McEwen (Re), 2020 ONCA 511

Can a Court of Appeal panel review and set aside a decision of a single judge of the Court of Appeal refusing leave to appeal pursuant to section 193(e) BIA?

Barbara Carroll, a pedestrian, was struck by a car driven by Robert McEwen and owned by Caroline McEwen. She suffered serious injuries and commenced an action against the McEwens and their insurer, Traders. In 2011, the McEwens made an assignment into bankruptcy and were subsequently discharged from their bankruptcies in 2012.

Carroll’s action proceeded to trial in 2015 and Carroll was awarded damages. A judgment was issued that stated the McEwens were liable to Carroll for damages of $2.418 million, consisting of $186,000 in general damages and $2.232 million in future care costs. The judgment against the McEwens personally was limited to the limits of their insurance policy in the amount of $1 million.

Prior to the issuance of the formal Judgment, Carroll asked the bankruptcy trustee for the McEwens to reopen the bankruptcy in order to file a proof of claim for the portion of the judgment not satisfied by the insurance policies. The trustee advised that, inter alia, it would consent to Carroll availing herself of the provisions of s. 38 of the Bankruptcy and Insolvency Act (the “BIA“) to take action in her own name. Carroll subsequently moved for and was granted an order under s. 38 of the BIA (the “BIA Order”). The Trustee assigned to Carroll all of its right, title and interest to and in the subject matter of the proposed action.

After Carroll commenced an action for damages based on bad faith, Traders moved to set aside the BIA Order but was ultimately unsuccessful. Traders subsequently filed a motion seeking leave to appeal pursuant to s. 193(e) of the BIA, which was denied. Traders now moved for an order under s. 7(5) of the Courts of Justice Act (the “CJA“) to set aside the order of a single judge of the Court of Appeal that denied it leave to appeal pursuant to s. 193(e) of the BIA.

Carroll argued that under s. 7(5) of the CJA, the Court of Appeal panel had no jurisdiction to review the decision of the chambers judge that denied leave to appeal under s. 193(e) of the BIA. Traders argued that a panel can review and set aside an order denying leave to appeal in exceptional circumstances, including where the judge mistakenly declines jurisdiction by acting on a wrong principle or by applying the wrong test such that the judge did not reach a decision on the merits of the motion.

Under s. 193(e) of the BIA, motions for leave to appeal are to be heard by a single judge of the appellate court. The Bankruptcy and Insolvency General Rules do not contain any specific procedure for reviewing the decision of a single judge of a provincial appellate court that denies leave to appeal under s. 193(e). Given the absence of a specific provision, the combined language of s. 183(2) of the BIA and r. 3 of the General Rules suggests that a party could seek a CJA s. 7(5) panel review of a decision of a single judge in accordance with its “ordinary procedure”.

Good policy reasons exist to limit the circumstances in which a panel of the appellate court can review the decision of a single chambers judge denying leave to appeal. Nevertheless, there must be an avenue of redress in exceptional cases. Exceptional cases include where the judge “mistakenly declines jurisdiction” on a leave motion.

The panel held that the exception applied in this case because the reasons of the Chambers Judge did not disclose that he reached a decision on the merits of Traders’ leave to appeal motion, resulting in him mistakenly declining jurisdiction. His reasons did not explain how he dealt with the critical issues that Traders argued merited granting leave to appeal. In his reasons, the Chambers Judge noted that “the motion judge found that the moving party had no standing to attack the proof of claim or the s. 38 order”. However, the reasons provided no explanation as to why the Chambers Judge did not consider Traders’ argument that it was an aggrieved person entitled to review the Trustee’s acts and decisions under a. 37 of the BIA. Nor did the reasons consider whether Traders fell within one of the recognized exceptions to the general rule that a proposed defendant could not seek to review a s. 38 order.

The reasons of the Chambers Judge were not sufficient to explain why he denied Traders leave to appeal, which leads the panel to conclude that the Chambers Judge declined jurisdiction by not making a decision on the merits of the leave motion. In the circumstances, the appellate panel was entitled to review under the Chambers Judge’s refusal to grant leave to appeal.

CounselHarvey Chaiton of Chaitons LLP and Alan Rachlin of Rachlin & Wolfson LLP for the moving party, Traders General Insurance Company and Joseph Obagi of Connolly Obagi LLP for the responding parties, Barbara Lynn Carroll et al.

Judges: David Brown J.A, E.E. Gillese J.A. and David M. Paciocco J.A. 




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