Royal Bank of Canada v. Seamount Marine Ltd., 2019 FC 1043 (2019-08-02)
Facts: This was a motion by a trustee in bankruptcy seeking a stay of the claim of Stryder King Holdings Ltd. (“Stryder King”) which alleged it was a the holder of an equitable mortgage over the fishing vessel “Ocean Marauder” pursuant to a loan agreement with the bankrupt defendant dated 20 May 2015. The loan agreement saw $2 million advanced by Stryder King to the defendant for the purchase of the vessel and called for a formal marine mortgage to be registered should the defendant default on any of the agreement’s re-payment terms. Some interest payments were made but ultimately the defendant defaulted on the payment terms and filed an assignment in bankruptcy on 13 December 2017. No formal marine mortgage was registered. The Ocean Marauder was sold by judicial sale on 1 November 2017 with proceeds paid into Court in this within action. Stryder King then sought to enforce its equitable mortgage claim in the within action. The trustee in bankruptcy opposed Stryder King’s claim on the basis that it conclusively decided that the loan agreement was inadequate to meet the test for an equitable mortgage in its notice of disallowance dated 30 October 2017. No appeal of that decision was made within the 30 days after the notice was served or sent as Stryder King was permitted to do under s. 135(4) of the Bankruptcy and Insolvency Act. The trustee relied on the doctrines of issue estoppel, collateral attack, abuse of process and election in support of its arguments.
Decision: Motion granted.
Held: The Court found that decisions of a trustee in bankruptcy in allowing or disallowing a claim are both final and of a judicial nature subject only to appeal under s. 135(4) of the BIA. If the disallowance of a claim was not appealed within 30 days then the matter was res judicata. On this basis alone the Court found that Stryder King was precluded from pursuing its claim through this within proceeding.