Clarity in Appeal Procedures Part II: The BIA Prevails – or Does It?

In January, we wrote about a decision of Justice Watt of the Ontario Court of Appeal, which addressed the question of which appeal procedure must be followed in appeals of Orders made in proceedings constituted under both the Bankruptcy and Insolvency Act (the “BIA”)¹ and the Courts of Justice Act (the “CJA”).² His decision in Business Development Bank of Canada v. Astoria Organic Matters Ltd. and Astoria Organic Matters Canada LP³ concluded that, even where the initial Order references both statutes, any appeal must follow the appeal procedures prescribed by s. 193 of the BIA and the Bankruptcy and Insolvency General Rules (the “BIA Rules”) due to Parliament’s exclusive jurisdiction over bankruptcy matters.

The appellant, SusGlobal Energy Belleville Ltd. (“SusGlobal”), appealed Justice Watt’s decision to a panel of the Court of Appeal. In reasons released April 8, 2019, Justice Zarnett, for a unanimous bench, upheld Justice Watt’s decision.⁴

Although the panel reached the same conclusion as Justice Watt, Justice Zarnett’s reasons introduce an additional nuance into the appeal route analysis by concluding that the appeal route to be followed is dependent upon the jurisdiction pursuant to which the specific Order under appeal was granted; it is not enough to look at the jurisdiction pursuant to which the proceeding was constituted. In so concluding, Justice Zarnett adopted the reasoning set out in a recent chambers decision from the B.C. Court of Appeal, wherein Justice Groberman stated:

I acknowledge that, in a case such as the present one, where relief is sought under both common law equitable principles and the Law and Equity Act as well as the Bankruptcy and Insolvency Act, there can be some question as to whether the appeal provisions of the Bankruptcy and Insolvency Act are engaged. In my view, the answer depends on whether the order under appeal is one granted in reliance on jurisdiction under the Bankruptcy and Insolvency Act. Where it is, the appeal provisions of that statute are applicable. (emphasis added by Justice Zarnett)⁵

In BDC v. Astoria, the Order under appeal arose out of paragraph 8 of the original receivership Order, being the standard prohibition on commencing proceedings against the receiver without leave of the Court (the “leave to sue provision”). Accordingly, Justice Zarnett held that the appeal route to be followed would depend upon whether the Court’s jurisdiction to include the leave to sue provision in the receivership Order was found in the BIA or the CJA.⁶

Ultimately, following a review of the history of leave to sue provisions and an analysis of the relevant principles of statutory interpretation, Justice Zarnett concluded that s. 243(1) of the BIA, which provides for the appointment of a national receiver, includes the power to order a leave to sue provision. He reached this conclusion having regard for the Supreme Court of Canada’s articulation of the purpose of s. 243 of the BIA in Lemare Lake Logging, as “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.⁷

Justice Zarnett held that s. 243 of the BIA must authorize the Court to grant broad powers to receivers, stating that:

By expressly empowering a court, in the BIA, to appoint a receiver as a court officer authorized to take a broad range of actions when just or convenient to do so, Parliament must be taken to have clothed the court with the power to make orders that are essential to the functioning of its officer, the court-appointed national receiver, and to the court’s role in supervising it.⁸

Justice Zarnett also noted that, prior to the enactment of s. 243, receivership orders under provincial legislation included leave to sue provisions.⁹ Accordingly, the leave to sue provision could have been grounded in either the BIA or the CJA. In these circumstances, the doctrine of paramountcy mandates that the BIA appeal provisions govern SusGlobal’s appeal. Even though the leave to sue provision could also have been grounded in the CJA power to appoint a receiver, as long as the BIA is one of the sources that authorized the leave to sue provision, SusGlobal’s appeal must follow the appeal route prescribed by the BIA.¹⁰

On its face, BDC v. Astoria complicates the analysis that must be conducted by a party when deciding how to appeal an Order made in a proceeding constituted under both the BIA and the CJA. The intended appellant must consider the statutory authority pursuant to which the specific Orders it seeks to appeal were granted, rather than simply relying on the fact that the proceeding was initiated under the BIA.

However, given Justice Zarnett’s conclusion that s. 243 of the BIA provides the Court with broad jurisdiction to grant such powers to receivers as are necessary, it is likely that the majority of Orders made in receivership proceedings will continue to find their source of authority in the BIA. Applicants seeking to commence court-supervised receivership proceedings may wish to consider whether any of the relief they are seeking depends exclusively on the CJA. If no such relief is being sought, it may be appropriate to eventually eliminate the reference to the CJA in the model order altogether.