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Insolvency (BIA) - Trustee. Proex Logistics Inc. (Re)
In Proex Logistics Inc. (Re) (Ont CA, 2025) the Ontario Court of Appeal dismissed an insolvency appeal, here brought against a "motion judge’s decision to deny ... standing, and to allow the trustee’s motion to consolidate estates, pay the claims of the respondent ... distribute any surplus to the equity holders, and approve the trustee’s report".
Here the court considers the range of an insolvency trustee's discretionary authority:(2) The Decision Not to Interfere with the Trustee’s Acceptance of Paul’s Unsecured Claim and Equity Claim for Wrongful Conduct
[76] Second, the motion judge held that she had no jurisdiction under the BIA to authorize the Trustee’s acceptance of Paul’s claims.
[77] Under the BIA, the Trustee decides whether to allow a claim in whole or in part. The BIA sets out the steps that may be taken if a party disagrees with the Trustee’s decision.
[78] The authority to approve claims vests solely with the Trustee subject only to (i) appeal of the Trustee’s decision within 30 days under s. 135(4) of the BIA, or (ii) the court’s ability to “expunge or reduce a proof of claim or a proof of security on the application of a creditor or of the debtor if the trustee declines to interfere in the matter” under s. 135(5) of the BIA.
[79] There is no authority in the BIA to permit the court to provide advice and directions after the Trustee has decided to allow a claim absent an application challenging that decision under s. 135. In this case, no application to challenge the Trustee’s determination of Paul’s claims was ever brought.
[80] As such, I see no error in the motion judge’s conclusion that:The BIA does not contemplate the court accepting an approval that has already been made by the Trustee, nor is it clear how the court could provide advice and directions after the Trustee had already made the decision. [Emphasis in original.] [81] The motion judge correctly held that since the Trustee had allowed Paul’s unsecured claim of $117,693.40 and equity claim of $2,650,000 for wrongful conduct under the BIA, there was no basis for the court to interfere and no need for the court to provide any further authorization for the acceptance of those claims to be valid.
....
(3) No Right under s.37 of the BIA to Challenge the Trustee’s Acceptance of the Wrongful Conduct Claim
[83] Rana claims that he is entitled to rely on s. 37 of the BIA to challenge the Trustee’s motion to make a distribution respecting the Wrongful Conduct Claim. He is incorrect. First, Rana is not a “person aggrieved” within the meaning of s. 37. Second, Rana cannot use s. 37 to effectively challenge the Trustee’s decision on a claim when the route to do so is in s. 135.
[84] Section 37 of the BIA provides:Where the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court and the court may confirm, reverse or modify the act or decision complained of and make such order in the premises as it thinks just. [Emphasis added.] [85] A “person aggrieved” is a person who has suffered a legal grievance, a person against whom a trustee’s decision has wrongfully deprived them of something, or wrongfully affected their title to something: Houlden, Morawetz, and Sarra, at §2.132.
[86] Rana claims that his share of the surplus will be diminished if the Trustee makes a distribution on account of the Wrongful Conduct Claim, and that this court should be guided by the broad reading of s. 37 cited in YG Limited Partnership and YSL Residences Inc., 2022 ONSC 6548, 4 C.B.R. (7th) 142, aff’d 2023 ONCA 505, 168 O.R. (3d) 153.
[87] I disagree. As noted by the court in YG Limited Partnership, at para. 29, the limited partners in that case were not “persons aggrieved” within the meaning of s. 37 solely because:… their ultimate potential recovery will presumably be reduced if the claim is allowed. That is not sufficient to make them aggrieved within the meaning of section 37. To conclude otherwise would mean that every creditor would have standing pursuant to section 37 to challenge the claim of every other creditor in a bankruptcy proceeding and I reject that notion. [88] Similarly, Rana opposes the distribution essentially because he says the Wrongful Conduct Claim should not have been accepted, as that will affect his claim to the portion of the surplus that would otherwise have been payable to him.
[89] The broad discretionary powers in s. 37 may not be used in place of s. 135 of the BIA: Re Drummie, 2004 NBQB 35, 272 N.B.R. (2d) 314.
[90] As outlined below, Rana failed to take any steps to challenge the Wrongful Conduct Claim under s. 135 which provides a complete code for dealing with proofs of claim. To permit him now to challenge the Trustee’s decision under s. 37 as a person “aggrieved”, would run contrary to the clear and specific legislative structure provided for dealing with proofs of claim under s. 135.
[91] For these reasons, I would dismiss this ground of appeal.
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