



COURT OF APPEAL FOR ONTARIO

CITATION: Davidson (Re), 2021 ONCA 135

DATE: 20210302

DOCKET: C68221

MacPherson, Gillese and Nordheimer JJ.A.

In the Matter of the Bankruptcy of

Christine Ann Davidson (aka Christine Ann Ottewell)

of the Town of Nottawa, in the County of Simcoe, in the Province of
    Ontario
Summary Administration

Sean N. Zeitz and Randy Schliemann, for
    the appellant Dale Ottewell

Brandon Jaffe and Elaine S. Peritz, for
    the respondents Christine Ann Davidson and Eleanor McKay

Heard: February 25, 2021 by
    video conference

On appeal from the order of Justice Bernadette
    Dietrich of the Superior Court of Justice, dated March 11, 2020, with reasons
    reported at 2020 ONSC 1379, 79 C.B.R. (6th) 142 dismissing appeals from the
    order of Master May J. Jean dated September 16, 2019 and from the order of
    Master Janet E. Mills dated September 17, 2019.

Nordheimer J.A.:

[1]

Dale Ottewell, a creditor of the bankrupt,
    appeals from the order of Justice Dietrich (appeal judge) that dismissed his
    appeals from the orders of Master Jean, and of Master Mills, each sitting as
    Registrars in Bankruptcy. Master Jean dismissed a motion by the appellant for
    leave to commence a proceeding under s. 38 of the
Bankruptcy and Insolvency
    Act
, R.S.C. 1985, c. B-3 (
BIA
). Master Mills dismissed a motion
    by the appellant for leave to examine the bankrupt, and a number of individuals
    associated with the bankrupt, under s. 163(2) of the
BIA
. At the
    conclusion of the oral hearing of this appeal, the parties were advised that
    the appeal was dismissed for reasons to follow. I now provide those reasons.

[2]

By way of brief background, the appellant is the
    former spouse of the bankrupt. While the bankruptcy proceedings were going on,
    there were concurrent family law proceedings underway between the appellant and
    the bankrupt. The issues raised here involve a house whose registered owner is
    the bankrupts mother but in which the bankrupt resides. The appellant sought
    to have the house included as an asset in the bankrupts estate, claiming that
    it is beneficially owned by the bankrupt. When the Trustee refused to pursue
    that claim, the appellant sought leave to commence his own proceeding for that
    relief. Meanwhile, however, the appellant had consented to an order in the
    family law proceedings which provided that the house shall not form part of [his
    former spouses] property, assets or estate for any purpose.

I: Is there an appeal as of right

[3]

The first issue to be addressed is whether the
    appellant has a right of appeal from the order of the appeal judge in either of
    its aspects or whether he must obtain leave to appeal. That issue turns on the
    wording of s. 193 of the
BIA
which reads:

Unless otherwise expressly provided,
    an appeal lies to the Court of Appeal from any order or decision of a judge of
    the court in the following cases:

(a) if the point at issue involves
    future rights;

(b) if the order or decision is
    likely to affect other cases of a similar nature in the bankruptcy proceedings;

(c) if the property involved in the
    appeal exceeds in value ten thousand dollars;

(d) from the grant of or refusal to
    grant a discharge if the aggregate unpaid claims of creditors exceed five
    hundred dollars; and

(e) in any other case by leave of a
    judge of the Court of Appeal.

[4]

The appellant contends that he has a right of
    appeal under any of s. 193(a), (b) or (c) of the
BIA
. I do not agree
    that the appellant has a right of appeal regarding either aspect of the appeal
    judges order under s. 193(a) or (b). Neither aspect of the order involves
    future rights as that expression has been defined in the case law. Future
    rights are future legal rights, not procedural rights or commercial advantages
    or disadvantages that may accrue from the order challenged on appeal
: Re
    Ravelston Corp.
(2005), 24 C.B.R. (5th) 256 (Ont. C.A.), at para. 18.

[5]

Similarly, neither aspect of the order is likely
    to affect other cases of a similar nature under s. 193(b). The existing case
    law establishes that s. 193(b) must concern real disputes likely to affect
    other cases raising the same or similar issues in the same bankruptcy or
    receivership proceedings:
2403177 Ontario Inc. v. Bending Lake Iron Group
    Ltd.
, 2016 ONCA 225, 35 C.B.R. (6th) 102, at para. 32.

[6]

In terms of s. 193(c), it does not apply to the aspect
    of the order regarding the examination of the bankrupt and others: see
Enroute
    Imports Inc. (Re)
,
2016 ONCA 247, 35 C.B.R. (6th) 1, at para. 6. That
    aspect dealt with a strictly procedural matter that did not involve property at
    all. It dealt only with the examination rights available under the
BIA
.
    If the appellant wishes to appeal that aspect of the order, he requires leave
    under s. 193(e).

[7]

On that point, I would not grant leave to
    appeal. The proposed appeal does not satisfy any of the factors normally
    considered in granting leave to appeal. It does not raise any issue that is of
    general importance to the practice in bankruptcy/insolvency matters or to the
    administration of justice as a whole; it is not
prima

facie
meritorious, and it would unduly hinder the progress of the bankruptcy
    proceeding:
Business Development Bank of Canada v. Pine Tree Resorts Inc.
,
2013 ONCA 282, 115 O.R. (3d) 617, at para. 29.

[8]

The issue regarding any appeal of the aspect of
    the order dealing with the appellants motion seeking leave to proceed under s.
    38 is more problematic, however. That aspect involves a proposed proceeding, the
    purpose of which is to seek to bring an asset, namely the house, into the
    bankrupts estate. The house has a value in excess of $200,000.

[9]

There is an ongoing debate among provincial
    appellate courts regarding the proper scope of s. 193(c). There are decisions
    suggesting that the section should be given a narrow interpretation. At the
    same time, there are other decisions that suggest that a broad view ought to be
    taken.

[10]

Given the ultimate result in this case, a
    resolution of this issue is best left to another day. I will assume, for the
    purposes of this appeal, that the appellant has a right of appeal under s.
    193(c) from the s. 38 determination.

II: The appeal

[11]

My reasons for the dismissal of the appeal
    differ in part from the courts below. In that regard, it is important to
    remember the distinction between the appellants personal status and his status
    as a creditor of the bankrupt.

[12]

The family law order could not affect the
    Trustees rights to pursue any claim, including a claim that the house should
    be part of the bankrupts estate. The family law proceeding did not involve the
    Trustee and is not binding on the Trustee. In considering this issue, it is
    important to remember the nature of the relief that a creditor seeks under s.
    38. It is worth reproducing the wording of ss.38(1) and (2), which read:

(1) Where a creditor requests the
    trustee to take any proceeding that in his opinion would be for the benefit of
    the estate of a bankrupt and the trustee refuses or neglects to take the
    proceeding, the creditor may obtain from the court an order authorizing him to
    take the proceeding in his own name and at his own expense and risk, on notice
    being given the other creditors of the contemplated proceeding, and on such
    other terms and conditions as the court may direct.

(2) On an order under subsection
    (1) being made, the trustee shall assign and transfer to the creditor all his
    right, title and interest in the chose in action or subject-matter of the
    proceeding, including any document in support thereof.

[13]

As the section makes clear, what a creditor
    obtains by way of a request under the section is the right to pursue a proceeding
    that the Trustee refuses or neglects to take. That is why the creditor is given
    an assignment of the Trustees interest in the chose in action or subject matter
    of the proceeding under s. 38(2). The creditor is not pursuing a personal claim:
    see
Re Zammit
(1998), 3 C.B.R. (4th) 193 (Ont. Gen. Div.) at para. 7.

[14]

This distinction is important to the proper
    application of the
BIA
. However, this concern does not alter the
    correctness of the result reached by the courts below. A request to commence a
    proceeding under s. 38 is not an absolute right. It is a discretionary remedy.
    It requires that the creditor show that there is some merit to the proposed claim.
    As Blair J. said in
Re Jolub Construction Ltd.
(1993), 21 C.B.R. (3d)
    313, (Ont. Gen. Div.), at para. 19:

Without intending to introduce another phrase
    into the melee, a creditor must establish, in my opinion, that there is a
    sufficient case on the merits  as contemplated by the thrust of those tests
    outlined in earlier cases  to warrant the Court's approval to proceed, in the
    circumstances.

[15]

The Master found that the appellant was
    attempting to do indirectly what he had expressly agreed not to do in the
    family law proceedings, that is, bring the house into his spouses (the
    bankrupts) assets. On appeal, the appeal judge said, at para. 33:

I find that Master Jean did not err in finding
    that the appellant failed to establish threshold merit to the proceeding in the
    face of the Vallee Order and that it would be inequitable to permit him to
    pursue an interest in the Property having consented to that Order. I also find
    that she did not err in declining to exercise her discretion to permit the
    appellant to step into the shoes of the Trustee to indirectly do what he had
    expressly agreed not to do. I find no error in principle or in law in her
    decision.

[16]

There is no error in the appeal judges
    conclusion in this respect. The appellant has also failed to show that the
    Masters exercise of her discretion under s. 38 was unreasonable.

[17]

It is for these reasons that the appeal was
    dismissed. The respondents are entitled to their costs of the appeal. They have
    agreed on the costs of a motion that was heard by Coroza J.A. at $7,500. They
    do not agree on the costs of the appeal. I would fix those costs at $10,000 for
    a total costs award of $17,500 inclusive of disbursements and HST.

Released: March 2, 2021 J.C.M

I.V.B.
    Nordheimer J.A.

I
    agree. J.C. MacPherson J.A.

I
    agree. E.E. Gillese J.A.


