Three municipalities appealed an Order made in a bankruptcy and insolvency Action, arguing that they should have been granted priority for tax arrears when the insolvent corporation’s assets were distributed. Pursuant to that Order, the Receiver had distributed the insolvent corporation’s funds to its secured creditors. The Appellants had not advanced claims as secured creditors within the receivership or bankruptcy, and therefore did not receive funds.

The Respondents (the Receiver and a secured creditor of the insolvent corporation) argued that (1) the Appeal was moot because the insolvent corporation’s funds had already been distributed, and (2) that the Appeal was an abuse of process, because the Appellants had failed to attend the hearing at which the distribution Order was made, despite having been given notice (and in fact had been directed to the proposed paragraph included in the Order that they sought to Appeal).

With respect to mootness, the Respondents acknowledged that they should have attended and advanced their position at the hearing, but they argued that the Appeal was “a live controversy and of public importance” which should be heard. The Court of Appeal held that the mere fact that the insolvent corporation’s assets had been distributed did not render the Appeal moot.

The Court then considered whether the Appeal constituted an abuse of process, and should therefore be struck pursuant to Rule 14.74(f). It noted, quoting from the Supreme Court of Canada in Toronto (City) v CUPE, Local 799, 2003 SCC 63, that the doctrine of abuse of process engages the Courts’ inherent power to “prevent the misuse of its procedure, in a way that would be manifestly unfair … or would … bring the administration of justice into disrepute.”

The Court decided that the doctrine of res judicata did not apply because the parties were not attempting to re-litigate an issue which was the subject of a final decision. While the Order was “final”, it contained a right of appeal. Additionally, the Court determined that the Appellants were not estopped from bringing their Appeal, despite having previously advised the Receiver that they would not be making secured claims within the receivership. Although the Court was “troubled” by the Appellants’ failure to attend at the initial hearing and found their explanation for not attending “unsatisfactory”, it held that the Appeal was not an abuse of process and should not be struck.

The Court of Appeal went on to consider the merits of the Appeal, ultimately determining that the Appeal should be dismissed.