ANDRE TARDIFF AGENCY LIMITED APPLICANT - v. –, 2015 SKQB 87

QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2015 SKQB 87 Date: 201 5 03 31 Estate No.: 23-1307975 Court No.: 19504 IN THE MATTER OF THE CONSUMER PROPOSAL OF OWEN SCOTT BUSHEY BETWEEN: ANDRE TARDIFF AGENCY LIMITED APPLICANT - And – BURLINGHAM ASSOCIATES INC., ADMINISTRATOR OF THE PROPOSAL OF OWEN SCOTT BUSHEY RESPONDENT Appearing: Anne Hardy and E. Dean Burlingham - on behalf of the Respondent, Burlingham Associates Inc. Allen Morris solicitor for the Applicant, Andre Tardiff Agency Limited JUDGMENT C.

ELAINE THOMPSON March 31, 2015 REGISTRAR IN BANKRUPTCY [ 1 ] This application concerns Andre Tardiff Agency Limited [Claimant]’s appeal from Burlingham Associates Inc. [Administrator]’s disallowance of a claim in the consumer proposal of Owen Scott Bushey [Debtor], in the amount of $176,459.65. [ 2 ] This application has already been considered by the Ontario Superior Court and the Ontario Court of Appeal. Both courts concluded that Saskatchewan was the proper forum to hear it. [ 3 ] The disallowed claim arose from a guarantee the Debtor and his wife executed in favour of the Claimant.

Under the guarantee, the Debtor agreed to be liable for the outstanding debt of 1407547 Ontario Inc., operating as Bushey’s Repairs [Principal

Debtor]. [ 4 ] Sometime after the parties entered into the lending arrangement, the Principal Debtor amalgamated with 1140701 Ontario ltd. [1140701]. The Debtor was president and a 50% shareholder of the Principal Debtor at the time of amalgamation. The Debtor’s father was president of 1140701. The Debtor became the president of the amalgamated company on formation [Amalgamated Entity]. [ 5 ] The Amalgamated Entity was deemed bankrupt after it defaulted on the terms of a Division I proposal and the trustee (also the Administrator in this case) obtained a court order annulling the proposal.

The Claimant is a creditor in that bankruptcy and Bryan Tardiff, the Claimant’s president, is the inspector in that bankruptcy. [ 6 ] The Claimant submits that it relied on the Debtor’s personal guarantee as security when it continued to extend credit to the Amalgamated Entity, according to the same arrangement that had previously existed with the Principal Debtor. [ 7 ] The Debtor submits in his affidavit that 1140701 had a pre-existing lending relationship with the Claimant.

No documentary evidence was tendered in support of a pre-existing credit arrangement between 1140701 and the Claimant. [ 8 ] There is no evidence that the Debtor or the Claimant executed any lending documents in contemplation of the amalgamation. [ 9 ] The Administrator submits this appeal is a nullity for being out of time. According to the Administrator, the Claimant lost its right to appeal on three grounds: 1. The Claimant failed to appeal the disallowance, with the proper court, within the 30 day limitation period in s. 135(4) of the Bankruptcy and Insolvency Act , RSC 1985 c B-3 [ BIA ]; 2.

The Claimant failed to set the hearing date for a hearing to occur within the 30 day limitation period; and 3. The Claimant failed to apply to the court for an extension of the time allowed for an appeal within the 30 day limitation period. [ 10 ] The Claimant submits that it preserved its right to appeal the disallowance once it served the notice of motion to appeal on the Administrator and filed the notice of motion with the court in Ontario, within the 30 day limitation period set out in s. 135(4) of the BIA .

The Claimant relies on s. 187(10) of the BIA to support its position that its claim was not nullified for having been filed in the wrong court. I. Issues A. Does the Registrar in Bankruptcy have authority to hear this application? B. Is this Court the proper forum to hear the disallowance application? C. Is the appeal of disallowance a nullity? D. Is the appeal of disallowance out of time for reasons other than improper filing? E. What is the nature and scope of the appeal? F. Ought the claim to have been allowed? i.

Did the terms of the agreement between the Claimant and the Principal Debtor [Principal Contract] limit the Debtor’s liability under the guarantee to $3,000.00? ii. Did the amalgamation of the Principal Debtor extinguish the Debtor’s liability on the guarantee? a. Is the Principal Contract enforceable? 1. What territorial law governs the Principal Contract? 2. Did the Principal Contract create liability? 3. Did the amalgamation of the Principal Debtor extinguish the Principal Contract liability? b. Did the amalgamation of the Principal Debtor extinguish the Debtor’s liability for the guarantee? II.

Background [ 11 ] As noted, both the Ontario Superior Court and the Ontario Court of Appeal in Andre Tardiff Agency Ltd. v. Bushey (Administrator of), 2013 ONCA 46 (Ont CA) [ Tardiff ] have considered this application. Although neither commented on the choice of law, both concluded that Saskatchewan was the proper court to hear the application. [ 12 ] Before the disallowance can be addressed, there are a number of preliminary questions having to do with the proper forum, the existence of the right to appeal, the scope of the appeal, and the choice of law that must be answered.

Most of these preliminary questions arise because of the inter-provincial nature of the Debtor’s commercial operations, which have changed and moved between three provinces over the course of the Debtor’s relationship with the Claimant.

[ 13 ] A chronology of the events leading up to the consumer proposal provides context for the analysis. The chronology is divided according to the following events: 1. The Principal Contract and the guarantee provided by the Debtor to the Claimant; 2. The amalgamation of the Principal Debtor; 3. The Debtor’s consumer proposal and the disallowance of the claim; 4. The Ontario court decisions; 5. The issuance of the Certificate of Full Performance of Proposal and distribution of dividends prior to the court’s determination on the disallowed claim.

The Principal Contract and the Guarantee [ 14 ] On February 12, 2001, the Principal Debtor applied to open a commercial line of credit with the Claimant. [ 15 ] The credit application form, dated February 12, 2001, is a one page document signed by the Debtor’s wife, Trina Bushey, in her capacity as “company representative” on behalf of “1407547 Ontario Inc., o/a Bushey’s Repairs”. [ 16 ] The top half of the credit application form provides blank spaces for the applicant to fill in details the Claimant sought, presumably for the purpose of assessing whether to offer credit to the applicant.

The information collected by the form includes: date of the credit application, applicant’s name, applicant’s contact information, applicant’s banks, applicant’s credit references, and the credit limit the applicant requests. [ 17 ] The credit limit requested by the Principal Debtor on the credit application form was $3,000.00. [ 18 ] The credit application form itself is designed so that its terms will form the basis of a contract between the parties if the creditor accepts the application.

The application, as filled in on behalf of the Principal Debtor, confirms that the Principal Debtor applied for “credit with Andre Tardiff Agency Limited for a commercial account for the supply of fuel, oil and other petroleum products.” The terms of the Principal Debtor’s credit application will be discussed in more detail in the analysis. [ 19 ] On February 13, 2001, Trina Bushey and the Debtor executed a document entitled “Personal Guarantee Commercial Accounts Andre Tardiff Agency Ltd.”. the guarantee was attached to the credit application form and it states: IN CONSIDERATION OF ANDRE TARDIFF AGENCY LIMITED EXTENDING CREDIT PURSUANT TO THIS APPLICATION, I/WE HEREBY PERSONALLY GUARANTEE THE DUE PAYMENT OF ALL PRESENT AND FUTURE INDEBTEDNESS OF THE APPLICANT(

S) AND BUSHEY’S REPAIRS TO ANDRE TARDIFF AGENCY LIMITED. [ 20 ] No lending agreement beyond the application was provided to this Court but both parties accept that the Claimant and the Principal Debtor entered into a lending contract based on the terms of the application [Principal Contract] and on the security provided in the guarantee.

The Amalgamation and Corporate Bankruptcy [ 21 ] Three years after the date of the guarantee, on November 1, 2003, the Principal Debtor amalgamated with 1140701 Ontario Ltd. [ 22 ] According to the amalgamation agreement and the corporation profile report, the Debtor and his father became the two directors and officers of the Amalgamated Entity, 1593658 Ontario Inc., also referred to as Bushey Enterprises.

The amalgamation agreement was executed by the Debtor and Trina Bushey, as President and Secretary/Treasurer of Bushey’s Repairs, respectively, and the Debtor and Larry Bushey (the Debtor’s father) as President and Secretary/Treasurer of 1140701 Ontario Limited, respectively. [ 23 ] The terms of the amalgamation agreement stipulate that “Amalgamated Corporation” shall mean “…the corporation continuing from the amalgamation of 1407547 and 1140701”.

Clause 15 of the amalgamation agreement stipulates that each party shall contribute “all of its assets, subject to its liabilities”. [ 24 ] The amalgamation occurred under the Ontario Business Corporations Act, RSO 1990, c B.16 [ OBCA ] and references to continuation and the effects of amalgamation, in the amalgamation agreement, incorporate the concepts of “continuance” that appear in ss. 174 and 179 of the OBCA.

Section 179 governs the effect of the issuance of a certificate of amalgamation under the OBCA . [ 25 ] The Debtor advised the Claimant of the amalgamation and the Claimant continued to lend to the Amalgamated Entity. [ 26 ] The Debtor attests that the Principal Debtor owed nothing to the Claimant at the time of amalgamation and that there was another lending arrangement that existed between the other amalgamating party and the Claimant at the time of the amalgamation.

No material evidence of such a relationship was tendered to support this fact. [ 27 ] No new lending documents were executed by the Amalgamated Entity or the Debtor. After amalgamation, the Amalgamated Entity requested credit and the Claimant provided credit until July 2008, when the Amalgamated Entity made a Division I proposal to its creditors, with the Administrator, Burlingham Associates Inc. [ 28 ] By that time, the Amalgamated Entity owed the Claimant $176,459.66. [ 29 ] An amended version of the Amalgamated Entity’s proposal was accepted by a two-thirds majority of the creditors,

including the Claimant, which had filed and established a claim in the Division I proposal for $176,459.65. [ 30 ] The Court of Queen’s Bench of Saskatchewan approved the Amalgamated Entity’s proposal on February 4, 2009 (see court order on the bankruptcy of 1593658 Ontario Inc. (File No. 16443) [Bankruptcy File 16443]). (I note for the reader that para. 12 in the Affidavit of Bryan Tardiff mistakenly refers to the bankruptcy assignment date as March 12, 2012.) [ 31 ] Approximately one year later, on February 24, 2010, the same court annulled the Division I proposal of the Amalgamated Entity and it was, thereupon, deemed to have made an assignment in bankruptcy by operation of s. 63(4) of the BIA . (Note that the form “Notice of Bankruptcy and First Meeting of Creditors”, attached with Exhibit “G” to the Affidavit of Bryan Tardiff, refers to 1593658 Ontario Inc. as having been deemed to have assigned in bankruptcy on August 25, 2008.

The annulment order was dated February 25, 2010, however) The Debtor’s Consumer Proposal and the Disallowance of the Applicant’s Claim [ 32 ] On January 8, 2010, approximately a month and a half before the Amalgamated Entity was deemed bankrupt, the Debtor executed a consumer proposal with regard to $113,536.00 of his unsecured debt. On the Statement of Affairs, the Debtor provided the following reason for his financial difficulties: Personal guarantee of debts of a corporation. A company which I owned 50% of the voting shares of filed a proposal to its creditors.

The proposal is now in default and the company will be in a state of bankruptcy. [ 33 ] I have inferred that the Debtor was referring to a guarantee on the Amalgamated Entity’s debts. [ 34 ] The Statement of Affairs makes no further reference to the corporation at the centre of the Debtor’s financial difficulties. In fact, there are a few gaps in the Statement of Affairs in this regard.

No corporate shares were identified in the list of the Debtor’s assets (as disclosed on the Statement of Affairs); nor was there any reference to a share disposition as having occurred (in the portion of the Statement of Affairs form where space is provided for a debtor to disclose relevant dispositions). [ 35 ] Just as there are unanswered questions about the share ownership and the corporation to which they refer, there are gaps in the disclosure around the guarantee liability that was identified as the reason for the Debtor’s financial difficulty.

Neither the Statement of Affairs nor the terms of the consumer proposal appear to contemplate a guarantee debt. The Liability Type Codes, which categorize each debt (identified by the bankrupt on the Statement of Affairs), confirm that the Debtor admitted liability for seven unsecured debts, identified as: two bank loans, four credit card loans, and one finance company loan. None of these descriptions refer to a personal guarantee debt. [ 36 ] Under the terms of the consumer proposal, the Debtor was to continue paying his secured creditors according to the terms of their respective contracts.

The Debtor also agreed to pay the Administrator $33,480.00, for the benefit of the unsecured creditors, by monthly instalments of $930.00 for 36 months, which amount included the administration fees and costs for the proposal. The creditors were to receive distributions on or around March of 2011, 2012 and 2013.

The consumer proposal creditors accepted the terms of the consumer proposal on January 11, 2010 and it was deemed to have been approved by the court on January 26, 2010, by operation of s. 66.22 of the BIA , without regard to the Claimant’s yet undetermined claim. [ 37 ] The Claimant was not identified as a creditor in the Debtor’s consumer proposal. [ 38 ] Although it had not received official notice of the consumer proposal, the Claimant filed a Proof of Claim in the Debtor’s consumer proposal with the Administrator in or around mid-March 2012. [ 39 ] The Proof of Claim indicates that the Debtor owed the Applicant $176,000.00.

In support of the claim, the Claimant provided invoices, addressed to Bushey Enterprises c/o 1593658 Ontario Inc. at a Lloydminster address with an Alberta postal code, showing an outstanding balance of $176,459.66.

This figure is identical to the figure denoting the amount of the Claimant’s proven claim in the bankruptcy of the Amalgamated Entity. [ 40 ] The Administrator served the Claimant with a Notice of Disallowance of Claim in the consumer proposal on April 5, 2012. [ 41 ] In the Notice of Disallowance, the Trustee gave the following reasons for the decision to disallow the claim: The first reason relates to the amount of the debt: 1) The application for credit, which was dated February 12, 2001, and signed by Trina Bushey on behalf of the applicant 1407547 Ontario Inc., O/A Bushey’s repair [sic] [Principal Debtor], showed that the credit limit requested was $3,000; 2) A personal guarantee by Owen Bushey [Debtor] and Trina Bushey was executed the following day, that being February 13, 2001.

This guarantee was signed “ in consideration of Andre Tardiff Agency Limited [Claimant] extending credit pursuant to this application.[ “ - sic] 3) The proof of claim submitted by Andre Tardiff agency [sic][Claimant] shows the amount of the debt owing by Owen Bushey [Debtor] pursuant to this guarantee is $176,000. This is well in excess of the amount of $3,000 shown on the credit application.

The second reason relates to the validity of the claim: 1) The corporation referred to as 1407547 Ontario Inc.[Principal Debtor] was amalgamated into 1593658 Ontario Inc. [Amalgamated Entity] on November 1, 2003; 2) If any indebtedness by either guarantor still existed at the date of the amalgamation, at this point it would be statute barred both

under Ontario and Saskatchewan law and unenforceable. 3) The statement of account provided to support the debt of $176,000 shows that the debts were incurred between August 24, 2007 and July 31, 2008. The name showing on the statement of account is Bushey Enterprises c/o 1593658 Ont Inc; 4) There is no evidence to support that Owen Bushey has guaranteed the amounts owing by 1593658 Ontario Inc. These debts were incurred well after the amalgamation.

Ontario Court Decisions on the Appeal of Disallowance [ 42 ] The Claimant initially filed its notice of motion appealing the disallowance with the Ontario Superior Court of Justice, Judicial Centre of Thunder Bay, Ontario, on May 3, 2012. It served the Administrator on May 4, 2012. Both service and filing with that court occurred within 30 days of the Claimant having been served with the Notice of Disallowance (on April 5, 2012). [ 43 ] There was some correspondence between the Claimant and the Administrator about whether the jurisdictional issue ought to be addressed in Saskatchewan.

Ultimately, the Administrator refused the Claimant’s offer to have the jurisdictional issues determined in the Saskatchewan court on the basis that he considered the issue to be clear (in a letter attached as Exhibit “D” to the affidavit of Sandra Kennelly, sworn July 5, 2012). According to the Administrator’s letter, Saskatchewan was the proper jurisdiction to hear the matter because the proposal had been filed with Saskatchewan’s Court of Queen’s Bench.

It is worth noting that only the Amalgamated Entity’s proposal had been filed in the Saskatchewan Court of Queen’s Bench; the consumer proposal had been deemed approved by the court, without any court filing. [ 44 ] The first hearing took place on July 13, 2012. The Ontario Superior Court endorsed the file on the same day, dismissing the appeal. Madam Justice Pierce concluded that the Ontario Superior Court could only become involved if Saskatchewan’s Court of Queen’s Bench requested the Ontario Court’s assistance pursuant to s. 188(2) of the BIA .

Notwithstanding her finding that Saskatchewan was the proper forum to hear the application, Pierce J. went on to conclude that the motion was out of time because the court’s general power to extend time for an appeal (s. 187(11)) was superseded by the specific limitation contained in s. 135(4) of the BIA .

No other reasons were provided for her conclusion. [ 45 ] The Claimant appealed the Superior Court decision within a month, serving the Administrator with the Notice of Appeal of Disallowance, on August 10, 2012, and filing the notice with the Ontario Court of Appeal on August 16, 2012. [ 46 ] On January 9, 2013, the Ontario Court of Appeal heard the matter and set aside Pierce J.’s order.

The Court of Appeal ordered the proceeding to be transferred to the Court of Queen’s Bench of Saskatchewan, to be heard in Saskatoon. [ 47 ] While the Ontario Court of Appeal agreed with Pierce J. that the motion ought to have been heard before the Court of Queen’s Bench of Saskatchewan, in the judicial district where the consumer proposal had been filed, the Ontario Court of Appeal concluded that Pierce J. had erred by failing to consider whether she should exercise her discretion to transfer the motion to the proper court according to the authority under s. 187(10) of the BIA . [ 48 ] In coming to this disposition, Laskin J.A., in Tardiff , observed that the failure of the lower court to transfer the file appeared to have arisen from Pierce J.’s conclusion that the motion was out of time.

Laskin J.A. made a point of noting that the Court of Appeal did not endorse Pierce J.’s conclusion on the motion being out of time. The substantive portions of Laskin J.A.’s reasoning appear in paras. 2-5 : 2 We agree with the motion judge that the appellant's motion should have been brought before the Court of Queen's Bench of Saskatchewan in Saskatoon where the Consumer Proposal was filed. See ss. 43(5) and 66.4 of the Bankruptcy and Insolvency Act (the " BIA ") and Sam Levy & Associates Inc. v.

Azco Mining Inc. , 2001 SCC 92 , at para. 27 . [para. 27 states: 27 Stewart was, as stated, a winding-up case, but the legislative policy in favour of "single control" applies as well to bankruptcy. There is the same public interest in the expeditious, efficient and economical clean-up of the aftermath of a financial collapse.

Section 188(1) ensures that orders made by a bankruptcy court sitting in one province can and will be enforced across the country.] 3 In our view, however, the motion judge erred by failing to consider whether she should exercise her discretion under s. 187(10) of the BIA to transfer the motion to the proper court, namely the Court of Queen's Bench of Saskatchewan in Saskatoon. Section 187(10) provides: Nothing in this

section invalidates any proceedings by reason of their having been commenced, taken or carried on in the wrong court, but the court may at any time transfer the proceedings to the proper court. 4 Her failure to do so appears to have resulted from her conclusion, which we do not endorse, that the appellant's motion was in any event out of time because it was not heard by her within 30 days after the appellant was served with a Notice of Disallowance as required by s. 135(4) of the BIA . 5 In the result, we set aside the motion judge' order and transfer the appellant's motion to the Court of Queen's Bench of Saskatchewan in Saskatoon.

We make no determination as to the effect of the failure of the appellant to file its motion with the proper court within the 30-day period prescribed by s. 135(4) of the BIA . Issuance of the Certificate of Full Performance of Proposal and distribution of dividends prior to the court’s determination on the disallowed claim

[ 49 ] With the Claimant’s appeal moving through Ontario’s courts, the Administrator and the Debtor continued to observe the terms of the consumer proposal, without regard to the outstanding appeal decision. [ 50 ] The affidavit of Kelly Englehardt attests that the affiant served the Administrator with the appeal book and factum by email (October 12, 2012), by courier (October 12, 2012) and by regular mail (October 15, 2012). [ 51 ] According to the Administrator’s Statement of Receipts and Disbursements, the proposal was fully performed as of October 31, 2012.

On that day, a few months after having been served with notice of the appeal of the lower court decision to the Ontario Court of Appeal and before the appeal hearing, the Administrator issued the Certificate of Full Performance of Proposal in reference to the Debtor’s consumer proposal. [ 52 ] It is not clear when the consumer proposal creditors were paid dividends, but it is clear that dividends were paid to the consumer proposal creditors either prior to or within a month of the Ontario Court of Appeal’s decision to have the disallowance appeal proceeding transferred to Saskatchewan for determination.

On the Certificate of Compliance and Deemed Discharge of Administrator, signed by the Administrator and dated February 7, 2013, the Administrator certified that he had disposed of all of the property of the consumer debtor that came into his hands. [ 53 ] In court, the Administrator reported that he had issued the Certificate of Full Performance of Proposal and the Certificate of Compliance because he understood that the claim had been disallowed. III. Analysis A.

Does the Registrar in Bankruptcy have the authority to hear this application? [ 54 ] The Registrar’s authority to hear this matter arises from its authority to determine appeals from the decision of a trustee to disallow a claim ( s. 192(1) (

n) of the BIA ), the authority to hear and determine any matter relating to practice and procedure in the courts (s.192(1)(

k) of the BIA ), and the authority to hear and determine any matter with the consent of all parties (s. 192(1)(

j) of the BIA ). [ 55 ] I sought and received the parties’ oral consent to hear and determine the matters raised by this application at the hearing. B.

Is this Court the proper court to hear the disallowance application? [ 56 ] As noted, the Administrator submits that the Claimant lost the right to appeal the disallowance when it filed in the wrong court. [ 57 ] The Claimant submits that it filed the Notice of Motion in Ontario because the arrangements between the parties had the most substantial connection to Ontario and, accordingly, it considered Ontario to be the more convenient court to hear the matter and to construe the provisions of the OBCA that, it submits, govern the contracts underlying the claim at issue. [ 58 ] Although the Claimant acknowledges that both Ontario courts determined Saskatchewan to be the proper court for the hearing, the Claimant submits that the Ontario filing date should be accepted as the filing date for this application.

According to the Claimant, the application for appeal was filed in Ontario and transferred to be heard in Saskatchewan by order of the Ontario Court of Appeal under s. 187(10) of the BIA .

The Claimant submits that s. 187(10) expressly supports the notion of a continuing proceeding, as opposed to a severed proceeding that created the need for a new application, where it stipulates that a filing in the wrong court does not invalidate the proceeding. [ 59 ] Counsel for the Claimant explained that the Claimant originally applied to the Ontario Court because it construed the court’s jurisdiction to deal with the consumer proposal to arise from the substantial connections around the consumer proposal.

From the Claimant’s knowledge, the Debtor lived in Ontario, it conducted its business operations in Ontario and the contracts between the Debtor and the Claimant, as well as the Principal Debtor and the Claimant, had been formed in Ontario; moreover the amalgamation of the Principal Debtor occurred under the OBCA .

From the Claimant’s perspective, the only connection with Saskatchewan was the fact that the Debtor had moved to Saskatchewan at some point close in time to the Debtor’s consumer proposal and the Amalgamated Entity’s bankruptcy. [ 60 ] Although it is not clear whether the Administrator considered the proper forum to have been determined by the filing of the Amalgamated Entity’s proposal, or by the filing of the consumer proposal, the Administrator considered the issue of forum to be clear and to be Saskatchewan.

The Administrator communicated this view in a letter to the Claimant’s Ontario counsel, confirming the position the Administrator planned to advance in the Ontario Superior Court: Carrel + Partners 1136 Alloy Drive Thunder Bay, ON P7B 6M9 Attention: Roderick W. Johansen Dear Sir, RE: Andre Tardiff Agency Ltd and Owen Bushey Consumer Proposal I am writing to advise that we received your letter by fax today and in that regard I have the following comments:

1) The filing by Owen Bushey was a Consumer Proposal and not a bankruptcy. 2) I believe that the jurisdictional issue is clear. The proposal was filed with the Court of Queen’s Bench in Saskatchewan and must be heard in Saskatchewan unless the Saskatchewan Court has requested the assistance from a Court in another jurisdiction, which it has not. 3) You have failed to apply to the Court within the 30 day period as set out in section 135(4) for an extension of time beyond the deadline of May 5, 2012. 4) As a consequence the trustee’s disallowance is final and conclusive in any jurisdiction, including Saskatchewan.

The position of the trustee is all of the above matters is [sic] set out in our letter to the Ontario Superior Court of Justice which is attached hereto and a copy was sent to you. For the reasons set out in that letter we do not intend to file further materials. … [ 61 ] The Administrator’s assertion is problematic, however, as no court file existed in Saskatchewan in connection with the consumer proposal until the Ontario Superior Court transferred the file to Saskatchewan on the Ontario Court of Appeal’s order of January 9, 2013.

Nor was I presented with any authority supporting a conclusion that the deemed court approval of the consumer proposal created an actual court file in Saskatchewan. [ 62 ] In short, the proper forum issue was not clear at the time of the application. [ 63 ] An overview of the jurisdiction and authority of the courts under the BIA and the case law explaining its mechanics highlights some of the complexities that arise in ascertaining the proper forum. [ 64 ] The BIA defines “court” broadly in ss. 2 and 183 . [ 65 ]

Section 2 reads: … “court”, except in paragraphs 178(1)(

a) and (a.1) and sections 204.1 to 204.3, means a court referred to in subsection 183(1) or (1.1) or a judge of that court, and includes a registrar when exercising the powers of the court conferred on a registrar under this Act; [ 66 ] Subsections 183(1) and (1.1) list the superior courts with jurisdiction and provide more detail about the authority conferred on them: 183.

(1) The following courts are invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers: (

a) in the Province of Ontario, the Superior Court of Justice; (b) [Repealed, 2001, c. 4, s. 33 ] (

c) in the Provinces of Nova Scotia and British Columbia, the Supreme Court; (

d) in the Provinces of New Brunswick and Alberta, the Court of Queen’s Bench; (

e) in the Province of Prince Edward Island, the Trial Division of the Supreme Court of the Province; (

f) in the Provinces of Manitoba and Saskatchewan, the Court of Queen’s Bench; (

g) in the Province of Newfoundland, the Trial Division of the Supreme Court; and (

h) in Yukon, the Supreme Court of Yukon, in the Northwest Territories, the Supreme Court of the Northwest Territories, and in Nunavut, the Nunavut Court of Justice.

(1.1) In the Province of Quebec, the Superior Court is invested with the jurisdiction that will enable it to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during its term, as it is now, or may be hereafter, held, and in vacation and in chambers. [ 67 ] While each of the provincial superior courts are conferred with competence to hear matters under the BIA , it does not follow that a party can choose the forum to hear proceedings under the BIA without regard to the location of the insolvency administration. [ 68 ] Nor does it follow that the location of the BIA filing automatically determines the proper forum to hear an application relating to that filing. [ 69 ] In Sam Lévy & Associés Inc. v Azco Mining Inc. , 2001 SCC 92 , [2001] 3 SCR 978 , the Supreme Court of Canada explained the rationale behind the “single control” model of the BIA .

Binnie J. acknowledged that this model does not exclude the possibility of transferring files inter-jurisdictionally, if warranted, but he also observed that the proper forum or venue for a bankruptcy application will generally be determined by a form of substantial connections test, which has been imported into the BIA by reference to the “locality of the debtor”.

[ 70 ] In the following paragraph, Binnie J. explains the rationale behind the “single control” model of the BIA and its effect on the relationship between creditors and the locality of the bankruptcy administration: 76 In the present case, we are confronted with a federal statute that prima facie establishes one command centre or "single control" ( Stewart, supra , at p. 349) for all proceedings related to the bankruptcy (s. 183(1)).

Single control is not necessarily inconsistent with transferring particular disputes elsewhere, but a creditor (or debtor) who wishes to fragment the proceedings, and who cannot claim to be a "stranger to the bankruptcy", has the burden of demonstrating "sufficient cause" to send the trustee scurrying to multiple jurisdictions. Parliament was of the view that a substantial connection sufficient to ground bankruptcy proceedings in a particular district or division is provided by proof of facts within the statutory definition of "locality of a debtor" in s. 2(1).

The trustee in that locality is mandated to "recuperate" the assets, and related proceedings are to be controlled by the bankruptcy court of that jurisdiction.

The Act is concerned with the economy of winding up the bankrupt estate, even at the price of inflicting additional cost on its creditors and debtors. [ 71 ] If the “locality of the debtor” imports a substantial connection test to determine the applicable forum, this test governs receivership applications, bankruptcy applications and applications for court approval of Division I proposals, as each of these applications must all be filed in “the locality of the debtor” according to the BIA .

There is no reference to the “locality of the debtor” in connection with consumer proposal-related court applications, however. [ 72 ] While the forum is not so clear for consumer proposal-related court applications, I am prepared to accept that a “locality of the debtor” test applies to ascertain the forum governing this application.

Section 66.4(1) of the BIA provides this Court with flexibility that allows it to address gaps in the consumer proposal provisions: 66.4

(1) All the provisions of this Act, except Division I of this Part, in so far as they are applicable, apply, with such modifications as the circumstances require, to consumer proposals. [ 73 ] Although the consumer proposal process is considered to be less formal and rigorous than the processes for Division I proposals, bankruptcy and receivership, the principles behind the court filing location requirements remain pertinent to the administration of a consumer proposal. To find otherwise would defeat the objectives of economy and efficiency that underlie the consumer proposal concept.

If an administrator is required to deal with a number of inter-jurisdictional applications outside of its home forum, the cost in time and money will quickly eat into any benefit the creditors may have obtained otherwise. [ 74 ] Even though I find that the “locality of the debtor” test ought to be used to ascertain the proper forum, the forum question is still not determined, as the factors in that test could still lead to a conclusion that more than one forum might be appropriate, as the Claimant suggested in its Ontario applications. [ 75 ] The “locality of the debtor” is defined in s. 2 of the BIA as follows: 2. … … "locality of a debtor" means the principal place (

a) where the debtor has carried on business during the year immediately preceding the date of the initial bankruptcy event, (

b) where the debtor has resided during the year immediately preceding the date of the initial bankruptcy event, or (

c) in cases not coming within paragraph (

a) or (b), where the greater portion of the property of the debtor is situated; [ 76 ] Under the circumstances of this case, the Debtor carried on business in Ontario, Saskatchewan, and Alberta (invoices sent from the Claimant to the Amalgamated Entity’s office in Lloydminster, Alberta) in the year prior to the consumer proposal; the Debtor moved to Saskatchewan at an undisclosed time, but the Statement of Affairs confirms that he had sold his house in Ontario at the time of the consumer proposal and had a residential address in Saskatchewan.

The Debtor had property in Ontario and Saskatchewan and I have no evidence with which to determine the location of the greater portion of his property at the time the consumer proposal was filed. [ 77 ] The Amalgamated Entity made its proposal in Saskatchewan and was assigned in bankruptcy by application to the Saskatchewan Court of Queen’s Bench.

In reference to the Amalgamated Entity’s choice to file its Division I proposal in Saskatchewan, Schwann J., in Hertz v 1593658 Ontario Inc. , 2011 SKQB 379 , 410 Sask R 1 , observed that the Amalgamated Entity had assets in Ontario and Saskatchewan and chose to address its insolvency issues through a Saskatchewan trustee because it was in the throes of transitioning its trucking operation from log hauling in Ontario to oil hauling in Saskatchewan. [ 78 ] There are connections between Ontario and the Debtor. There are also connections between Saskatchewan and the Debtor.

Although the bulk of the relations between the Debtor and Claimant originated in Ontario and continued in Ontario until the Amalgamated Entity’s insolvency in Saskatchewan, that relationship alone does not determine the proper forum to deal with the Debtor’s insolvency. It does go some way to explain the Claimant’s confusion in respect of the proper venue for this hearing, however. [ 79 ] The Debtor is an individual. He lived in Saskatchewan when he filed his consumer proposal in Saskatchewan with a trustee located in Saskatchewan.

The administration of the consumer proposal was initiated and carried out in Saskatchewan. The Ontario courts have transferred the file to Saskatchewan for hearing. [ 80 ] I agree with the Ontario courts that Saskatchewan is the proper forum to hear this application, notwithstanding the Ontario connections. In saying this I also acknowledge that the proper forum issue was neither simple nor clear in the circumstances of this consumer proposal, either at the time the consumer proposal was filed or at the time of the application.

Accordingly, I acknowledge that there is no reason to conclude the Claimant filed the motion appealing the disallowance in Ontario for wrong purposes.

C. Is the appeal of disallowance a nullity? [81] According to the Administrator, the application that was filed in Ontario is a nullity because Saskatchewan’s Court ofQueen’s Bench was seized with administration of the consumer proposal and the consumer proposal related proceedings before themotion was filed in Ontario. [82] As authority for this proposition, the Administrator's counsel cited the following comments from L.W. Houlden, G.B.

Morawetz & Janis Sarra, Bankruptcy and Insolvency Law of Canada, 4th ed, loose-leaf, vol 3 (Toronto:Thomson Reuters, 2013) [Bankruptcy and Insolvency Law] on the court’s authority to act in aid of each other with regard to enforcement proceedings pursuant tos. 188 of the BIA at p. 7-84: Once the court of one province is seized with the administration of a bankruptcy, no court in any other province can intervene in theproceedings unless a request is made under s. 188(2): Re Fairweathers Ltd. (1921), 2 C.B.R. 133 (Ont. S.C.).

If proceedings are taken inanother province without a request, the courts in which the bankruptcy proceedings originated will treat the proceedings in the otherprovince as a nullity: Re Bryant Isard & Co. (1923), (ON SC), 4 C.B.R. 317 (Ont. S.C.).

While these comments may very well represent the law pertaining to s. 188 of the BIA, I am not convinced that all improperly filedproceedings under the BIA are rendered a nullity on the authority of these comments. [83] While I accept that the law of seizure precludes the initiation of a proceeding in another jurisdiction, no substantivesubmissions were made on questions of seizure in reference to this consumer proposal-related application.

Nor were there anysubmissions supporting the conclusion that a consumer proposal that has been deemed to have been accepted by the court has the effectof deeming a court to have seizure over proceedings relating to that consumer proposal. [84] While I accept that this Court is the proper forum for the purpose of hearing this application, I have been provided withno authority to conclude that Saskatchewan's Court of Queen's Bench had seizure over the consumer proposal process at the time theClaimant appealed the disallowance to the Ontario Superior Court. [85] I would further add that the proposition that proceedings filed in the wrong court are nullified per se flies in the face ofthe provision that set out the general authority of the courts to transfer improperly filed proceedings in s. 187(10) of the BIA (whichestablishes the authority the Ontario Court of Appeal relied on to transfer the file to Saskatchewan).

This

section contemplates transfersbetween bankruptcy districts and divisions where proceedings are initiated in the wrong court. The concept of “transfer” implies thecontinuance of the proceeding, not a nullification. [86] In reference to the exercise of a court’s discretion to transfer a file under s. 187(10) of the BIA, Bankruptcy andInsolvency Law states that there is nothing in s. 187(10) that limits a court’s discretion to transfer a wrongly filed application.

Theircomments also refer to the rule that places the responsibility of transfer on the registrar of the transferring court at p. 7-77: I§29 — Proceedings Taken or Carried on in the Wrong Court By s. 187(10), if proceedings have been commenced, taken or carried on in the wrong court, the court may at any time transfer theapplication or proceedings to the proper court.

By Rule 10, when an order of transfer is made under s. 187(10), the registrar of the court from which the proceedings are transferred willsend all documents relating to the proceedings by post to the registrar of the court to which the proceedings are being transferred togetherwith a copy of the order of transfer. "Court" in s. 187(10) means the court having jurisdiction in bankruptcy: Re Chambers (1937), 18 C.B.R. 149 (Ont.S.C.). Thus, thebankruptcy court cannot under s. 187(10) transfer proceedings from the bankruptcy court to the ordinary civil courts.

Section 187(10)deals with proceedings taken in the wrong bankruptcy court not with proceedings taken by error in the civil courts that should have beentaken in the bankruptcy court: 512146 B.C. Ltd. v. Dextras Engineering & Construction Ltd. (2001), 26 C.B.R. (4th) 128, 2001 BCSC534, 9 C.L.R. (3d) 1, 2001 CarswellBC 1155 (B.C.S.C. [In Chambers]). In Re Tobin (1930), 12 C.B.R. 55 (Que.S.C.), an application was filed in Montreal against a debtor who had his residence and principalplace of business in Ontario.

The Québec Court found that the proceedings had been commenced in the wrong court and transferred theapplication and all proceedings connected with it to the bankruptcy court in Ontario. Section 187(10) confers a discretion on the court; the court does not have to grant the order. In Re Solloway (1938), 19 C.B.R. 350; affirmed 20 C.B.R. 309 (Ont. C.A.), it was held that the power given by s. 187(10) can only beexercised if the error in jurisdiction is made through inadvertence.

In the Solloway case, the court refused to transfer to Québec anapplication that had been improperly filed in Ontario as the application had deliberately chosen Ontario as the forum in which to file itsapplication. Instead of transferring the application, the court dismissed it. With respect, there is nothing in s. 187(10) that requiresinadvertence as the basis for the exercise of the power confered by the subsection.

It is true, as pointed in Re Solloway that once thecourt is made aware of the error, it should not proceed; however, there seems no reason why in the Solloway case, the court could nothave refused to make the bankruptcy order but, as was done in Re Tobin, have transferred the application to Québec. [87] Other than the Administrator’s submission that a new motion was required to bring the application to this Court and theClaimant’s assertion that the transfer from Ontario has the effect of continuing the proceeding in Saskatchewan, no authority wasprovided to me on the effect of the transfer except for the Claimant’s reference to s. 187(10). [88] I accept that s. 187(10) is designed to have the effect of continuing a BIA proceeding after it has been transferred andthat no new motion was required in Saskatchewan once the proceeding had been transferred.

[89] I would note that this conclusion is consistent with the concept of continuance in the Court Jurisdiction Proceedingsand Transfer Act, SS 1997, c C-41.1, that applies to non-bankruptcy transfers in civil court. Under that Act, a continuance is construed tohave occurred after a proceeding has been transferred to Saskatchewan and Saskatchewan has accepted the transfer.

I would also notethat I have not considered whether The Court Jurisdiction Proceedings and Transfer Act may apply to these proceedings because neitherparty made any submissions referring to this Act in written or oral submissions on this application. [90] I find that the notice of motion to appeal was served and filed within the limitation period, when it was filed with theOntario Superior Court.

There is no evidence that the Saskatchewan Court of Queen’s Bench was seized with the matter of consumerproposal administration at the time of the application, and that the Claimant’s mistake of filing in the wrong court, therefore, ought not tobe construed as nullifying the claim. D.

Is the appeal of disallowance out of time for reasons other than improper filing? [91] The Administrator submits that the limitation period renders this application out of time because the terms of thelimitation provision require a party appealing from disallowance to serve, file, and set the hearing within the 30 day limitation period. Incases where setting the hearing within that time is not possible, the Administrator submits, the appellant must also seek leave from thecourt to extend the 30 day period, prior to its expiry.

If the appellant fails to orchestrate the hearing within 30 days or fails to obtain leaveto extend the period for the appeal, then the claim is barred, according to the Administrator. [92] The Claimant submits that it served and filed the notice of appeal within the 30 day period and, accordingly, preservedthe right to appeal the disallowance. [93] At this juncture some general comments on the steps of the consumer proposal process is warranted. The consumerproposal process is designed to avoid the expense and time required in a bankruptcy or a commercial Division I proposal.

This meansthat there are fewer steps in the process and much less oversight by the courts. Ultimately, the creditors have few opportunities to objectif they have concerns about the process. In some cases the creditors’ only contact with the administrator will involve proving the claim,as there are mechanisms in the BIA that allow for a consumer proposal to be deemed to have been approved by the creditors and deemedto have been approved by the court. At the end of a consumer proposal, there is also a process for the administrator to be deemeddischarged from his obligation to administer the proposal.

While all of this will not affect the proven creditors’ rights, a creditor’slegitimate claim might be compromised by the process, if he is not identified by the debtor to the administrator, as that creditor willnever receive notice of his right to share in the consumer debtor’s proposal. [94] If no claim is established and the consumer proposal’s terms are fulfilled, then the unsecured creditor’s claim will bedetermined by the consumer proposal. In most cases, a claimant with a disallowed claim will have no recourse against the consumerdebtor once the consumer debtor completes the terms of the proposal.

In reference to this application, this means that if the appeal is outof time, the Claimant’s claim for the $176,000.00 debt will be determined by the completed consumer proposal administration processand the Claimant can no longer pursue the Debtor for the claim, irrespective of its legitimacy. [95] The Administrator’s counsel, Anne Hardy, cited Gunn J.’s decision in Canada (Minister of National Revenue) vEngdahl (1994), (SK KB), 27 CBR (3d) 114 (Sask QB) [Engdahl] as support for her submission that the Certificate ofFull Performance of Proposal should constitute a full bar to the Applicant’s claim, irrespective of its legitimacy, in this case.

I disagree.Engdahl concerned an application by the Canada Revenue Agency [CRA] to annul a consumer proposal on grounds that the debtor hadbeen ineligible to make the proposal because his debts exceeded the $75,000.00 cap for consumer debt that was in effect at that time.According to the CRA in Engdahl, the debtor’s pre-proposal debt included debt for taxes incurred prior to the proposal, even though theyhad been assessed by the CRA after the proposal had been made, approved, and a certificate of completion had been issued.

On the factsof that case, Gunn J. concluded that an annulment would not be appropriate because the debtor had not known that his debts renderedhim ineligible to make the proposal, there was evidence that the CRA had delayed pursuing the claim unduly and there would ultimatelybe no benefit to the creditors if the debtor were forced to make an assignment in bankruptcy. [96] In this case, the evidence supports the conclusion that the Debtor knew that he was responsible for the guarantee debt.Although the claim took some time to be heard (in part due to the complexity of determining the proper forum and in part due to the timeit took the Superior Court in Ontario to transfer the file to Saskatchewan), there is no evidence that the Claimant delayed theproceedings.

Ultimately, the Administrator knew that the Claimant’s appeal of the disallowance had not been determined at the time itissued the Certificate of Compliance. [97] The circumstances in Automotive Finance Corp v Davies, 2002 BCSC 509, 33 CBR (4th) 22 [Davies] align more closelyto those of the present case. In Davies, Boyd J., of the British Columbia Supreme Court, annulled a consumer proposal upon evidencethat the proposer knew about the liability under a personal guarantee but failed to include the liability in his consumer proposal.

In thatcase, the consumer proposal was filed and distributed to all creditors, except the creditor on the guarantee. It was approved by all of theother creditors and completed before the guarantee creditor caught wind of it. As in the present case, the inclusion of the guarantee debtwould have rendered the debtor ineligible to make a consumer proposal. [98] Some comments on the claim process may provide the reader with some context for the analysis to follow. [99] The process for admitting or disallowing Proofs of Claim is set out in s. 135 of the BIA.

In cases where atrustee/administrator disallows the claim, the disallowance is final and conclusive, unless the claimant appeals the disallowance within30 days of the disallowance having been served upon the applicant. For the convenience of the reader, s. 135 states as follows: 135.

(1) The trustee shall examine every proof of claim or proof of security and the grounds therefor and may require further evidence insupport of the claim or security.

(1.1) The trustee shall determine whether any contingent claim or unliquidated claim is a provable claim, and, if a provable claim, thetrustee shall value it, and the claim is thereafter, subject to this section, deemed a proved claim to the amount of its valuation.

(2) The trustee may disallow, in whole or in part, (

a) any claim; (

b) any right to a priority under the applicable order of priority set out in this Act; or (

c) any security.

(3) Where the trustee makes a determination under subsection (1.1) or, pursuant to subsection (2), disallows, in whole or in part, anyclaim, any right to a priority or any security, the trustee shall forthwith provide, in the prescribed manner, to the person whose claim wassubject to a determination under subsection (1.1) or whose claim, right to a priority or security was disallowed under subsection (2), anotice in the prescribed form setting out the reasons for the determination or disallowance.

(4) A determination under subsection (1.1) or a disallowance referred to in subsection (2) is final and conclusive unless, within a thirtyday period after the service of the notice referred to in subsection (3) or such further time as the court may on application made withinthat period allow, the person to whom the notice was provided appeals from the trustee’s decision to the court in accordance with theGeneral Rules.

(5) The court may expunge or reduce a proof of claim or a proof of security on the application of a creditor or of the debtor if the trusteedeclines to interfere in the matter. [100] Although some jurisdictions have determined that the appeal right can only be preserved if the appeal is served, filedand heard within the 30 day period (unless an application to extend the appeal period is also made within the 30 day period) this is notthe law in Saskatchewan. [101] In Pachal’s Beverages Ltd.( Re), (SK KB), [1973] 1 WWR 217 (Sask QB) [Pachal’s], Bayda J., as hethen was, construed the disallowance provisions and, specifically, the phrase “appeals to court in accordance with the General Rules.”He determined that the phrase only refers to the requirement for serving notice of the disallowance appeal and nothing further.

Bayda J.considered this phrase in the context of a previous version of the provision governing the process for determining claims, s. 94 of theBankruptcy Act, RSC 1952, c 14 (since rep), which contained wording substantively the same as today’s s. 135(4) of the BIA: 94.

(1) The trustee shall examine every proof and the grounds of the claim, and may require further evidence in support of it.

(2) Where he considers the Applicant is not entitled to rank on the estate, or is not entitled to rank for the full amount of his claim, or ifdirected by a resolution passed at any meeting of creditors or inspectors, he may disallow the claim in whole or in part, and in such caseshall give to the Applicant a notice of disallowance, and such notice shall contain the reasons for disallowance.

(3) The notice may be given either by serving the Applicant with a copy thereof personally or by mailing the copy in a registered letter,addressed to the Applicant at the last-known address, or at the address shown in or by the Applicant's proof.

(4) The disallowance is final and conclusive unless, within thirty days after the service or mailing of the notice or such further time as thecourt may on application made within the same thirty days allow, the Applicant appeals to the court in accordance with General Rulesfrom the trustee's decision. [102] In concluding that only service was required to preserve the right to appeal a disallowance, Bayda J. explained at 219-220 of Pachal’s, that the other steps required to move an appeal forward, such as filing the motion and setting the date for the hearing,are matters pertaining to the procedure of each territorial court and ought to be determined by each independently: It is my task to determine the meaning of the words "appeals to the court in accordance with General Rules" as these words are used in s.94(4) of the Act.

Upon making this determination, it will be relatively simple to decide whether what it is that has to be done within the30-day period was in fact done within that period. The words in question either mean:

a) Exercises his right of appeal by officially getting the appeal underway in the manner that the Bankruptcy Rules provide for getting anappeal underway (in other words takes the first official step in the appeal), or

b) Exercises his right of appeal by doing all of those things that he is required to do by the Bankruptcy Rules in order to initiate andprosecute his appeal to a conclusion, including a hearing (in other words takes all of the steps in the appeal). The words "appeals to thecourt in accordance with General Rules" simply do not lend themselves to the suggestion that they mean something in between (

a) and(b), that is to say, taking the first step and several intermediate steps but not necessarily all of them. If the legislators intended to ascribethis somewhat anomalous meaning to these words, it is fair to assume that they would have taken the precaution of expressly includingthis extraordinary definition in the statute. Faced with the choice of either (

a) or (b), I have no hesitation in selecting (a). Section 94(4) of the Act is primarily concerned withproviding an aggrieved claimant with a substantive right of appeal. It is further concerned with ensuring that the claimant does not delayin claiming his right. The subsection stipulates that if the claimant wishes the benefit of an appeal, he must lay his claim to the right of anappeal within 30 days. It is with this substantive right that the subsection is concerned and nothing more.

Whether the notice of motion, which initiates the appeal is filed, and if so when; whether a discovery of documents is permitted, and if sowhen; whether examinations for discovery of the various parties are permitted, and if so when; and whether the hearing of the appeal andall the other intervening steps between the launching of the appeal and the hearing are to take place within 30 days or more or less of theservice of the notice of disallowance are matters of procedure: see Re Smith & Hogan, Ltd.; Industrial Acceptance Corpn.

Ltd. et al v.Canada Permanent Trust Co., (SCC), [1931] S.C.R. 652, 13 C.B.R. 144, [1932] 1 D.L.R. 287, per Duff, J., as he then

was, at p. 145.

By R. 4 of the Bankruptcy Rules matters of procedure, except where these Rules and the Act otherwise specify, have beenassigned to those Courts that have been designated, by s. 140 of the Act, as the Bankruptcy Courts. [103] Since that decision, Bayda C.J.S, as he then became, revisited the reasoning in Pachal’s in Henry v Saskatchewan(Workers' Compensation Board) (1999), (SK CA), 172 DLR (4th) 73 (QL) at para 79 [Henry], wherein heconfirmed a general rule, outside of the bankruptcy context, that an application is considered to have been made when the motion hasbeen served and filed: 79 There remains this question: What is the effect of the delay between the making of the application and the hearing of theapplication?

As noted, there is a distinction between the "making" and the "hearing" of an application. An application is "made" whenthe notice of motion has been served and filed (see: Bearss v. Regina (City) (No. 2) (1956), (SK CA), 18 W.W.R. 90, 5D.L.R. (2d) 199 (Sask. C.A.); Pachal's Beverages Ltd., Re (1972), (SK KB), [1973] 1 W.W.R. 217 (Sask. Q.B.); andJanes v. Brown, (ON CA), [1955] 3 D.L.R. 221 (Ont. C.A.) per Hogg J.A..

An application is "heard" when the judgehears the submissions of the parties. [104] The Administrator served the Claimant with the Notice of Disallowance on April 5, 2012 and the Claimant filed theNotice of Motion in Ontario on May 3, 2012 and served the Notice of Motion on the Administrator on May 4, 2012 (29 days after thedisallowance had been served on the Claimant).

No issue as to the form of filing were raised in this application. [105] On the authority of Henry, I find that the Applicant preserved its right to appeal the disallowance when it served andfiled the Notice of Motion to Appeal within the 30 day limitation period. E.

What is the nature and scope of the appeal? [106] In South Beach Homes Ltd., Re, 2010 SKQB 182, 357 Sask R 82 [South Beach Homes], Registrar Schwann, as she thenwas, noted that the threshold question to any appeal under s. 135 of the BIA concerns the nature and scope of the appeal. [107] In South Beach Homes, Registrar Schwann concluded that the circumstances of each case ought to determine whetherthe appeal should proceed as a true appeal, strictly limited to the record; or, whether it should proceed on a de novo basis.

The Registraralso observed that fact-sensitive cases might be better determined according to a de novo approach (paras. 29-32): 29 The threshold question to any s. 135 appeal concerns the nature and scope of the appeal. Case law is divided on whether a s. 135appeal should proceed on a de novo basis or as a true appeal limited to a review of the record. 30 The de novo approach was adopted and new evidence relative to the claim admitted in the following cases: Re Eskasoni FisheriesLtd. (2000), (NS SC), 16 C.B.R. (4th) 173; Port Chevrolet Oldsmobile Ltd., 2004 BCCA 37, 49 C.B.R. (4th) 146.

Incontrast, other cases have declined to adopt the de novo approach opting instead to treat a s. 135 appeal as a true appeal on the record: ReGalaxy Sports Inc., 2004 BCCA 284, 1 C.B.R. (5th) 20; Johnson v. Erdman, 2005 SKQB 515, 18 C.B.R. (5th) 97. 31 As observed in Able Automotive Ltd. v. Cameron-Okolita Inc. (cited as Re Foreman) 2009 SKQB 476), more recent decisions haveeschewed the rigid approach adopted in both Galaxy Sports and Johnson v. Erdman in favour of a more flexible, case by case approach.(see for example: San Juan Resources, Inc.

Re, 2009 ABQB 55, 52 C.B.R. (5th) 97 and Lloyd's Non-Marine Underwriters v. J.J. LaceyInsurance Ltd., 2008 NLTD 9, 41 C.B.R. (5th) 137; Business Development Bank of Canada v. Pinder Bueckert & Associates Inc., 2009SKQB 458) 32 Adopting the approach taken by this Court in Able Automotive, I conclude that the fact-sensitive nature of the issues presented inthis appeal favours a de novo examination of the material.

This conclusion is further influenced by the absence of any discernible 'record'and by the plethora of affidavit material filed by both sides upon which reliance was placed. [108] While there is a discernible record in this appeal, other relevant material also appears on the record of the AmalgamatedEntity’s insolvency court file.

Both parties referred to material on that file during the hearing and I have concluded that information inthis file ought to be considered to ensure that this Court has a fulsome understanding of the circumstances governing this case beforemaking its decision. [109] In view of the circumstances of this case and the inter-relationship between the Debtor’s consumer proposal and theAmalgamated Entity’s insolvency proceedings, which appear in the Bankruptcy File No. 16443 (concerning the Amalgamated Entity’sbankruptcy), a de novo examination of the material is more appropriate. F.

Ought the claim to have been allowed? [110] The Administrator disallowed the claim for two reasons. 1. The Administrator determined that the guaranteed portion of the debt was limited to the $3,000.00 loan requested by the Debtor onthe application form; and 2. The guarantee does not form the basis for a claim, since the primary obligation was limited to credit extended to the Primary Debtor,and the obligations of the Primary Debtor were extinguished when that corporation amalgamated into the Amalgamated Entity. [111] Both of the Administrator’s conclusions are matters of legal

interpretation. The first has to do with the governing termsof the lending agreement between the Principal Debtor and the Claimant; the second concerns the status of a guarantee debt incircumstances where the principal debtor amalgamates and the creditor continues to lend to the amalgamated corporation. i. Did the terms of the agreement between the Claimant and the Principal Debtor limit the Debtor’s liability to $3,000.00?

[112] In the Affidavit of Owen Bushey, the Debtor swore that the personal guarantee was only signed to cover the PrincipalDebtor’s liability up to $3,000.00. The Debtor submits, in the Affidavit of Owen Bushey, that the Claimant’s rights under the guaranteewere restricted by the rights the Debtor had granted to the Claimant under the credit application form, wherein the Claimant was onlygiven the authority to “limit, reduce, or cancel” the credit it made available to the Principal Debtor.

The Administrator, and the Debtor inhis affidavit, both insist that the terms of the credit application form did not give the Claimant the authority to adjust the credit limit. [113] I have reviewed the credit application form that the Debtor’s wife signed on behalf of the Principal Debtor.

Although itcontains a request for credit in the amount of $3,000.00, I am not convinced that it is appropriate for me to infer from the request on thecredit application form that either the Claimant or the Principal Debtor intended to limit the Principal Debtor’s liability to $3,000.00. [114] Moreover, if you accept the reasons the Debtor provided for his financial difficulties, which referred to a guarantee andto the debts of an Amalgamated Entity, it can be inferred that the Debtor did not consider the lending arrangement of the AmalgamatedEntity to be limited to $3,000.00.

The Claimant extended credit to the Principal Debtor and the Amalgamated Entity and those companiesaccepted the credit, irrespective of the credit limit that the Principal Debtor requested on the credit application form. [115] I find that the credit limit requested on the credit application form did not limit the Principal Debtor’s liability to theClaimant, or, by consequence, the Debtor’s guarantee of that liability. ii.

Did the amalgamation of the Principal Debtor extinguish the Debtor’s liability on the guarantee? [116] Some understanding of guarantee law and corporate law must be undertaken before a proper assessment of the Debtor’sliability under the guarantee can be determined. [117] At its most basic, a guarantee debt is created by two contractual relationships: 1) the principal contract between theprincipal debtor and the creditor (also referred to in the case law as primary contract) and 2) the guarantee contract between guarantorand the creditor. [118] The principal contract is between a creditor and a debtor.

Under the principal contract the creditor promises to lendmoney to the debtor on condition that the debtor repays the creditor. [119] The guarantee contract is between the creditor and the guarantor. Under the guarantee contract the guarantor guaranteespayment of the principal debtor’s debt. [120] The guarantee only creates a debt if the principal debtor owes the creditor payment under the principal contract. If thereis no enforceable liability under the principal contract, the guarantee becomes irrelevant and will not form the basis for a debt.

No furtheranalysis will be required if these circumstances exist. [121] If there is liability under the principal contract, under the circumstances of this application, however, the court will berequired to consider a number of issues before concluding whether disallowance was warranted in this case. It will first have to ascertainwhether the Principal Contract debt continued to the Amalgamated Entity.

If the Principal Debtor’s liability continued with theAmalgamated Entity, then further analysis will be required to determine whether the Principal Debtor’s amalgamation extinguished theDebtor’s liability on the guarantee. The following analysis addresses these questions. a. Is the principal contract enforceable? 1.

What territorial law governs the Principal Contract? [122] Before determining whether rights under the Principal Contract are enforceable, the law governing the contractualrelations between the Claimant and the Principal Debtor and the Claimant and the Debtor must be ascertained. [123] The Claimant submits that Ontario’s law is the proper law to apply in assessing the enforceability of the contacts in thiscase. [124] According to the Claimant, the proper law depends on the outcome of the real and substantial connections test.

That testwas considered by the Supreme Court of Canada in Imperial Life Assurance Co. of Canada v Colmenares, (SCC), [1967]SCR 443, and was also considered by the Saskatchewan Court of Appeal by Culliton C.J.S. in Re O'Brien and Canadian Pacific Railway, (SK CA), [1972] 3 WWR 456, at 459: The general principles to be followed in determining the law governing a contract, or a particular issue within the contract, such asarbitration proceedings, may be stated as follows: (1) if the intention of the parties as to the law governing is expressly stated in thecontract, then in general that law governs; (2) if the intention of the parties as to the law governing the contract, or a particular mattertherein, is not expressly stated, but may properly be inferred from the terms and nature of the contract and the surroundingcircumstances, then the intention so inferred, in general, governs; (3) if the intention of the parties as to the applicable law cannot beascertained from the express terms of the contract, or cannot be inferred from the terms of the contract in the light of surroundingcircumstances, the intention of the parties may be inferred by referring to the system of law with which the contract has its closest andmost real connection.

See Dicey and Morris, Conflict of Laws, 8th ed., pp. 691-3; Bonython et al. v. Commonwealth of Australia, [1951]A.C. 201; Re United Rys. of Havana and Regla Warehouses Ltd., [1961] A.C. 1007, [1960] 2 All E.R. 332 ; Cie d'Armement MaritimeS.A. v. Cie Tunisienne de Navigation S.A., [1971] A.C. 572, [1970] 3 All E.R. 71. [125] The circumstances of both contracts must be considered to determine the law with the closest and most real connectionto each contract. [126] I have determined that the contracts in this case both have the closest and most real connections to Ontario. Bothcontracts were formed in Ontario.

At the time of contract formation, the Debtor lived in Ontario and operated the business of the

Principal Debtor in Ontario. The Claimant and the Principal Debtor were both located in Ontario at the time the contracts were entered into, as well. The Principal Debtor was an OBCA company and the Amalgamated Entity was also incorporated under the OBCA . The only connection between the contracts and Saskatchewan is the connection that arose when the Debtor moved from Ontario to Saskatchewan. [ 127 ] I find that Ontario’s law is the proper law of the contracts at issue. 2.

Did the Principal Contract create liability? [ 128 ] The next step in determining whether the claim on the Debtor’s guarantee ought to be allowed is to assess whether liability existed under the Principal Contract. [ 129 ] On February 12, 2001, the Principal Debtor applied for a commercial line of credit with the Claimant. [ 130 ] The credit application, dated February 12, 2001, is a one page document signed by Trina Bushey in her capacity as “company representative”. [ 131 ] The purpose of the lending arrangement is described as “credit with Andre Tardiff Agency Limited for a commercial account for the supply of fuel, oil and other petroleum products.” The application contains the following representations: 1.

The applicant will be jointly and severally liable for all amounts charged to the account; 2. If credit is extended, the applicant will pay the Andre Tardiff Agency Limited all amounts owing to Andre Tardiff Agency Limited within 30 days of the invoice date; 3. The applicant shall pay interest on all overdue amounts at the rate of 2% per month, compounded monthly, equivalent to 26.5% per annum; and 4.

The applicant agrees that in the event of default in payment of account, Andre Tardiff Agency Limited may recover from the applicant all reasonable legal expenses incurred in recovering the outstanding indebtedness; and 5.

The applicant authorizes Andre Tardiff Agency Limited to obtain financial disclosure about it. [ 132 ] The application form also contains an acknowledgement by the applicant that Andre Tardiff Agency Limited has the sole discretion to “reduce or cancel credit made available to the applicant”. [ 133 ] I accept that the credit application triggered the credit arrangement and formed the contract between the Principal Debtor and the Claimant. [ 134 ] According to the evidence in the Affidavit of Bryan Tardiff, the relationship between the parties developed over a series of requests from the Principal Debtor and advances by the Claimant.

The Debtor’s affidavit does not contradict this evidence. [ 135 ] Based on this evidence, I find that the terms of the application form and the conduct of the Principal Debtor and Claimant support the conclusion that both parties understood there was a contract between the Claimant and the Principal Debtor and acted on its terms. The Principal Contract created liability. 3.

Did the amalgamation of the Principal Debtor extinguish the Principal Contract liability? [ 136 ] According to the Administrator, the Debtor’s liability on the guarantee ended at the Principal Debtor’s amalgamation because that is when the Principal Debtor ceased to exist and only the Principal Debtor’s liability was guaranteed. The Administrator takes the position that the Principal Debtor owed nothing to the Claimant at the time of amalgamation and that any debt the Amalgamated Entity assumed at amalgamation was a debt of 1140701.

As for continuing liability under the Principal Contract, the Administrator submits that debts accrued after the amalgamation arose from the continuation of the credit arrangement between the other amalgamating company and the Amalgamated Entity, only. [ 137 ] The Administrator also submits that the change in the Debtor’s wife’s role in the business operations, as secretary and demanding credit on behalf of the Principal Debtor but as a stranger to the Amalgamated Entity, lends weight to the Claimant’s assertion that the fundamental change of amalgamation created a new set of risks for the Debtor and his wife that neither consented to guarantee. [ 138 ] The Claimant submits that the Principal Debtor’s liability continued as a liability of the Amalgamated Entity and that the terms of the amalgamation agreement, the effect of s. 179 of the OBCA and the conduct of the Debtor and the Claimant all support this conclusion. [ 139 ] In reference to the role of the Debtor’s wife, the liability of the Debtor’s wife is not at issue in this application.

Although she signed the credit application form, as a representative for the Principal Debtor, along with the guarantee that secured the principal debt, I have little evidence with which to assess Trina Bushey’s involvement in the operations of the Amalgamated Entity, her understandings concerning the amalgamation process, or her general involvement in requesting credit from the Claimant.

In addition to the evidentiary issues, I have been provided with no legal authority to demonstrate that Trina Bushey’s liability on the guarantee affects the Debtor’s liability in a manner that would change the outcome in this application.

Absent such authority, I do not consider it appropriate for this Court to delve further into this issue as it touches on the rights of a stranger to the consumer proposal and lies outside of the purview of this application. [ 140 ] In reference to the effect of corporate law, further analysis is required. [ 141 ] Although the process of amalgamation extinguishes each amalgamating entity (as entities separate from each other) the

extinguishment is only partial because the liabilities and rights of each amalgamating party continue to exist in the amalgamated entityonce the articles of amalgamation become effective, by operation of s. 179 of the OBCA, which provides as follows: 179. Upon the articles of amalgamation becoming effective, (

a) the amalgamating corporations are amalgamated and continue as one corporation under the terms and conditions prescribed in theamalgamation agreement; (a.1) the amalgamating corporations cease to exist as entities separate from the amalgamated corporation; (

b) the amalgamated corporation possesses all the property, rights, privileges and franchises and is subject to all liabilities, includingcivil, criminal and quasi-criminal, and all contracts, disabilities and debts of each of the amalgamating corporations; (

c) a conviction against, or ruling, order or judgment in favour or against an amalgamating corporation may be enforced by or against theamalgamated corporation; (

d) the articles of amalgamation are deemed to be the articles of incorporation of the amalgamated corporation and, except for thepurposes of subsection 117 (1), the certificate of amalgamation is deemed to be the certificate of incorporation of the amalgamatedcorporation; and (

e) the amalgamated corporation shall be deemed to be the party plaintiff or the party defendant, as the case may be, in any civil actioncommenced by or against an amalgamating corporation before the amalgamation has become effective. [142] The general principal of continuing liability was affirmed by the Supreme Court of Canada in R v Black and DeckerManufacturing Co., (SCC), [1975] 1 SCR 411 [Black and Decker]. In Black and Decker, Dickson J. considered thewording in s. 179(

b) of the OBCA, and clarified that the liabilities of an amalgamating company continue as obligations of theamalgamated entity, irrespective of the liability’s origin or nature. [143] The decision in Black and Decker overturned the Ontario Court of Appeal’s decision which had distinguished criminalliability as a form of liability that did not flow to an amalgamated entity. Rejecting the distinction between forms of liability in thecontext of amalgamation, Dickson J. drew the analogy of two rivers coming together to explain continuance by way of amalgamation.

Henoted that all of the strengths and weaknesses of each amalgamating entity contribute to form the amalgamated entity at pps 420-421 ofBlack and Decker as follows: There are various ways in which companies can be put together. The assets of one or more existing companies may be sold to anotherexisting company or to a company-newly incorporated, in exchange for cash or shares or other consideration. The consideration receivedmay then be distributed to the shareholders of the companies whose assets have been sold, and these companies wound up and theircharters surrendered.

In this type of transaction a new company may be incorporated or an old company may be wound up but the legalposition is clear. There is no fusion of corporate entities. Another form of merger occurs when an existing company or a newly-incorporated company acquires the shares of one or more existing companies which latter companies may then be retained assubsidiaries or wound up after their assets have been passed up to the parent company. Again there is no fusion.

But in an amalgamationa different result is sought and different legal mechanics are adopted, usually for the express purpose of ensuring the continued existenceof the constituent companies. The motivating factor may be the Income Tax Act or difficulties likely to arise in conveying assets if themerger were by asset or share purchase. But whatever the motive, the end result is to coalesce to create a homogeneous whole.

Theanalogies of a river formed by the confluence of two streams, or the creation of a single rope through the intertwining of strands havebeen suggested by others. [Emphasis in original] Counsel for the accused argued that an amalgamation agreement provides for so many changes (s. 137(3)) and the transformation of theamalgamating companies is so complete as to amount to extinction of life. I do not agree. A company can, by supplementary LettersPatent, make equally drastic changes without affecting, in the slightest, corporate longevity.

It was also submitted that if the amalgamating companies continue in amalgamation, in all their plenitude, then ss. 137(13)(

b) and137(14) are mere surplusage. I would not so regard

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