Law (Re), 2021 ABQB 452

Court of Queen’s Bench of Alberta Citation: Law (Re), 2021 ABQB 452 Date: 20210610 Docket: B201 586346 Registry: Calgary In the Matter of the Bankruptcy of Melanie Rae Law AND Docket: B201 583776 In the Matter of the Bankruptcy of Thomas Frank Nopper (aka Tom Nopper) _______________________________________________________ Endorsement of the Honourable Madam Justice B.E. Romaine _______________________________________________________ [ 1 ] This is an appeal from a decision of Registrar Mattis dated January 29, 2021. The issue is whether the stays imposed by

section 69.1 (

a) of the Bankruptcy and Insolvency Act , RSC 1985, c B-3 with respect to the bankruptcy proceedings of Melanie Rae Law and Thomas Frank Nopper should be lifted. [ 2 ] The application to lift the stays was brought by the appellant judgment creditors of the bankrupts, Zoe Anderson and Josh Van Beers. The appellants obtained default judgments against Ms. Law in the amount of approximately $700,000 and Mr. Nopper in the amount of approximately $680,000. The Registrar declined to lift the stays. [ 3 ] The appellants sought to lift the stays in order to continue to prosecute their civil action against Mr.

Nopper and Ms. Law for the purposes of obtaining further evidence establishing the liability of the bankrupts and to obtain evidence against a third defendant. The action has continued against the third defendant. They applied for additional relief that was also dismissed by the Registrar. [ 4 ] An appeal to a bankruptcy judge from a registrar is a true appeal and not a hearing de novo, except in exceptional circumstances.

While the appellants submitted that such circumstances exist in this case, it is clear that they chose to bring their application to lift the stays before the Registrar, and the respondents did not object, implying the consent of all parties to this manner of procedure. Thus, the application was within the jurisdiction of the Registrar pursuant to section 192(1)(

j) of the BIA , and this appeal is a true appeal. [ 5 ] The only admissible evidence on an appeal is a transcript of the evidence before the Registrar, unless the appellants satisfy the requirements for the admission of new evidence. The appellants have not done so. There is no indication that the proposed new evidence could not have been obtained by reasonable diligence for use at the hearing before the Registrar, other than the suggestion that the appellants did not want to delay the hearing. By their own admission, the gist of the evidence was before the Registrar in other

formats. I note that it is unlikely that the proposed new evidence would have had an important effect on the result of the application. [6] An appellate judge should not substitute her opinion for that of the Registrar unless the appellant establishes that theRegistrar erred in principle or in law, failed to take into account a proper factor or took into account an improper factor which led to awrong conclusion, made a palpable and overriding error with respect to a finding of fact or otherwise acted unreasonably: Impact Tool &Mould Inc. (Trustee of) v Impact Tool & Mould (Windsor) Inc. (Receiver of) (2006) (ON CA), 79 OR (3d) 241 atparas 48-49 (Ont. C.A.); Re Saban

(2012) ONSC 223 at para. 11. [7] The decision under appeal involves the issue of whether the stays ought to be lifted.

Section 69.2 of the BIA provides that astay may be lifted if the Court is satisfied (

a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or (

b) that it is equitable on other grounds to make such a declaration. [8] As noted in Re May, (ONCA) at para. 3, and by the Registrar: … lifting the automatic stay is far from a routine matter. There is an onus on the applicant to establish a basis for the order within themeaning of s.69.4. …the role of the court is to ensure that there are "sound reasons, consistent with the scheme of the [BIA]" to relieveagainst the automatic stay.

While the test is not whether there is a prima facie case, that does not ... preclude any consideration of themerits of the proposed action where relevant to the issue of whether there are "sound reasons" for lifting the stay. For example, if it wereapparent that the proposed action had little prospect of success, it would be difficult to find that there were sound reasons for lifting thestay. [9] As the Registrar notes, the appellants rely on two of the five circumstances that may justify a registrar or court lifting a stayset out in Re Advocate Mines Ltd. (1984) 52 CBR (NS) 277 at para. 3:

a) actions against the bankrupt for a debt to which a discharge would not be a defence; and

b) actions in which the bankrupt is a necessary party for the complete adjudication of the matters at issue involving other parties. [10] I agree with the Registrar that both of these circumstances involve situations where a judgment has not been obtained againstthe bankrupt. The appellants do not seek to lift the stays to pursue a debt to which a discharge would not be a defence: they already havedefault judgments against the bankrupts.

Given the default judgments, the bankrupts are deemed to have admitted the allegations in thestatement of claim, which include allegations of misappropriation and acting in a fiduciary capacity.

If the facts as pled do not achievethe goal of producing a judgment to which a discharge would not be a defence, which I do not determine in this appeal, giving theappellants an opportunity to open up the judgments and strengthen their case with respect to that issue is not a sound reason in thecircumstances to lift the stay and would not be in accordance with the principles of the BIA. [11] With respect to the second circumstance, whether the bankrupts are necessary parties for the complete adjudication of mattersat issue involving other parties, as noted previously, the judgments render the causes of action pled against the bankrupts in the litigationadmitted by the bankrupts.

It is unclear why it would be necessary to lift the stays in order to effectively proceed against the remainingdefendant. The appellants would be able to subpoena the bankrupts as witnesses at the trial if they are of the view that their testimony isnecessary, including with respect to the allegation of conspiracy. [12] With respect to the submission that it is necessary for the stays to be lifted because the bankrupts are necessary parties toobtain a tracing remedy, the appellants already have the benefit of pre-bankruptcy orders of this Court with respect to disclosure.

If thedisclosure is incomplete, as they submit, or, if it has not been provided at all, the appellants are able to bring applications for contemptagainst the bankrupts. Contempt applications are unaffected by the stays: Walchuk et al v Houghton et al, 2015 ONSC 1291 at paras.14-17. [13] I therefore find that Registrar Mattis was neither incorrect at law nor in principle with her decision that there are not soundreasons to lift the stays.

She applied the appropriate principles and exercised her discretion in a reasonable manner. [14] I dismiss the appeal. [15] If the parties are unable to agree on costs, they may make written submissions limited to five pages on that issue. Dated at the City of Calgary, Alberta this 10th day of June, 2021.

B.E. Romaine J.C.Q.B.A. Appearances: Richard E. Harrison for the Appellants Daniel Jukes for the Respondent, Tom Nopper