Court of Appeal for Ontario issues guidance on appeals from bankruptcy orders and Mareva survival

In Aquino (Re)¹, the Court of Appeal for Ontario delivered a significant decision addressing several issues of importance to insolvency practitioners: the right to appeal a bankruptcy order without leave; the incidental authority of a CCAA monitor to seek a bankruptcy order against a judgment debtor; and—perhaps most notably—the continuation of a Mareva injunction notwithstanding a bankruptcy order. The decision provides a useful roadmap for creditors seeking to preserve the efficacy of pre-judgment asset-freezing orders in the bankruptcy context.

What you need to know

• Appeals from bankruptcy orders are as of right under section 193(c) of the BIA. The Court of Appeal confirmed that a bankruptcy order is appealable without leave where the property involved exceeds $10,000 in value, rejecting the respondent’s argument that a restrictive approach to section 193(c) mandates a leave to appeal requirement.
• Monitors empowered to pursue a claim have incidental authority to bring bankruptcy applications. Where a CCAA monitor has been authorized to bring litigation and obtains a judgment, the authority to take steps as a judgment creditor—including commencing a bankruptcy application—flows incidentally from that authorization without requiring further court approval.
• The test for “insolvent person” under the BIA is disjunctive. The Court of Appeal confirmed that satisfying either prong (a) (inability to meet obligations as they generally become due) or prong (b) (ceasing to pay current obligations in the ordinary course) of the BIA definition is sufficient to establish insolvency, regardless of whether prong (c) (balance sheet insolvency) is also satisfied.
• Mareva injunctions can continue notwithstanding a bankruptcy order. In what may be new law, the Court of Appeal interpreted the bankruptcy judge’s order continuing a Mareva injunction as effectively lifting the stay of proceedings under section 69.4 of the BIA to permit the monitor to continue enforcing the Mareva despite the bankruptcy, providing a potential roadmap for future creditors seeking to maintain asset-freezing relief in the bankruptcy context.

Background and context

This appeal arose from the long-running saga involving Bondfield Construction Company Limited, which obtained protection under the Companies’ Creditors Arrangement Act (CCAA) in April 2019. Ernst & Young Inc. (the Monitor) was appointed as monitor and subsequently commenced litigation against John Aquino, Bondfield’s former president and directing mind, alleging that he conducted a false invoicing scheme resulting in transfers of over $20 million from Bondfield to himself and his associates for services never provided. The Monitor brought a claim to recover these funds as “transfers at undervalue” under the Bankruptcy and Insolvency Act (BIA).

In companion litigation, KSV Restructuring Inc, in its capacity as trustee in bankruptcy of 1033803 Ontario Inc. (the FomaCon Trustee), brought an application to recover an additional $11 million from Mr. Aquino and others for a similar scheme involving FormaCon, a wholly owned subsidiary of Bondfield².

In 2020, the Monitor obtained a Mareva injunction against Mr. Aquino to prevent dissipation of his assets. In 2021, the Monitor obtained judgment against Mr. Aquino for over $21.8 million and the FormaCon Trustee obtained judgment against Mr. Aquino for over $11.3 million. Mr. Aquino’s appeals were dismissed by the Court of Appeal for Ontario (the Court) in 2022 and by the Supreme Court of Canada in 2024, with Justice Jamal describing the scheme as one in which Mr. Aquino and his accomplices “fraudulently [took] tens of millions of dollars from Bondfield and Forma-Con through a false invoicing scheme”.

In 2025, the Monitor applied for a bankruptcy order against Mr. Aquino and sought an order confirming that the Mareva injunction remained in effect. The FormaCon Trustee supported the Monitor’s applications. Justice Conway of the Ontario Superior Court of Justice (Commercial List) granted both orders, and Mr. Aquino appealed.

The Court’s analysis

Appeals from bankruptcy orders are as of right

At the request of the Court, the parties made submissions on whether the bankruptcy order was appealable as of right or only with leave. Mr. Aquino relied on Royal Bank v. Bodanis³, which held that a bankruptcy order was appealable as of right under section 193(c) of the BIA because “the property involved in the appeal exceeds in value ten thousand dollars”. The Monitor argued that Bodanis was incorrectly decided and had been implicitly overruled by the restrictive approach to section 193(c) endorsed in North House Foods Ltd. (Re)⁴.

Justice Zarnett, writing for the Court, rejected the Monitor’s argument. The restrictive approach requires that an appeal (i) be more than procedural in nature, (ii) involve the value of the debtor’s property, and (iii) result in a loss to the appellant. Applying these criteria, the Court held that the bankruptcy order plainly fit within section 193(c): it stripped Mr. Aquino of any capacity to dispose of or deal with his property and vested that property in the bankruptcy trustee, clearly resulting in a loss to him. The Court noted it would be “strange if an order placing someone in bankruptcy required leave to appeal, while orders about exiting bankruptcy are appealable as of right” under section 193(d).

Monitors have incidental authority to bring bankruptcy applications

Mr. Aquino argued that the Monitor lacked authority to bring the bankruptcy application because the order appointing the Monitor did not specifically enumerate the power to do so. Justice Conway rejected this argument at first instance, finding that authority granted to the Monitor to bring the TUV litigation and obtain judgment implicitly extended to taking steps as a judgment creditor, including commencing a bankruptcy application.

The Court affirmed this reasoning, holding that “whatever the source of the authority, the bankruptcy judge’s reasoning that authority to commence litigation and obtain a judgment implicitly extends to taking steps as a judgment creditor, including commencing a bankruptcy application in that capacity, is unassailable”. This clarifies that monitors need not seek separate court authorization for each step in the enforcement process where they have been authorized to pursue the underlying litigation.

The definition of “insolvent person” is disjunctive

Mr. Aquino argued he was a solvent person who should not have been subject to a bankruptcy order because he held shares in corporations owning valuable real estate (albeit subject to litigation with his father over their validity). The Court confirmed that the proper interpretation of the BIA’s definition of “insolvent person” can be satisfied by proving any of the conditions set out in the definition, which includes a person who: (a) is unable to meet obligations as they generally become due; (b) has ceased paying current obligations in the ordinary course; or (c) whose property is insufficient at fair valuation to pay all obligations.

Mr. Aquino was admittedly insolvent under prongs (a) and (b). The Court held this was determinative: “Given that he had no current ability to realize on corporate assets he may as well have been insolvent under prong (c). But that is beside the point in this case”. A bankruptcy order is granted where a debtor has committed an act of bankruptcy, and satisfaction of either prong (a) or (b) is sufficient regardless of whether the debtor’s assets might exceed liabilities.

Mareva injunctions can continue notwithstanding a bankruptcy order

Perhaps the most significant aspect of the decision is the Court’s treatment of the Mareva injunction. The General Mareva Order specifically stated that it remained in effect until varied by further order of the court, and it had not been varied. The bankruptcy judge continued the Mareva in effect after making the bankruptcy order.

Mr. Aquino argued that this created uncertainty given the bankruptcy, as section 69.3(1) of the BIA ordinarily prevents creditors from pursuing remedies against a debtor or their property upon bankruptcy. The Court rejected this argument, holding that although Justice Conway “did not put it in those terms, the bankruptcy judge effectively exercised [the] power” under section 69.4 of the BIA to declare that the stay did not apply to the Monitor’s enforcement of the Mareva.

The Court found “no reversible error in that exercise of discretion”, holding that it was “appropriate to prevent any purported dealings with or dissipation of assets by the appellant while the bankruptcy trustee was readying itself to seek out and take control of the assets legally vested in it”. The impact of the automatic stay of the bankruptcy order resulting from Mr. Aquino’s appeal “confirms the wisdom of keeping the restraints on dissipation of assets in place”.

Implications

The Aquino decision provides welcome clarity on several points of insolvency law. The confirmation that bankruptcy orders are appealable as of right under section 193(c) where the property exceeds $10,000 in value resolves any lingering uncertainty following North House. The recognition that monitors have incidental authority to pursue enforcement steps as judgment creditors will streamline the administration of CCAA proceedings and reduce the burden on supervising courts.

More significantly, the Court’s analysis of the Mareva injunction in the bankruptcy context may represent new law with important practical implications. By interpreting Justice Conway’s order as an implicit lifting of the stay under section 69.4 of the BIA, the Court has provided a roadmap for creditors seeking to maintain asset-freezing relief notwithstanding a bankruptcy order. This is particularly valuable where, as here, an appeal of the bankruptcy order results in an automatic stay that would otherwise create a window for asset dissipation. Practitioners may consider seeking express orders under section 69.4 when applying for bankruptcy orders in circumstances where pre-existing Mareva relief should be preserved, ensuring that asset-freezing protections remain in place throughout the bankruptcy process and any subsequent appeals.