No Standing For Equity Holders To Challenge Creditor Claims

In YG Limited Partnership and YSL Residences Inc. (Re), 2023 ONCA 505, the Court of Appeal for Ontario recently upheld a decision of Justice Osborne of the Commercial List that the limited partners of a debtor do not have standing to challenge a claim advanced by a creditor against the debtor in a Bankruptcy and Insolvency Act ("BIA") proposal process.

This article summarizes the Court of Appeal's decision, including its determination that general principles of standing (including Rule 13.01(1) of the Rules of Civil Procedure) do not apply to BIA claim appeals and that the applicable BIA provisions (sections 37 and 135 of the BIA) do not give standing to limited partners who have an indirect rather than a direct legal interest even though acceptance of the creditors' claim would reduce the recovery to the limited partners under the BIA proposal by $1.2 million. The article also goes on to posit that a similar outcome would be likely in a claim appeal in Companies'