Case information

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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.

Bankruptcy and insolvency – International insolvencies – Review of ex parte proceedings – Recognition of foreign judgments (public policy exception) – Powers of interim receiver (search and seizure) – Consequences of a breach of the duty of full and frank disclosure in ex parte proceedings – Responsibility for paying the reasonable fees and disbursements of the interim receiver – Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 2, 189, 269, 272, 281, 284; Civil Code of Québec, S.Q. 1991, ch. 64, s. 3155.

On a motion under the BIA to review, rescind and vary ex parte orders made by the Superior Court in cross-border insolvency proceedings, Schrager J. decided that a foreign bankruptcy judgment should not have been recognized because, inter alia, the ex parte petitioners had failed in their duty of full and frank disclosure; the foreign civil judgements at the root of the foreign bankruptcy proceeding, although enforceable under foreign law, were not final, and neither was the bankruptcy judgment; the damages awards in the civil judgments were excessive, and recognition would be contrary to public order as contemplated under the C.C.Q. and the BIA. He also quashed the search warrants issues ex parte, on the grounds that 1) s. 189 of the BIA applies only after a bankruptcy judgment is made by a Canadian court, which was not yet the case, and 2) the seizures were in any event illegal. Finally, he dismissed the receiver or interim receiver and ordered it to return all property seized at its own costs.

The Court of Appeal held that the foreign bankruptcy judgment could be recognized despite the violation of the duty of full and frank disclosure; the BIA does not require a final judgment, and the public policy exception did not apply. It ruled that s. 189 of the BIA did apply to a debtor not yet bankrupt and that, in any event, upon recognizing a foreign proceeding, a court could make any order appropriate to protect the interests of the creditors under s. 272 of the BIA. It varied the interim receiver’s powers, annulled some of the seizures and found that even if the orders made in favour of the receiver were subsequently varied, the receiver was entitled to have its reasonable fees and disbursements paid out of the assets of the debtor.