



COURT OF APPEAL FOR ONTARIO

CITATION: Sally Creek Environs Corporation (Re), 2013
    ONCA 329

DATE: 20130521

DOCKET: C55472

Simmons, Hoy and Strathy JJ.A.

In the Matter of the Bankruptcy of Sally Creek
    Environs Corporation of the City of Brantford in the County of Brant in the
    Province of Ontario

Bobby H. Sachdeva and Wojtek Jaskiewicz for A. Robert
    Murphy, A. Robert Murphy Architect Incorporated and Gray Wave Resources Inc.

Liz Tinker for The Superintendent of Bankruptcy

Heard: May 13, 2013

On appeal from the order of Justice Peter A. Cumming of
    the Superior Court of Justice, dated April 30, 2012.

ENDORSEMENT

[1]

The appellants, A. Robert Murphy, A. Robert Murphy Architect
    Incorporated and Gray Wave Resources Inc., creditors of the bankrupt Sally
    Creek Environs Corporation (Sally Creek), appeal an order dismissing their
    motion for leave pursuant to s. 215 of the
Bankruptcy and Insolvency Act
(the BIA) to commence an action against the Office of the Superintendent of
    Bankruptcy (the OSB) and two of its employees (collectively, the OSB
    Defendants).

[2]

The background, briefly, is as follows.

[3]

Sally Creek was assigned into bankruptcy on January 10, 2003. In 2004
    and 2005, the appellants filed complaints with the OSB regarding perceived
    misconduct of the Trustee in bankruptcy of the Estate of Sally Creek. The OSB
    investigated and responded to the complaints.

[4]

The appellants also challenged the Trustees Statement of Receipts and
    Disbursements over the course of a fourteen day taxation hearing before the
    Registrar in Bankruptcy, held between June of 2007 and March of 2008. In his
    decision of June 23, 2008, the Registrar made findings of serious misconduct on
    the part of the Trustee and reduced the Trustees fees to the nominal sum of
    one dollar and disallowed a significant amount of the Trustees disbursements
    for legal fees. The effect of this was to require the Trustee to repay a
    significant amount to the Estate. The Registrars decision was appealed first
    to Mesbur J. of the Superior Court of Justice, and then to this court.
    Ultimately, the Trustees fees and disbursements were reduced from the amount
    sought, but not as drastically as had been done by the Registrar.

[5]

Subsequently, the appellants sought to commence a negligence action
    against the OSB Defendants, on their own behalf and on behalf of the Estate. They
    assert that creditors would have received a larger dividend, but for the
    Trustees mismanagement of the Estate, and that the OSB Defendants are
    responsible for not correcting the Trustees mismanagement. They also assert
    that the OSB breached a duty it owed to them when, after the Registrars
    decision, it failed to require the Trustee to increase the amount of its bond.

[6]

Section 215 of the BIA provides that no action lies against the
    Superintendent of Bankruptcy except by leave of the court. The appellants
    accordingly brought a motion for leave in April of 2012. The motion judge
    concluded that the negligence claims that the appellants sought to assert
    against the OSB Defendants were not sustainable at law because they were barred
    by the operation of the
Limitations Act, 2002
, S.O. 2002, c. 24,
    Sched. B. He accordingly dismissed their motion.

[7]

Before the motion judge, counsel for the appellants conceded that the
    limitation period in respect of their proposed actions against the OSB
    Defendants would have begun to run by no later than June 23, 2008  the date
    that the Registrar made his finding of serious misconduct on the part of the
    Trustee and required the Trustee to pay a significant amount to the Estate 
    but for the appeal of the Registrars decision to Mesbur J., and the subsequent
    appeal of her decision to this court. The only issue before the motion judge
    was the effect of those appeals on the limitation period. The motion judge
    concluded that all material facts with respect to the asserted causes of action
    against the OSB Defendants were known by June 23, 2008, and neither appellate
    decision affected the calculation of the limitation period.

[8]

On this appeal, the appellants argue that the motion judge made two
    errors.

[9]

The first is that the motion judge did not consider what the appellants
    allege was the effect of Mesbur J.s decision, namely that the Trustee did not
    have to pay the Estate any money. They argue that the effect of her decision
    was that damage, such as required for a cause of action based on the OSBs
    failure to require the Trustee to increase the amount of its bond to accrue,
    had not occurred.

[10]

Their
    reasoning is as follows. After the Registrar rendered his decision requiring
    the Trustee to pay significant amounts to the Estate, the appellants were
    concerned that the Trustee would be unable to pay the amounts ordered and
    cautioned the OSB Defendants that the OSB should increase the amount of the
    bond the Trustee was required to post. The OSB did not. The appellants argue
    that if the Trustee did not have to pay any amount to the Estate, there would
    have been no need to have recourse to any security, and they would therefore
    not have suffered damages as a result of the OSB Defendants failure to require
    the Trustee to post additional security.

[11]

This
    first argument has no merit. Whether the effect of Mesbur J.s order was that
    the Trustee was not required to pay monies to the Estate is in our view of no
    moment. As the motion judge concluded, all of the material facts with respect
    to the asserted causes of action set out in s. 5(1)(a) of the
Limitations
    Act, 2002
 including that damage had occurred  were known by no later
    than June 23, 2008. The appellants provided no authority for their argument
    that Mesbur J.s decision, in effect, tolled the limitation period that they
    concede had already begun to run.

[12]

The
    appellants second argument arises out of a comment made by Mesbur J. in the
    course of her reasons of February 19, 2009.  In her view, certain findings made
    by the Registrar were improper because they had been the subject of the OSBs
    investigations, in response to the appellants complaints.  She wrote that the
    appellants presumably could have applied for judicial review of the findings
    of the regulatory bodies. It did not. The appellants acknowledge that Mesbur
    J.s conclusion that the findings were not open to the Registrar was overturned
    on appeal to this court. However, they argue that commencing an action
    following the decision of Mesbur J. and prior to the decision of this court would
    have been an impermissible collateral attack on her decision.

[13]

This
    second argument similarly has no merit.  It does not address the core finding
    of the motion judge, with which we agree, namely that all material facts with
    respect to the asserted causes of action were known by no later than June 23,
    2008.  The subsequent comment of Mesbur J. does not affect this.

[14]

The
    appeal is accordingly dismissed.

[15]

The
    OSB is entitled to costs of this appeal and motion for leave to bring this
    appeal, fixed in the agreed amount of $9,500, inclusive of disbursements and
    applicable taxes.

Janet Simmons
    J.A.

Alexandra Hoy
    J.A.

G.R. Strathy J.A.


