In Walchuk v. Houghton, the Ontario Court of Appeal held that the stay of all proceedings against a bankrupt pursuant to the Bankruptcy and Insolvency Act applies to a contempt motion brought by a judgment creditor where the contempt arises after the bankruptcy. In that case, a judgment debtor failed to bring specified documents to an examination in aid of execution. He was ordered to attend the examination prior to making an assignment in bankruptcy, but the examination was held after the assignment. Rather than bringing the documents specified to the examination, the debtor brought a Notice of Stay of Proceedings issued pursuant to s. 69 of the BIA. The motion judge found the debtor to be in contempt of court.
The Court of Appeal overturned the finding of contempt, holding that where the contempt occurred after the assignment into bankruptcy, the stay in s. 69.3 o the BIA applied to the contempt proceedings. The Court distinguished previous cases where the contempt occurred prior to the assignment into bankruptcy. The Court held that since the order to attend the examination was stayed prior to the examination, the examination as exactly the kind of proceedings that s. 69.3 of the BIA was intended to stay. Finally, the Court observed that the bankruptcy process is intended to be a single forum for creditors, so allowing the contempt process to unfold in the case would offend this principle.
This case is notable because it provides clarity to judgment creditors and debtors about the operation of the stay in bankruptcy, and reinforces the Court’s deference to the scheme in the BIA as a comprehensive code for creditors’ rights in bankruptcy.