Mainville, Gagné, Beaupré

Application for leave to appeal and application de bene esse to extend the time limit to appeal. Granted. Appeal from a Superior Court judgment authorizing additional extraneous evidence. Allowed.

The creditor obtained a judgment from a North Carolina court condemning the debtor and his company to pay $840,860. The debtor then made a consumer proposal under the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3). The Superior Court recognized the North Carolina judgment and authorized its enforcement. The creditor argues that, in accordance with the release exception in section 178(1)(e) of the Act, the debtor cannot be released from the US judgment debt. The Superior Court authorized additional extraneous evidence to be adduced to characterize the foreign judgment debt under section 178(1)(e).

Sections 31(1) and 31(2) of the Bankruptcy and Insolvency General Rules (C.R.C. 1978, c. 368) state that an appeal or application for leave to appeal is made within 10 days after the day of the trial order or decision appealed from. This period is not computed as of the date of the notice of judgment, in accordance with article 360 of the Code of Civil Procedure (CQLR, c. C-25.01), but instead as of the date of the judgment. When the prescribed provincial appeal procedure conflicts with the federal one, the latter prevails. The fundamental criterion to determine whether the time limit should be extended is the interest of justice, and several criteria must be considered to determine this interest, which are met in this case.

A judgment that recognizes and characterizes a debt, either explicitly in its reasons and conclusions or implicitly in light of the pleadings and the evidence leading to the judgment, has authority of res judicata provided identity of parties, cause, and object is established. Thus, a judgment recognizing that a debt explicitly or implicitly arises from fraud or misrepresentations binds the court seized with characterizing this same debt under section 178(1)(e) of the Act. To decide otherwise would amount to questioning the principle of res judicata.

However, when the judgment recognizing the debt does not explicitly or implicitly deal with the fraudulent nature of the debt, it is difficult to see what could justify authorizing a party to reopen the debate in this regard when it should have been done during the trial that resulted in the judgment debt. Thus, the court that characterizes the debt under section 178(1)(e) must refuse to authorize extraneous evidence in addition to what was adduced in support of the judgment debt when fraud was not alleged. Barring rare cases, when there is a judgment debt, only the judgment, the pleadings, and the evidence that resulted in the judgment are relevant to the court’s characterization under section 178(1)(e).

In this case, the trial judgment should be reversed because the only evidence admissible for the purpose of characterization was the North Carolina judgment and the material adduced in support of that judgment.

Text of the decision: http://citoyens.soquij.qc.ca