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PROCEEDINGS - Enforcement of orders

Monday, August 16, 2021 @ 9:34 AM  

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Appeal by the Pelletiers from the decision of a chambers judge granting applications brought by trustees in a foreign bankruptcy proceeding to recognize an order absolute in bankruptcy against the husband and a freezing order against the wife issued in the Cayman Islands in Alberta. The appellants moved their assets from Alberta to the Cayman Islands and now resided there. An Alberta company subsequently obtained a judgment against the husband and his holding company. An interim order of bankruptcy was granted against the husband in the Cayman Islands. The trustees also obtained a freezing order in the Cayman court against the wife’s assets. The holding company was placed into bankruptcy in Alberta. A court of the Cayman Islands subsequently granted an order absolute with respect to the husband’s bankruptcy. The chambers judge granted an order to the trustees in the Cayman Islands for the recognition of the interim order. The decision was not appealed. The chambers judge determined that the recognition of the Cayman order absolute was a logical extension of his previous recognition of the Cayman proceeding as being the foreign main proceeding for the husband’s bankruptcy. In the absence of new evidence, he found it would be highly incongruent to refuse to recognize the order absolute after recognizing the interim bankruptcy orders only weeks or months earlier. The chambers judge also pointed out that recognizing the Cayman order absolute in respect of the husband’s bankruptcy did not constitute a decision to recognize any bankruptcy or fraudulent preference judgment that might be issued by the Cayman courts. The chambers judge found that recognition of the freezing order was supported by the Bankruptcy and Insolvency Act, the common law requirements for enforcing foreign non-monetary judgments, and the test for injunctive relief. The chambers judge held that recognition of the freezing order fell within the criteria in s. 272(1) of the Act because it was necessary to protect the debtor’s property and it was in the interest of creditors.

HELD: Appeal dismissed. The same statutory criteria of the Act that had applied to the chambers judge’s assessment of the application for recognition of the interim foreign bankruptcy orders also applied to the application for recognition of the foreign order absolute. The chambers judge thus made no error when he concluded that recognizing the order absolute was a logical extension of the court’s previous recognition order. There was no new evidence of any significance that would have justified a different result. The husband took no issue with the interim bankruptcy order, although given an opportunity to do so. The Act did not require that foreign legislation be consistent with the Canadian legislation. It was not contrary to public policy to recognize foreign laws different than Canadian law. The chambers judge did not err in exercising his discretion to recognize the freezing order. The chambers judge found the foreign representatives established a pattern of dealings that showed a real risk that the wife’s assets would be dissipated and that she was both willing and able to move her wealth to different parts of the world, using sophisticated financial structures. The Cayman Islands freezing order was prepared with an eye to assets not only within the Cayman Islands but also for the enforcement of assets of the appellants in Singapore and Canada. It was crafted in a way that responded to the realities of a bankruptcy that in many ways extended beyond the borders of the centre of the debtor’s main interests in the Cayman Islands. Recognizing the Cayman freezing order was the least burdensome or complicated way to ensure consistent actions were taken across jurisdictions, while at the same time promoting judicial comity. The Cayman freezing order arguably met this finality threshold, having been found by the chambers judge to be limited in scope and final in the Cayman Islands.

Pelletier v. Maclnnis, [2021] A.J. No. 963, Alberta Court of Appeal, J.D.B. McDonald, B.K. O'Ferrall and B.L. Veldhuis JJ.A., July 19, 2021. Digest No. TLD-August162021002