Upon the filing of an appeal of a bankruptcy order, that order is stayed pursuant to section 195 of the Bankruptcy and Insolvency Act (“BIA”). In Msi Spergel v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550, the Ontario Court of Appeal had to decide whether that stay suspends the limitation period applicable to a motion by a trustee to set aside a preferential payment by a bankrupt under s. 95 of the BIA. Strathy J.A., on behalf of a unanimous court, concluded that it did not.

On January 11, 2010, a bankruptcy order was obtained against one Dilollo and a trustee was appointed. On January 20, 2010, Dilollo filed an appeal from that bankruptcy order. On September 27, 2010, the Ontario Court of Appeal dismissed that appeal. On August 24, 2012, the Trustee brought a motion under s. 95 of the BIA for the Court to declare that a sum paid by Dilollo to the respondent Propco prior to the bankruptcy order constituted a preference. The trustee sought an order that Propco repay that amount to the Trustee.

All parties agreed that the limitation period to set aside a preference is the two-year period under the Limitations Act. The trustee conceded it was aware of the potential preference claim on January 11, 2010. The question was thus whether the limitation period was suspended during the eight month period pending disposition of the appeal. The trustee’s argument was that s. 195 of the BIA, which suspends a bankruptcy order pending an appeal, also suspends the limitation period for setting aside a preference order.

Strathy J.A. did not accept this argument. He agreed with the motion judge, as s. 195 of the BIA contains no limitation period and s. 20 of the Limitations Act (which concerns the extension, suspension or otherwise varying of limitations periods) was inapplicable. Strathy J.A. nonetheless pointed out that he disagreed with the motion judge’s conclusion that, in order for s. 20 of the Limitations Act to be inapplicable, there needs to be a limitation period in the other statute. Section 28 of the Class Proceedings Act is an example of a provision which suspends a limitation period even though it contains no limitations period.

However, nothing in the language of the statute suggested that s. 195 suspended a limitations period pending an appeal. Moreover, Strathy J.A. rejected an analogy to s. 69 of the BIA, which suspends civil remedies during a bankruptcy. He held:

[52]      … 69 of the BIA is not, as such, a provision that extends, suspends or varies a limitation period. It takes away creditors’ civil remedies and requires them to submit their claims through the bankruptcy process. The bar on commencing or continuing proceedings serves this end and preserves the integrity of the bankruptcy process. In most cases, the limitation period is of no further significance because creditors’ claims are dealt with in the bankruptcy. In the rare case, where the bankrupt is not discharged or the claim survives bankruptcy, the limitation period may resume running. It also continues to run against a creditor who seeks to recover a debt in proceedings unconnected to the bankruptcy: …

[53]      The stay under s. 195 of the BIA serves a very different purpose. It simply provides that on the appeal of any order or judgment made in the course of a bankruptcy, the status quo will be preserved, unless the court orders otherwise. This is not dissimilar to the automatic stay of a judgment for the payment of money, under rule 63.01 of the Rules of Civil Procedure. Its purpose is to ensure that no steps are taken that cannot be unwound if the appeal succeeds.

[54]      The Trustee also argued that the motion judge failed to appreciate that a trustee is incapable of acting where the very order from which it derives its authority is under appeal. It submits that during the stay under s. 195 a trustee is unable to hold a first meeting of creditors, hold a meeting with the inspectors, investigate potential claims and obtain legal opinions about such claims. This, said the Trustee, would put a trustee and creditors at risk, because the limitation period could slip away before the trustee had an opportunity to investigate potential claims or to take action. It argued that a trustee must have a full two years after its appointment to be able to investigate the situation and make decisions, with the advice of the creditors and the inspectors, before deciding whether to commence proceedings.

[55]      The motion judge addressed this issue at para. 17 of his reasons, referred to above at para. 23, where he noted that it was open to the Trustee to apply to lift the stay if it interfered with its ability to initiate the preference motion. As the motion judge also noted, the Trustee had ample time to commence the preference motion.

[56]      Accordingly, I regard s. 69 of the BIA, and the line of cases under it, to be entirely distinguishable from s. 195 and from the case before this court. Both provisions are also distinguishable from s. 20 of the Limitations Act, which is concerned with provisions in other acts for the extension, suspension or other variation of limitation periods contained in those other acts.

[57]      To conclude, this is not a case in which a statute other than the Limitations Act contains either a limitation period or an express extension, suspension or other variation of the limitation period. The Trustee relies, in effect, on an implicit or implied statutory extension of the limitation period. This court considered a somewhat similar argument in Sally Creek Environs Corporation (Re), 2013 ONCA 329. In that case, certain creditors of the bankrupt brought a motion for leave pursuant to s. 215 of the BIA to commence an action for negligence against the Office of the Superintendent of Bankruptcy and two of its employees. They alleged that the OSB was negligent in supervising the trustee in bankruptcy, with the result that the dividend paid to creditors was less than it would otherwise have been.

[58]      In a taxation hearing, the Registrar in Bankruptcy made findings of serious misconduct on the part of the trustee. It was acknowledged that the limitation period for an action against the OSB began to run when the Registrar’s decision was released on June 23, 2008, because the creditors were aware on that date of the material facts with respect to their cause of action.

[59]      In response to the motion for leave, the OSB argued that the motion was time-barred because it had been brought more than two years after the Registrar’s decision. The creditors responded, however, that the Registrar’s decision had been appealed, first to the Superior Court of Justice and then to this court. They argued that the appeal had the effect of “suspending” the limitation period. The motion judge found that all material facts were known by June 23, 2008 and the running of the limitation period was unaffected by the appeals.

[60]      This court affirmed the decision of the motion judge. It noted, at para. 11, that the appellants had provided no authority for the proposition that the limitation period, having begun to run, was tolled by an appeal or as a result of the outcome of the appeal.

[61]      The decision of this court in Sally Creek, like Guillemette and Joseph, is consistent with the purpose of the Limitations Act of promoting certainty and clarity in the law of limitation periods. That purpose is not accomplished by extending, suspending or varying a limitation period unless expressly authorized by statute. In my view, this is not such a case.