Background
Avida 2015 Inc. filed for bankruptcy. The trustee identified a potential cause of action against Bank of Montreal, a creditor of the estate, and sought to auction it. In September 2025, the bankruptcy judge authorized the auction but permitted BMO to credit-bid—using its secured debt as currency rather than cash—for the asset, even though the asset did not attach to BMO’s security interest. David Reale appealed, arguing that BMO should be required to bid in cash.
In June 2026, a Court of Appeal panel granted leave to appeal, observing that the credit-bidding question was of importance to bankruptcy proceedings generally and that the appeal appeared prima facie meritorious. The court then convened a case management conference to establish procedures for the appeal and address any intervention requests.
The Court’s Holding
This is a case management order that establishes the procedural framework for hearing the substantive appeal—it does not decide the merits of the credit-bidding question. Justice Zarnett directed that the appellant must perfect the appeal by July 15, 2026, and BMO must file its materials by July 31, 2026. Parties may file fresh materials or rely on their leave panel submissions.
The court established a structured timeline for intervention motions, with proposed interveners submitting materials by August 19, opposing responses due August 26, and any reply by September 2. Interveners granted leave must file their own materials by September 16. The appeal will be heard on a date to be set, with two hours allocated for oral argument, with specific time allocations to be determined after intervention motions are decided. The court reserved the question of costs from the leave panel hearing for the appeal panel to address.
Key Takeaways
- The Court of Appeal is proceeding with compressed timelines to expedite resolution of this important bankruptcy principle.
- The court has opened the door for intervention by interested parties, signaling that the credit-bidding issue extends beyond the immediate parties.
- The substantive question—whether creditors can credit-bid on estate assets that do not attach to their security—remains undecided and will be addressed on the merits of the appeal.
Why It Matters
The credit-bidding issue is significant for bankruptcy practice. If creditors can use credit-bids to acquire assets unrelated to their security interests, it affects the trustee’s ability to maximize estate recoveries and influences how other creditors value their claims in auction processes. The appellate court’s decision to grant leave and permit intervention indicates that this practice has systemic implications for how Canadian bankruptcy auctions function.
For practitioners, the outcome will clarify the scope of creditors’ participation rights in trustee auctions and may reshape strategies for marketing estate assets in insolvency proceedings.