Extending a notice of intention to file a proposal beyond 6 months permitted in COVID-19 pandemic

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In trying to respond to the extraordinary circumstances of the Covid-19 pandemic, the court has had ample opportunity to utilize its inherent jurisdiction in the interests of justice. In Durham Sports Barn Inc. Bankruptcy Proposal 2020 ONSC 5938, the court used its inherent jurisdiction to extend the time that a debtor has to make a proposal to its creditors under s. 50.4(9) of the Bankruptcy and Insolvency Act (“BIA”).

Under s. 50.4(9), once a debtor files a Notice of Intention to File a Proposal (NOI), it must either file a proposal within 30 days or it can seek extensions to the time it has to file a proposal from the court of up to 45 days each. Cumulatively, the total period between the filing of the NOI and the filing of the debtor’s proposal cannot exceed six months.

In Durham Sport Barn Inc. the debtor had filed an NOI on January 3, 2020. Certain issues arose between the debtor and its landlord that needed to be resolved before the debtor could make a proposal to its creditors. Due to the Covid-19 pandemic, the motion involving the landlord wasn’t able to be heard by the court until early September 2020. At that motion the debtor applied for a further extension from the court for the time in which it could file its proposal (which conceivably would have been of retroactive application as the six month limit would have already elapsed).

The court held that even though s. 50.4(9) does not permit extensions beyond six months, requiring compliance with it would be overly strict and contrary to the objectives of the BIA. It wouldn’t be reasonable or desirable in the circumstances. The court ordered that the debtor had until October 31, 2020 to file its proposal (which was nearly ten months since the filing of the NOI). We are aware of at least one proposal proceeding where the court has followed Durham Sports Barn Inc., though unreported (Quebec Superior Court (Commercial Division) No. 500–11–058613–205 in the Proposal Proceedings of 168662 Canada Inc., order made on December 4, 2020).

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