So, You’re Going to Bankruptcy Court in Ontario: Some General Tips

As my bankruptcy/insolvency practice continues to advance at Mark Donald Law, I thought I’d take the opportunity on my new website on to discuss some of the things I’ve picked-up along the way while acting for both trustees and bankrupts in the insolvency litigation process.

The interesting thing about bankruptcy court in Toronto is the relatively sizable number of who come into bankruptcy court treating it like superior court, both in terms of procedure, and substantive law. With that in mind, I’ve come up with a brief list of things to keep in mind when bankruptcy court matters come calling:

1. Read the Bankruptcy & Insolvency Act and the Bankruptcy General Rules

The first thing to recognize is that since you aren’t in regular old Superior Court, the usual Rules of Civil Procedure often don’t apply. Its important to review both the BIA and the companion Bankruptcy General Rules (for the latter, see: http://laws-lois.justice.gc.ca/eng/regulations/C.R.C.,_c._368/ ) to make sure that you are on top of all the relevant requirements for filing, service and appeal timelines.

On a related note, if you find yourself doing bankruptcy work, go ahead and buy Houlden and Morawetz’s Annotated Bankruptcy and Insolvency Act. Just do it – trying to make sense of bankruptcy jurisprudence by searching basic research channels is, generally speaking, a bad idea.

2. Some bankruptcy courts within Ontario have their own practice directions and notices to the profession – contact the court

Moreover, these practice directions are often quite hard to find online, if they’re available at all. If it’s your first appearance, it’s a good idea to phone regional bankruptcy courts to obtain any recent practice directions/directions to the profession. This is particularly the case if you start doing work on behalf of trustees, as in my experience, trustee’s counsel are usually provided with these updates as a matter of course by the bankruptcy court, whereas counsel who are new to the bankruptcy game may get left out. The directions are important as they can contain helpful motion scheduling guidance, as well as filing requirements that may be particular to that specific regional court.

3. Check out websites for the larger licensed trustees – these can offer very useful precedents

Getting your hands on useful bankruptcy/insolvency precedents is difficult unless your firm practices in the area and can shell-out on specialized online services. Another resource for good precedents are the websites of some of the larger bankruptcy and insolvency trustees (See, for example: https://www.richter.ca/Folder/Insolvency-Cases). While many of the precedents available on these sites will be more complex than is required for standard bankruptcy proceedings, there are still useful templates that will provide a good starting point.

4. Understand the trustee-bankrupt-creditor relationship: don’t bring a knife to a gun fight

If you happen to be working in a matter where the trustee and bankrupt or creditor are at loggerheads, its important to recognize the way that the court views the relationship. Just like lawyers, trustees are Officers of the Court with a mandate to work in everyone’s interests. This means that the Court will look to them for guidance and will expect the highest level of disclosure. The flip side, is that trustees will generally get significant deference from the court.

In my experience, therefore, any party seeking to challenge a trustee’s conduct or decision-making has a tall order indeed. The case law impugning trustee conduct is sparse, and more often then not, if a bankruptcy court master/registrar does not agree with the trustee’s conduct, the usual recourse will be a reduction of the trustee’s fees at the bill taxation stage, as opposed to any reversal or alteration of the trustee’s decision under section 37 of the Bankruptcy and Insolvency Act.

If it so happens that your client does seek to impugn a trustee’s decision, be sure to be very well-briefed with demonstrable economic harm and/or clear negligence. If your client is committed to pursuing the trustee, it may be advisable to bring a companion complaint before the Office of the Superintendent of Bankruptcy – the regulator that oversees licensed trustees’ conduct. If you can find grounds for a complaint from the regulator, this may serve as valuable evidence that can be used in civil bankruptcy proceedings.

Mark Donald practices in the areas of corporate and civil legal disputes, including a practice in bankruptcy and insolvency litigation. If you have a legal dispute, you are most welcome to schedule a consultation with Mark. He can be reached at ph: 416-681-9615, or, mark@markdonaldlaw.com

 

Note: This article is a general survey of the law and expresses Mr. Donald’s personal views on the subject matter discussed. It is not a substitute for, nor does it constitute legal advice. Viewing this article does not create a lawyer-client relationship.

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Section 38 provides: “Where the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court and the court may confirm, reverse or modify the act or decision complained of and make such order in the premises as it thinks just”.