Canada: Court Counsels Engagement With Creditor Before Ruling On Proofs Of Claim

Last Updated: September 23 2019
Article by Jeffrey Levine and Guneev Bhinder

A Manitoba Court recently offered guidance on how to approach an appeal from a notice of disallowance or determination of a claim under section 135(4) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 (“BIA”).  Existing jurisprudence provided conflicting positions on whether to treat such appeals as true appeals or a hearing de novo. True appeals generally restrict the evidentiary record before the court to the evidence that was before the trustee. In a de novo hearing, the appeal court considers fresh evidence as a matter of course.   

Three lines of cases exist. One line of cases holds that appeals from a notice of disallowance are de novo appeals. A second line of cases holds that such appeals are true appeals and are determined on the record as presented to the trustee. Third, certain cases have called for a hybrid approach where the appeal is treated as a de novo hearing only where required in the interests of justice.

In Re 5274398 Manitoba Ltd o/a Cross Country Manufacturing (Bankrupt), 2019 MBQB 89 (“Cross Country”), the Manitoba Court of Queen’s Bench concluded that a hybrid approach was best. The Court allowed the filing of further evidence on the facts of the case.


The debtor company, Cross Country, filed a proposal pursuant to the BIA. Bellhop Express Corp (“Bellhop”) submitted its proof of claim a day before the creditors’ meeting and registered its vote against the proposal. Prior to the meeting, the trustee disallowed Bellhop’s claim for voting purposes and, therefore, disregarded Bellhop’s vote. Subsequently, the court approved the proposal. Following the approval, the trustee further considered Bellhop’s proof of claim on the strength of an affidavit of Bellhop’s president filed in support.

As part of its consideration of the claim, the trustee requested and received certain information from representatives of Cross Country. The trustee then disallowed Bellhop’s claim partly based on the new information received. However, Bellhop was not privy to the information of Cross Country disclosed to the trustee, and thus had no opportunity to respond to it. 

Bellhop appealed the trustee’s decision. At the appeal hearing, Bellhop sought to introduce another affidavit from the president setting out evidence that had not been provided to the trustee before it ruled on the claim. Before deciding whether the disallowance was proper, the Court considered whether the fresh evidence ought to be admitted on appeal.

The Court’s Analysis

The Manitoba Court noted that the trustee must maintain an even hand between the various stakeholders, including the claimants whose claim is then under consideration, when assessing proofs of claim. The Court observed that it is not unusual in the course of assessing a proof of claim for a trustee to engage in negotiation with a claimant with a view to finding a compromise. With this practice in mind, the Court went through an analysis of the amendments to the BIA, authorities addressing appeals prescribed by statute and conflicting policy interests as to whether an appeal from a notice of disallowance should be a true appeal or a hearing de novo.

The Court adopted a hybrid approach. In this compromise approach, by default the appeal is on the record that was before the trustee. However, a party will be granted leave to file additional materials if the interests of justice require it. The Court acknowledged the risk of “the interests of justice” being too wide a concept which may encourage claimants to seek leave to file additional supporting evidence in every case. But the Court concluded that the pre-condition of obtaining leave should act as an incentive for a claimant to be diligent in the provision of support filed together with its proof of claim.

In Cross Country, the interests of justice called for the granting of leave to file further evidence, because the claimant should not have been deprived of an opportunity to address information the trustee had received when making its own investigation about Bellhop’s proof of claim.  After all, audi alteram partem – or “hear the other side” – is a principle of natural justice that should not be denied without good reason.


In the end, the Court in Cross Country dismissed the appeal, holding that the trustee had come to a reasonable conclusion on each aspect of the claim even having considered the fresh evidence.  The case is nevertheless helpful for the extensive guidance it offers trustees as to the treatment of claims which have the appearance of some substance.  In particular, the Court counseled as follows:

31…Rather than dealing with it primarily on the basis of the gaps in the materials attached to the Proof of Claim, it would have been prudent for the Trustee to raise its specific concerns with counsel for Bellhop before simply casting the claim aside. Relying too heavily on the proposition that a claimant has the onus of proving its claim upon its initial filing will many times result in an appeal in which the claimant is entitled to file additional material because it did not anticipate the concerns expressed in the Notice of  Disallowance.

32 In my respectful view, one of the ways that a Trustee might avoid the claimant's use of additional evidence in an appeal would be to telegraph its decision to the claimant in advance of the formal Notice of Disallowance and seek the claimant's comments, if any, before issuing its decision. If the claimant failed to respond, or respond appropriately, then it will have a more difficult task in obtaining leave to give further evidence if it launches an appeal to the court. Alternatively, the use of the examination sections under the BIA might assist the Trustee in cases in which the evidence provided with the Proof of Claim is deficient, since then, the Trustee might invite the claimant to fill in the gaps and avoid the argument at a subsequent time that the claimant was not given enough opportunity to advance its position. Neither of these two alternatives are mandated, and in many cases may not be appropriate. However, in some cases, taking advantage of them may save the Trustee (and the estate) additional time and expense in the long run.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2019

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

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

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
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 (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

To Use 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.


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.


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