Legal Blog

Limitations and Assigned Action

AssessNet Inc.  v. Taylor Leibow Inc., bankruptcy trustee 2023 Ont CA

Creditor sued debtors’ former bankruptcy trustee. It first needed to obtain a s. 38 order and an order granting leave to do so under s. 215 of the BIA. The trustee claimed that the action was statute barred. Section 12 of the Limitations Act deals with an assigned action (including an action under s. 38 which was assigned from the current trustee in bankruptcy) has to be brought within 2 years from earlier of the dates that the predecessor and the claimant first knew or ought to have known of the matters in issue. In this case, the fact that the creditor’s representative was an inspector of the bankrupt estate was irrelevant because an inspector owes a duty to act in the best interests of the estate, not in its own best interests and suing the then trustee was not in the best interests of the estate. Further, the claimant was not able to sue the trustee until it obtained the s. 38 and s. 215 orders and the action was commenced within two years of obtaining them.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.