Canada: Restrictive BIA Appeal Provisions Continue To Be Applied Broadly In Receiverships

Last Updated: November 6 2019
Article by Restructuring Roundup and Trevor Courtis

In a previous article, we discussed the Ontario Court of Appeal's decision in Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, which commented extensively on whether an appeal of a decision in receivership proceedings was subject to the more restrictive appeal provisions in the Bankruptcy and Insolvency Act (Canada) (the "BIA") or the regular civil appeal provisions in the Courts of Justice Act (Ontario).

We noted that while Astoria dealt with the narrow issue of the appropriate appeal period for decisions granting or refusing leave to sue the receiver, the reasoning in the decision would apply equally to all terms in a receivership appointment order that are necessary for the accomplishment of the objective of section 243 of the BIA. We listed a number of material provisions in the model receivership appointment order that this reasoning could apply to, including:

  1. The authority of the receiver to obtain approval and vesting orders to convey the property of the debtor free and clear of encumbrances; and
  2. The authority to distribute proceeds to creditors.

Since Astoria was released in April 2019, two appellate decisions have been released confirming our supposition that decisions engaging these provisions are subject to the more restrictive BIA appeal provisions.

Third Eye Capital: Approval and Vesting Orders

In Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, which we previously discussed in depth with respect to its central discussion of the appropriate framework for vesting out rights in property, the Ontario Court of Appeal also held that an appeal of an approval and vesting order was governed by the BIA appeal provisions as (i) the power to sell assets was an essential component of the receiver's powers, and (ii) the ability to obtain an approval and vesting order with respect to those sales was incidental and ancillary to that power.

The Court dismissed the appeal as it was not filed within the 10-day appeal period provided in the BIA and an extension of time was not appropriate in the circumstances.

Forjay Management: Distribution Orders

In Forjay Management Ltd. v. 625536 B.C. Ltd., 2019 BCCA 368, the motions judge granted an order authorizing the receiver to distribute proceeds of sale to a secured creditor and dismissed the request by another secured creditor, 625, to impose terms on the distribution that would protect its interests. 625 filed its appeal after the 10-day appeal period provided in the BIA had expired.

625 argued that it was appealing the refusal by the motions judge to impose terms and conditions on the distribution order pursuant to the Rule 13-1(19) of the Supreme Court Civil Rules (BC) which provides the court with the general jurisdiction to impose terms and conditions when making an order, and thus the civil appeal provisions governed and its appeal was not out of time.

The British Columbia Court of Appeal held that the BIA appeal provisions governed. While the BIA did not explicitly provide the court with authority to make a distribution order, such orders were practically necessary for the accomplishment of the objectives of receiverships and the jurisdiction to make them was thus granted by implication. The Court noted that the receivership appointment order included a provision authorizing the receiver to apply to the court for advice and directions on the discharge of its powers and duties. The distribution order was such an order.

The Court dismissed the appeal as it had been filed late and an extension of time was not appropriate in the circumstances.

Takeaways

These decisions buttress our prior advice that debtors, creditors, receivers and other stakeholders in a receivership should ensure that appeals of any decisions made in receivership proceedings are filed within 10 days of such decision and meet either the criteria for an appeal as of right under section 193 of the BIA, or the test for leave to appeal set out in Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282 at para. 29.

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