Dornan, Re, 2015 ABQB 647

• Jurisdiction: Alberta
• Court: Court of Queen's Bench of Alberta (Canada)
• Judge: Veit, J.
• Citation: 2015 ABQB 647,[2015] A.R. TBEd. OC.069
• Date: 06 August 2015
• Subject Matter: BANKRUPTCY,COURTS

Dornan, Re, [2015] A.R. TBEd. OC.069

MLB being edited

Currently being edited for A.R. - judgment temporarily in rough form.

Temp. Cite: [2015] A.R. TBEd. OC.069

In The Matter Of the Proposal of Frederick Stephen Dornan

Terry Dingwall, Iesi Inc. and Hyunsuk Chai (applicants/respondents) v. Frederick Stephen Dornan (defendant) and Bart Dornan and Mowbrey Gil LLP (appellants)

(B103 895178; 2015 ABQB 647)

Indexed As: Dornan, Re

Alberta Court of Queen's Bench

Judicial District of Edmonton

Veit, J.

October 14, 2015.

Summary:

Fred Dornan was an insolvent person who had made a proposal. Fred owned 50% of the shares of 910137 Alberta Ltd., a holding company which owned 100% of the shares of Norwood Foundry, an operating business. Fred's son, Bart Dornan, owned the other 50% of the shares of 910137. Twenty-six days after the Alberta Court of Appeal confirmed a $4.1 million judgment against Fred in favour of the respondent creditors, Fred sold his stake in 910137 to Bart for $325,000. Mowbrey Gil LLP was the accountant for 910137 and Norwood Foundry. Bart Dornan and Mowbrey Gil appealed an order of a Registrar, made pursuant to s. 52(b) of the Bankruptcy and Insolvency Act, giving to the respondent creditors the right to examine Bart Dornan and Mowbrey Gil and to require them to produce certain records (see [2015] A.R. TBEd. JL.012). The appellants contended that the respondents' application to the Registrar was actually brought under s. 38 of the Act, but that all parties, and the Registrar, agreed that the statutory pre-requisite to the operation of that section was missing. The appellants further contended that the Registrar's fashioning of a s. 52 remedy at the hearing deprived them of the opportunity to properly respond to the s. 52 issues as they did not know they would have to meet the Registrar's case. The creditors responded that even though s. 52 was not mentioned in their application, the appellants knew the case they had to meet which was to compel production of records and to submit to examination.

The Alberta Court of Queen's Bench allowed the appeal. The Registrar's decision to grant a remedy under s. 52 of the Act failed to give the appellants the opportunity of making full submissions on s. 52 issues. It could not be said that the failure to do so could not have made a difference to the outcome of the hearing before the Registrar. The issue of who should conduct any such examination (the creditors or the proposal trustee) was a real issue. That issue was highlighted because the creditors were given the right to examine an accountant. Although it seemed likely that an accountant could be examined under the provisions of s. 52, special provisions might be necessary to deal with professional ethical privacy issues. The appellants' inability to make full submissions with respect to these issues, in addition to the issues raised by the proposal trustee and the Registrar himself, required a new hearing which would provide that opportunity.

Bankruptcy - Topic 2486

Proposals - Practice - Investigation and examination - See paragraphs 1 to 38.

Courts - Topic 2546

Registrars and prothonotaries - Duties - To notify parties of procedural matters - See paragraphs 1 to 38.

Counsel:

Michael McCabe, Q.C. (Reynolds Mirth Richards & Farmer LLP), for the appellant, Bart Dornan;

Jeremy Hockin, Q.C. (Parlee McLaws LLP), for the appellant, Mowbrey Gil LLP;

Donald J. Wilson (DLA Piper (Canada) LLP), for the respondents;

Brian Summers (Dentons Canada LLP), for PricewaterhouseCoopers Inc. as Proposal Trustee.

This appeal was heard on August 6, 2015, before Veit, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following memorandum of decision on October 14, 2015.