Kaiser (Bankrupt), Re,

JurisdictionOntario
JudgeCronk, J.A.
Neutral Citation2011 ONCA 713
Citation2011 ONCA 713,(2011), 285 O.A.C. 275 (CA),285 OAC 275,(2011), 285 OAC 275 (CA),285 O.A.C. 275
Date18 October 2011
CourtCourt of Appeal (Ontario)

Kaiser (Bankrupt), Re (2011), 285 O.A.C. 275 (CA)

MLB headnote and full text

Temp. Cite: [2011] O.A.C. TBEd. NO.030

In The Matter Of the Bankruptcy of Morris Kaiser of the City of Toronto in the Province of Ontario

Morris Kaiser, a Bankrupt (applicant) v. Soberman Inc., Trustee in Bankruptcy of the Estate of Morris Kaiser (respondent)

(M40462; 2011 ONCA 713)

Indexed As: Kaiser (Bankrupt), Re

Ontario Court of Appeal

Cronk, J.A.

November 14, 2011.

Summary:

Kaiser was adjudged bankrupt. Soberman Inc. was appointed Trustee of the bankrupt estate. A partner (Davis) in the law firm of Davis Moldaver LLP, acted for the Trustee in the Kaiser bankruptcy. For more than a decade, Davis had acted as counsel in more than 14 actions against Kaiser or his interests. None of the Trustee or the bankrupt's major creditors had objected to the representation of the Trustee by Davis. Kaiser moved for an order removing Davis Moldaver LLP as counsel of record for the Trustee. On the removal motion, Kaiser alleged that the law firm was in a conflict position.

The Ontario Superior Court, in a decision reported at [2011] O.T.C. Uned. 4877, dismissed the motion and awarded costs to the Trustee. Kaiser moved for leave to appeal. The Trustee argued that the motion, like the removal motion, was tactical in nature and designed to further delay the proper administration of Kaiser's bankrupt estate.

The Ontario Court of Appeal, per Cronk, J.A., dismissed the leave motion. The Trustee was entitled to its partial indemnity costs of the leave motion.

Bankruptcy - Topic 6882

Practice - Appeals - When available - [See all Bankruptcy - Topic 6888 ].

Bankruptcy - Topic 6888

Practice - Appeals - Leave to appeal - A bankrupt moved for leave to appeal from a motion judge's order dismissing his request to order the removal of a law firm as counsel of record for the Trustee in bankruptcy - For more than a decade, the law firm had acted as counsel in more than 14 actions against the bankrupt or his interests - The preliminary issue was whether leave to appeal was required - Under s. 193(e) of the Bankruptcy and Insolvency Act, leave of a judge of the Court of Appeal was required to appeal to the court "in any other case" - It was the Trustee's position that s. 193(e) was engaged - The Ontario Court of Appeal, per Cronk, J.A., was not persuaded that the proposed appeal fell within any of the appeal as of right categories set out in s. 193 - Nor did the bankrupt urge a contrary conclusion - The court therefore proceeded on the basis that leave to appeal to the court was required under s. 193(e) - See paragraphs 10 to 16.

Bankruptcy - Topic 6888

Practice - Appeals - Leave to appeal - Under s. 193(e) of the Bankruptcy and Insolvency Act (BIA), leave of a judge of the Court of Appeal was required to appeal to the court "in any other case" - The Ontario Court of Appeal, per Cronk, J.A., stated that "[t]he jurisprudence of this court indicates that a flexible approach should be applied to the factors to be considered on a motion for leave under s. 193(e) of the BIA" - The factors to consider included: "(1) whether the judgment at issue appears to be contrary to law, amounts to an abuse of judicial power or involves an obvious error, causing prejudice for which there is no remedy; (2) whether the point of the appeal is of significance to the practice or to the action itself; (3) whether the appeal is prima facie meritorious or frivolous; and (4) whether the appeal will unduly prejudice the progress of the action ... The relevant factors to consider will vary according to the circumstances of each case." - See paragraph 17.

Bankruptcy - Topic 6888

Practice - Appeals - Leave to appeal - A bankrupt moved for leave to appeal from a motion judge's order dismissing his request to order the removal of a law firm as counsel of record for the Trustee in bankruptcy - The Ontario Court of Appeal, per Cronk, J.A., determined that leave to appeal to the court was required under s. 193(e) of the Bankruptcy and Insolvency Act - One factor that was considered was whether the proposed appeal was prima facie meritorious - "[T]he court's inquiry is informed by the principle of deference owed to a commercial court judge. Absent demonstrable error, an appeal court will not interfere. ... In addition, where the order sought to be appealed from is discretionary, as in this case, this court has recognized that leave will not be granted unless the matter is of importance either to the administration of justice generally or to the respective rights of the parties to the litigation" - Given the nature of the order sought to be appealed, the leave motion was also informed by the principles that governed the court-ordered removal of a litigant's counsel of record - See paragraphs 18 to 20.

Barristers and Solicitors - Topic 1601.3

Relationship with client - Conflict of interest - Considerations - Removal litigation - A motion judge refused to order the removal of a law firm as counsel of record for a Trustee in bankruptcy, noting that "A litigant should not be deprived of counsel of its choice without good cause" - The Ontario Court of Appeal, per Cronk, J.A., in considering the motion for leave to appeal the order, stated that "Canadian courts exercise the highest level of restraint before interfering with a party's choice of counsel. Where such discretionary, equitable relief is invoked, there must be a possibility of real mischief should a removal order be refused. The test is whether a fair-minded and reasonably informed member of the public would conclude that counsel's removal is necessary for the proper administration of justice" - See paragraph 21.

Barristers and Solicitors - Topic 1601.3

Relationship with client - Conflict of interest - Considerations - Removal litigation - A bankrupt moved for leave to appeal from a motion judge's order dismissing his request to order the removal of a law firm as counsel of record for the Trustee in bankruptcy - For more than a decade, the law firm had acted as counsel in more than 14 actions against the bankrupt or his interests - The Ontario Court of Appeal, per Cronk, J.A., concluded that the bankrupt had failed to satisfy the test for leave under s. 193(e) of the Bankruptcy and Insolvency Act - The bankrupt had a demonstrated history of initiating proceedings, including removal motions against the law firm, for purely strategic reasons - Also, there was considerable evidence before the motion judge to support his finding that the bankrupt had declined to cooperate with the Trustee in locating assets belonging to the bankrupt estate - The removal motion and, arguably, the leave motion, were merely the latest steps taken by the bankrupt to delay and impede the administration of his bankrupt estate, and undercut the bankrupt's contention that his proposed appeal was meritorious or of significance either to the parties or to commercial bankruptcy practice in general - See paragraphs 22 to 36.

Barristers and Solicitors - Topic 1601.3

Relationship with client - Conflict of interest - Considerations - Removal litigation - A bankrupt moved for leave to appeal from a motion judge's order dismissing his request to order the removal of Davis Moldaver LLP (Davis) as counsel for the Trustee in bankruptcy on the basis that the law firm was in a conflict position - For more than a decade, the law firm had acted as counsel in more than 14 actions against the bankrupt or his interests - None of the Trustee or the bankrupt's major creditors had objected to the representation of the Trustee by Davis - The motion judge rejected the bankrupt's claims of any impropriety by Davis and, in particular, in respect of a waiver document prepared by the involved counsel, pursuant to which the Trustee purported to waive the bankrupt's solicitor-client privilege - The Ontario Court of Appeal, per Cronk, J.A., dismissed the leave motion - The merits of the identified grounds of appeal were "highly dubious" - "I see no error in the motion judge's reasoning on this issue or in the proposition that it is the trustee in bankruptcy, as principal, rather than his or her solicitor, as agent, who owes direct legal duties to the creditors of a bankrupt or the bankrupt" - Nor did the court read the Bankruptcy and Insolvency General Rules as undermining that conclusion - "Perhaps more importantly", on the motion judge's findings, neither the counsel involved nor the law firm breached any obligations to the bankrupt - See paragraphs 36 to 57.

Barristers and Solicitors - Topic 1603

Relationship with client - Conflict of interest - Acting for receiver or trustee - [See all Barristers and Solicitors - Topic 1601.3 ].

Cases Noticed:

SVCM Capital Ltd. v. Fiber Connections Inc. (2005), 198 O.A.C. 27; 10 C.B.R.(5th) 201 (C.A.), refd to. [para. 17].

GMAC Commercial Credit Corp. - Canada v. TCT Logistics Inc. et al. (2003), 185 O.A.C. 138 (C.A.), refd to. [para. 17].

Ravelston Corp., Re, [2007] O.A.C. Uned. 156; 31 C.B.R.(5th) 233; 2007 ONCA 268, refd to. [para. 18].

Zurich Indemnity Co. of Canada v. Reemark Rideau Developments Ltd. (1992), 18 B.C.A.C. 221; 31 W.A.C. 221; 22 C.B.R.(3d) 291; 84 B.C.L.R.(2d) 283 (C.A.), refd to. [para. 19].

MacDonald Estate v. Martin and Rossmere Holdings (1970) Ltd., [1990] 3 S.C.R. 1235; 121 N.R. 1; 70 Man.R.(2d) 241, refd to. [para. 21].

Zawadski et al. v. Matthews Group Ltd. et al. (1998), 50 O.T.C. 392; 18 C.P.C. (4th) 373 (Gen. Div.), refd to. [para. 21].

Colville-Reeves v. Canadian Home Publishers Inc. et al., [2002] O.T.C. 124; 111 A.C.W.S. (3d) 1202 (Sup. Ct.), refd to. [para. 21].

Lautec Properties Inc. v. Barzel Windsor (1984) Inc. et al., [2002] O.T.C. 672; 26 C.P.C. (5th) 131 (Sup. Ct.), refd to. [para. 21].

Engles (Bankrupt), Re, [2002] O.T.C. 525; 60 O.R.(3d) 572; 35 C.B.R.(4th) 77 (Sup. Ct.), affd. (2004), 181 O.A.C. 94; 69 O.R.(3d) 183; 48 C.B.R.(4th) 68 (C.A.), refd to. [para. 42].

Engles v. Killen (Richard) & Associates Ltd. - see Engles (Bankrupt), Re.

Dugas (Bankrupt), Re (2003), 261 N.B.R.(2d) 315; 685 A.P.R. 315; 41 C.B.R.(4th) 168; 2003 NBQB 197, refd to. [para. 42].

Turbo Logistics Canada Inc. et al. v. HSBC Bank Canada, [2009] O.T.C. Uned. O08; 2009 CanLII 55292 (Sup. Ct.), consd. [para. 43].

Manufacturers Life Insurance Co. v. Juno Developments (North Bay) Ltd., [2011] O.T.C. Uned. 3945; 79 C.B.R.(5th) 229; 2011 ONSC 3945, refd to. [para. 43].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 193 [para. 11].

Counsel:

Melvyn L. Solmon and Cameron J. Wetmore, for the applicant;

Neil Rabinovitch and Milton A. Davis, for the respondent.

This motion for leave to appeal was heard on October 18, 2011, before Cronk, J.A., of the Ontario Court of Appeal, in Chambers, who delivered the following endorsement on November 14, 2011.

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14 practice notes
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    ...Co. v. McKercher LLP, 2013 SCC 39 at para. 65. [14] Konjevic v. Uber Technologies Inc., 2016 ONSC 5832 at para. 22. [15] Re Kaiser, 2011 ONCA 713; Karas v. Her Majesty the Queen, 2011 ONSC 5181 (Master); Ontario Realty Corporation v. P. Gabriele & Sons Ltd., [2006] O.J. No. 4497 at para......
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    ...informed member of the public would conclude that counsel’s removal is necessary for the proper administration of justice: Kaiser (Re), 2011 ONCA 713, 84 C.B.R. (5th) 269, at para. 21. This principle was applied by the Court of Appeal in Maftoun v. Banitaba, 2012 ONCA 786, at para. 4, and i......
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    ...delay the proper administration of Kaiser's bankrupt estate. The Ontario Court of Appeal, per Cronk, J.A., in a decision reported at 285 O.A.C. 275, dismissed the leave motion. The Trustee was entitled to its partial indemnity costs of the leave The Trustee moved for an order compelling Kai......
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13 cases
  • Bose v. Bangiya Parishad Toronto, 2018 ONSC 7639
    • Canada
    • Superior Court of Justice of Ontario (Canada)
    • December 20, 2018
    ...Co. v. McKercher LLP, 2013 SCC 39 at para. 65. [14] Konjevic v. Uber Technologies Inc., 2016 ONSC 5832 at para. 22. [15] Re Kaiser, 2011 ONCA 713; Karas v. Her Majesty the Queen, 2011 ONSC 5181 (Master); Ontario Realty Corporation v. P. Gabriele & Sons Ltd., [2006] O.J. No. 4497 at para......
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    • Canada
    • Manitoba Court of Queen's Bench of Manitoba (Canada)
    • January 9, 2015
    ...a motion by a bankrupt to remove counsel for the trustee who was also counsel for the major creditor. Leave to appeal was refused (2011 ONCA 713, 84 C.B.R.(5th) 269). [33] The only case from Manitoba which was cited to me was a decision of Krindle, J., in Barkman-Landmark Homes Inc. (Bankru......
  • Geraldine Sanson v. John B. Paterson, 2020 ONSC 7773
    • Canada
    • Superior Court of Justice of Ontario (Canada)
    • December 14, 2020
    ...informed member of the public would conclude that counsel’s removal is necessary for the proper administration of justice: Kaiser (Re), 2011 ONCA 713, 84 C.B.R. (5th) 269, at para. 21. This principle was applied by the Court of Appeal in Maftoun v. Banitaba, 2012 ONCA 786, at para. 4, and i......
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    • Canada
    • Ontario Court of Appeal (Ontario)
    • June 27, 2012
    ...delay the proper administration of Kaiser's bankrupt estate. The Ontario Court of Appeal, per Cronk, J.A., in a decision reported at 285 O.A.C. 275, dismissed the leave motion. The Trustee was entitled to its partial indemnity costs of the leave The Trustee moved for an order compelling Kai......
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