Hertz v. 1593658 Ontario Inc. (Bankrupt), (2011) 410 Sask.R. 1 (QB)

• Judge: Schwann, J.
• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: October 13, 2011
• Jurisdiction: Saskatchewan
• Citations: (2011), 410 Sask.R. 1 (QB);2011 SKQB 379

Hertz v. 1593658 Ont. (2011), 410 Sask.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2013] Sask.R. TBEd. FE.059

In The Matter Of the Bankruptcy of 1593658 Ontario Inc., o/a Bushey Enterprises of the Town of Ignace in the Province of Ontario

Vern Hertz (applicant) v. 1593658 Ontario Inc. o/a Bushey Enterprises, in Bankruptcy and Burlingham Associates Inc., Trustee in Bankruptcy (respondents)

(16443; 23-1102027; 2011 SKQB 379)

Indexed As: Hertz v. 1593658 Ontario Inc. (Bankrupt)

Saskatchewan Court of Queen's Bench

Judicial Centre of Saskatoon

Schwann, J.

October 13, 2011.

Summary:

Hertz rented a building and tools from Bushey Enterprises. Bushey went bankrupt. Hertz filed a property claim (i.e., a claim for tools, inventory, etc.). The trustee disallowed the property claim. Hertz appealed.

The Saskatchewan Court of Queen's Bench allowed the appeal.

Editor's Note: This case is being reported at this time as it was only recently drawn to our attention by a reader.

Bankruptcy - Topic 3626.1

Creditors - General - Claims - General - Property in possession of bankrupt - Hertz rented a building and tools from Bushey Enterprises - Bushey went bankrupt - Hertz filed a property claim (i.e., a claim for tools, inventory, etc.) - The trustee disallowed the property claim - Hertz appealed - The Saskatchewan Court of Queen's Bench allowed the appeal - The trustee committed errors of law and was unreasonable in his assessment of the facts - The disallowance was set aside - Rather than remitting the matter to the trustee, the court determined Hertz's claim on the basis of the record - See paragraphs 52 to 61.

Bankruptcy - Topic 3638

Creditors - General - Claims - General - Set-off - Hertz rented a building and tools from Bushey Enterprises - Bushey went bankrupt - Hertz filed a property claim (i.e., a claim for tools, inventory, etc.) - The trustee asserted a claim for unpaid rent which the trustee contended could be set-off against the value of property belonging to Hertz - The Saskatchewan Court of Queen's Bench held that a legal set-off did not arise in these circumstances because there was no mutual cross obligation - Hertz sought the return of property and the trustee claimed to be owed unpaid rent - Hertz's claim was not one for a debt - An equitable set-off did not arise because the trustee had not taken any action for recovery of debt due to the bankrupt as required by s. 97(3) of the Bankruptcy and Insolvency Act - See paragraphs 39 to 51.

Bankruptcy - Topic 6885.1

Practice - Appeals - From trustee's decision (incl. nature of, standard of review, etc.) - Hertz rented a building and tools from Bushey Enterprises - Bushey went bankrupt - Bushey's bankruptcy trustee disallowed Hertz's property claim (i.e., a claim for tools, inventory, etc.) - Hertz appealed (Bankruptcy and Insolvency Act, s. 81) - An issue arose as to whether an appeal under s. 81 was an appeal on the record or an appeal de novo - The determination of this issue dictated whether affidavits filed in support of the trustee's position could properly be considered - The Saskatchewan Court of Queen's Bench held that an appeal under s. 81 was an appeal on the record alone - Thus the two affidavits which were prepared and filed after the trustee's decision were not admissible on the appeal - See paragraphs 34 to 37.

Bankruptcy - Topic 6885.1

Practice - Appeals - From trustee's decision (incl. nature of, standard of review, etc.) - Hertz rented a building and tools from Bushey Enterprises - Bushey went bankrupt - Bushey's bankruptcy trustee disallowed Hertz's property claim (i.e., a claim for tools, inventory, etc.) - Hertz appealed (Bankruptcy and Insolvency Act, s. 81) - The Saskatchewan Court of Queen's Bench stated that "Where a Trustee's decision involves a question of law or the interpretation of a statute, the standard of review is correctness. On the other hand, where the matter under consideration is factual in nature or involves a discretionary element, the standard of review is reasonableness" - See paragraph 38.

Bankruptcy - Topic 6889

Practice - Appeals - Time for (incl. extension of) - Hertz rented a building and tools from Bushey Enterprises - Bushey went bankrupt - On February 1, 2011, Bushey's bankruptcy trustee disallowed Hertz's property claim (i.e., a claim for tools, inventory, etc.) - On March 7, 2011, Hertz appealed - An issue arose as to whether the appeal was barred by the 15 day limitation period (Bankruptcy and Insolvency Act, s. 81(2)) - Hertz claimed that he should not lose his right of appeal because of procedural irregularities (i.e., the trustee mistakenly treated his property claim as if it were a claim under s. 135 which concerned proofs of claims and security instead of a third party property claim under s. 81) - The Saskatchewan Court of Queen's Bench held that this was an appropriate case to extend the time to appeal, or if it was wrong on that point, to invoke the curative provisions of s. 187(11) to permit the appeal to proceed - See paragraphs 31 to 33.

Bankruptcy - Topic 6900

Practice - Appeals - Evidence - [See first Bankruptcy - Topic 6885.1 ].

Cases Noticed:

Patrick Estate (Bankrupt), Re (1999), 181 Sask.R. 165; 9 C.B.R.(4th) 64 (Q.B. Bktcy. Reg.), refd to. [para. 32].

Sran v. Sands & Associates, [2010] B.C.T.C. Uned. 937; 69 C.B.R.(5th) 99; 2010 BCSC 937, folld. [para. 35].

Eskasoni Fisheries Ltd. (Bankrupt), Re (2000), 187 N.S.R.(2d) 363; 585 A.P.R. 363; 16 C.B.R.(4th) 173 (S.C. Bktcy. Registrar), refd to. [para. 38].

Lacey (J.J.) Insurance Ltd. (Bankrupt), Re (2008), 274 Nfld. & P.E.I.R. 314; 837 A.P.R. 314; 41 C.B.R.(5th) 137; 2008 NLTD 9, refd to. [para. 38].

Collins (Keith G.) Ltd. v. McKenzie (2005), 192 Man.R.(2d) 191; 340 W.A.C. 191; 11 C.B.R.(5th) 116; 2005 MBCA 35, refd to. [para. 49].

Melnitzer, Re (1991), 9 C.B.R.(3d) 30; 87 D.L.R.(4th) 696 (Ont. Gen. Div. Bktcy.), refd to. [para. 52].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 81 [para. 28]; sect. 81(2) [para. 32]; sect. 97(3) [para. 47]; sect. 187(11) [para. 32].

Authors and Works Noticed:

Houlden, Lloyd W., Morawetz, Geoffrey B., and Sarra, Janis P., The 2010 Annotated Bankruptcy and Insolvency Act (2010), p. 543 [para. 48].

Counsel:

Anne Hardy, for the Trustee;

Mike Russell, for the applicant.

This appeal was heard before Schwann, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Saskatoon, who delivered the following judgment on October 13, 2011.