

[7]

In April of 2016, the appellant was examined for discovery. The
    appellant says that during the examination it became clear to him, for the
    first time, that the respondents were seeking damages against him for actions
    or omissions of Reiber.

[8]

The appellant wished to commence a third party claim in each action
    against Reiber for contribution and indemnity. He took steps to obtain the
    consent of the respondents to issue the third party claims. The respondents
    refused to consent. The appellant then brought a motion for leave to issue the
    third party claims against Reiber and to extend the time for so doing.

[9]

Reiber took no position on the appellants motion. The respondents and
    the Trustee in Bankruptcy opposed the motion, arguing that the proposed claim
    for contribution and indemnity constituted property which is vested in the
    Trustee by virtue of s. 71.

[10]

The
    motion judge found that the Trustee did not have any intention of pursuing the
    third party claims. However, she also found that the appellant could not pursue
    the third party claims because he is an undischarged bankrupt and thus has no
    capacity to dispose of or otherwise deal with his property pursuant to s. 71. Consequently,
    she dismissed the appellants motion.

Analysis

[11]

I
    begin my analysis with reference to s. 71 which reads:

On a bankruptcy order being made or an assignment being filed
    with an official receiver, a bankrupt ceases to have any capacity to dispose of
    or otherwise deal with their property, which shall, subject to this Act and to
    the rights of secured creditors, immediately pass to and vest in the Trustee
    named in the bankruptcy order or assignment, and in any case of change of Trustee
    the property shall pass from Trustee to Trustee without any assignment or
    transfer

[12]

Property
    is defined in s. 2 as follows:

property means any type of property, whether situated in Canada
    or elsewhere, and includes money, goods, things in action, land and every
    description of property, whether real or personal, legal or equitable, as well
    as obligations, easements and every description of estate, interest and profit,
    present or future, vested or contingent, in, arising out of or incident to
    property.

[13]

[T]hings
    in action has the same meaning as a chose in action. A chose in action is
    defined in
Black's Law Dictionary
,
10th ed, as:

1.   A proprietary right in personam,
    such as a debt owed by another person, a share in a joint-stock company, or a
    claim for damages in tort;

2.  The right to bring an action to recover a debt, money,
    or thing;

[14]

The
    issue is whether a claim for contribution or indemnity is a chose in action
    such that it falls within the definition of property in s. 2 of the
BIA
.

[15]

The
    appellant relies on this courts decision in
Placzek v. Green
, 2009
    ONCA 83, 245 O.A.C. 220, where Simmons J.A. said, at para. 35:

There is ample authority in Ontario for the proposition that a
    claim for contribution and indemnity under s. 1 of the
Negligence Act
is not a damage claim arising out of a tort, but instead is a statutory claim
    founded on principles of restitution and unjust enrichment.

[16]

The
    appellant proceeds from this authority to assert that the third party claim is
    strictly defensive in nature and serves only to limit his exposure to liability
    and damages. Consequently, the appellant asserts that the result of the third party
    claim does not constitute property within the meaning of the
BIA
.

[17]

I
    do not agree. In my view, a third party claim for contribution and indemnity is
    properly considered property as that term is defined in the
BIA
. I
    reach that conclusion for the following reasons.

[18]

First,
    I appreciate that a claim for contribution and indemnity does not exist until
    another claim is launched to which the claim for contribution and indemnity can
    attach. That reality does not change the fact, though, that a third party claim
    for contribution and indemnity is an action that can result in a benefit to the
    bankrupt and thus is a potential asset in which all of the bankrupts creditors
    should share.
[1]
For example, if a stay was lifted to permit a claim to be advanced against a bankrupt
    and the Trustee knew that the bankrupt had insurance for the claim, the Trustee
    would presumably want to advance a claim for contribution and indemnity to
    protect against that claim. In that situation, some portion of the plaintiffs
    judgment would be recovered from the third party and would come into the
    bankrupts estate.

[19]

Second,
    the definition of property is very broad. It is clear that the intention was
    to vest all of the property of the bankrupt in the Trustee. As noted in
Chetty
    v. Burlingham Associates Inc
.
(1995), 25 Sask. R. 249 (C.A.), at
    para. 10:

This is a very broad description designed to catch every
    conceivable type of asset. Indeed, the general scheme of the Act is to include
    virtually all assets and then to exclude certain specific assets from
    distribution to the creditors as is provided in s. 67(1).

[20]

Third,
    the conclusion that a claim for contribution and indemnity constitutes property
    is consistent with the decision in
Meisels v. Lawyers Professional
    Indemnity Co
.,
2015 ONCA 406, 126 O.R. (3d) 448, where this court
    concluded that a claim for indemnity under an insurance policy was a claim that
    vested in the Trustee.

[21]

The
    fact that the claim for contribution and indemnity was property that vested in
    the Trustee is not the end of the inquiry, however. The court was still
    entitled to review the decision of the Trustee not to pursue the claim and, if
    appropriate, authorize the bankrupt to advance it under s. 37 of the

BIA
.
    Section 37 reads:

Where the bankrupt or any of the creditors or any other person
    is aggrieved by any act or decision of the Trustee, he may apply to the court
    and the court may confirm, reverse or modify the act or decision complained of
    and make such order in the premises as it thinks just.

[22]

The
    appellant raised this point before the motion judge. She dismissed it on the
    basis that no motion had been brought by the appellant for such relief.
[2]
In my view, the motion judge erred in her approach to this issue. Rather than
    simply dismissing it, the motion judge ought to have taken one of the following
    three routes. One, she could have dealt with the s. 37 issue since it was squarely
    before her. Two, she could have adjourned the motion before her to permit the
    bankrupt to bring a s. 37 motion so that the matters could be addressed
    together. Three, failing to take either of the first two routes, she ought to
    have made it clear that her decision did not resolve whether the appellant
    should be entitled to relief under s. 37.

[23]

The
    problem created by the manner in which this proceeding has unfolded is that
    there is an outstanding order of the Superior Court denying the bankrupt the
    right to advance the third party claim. It is not clear, therefore, that a
    judge hearing the s. 37 motion would now have jurisdiction to grant the
    bankrupt the right to do so. Had the motion judge expressly made her order
    without prejudice to the bankrupt seeking the same relief through a s. 37
    motion, that problem would have been avoided. However, she did not do so,
    either in her order or in her endorsement.

[24]

Precluding
    the bankrupt from bringing a claim for contribution and indemnity, in light of
    the Trustees refusal to do so, leaves the situation that the bankrupt could be
    faced with a judgment for the entire amount due to the respondents, that will
    come out of his or her estate, with no ability to reclaim some portion of that
    amount from another person who contributed to the loss. Not only does that
    result work to the detriment of the bankrupt, it also works to the detriment of
    all creditors who would otherwise share in the benefit that would result from a
    reduction (or possible elimination) of any judgment that the respondents might
    obtain. That result becomes even more egregious in a situation, such as this,
    where the respondents are seeking to have their claims declared to come within s.
    178. If that relief is granted, then the appellant, once discharged, still has
    the judgment to honour and yet has no ability to then claim the contribution
    due to him by the third party. The inequity of that result is obvious.

[25]

The
    respondents and the Trustee attempt to avoid this inequity in two ways. One is
    that they claim that their settlement with the third party has dealt with any
    contribution that the third party might have to make to the respondents claims.
    With respect, that is not the result of that settlement. The appellant was not
    a party to that settlement and is not bound by whatever determination was made
    as to the third partys responsibility for the matters in issue. All the
    settlement does, at most, is require the respondents to reduce their claims by
    the amount of any monies received.

[26]

The
    other is the suggestion that the respondents are only seeking damages against
    the appellant for which he is solely responsible. In that regard, the
    respondents and the Trustee say that the situation here mirrors the decision in
Taylor v. Canada (Minister of Health)
, 2009 ONCA 487, 95 O.R. (3d) 561.
    In
Taylor
, the plaintiff had clearly limited her claim to the alleged negligence
    of Health Canada. That is not how the amended statements of claim are drafted
    in this case. In this case, the claims are advanced for the joint actions of
    the appellant and Reiber. There is no similar restriction of the claims just to
    the individual responsibility of the appellant.

[27]

The
    inequity that results from the order of the motion judge remains. I acknowledge
    the possibility that there might be circumstances where a Trustee could have
    legitimate and pressing concerns regarding the impact that advancing a third
    party claim might have on the overall administration of the bankrupts estate. No
    such concerns are apparent in this case nor were any outlined for us during the
    course of the appeal hearing. However, if there are any such issues, they can
    be considered on the s. 37 motion.

[28]

The
    motion judge erred in dismissing the appellants motions for leave to issue
    third party claims in these circumstances. The appeal must be allowed and the
    order below set aside. That result will permit the question of whether the
    appellant should be granted leave to issue the third party claims to be dealt
    with in the outstanding s. 37 motion.

[29]

The
    parties may make submissions on the matter of costs. The appellant shall file
    his submissions within 10 days of the release of these reasons and the
    respondents and the Trustee shall file their submissions within 10 days
    thereafter. No reply submissions are to be filed without leave of the court. None
    of the submissions shall exceed five pages in length.

Released: DD FEB 14 2018

I.V.B. Nordheimer J.A.

I agree. Doherty J.A.

I agree. David M. Paciocco J.A.





[1]

I note that a third party claim is defined as an action in s.
    1(1) of the
Courts of Justice Act
, R.S.O. 1990, c. C.43 and r. 1.03(1)
    of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194.



[2]
We are advised that, since the motion judges decision, a s. 37 motion has been
    brought but it has been adjourned pending the outcome of this appeal.


