WorkGroup Designs Inc., Re, (2008) 234 O.A.C. 166 (CA)

• Jurisdiction: Ontario
• Court: Court of Appeal (Ontario)
• Judge: O'Connor, A.C.J.O., Rouleau and Watt, JJ.A.
• Citation: (2008), 234 O.A.C. 166 (CA),2008 ONCA 214
• Date: 31 March 2008

WorkGroup Designs Inc., Re (2008), 234 O.A.C. 166 (CA)

MLB headnote and full text

Temp. Cite: [2008] O.A.C. TBEd. MR.090

In The Matter Of the Proposal of WorkGroup Designs Inc., carrying on business and having its head office in the City of Vaughan in the Province of Ontario

(C47607; 2008 ONCA 214)

Indexed As: WorkGroup Designs Inc., Re

Ontario Court of Appeal

O'Connor, A.C.J.O., Rouleau and Watt, JJ.A.

March 31, 2008.

Summary:

WorkGroup filed a proposal under the Bankruptcy and Insolvency Act. The proposal trustee rejected a bank's status as a secured creditor, because all of WorkGroup's assets were encumbered by the priority claims of the Canada Revenue Agency. Accordingly, the bank was treated as a non-secured creditor for the purposes of the proposal. The bank appealed. The Deputy Registrar in Bankruptcy allowed the appeal and restored the bank's status as a secured creditor. WorkGroup appealed.

The Ontario Superior Court, in a judgment reported [2007] O.T.C. 1750, allowed the appeal and restored the proposal trustee's decision on the ground that s. 135 of the Act authorized the proposal trustee to determine the value of the bank's secured claim under the proposal and to disallow the claim to security. The bank appealed.

The Ontario Court of Appeal allowed the appeal. Section 50.1, which specifically dealt with the value of a secured creditor's claim for voting in respect of a proposal, prevailed over s. 135, which was a general provision. Accordingly, the proposal trustee was not entitled to disallow the bank's secured claim for the purpose of voting on the proposal.

Bankruptcy - Topic 2285

Proposals - Voting - Value of creditors' claims - WorkGroup filed a proposal under the Bankruptcy and Insolvency Act - The proposal trustee, relying on s. 135 of the Act, rejected a bank's status as a secured creditor, because all of WorkGroup's assets were encumbered by the priority claims of the Canada Revenue Agency - Accordingly, the bank was treated as a non-secured creditor for the purposes of voting on the proposal - The Ontario Court of Appeal held that the proposal trustee was not entitled to disallow the bank's secured claim for the purpose of voting on the proposal - Section 50.1, which applied specifically to this fact situation, provided the procedure for determining the value of the bank's secured claim for voting purposes - Section 50.1 prevailed over the general provisions of s. 135, which was concerned with the allowance or disallowance, in whole or in part, of the security itself for the purposes of distribution of dividends from a bankrupt's estate - Accordingly, applying s. 51.1, the bank was entitled to vote its entire $125,000 secured claim in voting for or against the proposal.

Cases Noticed:

McEwen (Bankrupt), Re (1997), 193 N.B.R.(2d) 31; 493 A.P.R. 31; 50 C.B.R.(3d) 111 (C.A.), refd to. [para. 15].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 50.1 [para. 8]; sect. 135 [para. 10].

Authors and Works Noticed:

Houlden, Lloyd W., Morawetz, Geoffrey B., and Sarra, Janis P., The 2008 Annotated Bankruptcy and Insolvency Act (2007), p. 240 [para. 14].

Counsel:

Natalie Marconi, for the appellant, Royal Bank of Canada;

Geoff R. Hall, for the respondent, WorkGroup Designs Inc.

This appeal was heard on February 22, 2008, before O'Connor, A.C.J.O., Rouleau and Watt, JJ.A., of the Ontario Court of Appeal.

On March 31, 2008, Rouleau, J.A., released the following judgment for the Court of Appeal.