9.15: Setting aside, varying and discharging judgments and orders
11.21: Service by electronic method

Case Summary

The Defendant condominium developer became insolvent and a Receiver was appointed to market the Defendant’s assets and property pursuant to a Receivership Order. One of the secured creditors, Alco Industrial Inc. (“Alco”), held a second mortgage on the condominium in the amount of $1,075,000. The Receiver was advised that the appropriate contact at Alco for communications with respect to the insolvency and related creditor information was the President of the company, and Alco provided the email address for the President. The Receiver served Alco by email with notices relating to the Receiver’s status, communications with respect to the receivership and notice of an Order Approving Sale. The President of Alco agreed that he had received the emails but had not opened them since he was unfamiliar with computers. The sale of the Defendant’s assets proceeded and Alco ultimately received a sum which was insufficient to pay out the mortgage. Alco sought leave to file a Statement of Claim against the Receiver for gross negligence or wilful misconduct in handling the sale of the Defendant’s assets and property.

Nielsen J. considered Rules 9.15 and Rule 11.21 with respect to service via email. Justice Nielsen noted that it was reasonable to infer that whoever provided the email address to the Receiver was not aware that the President of Alco would not access his email; and, it was also reasonable to infer that the President of Alco would not have an email address if he was “totally computer illiterate”. Justice Nielsen stated that Rule 11.21 requires that the recipient specifically provide an address, and that there was nothing in the material before the Court to suggest that the Rule’s requirements were not met. Justice Nielsen also noted that, if Alco wished to argue that the Order Approving Sale had been obtained without notice, Alco could have applied pursuant to Rule 9.15 to vary or discharge the Judgment or Order due to lack of notice. His Lordship observed that an Application under Rule 9.15 must be made within 20 days after the service of Order on the Applicant, or the date the Order first came to the Applicant’s attention, whichever occurred first. Justice Nielsen commented that Alco was well aware of the Application for the Order Approving Sale and took no timely steps to set it aside upon becoming aware of it. Justice Nielsen also noted, that electronic service is a reflection of the practical realties in the area of bankruptcy and insolvency. Justice Nielsen held that there was no factual basis to suggest that the Receiver was either grossly negligent or that it willfully misconducted itself in effecting service of the documents by email. Alco’s Application for leave to file the Statement of Claim against the Receiver was dismissed.

View CanLII Details