



COURT OF APPEAL FOR ONTARIO

CITATION: Comfort Capital Inc. v. Yeretsian, 2019 ONCA 1017

DATE: 20191220

DOCKET: M51021 (C67460)

Zarnett J.A. (Motions
    Judge)

BETWEEN

Comfort Capital Inc.,
    The Bank of Nova Scotia Trust Company,
E. Manson Investments Ltd., Fenfam Holdings Inc., 593651 Ontario
Ltd., 1031436 Ontario Inc., Alrae Investments Inc., Barry Spiegel,
Sharon Nightingale, David Sugar, Phyllis Sugar, National Tire Ltd.,
1119778 Ontario Limited, 1415976 Ontario Limited, Alrae Investments
Inc., Bamburgh Holdings Ltd., Beverley Gordon, Diane Grafstein,
Richard Gruneir, B.& M. Handelman Investments Ltd., Ridgeway
Occupational Consultants Inc., Yerusha Investments Inc., Mihal
Tylman, A. Eliezer Kirshblum, 593651 Ontario Limited, The Bank of
Nova Scotia Trust Compnay in trust for Bailey Levenson, The Bank of Nova Scotia
    Trust Compnay in trust for Rosemonde Kelly, Anne
Handelman, Yerusha Investments Inc., Celmar Investments Corp.,
Beverley Gordon, Philgor Investments Ltd., Brilliant Investcorp
Inc., Maxoren Investments, 2227046 Ontario Limited, Dast Properties
Limited, Tova Markovzki, Joseph Suckonic and B. & M. Handelman
Investments Limited

Applicants

and

Annie Yeretsian, Terry
    Wilson, 2457674 Ontario Inc.,
2399029 Ontario Inc. and Moss Development Ltd.

Respondents

Eric Golden, for the moving party, the receiver, Rosen
    Goldberg Inc.

Doug Bourassa, for the responding parties, Stanbarr
    Services Limited, Janodee Investments Ltd., Meadowshire Investments Ltd.,
    Regard Investments Ltd., 1563503 Ontario Limited, Beaver Pond Investments Ltd.,
    The Canada Trust Company, Rita Rosenberg and 527540 Ontario Limited

Margaret Sims and P. James Zibarras, for the responding
    party, Canada Investment Corporation

Heard: November 26, 2019

REASONS FOR DECISION

INTRODUCTION

[1]

Rosen Goldberg Inc. is the court appointed
    receiver (the receiver) of the assets, undertaking, and property of the three
    corporations and two individuals named as respondents in the court below (the debtors
    in receivership). The receiver moves for certain relief in connection with an
    appeal brought by Canada Investment Corporation (CIC) from an order made in
    the receivership proceedings by Penny J. dated September 13, 2019. The order resolved
    certain claims in respect of the proceeds of sale of one of the properties
    subject to the receivership.

[2]

The specific questions raised by the receivers
    motion, and CICs response to it, are: (i) whether the CIC appeal is as of
    right or requires leave under s. 193 of the
Bankruptcy and Insolvency Act
,
    R.S.C. 1985, c. B-3 (the


BIA
); and (ii) if the CIC appeal
    requires leave under s. 193 of the
BIA
whether CIC should be granted
    leave. Although the receiver also asked that any stay of Penny J.s order
    effected by the CIC appeal be lifted, it withdrew that request during oral
    argument.

BACKGROUND

[3]

CIC held a mortgage on a property that was
    subject to the receivership, known as the Caldwell property. The receiver
    effected a sale of that property, and out of the amounts generated by the sale,
    the sum of $784,843 was available to be paid to CIC under its mortgage
    security.

[4]

Stanbarr Services Limited and others, described
    below and in this court collectively as the Stanbarr Claimants, are not
    creditors of the debtors in receivership. They do not have a direct claim
    against those debtors for a portion of the proceeds realized on the sale of the
    Caldwell property. They do, however, claim to be creditors of CIC, and to have
    established that status as a result of findings made in a 2015 decision of
    Matheson J. in litigation between the Stanbarr Claimants and CIC (the Scollard
    Action). They claim that the amount of the debt owing to them by CIC exceeds
    the amount CIC is otherwise entitled to from the proceeds of the sale of the
    Caldwell property. CIC disagrees with that position.

[5]

On June 26, 2018, the Stanbarr Claimants brought
    a motion in the receivership proceedings for an order directing that any funds
    from the sale of the Caldwell property that would otherwise be payable to CIC
    instead be paid to the credit of the Scollard Action. CIC opposed the motion.

[6]

By orders made on August 3 and 31, 2018, a
    claims process was established in the receivership proceedings. It envisaged
    that the Stanbarr Claimants claim to receive proceeds from the sale of
    property subject to the receivership that would otherwise be payable to CIC
    would be determined in the receivership proceedings.

[7]

By order dated January 25, 2019, claims process
    ground rules were set. As it pertained to this claim, the ground rules provided
    that the parties making the claim to proceeds from the sale of the Caldwell
    property that would otherwise flow to CIC would have to prove on a balance of
    probabilities a direct claim against CIC, but did not have to prove a tracing
    remedy. The claim was to be determined based on affidavit evidence, cross-examinations,
    and out-of-court examinations of witnesses, unless the court decided
viva
    voce
evidence at the hearing was required. The court would decide the
    claim after a hearing. The receiver was required to deliver a report, prior to
    the hearing but after the exchange of facta by the Stanbarr Claimants and CIC,
    in which it would evaluate the various claims, and make recommendations to the
    Court.

[8]

The receiver delivered a report on August 7,
    2019. In its report, the receiver concluded that CIC was indebted to the
    Stanbarr Claimants as a result of determinations made in 2015 in the Scollard
    Action, in an amount greater than the amount CIC was entitled to from the sale
    of the Caldwell property. The receiver recommended that the funds that would
    otherwise have been payable to CIC from the sale of the Caldwell property be
    paid to the Stanbarr Claimants.

[9]

Penny J. concluded that the receiver was correct
    that the decision of Matheson J. in the Scollard Action was dispositive of the
    Stanbarr Claimants claim. He accepted the receivers recommendation and
    ordered that funds be paid to the Stanbarr Claimants.

[10]

CIC filed a Notice of Appeal dated September 23,
    2019 asking that the order of Penny J. be set aside, and that the claim of the
    Stanbarr Claimants be dismissed or remitted for a new hearing. In its notice of
    appeal, CIC claimed it had an appeal as of right under s. 6(1)(b) of the
Courts
    of Justice Act
, R.S.O. 1990, c. C. 43 (the 
CJA
) or under s.
    193(c) of the
BIA
. Alternatively, it requested leave to appeal under
    s. 193(e) of the
BIA
.

ANALYSIS

[11]

The receiver, supported by the Stanbarr
    Claimants, asks for a determination that the appeal of CIC is not one that may
    be brought as of right.

[12]

The notice of appeal refers to the
CJA
.
    However, the appeal route in this case is not governed by the
CJA.
The
    order of Penny J. was made in the receivership proceedings, which have their
    root in an order made under the
BIA
and the
CJA
appointing
    the receiver. The orders which approved the sale of the Caldwell property
    generating the proceeds that were the subject of the dispute, and which set up
    a claims process to deal with the disputes, flowed from an authority under the
BIA
to direct and supervise the receiver and its activities. In making a decision
    under the claims process in the receivership about the proper recipient of the sale
    proceeds, Penny J. was exercising a jurisdiction flowing from the same source.
    The
BIA
governs the appeal route:
Business Development Bank of
    Canada v. Astoria Organic Matters Ltd.
, 2019 ONCA 269, 69 C.B.R. (6th) 13,
    at paras. 5 and 29-31;
Third Eye Capital Corporation v. Ressources Dianor
    Inc./Dianor Resources Inc.
, 2019 ONCA 508, 435 D.L.R. (4th) 416, at paras.
    128-131.

[13]

The question of whether the appeal requires
    leave or is as of right is therefore governed by s. 193 of the
BIA
,
    which provides:

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.

[14]

CIC argues that its appeal is as of right under
    s. 193(c) because the property involved is more than $10,000, namely the $784,843
    it would have received from the sale of the Caldwell property. It submits that
    the effect of the decision below is to direct funds owing to it to other
    parties, causing it a loss of the sum in question.

[15]

The receiver argues that the appeal requires
    leave. It submits that the jurisprudence of this court is clear that the
BIA
provisions which provide that an appeal may be brought as of right are to be
    read narrowly, both in light of the opportunity for parties to seek leave to
    appeal under s. 193(e) and to minimize disharmony with the
Companies
    Creditors Arrangement Act
, R.S.C. 1985, c. C-36, under which all appeals
    require leave to appeal: see for example:
B&M Handelman

Investments
    Limited v. Drotos
, 2018 ONCA 581, 61 C.B.R. (6th) 208, at paras. 27-28.

[16]

In
2403177 Ontario Inc. v. Bending Lake Iron
    Group Ltd
., 2016 ONCA 225, 396 D.L.R. (4th) 635, three types of orders were
    identified from which s. 193(c) does not provide an appeal as of right: at
    para. 53. The first are orders that are procedural in nature including orders
    concerning the methods by which receivers or trustees realize an estates
    assets: at para. 54. The second are orders that do not bring into play the
    value of the debtors property such as an order appointing a receiver to
    monetize assets: at para. 59. The third are orders that do not result in a gain
    or loss, because they do not contain some element of a final determination of the
    economic interests of a claimant in the debtor: at para. 61.

[17]

This case does not involve an order that is
    procedural in nature; it is not a case like
Bending Lake
, a case where
    the majority of the grounds of appeal concerned issues about the process for
    the sale of assets. And, on the topic of the value of the property in play, unlike
Bending Lake
, in the case at bar the Court was called upon to
    consider more than the monetization of an asset:
Forjay Management Ltd. v.
    Peeverconn Properties Inc.
, 2018 BCCA 188, 61 C.B.R. (6th) 221, at para.
    52. The real issue in this case is whether it comes within the third category,
    that is, whether the order results in a loss to CIC.

[18]

The receiver submits that Penny J.s order is
    not an order that involves a loss for two reasons. First, it argues the order
    is no different than an order that settles a priority dispute between creditors
    of an insolvent. Second, Penny J. accepted that it had already been determined
    in the Scollard Action that CIC was indebted to the Stanbarr Claimants. Therefore,
    by giving effect to that Penny J. was not causing any additional loss to CIC. I
    disagree.

[19]

In my view, this case is not a priority dispute,
    the resolution of which does not give rise to an appeal as of right, in the
    sense used in
Ontario Wealth Management

Corp. v. Sica Masonry and
    General Contracting Ltd
., 2014 ONCA 500, 17 C.B.R. (6th) 91. In
Ontario
    Wealth
, the priority contest was between two creditors of the debtor with
    valid claims against the debtors assets. There was no dispute as to the value
    of the claims at issue or the proceeds of sale: at para. 41. The order did not
    cause a loss to either party as the inability to pay both creditors flowed not from
    the order but from the reality that there [were] insufficient funds in the
    estate to repay both creditors: at para. 41. The decision in that priority
    contest was not appealable as of right.

[20]

In contrast, in this case, the dispute was not
    between creditors of the debtors in receivership. The issue before Penny J. was
    whether the Stanbarr Claimants had the claim they alleged against CIC, and if
    so its value. There were funds in the receivership estate to make a payment to
    CIC. The reason CIC is not receiving the payment is due to the order under
    appeal, not an insufficiency of assets. The order finally determined the
    economic interests of CIC in the assets of the debtors in receivership resulting
    from the sale of the Caldwell property.

[21]

Ontario Wealth
was
    distinguished in
Firepower Debt GP Inc. v. TheRedPin, Inc.
(12
    February 2019), M50109 (C66336) (Ont. C.A.), where the contest was over whether
    funds were properly part of the debtors assets or the property of third
    parties. In
Firepower
, the order under appeal, which determined the
    funds to be part of the debtors assets available to all of its creditors,
    rather than the property of third parties, was held to be appealable as of
    right under s. 193(c).

[22]

Here, Penny J.s determination that the Stanbarr
    Claimants, who are third parties to the receivership, should receive a payment
    from the debtors assets of an amount that would otherwise be payable to CIC, one
    of the creditors of the debtors in receivership, should be viewed as similarly
    appealable as of right.

[23]

Moreover, I do not accept the receivers
    position that, for the purpose of determining the appeal route, I should view
    the order as having caused no loss to CIC since the Scollard Action had already
    established that CIC owed money to the Stanbarr Claimants.

[24]

CIC argues that the Scollard Action has not
    resulted in a judgment that CIC pay any amount to the Stanbarr Claimants; CIC
    submits that further proceedings are contemplated in it, and the findings in
    the Scollard Action did not form a proper basis for the receivers
    recommendation or Penny J.s acceptance of it. The receiver characterizes that
    position as unmeritorious and one that was rightly rejected by Penny J.
    However, that is beside the point on the question of whether the appeal is as
    of right.

[25]

In my view, whether the appeal is as of right
    must be judged by the nature of the order itself, without assuming it was
    correctly or incorrectly made. The nature of the order is to cause payment to
    the Stanbarr Claimants of an amount otherwise payable to CIC, and thus constitutes
    a loss to CIC. That the order was made to give effect to what was determined to
    be a pre-existing obligation relates to the correctness of the order and the
    strength of the grounds of appeal, but is not germane to whether there is an
    appeal as of right from the order.

[26]

Accordingly, the order is appealable as of right
    under s. 193(c) of the
BIA
.

[27]

In light of my conclusion, it is unnecessary to
    consider whether, if leave to appeal were necessary, it should be granted.

DISPOSITION

[28]

The receivers motion is dismissed.

[29]

If costs cannot be agreed to the parties may
    make written submissions not exceeding two pages within 10 days.

B. Zarnett J.A.


