Canada: (Not) So Long, Astoria: Only 10 Days To Appeal Orders In Receivership Proceedings

In Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, ("Astoria") the Ontario Court of Appeal recently held that appeals of decisions rendered pursuant to receivership orders issued under the authority of section 243 of the Bankruptcy and Insolvency Act (Canada) (the "BIA") and section 101 of the Courts of Justice Act (Ontario) (the "CJA") are subject to the much shorter and more restrictive appeal provisions in the BIA. While Astoria was specifically addressing an appeal of a decision refusing to grant leave to bring an action against the receiver, the reasoning seems applicable to broad range of decisions in the receivership context, such as approval and vesting orders, lift stays and fee approvals.

Background

Business Development Bank of Canada, a secured creditor of Astoria Organic Matters Ltd. ("Astoria"), obtained an order from Hainey J. appointing BDO Canada Ltd. ("BDO") as receiver with respect to Astoria. Consistent with the model order of the Commercial List, the Order stated that it was issued pursuant to both section 243 of the BIA and section 101 of the CJA and contained the following standard "leave to sue" provision requiring leave before any action could be commenced against the receiver:

  1. THIS COURT ORDERS that no proceeding or enforcement process in any court or tribunal (each, a "Proceeding"), shall be commenced or continued against the Receiver except with the written consent of the Receiver or with leave of this Court.

BDO sold assets to SusGlobal Energy Belleville Ltd. ("SusGlobal"). Shortly after closing, SusGlobal alleged that BDO had breached obligations owed to it under the Asset Purchase Agreement and brought an application for leave to sue BDO. McEwen J. dismissed the application. SusGlobal filed an appeal of that decision after the 10-day appeal period provided in the BIA had expired but within the 30-day appeal period under the CJA. The sole issue on appeal to the Ontario Court of Appeal was which appeal period governed.

Express and Implied Statutory Authority

The Court of Appeal considered whether the leave to sue provision was included in the appointment order under authority conferred by the BIA, the CJA or both. Section 243 of the BIA, which was added in 2009, authorizes a court to appoint a national receiver over the assets of a debtor in all provinces:

Court may appoint receiver

243 (1) Subject to subsection (1.1), on application by a secured creditor, a court may appoint a receiver to do any or all of the following if it considers it to be just or convenient to do so:

(a) take possession of all or substantially all of the inventory, accounts receivable or other property of an insolvent person or bankrupt that was acquired for or used in relation to a business carried on by the insolvent person or bankrupt;

(b) exercise any control that the court considers advisable over that property and over the insolvent person's or bankrupt's business; or

(c) take any other action that the court considers advisable. [emphasis added]

In Ontario, section 101 of the CJA also provides authority to appoint a receiver and has a separate provision, lacking in the BIA, which gives the Court the authority to include "such terms as are considered just":

Injunctions and receivers

101 (1) In the Superior Court of Justice, an interlocutory injunction or mandatory order may be granted or a receiver or receiver and manager may be appointed by an interlocutory order, where it appears to a judge of the court to be just or convenient to do so.

Terms

(2) An order under subsection (1) may include such terms as are considered just.  [emphasis added]

The jurisdiction of a court to make any particular order is either derived from statute or from its inherent jurisdiction. In the context of insolvency legislation such as the BIA, the courts look first to statutory authority and exhaust their statutory interpretive function before resorting to inherent jurisdiction (Century Services Inc. v. Canada (Attorney General), 2010 SCC 60 at paras. 64-65). Statutory authority includes the powers expressly granted by statute and, by implication, "all powers which are practically necessary for the accomplishment of the object intended to be secured by the statutory regime created by the legislature" (ATCO Gas & Pipelines Ltd. v. Alberta (Energy & Utilities Board), 2006 SCC 4 at para. 51).

It seems pretty clear that section 243 of the BIA does not provide the express authority to include terms such as a leave to sue provision in receivership appointment orders. While the Court in Astoria appeared reticent to concede this point, seeming to key on the language "if it considers it just and convenient to do so" as conferring some independent authority, section 243 only expressly confers the authority to appoint a receiver to take actions that the court considers advisable. It does not contain a provision similar to section 101(2) of the CJA authorizing the Court to include such terms in the appointment as the court considers just. This seems like a legislative oversight and should be rectified in the BIA.

As a result, the issue was whether authority to include such leave to sue provisions could be implied under the "doctrine of necessary implication" as it was practically necessary to accomplish the objective intended to be secured by the appointment of a national receiver.

Implied Authority Under BIA to Include Terms Essential to Appointment of Receiver

The Court noted the lengthy history of leave to sue provisions being included in receivership appointment orders prior to the addition of section 243 to the BIA. They are included in the model receivership appointment orders developed in Ontario, Alberta, British Columbia and Nova Scotia. The Court stated that Parliament must be taken to have included the authority to make such orders that were essential and commonplace to the appointment of a receiver:

It is unlikely that Parliament would have authorized the court to appoint a receiver and at the same time excluded the power to do so with provisions considered to be essential to the court's role in a receivership... A leave to sue provision is essential to a receivership; it is required to preserve the integrity of the court's role as supervisor of the receivership. (Astoria at para. 46 [emphasis added])

Additionally, the Court noted that the purpose of enacting section 243 was to allow the appointment of a national receiver to increase efficiency and eliminate the need to apply for the appointment in multiple jurisdictions. If the Court did not have the authority to include the leave to sue protection under the BIA which applies nationwide, the receiver would have to seek that relief under the CJA and comparable legislation in each of the other provinces, which is exactly the patchwork relief that section 243 was designed to avoid.

For those reasons, the Court held that the authority to include leave to sue provisions could be implied into the BIA under the doctrine of necessary implication:

By expressly empowering a court, in the BIA, to appoint a receiver as a court officer authorized to take a broad range of actions when just or convenient to do so, Parliament must be taken to have clothed the court with the power to make orders that are essential to the functioning of its officer, the court-appointed national receiver, and to the court's role in supervising it. (Astoria at para. 51)

Paramountcy: BIA Appeal Provisions Govern

Accordingly, the leave to sue provision could have been based under either the authority of the BIA or the CJA and the appeal provisions in the BIA and the CJA both arguably applied. Pursuant to the doctrine of paramountcy, the Court held that the more restrictive appeal provisions in the BIA governed:

In cases like this, where the court's power may be grounded in the BIA or the CJA, the doctrine of paramountcy would prevent an appellant from resorting to the CJA appeal provisions as they are in operational conflict with those of the BIA in respect of timing and leave requirements. To the question "May one appeal without leave and do so after 10 days have expired?" one enactment says "yes" and the other says "no", meeting the test for operational conflict. (Astoria at para. 67)

More Restrictive Appeal Provisions May Govern in Broad Range of Circumstances

While Astoria dealt with the narrow issue of whether the BIA conferred authority to include leave to sue provisions as part of a receivership appointment order, the reasoning in the decision would apply equally to all terms in an appointment order that are necessary for the accomplishment of the objective of section 243 of the BIA. Since the objective is to avoid a receiver being required to seek the specified relief in multiple jurisdictions, one could certainly argue that section 243 confers the implied authority to include all of the material provisions in the model receivership appointment order, including, among others:

  1. The authority of the receiver to take possession of and secure the property of the debtor, carry on the business of the debtor, collect receivables and continue litigation;
  2. The authority of the receiver to obtain approval and vesting orders to convey the property of the debtor free and clear of encumbrances;
  3. The stay of proceedings against the debtor, and applications to lift the stay of proceedings;
  4. The prohibition on discontinuing or altering supply under existing agreements, and applications for leave against that prohibition;
  5. The authority to distribute proceeds to creditors;
  6. Passing accounts of the receiver and its counsel;
  7. Limitations on the receiver's liability for employment, environmental and other liabilities; and
  8. Borrowing by the receiver.

Based on the Court's reasoning in Astoria, the more restrictive appeal provisions in the BIA will likely apply to all judicial decisions related to these provisions.

Takeaways

  1. The Commercial List Users Committee in Ontario should consider removing the reference to section 101 of the CJA in the model receivership appointment order as, based on Astoria, it is entirely superfluous.
  2. Debtors, creditors, receivers and other stakeholders in a receivership should ensure that any appeals of decisions made in receivership proceedings are filed within 10 days of such decision moving forward.
  3. Potential appellants must also consider whether their appeal fits within one of the following four categories where an appeal to the Court of Appeal exists as of right, otherwise, they must bring an application for leave to appeal to a single judge of the Court of Appeal: 

    1. if the point at issue involves future rights;
    2. if the order or decision is likely to affect other cases of a similar nature in the bankruptcy proceedings;
    3. if the property involved in the appeal exceeds in value ten thousand dollars; or
    4. from the grant of or refusal to grant a discharge if the aggregate unpaid claims of creditors exceed five hundred dollars (BIA, s. 193).

To view the original article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions