Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269

What statute governs an appeal when a receiver is appointed under both the BIA and CJA?

BDO Canada Ltd. (“BDO”) was appointed receiver of two debtor companies under both Canada’s Bankruptcy and Insolvency Act (the “BIA“) and Ontario’s Courts of Justice Act (the “CJA“). The receivership order contained a “leave to sue provision” under which the receiver cannot be sued without consent or leave of the court.

The Appellant appealed from the orders of the Superior Court, which denied it leave to sue BDO in its capacity as receiver and further denied its request to re-open the original application for leave so that the Appellant could file fresh evidence. The orders were based on a finding that the BIA, not the CJA, was the governing authority for the appeal, since the root authority under which BDO was appointed was s. 243(1) of the BIA. Further, the provisions of the BIA that provide for appeals as of right, including s. 193(c), were not applicable in this case.

The Appellant asserted that it could appeal the Superior Court’s decisions as of right under s. 6(1)(b) of the CJA because they were final orders of a judge of the Superior Court. It argued that provincial laws governing receivers are not rendered inoperative by s. 243 of the BIA. As long as there is no operational conflict between provincial and federal law, and the provincial law does not frustrate the federal law’s purpose, the provincial law continues to apply alongside the federal law. Since the Superior Court’s orders gave effect to a provision of the receivership order that was made under the CJA, the appeal from such a decision should be governed by the CJA, even if other aspects of the receivership order were authorized by the BIA.

The question of how one determines the applicable appeal route when a receiver has been appointed under s. 243(1) of the BIA and under provincial law was addressed in Industrial Alliance Insurance and Financial Services Inc. v. Wedgemount Power Limited Partnership, 2018 BCCA 283, 61 C.B.R. (6th) 196. The Court confirmed that where relief is sought under both provincial law and the BIA, the appeal provisions contained in the BIA are engaged when the order under appeal is one granted in reliance on jurisdiction under the BIA.

A leave to sue provision is required to preserve the integrity of the court’s role as supervisor over the preservation and realization of the assets within its administration. The court has an obligation, in ensuring the properly and orderly conduct of the receivership, to protect the estate from groundless or unjustified proceedings. The essential and customary nature of a leave to sue provision in court-ordered receiverships informs the analysis of the source of the court’s authority to include it.

Section 243(1) of the BIA was enacted against the backdrop of already existing provincial legislation authorizing the appointment of receivers. There are similarities among the language of the CJA and the BIA. Both speak of the court appointing a receiver when it considers it to be just or convenient to do so. Further, the Supreme Court of Canada has clarified that, in the insolvency context, statutory authority is to be considered before inherent jurisdiction. A finding of statutory authority makes any reference to inherent jurisdiction unnecessary.

The modern approach to statutory interpretation instructs a court to consider the words of a statute “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”. While there is a presumption that the plain meaning of a statute’s words reflect Parliament’s intention, that plain meaning is only one aspect of the modern approach. The court must read statutory provisions in their entire context. This involves considering “the history of the provision at issue, its place in the overall scheme of the Act, the object of the Act itself, and Parliament’s intent both in enacting the Act as a whole, and in enacting the particular provision at issue”.

A proper understanding of the language of s. 243(1) leads to the conclusion that Parliament must be taken, by necessary implication, to have clothed the court with the power to require leave to sue a receiver appointed under s. 243(1). 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. It is also unlikely that Parliament intended the court to appoint a receiver when just or convenient while depriving the court of the power to include an essential term in the appointment. 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.

Reading s. 243(1) as providing the power to include a leave to sue provision accords with Parliament’s purpose in enacting s. 243(1): “the establishment of a regime allowing for the appointment of a national receiver, thereby eliminating the need to apply for the appointment of a receiver in multiple jurisdictions” and increasing efficiency. The power to include a leave to sue provision in a receivership order is thus necessarily implied by the statutory power to appoint a receiver in s. 243(1).

Reading s. 243(1) and the court’s powers thereunder as sufficiently flexible to authorize a wide range of conduct dealing with the taking, management, and eventual disposition of the debtor’s property is consistent with the court having the power to include a leave to sue provision in a receivership order. A receiver directed by the court to take possession and control of property and to sell it, for example, may be subject to claims by those with whom the court has directed or authorized the receiver to deal. This is a central reason for the leave to sue provision’s necessity.

The SCC endorsed the hierarchical approach to interpreting insolvency legislation, holding that courts should first look to statutory authority, exhausting their statutory interpretive function before resorting to inherent jurisdiction. Accordingly, referring to a power as flowing from inherent jurisdiction does not necessarily take an appeal out of the BIA stream. It does not matter that a leave to sue provision is or could also be grounded in the CJA power to appoint a receiver. As long as the BIA is one of the sources that authorizes the leave to sue provision, an appeal from an order made under it necessarily implicates a provision sourced in the BIA.

The Court concluded that the authority that grounded the Superior Court’s refusal to grant the Appellant’s leave to sue BDO is found in both the BIA and the BJA. Federal paramountcy dictates that the BIA appeal provisions governs. The Court consequently dismissed the Appellant’s motion.

CounselMelvyn Solmon and Rajiv Joshi of Solmon Rothbart Goodman LLP and Frank Bennett of Bennett & Company for the moving party SusGlobal Energy Belleville Ltd. and Steven Graff and Miranda Spence of Aird & Berlis LLP, for the responding party BDO Canada Ltd.

 

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