Oct 6, 2020

Keywords: Jurisdiction; Bankruptcy and Insolvency Act, RSC 1985, c B-3; Construction Act, RSO 1990, c C.30

Synopsis:

A Receiver is appointed pursuant to an Order under s. 243(1) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 [BIA] and s. 101 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

The Receiver then brings a motion for directions and the Ontario Superior Court of Justice makes a determination that certain construction lien claimants have priority over a mortgagee. The motion concerns the proceeds from the sale of a debtor’s property, under s. 78 of the Construction Act, RSO 1990, c C.30.

The parties dispute the determination of the Superior Court of Justice and agree to separate this issue from other issues in the receivership. They seek a further ruling from the Court of Appeal, based on an agreed statement of facts. The question: does an appeal lie to the Court of Appeal or the Divisional Court? As set out by the Court of Appeal at paras. 3-4, if s. 193 of the BIA (a federal statute) governs the appeal route, then jurisdiction lies with the Court of Appeal:

193 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.

On the other hand, if s. 71(1) of the Construction Act (a provincial statute) applies, an appeal lies to the Divisional Court as of right:

71(1) Except as otherwise provided in this section, an appeal lies to the Divisional Court from a judgment or an order on a motion to oppose confirmation of a report under this Act.

Citing Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, the Court of Appeal determines that, because the Order under appeal was “granted in reliance on jurisdiction under the Bankruptcy and Insolvency Act”, the appeal route is to the Court of Appeal. (See para. 12).

Importance:

The Court of Appeal described the “operative question” when determining an appeal route in this context as “whether the order under appeal is one granted in reliance on jurisdiction under the Bankruptcy and Insolvency Act. Where it is, the appeal provisions of that statute are applicable.” (See para. 5).

But what happens when there is more than one potential source of jurisdiction for the Order under appeal? Here, the Order under appeal was granted partly in reliance on the BIA – the Order itself confirmed the motion was brought “to determine competing priorities under … the Construction Act … between certain construction liens and a registered real property mortgage”, in an “APPLICATION UNDER Section 243(1) of the Bankruptcy and Insolvency Act and Section 101 of the Courts of Justice Act”. (See para. 10).

In this context, the Court of Appeal noted that, “[e]ven if provincial law is also a source of jurisdiction for the order under appeal and provides for a different appeal route, the principle of federal paramountcy resolves any conflict in favour of the appeal route under the Bankruptcy and Insolvency Act”. (See para. 6).

At the same time, the Court of Appeal acknowledged that “the mere act of styling the motion in the receivership” is insufficient. As stated in RREF II BHB IV Portofino, LLC v. Portofino Corporation, 2015 ONCA 906, the jurisdiction of the Court of Appeal depends on the substance of the Order being appealed. (See para. 11). Ultimately, the Court of Appeal determined that the substance of the Order was s. 249 of the BIA; that the purpose of the underlying motion for directions was to help the Receiver distribute funds in the receivership. (See para. 11).

What does this mean for future litigants? The Court of Appeal appears to be saying appellate jurisdiction with respect to a motion brought in reliance on the BIA and another provincial statute is to be determined on a case-by-case basis, with regard to the form and substance of the underlying motion. It remains to be seen whether the parties will bring a Leave to Appeal in the S.C.C. Qui vivra, verra.

Counsel for the Moving Party (Crowe Soberman Inc.): Brendan Bissell (Goldman, Sloan, Nash & Haber LLP, Toronto)

Counsel for the Responding Party (Donald Dal Bianco): David Ullmann and Brendan Jones (Blaney McMurtry LLP, Toronto)

Counsel for the Responding Party (Deep Foundations Contractors Inc.): Harold Rosenberg (Battiston & Associates, North York)

Counsel for the Responding Party (Kieswetter Excavating Inc.): Edward D’Agostino (Oldfield, Greaves, D’Agostino & Scriven, Waterloo)

Counsel for the Responding Party (EXP Services Inc.): Jeffrey Armel (Koskie Minsky LLP, Toronto)

Counsel for the Responding Party (Maxion Management Services Inc.): Eric Gionet (Dooley Lucenti, Barristers & Solicitors, Barrie)

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