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Insolvency (BIA) - 'Claim Provable in Bankruptcy' (2). Proex Logistics Inc. (Re) [time limits for filing]
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 timelines for filing proof of claim in a bankruptcy:[103] Under the BIA, there are generally three opportunities to file a proof of claim: (i) prior to the first meeting of creditors, to be permitted to vote; (ii) in response to a notice to prove a claim sent by the Trustee, to be provided within 30 days; and (iii) prior to a distribution, if the creditor wishes to participate in the distribution. . 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 considered BIA s.135 ['Admission and Disallowance of Proofs of Claim and Proofs of Security']:[9] Section 135(5) of the BIA allows the court to expunge a proof of claim on the application of a creditor or the debtor if the trustee declines to interfere in the matter. A s.135(5) challenge is available both before and after a claim is allowed: L.W. Houlden, G.B. Morawetz, and Janis Sarra, Bankruptcy and Insolvency Law of Canada, loose-leaf (2025-Rel. 7), 4th ed (Toronto: Thomson Reuters, 2009) at §6.283. The BIA also allows a claimant to appeal the Trustee’s acceptance of a claim within 30 days pursuant to s. 135(4) of the BIA.
[10] In this case, Rana brought no challenge under s. 135(4) and did not ask the trustee to disallow the claim as required under s. 135(5). The motion judge allowed the Trustee’s motion, noting that the Trustee allowed Paul’s claims, all appeal rights with respect to Paul’s claims had expired, and therefore any claim against the Trustee at this stage would constitute a collateral attack.
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(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.
(4) No Right under s.135(5) of the BIA to Challenge the Trustee’s Acceptance of the Wrongful Conduct Claim
(a) Rana is not a Creditor
[92] To challenge the Wrongful Conduct Claim, Rana must invoke s. 135 of the BIA. However, the motion judge held that he does not meet the preconditions to do so I agree.
[93] The motion judge found that in any event:Rana, as an ‘equity owner’ of the bankrupt entities, is not a creditor and has no standing to challenge the Trustee’s decision to accept Paul’s Claims. The fact that Rana’s economic interests may be negatively affected by the manner in which the assets may be distributed as a result of the acceptance by the Trustee of Paul’s Claims does not provide Rana with a right of standing. [94] Section 135(5) of the BIA provides that:The court may 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. [Emphasis added.] [95] In this case, the motion judge held that as an equity owner, Rana would not have had standing to apply to the court to expunge Paul’s claims under s. 135(5) of the BIA because he was neither a creditor nor a debtor under the statutory meaning of those terms.
[96] A “creditor” within the meaning of s. 2 of the BIA, is a person who has, on a balance of probabilities, established that they have a provable claim.
[97] In this proceeding, a “Claim” is (i) based on facts that in whole or in part, existed before the date of the Receivership Order, (ii) relates to a time prior to the date of the Receivership Order, or (iii) would have been provable in bankruptcy had RGC become bankrupt on the date of the Receivership Order.
[98] As discussed below, in some circumstances equity holders may be creditors in the context of bankruptcy proceedings. An equity interest alone, however, is not enough to grant Rana access to s. 135(5). In the circumstances of this case, Rana is not a creditor, because he did not file a timely and valid proof of claim in either the receivership or the bankruptcy..
(b) Rana Did Not Bring a s.135(5) Application
[99] Rana did not bring an application under section 135(5) of the BIA, though the motion judge found he “had every opportunity to bring a motion to challenge the allowance of Paul’s Claims”. Rana had many opportunities to question the Trustee on the details of Paul’s claims or formally request that the Wrongful Conduct Claim be disallowed, but on the record before us, it appears he failed to do so. He did not bring a s. 135(5) application and did not take the steps necessary for one to be validly brought. Nor, in the circumstances, could he have done so. . YG Limited Partnership and YSL Residences Inc. (Re) [remoteness]
In YG Limited Partnership and YSL Residences Inc. (Re) (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, here from an earlier appeal which reversed "the Trustee’s decision disallowing [the respondent employee's] profit-sharing claim"."
Here the court considers whether an employee's profit-sharing involvency claim is 'too remote and speculative', and thus not allowable as a 'claim provable' in bankruptcy:(ii) Ms. Athanasoulis’ claim is not too remote or speculative
[76] The Trustee’s argument that Ms. Athanasoulis’ profit-sharing claim is too remote and speculative is primarily based on its position that it is a contingent claim.
[77] As noted by the appeal judge, once it is determined that the profit-sharing claim is not a contingent claim, remoteness is only a bar to the recovery of damages if, as a matter of contract law, the type of loss at issue is too remote. There are two branches to the remoteness test: damages may be recoverable if (a) in the “usual course of things”, they arise fairly, reasonably and naturally as a result of the breach of contract, or (b) they were within the reasonable contemplation of the parties at the time of contract: The Rosseau Group Inc. v. 252801 Ontario Inc., 2023 ONCA 814, 169 O.R. (3d) 192, at para. 68. Damages that fall outside of either branch are not recoverable because they are too remote: Rosseau, at para. 68. Importantly, remoteness in a breach of contract case deals with the “type” of loss that is recoverable, not with the measure or quantification of the loss: Rosseau, at para. 70. Damages that are difficult to calculate are not inherently too remote: General Mills Canada Ltd. v. Maple Leaf Mills Ltd. (1980), 1980 CanLII 4566 (ON SC), 52 C.P.R. (2d) 218 (Ont. H. Ct.), at p. 219; Jason W. Neyers, Fridman’s The Law of Contract in Canada, 7th ed. (Toronto: Thomson Reuters, 2024), at §22:24.
[78] In applying these principles to this case, the appeal judge found:The type of loss at issue here is in respect of the lost opportunity to contribute to and eventually share in the profits that the parties anticipated would eventually be earned by YSL when the YSL Project was completed. The remoteness concerns identified by the Proposal Trustee are in respect of the measure of damages, not the type of loss. [79] I see no error in the appeal judge’s determination that the type of loss claimed by Ms. Athanasoulis is not the type of loss that is too remote for recovery. At the time of the breach, she lost the opportunity to work towards and share in YSL’s profits. Her lost opportunity flowed naturally from the breach and was within the reasonable contemplation of the parties when the profit-sharing agreement was formed.
[80] As noted by the appeal judge and already stated above, quantifying the loss in this case may be complicated and may involve taking many different factors into consideration, but this does not make the type of loss too remote as a matter of contract law. As the appeal judge stated, quantifying damages will be “an issue for another day in these proceedings”.
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