PricewaterhouseCoopers Inc v Date:, 2018 MBCA 41

Citation: PricewaterhouseCoopers Inc v Date: 20180417 Ramdath, 2018 MBCA 41 Docket: AI18-30-09007 IN THE COURT OF APPEAL OF MANITOBA ) D. R. M. Jackson and in the matter of the bankruptcy ) S. A. Gabor of: ) for the Applicant ) r. litz & sons company limited ) K. D. Toyne ) for the Respondent ) BETWEEN : ) C. E. Howden ) for R. Litz & Sons Company PETER RAMDATH ) Limited ) Respondent ) J. M. J.

Dow ) for the creditor Canadian - and - ) Western Bank ) PRICEWATERHOUSECOOPERS INC. ) Chambers motion heard: ) April 5 , 2018 Applicant ) ) Decision pronounced: ) April 17, 2018 mainella JA Introduction [ 1 ] The dispute that has come before me in chambers relates to whether an appeal filed under the Bankruptcy and Insolvency Act , RSC 1985, c B-3 (the BIA ), requires leave or is as of right. [ 2 ] PricewaterhouseCoopers Inc. (PWC) moves to strike the appeal of Peter Ramdath (Mr. Ramdath) of an order approving the amended proposal of R. Litz & Sons Company Limited (Litz Crane) pursuant to

section 59 of the BIA . Background [ 3 ] In August 2017, as result of financial difficulties, Litz Crane, a Winnipeg crane company, filed for creditor protection under the BIA . Subsequently, Litz Crane identified financial irregularities in the form of the possible misappropriation of over $3 million by Mr. Ramdath, its former chief financial officer. In October 2017, by order of the Court of Queen’s Bench, PWC was appointed the interim receiver and a Mareva injunction ( Mareva Compania Naviera SA v International Bulkcarriers SA , [1980] 1 All ER 213 (CA) ) was granted against Mr.

Ramdath to restrain him from disposing of his assets. PWC worked with Litz Crane to restructure the business and prepare a proposal for its creditors. PWC also prepared and filed with the Court several investigative reports as the interim receiver. [ 4 ] Part of the proposal prepared by PWC and Litz Crane for the consideration of the creditors was that PWC would be authorized to complete its investigation of financial irregularities as the proposal trustee because PWC’s investigative powers as an interim receiver would expire once any proposal received court approval (see

section 47.1(1) (1.1) of the BIA ). [ 5 ] At a creditors’ meeting on December 22, 2017, an amended form of the proposal received the approval of 90 percent of the creditors representing 98.2 percent of the proven claims. Under

Article 8 of the amended proposal, PWC, in its capacity as proposal trustee, was given the discretion to utilize investigatory and remedial powers under the BIA to assist in the continued investigation of financial irregularities at Litz Crane. [ 6 ] The amended proposal received court approval on February 1, 2018. The only objection to the amended proposal came from Mr. Ramdath in relation to

Article 8. Mr. Ramdath is not a creditor or shareholder of Litz Crane; he has no legal status with or financial interest in the company. The bankruptcy judge who granted the approval order concluded that continuing the investigative powers of PWC under the BIA in its capacity as proposal trustee was “justified and reasonable” in the circumstances. In his view, the purpose of

Article 8 of the amended proposal was in conformity with the BIA and would allow PWC to complete its investigation, provide the creditors with further information about the financial irregularities at Litz Crane and assist Litz Crane in the recovery of funds to help it satisfy its obligations, to the benefit of the creditors, under the amended proposal.

[7] On February 9, 2018, without seeking leave to appeal, Mr. Ramdath filed a notice of appeal of the approval orderseeking to set aside PWC’s continued investigative powers set out in

Article 8 of the amended proposal. He does not challenge any otherpart of the amended proposal. The notice of appeal states that the appeal is being brought pursuant to

section 193(

a) of the BIA. [8] The parties agree that the appeal provisions of the BIA create two routes of appeal: appeals as of right in certainclasses of cases and appeals based on leave in any other case. The relevant provisions of

section 193 of the BIA applicable here are: Court of Appeal 193 Unless otherwise expressly provided, an appeal lies to the Court of Appeal from any order or decision of a judge of the court inthe following cases: (

a) if the point at issue involves future rights; . . . (

e) in any other case by leave of a judge of the Court of Appeal. [9] Mr. Ramdath says that the circumstances here fall within the automatic right of appeal provided for in

section 193(a)of the BIA. He argues that the investigative powers under the BIA can only be used for purposes relating to the BIA, such as providinginformation to creditors so that they can decide whether to approve a proposal. He submits that the amended proposal has already beenapproved; therefore, there is no need to give PWC continuing investigative powers because it is not a “mercenar[y]” in the cause of LitzCrane against him over what happened during the course of his employment.

His position is that an appeal from the bankruptcy judge’sdecision to approve the amended proposal involves the “future rights” of both PWC and him (see Re Kern Agencies Ltd, (SK CA), [1931] 2 DLR 614 (Sask CA)). [10] PWC argues that Mr. Ramdath’s

interpretation of his right of appeal under

section 193(

a) of the BIA and the decision inRe Kern Agencies is too broad. PWC says that the meaning of the term “future rights” in

section 193(

a) of the BIA is more limited; afuture right is a future legal right—not a procedural right, commercial advantage or disadvantage that may accrue from the orderchallenged, or a right that currently exists that may be exercised in the future or altered by the order challenged (see Elias v Hutchinson,1981 ABCA 31 at paras 22-24; and Ravelston Corp, Re, 2005 CarswellOnt 9058 at paras 18-19 (CA)). [11] PWC submits that, while the refinancing of Litz Crane has occurred to allow it to continue to operate, the investigationof what happened and where the missing money went is not completed.

Moreover, PWC asserts that a fatal flaw of Mr. Ramdath’s claimthat the order approving the amended proposal involves future rights is that he has no economic interest in Litz Crane (see 2403177Ontario Inc v Bending Lake Iron Group Limited, 2016 ONCA 225 at para 25). The position of PWC is that the only way Mr. Ramdathcan challenge

Article 8 of the amended proposal is by seeking leave to appeal the approval order pursuant to

section 193(

e) of the BIAwhich he has not done. [12] Prior to hearing the motion, I raised with counsel, through a communication from the Registrar, “whether a ChambersJudge, as opposed to a panel, is the appropriate forum to decide a motion to strike a Notice of Appeal in light of section 7(1) of The Courtof Appeal Act, CCSM c C240.” That provision is as follows: Powers of judge in chambers 7(1) In any cause or matter pending in the court, any application or motion incidental thereto, not involving the decision of that causeor matter may be heard and disposed of by a judge of the court sitting in chambers; and a judge of the court may at any time duringvacation make any interim order to prevent prejudice to the claims of any party as the judge thinks fit. [13] Where a chambers judge determines that he or she lacks statutory authority to decide a motion, he or she can dismiss itor refer the matter to a panel of the Court to decide (see r 44 of the Manitoba, Court of Appeal Rules, Man Reg 555/88R). [14] At the hearing of the motion, counsel for both parties suggested that I follow the practice that has apparently arisen inOntario, that if there is a question of whether leave to appeal is required under the BIA, I deal with the issue as a “motion for directions”(see Fibre Connections Inc v SVCM Capital Ltd, 2005 CarswellOnt 1834 (CA); and 2403177 Ontario Inc).

Discussion [15] Section 183(2) of the BIA confers appellate jurisdiction on the common law courts of appeal throughout Canada toexercise the “power and jurisdiction at law and in equity, according to their ordinary procedures, except as varied by this Act or theGeneral Rules, to hear and determine appeals from the courts vested with original jurisdiction under this Act.” [16] The mere fact that the parties agree that I decide the dispute as to the nature of Mr.

Ramdath’s right of appeal under theBIA does not confer jurisdiction for me to do so; statutory authority to make that decision is required (see Ferland v Desjardins et al, (SCC), [1961] SCR 306 at 307; and Director of Child and Family Services v AC et al, 2008 MBCA 18 at para 27). [17] I am not prepared to characterise the motion of PWC as a motion for directions. I am doubtful that, in Manitoba, there

is a broad power for a chambers judge to decide any issue raised by a litigant through the device of a motion for directions. The onlyreference in the Court of Appeal Rules to “directions” is the power for case management of an appeal that can be ordered pursuant tor 37.1. That is not the nature of the dispute here. In my view, the situation in Manitoba is similar to Saskatchewan; there is no generalauthority in the rules for a chambers judge to provide advice as to how an appeal should proceed (see Mann v Hawkins, 2011 SKCA 7 atparas 4-6).

In other jurisdictions, a general right to apply for directions exists in the rules of court (e.g., r 32 of the Newfoundland, Courtof Appeal Rules, NL R 38/16; and r 54 of the Federal Court Rules, SOR/98-106). [18] The limited jurisdiction of a chambers judge to grant relief in Manitoba is well established. The general rule is that achambers judge should not decide a dispute absent some enactment assigning authority to do so (see Canada (Attorney General) vCourchene, 2010 MBCA 4 at paras 3-5; and British Aviation Insurance Group v Coseco Insurance Co, 2010 MBCA 56 at paras 2-3).

Section 7(1) of The Court of Appeal Act generally precludes orders that go beyond incidental matters that would dispose of or determinean appeal (see Klippenstein v Manitoba Ombudsman, 2015 MBCA 15 at para 34). Therefore, a motion to strike an appeal, which PWCseeks in this proceeding, would normally be decided by a panel of the Court, not a single chambers judge. [19] If jurisdiction exists for me to decide whether Mr. Ramdath requires leave to appeal the order approving the amendedproposal, that authority must come by virtue of the BIA.

While I am not satisfied that I can take the drastic step of determining whetherMr. Ramdath’s appeal should be struck or quashed and, thus, dispose of his appeal right, I am persuaded by virtue of the wording ofsection 193 of the BIA that I can decide the narrower threshold question of whether Mr. Ramdath has an appeal as of right or whether herequires leave to appeal in the circumstances (see Alternative Fuel Systems Inc v EDO (Canada) Limited, 1997 ABCA 273 at para 4). [20] Implicit in Parliament empowering a single judge of the Court of Appeal in

section 193(

e) of the BIA with the ability togrant leave to appeal is the necessarily incidental power to perform that mandate—to decide the preliminary point of whether leave toappeal is required in the first place given that there are some classes of cases under the BIA where leave to appeal is not required. Frommy review of the case law, it is not uncommon for single appellate judges sitting in chambers to exercise this sorting jurisdiction anddecide the nature of a party’s right of appeal under

section 193 of the BIA (e.g., see Farm Credit Canada v Gidda, 2014 BCCA 501; andCrate Marine Sales Limited (Re), 2016 ONCA 140). [21] Given that proceeding in this fashion would result in no prejudice to Mr. Ramdath (indeed, he seeks an answer to thenature of his appeal right), I am prepared to do so despite PWC’s objection to the notice of appeal as originally framed. [22] It appears that all that

Article 8 of the amended proposal does is continue PWC’s discretion to exercise powers underthe BIA as the proposal trustee that it could exercise previously as the interim receiver. The rights provided to PWC by

Article 8 are not“future rights” within the meaning of

section 193(

a) of the BIA because the methods by which the trustee proceeds, including theexercise of investigative powers, to fulfil the objectives and purposes of the BIA is “a matter of procedure” (Re Dominion Foundry CoLtd (1965), (MB CA), 52 DLR (2d) 79 at 84 (Man CA); see also Asselin c Daniel Girouard & Associés Inc, 2013QCCA 159 at paras 24-27). Moreover, because Mr. Ramdath has no economic interest in Litz Crane as a creditor or a shareholder, hehas no future rights to underpin an automatic right of appeal under

section 193(

a) of the BIA (see 2403177 Ontario Inc at para 25). Onmy review of the record, it would be mere speculation to say that

Article 8 of the amended proposal involves the future rights of Mr.Ramdath. [23] The authority relied on by Mr. Ramdath, Re Kern Agencies, is readily distinguishable as that was an appeal brought bythe trustee. The proposal trustee here, PWC, is quite content with the approval order and does not wish it to be set aside on appeal. Mr.Ramdath cannot ride on the coattails of a theoretical appeal right that PWC possesses but has no desire to exercise. To adopt the positionof Mr.

Ramdath would be tantamount to recognizing an automatic right of appeal of any order approving or refusing a proposal, even forindividuals without an economic interest as a creditor or shareholder, a position which is not consistent with the wording of

section 193of the BIA (because that

section creates two different rights of appeal). [24] I am satisfied that PWC’s objection to Mr. Ramdath’s notice of appeal is a valid one. Mr. Ramdath’s challenge to theorder approving

Article 8 of the amended proposal does not involve future rights within the meaning of

section 193(

a) of the BIA. Inorder to get the Court of Appeal to review the appropriateness of

Article 8 of the amended proposal, he requires permission to appeal viaan order granting him leave to appeal pursuant to

section 193(

e) of the BIA. [25] Having come to that decision, what is the appropriate remedy? [26] One approach taken by some courts when dealing with the situation of an invalid notice of appeal in relation to an orderthat can only be appealed with leave is to make an order quashing the appeal or declaring the notice of appeal to be a nullity because ofthe failure to seek leave to appeal (see Kapelus v UBC, 2002 BCCA 566 at para 10, aff’d 2003 BCCA 109); Wright v Sun Life AssuranceCompany of Canada, 2015 BCCA 312 at para 60, aff’d 2015 BCCA 528; and 2403177 Ontario Inc at para 71). [27] Another approach is to permit the notice of appeal to stand as a notice of application for leave to appeal and grant theappellant time to bring on his or her application for leave to appeal (see Freshwest Equities Trading Corp v Millard, 2015 BCCA 482 atpara 11; and Sangha v Bhamrah, 2017 BCCA 434 at para 12). [28] In my view, the latter approach is preferable given the wording of the BIA and the nature of the jurisdiction of a singlejudge sitting in chambers under section 7(1) of The Court of Appeal Act (see Badlands Land & Cattle Co v Walker Ranch Ltd (Trusteeof), 1996 CarswellSask 138 at para 3 (CA); and NsC Diesel Power Inc, Re, 1996 NSCA 2 at para 54). [29] Mr.

Ramdath’s notice of appeal does not comply with the requirements of r 31(2) of the Bankruptcy and InsolvencyGeneral Rules, CRC c 368 (which modify this Court’s normal civil rules governing the contents of a notice of appeal) as it lacks anapplication for leave to appeal.

Section 31 reads as follows in its entirety: Appeal to Court of Appeal 31(1) An appeal to a court of appeal referred to in subsection 183(2) of the Act must be made by filing a notice of appeal at the office of

the registrar of the court appealed from, within 10 days after the day of the order or decision appealed from, or within such further time as a judge of the court of appeal stipulates. 31

(2) If an appeal is brought under paragraph 193(

e) of the Act, the notice of appeal must include the application for leave to appeal. [ 30 ] By virtue of r 9 of the Court of Appeal Rules , I have the power to amend a notice of appeal “on such terms as may be considered just.” PWC’s objection to Mr. Ramdath’s notice of appeal can be addressed by an amendment of the initiating document, which will correct the error of leave to appeal not being sought while still preserving in full the right to seek leave to appeal under

section 193 (

e) of the BIA . In my view, because Mr. Ramdath does not have an automatic right of appeal of the approval order of the amended proposal of Litz Crane under

section 193(

a) of the BIA , it would be just to amend his notice of appeal so that it is in conformity with his right of appeal under

section 193(

e) of the BIA and the requirements of an initiating document for such an appeal under r 31(2) of the Bankruptcy and Insolvency General Rules . Decision [ 31 ] It is therefore ordered that Mr. Ramdath’s notice of appeal, as amended, will be permitted to stand as a notice of appeal pursuant to

section 193 (

e) of the BIA , as well as an application for leave to appeal. Mr. Ramdath will have seven days from today to file and serve the amended initiating document. I further direct that Mr. Ramdath’s application for leave to appeal the approval order of the amended proposal of Litz Crane be heard by a chambers judge within 30 days or such other time as the registrar or a judge may determine. [ 32 ] Costs of this motion will be reserved for the chambers judge hearing the leave application or, in the event that does not occur, I will accept written submissions if counsel cannot agree. JA