



COURT OF APPEAL FOR ONTARIO

CITATION: msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550

DATE: 20131002

DOCKET: C56626

Feldman, Sharpe and Strathy JJ.A.

In the Matter of the Bankruptcy of Cosimo Dilollo

msi
    Spergel Inc., as Trustee of the

Estate
    of Cosimo Dilollo, a Bankrupt

Applicant (Appellant)

and

I.F. Propco Holdings (Ontario) 36 Ltd.

Respondent

(Respondent in Appeal)

APPLICATION UNDER section 95 of the
Bankruptcy
    and Insolvency Act
,     R.S.C. 1985 c. B-3, as amended

Mervyn D. Abramowitz, and Philip Cho, for the appellant

Harvey Chaiton and Douglas A. Bourassa, for the
    respondent

Heard: June 3, 2013

On appeal from the order of Justice David M. Brown of the
    Superior Court of Justice, dated January 29, 2013, with reasons reported at
Dilollo
    (Re)
, 2013 ONSC 578.

Strathy J.A.:


[1]

Under s. 195 of the
Bankruptcy and Insolvency Act
, R.S.C.
    1985, c. B-3, as amended (the 
BIA
), a bankruptcy order is stayed
    upon the filing of an appeal. This appeal raises the issue of whether that stay
    suspends the limitation period applicable to a motion by a trustee to set aside
    a preferential payment by a bankrupt under s. 95 of the
BIA
.

[2]

The motion judge found that the limitation period was not suspended by
    the stay and dismissed the preference motion as time-barred. For the reasons
    that follow, although I do not agree entirely with the motion judges analysis,
    I agree with his conclusion and would dismiss the trustees appeal.

A.

The Facts

[3]

On July 6, 2006, the respondent, I.F. Propco Holdings (Ontario) 36 Ltd.
    (Propco), obtained a default judgment against the bankrupt, Cosimo Dilollo (Dilollo),
    for $22,031,787.67.

[4]

On December 15, 2006, Propco brought a bankruptcy application against
    Dilollo. Ultimately, Propco and Dilollo agreed to compromise Propcos judgment
    for $1.2 million. They agreed that if this sum was paid, both parties would
    consent to the dismissal of Propcos bankruptcy application and would exchange
    releases.

[5]

Between August and December, 2007, Dilollo paid $1,136,500, which,
    although less than the agreed amount, Propco accepted in satisfaction of the
    settlement. As matters transpired, the bankruptcy application was not dismissed
    and releases were not exchanged. By early 2008, Propcos bankruptcy application
    remained outstanding and by order dated May 22, 2008, three other creditors
    were added as applicants to it.

[6]

On June 5, 2009, the bankruptcy application was heard by Morawetz J.
    Dilollo admitted at the hearing that he had settled Propcos claim for
    something around $1.185 million. A bankruptcy order was made on January 11,
    2010, and a trustee was appointed. In his endorsement granting the application,
    Morawetz J. referred to the settlement of the debt between Propco and Dilollo
    for $1.185 million.

[7]

On January 20, 2010, Dilollo filed an appeal from the bankruptcy order.
    This court dismissed that appeal on September 27, 2010.

[8]

At the first meeting of creditors on May 31, 2011, the appellant, msi Spergel
    Inc. (the Trustee), was appointed in place of the original trustee.

[9]

On August 24, 2012, the Trustee brought a motion under s. 95 of the
BIA
for a declaration that the $1.1365 million paid by Dilollo to Propco under
    the settlement constituted a preference and sought an order that Propco repay
    that amount to the Trustee.

[10]

Propco,
    for its part, brought a motion for an order that the Trustees claim was
    time-barred by the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B
    (the 
Limitations Act
). Alternatively, it sought an order that if the
    Trustees claim was not time-barred, it was entitled to file a proof of claim
    in Dilollos estate for the full amount of its $22,031,787.67 judgment. Propco
    said that if the preferential payment was set aside, the settlement agreement
    under which the payment had been made should also be set aside, with the result
    that the full amount of its claim was outstanding and provable in the
    bankruptcy. The difference was important, because if Propco could file a claim
    for the full amount of the judgment, it would account for about 90% of the
    value of proven claims.

B.

Statutory Provisions

[11]

The
    Trustee brought its motion to set aside the payment to Propco as a preference
    under s. 95(1)(a) of the
BIA
:

(1) A transfer of property made, a
    provision of services made, a charge on property made, a payment made, an
    obligation incurred or a judicial proceeding taken or suffered by an insolvent
    person

(a) in favour of a creditor who is
    dealing at arms length with the insolvent person, or a person in trust for
    that creditor, with a view to giving that creditor a preference over another
    creditor is void as against  or, in Quebec, may not be set up against  the
    trustee if it is made, incurred, taken or suffered, as the case may be, during
    the period beginning on the day that is three months before the date of the
    initial bankruptcy event and ending on the date of the bankruptcy.

[12]

There
    is no limitation period in the
BIA
applicable to the time within which
    the trustee is required to bring a motion to set aside a preference. In
Edwards
    Estate v. Food Family Credit Union
, 2011 ONCA 497, 336 D.L.R. (4th) 719,
    at para. 4, this court applied the proposition that general limitation periods
    in provincial statutes apply to bankruptcy proceedings, referring to
Gingras
    v. General Motors
, [1975] 1 S.C.R. 426 and
Employers Liability
    Assurance Corp. v. Ideal Petroleum
, [1978] 1 S.C.R. 230.

[13]

Both
    parties, therefore, agreed that the general two-year limitation period in s. 4
    of the
Limitations Act
applied to the motion to set aside the
    preference. That section provides:

Unless this Act provides otherwise, a
    proceeding shall not be commenced in respect of a claim after the second
    anniversary of the day on which the claim was discovered.

[14]

The
    Trustee acknowledged that it was aware of the potential preference claim on
    January 11, 2010, the date of release of the reasons of Morawetz J. granting
    the bankruptcy order. It also conceded that the limitation period began on the
    date of the bankruptcy order, but argued that Dilollos appeal to this court
    suspended the running of the limitation period pending the disposition of the
    appeal. It relied in this regard on the combined operation of s. 20 of the
Limitations
    Act
and s. 195 of the
BIA.

[15]

Section
    19 of the
Limitations Act
has the effect of invalidating any
    limitation period not specifically referred to in the Schedule to that Act,
    unless it was in effect on January 1, 2004, and incorporates by reference a
    statutory provision listed in the Schedule. It states:

(1) A limitation period set out in
    or under another Act that applies to a claim to which this Act applies is of no
    effect unless,

(a) the provision establishing it is
    listed in the Schedule to this Act; or

(b) the provision establishing it,

(i) is in existence on January 1,
    2004, and

(ii) incorporates by reference a
    provision listed in the Schedule to this Act.

[16]

However,
    section 20 of the
Limitations Act
provides:

This Act does not affect the extension,
    suspension or other variation of a limitation period or other time limit by or
    under another Act.

[17]

The
    Trustee argued that s. 195 of the
BIA
operated as a suspension of the limitation period pending the appeal
    to this court. That section provides
:

Except to the extent that an order or
    judgment appealed from is subject to provisional execution notwithstanding any
    appeal therefrom, all proceedings under an order or judgment appealed from
    shall be stayed until the appeal is disposed of, but the Court of Appeal or a
    judge thereof may vary or cancel the stay or the order for provisional
    execution if it appears that the appeal is not being prosecuted diligently, or
    for such other reason as the Court of Appeal or a judge thereof may deem
    proper.

[18]

Returning
    to the time periods at issue here, the key dates are as follows:

January 11, 2010             Bankruptcy order

January 20, 2010             Appeal filed by Dilollo

September 27,
    2010        Appeal dismissed by Court of Appeal

January 11, 2012             Two-year
    limitation period expired

August 24, 2012              Preference
    motion commenced

[19]

If
    the stay of proceedings pursuant to s. 195 of the
BIA
during the
    appeal of the bankruptcy order had the effect of suspending the limitation
    period for the preference motion, the limitation period would have expired on September
    18, 2012, and the Trustees preference motion would have been brought in time.
    If the stay did not suspend the limitation period, it would have expired two
    years after the date of the bankruptcy order  that is, on January 11, 2012 
    and the preference motion, which was brought about 30 months after the
    bankruptcy order, would have been time-barred.

C.

The Motion Judges Reasons

[20]

There
    were two issues before the motion judge. The first was whether the limitation
    period for the Trustees preference motion was suspended by the stay of
    proceedings in s. 195 of the
BIA
during the pendency of the appeal
    from the bankruptcy order.

[21]

The
    second issue was whether, if the motion was not time-barred, and if the Trustee
    was ultimately successful in voiding the preferential payment under s. 95 of
    the
BIA
, Propco was entitled to file a claim for the full amount of its
    judgment (in excess of $22 million), or was confined to  claiming the
    settlement amount of $1,136,500.

[22]

The
    motion judge found that before s. 20 can apply to extend, suspend or vary a
    limitation period, there must be a limitation period in another statute and
    that other statue must provide for the extension, suspension or other variation
    of
that limitation period
. Since there was no limitation period in s.
    195 of the
BIA
,

and that provision did not purport to suspend
    or extend a limitation period in the
BIA
, the ordinary limitation
    period applied. He expressed this conclusion as follows, at para. 16:

To engage section 20 of the
Limitations
    Act
, 2002
requires that some
    other statute provides for a limitation period and also provides for the
    "extension, suspension or other variation of a limitation period or other
    time limit by or under another Act". Section 195 of the
BIA
does not contain any limitation period or provide for the
    "extension, suspension or other variation" of a limitation period.
    Since
BIA
s. 195 does not purport to extend,
    suspend or vary a limitation period contained in the
BIA
, section 20 of the
Limitations Act, 2002
does not apply. Since no other suspension provision contained in the
Limitations
    Act, 2002
would apply in the circumstances of this case, the
    basic two year limitation period set out in section 4 governs. The parties
    agreed that time started to run on the day the Bankruptcy Order was made, so
    the basic two-year limitation period expired on January 11, 2012, well before
    the Trustee initiated the Preference Motion. That motion, therefore, is
    statute-barred. [Citations omitted.]

[23]

The motion judge also concluded that the stay pending appeal under s.
    195 of the
BIA
was not functionally equivalent to
    a limitation period, and it was open to the Trustee to move to lift the stay if
    so advised. He stated, at para. 17 of his reasons:

That a stay pending appeal might prevent a person
    from taking some step does not alter that conclusion. A stay of proceedings
    pending the hearing of an appeal is not the functional equivalent of a
    limitation period. Limitation periods set deadlines by which a person must
    initiate legal process in respect of a cause of action. Stays pending appeal
    are engaged following the initial disposition of the legal process in which the
    cause of action was asserted. Limitation periods and stays pending appeal
    conceptually are quite different creatures. If a stay might operate to
    prejudice a person's legal rights, recourse generally is available to seek a
    lifting of the stay from the court. Section 195 of the
BIA
specifically provides that "the Court of Appeal or a judge thereof
    may vary or cancel the stay ... for such other reason as the Court of Appeal or
    judge thereof may deem proper". In the present case it was always open to
    the Trustee to seek a lifting of the stay from the Court of Appeal if the
    Trustee thought that its ability to initiate a preference motion might be
    prejudiced by the appeal. As matters transpired, the Trustee was left with
    ample time following the dismissal of the appeal to commence its Preference
    Motion.

[24]

In the result, he found that the Trustees motion was time-barred.
    Although not necessary to do so in the circumstances, the motion judge went on
    to consider whether, if the claim under s. 95(1)(a) of the
BIA
was not statute-barred, and if the payment under the settlement was
    found void as a preference, Propco was entitled to claim for the full amount of
    its judgment or was restricted to the compromised amount. He concluded that the
    Trustee could file a claim for the full amount of the judgment.

D.

The Parties Submissions

[25]

The
    Trustees position, both before the motion judge and in this court, was that
    pursuant to s. 195 of the
BIA
, the appeal of the bankruptcy order
    resulted in an automatic stay of proceedings and suspended the limitation
    period applicable to the s. 95 preference motion. In that case, the preference
    motion would not be statute-barred until two years less nine days
[1]
after the appeal of the bankruptcy order was dismissed by this court on
    September 27, 2010. Under this theory, the preference motion was brought about
    a month before the expiry of the two-year limitation period.

[26]

The
    Trustee submits that the motion judge failed to follow established
    jurisprudence concerning the effect of a stay under the
BIA
on the
    running of limitation periods. It refers to case law under s. 69 of the
BIA
which holds that the limitation period ceases to run for creditors claims
    against the bankrupt while the bankruptcy is in effect
.

[27]

The
    Trustee also submits that the motion judge erred in holding that the absence of
    a limitation period in the
BIA
for bringing a preference motion meant
    that s. 20 of the
Limitations Act
was inapplicable. In this regard,
    the Trustee argues that the motion judge failed to properly consider and apply
    this courts decision in
Joseph v. Paramount Canadas Wonderland
, 2008
    ONCA 469, 90 O.R. (3d) 401.

[28]

Propco
    submits that the motion judge was correct in finding that s. 195 of the
BIA
does not extend, suspend or vary the basic two-year limitation period, because
    it does not contain a limitation period or provide for the extension,
    suspension or other variation of a limitation period. It relies on this
    courts decision in
Guillemette v. Doucet
,

2007 ONCA 743, 88
    O.R. (3d) 90, which it submits makes it clear that s. 20 of the
Limitations
    Act
only applies where the other statute contains
both
a
    limitation period
and
a provision extending, suspending or varying
    that limitation period. Propco also relies on
Joseph
for the
    proposition that a common law extension of the limitation period is not
    available under s. 20.

[29]

Finally,
    Propco distinguishes the authorities under s. 69 of the
BIA
relied
    upon by the Trustee, none of which involved s. 20 of the
Limitations Act
and
    which, it says, are based on English authority inapplicable to Ontarios
    comprehensive limitations regime.

E.

Analysis

[30]

The
    appropriate starting point for the analysis of the issues is the language of
    the statutory provision relied upon by the Trustee to suspend the limitation
    period. Section 195 of the
BIA
states that all proceedings under an
    order or judgment appealed from shall be stayed until the disposition of the
    appeal. It provides, however, that this court or a judge of this court may vary
    or cancel the stay if the appeal is not being prosecuted diligently, or for
    such other reason as the Court of Appeal or a judge thereof may deem proper.

[31]

The
    section contains no limitation period and makes no express reference to the
    extension, suspension or variation of any limitation period. For this reason,
    the motion judge found that s. 20 of the
Limitations Act
was
    inapplicable and the basic two-year limitation period applied.

[32]

I
    agree within this conclusion, but do not agree with the portion of the motion
    judges reasons dealing with the interpretation of s. 20 of the
Limitations
    Act
.

In my view, read together, this courts decisions in
Guillemette
and
Joseph
establish that s. 20 speaks to two situations: (a)
    where a statute contains a limitation period or time limit to which the
Limitations
    Act
does not apply and a provision for the extension, suspension or
    variation of that period or time limit; and (b) where a statute simply contains
    a provision for the extension, suspension or variation of a limitation period
    or other time limit imposed by or under another statute.

[33]

In
Joseph
, Feldman J.A. adopted this interpretation, but found that the
    special circumstances doctrine was a creature of the common law, and could
    not be considered an extension
under
the
Courts of Justice Act
,
    R.S.O. 1990, c. C.43. It is apparent from her reasons that, had she found it to
    be a statutory extension, she would have applied it to the limitation period
    under the
Limitations Act
.

[34]

While
    there is language in
Guillemette
that could be taken to suggest, as
    Propco argues and as the motion judge held, that the operation of s. 20 is
    limited to statutes that contain their own limitation periods, that was not, in
    fact, the result in
Guillemette.
In that case, the limitation period
    in the
Solicitors Act
, R.S.O. 1990, c. S.15, was found to be of no
    effect by virtue of s. 19 of the
Limitations Act
, because it was not
    listed in Schedule A of the statute, but its suspension provision
    nevertheless applied to extend the limitation period in the
Limitations Act
.

[35]

Section
    28 of the
Class Proceedings Act 1992
, S.O. 1992, c. 6, is a
    well-recognized example of such a statutory extension. It suspends the operation
    of the applicable limitation period in favour of class members when a class
    proceeding is commenced. There is no limitation period in the statute itself
    that is suspended, but the statute operates to suspend another statutory
    limitation period applicable to the cause of action: see, for example,
Coulson
    v. Citigroup Global Markets Canada Inc.
, 2012 ONCA 108, 16 C.PC. (7th) 1.

[36]

I
    therefore agree with the Trustees submission that an extension, suspension or
    other variation contained in the
BIA
would be capable of suspending
    the operation of the limitation period in the
Limitations Act
. The
    question is whether s. 195 of the
BIA
has that effect. I agree with
    the motion judges conclusion that it does not.

[37]

The
    Trustee acknowledges that there is no direct authority that a stay under s. 195
    of the
BIA
suspends the limitation period. It submits, however, that
    there is a long line of authority holding that the statutory stay of creditors
    claims under s. 69 of the
BIA
has the effect of suspending the
    limitation period. It submits that the principles contained in the case law
    under s. 69 apply equally to s. 195.

[38]

Section
    69 of the
BIA
and several sections that follow  s. 69.1 (Division I
    proposals), s. 69.2 (consumer proposals) and s. 69.3 (bankruptcies)  provide
    for a stay of proceedings against an insolvent person or debtor, as the case
    may be, after the filing of a notice of intention, after filing a proposal, or after
    a bankruptcy order. The wording of s. 69.3(1), dealing with bankruptcies, is
    typical:

Subject to subsections (1.1) and (2) and sections
    69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy
    against the debtor or the debtors property, or shall commence or continue any
    action, execution or other proceedings, for the recovery of a claim provable in
    bankruptcy.

[39]

Subsection
    (1.1) provides that the stay ceases to apply on the day the trustee is
    discharged. Subsection (2) deals with the claims of secured creditors, who are
    permitted to realize their security unless the court orders otherwise. Section
    69.4 provides that a creditor may apply to the court to have the stay lifted,
    and s. 69.5 permits the collection of withholdings or deductions under
    provincial tax laws.

[40]

These
    provisions promote the objects of the
BIA
by providing an orderly and
    fair distribution of the property of the bankruptcy amongst creditors and by
    preventing proceedings by a creditor that would give that creditor an advantage
    over others: see
Re Cohen
,

[1948] 4 D.L.R. 808 (Ont. C.A.),
    at para. 12.

[41]

These
    provisions stipulate that on the happening of the particular act, no creditor
    has any
remedy
against the debtor or the debtors property (emphasis
    added).

[42]

Although
    the heading of these provisions refers to a stay of proceedings, they
    accomplish this result by preventing the exercise of the creditors remedy 
    the cause of action.

[43]

This
    court has, on a number of occasions, adopted the definition of cause of
    action propounded by Morden J.A. in
July et al. v. Neal
(1986), 57
    O.R. (2d) 129 (C.A.), at p. 137, adopting the words of Lord Diplock in
Letang
    v. Cooper
, [1965] 1 Q.B. 232 (C.A.) at pp. 242-3: 
a factual situation the existence of which entitles
    one person to obtain from the court a remedy against another person.

For other examples see:
Wilson Truck Lines Ltd. v. Pilot
    Insurance Co.
(1996), 31 O.R. (3d) 127 (C.A.), supp. reasons, (1997), 33
    O.R. (3d) 37 (C.A.);
Goorbarry v. Bank of Nova Scotia
, 2011 ONCA 793,
    109 O.R. (3d) 92.

[44]

By
    providing that the creditor has no remedy against the bankrupt, s. 69 prevents
    the exercise of the creditors cause of action while the bankruptcy is in
    effect. This is entirely consistent with the purpose of the
BIA
of
    providing for the orderly and fair distribution of a bankrupts property and
    preventing any creditors from gaining an advantage. The section does not
    suspend the limitation period. It prohibits any action on a claim that is
    provable in the bankruptcy. In most cases, the limitation period becomes
    irrelevant because, by s. 178(2) of the
BIA
, on discharge the bankrupt
    is released of all claims provable in the bankruptcy other than those set out
    in s. 178(1).

[45]

The
    Trustee relies, however, on a line of cases under s. 69, which are summarized
    by the following quote from L.W. Houlden, G.B. Morawetz and Janis Sarra,
Bankruptcy
    and Insolvency Law in Canada
, 4th ed. rev., vol. 3, loose-leaf (Toronto:
    Carswell, 2013), at p. 5-99:

When a bankruptcy occurs, the
Statute
    of Limitations

ceases to run against claims  The
    creditors ability to take proceedings against the debtor is stayed by the
Act
,
    and the stay of proceedings suspends the operation of the limitation period.
    The suspension ends when the trustee is discharged (s. 69.3(1)), and the
Statute
    of Limitations

commences to run again at that time. [Citations
    omitted.]

Cases that follow this principle include:
Lakehead Newsprint (1990) Ltd. v. 893499 Ontario Ltd.
(2001), 23 CBR (4th) 170 (Ont. S.C.), varied, 155 O.A.C. 328;
Canada
    (Attorney General) v. Fekete
, 1999 ABQB 262, 242 A.R. 193;
Toronto-Dominion
    Bank v. Barry-Kays
, 2010 ONSC 3535, 69 C.B.R. (5th) 243;
Re
    Mawji
, 2011 ONSC 4259, 94 C.B.R. (5th) 77, affirmed 2012
    ONCA 152, 94 C.B.R. (5th) 135;
Fimax Investments v. Grossman
, 2012 ONSC 2436.

[46]

The
    common root of these authorities runs deep  an 1887 decision of the English
    Chancery Division,
Re Crosley. Munns v. Burn
(1887), 35 Ch. D. 266. In
    that case, Crosley, a broker, was adjudged bankrupt in February 1874. It was
    discovered that he had misappropriated securities that he had held for a
    customer, Captain Ayscough. Ayscough made a claim in the bankruptcy and
    received a small dividend. The administration of the bankrupt estate was
    completed in 1880 and an order was made annulling Crosleys bankruptcy.

[47]

Crosley
    died in 1885 and in May 1896 an order was made for the administration of his
    estate. Captain Ayscough made a claim for the balance of what he was owed, on
    the basis that the debt was incurred by Crosleys fraud and therefore survived
    the bankruptcy.

[48]

It
    was argued, however, that the claim was barred by the six-year statute of
    limitations. Lord Justice Cotton said this, at p. 270:

Then it is said that the claim is barred by the
    Statute of Limitations. But the fraud was not discovered till after the
    adjudication in bankruptcy. While the bankruptcy was in force no action could
    be brought, so the statute could not begin to run till the annulling of the
    bankruptcy, and within six years from that time an order for administration was
    made. The Statute of Limitations is therefore no defence, and the appeal must
    be dismissed.

[49]

Lindley
    J. agreed, at p. 271, stating:

The short answer to the argument founded on the
    Statute of Limitations is that the statute did not begin to run till the
    bankruptcy had been annulled.

[50]

While
    the respondent argues that the court referred to no authority in support of the
    proposition that the statute of limitations did not run during the bankruptcy,
    the proposition was not new. In
Re Westby ex p. Lancaster Banking Corpn
.
    (1879), 10 Ch. D. 776, at p. 784, the bankruptcy commenced in 1870. After the
    estate had been realized, and the trustees determined that nothing more could
    be brought in, the bankruptcy was deemed to be closed. The bankrupt failed to
    pay his creditors the requisite ten shillings on the pound, which would have
    entitled him to a discharge, and he never obtained a discharge. Subsequently,
    in 1878, the bankrupt inherited a large amount of money. A creditor, whose debt
    had appeared on the statement of affairs, but who had not proven his debt
    before the close of the bankruptcy, sent a proof of claim to the Receiver, who
    had taken over as trustee.

[51]

It
    was held that the creditor was entitled to apply for leave to enforce his debt
    as a judgment debt against the debtors property. In answer to the argument that
    the creditors claim was time-barred, Sir James Bacon, the Chief Judge in
    Bankruptcy, abruptly dismissed the assertion, at p. 272:

The argument founded on the
Statute of Limitations

as
    an answer to this claim is not tenable for a moment.
The Statute of
    Limitations has nothing to do with the bankruptcy laws
. When a bankruptcy
    ensues, there is an end to the operation of that statute, with reference to
    debtor and creditor. The debtors rights are established and the creditors
    rights are established in the bankruptcy, and the
Statute of Limitations

has no application at all to such a case, or to the principles by which it
    is governed. [Emphasis added.]

[52]

In
    my view, this proposition remains valid. Section 69 of the
BIA
is not,
    as such, a provision that extends, suspends or varies a limitation period. It
    takes away creditors civil remedies and requires them to submit their claims
    through the bankruptcy process. The bar on commencing or continuing proceedings
    serves this end and preserves the integrity of the bankruptcy process. In most
    cases, the limitation period is of no further significance because creditors
    claims are dealt with in the bankruptcy. In the rare case, where the bankrupt
    is not discharged or the claim survives bankruptcy, the limitation period may
    resume running. It also continues to run against a creditor who seeks to
    recover a debt in proceedings unconnected to the bankruptcy: see Houlden,
    Morawetz and Sarra at 5-99, referring to
In re Benzon. Bower v. Chetwynd
,
    [1914] 2 Ch. 68.

[53]

The
    stay under s. 195 of the
BIA
serves a very different purpose. It
    simply provides that on the appeal of any order or judgment made in the course
    of a bankruptcy, the status quo will be preserved, unless the court orders
    otherwise. This is not dissimilar to the automatic stay of a judgment for the
    payment of money, under rule 63.01 of the
Rules of Civil Procedure
.

Its purpose is to ensure that no steps are taken that cannot be unwound if
    the appeal succeeds.

[54]

The
    Trustee also argued that the motion judge failed to appreciate that a trustee
    is incapable of acting where the very order from which it derives its authority
    is under appeal. It submits that during the stay under s. 195 a trustee is
    unable to hold a first meeting of creditors, hold a meeting with the
    inspectors, investigate potential claims and obtain legal opinions about such
    claims. This, said the Trustee, would put a trustee and creditors at risk,
    because the limitation period could slip away before the trustee had an
    opportunity to investigate potential claims or to take action. It argued that a
    trustee must have a full two years after its appointment to be able to
    investigate the situation and make decisions, with the advice of the creditors
    and the inspectors, before deciding whether to commence proceedings.

[55]

The motion judge addressed this issue at para. 17 of his reasons,
    referred to above at para. 23, where he noted that it was open to the Trustee
    to apply to lift the stay if it interfered with its ability to initiate the
    preference motion. As the motion judge also noted, the Trustee had ample time
    to commence the preference motion.

[56]

Accordingly,
    I regard s. 69 of the
BIA
, and the line of cases under it, to be
    entirely distinguishable from s. 195 and from the case before this court. Both
    provisions are also distinguishable from s. 20 of the
Limitations Act
,

which is concerned with provisions in other acts for the extension,
    suspension or other variation of limitation periods contained in those other
    acts.

[57]

To
    conclude, this is not a case in which a statute other than the
Limitations
    Act
contains either a limitation period or an express extension,
    suspension or other variation of the limitation period. The Trustee relies, in
    effect, on an implicit or implied statutory extension of the limitation period.
    This court considered a somewhat similar argument in
Sally Creek Environs
    Corporation (Re)
, 2013 ONCA 329. In that case, certain creditors of the
    bankrupt brought a motion for leave pursuant to s. 215 of the
BIA
to
    commence an action for negligence against the Office of the Superintendent of
    Bankruptcy and two of its employees. They alleged that the OSB was negligent in
    supervising the trustee in bankruptcy, with the result that the dividend paid
    to creditors was less than it would otherwise have been.

[58]

In
    a taxation hearing, the Registrar in Bankruptcy made findings of serious
    misconduct on the part of the trustee. It was acknowledged that the limitation
    period for an action against the OSB began to run when the Registrars decision
    was released on June 23, 2008, because the creditors were aware on that date of
    the material facts with respect to their cause of action.

[59]

In
    response to the motion for leave, the OSB argued that the motion was
    time-barred because it had been brought more than two years after the
    Registrars decision. The creditors responded, however, that the Registrars
    decision had been appealed, first to the Superior Court of Justice and then to
    this court. They argued that the appeal had the effect of suspending the
    limitation period. The motion judge found that all material facts were known by
    June 23, 2008 and the running of the limitation period was unaffected by the
    appeals.

[60]

This
    court affirmed the decision of the motion judge. It noted, at para. 11, that
    the appellants had provided no authority for the proposition that the
    limitation period, having begun to run, was tolled by an appeal or as a result
    of the outcome of the appeal.

[61]

The
    decision of this court in
Sally Creek
, like
Guillemette
and
Joseph
,
    is consistent with the purpose of the
Limitations Act
of promoting
    certainty and clarity in the law of limitation periods. That purpose is not
    accomplished by extending, suspending or varying a limitation period unless
    expressly authorized by statute. In my view, this is not such a case.

F.

Conclusion

[62]

For
    these reasons, I would dismiss the appeal. As a result, the payment to Propco could
    not be impeached and it is unnecessary to consider the second issue before the
    motion judge.

[63]

In
    default of agreement as to costs, I would direct the parties to file brief
    written submissions, no more than three pages in length, exclusive of the costs
    outline. I would order that Propcos submissions be delivered within 20 days
    and the Trustees submissions within 20 days thereafter.

Released: KF October 2, 2013

G.R. Strathy J.A.

I agree. K. Feldman
    J.A.

I agree. R. Sharpe
    J.A.





[1]
Nine days being the time between the bankruptcy order and the filing of the
    appeal.


