Court of Appeal

CASE NO.                                     VOLUME                                            PAGE

Cite as: 3004876 Nova Scotia Ltd. v. Laserworks Computer Services Inc., 1998 NSCA  42

3004876  NOVA SCOTIA LIMITED                       LASERWORKS COMPUTER

SERVICES INC.

                                                         - and -

(Appellant)                                                                                      (Respondent)

C.A.  No. 141313                        Halifax, N.S.                           FREEMAN, J.A.

APPEAL HEARD:                             December 9, 1997

JUDGMENT DELIVERED:               February 13, 1998

SUBJECT:       The Bankruptcy And Insolvency Act

R.S.C. 1985, c. B-3; Proposals; Rejection of Votes; Improper                  Purpose; Class Voting; Substantial Injustice.

SUMMARY:    The Respondent made a proposal under the Bankruptcy and                                  Insolvency Act (the BIA).  The Appellant, a competitor but not              previously a creditor, acquired sufficient claims to defeat the proposal                    and voted them over the respondent=s objection at a meeting of                   creditors.  At the hearing into the objection the Registrar disallowed        the votes, finding they were exercised for an improper purpose, and                  restored the proposal.  His decision was upheld on an appeal to the                   Supreme Court of Nova Scotia, where it was also found the appellant                had breached requirements for class voting.  The appellant appealed                on the main grounds that the appellant=s motive was not proven and         in any event, not relevant.

ISSUE:             The chief issue was whether the court=s supervisory jurisdiction               should be invoked to interfere in a proposal to creditors when it                appeared the statutory process was being used for purposes not                contemplated by Parliament.

RESULT:         The appeal was dismissed with costs.   The court=s supervisory                    jurisdiction extended to proposals as well as petitions.  Courts are           empowered to remedy substantial injustice resulting not from motive              alone but from use of the provisions of the Act for an improper           purpose: tort-like behavior such as abuse of process or fraud in the                bankruptcy context.