COURT OF APPEAL FOR ONTARIO

CITATION: msi Spergel Inc. v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550

DATE: 20131002

DOCKET: C56626

Feldman, Sharpe and Strathy JJ.A.

In the Matter of the Bankruptcy of Cosimo Dilollo

msi
    Spergel Inc., as Trustee of the

Estate
    of Cosimo Dilollo, a Bankrupt

Applicant (Appellant)

and

I.F. Propco Holdings (Ontario) 36 Ltd.

Respondent

(Respondent in Appeal)

APPLICATION UNDER section 95 of the
Bankruptcy
    and Insolvency Act
,     R.S.C. 1985 c. B-3, as amended

Mervyn D. Abramowitz, and Philip Cho, for the appellant

Harvey Chaiton and Douglas A. Bourassa, for the
    respondent

Heard: June 3, 2013

On appeal from the order of Justice David M. Brown of the
    Superior Court of Justice, dated January 29, 2013, with reasons reported at
Dilollo
    (Re)
, 2013 ONSC 578.

Strathy J.A.:

[1]

Under s. 195 of the
Bankruptcy and Insolvency Act
, R.S.C.
    1985, c. B-3, as amended (the
BIA
), a bankruptcy order is stayed
    upon the filing of an appeal. This appeal raises the issue of whether that stay
    suspends the limitation period applicable to a motion by a trustee to set aside
    a preferential payment by a bankrupt under s. 95 of the
BIA
.

[2]

The motion judge found that the limitation period was not suspended by
    the stay and dismissed the preference motion as time-barred. For the reasons
    that follow, although I do not agree entirely with the motion judges analysis,
    I agree with his conclusion and would dismiss the trustees appeal.

A.

The Facts

[3]

On July 6, 2006, the respondent, I.F. Propco Holdings (Ontario) 36 Ltd.
    (Propco), obtained a default judgment against the bankrupt, Cosimo Dilollo (Dilollo),
    for $22,031,787.67.

[4]

On December 15, 2006, Propco brought a bankruptcy application against
    Dilollo. Ultimately, Propco and Dilollo agreed to compromise Propcos judgment
    for $1.2 million. They agreed that if this sum was paid, both parties would
    consent to the dismissal of Propcos bankruptcy application and would exchange
    releases.

[5]

Between August and December, 2007, Dilollo paid $1,136,500, which,
    although less than the agreed amount, Propco accepted in satisfaction of the
    settlement. As matters transpired, the bankruptcy application was not dismissed
    and releases were not exchanged. By early 2008, Propcos bankruptcy application
    remained outstanding and by order dated May 22, 2008, three other creditors
    were added as applicants to it.

[6]

On June 5, 2009, the bankruptcy application was heard by Morawetz J.
    Dilollo admitted at the hearing that he had settled Propcos claim for
    something around $1.185 million. A bankruptcy order was made on January 11,
    2010, and a trustee was appointed. In his endorsement granting the application,
    Morawetz J. referred to the settlement of the debt between Propco and Dilollo
    for $1.185 million.

[7]

On January 20, 2010, Dilollo filed an appeal from the bankruptcy order.
    This court dismissed that appeal on September 27, 2010.

[8]

At the first meeting of creditors on May 31, 2011, the appellant, msi Spergel
    Inc. (the Trustee), was appointed in place of the original trustee.

[9]

On August 24, 2012, the Trustee brought a motion under s. 95 of the
BIA
for a declaration that the $1.1365 million paid by Dilollo to Propco under
    the settlement constituted a preference and sought an order that Propco repay
    that amount to the Trustee.

[10]

Propco,
    for its part, brought a motion for an order that the Trustees claim was
    time-barred by the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B
    (the
Limitations Act
). Alternatively, it sought an order that if the
    Trustees claim was not time-barred, it was entitled to file a proof of claim
    in Dilollos estate for the full amount of its $22,031,787.67 judgment. Propco
    said that if the preferential payment was set aside, the settlement agreement
    under which the payment had been made should also be set aside, with the result
    that the full amount of its claim was outstanding and provable in the
    bankruptcy. The difference was important, because if Propco could file a claim
    for the full amount of the judgment, it would account for about 90% of the
    value of proven claims.

B.

Statutory Provisions

[11]

The
    Trustee brought its motion to set aside the payment to Propco as a preference
    under s. 95(1)(a) of the
BIA
:

(1) A transfer of property made, a
    provision of services made, a charge on property made, a payment made, an
    obligation incurred or a judicial proceeding taken or suffered by an insolvent
    person

(a) in favour of a creditor who is
    dealing at arms length with the insolvent person, or a person in trust for
    that creditor, with a view to giving that creditor a preference over another
    creditor is void as against  or, in Quebec, may not be set up against  the
    trustee if it is made, incurred, taken or suffered, as the case may be, during
    the period beginning on the day that is three months before the date of the
    initial bankruptcy event and ending on the date of the bankruptcy.

[12]

There
    is no limitation period in the
BIA
applicable to the time within which
    the trustee is required to bring a motion to set aside a preference. In
Edwards
    Estate v. Food Family Credit Union
, 2011 ONCA 497, 336 D.L.R. (4th) 719,
    at para. 4, this court applied the proposition that general limitation periods
    in provincial statutes apply to bankruptcy proceedings, referring to
Gingras
    v. General Motors
, [1975] 1 S.C.R. 426 and
Employers Liability
    Assurance Corp. v. Ideal Petroleum
, [1978] 1 S.C.R. 230.

[13]

Both
    parties, therefore, agreed that the general two-year limitation period in s. 4
    of the
Limitations Act
applied to the motion to set aside the
    preference. That section provides:

Unless this Act provides otherwise, a
    proceeding shall not be commenced in respect of a claim after the second
    anniversary of the day on which the claim was discovered.

[14]

The
    Trustee acknowledged that it was aware of the potential preference claim on
    January 11, 2010, the date of release of the reasons of Morawetz J. granting
    the bankruptcy order. It also conceded that the limitation period began on the
    date of the bankruptcy order, but argued that Dilollos appeal to this court
    suspended the running of the limitation period pending the disposition of the
    appeal. It relied in this regard on the combined operation of s. 20 of the
Limitations
    Act
and s. 195 of the
BIA.

[15]

Section
    19 of the
Limitations Act
has the effect of invalidating any
    limitation period not specifically referred to in the Schedule to that Act,
    unless it was in effect on January 1, 2004, and incorporates by reference a
    statutory provision listed in the Schedule. It states:

(1) A limitation period set out in
    or under another Act that applies to a claim to which this Act applies is of no
    effect unless,

(a) the provision establishing it is
    listed in the Schedule to this Act; or

(b) the provision establishing it,

(i) is in existence on January 1,
    2004, and

(ii) incorporates by reference a
    provision listed in the Schedule to this Act.

[16]

However,
    section 20 of the
Limitations Act
provides:

This Act does not affect the extension,
    suspension or other variation of a limitation period or other time limit by or
    under another Act.

[17]

The
    Trustee argued that s. 195 of the
BIA
operated as a suspension of the limitation period pending the appeal
    to this court. That section provides
:

Except to the extent that an order or
    judgment appealed from is subject to provisional execution notwithstanding any
    appeal therefrom, all proceedings under an order or judgment appealed from
    shall be stayed until the appeal is disposed of, but the Court of Appeal or a
    judge thereof may vary or cancel the stay or the order for provisional
    execution if it appears that the appeal is not being prosecuted diligently, or
    for such other reason as the Court of Appeal or a judge thereof may deem
    proper.

[18]

Returning
    to the time periods at issue here, the key dates are as follows:

January 11, 2010             Bankruptcy order

January 20, 2010             Appeal filed by Dilollo

September 27,
    2010        Appeal dismissed by Court of Appeal

January 11, 2012             Two-year
    limitation period expired

August 24, 2012              Preference
    motion commenced

[19]

If
    the stay of proceedings pursuant to s. 195 of the
BIA
during the
    appeal of the bankruptcy order had the effect of suspending the limitation
    period for the preference motion, the limitation period would have expired on September
    18, 2012, and the Trustees preference motion would have been brought in time.
    If the stay did not suspend the limitation period, it would have expired two
    years after the date of the bankruptcy order  that is, on January 11, 2012
    and the preference motion, which was brought about 30 months after the
    bankruptcy order, would have been time-barred.

C.

The Motion Judges Reasons

[20]

There
    were two issues before the motion judge. The first was whether the limitation
    period for the Trustees preference motion was suspended by the stay of
    proceedings in s. 195 of the
BIA
during the pendency of the appeal
    from the bankruptcy order.

[21]

The
    second issue was whether, if the motion was not time-barred, and if the Trustee
    was ultimately successful in voiding the preferential payment under s. 95 of
    the
BIA
, Propco was entitled to file a claim for the full amount of its
    judgment (in excess of $22 million), or was confined to  claiming the
    settlement amount of $1,136,500.

[22]

The
    motion judge found that before s. 20 can apply to extend, suspend or vary a
    limitation period, there must be a limitation period in another statute and
    that other statue must provide for the extension, suspension or other variation
    of
that limitation period
. Since there was no limitation period in s.
    195 of the
BIA
,

and that provision did not purport to suspend
    or extend a limitation period in the
BIA
, the ordinary limitation
    period applied. He expressed this conclusion as follows, at para. 16:

To engage section 20 of the
Limitations
    Act
, 2002
requires that some
    other statute provides for a limitation period and also provides for the
    "extension, suspension or other variation of a limitation period or other
    time limit by or under another Act". Section 195 of the
BIA
does not contain any limitation period or provide for the
    "extension, suspension or other variation" of a limitation period.
    Since
BIA
s. 195 does not purport to extend,
    suspend or vary a limitation period contained in the
BIA
, section 20 of the
Limitations Act, 2002
does not apply. Since no other suspension provision contained in the
Limitations
    Act, 2002
would apply in the circumstances of this case, the
    basic two year limitation period set out in section 4 governs. The parties
    agreed that time started to run on the day the Bankruptcy Order was made, so
    the basic two-year limitation period expired on January 11, 2012, well before
    the Trustee initiated the Preference Motion. That motion, therefore, is
    statute-barred. [Citations omitted.]

[23]

The motion judge also concluded that the stay pending appeal under s.
    195 of the
BIA
was not functionally equivalent to
    a limitation period, and it was open to the Trustee to move to lift the stay if
    so advised. He stated, at para. 17 of his reasons:

That a stay pending appeal might prevent a person
    from taking some step does not alter that conclusion. A stay of proceedings
    pending the hearing of an appeal is not the functional equivalent of a
    limitation period. Limitation periods set deadlines by which a person must
    initiate legal process in respect of a cause of action. Stays pending appeal
    are engaged following the initial disposition of the legal process in which the
    cause of action was asserted. Limitation periods and stays pending appeal
    conceptually are quite different creatures. If a stay might operate to
    prejudice a person's legal rights, recourse generally is available to seek a
    lifting of the stay from the court. Section 195 of the
BIA
specifically provides that "the Court of Appeal or a judge thereof
    may vary or cancel the stay ... for such other reason as the Court of Appeal or
    judge thereof may deem proper". In the present case it was always open to
    the Trustee to seek a lifting of the stay from the Court of Appeal if the
    Trustee thought that its ability to initiate a preference motion might be
    prejudiced by the appeal. As matters transpired, the Trustee was left with
    ample time following the dismissal of the appeal to commence its Preference
    Motion.

[24]

In the result, he found that the Trustees motion was time-barred.
    Although not necessary to do so in the circumstances, the motion judge went on
    to consider whether, if the claim under s. 95(1)(a) of the
BIA
was not statute-barred, and if the payment under the settlement was
    found void as a preference, Propco was entitled to claim for the full amount of
    its judgment or was restricted to the compromised amount. He concluded that the
    Trustee could file a claim for the full amount of the judgment.

D.

The Parties Submissions

[25]

The
    Trustees position, both before the motion judge and in this court, was that
    pursuant to s. 195 of the
BIA
, the appeal of the bankruptcy order
    resulted in an automatic stay of proceedings and suspended the limitation
    period applicable to the s. 95 preference motion. In that case, the preference
    motion would not be statute-barred until two years less nine days
[1]
after the appeal of the bankruptcy order was dismissed by this court on
    September 27, 2010. Under this theory, the preference motion was brought about
    a month before the expiry of the two-year limitation period.

[26]

The
    Trustee submits that the motion judge failed to follow established
    jurisprudence concerning the effect of a stay under the
BIA
on the
    running of limitation periods. It refers to case law under s. 69 of the
BIA
which holds that the limitation period ceases to run for creditors claims
    against the bankrupt while the bankruptcy is in effect
.

[27]

The
    Trustee also submits that the motion judge erred in holding that the absence of
    a limitation period in the
BIA
for bringing a preference motion meant
    that s. 20 of the
Limitations Act
was inapplicable. In this regard,
    the Trustee argues that the motion judge failed to properly consider and apply
    this courts decision in
Joseph v. Paramount Canadas Wonderland
, 2008
    ONCA 469, 90 O.R. (3d) 401.

[28]

Propco
    submits that the motion judge was correct in finding that s. 195 of the
BIA
does not extend, suspend or vary the basic two-year limitation period, because
    it does not contain a limitation period or provide for the extension,
    suspension or other variation of a limitation period. It relies on this
    courts decision in
Guillemette v. Doucet
,

2007 ONCA 743, 88
    O.R. (3d) 90, which it submits makes it clear that s. 20 of the
Limitations
    Act
only applies where the other statute contains
both
a
    limitation period
and
a provision extending, suspending or varying
    that limitation period. Propco also relies on
Joseph
for the
    proposition that a common law extension of the limitation period is not
    available under s. 20.

[29]

Finally,
    Propco distinguishes the authorities under s. 69 of the
BIA
relied
    upon by the Trustee, none of which involved s. 20 of the
Limitations Act
and
    which, it says, are based on English authority inapplicable to Ontarios
    comprehensive limitations regime.

E.

Analysis

[30]

The
    appropriate starting point for the analysis of the issues is the language of
    the statutory provision relied upon by the Trustee to suspend the limitation
    period. Section 195 of the
BIA
states that all proceedings under an
    order or judgment appealed from shall be stayed until the disposition of the
    appeal. It provides, however, that this court or a judge of this court may vary
    or cancel the stay if the appeal is not being prosecuted diligently, or for
    such other reason as the Court of Appeal or a judge thereof may deem proper.

[31]

The
    section contains no limitation period and makes no express reference to the
    extension, suspension or variation of any limitation period. For this reason,
    the motion judge found that s. 20 of the
Limitations Act
was
    inapplicable and the basic two-year limitation period applied.

[32]

I
    agree within this conclusion, but do not agree with the portion of the motion
    judges reasons dealing with the interpretation of s. 20 of the
Limitations
    Act
.

In my view, read together, this courts decisions in
Guillemette
and
Joseph
establish that s. 20 speaks to two situations: (a)
    where a statute contains a limitation period or time limit to which the
Limitations
    Act
does not apply and a provision for the extension, suspension or
    variation of that period or time limit; and (b) where a statute simply contains
    a provision for the extension, suspension or variation of a limitation period
    or other time limit imposed by or under another statute.

[33]

In
Joseph
, Feldman J.A. adopted this interpretation, but found that the
    special circumstances doctrine was a creature of the common law, and could
    not be considered an extension
under
the
Courts of Justice Act
,
    R.S.O. 1990, c. C.43. It is apparent from her reasons that, had she found it to
    be a statutory extension, she would have applied it to the limitation period
    under the
Limitations Act
.

[34]

While
    there is language in
Guillemette
that could be taken to suggest, as
    Propco argues and as the motion judge held, that the operation of s. 20 is
    limited to statutes that contain their own limitation periods, that was not, in
    fact, the result in
Guillemette.
In that case, the limitation period
    in the
Solicitors Act
, R.S.O. 1990, c. S.15, was found to be of no
    effect by virtue of s. 19 of the
Limitations Act
, because it was not
    listed in Schedule A of the statute, but its suspension provision
    nevertheless applied to extend the limitation period in the
Limitations Act
.

[35]

Section
    28 of the
Class Proceedings Act 1992
, S.O. 1992, c. 6, is a
    well-recognized example of such a statutory extension. It suspends the operation
    of the applicable limitation period in favour of class members when a class
    proceeding is commenced. There is no limitation period in the statute itself
    that is suspended, but the statute operates to suspend another statutory
    limitation period applicable to the cause of action: see, for example,
Coulson
    v. Citigroup Global Markets Canada Inc.
, 2012 ONCA 108, 16 C.PC. (7th) 1.

[36]

I
    therefore agree with the Trustees submission that an extension, suspension or
    other variation contained in the
BIA
would be capable of suspending
    the operation of the limitation period in the
Limitations Act
. The
    question is whether s. 195 of the
BIA
has that effect. I agree with
    the motion judges conclusion that it does not.

[37]

The
    Trustee acknowledges that there is no direct authority that a stay under s. 195
    of the
BIA
suspends the limitation period. It submits, however, that
    there is a long line of authority holding that the statutory stay of creditors
    claims under s. 69 of the
BIA
has the effect of suspending the
    limitation period. It submits that the principles contained in the case law
    under s. 69 apply equally to s. 195.

[38]

Section
    69 of the
BIA
and several sections that follow  s. 69.1 (Division I
    proposals), s. 69.2 (consumer proposals) and s. 69.3 (bankruptcies)  provide
    for a stay of proceedings against an insolvent person or debtor, as the case
    may be, after the filing of a notice of intention, after filing a proposal, or after
    a bankruptcy order. The wording of s. 69.3(1), dealing with bankruptcies, is
    typical:

Subject to subsections (1.1) and (2) and sections
    69.4 and 69.5, on the bankruptcy of any debtor, no creditor has any remedy
    against the debtor or the debtors property, or shall commence or continue any
    action, execution or other proceedings, for the recovery of a claim provable in
    bankruptcy.

[39]

Subsection
    (1.1) provides that the stay ceases to apply on the day the trustee is
    discharged. Subsection (2) deals with the claims of secured creditors, who are
    permitted to realize their security unless the court orders otherwise. Section
    69.4 provides that a creditor may apply to the court to have the stay lifted,
    and s. 69.5 permits the collection of withholdings or deductions under
    provincial tax laws.

[40]

These
    provisions promote the objects of the
BIA
by providing an orderly and
    fair distribution of the property of the bankruptcy amongst creditors and by
    preventing proceedings by a creditor that would give that creditor an advantage
    over others: see
Re Cohen
,

[1948] 4 D.L.R. 808 (Ont. C.A.),
    at para. 12.

[41]

These
    provisions stipulate that on the happening of the particular act, no creditor
    has any
remedy
against the debtor or the debtors property (emphasis
    added).

[42]

Although
    the heading of these provisions refers to a stay of proceedings, they
    accomplish this result by preventing the exercise of the creditors remedy
    the cause of action.

[43]

This
    court has, on a number of occasions, adopted the definition of cause of
    action propounded by Morden J.A. in
July et al. v. Neal
(1986), 57
    O.R. (2d) 129 (C.A.), at p. 137, adopting the words of Lord Diplock in
Letang
    v. Cooper
, [1965] 1 Q.B. 232 (C.A.) at pp. 242-3:
a factual situation the existence of which entitles
    one person to obtain from the court a remedy against another person.

For other examples see:
Wilson Truck Lines Ltd. v. Pilot
    Insurance Co.
(1996), 31 O.R. (3d) 127 (C.A.), supp. reasons, (1997), 33
    O.R. (3d) 37 (C.A.);
Goorbarry v. Bank of Nova Scotia
, 2011 ONCA 793,
    109 O.R. (3d) 92.

[44]

By
    providing that the creditor has no remedy against the bankrupt, s. 69 prevents
    the exercise of the creditors cause of action while the bankruptcy is in
    effect. This is entirely consistent with the purpose of the
BIA
of
    providing for the orderly and fair distribution of a bankrupts property and
    preventing any creditors from gaining an advantage. The section does not
    suspend the limitation period. It prohibits any action on a claim that is
    provable in the bankruptcy. In most cases, the limitation period becomes
    irrelevant because, by s. 178(2) of the
BIA
, on discharge the bankrupt
    is released of all claims provable in the bankruptcy other than those set out
    in s. 178(1).

[45]

The
    Trustee relies, however, on a line of cases under s. 69, which are summarized
    by the following quote from L.W. Houlden, G.B. Morawetz and Janis Sarra,
Bankruptcy
    and Insolvency Law in Canada
, 4th ed. rev., vol. 3, loose-leaf (Toronto:
    Carswell, 2013), at p. 5-99:

When a bankruptcy occurs, the
Statute
    of Limitations

ceases to run against claims  The
    creditors ability to take proceedings against the debtor is stayed by the
Act
,
    and the stay of proceedings suspends the operation of the limitation period.
    The suspension ends when the trustee is discharged (s. 69.3(1)), and the
Statute
    of Limitations

commences to run again at that time. [Citations
    omitted.]

Cases that follow this principle include:
Lakehead Newsprint (1990) Ltd. v. 893499 Ontario Ltd.
(2001), 23 CBR (4th) 170 (Ont. S.C.), varied, 155 O.A.C. 328;
Canada
    (Attorney General) v. Fekete
, 1999 ABQB 262, 242 A.R. 193;
Toronto-Dominion
    Bank v. Barry-Kays
, 2010 ONSC 3535, 69 C.B.R. (5th) 243;
Re
    Mawji
, 2011 ONSC 4259, 94 C.B.R. (5th) 77, affirmed 2012
    ONCA 152, 94 C.B.R. (5th) 135;
Fimax Investments v. Grossman
, 2012 ONSC 2436.

[46]

The
    common root of these authorities runs deep  an 1887 decision of the English
    Chancery Division,
Re Crosley. Munns v. Burn
(1887), 35 Ch. D. 266. In
    that case, Crosley, a broker, was adjudged bankrupt in February 1874. It was
    discovered that he had misappropriated securities that he had held for a
    customer, Captain Ayscough. Ayscough made a claim in the bankruptcy and
    received a small dividend. The administration of the bankrupt estate was
    completed in 1880 and an order was made annulling Crosleys bankruptcy.

[47]

Crosley
    died in 1885 and in May 1896 an order was made for the administration of his
    estate. Captain Ayscough made a claim for the balance of what he was owed, on
    the basis that the debt was incurred by Crosleys fraud and therefore survived
    the bankruptcy.

[48]

It
    was argued, however, that the claim was barred by the six-year statute of
    limitations. Lord Justice Cotton said this, at p. 270:

Then it is said that the claim is barred by the
    Statute of Limitations. But the fraud was not discovered till after the
    adjudication in bankruptcy. While the bankruptcy was in force no action could
    be brought, so the statute could not begin to run till the annulling of the
    bankruptcy, and within six years from that time an order for administration was
    made. The Statute of Limitations is therefore no defence, and the appeal must
    be dismissed.

[49]

Lindley
    J. agreed, at p. 271, stating:

The short answer to the argument founded on the
    Statute of Limitations is that the statute did not begin to run till the
    bankruptcy had been annulled.

[50]

While
    the respondent argues that the court referred to no authority in support of the
    proposition that the statute of limitations did not run during the bankruptcy,
    the proposition was not new. In
Re Westby ex p. Lancaster Banking Corpn
.
    (1879), 10 Ch. D. 776, at p. 784, the bankruptcy commenced in 1870. After the
    estate had been realized, and the trustees determined that nothing more could
    be brought in, the bankruptcy was deemed to be closed. The bankrupt failed to
    pay his creditors the requisite ten shillings on the pound, which would have
    entitled him to a discharge, and he never obtained a discharge. Subsequently,
    in 1878, the bankrupt inherited a large amount of money. A creditor, whose debt
    had appeared on the statement of affairs, but who had not proven his debt
    before the close of the bankruptcy, sent a proof of claim to the Receiver, who
    had taken over as trustee.

[51]

It
    was held that the creditor was entitled to apply for leave to enforce his debt
    as a judgment debt against the debtors property. In answer to the argument that
    the creditors claim was time-barred, Sir James Bacon, the Chief Judge in
    Bankruptcy, abruptly dismissed the assertion, at p. 272:

The argument founded on the
Statute of Limitations

as
    an answer to this claim is not tenable for a moment.
The Statute of
    Limitations has nothing to do with the bankruptcy laws
. When a bankruptcy
    ensues, there is an end to the operation of that statute, with reference to
    debtor and creditor. The debtors rights are established and the creditors
    rights are established in the bankruptcy, and the
Statute of Limitations

has no application at all to such a case, or to the principles by which it
    is governed. [Emphasis added.]

[52]

In
    my view, this proposition remains valid. Section 69 of the
BIA
is not,
    as such, a provision that extends, suspends or varies a limitation period. It
    takes away creditors civil remedies and requires them to submit their claims
    through the bankruptcy process. The bar on commencing or continuing proceedings
    serves this end and preserves the integrity of the bankruptcy process. In most
    cases, the limitation period is of no further significance because creditors
    claims are dealt with in the bankruptcy. In the rare case, where the bankrupt
    is not discharged or the claim survives bankruptcy, the limitation period may
    resume running. It also continues to run against a creditor who seeks to
    recover a debt in proceedings unconnected to the bankruptcy: see Houlden,
    Morawetz and Sarra at 5-99, referring to
In re Benzon. Bower v. Chetwynd
,
    [1914] 2 Ch. 68.

[53]

The
    stay under s. 195 of the
BIA
serves a very different purpose. It
    simply provides that on the appeal of any order or judgment made in the course
    of a bankruptcy, the status quo will be preserved, unless the court orders
    otherwise. This is not dissimilar to the automatic stay of a judgment for the
    payment of money, under rule 63.01 of the
Rules of Civil Procedure
.

Its purpose is to ensure that no steps are taken that cannot be unwound if
    the appeal succeeds.

[54]

The
    Trustee also argued that the motion judge failed to appreciate that a trustee
    is incapable of acting where the very order from which it derives its authority
    is under appeal. It submits that during the stay under s. 195 a trustee is
    unable to hold a first meeting of creditors, hold a meeting with the
    inspectors, investigate potential claims and obtain legal opinions about such
    claims. This, said the Trustee, would put a trustee and creditors at risk,
    because the limitation period could slip away before the trustee had an
    opportunity to investigate potential claims or to take action. It argued that a
    trustee must have a full two years after its appointment to be able to
    investigate the situation and make decisions, with the advice of the creditors
    and the inspectors, before deciding whether to commence proceedings.

[55]

The motion judge addressed this issue at para. 17 of his reasons,
    referred to above at para. 23, where he noted that it was open to the Trustee
    to apply to lift the stay if it interfered with its ability to initiate the
    preference motion. As the motion judge also noted, the Trustee had ample time
    to commence the preference motion.

[56]

Accordingly,
    I regard s. 69 of the
BIA
, and the line of cases under it, to be
    entirely distinguishable from s. 195 and from the case before this court. Both
    provisions are also distinguishable from s. 20 of the
Limitations Act
,

which is concerned with provisions in other acts for the extension,
    suspension or other variation of limitation periods contained in those other
    acts.

[57]

To
    conclude, this is not a case in which a statute other than the
Limitations
    Act
contains either a limitation period or an express extension,
    suspension or other variation of the limitation period. The Trustee relies, in
    effect, on an implicit or implied statutory extension of the limitation period.
    This court considered a somewhat similar argument in
Sally Creek Environs
    Corporation (Re)
, 2013 ONCA 329. In that case, certain creditors of the
    bankrupt brought a motion for leave pursuant to s. 215 of the
BIA
to
    commence an action for negligence against the Office of the Superintendent of
    Bankruptcy and two of its employees. They alleged that the OSB was negligent in
    supervising the trustee in bankruptcy, with the result that the dividend paid
    to creditors was less than it would otherwise have been.

[58]

In
    a taxation hearing, the Registrar in Bankruptcy made findings of serious
    misconduct on the part of the trustee. It was acknowledged that the limitation
    period for an action against the OSB began to run when the Registrars decision
    was released on June 23, 2008, because the creditors were aware on that date of
    the material facts with respect to their cause of action.

[59]

In
    response to the motion for leave, the OSB argued that the motion was
    time-barred because it had been brought more than two years after the
    Registrars decision. The creditors responded, however, that the Registrars
    decision had been appealed, first to the Superior Court of Justice and then to
    this court. They argued that the appeal had the effect of suspending the
    limitation period. The motion judge found that all material facts were known by
    June 23, 2008 and the running of the limitation period was unaffected by the
    appeals.

[60]

This
    court affirmed the decision of the motion judge. It noted, at para. 11, that
    the appellants had provided no authority for the proposition that the
    limitation period, having begun to run, was tolled by an appeal or as a result
    of the outcome of the appeal.

[61]

The
    decision of this court in
Sally Creek
, like
Guillemette
and
Joseph
,
    is consistent with the purpose of the
Limitations Act
of promoting
    certainty and clarity in the law of limitation periods. That purpose is not
    accomplished by extending, suspending or varying a limitation period unless
    expressly authorized by statute. In my view, this is not such a case.

F.

Conclusion

[62]

For
    these reasons, I would dismiss the appeal. As a result, the payment to Propco could
    not be impeached and it is unnecessary to consider the second issue before the
    motion judge.

[63]

In
    default of agreement as to costs, I would direct the parties to file brief
    written submissions, no more than three pages in length, exclusive of the costs
    outline. I would order that Propcos submissions be delivered within 20 days
    and the Trustees submissions within 20 days thereafter.

Released: KF October 2, 2013

G.R. Strathy J.A.

I agree. K. Feldman
    J.A.

I agree. R. Sharpe
    J.A.

[1]
Nine days being the time between the bankruptcy order and the filing of the
    appeal.


COURT OF APPEAL FOR ONTARIO

CITATION: Musoni v. Logitek Technology
    Ltd., 2013 ONCA 622

DATE: 20131011

DOCKET: C56385

Feldman, MacPherson and Pepall J.J.A.

BETWEEN

Bernard Musoni

Appellant (Plaintiff)

and

Logitek Technology Ltd.

Respondent (Defendant)

Bernard Musoni, appellant appearing in person

Reagan Ruslim, counsel for respondent

Heard:  October 4, 2013

On appeal from the judgment of Justice Edward M. Morgan
    of the Ontario Superior Court of Justice, dated November 28, 2012.

APPEAL BOOK ENDORSEMENT

[1]

The employment contract between the appellant and the respondent was
    clear in providing for 15 days notice in order to terminate. The appellant was
    given pay in lieu of notice with accordance with the agreement, as found by
    Morgan J. We see no error in Morgan J.s conclusions. The appeal is therefore
    dismissed with costs fixed at $3,500 inclusive of disbursements and HST.


COURT OF APPEAL FOR ONTARIO

CITATION: Nashid v. Michael, 2013 ONCA 638

DATE: 20131022

DOCKET: C57046

Cronk, Rouleau and Tulloch JJ.A.

BETWEEN

Nabila Nashid

Appellant (Applicant)

and

Waheed Michael

Respondent

Granville N. Cadogan, for the appellant

Avra Rosen, for the respondent

Heard: October 15, 2013

On appeal from the order of Justice K.V.W. Whitaker of
    the Superior Court of Justice, dated April 5, 2013.

ENDORSEMENT

[1]

The appellant appeals from the order of Whitaker J. of the Superior
    Court of Justice (the Motion Judge), dated April 5, 2013, dismissing her
    motion to set aside the judgment of Kruzick J. of the Superior Court of Justice
    (the Trial Judge), dated May 18, 2012, in an undefended matrimonial trial
    (the Matrimonial Trial).

[2]

The appellant raises four grounds of appeal.  She argues that: (1) after
    she was found in contempt of various court orders by order of Herman J. of the
    Superior Court of Justice, dated April 5, 2011, (the Contempt Order), she was
    denied procedural fairness because the Matrimonial Trial proceeded without
    notice to her and in her absence; (2) she has, in fact, purged her contempt;
    (3) the Matrimonial Trial proceeded without disclosure to the Trial Judge of
    what the appellant describes as her then pending motion to set aside the
    order of Herman J., dated February 3, 2012, striking the appellants pleadings
    in the matrimonial litigation (the Strike Order) due to the appellants continuing
    contempt of various court disclosure orders; and (4) the respondent failed to
    make full and frank disclosure of his financial affairs and of the appellants
    allegedly pending motion to the Trial Judge.

[3]

We conclude that these grounds of appeal must be rejected and the appeal
    dismissed.

[4]

The litigation between the parties has been acrimonious and protracted.
    It has resulted in numerous court motions and multiple court orders against the
    appellant, the full details of which need not be set out in these reasons.  The
    following aspects of the litigation history are particularly pertinent:

1)

by
    three separate court orders dated April 7, 2011, May 26, 2011 and June 28, 2011
    (two of which were on consent), Herman J. directed the appellant to make
    various types of financial disclosure and effect various property transfers
    (the Disclosure Orders);

2)

by
    the time of the hearing of the contempt motion on July 28, 2011, the appellant
    had failed to fully comply with the Disclosure Orders.  She had also failed to
    pay several outstanding costs orders against her, then totalling $6,500;

3)

the
    appellants continuing non-compliance with her court-ordered obligations led to
    the Contempt Order.  In her reasons for the Contempt Order, Herman J. concluded
    that the appellants acts of non-compliance were deliberate and wilful, not
    trivial and involved significant matters in the litigation;

4)

nonetheless,
    Herman J. provided the appellant with one final opportunity to comply with the Disclosure
    Orders and purge her contempt, by August 31, 2011.  The appellant failed to do
    so without adequate excuse and also failed to attend multiple court hearings
    related to the matter.  The Strike Order followed on February 3, 2012;

5)

under
    the Strike Order: (1) the respondent was granted leave to proceed with an
    undefended trial
after March 31, 2012
; and (2) the appellant was
    granted leave, on terms, to apply to the court,
prior to March 31, 2012
,
    to set aside the Strike Order;

6)

the
    appellant appealed the Contempt Order to this court.  Her appeal was adjourned,
    at her own request.  This court ordered that after March 31, 2012 (the outside
    date by which the appellant was to purge her contempt and move to set aside the
    Strike Order), the appellant could bring her appeal back on by May 31, 2012.
    Costs were awarded in favour of the respondent;

7)

the
    appellant attempted to schedule a motion to set aside the Strike Order before
    March 31, 2012.  However, she was unable to set the motion down because the
    court file had gone missing;

8)

counsel
    for the respondent did not hold the appellant to the March 31st date.  She
    agreed to two subsequent dates for the motion and later indicated her
    availability on a third date  May 17, 2012  to argue the motion;

9)

no
    scheduled motion proceeded on any of these dates.  The appellant failed to file
    a factum for the motion or to serve and file a return of motion in accordance
    with the
Family Law Rules
;

10)

nor did the
    appellant otherwise purge her contempt by fully complying with the Disclosure
    Orders.  She also did not pay the outstanding costs orders; and

11)

in the meantime,
    the Family Court offices scheduled a commencement date  May 14, 2012  for the
    undefended Matrimonial Trial.  The appellants pleadings not having been
    reinstated and her contempt continuing, the undefended Matrimonial Trial proceeded
    on May 14 and 15, 2012 in accordance with the Strike Order.

[5]

Against this backdrop, the appellant argues that she was denied
    procedural fairness because the Matrimonial Trial proceeded without notice to
    her and in her absence.  She also asserts that the respondent failed to inform
    the Trial Judge of her pending motion to set aside the Strike Order and purge
    her contempt.  Further, she alleges that the respondent failed to make proper
    financial disclosure at the Matrimonial Trial.

[6]

On this record, these claims are unsustainable.

[7]

The respondent was entitled under the terms of the Strike Order and Rule
    10(5) of the
Family Law Rules
to proceed with the Matrimonial Trial
    after March 31, 2012 if the appellant failed to purge her contempt and obtain
    an order reinstating her pleadings by that date.  Neither event occurred,
    notwithstanding the appellants numerous opportunities to meet the terms of the
    Strike Order.

[8]

Indeed, on May 11, 2012 (the Friday before the commencement of the
    Matrimonial Trial), the appellant remained in contempt, had not fully satisfied
    the Disclosure Orders, had not paid all the outstanding costs orders against
    her, and had not obtained a court-ordered reinstatement of her pleadings.

[9]

Moreover, contrary to the appellants submission, by the time the
    Matrimonial Trial commenced on May 14, 2012, there was no pending motion to
    set aside the Strike Order.  The appellant conceded before this court, through
    counsel, that no properly served and filed return of her intended March 2012
    motion to set aside the Strike Order had been scheduled.

[10]

We
    note that almost one year later, these acts of non-compliance continued.  In
    his reasons dated April 2, 2013, the Motion Judge held:

(1)

the
    appellant had not provided the court ordered disclosures;

(2)

costs
    orders remained unpaid;

(3)

the
    appellants obligations remained outstanding; and

(4)

the
    appellant failed to move with dispatch within the time frame set out by
    Justice Herman in the [Strike Order].

[11]

These
    factual findings were open to the Motion Judge on the record.  On the record
    now before this court, there is no basis to conclude that any of these findings
    are tainted by reversible error.

[12]

The
    appellants complaint of the respondents alleged inadequate or incomplete
    disclosure of his financial affairs before the Trial Judge must also be
    rejected.  The appellant has not provided a transcript of the Matrimonial
    Trial; nor, as we have said, was she in attendance at that trial, during which
    the oral evidence of the respondent was heard over two days.

[13]

In
    these circumstances, this court is unable to give effect to this claim.   The
    Trial Judge, having considered the evidence at the Matrimonial Trial, was
    satisfied with and accepted the respondents evidence, indicating that he was
    not only fair but at times fair to his detriment in his testimony at trial.

[14]

The
    appeal is dismissed.  The respondent is entitled to his costs of the appeal,
    fixed in the total amount of $8,500.00, inclusive of disbursements and all
    applicable taxes.

E.A. Cronk
    J.A.

Paul Rouleau
    J.A.

M. Tulloch
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Nortel Networks Corporation (Re), 2013 ONCA
    599

DATE: 20131003

DOCKET: C55682

Goudge, MacPherson and Juriansz JJ.A.

In
    the Matter of the
Companies Creditors Arrangement Act
,

R.S.C. 1985, c. C-36, as amended

And in the Matter of a
    Plan of Compromise or Arrangement of Nortel Networks Corporation, Nortel
    Networks Limited, Nortel Networks Global Corporation, Nortel Networks
    International Corporation and Nortel Networks Technology Corporation

Leonard F. Marsello and William R. MacLarkey, for the
    appellant Her Majesty the Queen in right of Ontario as represented by the
    Ministry of the Environment

David W. DeMille, for the City of Belleville and the Algonquin
    and Lakeshore Catholic District School Board

Alan B. Merskey and Vasuda Sinha, for the respondents
    Nortel Networks Corp., Nortel Networks Ltd., Nortel Networks Global Corp.,
    Nortel Networks International Corp. and Nortel Networks Technology Corp.

Joseph Pasquariello, for the Monitor Ernst & Young
    Inc.

Adam Hirsh, for Former Directors and Officers of Nortel
    Networks Corp. and Nortel Networks Ltd.

Jane Dietrich, for Unsecured Creditors Committee of
    Nortel Networks Inc.

Adam Slavens, for Nortel Networks Inc.

Gavin H. Finlayson, for Informal Committee of
    Noteholders

Heard: June 19, 2013

On appeal from the order of Justice Geoffrey B. Morawetz
    of the Superior Court of Justice, dated March 9, 2012, with reasons reported at
    2012 ONSC 1213.

Juriansz J.A.:

A.

Overview

[1]

The CCAA judge, whose decision is the subject of this appeal, aptly
    described the issues as arising from the untidy intersection of the
Companies'
    Creditors Arrangement Act
, R.S.C. 1985, c. C-36, (CCAA) and the powers
    of the provincial Minister of the Environment (MOE) to make orders with
    respect to the remediation of real property in Ontario.

[2]

After the usual order staying proceedings (the Initial Order) was
    granted to the insolvent respondents, Nortel Networks Corporation, Nortel Networks
    Limited, Nortel Networks Global Corporation, Nortel Networks International
    Corporation and Nortel Networks Technology Corporation (collectively, Nortel
    or the respondents), the MOE issued orders pursuant to the
Environmental
    Protection Act
, R.S.O. 1990, c. E-19, (EPA) requiring Nortel Networks
    Limited to remediate environmental contamination remaining on properties it
    once or currently owned.

[3]

In his order dated March 9, 2012, the CCAA judge declared that the MOEs
    remediation orders were subject to the stay granted by the Initial Order.
    Ancillary to that declaration, he granted certain other relief. He declared
    that all proceedings against the respondents or the Former Directors and
    Officers before the Ontario Environmental Review Tribunal in relation to the
    EPA orders were subject to the stay of proceedings; he authorized the respondents
    to cease performing remediation of property; he declared that any claims in
    relation to current or future remediation requirements imposed by orders under
    the EPA against the respondents or the Former Directors and Officers were
    subject to the insolvency claims process; and he authorized the respondents to
    repudiate all contractual obligations to carry out remediation at the
    properties.

[4]

The MOE appeals.

[5]

For the reasons that follow, I would allow the appeal.

B.

Facts

[6]

Nortel is engaged in a liquidating insolvency and has no
    operations. The sites where Nortel and its predecessors once conducted
    manufacturing operations were largely disposed of in the late 1990s. At that
    time Nortel identified environmental impacts that arose from its past
    operations at Brampton, Brockville, Kingston, Belleville, and London (the
    Impacted Sites) and was conducting remediation at those sites on a voluntary
    or contractual basis.

[7]

On January 14, 2009, Nortel filed for protection under the CCAA. At that
    time, Nortel maintained only a partial interest in the London site. It had disposed
    of its interests in the other Impacted Sites. As well, the MOE had not issued
    any remediation orders against Nortel. Nortel says that it spent some $28.5
    million on remediation of the sites before filing under the CCAA. After
    Nortels CCAA filing, the MOE issued remediation orders (the MOE Orders) that
    Nortel estimates would require further expenditures of approximately $18
    million.

[8]

Nortel brought a motion before the CCAA judge seeking an order declaring
    that the relief the MOE Orders sought was financial and monetary in nature;
    that the Initial Order stayed the MOE Orders; and an order staying all related
    proceedings before the Ontario Environmental Review Tribunal. Nortel also
    sought authorization and direction that it cease performing remediation at the
    Impacted Sites and a declaration that any claims in relation to current or
    future remediation by the MOE or any other person against Nortel were stayed
    and had to be dealt with according to the CCAA claims procedure. In
    addition, Nortel sought an order repudiating or disclaiming any contractual
    obligations to carry out remediation at the Impacted Sites; and finally, advice
    and direction with respect to the London site where Nortel maintained a partial
    interest in the property.

[9]

On March 9, 2012, the CCAA judge determined that, where operations had
    ceased on a particular property and a company could only comply with the EPA or
    MOE Orders by expending funds, the environmental liabilities involved amount to
    financial obligations to pay. Therefore, they were subject to the Initial Order
    and had to be addressed as claims in the CCAA process.

[10]

On
    June 22, 2012, the MOE was granted leave to appeal the CCAA judges order.

[11]

While
    the MOEs appeal was pending, the Supreme Court released its decision in
Newfoundland
    and Labrador v. AbitibiBowater Inc.
, 2012 SCC 67, [2012] 3 S.C.R. 443, on
    December 7, 2012. On March 28, 2013, the parties were given leave to file
    fresh factums and fresh evidence.

[12]

The
    parties dispute the interpretation of the Supreme Courts decision, and how it
    should be applied to the case under appeal.

C.

Supreme Courts Decision In AbitibiBowater

[13]

AbitibiBowater
    Inc. (Abitibi) had carried on industrial activities in the Province of
    Newfoundland and Labrador for over 100 years. In 2009, Abitibi sought
    protection under the CCAA.

[14]

Subsequently,
    the Minister of Environment and Conservation of Newfoundland and Labrador
    issued five ministerial orders against Abitibi under the provinces
    environmental legislation. These orders required Abitibi to remediate several
    sites, most of which had been expropriated by the province. The province also
    brought a motion for a declaration that the CCAA claims process did not bar the
    province from enforcing the orders. The province argued, among other things,
    that the remediation orders were regulatory orders, not "claims"
    under the CCAA, and therefore they could not be stayed or subjected to
    compromise in the CCAA restructuring process.

[15]

The
Supreme Court decided that a CCAA court could
    determine whether an environmental order that is not framed in monetary terms
    is in fact a provable claim. Justice Deschamps, writing for the majority, held
    that [a] finding that a claim of an environmental creditor is monetary in
    nature does not interfere in any way with the creditor's activities. Its claim
    is simply subjected to the insolvency process (at para. 18). The CCAA court
    should consider the substance of an order rather than its form: [i]f the
    Province's actions indicate that, in substance, it is asserting a provable
    claim within the meaning of federal legislation, then that claim can be
    subjected to the insolvency process (at para. 19).

[16]

The
    CCAA, informed by the
Bankruptcy and Insolvency Act
, R.S.C. 1985, c.
    B-3 (BIA), establishes three requirements for establishing a provable claim.
    First, there must be a debt, liability or obligation to a creditor. This
    requirement is satisfied simply by the regulatory body exercising its enforcement
    power against a debtor: at paras. 26-27.

[17]

Second,
    a claim must be founded on an obligation that falls within the time limit for
    claims. Section 11.8(9) of the CCAA provides temporal flexibility for environmental
    claims by providing that

[a] claim against a debtor company for costs of
    remedying any environmental condition or environmental damage affecting real property
    of the company shall be a claim under this Act, whether the condition arose or
    the damage occurred before or after the date on which proceedings under this
    Act were commenced.

However, statutory environmental obligations relating
    to polluting activities that continue after the reorganization will not satisfy
    the time limits: at paras. 28-29.

[18]

Both
    the first and second requirements were easily satisfied in the Abitibi case.

[19]

The
    third requirement is that it be possible to attach a monetary value to the
    obligation; that is, the question is whether orders that are not expressed in
    monetary terms can be translated into such terms (at para. 30). A court must
    look at the substance of the order not its form and apply its usual approach in
    dealing with future or contingent claims.

[20]

The
    usual test courts use to decide if a contingent claim will be included in
    insolvency proceedings is whether it is too remote or speculative: at para.
    36, citing
Confederation Treasury Services Ltd. (Re)
(1997), 96 O.A.C.
    75, leave to appeal to S.C.C. refused, [1997] S.C.C.A. No. 229. This means that
    there must be sufficient indications that the regulatory body that made the
    remediation order will ultimately perform remediation work itself, thus
    entitling it to seek reimbursement by means of a monetary claim:
AbitibiBowater
,
    at para 36.

[21]

Accordingly,
    Deschamps J. concluded that the CCAA court must assess whether it is
    sufficiently certain that the regulatory body will perform the remediation work
    and, as a result, have a monetary claim (at para. 46).

[22]

The
    CCAA judges discretion will govern the assessment, but several considerations
    may be relevant, depending on the circumstances of the case. Justice Deschamps
    identified four potential factors: whether the [polluting] activities are
    ongoing, whether the debtor is in control of the property, whether the debtor
    has the means to comply with the order, and the effect that requiring the
    debtor to comply with the order would have on the insolvency process (at para.
    38).

[23]

In
    the circumstances of
AbitibiBowater
, Deschamps J. acknowledged that
    the CCAA judge had not addressed whether it was sufficiently certain that the
    Province would remediate the property and seek reimbursement, but she concluded
    that his reasons rested on the implicit finding that the Province would do so
    (at para. 51). The CCAA judge explicitly referred to the facts that supported
    this finding, at paras. 53-55:

·

Abitibi was not in a position to carry out the remediation
    because it was no longer in possession of most of the sites;

·

Abitibis operations were funded through debtor-in-possession
    financing and its access to funds would limited to ongoing operations;

·

the timetable set by the Province in the remediation orders
    suggested that the Province never truly expected Abitibi to perform the
    remediation work;

·

and the surrounding facts suggested that the Province had
    intentionally targeted Abitibi.

[24]

On
    this reasoning, Deschamps J., writing for the majority, deferred to the CCAA
    judges implicit conclusion it was sufficiently certain that the Province would
    perform the remediation work. Therefore, the Province fell within the
    definition of a creditor with a monetary claim.

[25]

McLachlin
    C.J. and LeBel J. dissented.

D.

The respondents effort to distinguish AbitibiBowater

[26]

The
    respondents submit that it is an oversimplification of the
AbitibiBowater
decision to read it as requiring all future courts to examine environmental
    remediation orders through the exclusive and binary test of determining
    whether it is sufficiently certain that the province would perform the
    remediation and claim reimbursement. The respondents suggest that in
AbitibiBowater
the court used this language because it was particularly apt for the
    circumstances in the case. They claim that a careful reading of the reasons
    makes evident that the test the court established is less specific.

[27]

The
    respondents point to the more general language in Deschamps J.s reasons. They
    highlight the various factors that Deschamps J. indicated could be relevant
    depending on the circumstances of each case to determine whether remediation
    orders will be subject to a CCAA stay: at para. 38. They argue that as long as
    the order requires an expenditure of funds its nature is monetary. In setting
    out the three basic requirements to determine whether an environmental order is
    a claim, Deschamps J. said with respect to the third requirement, that it be
    possible to attach a monetary value to the obligation, the question is whether
    orders that are not expressed in monetary terms can be translated into such
    terms (at para. 30).

[28]

Instead,
    the respondents posit that in
AbitibiBowater
, the Supreme Court set
    out the policy approach to be followed in determining whether nonmonetary
    orders can be translated into monetary terms. This approach, as Deschamps J. emphasized,
    concerns: the importance of the single proceeding model of insolvency in Canada;
    the necessity of examining the substance, not only the form, of an
    environmental remediation order; the balance struck by Parliament between
    enforcement of environmental regulation and the interests of insolvency
    stakeholders; and the need to have regard to the interests of third-party
    creditors.

[29]

Turning
    to this case, the respondents submit that it was sufficiently certain that
    compliance with the orders would require the expenditure of a minimum of $18
    million. Whether the money is paid to the MOE as reimbursement for the costs of
    performing the remediation, or paid to third parties retained to perform the
    remediation should make no difference. The environmental problems at the
    impacted sites were long-standing; the soil had been contaminated decades
    earlier. In fact, the Brockville site was already contaminated when Nortel
    bought it. Historical environmental problems, the respondents argue, should be
    distinguished from current ones, where the debtor is polluting at the time.

[30]

Finally,
    the respondents stress that the CCAA court should be mindful of the impact on
    the debtor and the stakeholders and avoid giving the MOE a super-priority it
    would not have under the BIA. Under the BIA there is no debtor-in-possession,
    only a trustee, and the trustee could abandon the contaminated property. In a
    liquidating reorganization there was no good reason why the MOE should do
    better under the CCAA than under the BIA.

E.

Analysis

[31]

I
    cannot accept the respondents proposed interpretation of
AbitibiBowater
.
    In determining whether a regulatory order is a provable claim, a CCAA court
    must apply the general rules that apply to future or contingent claims. As I
    read it, the Supreme Courts decision is clear: ongoing environmental
    remediation obligations may be reduced to monetary claims that can be
    compromised in CCAA proceedings only where the province has performed the
    remediation work and advances a claim for reimbursement, or where the
    obligation may be considered a contingent or future claim because it is
    sufficiently certain that the province will do the work and then seek
    reimbursement.

[32]

The
    respondents approach is not only inconsistent with
AbitibiBowater
, it
    is too broad. It would result in virtually all regulatory environmental orders
    being found to be provable claims. As Deschamps J. observed, a company may
    engage in activities that carry risks. When those risks materialize, the costs
    are borne by those who hold a stake in the company. A risk that results in an environmental
    obligation becomes subject to the insolvency process only when it is in
    substance monetary and is in substance a provable claim.

[33]

Parliament
    has struck a balance between the interests of the stakeholders and that of the
    public in designing the CCAA process. Parliament, in s. 11.8(8) of the CCAA,
    granted the MOE's claims with respect to remediation costs the security of a
    charge on the contaminated property. And Parliament, in s. 11.1(3), made it
    clear that a CCAA court has the discretion to stay regulatory orders on
    specified criteria.

F.

Is it implicit THAT THE CCAA JUDGE APPLIED THE CORRECT TEST?

[34]

The
    CCAA judge in this case, without the benefit of the
AbitibiBowater
decision, did not explicitly consider the question whether it was sufficiently
    certain that the MOE would perform the remediation work ordered. In these
    circumstances there are two legal approaches available to this court. This
    court could attempt to glean from the CCAA judges reasons how he would have answered
    the question had the law been available to him; and it can consider the
    evidence in the record and answer the question in his stead, as the dissenting
    judges did in
AbitibiBowater
.

[35]

I
    am unable to read the CCAA judges reasons as implicitly addressing the
    question whether it was sufficiently certain that the MOE would perform the
    remediation work. The CCAA judges analysis focused on whether Nortel would be
    required to incur a financial obligation to comply with the remediation orders,
    without regard to whom the financial obligations would be owed. He rejected the
    MOEs contention that financial obligations incurred by Nortel for the purpose
    of complying with the MOE Orders are different from obligations incurred
    directly to the Crown. He focused instead on the fact that undertaking
    remedial work would result in Nortel expending money that would be directed
    away from creditors participating in the insolvency proceedings. He held that
    the same insolvency considerations ought to apply regardless of who receives
    the money (at para. 107).

[36]

This
    analysis stands in contrast to that of Deschamps J. She made it clear, at para.
    3, that the question was whether there are sufficient facts indicating the
    existence of an environmental duty that will ripen into a financial liability
    owed
to the regulatory body that issued the order

    (emphasis added).

[37]

The
    CCAA judge was well aware that in this case, unlike
AbitibiBowater
, it
    could not be said that the regulatory body had no realistic alternative but to
    perform the remediation work itself. Nortel no longer owns most of the
    properties, and the MOE Orders are directed to Nortel and the subsequent owners.
    In fact, the CCAA judge specifically discussed Nortels contractual
    arrangements with some of the subsequent purchasers and in his order permitted
    Nortel to repudiate some of those arrangements.

[38]

In
    my view, this court lacks the basis to conclude, as did the majority in
AbitibiBowater
,
    that the CCAA judge

s decision rests on an implicit
    finding that the MOE will most likely perform the work.

G.

Is it sufficiently certain the MOE will undertake the remediation?

[39]

Considering
    the matter afresh, I would conclude that it is not sufficiently certain that
    the MOE will perform the remediations ordered. The MOE orders respecting in the
    Belleville, Brockville and Kingston sites are directed to Nortel together with other
    current and former owners of the properties. In fact with respect to the
    Kingston site, the other current and former owners named in the orders are
    jointly and severally liable with Nortel to carry out the activities required
    by the orders. Under s. 18 of the EPA, the MOE clearly has the power to make
    orders against subsequent (or past) owners for anything it ordered Nortel to
    do.

[40]

In
AbitibiBowater
, the province had expropriated most of the properties
    and remained the owner. It would seem reasonable to expect that the MOE would enforce
    the orders against other parties instead of undertaking the remediation itself.
    Indeed, the CCAA judge observed that subsequent purchasers of the properties
    may have unsecured contractual claims against Nortel.

[41]

Matters
    at the London site are not so clear. Evidently, in 1997 and 1998 Nortel
    subdivided and sold three parts of the London site to others, but retained the
    fourth part. The MOE order respecting the London site is directed to Nortel and
    the three entities who own the other parts and imposes joint responsibilities
    as well as some individual responsibilities on them. After the insolvency there
    will be no going-forward entity. Evidently Nortels retained portion of the
    land is worth less than the cost of remediating it and it seems probable that
    the retained portion will eventually be abandoned. There is no one to carry out
    Nortels responsibilities under the MOE Order. As a result, I consider it
    sufficiently certain that MOE will ultimately undertake Nortels obligations
    under the order, and may seek to claim the security provided by s. 11.8(8).

H.

Conclusion

[42]

I
    would conclude that the MOE Orders in relation to the Impacted Sites other than
    the retained portion of the London property have not been established to be
    provable claims that must be included in the insolvency process.

[43]

In
    paragraph 2 of his order, the CCAA judge declared that the MOEs remediation
    orders are subject to the stay of proceedings granted in the initial order
    and stayed thereunder. This declaration cannot stand. Paragraph 15 of the
    initial order contains the caveat that nothing in this Order shall(ii) exempt
    the [respondents] from compliance with statutory or regulatory provisions
    relating to health, safety or the environment. The conclusion that the
    remediation orders are regulatory rather than provable claims brings them
    within the ambit of this caveat.

[44]

The
    CCAA judge himself acknowledged, at para. 104 that if the Minister is solely
    acting in its regulatory capacity, it can do so unimpeded by the Stay. This is
    the effect of s. 11.1(2) of the CCAA. Section 11.1(2) provides:

(2) Subject to subsection (3), no order made
    under section 11.02 affects a regulatory bodys investigation in respect of the
    debtor company or an action, suit or proceeding that is taken in respect of the
    company by or before the regulatory body, other than the enforcement of a
    payment ordered by the regulatory body or the court.

[45]

I
    would therefore allow the appeal and modify the CCAA judges declaration that the
    MOE Orders are stayed by the Initial Order so that it applies only to the retained
    London lands. I would also modify paragraphs 3, 4, 5, and 6 of his order, which
    are premised on the finding that MOE Orders are claims and are not regulatory, so
    that they apply only to the retained London lands.

[46]

If
    the MOE is seeking costs, it may make written submissions through the courts senior
    legal counsel, John Kromkamp.

R.G. Juriansz J.A.

I agree S.T. Goudge
    J.A.

I agree J.C.
    MacPherson J.A.

Released: October 03, 2013


COURT OF APPEAL FOR ONTARIO

CITATION: Northstar Aerospace Inc. (Re), 2013 ONCA 600

DATE: 20131003

DOCKET: C56518

Goudge, MacPherson and Juriansz JJ.A.

In the Matter of the
Companies Creditors
    Arrangement Act
, R.S.C. 1985, c. C-36, as amended

And in the Matter of
    a Plan of Compromise or Arrangement of Northstar Aerospace Inc., Northstar
    Aerospace (Canada) Inc., 2007775 Ontario Inc. and 3024308 Nova Scotia Company

Leonard F. Marsello, William R. MacLarkey and Jacqueline L.
    Wall, for the appellant Her Majesty the Queen in right of Ontario as
    represented by the Ministry of the Environment

Steven J. Weisz and Jenna Willis, for the respondent Fifth
    Third Bank

Paul D. Guy and Scott McGrath, for the Former Directors and
    Officers Group

Craig J. Hill, for the Monitor Ernst & Young Inc.

Heard: June 19, 2013

On appeal from the order of Justice Geoffrey B. Morawetz
    of the Superior Court of Justice, dated July 24, 2012, with reasons reported at
    2012 ONSC 4423.

Juriansz J.A.:

[1]

The appellant, Her Majesty the Queen in right of Ontario as represented
    by the Ministry of the Environment (the MOE), appeals from the order of the
    CCAA judge dated July 24, 2012, with written reasons released on July 30, 2012.

[2]

In his decision, the CCAA judge granted the motion of the insolvent
    respondents, Northstar Aerospace Inc., Northstar Aerospace (Canada) Inc.
    (Northstar Canada), 2007775 Ontario Inc. and 3024308 Nova Scotia Company
    (collectively, Northstar), for approval of an agreement for the sale of Northstars
    assets, and dismissed the MOEs motion for a declaration that a remediation
    order issued by the MOE under the
Environmental Protection Act
, R.S.O.
    1990, c. E-19 (EPA), was not subject to the stay of proceedings previously
    ordered, or, in the alternative, an order lifting the stay in respect of that
    remediation order.

[3]

Leave to appeal the CCAA judges order was granted only from the
    dismissal of the MOEs motion.

[4]

For the reasons that follow, I would dismiss the appeal.

A.

Facts

[5]

Northstar Canada operated a manufacturing and processing facility in
    Cambridge, Ontario from around 1981 to 2009. The chemical trichloroethylene, a carcinogen,
    was used in these operations, and the operations produced waste containing heavy
    metals. Since 2004, Northstar Canada has been actively involved in monitoring the
    contamination at the site and in the surrounding community, a part of which is
    residential, and subsequently began remediation activities. In 2012, the MOE,
    due to a concern that Northstar would be unable to continue its voluntary remediation
    because of financial problems, issued two remediation orders against it, dated
    March 15, 2012 and May 31, 2012 (the MOE Orders).

[6]

On June 14, 2012, Northstar sought and obtained protection under the
Companies
    Creditors Arrangement Act
, R.S.C. 1985, c. C-36 (CCAA). The usual
    initial order staying all rights and remedies against the insolvent company was
    issued that same date (the Initial Order). The Initial Order does not affect regulatory
    proceedings as contemplated by s.11.1(2) of the CCAA.

[7]

On July 24, 2012, the CCAA judge approved the agreement for the sale of
    substantially all of Northstars assets. The contaminated site at Cambridge was
    not included in the sale. The debtor-in-possession lenders advised Northstar
    that they would not continue to fund its remediation efforts after the
    agreement for sale of assets closed on August 3, 2012. Northstar advised the
    MOE that if the sale of assets were approved, its intention was to abandon the
    site and terminate the remediation work. Also on July 24, 2012, the CCAA judge
    dismissed the MOEs motion. He found that the remediation orders were subject
    to the stay of proceedings granted in the Initial Order. Northstar has made no
    provision to continue its remediation activities after the close of the sale of
    assets transaction.

B.

The decision under appeal

[8]

In his reasons, the CCAA judge noted that the Initial Order excepted
    regulatory proceedings as permitted by s. 11.1 of the CCAA. He referred to his
    earlier decision in
Re Nortel Networks Corp.
, 2012 ONSC 1213, 88
    C.B.R. (5th) 111, quoting his remarks that if the insolvent company was not
    carrying on operations at the property, it is necessary to consider the
    substance of the MOEs actions (at para. 105). If the MOE orders require the
    debtor to act in a certain way, it is inevitable that the debtor would incur
    financial obligations to comply. Where there is no going-forward business, the
    debtor has no option but to pay money to comply. The clear result would be that
    [t]he MOE would be, in reality, enforcing a payment obligation, which the
    Initial Order prohibited (at para. 105).

[9]

The CCAA judge noted that the Cambridge facility had been shut down in
    2010 and only remediation activities have been carried on there since that
    time. In the court-supervised sales process, no bidder was willing to purchase (or
    expressed any interest in purchasing) the Cambridge facility, either alone or
    together with the other assets of Northstar.

[10]

The
    CCAA judge therefore adopted his reasoning in
Nortel
and concluded
    that, in the circumstances of this case, any financial activity the debtor is
    required to undertake to comply with environmental orders is stayed by the Initial
    Order. He went on to remark that in this case it was quite clear that the
    March 15 [MOE] Order seeks to enforce a payment obligation (
Northstar
,
    at para. 61). He concluded that while the MOE was entitled to file a claim for any
    costs of remedying the environmental conditions at the Cambridge facility, it
    was not entitled to use the remediation order to create a priority that it
    otherwise does not have access to under the legislation (at para. 66).

[11]

On
    this reasoning, the CCAA judge dismissed the MOEs motion.

C.

Analysis

[12]

On
    August 1, 2012, the MOE brought a motion for a partial stay of the CCAA judges
    order permitting distribution of the sales proceeds. The motion was dismissed and
    leave to appeal that denial was refused. Thus, this appeal may have some
    jurisprudential significance but will be of no practical consequence.

[13]

While
    the motion for leave to appeal was pending, the Supreme Court of Canada
    released its decision in
Newfoundland and Labrador v. AbitibiBowater
,
    2012 SCC 67, [2012] 3 S.C.R. 443. That the CCAA judge did not have the benefit
    of the Supreme Courts decision must be kept in mind in reviewing his reasons.
    The same situation arose in
Nortel Networks Corp. (Re)
, 2013 ONCA 599,
    and the two appeals were heard together.

[14]

I
    adopt my review of the
AbitibiBowater
decision as set out in
Nortel
.
    Briefly stated, the Supreme Court decided that ongoing environmental
    remediation obligations may be reduced to monetary claims that can be
    compromised in CCAA proceedings in two circumstances: (1) where the province
    has performed the remediation work and advances a claim for reimbursement, or
    (2) where the obligation may be considered a contingent or future claim because
    it is sufficiently certain that the province will do the work and then seek
    reimbursement.

[15]

This
    court, in reviewing a decision of a CCAA judge rendered before the Supreme
    Courts decision in
AbitibiBowater
, may attempt to glean from the
    reasons how he or she would have answered the question had the law been available;
    and it may consider the evidence in the record and answer the question in his
    or her stead.

[16]

It
    seems to me, the CCAA judges reasons show that he was of the view the MOE had
    no realistic alternative but to remediate the property. The property had been
    contaminated during Northstars operations while Northstar owned it, and there
    was no subsequent purchaser whom the MOE could order to undertake the
    remediation. The CCAA judge said that it seemed quite clear to him that the
    remediation order sought to enforce a payment obligation.

[17]

In
    my view, the CCAA judge implicitly found it was sufficiently certain the MOE
    would remediate the lands.

[18]

A
    review of the fresh evidence supports his conclusion.

[19]

Northstar
    went bankrupt and the trustee abandoned the Cambridge property. The MOE therefore
    commenced remediation activities at the site. The Ministers Direction
    permitting the MOE to perform work at the site provides: [u]ntil such time as
    any other person assumes responsibility for the work required by the [MOE] Order,
    it is in the public interest to cause some or all of the work required by the [MOE]
    Order to be done by the [MOE].

[20]

The
    affidavit supporting the MOEs fresh evidence motion states that [t]he MOE has
    undertaken the Preventive Work without prejudice to its position in this
    appeal. The MOE also filed a claim with the Monitor for the costs incurred,
    again on the basis that doing so was without prejudice to the MOEs position
    that the two Directors Orders are not pre-filing claims The MOE is currently
    seeking to compel a group of former directors and officers of Northstar to
    continue remediating the property. The directors and officers appeared on the
    appeal to submit that they will be able to successfully resist the MOEs
    efforts.

[21]

The
    issues between the MOE and the directors will be decided elsewhere. As far as
    this proceeding is concerned, in my view, the fact that the MOE has undertaken
    remediation activities makes it sufficiently certain that it will do so. I am
    unsure what the MOE hoped to achieve by its unilateral assertion of having
    undertaken the work on a without prejudice basis.

[22]

It
    is certainly conceivable that the MOE, after commencing remediation work, is
    able to compel other responsible parties to take over the work and complete it.
    If the MOE is successful in doing so, the work will be done without the MOE
    expending funds. As far as the other responsible parties are concerned, the MOE
    will be acting in a purely regulatory capacity. However, as far as the MOE
    Orders against Northstar are concerned, its commencement of the work in the
    circumstances of this case establishes that the MOE Orders are in substance a
    claim provable in the insolvency.

D.

Conclusion

[23]

For
    these reasons, I would dismiss the appeal.

[24]

Given
    the distribution order, the Fifth Third Bank had no stake in the outcome of
    this appeal and appeared to assist the court by addressing the creditors
    perspective. The issues between the directors and officers and the MOE are
    being dealt with elsewhere. This is not a case for costs.

R.G. Juriansz J.A.

I agree S.T. Goudge
    J.A.

I agree J.C.
    MacPherson J.A.

Released: October 03, 2013