Summary

40417

In the matter of the bankruptcy of Brian Wayne Flight, et al. v. John Adamson

(Ontario) (Civil) (By Leave)

Keywords

Civil procedure — Costs — Bankruptcy and insolvency — Trustee — Bankrupt suing trustee in bankruptcy for failing to detect and respond to fraudulent activities of bankrupt’s bookkeeper —Should this Court award costs against the bankrupt party, where the lower court awarded costs in the cause to the bankrupt party, and the matter is returned to the lower Court for re-determination? — Whether this Court should award costs against a bankrupt party, where the court has not made a final determination on the issues in dispute?

Summary

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

In September, 2019, the applicant, Mr. Flight and his spouse brought an action personally against Mr. Flight’s trustee in bankruptcy, for fraud, negligence, breach of fiduciary duty, unjust enrichment, misfeasance and conversion, claiming $10 million in damages. Between 2004 and 2016, Mr. Flight, the sole proprietor of Heritage Painters & Services, made four assignments in bankruptcy. Each time, the respondent, Mr. Adamson of Adamson Inc., acted as the trustee in bankruptcy. Mr. Flight claimed that his financial ruin was the fault of Mr. Adamson for failing to detect and appropriately respond to fraudulent activities conducted by Mr. Flight’s bookkeeper. The trustee’s position was that Mr. Flight was required to obtain leave of the court under s. 215 of the Bankruptcy and Insolvency Act R.S.C. 1985, c. B-3. Mr. Flight brought a motion for directions as to whether he required leave of the court to continue his action. The motion judge held that leave was not required. This decision was overturned on appeal. The matter was remitted back to the Superior Court of Justice for a determination on whether leave ought to be granted. The respondents were awarded costs of the appeal.

Lower Court Rulings

June 15, 2021
Ontario Superior Court of Justice

2021 ONSC 4278, 35-2122786, CV-19-2035
Applicants not required to obtain leave to continue their action against the trustee in bankruptcy under s. 215 of the Bankruptcy and Insolvency Act,
July 13, 2022
Court of Appeal for Ontario

2022 ONCA 526, C69594
Leave to appeal granted, appeal allowed; matter returned to bankruptcy court to determine whether applicants should be granted leave to sue trustee in bankruptcy.