Jay Vee Sandblasting Ltd (Re), 2016 ABQB 5

Court of Queen ’ s Bench of Alberta Citation: Jay Vee Sandblasting Ltd (Re), 2016 ABQB 5 Date: 20160104 Docket: BK03 115693 Registry: Edmonton In the Matter of the Bankruptcy of Jay Vee Sandblasting Ltd. Between: Thompson Bros. (Constr.) Ltd. Applicants - and - Sandra Kirkup, Mmd Leasing Ltd. and 67017 Manitoba Ltd. Respondents _______________________________________________________ Reasons for Judgment of L.A. Smart, Registrar in Bankruptcy _______________________________________________________ Introduction

[ 1 ] On December 18, 2014, I granted an Order pursuant to

Section 38 of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 on application made by Sandra Kirkup, MMD Leasing Ltd and 67017 Manitoba Ltd (Kirkup Group) to allow them to bring an action on behalf of the Bankrupt, Jay Vee Sandblasting Ltd against Thompson Bros. (Constr.) Ltd (Thompson). Thompson applies to set aside that Order under s 187(5) of the BIA. It also applies to set aside or vary rights granted to the Kirkup Group pursuant to s 163 of the BIA permitting questioning and production.

Section 163 [ 2 ] Thompson argues that the relief granted under s 163 ought not to have been granted without notice and further that is overly broad and susceptible to

interpretation that could result in an abuse of process. It is undisputed that notice to a proposed defendant is not required for an application under s 38. In 371890 Alberta Ltd v Gray Beverage Inc ., 1991 ABCA 124 , it was determined that assignment of the powers given by s 163 as part of a s 38 order is often necessary to give practical effect to the order. Inclusion of the assignment of rights under s 163 has become a customary provision in s 38 orders and in my view is not of an extraordinary nature requiring notice to the proposed defendant(s).

Counsel for the Kirkup Group has acknowledged that anyone may object to being questioned or to the production of documents and it is for the Kirkup Group to bring application to compel attendance or production. Furthermore, the Order granted being in general in nature will not be presented as entitling them to additional sanctions for contempt or otherwise.

Although I am generally satisfied that the language of the Order is sufficiently restrictive to avoid abuse, Counsel for the Kirkup Group has also undertaken to proceed with questioning in the authorized action under the provisions and governance set out in the Rules of Court without resorting to s 163. Section 187(5) [ 3 ] To obtain an order under s 38 an applicant must satisfy the court of four criteria.

There is no dispute that the first three criteria have been met leaving the requirement that there be threshold merit to the proposed proceeding, i.e., it is not obviously spurious ( Smith v Price Waterhouse Coopers Inc ., 2013 ABCA 288 ). Thompson is of the view that there was insufficient evidence before me to make that determination. The Kirkup Group relied upon the decision of Justice Burrows in Thompson Bros. (Constr.) Ltd v Jay Vee Sandblasting Ltd , 2013 ABQB 670 and referred to materials used in support in that matter.

Justice Burrows reviewed the concerns expressed by the Kirkup Group and observed that he was not aware of any objective determination with respect to issues surrounding a significant decline in inventory and accounts receivable in the six months preceding the appointment of a Receiver nor was he aware that it had been determined whether any causes of action existed in favor of Jay Vee in connection with whatever those causes were. I agree with Counsel for Thompson that these comments of Justice Burrows alone may well be insufficient to provide the necessary factual support for the s 38 Order.

However Justice Burrows summarizes the significant features of the circumstances before him and states: “the Kirkup Group has raised serious concerns regarding the amount owing under the security claimed by Thompson Bros., the dissipation of Jay Vee assets prior to the receivership, and the involvement of Thompson Bros. in the management of Jay Vee prior to the receivership.” In my view his observations are sufficient to meet the merit threshold. However, if I am mistaken in that regard, I note that in support of this application, an affidavit of Paul Sturt was filed.

Questioning took place on that affidavit and answers were provided to undertakings given. The combined evidence in the affidavit and arising from questioning provides a factual basis, albeit a thin one, for the claims that have been advanced against Thompson. In sum, I would not conclude that the claims advanced by the Kirkup Group can be characterized as obviously spurious. Conclusion [ 4 ] Accordingly, I decline to exercise my discretion under s 187(5) of the BIA to set aside my Order of December 18, 2014. The Kirkup Group shall have its costs on Column 1 of

Schedule C. Dated at the City of Edmonton, Alberta this 4 th day of January, 2016. L.A. Smart Registrar in Bankruptcy Appearances:

Sigurd Delblanc Bryan & Company LLP for the Applicants Greg D. Heinrichs, Q.C. DLA Piper (Canada) LLP for the Respondents