Siler (Re), 2017 ABQB 810

Court of Queen’s Bench of Alberta Citation: Siler (Re), 2017 ABQB 810 Date: 20171222 Docket: 24-1758499 Registry: Edmonton In the Matter of the Bankruptcy and Insolvency Act RSC 1985, C. B-3 And in the Matter of the Bankruptcy of James Elmo Siler And Between: Robert Walker and Rita Walker Applicants - and - James Elmo Siler Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Robert A.

Graesser _______________________________________________________ Introduction [ 1 ] Robert and Rita Walker apply for an extension of time within which to file their notice of appeal from the decision of Registrar Schulz dated September 1, 2017. [ 2 ] Registrar Schulz denied the Walkers’ application under

section 38 of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 (BIA). She also denied James Elmo Siler’s application for a discharge from Bankruptcy and instead granted him a conditional discharge,

requiring payment of $30,000 as either a lump sum or in to-be-agreed-upon monthly payments. [ 3 ] Counsel negotiated over the form of order resulting from Registrar Schulz’s decision, and the form of order was agreed on September 22. The filed order was served on the Walkers’ solicitor on September 27. [ 4 ] A notice of appeal was prepared by the Walkers’ former solicitor, and it was filed on September 29, 2017. A copy of the filed notice of appeal was served on the Trustee on September 29, 2017. [ 5 ] Counsel for Mr.

Siler immediately notified former counsel for the Walkers that the notice of appeal had been filed out of time. [ 6 ] On October 5, 2017 the Walkers filed an application to extend the time for appeal. The application was supported by the affidavit of Robert Walker, sworn October 12. Mr. Walker was cross-examined on his affidavit on October 16. [ 7 ] Rule 30 of the Bankruptcy and Insolvency General Rules provides that appeals are to be filed within 10 days from pronouncement of the decision appealed from. The appeal period thus expired on September 11.

Background [ 8 ] The background to this matter is set out in Registrar Schulz’s decision Siler (Re) , 2017 ABQB 534 . I need not repeat it here, other than to say that the Walkers are unsecured creditors of Mr. Siler. Their claim amounts to 96.4 percent of the approved claims in Mr. Siler’s bankruptcy. Mr. Siler’s bankruptcy resulted from a judgment of nearly $500,000 the Walkers obtained against Mr. Siler arising out of a construction dispute over the Walkers’ home.

That dispute is detailed in Walker v Siler , 2013 BCSC 107 . [ 9 ] The bankruptcy proceedings have essentially been a fight between the Walkers and Mr. Siler and his wife. [ 10 ] At the time of the bankruptcy, Mr. Siler owned 50 percent of the shares in two corporations, water bottling business and a bottled water delivery business. Mrs. Siler owned the other 50 percent, and was each corporation’s sole director. Mr. Siler was the sales manager. During the course of the bankruptcy, Mrs. Siler offered to purchase the Estate’s interest in these two corporations. Mr. Walker, as inspector, rejected the offer.

The Estate continues to own 50 percent of the shares in these companies. The shares have now been valued at $13,937.50, which is significantly less than Mrs. Siler had offered. [ 11 ] In the proceeding before Registrar Schulz, the Walkers alleged that Mrs. Siler had appropriated a corporate opportunity, being the purchase of another water distribution business. The second water distribution business was a significant customer of the water bottling business.

The Walkers believe that this transaction will significantly impact the value of the Estate’s 50 percent interest in the first water distribution business. [ 12 ] The Walkers wanted the Trustee to pursue a claim against Mrs. Siler for appropriating this opportunity. The Trustee refused, so the Walkers brought an application under

section 38 of the BIA to allow them to take the proceeding in their own names, and at their own expense and risk. [ 13 ] The Walkers also wanted the Trustee to pursue Mrs. Siler for participating in a scheme to remove or reduce the value of the Estate by converting the Bankrupt’s dividends from these corporations to salary. [ 14 ] At the same time, Mr. Siler brought an application for discharge. [ 15 ] With respect to the

section 38 application, Registrar Schulz dismissed it on the basis that it had not been demonstrated that the opportunity had come to Mr. and Mrs. Siler in their personal capacities or as representatives for their corporations. Mr. Siler declined the opportunity, but Mrs. Siler pursued it and arranged for financing from the vendor. No funds were provided by Mr.

Siler or by their corporations. [ 16 ] Registrar Schulz’s ruling is at paragraph 35 of her decision: [35] Given the uncontradicted evidence of the Silers, I find this is a situation where the key employee/director/shareholder has obtained this opportunity with the consent and full knowledge of Trickle Creek and WPS, and most notably, the 50% shareholder. This is not a situation where a person divested himself of an asset just prior to declaring bankruptcy.

This is a situation where a person was exercising his previously expressed desire to retire or cut back on his work and expressly rejected the business opportunity. The key employee/director/shareholder acted in a manner consistent with the historical practice of the corporations and the individuals and acted to preserve the business of WPS. I do not find that Ms. Siler seized a corporate opportunity without the consent of the corporation; rather I find that she had the consent of the corporation. It does not make a difference that the key employee/director/shareholder is married to the other shareholder.

She is a separate individual entitled to pursue her own business interests. [ 17 ] Registrar Schulz also concluded that there was no merit to the argument that Mrs. Siler had participated in a scheme to harm the Estate. She noted that “suspicions are not sufficient to establish threshold merit” (at paragraph 42). [ 18 ] With respect to Mr. Siler’s discharge from bankruptcy, Registrar Schulz balanced Mr. Siler’s position as a first time bankrupt with the concern that bankruptcy not be used as a mechanism for allowing a debtor to escape a single judgment. [ 19 ] Ultimately, she directed that Mr.

Siler be entitled to retain his shares in the two water companies on paying the Trustee $13,937.50 (being the value of his shares in the corporations under the valuation obtained by the Trustee, and that he be discharged on paying the Trusee $30,000. [ 20 ] Registrar Schulz ordered the Walkers to pay the costs incurred by the Estate.

Law [21] The parties agree that the factors for determining whether an appellant should be permitted to file an appeal after the filingtime has expired are those from Cairns v Cairns, (ABSCAD). In Kubota Canada Ltd. v Case Credit Ltd., 2004 ABCA41, Russell JA stated at paragraph 10: The governing factors for such applications in this province were established by this Court in Cairns v. Cairns, (ABCA), [1931] 3 W.W.R. 335 (C.A.) (Cairns). They include whether: 1.

There was a bona fide intention to appeal while the right to appeal existed, and some special circumstance that would excuse orjustify the failure to appeal; 2. There is an explanation for the delay and the other side was not so seriously prejudiced by the delay that it would be unjust todisturb the judgment, having regard to the position of both parties; 3. The appellant has not taken the benefits of the judgment from which the appeal is sought; and 4. The appeal has a reasonable chance of success if allowed to proceed. [22] The parties referred to a number of cases dealing with the various factors, being:

a) Travis v D & J Overhead Door Ltd., 2016 ABCA 41;

b) Lofstrom v Radke, 2017 ABCA 211;

c) Lofstrom v Radke, 2017 ABCA 287;

d) Edmonton (City) v Edmonton (Subdivision and Development Appeal Board), 2016 ABCA 129;

e) Impact Tool & Mould (Trustee of) v Impact tool & Mould (Interim Receiver of), (ONCA);

f) Attila Dogan Construction and Installation Co. Inc. v AMEC Americas Limited, 2015 ABCA 257;

g) Re Bankruptcy of Zee Saban, 2012 ONSC 223;

h) AGF Industries Ltd. v PricewaterhouseCoopers, 2003 ABCA 13;

i) Re Bankruptcy of Zee Saban, 2012 ONSC 6700;

j) BDO Canada Limited v Beothuck Trailers Ltd., 2010 ABQB 667;

k) Re Rassell (Bankrupt), 1998 ABQB 479;

l) Paesch (Re), 2008 ABQB 357; and

m) Elford (Re), 2017 ABQB 433. Analysis [23] It is clear that analyzing the tests in Cairns v Cairns is essential. Where the Alberta Court of Appeal decisions appear to be atodds with each other is in relation to the effect of not satisfying one or more of the Cairns criteria. For the purposes of my analysis here, Iam going to restrict my comments to Alberta decisions.

The Cairns criteria are described in the cases as being four or five tests; thatresults from combining “bona fide intention to appeal” and “special circumstances” together in some of the cases. [24] In this case, tests 2 and 3 have been satisfied; the delay has been explained, and there is no serious prejudice to the Walkers bythe delay, and the Walkers have not taken any benefit from the decision they seek to appeal from. While Mr.

Siler argues that any delaywill prejudice him noting that it is already more than three years from his assignment into bankruptcy, and he is 71 years old, I do not seethat those factors amount to the sort of prejudice contemplated by the test. [25] I will thus only deal with tests 1 and 4. Bona fide intention and special circumstances [26] The appeal period for appeals from Registrars in bankruptcy is a short one.

Ten days from pronouncement is considerablyshorter than the “normal” appeal periods, which are one month from pronouncement to the Court of Appeal in civil matters (Rule 14.8),30 days from pronouncement to the Court of Appeal in Divorce Act matters (Rule 12.59), one month from pronouncement for appealsfrom Provincial Court to the Court of Queen’s Bench (Rule 12.61), and 30 days from the date of sentence in criminal matters (CriminalAppeal Rules). [27] Only appeals to a judge from decisions of Masters in Chambers are short, being 10 days from filing and service of the order(Rule 6.14).

Ten days from pronouncement is a very short appeal period, and is a trap for the unwary.

[28] Here, the uncontradicted but uncorroborated evidence of Mr. Walker was that he formed an intention to appeal immediatelyafter he received a copy of Registrar Schulz’s decision on or about September 1. Cross-examination established that Mr. Walker was ofthe belief that they had 30 days to appeal.

The intention to appeal was more of a wish to find out what was involved in appealing, asopposed to committing to an appeal and formally instructing counsel to do so. [29] Discussions with counsel appear to have taken place on September 14, and instructions to appeal were given no later thanSeptember 25. [30] In my view, that satisfies the first branch of the test. Mr. Walker received the decision within the appeal period and formedthe necessary intention to appeal within the appeal period.

The fact that instructions were not given to the Walkers’ lawyer until after theappeal period had expired, or that the intention to appeal had not been communicated to the Trustee or Mr. Siler’s counsel until after theappeal period had expired, are not relevant to this test. [31] Mr. Siler was under the mistaken belief that he had 30 days from September 1 to launch the appeal. He learned of that timeframe from former counsel. Mr. Siler formed an immediate intention, within the real appeal period, to explore the possibility of anappeal, and instructed former counsel to file an appeal within the time Mr.

Siler believed he had to make a final decision on appealingMaster Schulz’s decision. [32] It was not unreasonable for Mr. Siler to take time to consider their position, especially as he had not heard back from formercounsel within the real appeal period. It cannot be said that Mr. Siler was himself guilty of any delay on the evidence before me. [33] The real issue is whether or not a mistake of counsel in calculating the relevant appeal period amounts to “specialcircumstances that would excuse or justify the failure to appeal.” [34] In Travis v D & J Overhead Door Ltd., 2016 ABCA 319, Wakeling JA says no.

In Lofstrom v Radke, 2017 ABCA 211,Slatter JA says yes, referencing Attila Dogan Construction and Installation Co. Inc. v AMEC Americas Limited, 2015 ABCA 257. InAdderly v 1400467 Alberta Ltd., 2014 ABCA 291, Brown JA (as he then was) says no. [35] Travis v D & J was an application to extend time to file appeals, heard by Wakeling JA sitting as a single judge. Mr. Travishad two lawsuits arising out of motor vehicle accidents in 2003 and 2004. The lawsuits proceeded very slowly. The lawsuits were bothdismissed for delay under Rule 4.31. The applications had been served on Mr. Travis’s then lawyer.

No one appeared on the applicationsand they were granted. Defence counsel immediately notified Mr. Travis’s lawyer that the orders dismissing the actions had beengranted. Mr. Travis’s lawyer advised that he “expected to appeal the orders.” [36] Mr. Travis had learned of the orders within two weeks from them being granted, but not from his lawyer. He immediatelycalled his lawyer, who told him “he had the matter under control.” [37] Some seven months later, with nothing having been done in the meantime, Mr.

Travis’s new lawyer filed an applicationseeking an order extending the time for filing an appeal. [38] Wakeling JA did an extensive review of the case law on extending time to appeal, and concluded that the lawyer’s failure toact in a timely manner did not constitute special circumstances and denied the application, largely on the basis that the Cairns v Cairnscriteria had not all been met. [39] If I understand Wakeling JA’s decision correctly, he differentiates between situations involving brief delays in filing a noticeof appeal from those involving more substantial delays.

According to Wakeling JA, the first brief category is itself divided into twosubcategories. The first is where the Cairns criteria are met. In that situation, the granting of an extension of time is presumptive. [40] The second subset is where not all of the Cairns criteria have been met.

Wakeling JA suggests that so long as the applicantdemonstrates a reasonable chance of success on the appeal, an applicant who has moved quickly in the face of a brief delay may begranted leave. [41] Where longer delays have taken place, all of the Cairns criteria must be met, following Ramsdell v Elliott, (AB CA), [1937] 1 WWR 37 (SCAD). [42] Thus, while Travis v D & J stands for the proposition that lawyer error does not constitute special circumstances, the casealso holds that the absence of special circumstances is not of itself fatal to an extension application where the delay has been a short one,and the applicant moves quickly to apply for the extension. [43] In Adderley v 1400467 Alberta Ltd., Brown JA (as he then was) considered an extension application in the context of an errormade by a student-at-law as to the appeal period, a fairly brief delay and a prompt application.

He stated at paragraph 10: I accept that the student’s evidence is sufficient to negate any inference that the failure to appeal in time was the product of a deliberatedecision or game-playing on the part of the applicants. That, however, goes to demonstrate the applicants’ bona fide intention to appeal isnot at issue here.

What matters is whether his misunderstanding of the pertinent rule, and its effect of delaying the filing of the Notice ofAppeal discloses a special circumstance which reasonably explains that delay. [44] In that case, the delay was solely the result of an error on the part of a student-at-law.

Brown JA noted at paragraph 12: A misunderstanding of the effect of a rule does not constitute a “special circumstance” that qualifies as furnishing a reasonableexplanation... [45] Ultimately, Brown JA dismissed the application because there were no special circumstances, and there was no reasonableprospect of success on the appeal, stating at paragraph 19:

[19] The reason this Court occasionally agrees to extend time limits is to allow for the flexibility which is sometimes necessary to seethat justice is done: Samson Cree Nation v O’Reilly & Associés, 2014 ABCA 268 at para 185. Where applicants can establish,inter alia, that a special circumstance reasonably explains their delay in filing a Notice of Appeal, and that their proposed appeal has areasonable prospect of success, then the interests of justice can support granting relief to ensure that an appeal does not fail for want ofcompliance with a technicality that caused no prejudice to a respondent.

Here, however, because the applicants cannot establish either ofthose things, the interests of justice do not support granting relief. [46] This decision is not inconsistent with Travis v D & J.

Here, Brown JA recognized some discretion in the absence of fullcompliance with the Cairns criteria “to see that justice is done.” From my reading of Travis v D & J, Wakeling JA would limit thatdiscretion to situations involving brief delays and prompt responses. [47] An earlier case, AFG Industries Ltd. v Pricewaterhousecoopers Inc., 2003 ABCA 13, dealt specifically with the 10-dayappeal period under the Bankruptcy Rules. Côté JA, sitting as a single judge on the extension application, declined to “declare federallegislation to be unreasonable, and routinely override it” (at paragraph 2).

In that case, more than a month had passed from the expiry ofthe appeal period until the extension application was filed. He declined to extend the time, with no consideration of the merits of theappeal. [48] I do not view AFG v Pricewaterhousecoopers as being inconsistent with either Travis v D & J or Adderley, at least in thecontext of short delays. [49] Lofstrom v Radke, 2017 ABCA 211, is cited for the proposition that lawyer error may constitute exceptional circumstances.In that case, Slatter JA, sitting alone on an extension application, considered Travis v D & J.

While Slatter JA dismissed the extensionapplication, he disagreed with the approach taken by Wakeling JA in Travis v D & J, stating at paragraph 6: [6] The suggestion in the single judge Travis decision that there is a more stringent test does not reflect the law, and should not befollowed to the extent that it conflicts with Cairns and the many other full panel judgments of this Court: see Royal Bank of Canada vMorin, 1977 ALTASCAD 209 , 1977 AltaSCAD 209 at paras. 4-9, 6 AR 341; Sohal v Brar, 1998 ABCA 375 at para.1, 223 AR 141; Stoddard v Montague at para. 7; R. v Canto, 2015 ABCA 306 at para. 13, 28 Alta LR (6th) 49, 607 AR 298;Duzs v Duzs, 1973 ALTASCAD 9 , [1973] 3 WWR 394 at p. 396, 35 DLR (3d) 310 (Alta SCAD); Petryga v Alberta, 1980ABCA 323 at para. 11, 26 AR 290; Mayer (Guardian of) v Wolski (Guardian of), 1983 ABCA 198 at para. 2, 52 AR390; Smoky Lake General and Auxiliary Hospital & Nursing Home District No 73 v Higdon, 1983 ABCA 331 at paras. 12-16,50 AR 185, 29 Alta LR (2d) 215; Royal Bank of Canada v Lane, 1990 ABCA 181 at para. 7, 107 AR 144; Bank of Montreal vGrotski (1991), 1992 ABCA 4 , 120 AR 149 at para. 6, 4 CPC (3d) 197 (CA); Little v Little, 1998 ABCA 400 atparas. 10-12, 228 AR 344; Hebert v Canada, 2004 ABCA 36 at paras. 7-9; Heffernan v Korman, 2006 ABCA 262 atpara. 3; Leibel (c.o.b.

D and D Enterprises) v Cedarglen Group Inc., 2007 ABCA 73 at para. 6, 404 AR 36. There is no basis onwhich the law can now be rolled back to 1937. [50] Slatter JA refers to his own decision in Attila Dogan v AMEC, where he stated at paragraph 7: [7] There are undoubtedly cases where an error by counsel, or a misunderstanding of the pertinent rule, was found not to be asufficient excuse in the particular context, but that does not mean that there is a fixed rule to that effect.

The various factors in the Cairnstest must be weighed together, and whether to permit a late appeal is ultimately in the discretion of the Court: Cairns at p. 829; Stoddardv Montague, 2006 ABCA 109 at para. 8, 412 AR 88. Because there is an overriding discretion to permit a late appeal even ifthe Cairns test is not met, it does not advance the analysis to say that certain explanations can “never” be acceptable under that test. TheCourt could theoretically grant an extension even if none of the Cairns factors were met. [51] Lofstrom v Radke was appealed to a full panel of the Court of Appeal (2017 ABCA 287).

The appeal was dismissed, with nodiscussion about the Cairns factors. It is not of assistance on this application. [52] These are the cases that were cited to me. There are several other cases from Court of Appeal judges sitting alone on leaveapplications or extension of time applications. They generally confirm a residual discretion to see that justice is done, but the differencebetween Travis and Lofstrom has not been reconciled by a full panel. [53] It is difficult for a Queen’s Bench judge to choose between competing Court of Appeal decisions. To determine thisapplication, I do not think I have to choose.

These competing decisions will ultimately require a full panel of the Court of Appeal toweigh in and provide a binding decision for judges below, and presumably its own members. [54] What I glean from the most recent cases, Adderley, Travis, and Lofstrom, is that despite Cairns v Cairns and Ramsdell vElliott, there is a residual discretion on an extension application to grant an extension in circumstances where not all of the Cairnscriteria have been met.

That discretion may be broad enough to ensure that justice is done, or it may be limited to cases where at aminimum, the delay is brief, remedial steps are taken promptly, and there is a reasonable prospect of success on appeal. [55] Here, Mr. Siler argues that the delay was not brief, at least in the terms described in Travis as “one or two days.” In my view,the discretion described in Travis is not limited to several days. It does not extend as long as five weeks (as in AGF vPricewaterhouseCoopers). I will not attempt to create any narrower bookends.

Here, I would observe that the notice of appeal wasattempted to be filed within the “usual” appeal period and within the time the Walkers understood to be the appeal period, and theapplication to extend the time was made immediately after the Walkers learned of the timing error. [56] In these circumstances, I am satisfied that the delay was relatively brief, remedial steps were taken quickly.

Because of thesefactors, I am satisfied either that the error in recognizing the appropriate appeal period in the context of a 10-day appeal periodconstitutes exceptional circumstances, or if no exceptional circumstances are made out, the failure to satisfy that Cairns criteria does notprevent me granting leave if I am satisfied that there is a reasonable prospect of success on the appeal itself.

Reasonable Chance of Success [57] I do not think that the standard of review should play much of a role in determining whether the appeal has a reasonablechance of success. On this application, I am not going to weigh in as to whether the errors alleged are errors of law attracting acorrectness standard, or are errors of fact or mixed fact and law, attracting the palpable and overriding error standard. Arguments [58] Here, the Walkers allege three errors:

a) The Registrar erred with respect to the valuation of the shares owned by Mr. Siler in the two corporations involved in the waterbusiness in that (

a) the Registrar did not consider the factors under section 30(4) of the BIA; (

b) the Registrar relied on a flawedvaluation; and the valuation and “sale” to Mr. Siler has the potential to create mischief;

b) The Registrar erred in denying the

section 38 application on the basis that the Walkers had not established threshold merit to theapplication because the corporation agreed to allow Mrs. Siler to pursue the opportunity herself to acquire the competing business; and

c) The Registrar failed to properly consider the factors under

section 173 of the BIA in granting Mr. Siler a conditional discharge. [59] Mr. Siler responds in his brief to each of these arguments. Regarding the share valuation, Mr. Siler notes that the Walkerspresented no alternative evidence to the Court. Only the valuation obtained by the Trustee was provided, and the Registrar was alive tothe problems of selling 50 percent of the shares in a corporation where the other 50 percent are owned by a non-bankrupt party.Registrar Schulz was also aware that there had been offers to purchase the shares (albeit from Mrs. Siler) which were in excess of thevaluation but which had been rejected by Mr. Walker in his capacity as Inspector. [60] With respect to the

section 38 application, the Walkers note that Mr. Siler expressly declined the opportunity himself, and thecorporation consented to it. Mr. Siler argues that any claim against Mrs. Siler is bound to fail because he consented to the purchase byher. He also notes that the claim is hopeless because it is statute-barred. [61] With respect to the argument that the purchase of 169 was a reviewable transaction under

section 96 of the BIA, Mr. Silernotes that this argument was not raised by the Walkers before the Registrar, and it cannot now be a valid ground for appeal. Analysis of reasonable prospect of success [62] The “net effect” of the Registrar’s decision is to allow Mr. Siler to retain his shares in the two water companies on payment of$13,937, and to be discharged from bankruptcy on payment of a further $30,000. [63] The $13,937 for the shares is significantly less than Mrs. Siler was prepared to pay following Mr. Siler’s bankruptcy.

Thevalue of the shares has been significantly reduced because WPS did not acquire the business of one of its wholesale customers. Mrs. Sileracquired the shares, and that company, and not Trickle Creek, profits from the retail sale of Trickle Creek’s products. The purchase ofthis business by Mrs. Siler, not WPS, took place on September 7, 2012, some two and a half weeks before the commencement of theWalkers’ trial against Mr. Siler in Cranbrook, BC. The effect of that sale was to eliminate any value in WPS. Mr.

Siler went bankrupt asa result of the decision against him resulting from that trial. [64] According to Mr. Walker, after obtaining the BC judgment against Mr. Siler, Mr. Siler proposed settlement, telling Mr.Walker that if he didn’t accept the settlement offer, Mr. Siler would “take my best five (water) customers and start a new company.”While Mr. Siler denies saying that, the acquisition of the customer’s company by Mrs. Siler essentially did just that. [65] Wakeling JA describes the test for a “reasonable chance of success” as a low standard.

He says at paragraph 57 in Edmonton(City) v Edmonton (Subdivision and Development Appeal Board), 2016 ABCA 129, that it “is enough if the applicant’s position isarguable.

A position is arguable if it is not frivolous.” [66] In Re Bankruptcy of Zeev Saban, 2012 ONSC 6700, Newbould J described the standard of review from the Registrar tosuperior court at paragraph 5: 5 So far as the appeal is concerned, an appeal is not a trial de novo and a judge can consider only the evidence before the Registrar.The appellant must establish that the Registrar erred in principle, erred in law or failed to take into account a proper factor or took intoaccount an improper factor that demonstrably led to a wrong conclusion. See Re Borden (2010), 69 C.B.R. (5th) 251 per Hoy J. (as shethen was).

If an appeal is based on an alleged error in a finding of fact, the error must be palpable and overriding. See Clarke v. Caister(2000), 2000 BCCA 256 , 17 C.B.R. (4th) 49 (B.C.C.A.) and Houlden, Morawetz and Sarra, 2012-2013 Annotated Bankruptcyand Insolvency Act (Carswell) at Is.61. [67] In looking at the Registrar’s reasons and the grounds for appeal cited by the Walkers, I do not see that they are frivolous. [68] The valuation of the water companies is essentially a question of fact. It is troublesome that the Walkers did not provide someevidence to contradict the valuation obtained by the Trustee.

Nevertheless, the Registrar did not have to accept the Trustee’s valuation,and could have directed some further investigation by the Trustee. Or she could have adjourned the application so that the Walkers couldhave obtained their own valuation. [69] It is not frivolous for the Walkers to argue that the Registrar should have considered the section 30(4) factors in permitting

Mr. Siler to purchase the shares from his estate. There is an arguable position in regard to this issue. [ 70 ] The

section 38 application is a challenging one. The timing of the purchase by Mrs. Siler of 169 is suspicious, as it was on the eve of the trial that resulted in Mr. Siler’s bankruptcy. It may have followed a threat (albeit denied) by Mr. Siler to accomplish just that. It was also a sale that involved no down payment by Mrs. Siler and was paid for out of the ongoing profits from that company. The explanation that Mr. Siler didn’t want to get involved rings a bit hollow because WPS could presumably have acquired 169 itself with no down payment. No activity on Mr.

Siler’s part was required, and no funds from him (or Mrs. Siler) were necessary. [ 71 ] While the Registrar is right when she says that suspicions are not enough to find threshold merit, someone else looking at the circumstances might conclude that the suspicions are more than just suspicions and are inferences that can properly be drawn from the facts. [ 72 ] I do not see the Walkers’ argument on this issue to be frivolous. More challenging, however, is the limitation argument. The request for a

section 38 order is long past the time of the impugned transaction. The normal two-year limitation period is extended by discoverability, although the corporation, WPS, knew of the circumstances when they occurred. [ 73 ] It is unclear when the Trustee learned of the transactions. It may have been when Mrs. Siler was questioned on September 8, 2016. If

section 96 of the BIA applies to the transaction, then it may be attackable by the trustee, or under

section 38 , within five years. [ 74 ] Again, these are not frivolous arguments, and I do not think it can be said that there is no reasonable prospect of success, as defined by Wakeling JA. [ 75 ] Mr. Siler argues that the

section 96 issue was not specifically raised before the Registrar. That appears to be the case from her reasons, although

section 96 in the context of a

section 38 application would appear to relate to defences that might be raised by Mrs. Siler. [ 76 ] Appeals are based on the evidence before the Registrar. Arguments are not evidence. New arguments are frequently raised on appeal​ and while that may seem unfair, late arguments can always be addressed in costs. The fact that an argument was not raised before the Registrar is not a bar to it being raised on appeal. [ 77 ] With respect to the terms of Mr. Siler’s discharge, it is not frivolous to argue that the Registrar overemphasized one or more factors, or underemphasized others.

This ground of appeal is not a reasonable prospect of success. Conclusion [ 78 ] This matter involves counsel apparently missing a somewhat unusual limitation period. The delay between the expiry of the limitation period and bringing this application was brief. The Walkers had an intention to appeal within the limitation period, and the grounds for appeal are not without some merit. They are not bound to fail, and have a reasonable chance of success, recognizing that a reasonable chance of success does not equate to a balance of probabilities. [ 79 ] While Mr.

Siler may be prejudiced by the delay resulting from the appeal proceeding, most of the delay relates to this attempt to “cure” the former lawyer’s error. The delay relates to the uncertainty of bankruptcy continuing to hang over Mr. Siler’s head, and nothing specific. [ 80 ] As a result, I grant the application for an extension in time to file the notice of appeal. The notice should be filed forthwith, and the appeal prosecuted diligently. [ 81 ] I am grateful to all counsel for the quality of their written and oral arguments.

Costs [ 82 ] While the Walkers have been successful on this application, it was not unreasonable for Mr. Siler to oppose it. The law in this area is unsettled and they were entitled to resist this application. There should be no costs payable to the Walkers in regard to this matter. Mr. Siler’s costs of resisting this application should be assessed on the hearing of the appeal. Observations [ 83 ] There is a saying “be careful what you wish for, you might get it.” That may well apply here. Registrar Schulz recognized that the Walkers are angry and bitter about the loss they suffered at Mr.

Siler’s hands relating to the construction of their home in BC. They are also angry and bitter about the bankruptcy process and the results of it. [ 84 ] They have already experienced a much lower return from the bankruptcy than they could have realized through the offer made to them by Mr. Siler before bankruptcy, the proposal made before bankruptcy, and the offer by Mrs. Siler during the bankruptcy. [ 85 ] The Walkers may well lose the appeal I have permitted by this decision. I am in no way critical of Registrar Schulz, and her decision may well be upheld as being a reasonable one.

Even if the Walkers succeed in being able to pursue a

section 38 claim against Mrs. Siler, there are defences available to her both on the merits (consent) and because of limitation periods. [ 86 ] The Walkers complain that they spent more pursuing Mr. Siler than they recovered by way of the unsatisfied judgment against him. If they are successful on the appeal, they will undoubtedly expend a lot more pursuing Mrs. Siler and continuing to oppose Mr. Siler’s discharge, and they may not succeed. That would make them liable for significant costs, plus their own legal fees. Even if

they succeed, it is unclear what a successful judgment might look like, and collectability is frequently an issue. I would not want this decision to be seen as any encouragement to them in pursuing their claims against Mr. Siler. Heard on the 23 rd day of October, 2017. Dated at the City of Edmonton, Alberta this 22nd day of December, 2017. Robert A. Graesser J.C.Q.B.A. Appearances: Mathieu LaFleche Bennett Jones LLP for the Applicants Kyle Kawanami Emery Jamieson LLP For the Respondent Siler Jordan Day BDO Canada Ltd. Trustee for Estate of James Elmo Siler