Royal Bank of Canada v. Bodanis, 2020 ONCA 185

Is a bankruptcy order appealable as of right?

Both Debtors owed monies to the Royal Bank of Canada (“RBC“) and others pursuant to various judgments and costs awards totalling in the hundreds of thousands of dollars. They have owed these monies, in some cases, for many years. 

In November 2018, RBC commenced bankruptcy applications against the Debtors. A trial was held on these applications and, on August 12, 2019, the trial judge granted bankruptcy orders. The Debtors then filed appeals from those orders. RBC brought a motion for an order that the Debtors did not have an appeal as of right, but rather must seek leave to appeal.

The conclusion on this issue turned on the wording of s. 193 of the Bankruptcy and Insolvency Act (the “BIA“), which reads:

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.

The Court concluded that ss. 193(a) and (b) did not apply in this case. A bankruptcy order does not involve future rights. Similarly, there was no evidence in this case that the bankruptcy orders would likely affect another case raising the same or similar issues in the same bankruptcy proceedings. However, the Court held that the remaining provisions did apply, specifically s. 193(c).

The value of the property involved in this appeal exceeded $10,000. RBC argued that the bankruptcy orders, which appoint a Trustee in Bankruptcy, simply preserve the assets of the bankrupt and therefore do not “involve” property of more than $10,000. The Court noted that a Trustee in Bankruptcy does not require court approval in order to monetize the bankrupt’s assets. Therefore, section 193(c) properly applies where an appellant Debtor’s entire property has been taken out of their control and placed into the hands of a Trustee, who has the right to dispose of that property and distribute it among the creditors, without further court intervention.

As such, each of the Debtors were entitled to appeal as of right.

That conclusion then raised a second issue: should the Court cancel the automatic stay that results from an appeal? In determining this issue, courts will principally consider two factors:
  1. the merits of the appeal; and
  2.  the relative prejudice to the parties.
In this case, while the appeals were not entirely meritless, they appeared to only challenge either the trial judge’s exercise of discretion in refusing an adjournment, or his factual findings that an act of bankruptcy had been committed. The Court noted that the chances of success were not very high. Moreover, the Court held that there would be no prejudice to the Debtors if the automatic stay was cancelled. The Debtors’ sole significant asset was their residence, which was already the subject of proceedings by the Toronto-Dominion Bank. Consequently, the Court concluded that the automatic stay under s. 195 of the BIA should be cancelled.
 
CounselRachel Moses of Minden Gross for the moving party and Scott Rosen for the responding parties.
 

Fullcase: http://canlii.ca/t/j5s6w

 

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