Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on whether the debtor, Gestion Valiquette Oakes inc., qualified as an “insolvent person” under section 2 of the Bankruptcy and Insolvency Act (BIA) despite owning a highly valuable immovable.
• CRA tax assessments and subsequent Federal Court certificates, legal hypothecs, seizure and judicial sale process formed the factual and evidentiary basis for the Attorney General of Canada’s recovery efforts.
• The debtor’s failure to oppose tax assessments, challenge Federal Court certificates, or react to multiple enforcement steps raised credibility and good-faith issues regarding its later reliance on insolvency protections.
• Evidence of the immovable’s market value and the total amount of the debtor’s liabilities was central to determining whether its assets were sufficient to cover all debts and thus to its insolvency status.
• The timing and content of the notice of intention and extension request suggested a strategic attempt to delay inevitable enforcement rather than to make a viable proposal to creditors.
• The Court assessed whether the statutory criteria for extending time under section 50.4(9) BIA—good faith, diligence, viability of a proposal, and absence of serious prejudice to creditors—were met and found they were not.

Facts of the case

Gestion Valiquette Oakes inc. is a real estate management company that became the subject of tax enforcement proceedings by the Canada Revenue Agency (CRA). The matter arises from two income tax assessments issued against the company on 3 July 2025, for $104,089 and $330,161, respectively. These assessments were based on transfers of money made to the debtor without consideration by two related corporations. The debtor did not object to the assessments within the prescribed time, allowing the Minister of National Revenue to commence collection measures under the Income Tax Act. The CRA registered certificates of its tax claim in the Federal Court, which, by virtue of section 223 of the Income Tax Act, have the same force as final judgments. Legal hypothecs (statutory liens) were registered against the debtor’s immovable property on 18 July 2025, and the Minister proceeded with seizure of the property. The debtor did not contest these steps. An originating notice of sale under judicial control was served on the debtor on 10 September 2025, and on 8 October 2025, a Federal Court judge (Shannon J.) noted the debtor’s default and ordered the surrender (délaissement) of the immovable for sale. The debtor then appeared and filed a motion in retraction of that Federal Court judgment; however, on 10 November 2025, the Federal Court dismissed the motion, leaving the enforcement process in place.

Insolvency proceedings and notice of intention

Against this backdrop, on 30 October 2025, while the tax collection and judicial sale process was advancing, Gestion Valiquette Oakes inc. filed a notice of intention to make a proposal to its creditors under the Bankruptcy and Insolvency Act (BIA). This filing triggered the stay and protection mechanisms available to an “insolvent person” who seeks to restructure through a proposal. The company obtained an initial extension of time to file its proposal and later sought a second extension. In response, the Attorney General of Canada, acting for the Minister of National Revenue, applied to the Superior Court of Québec for annulment of the notice of intention and opposed any further extension. The Attorney General argued that the notice of intention was filed not to reorganize the debtor’s affairs in good faith but to delay execution of the Federal Court judgment and the CRA’s enforcement measures. It was also argued that the debtor did not meet the statutory definition of an “insolvent person” under section 2 BIA because its assets, particularly its immovable property, were more than sufficient to pay all of its debts.

Financial picture and evidence of solvency

In support of its request for an extension, the debtor filed a forecast of cash flows for the period from November 2025 to March 2026. Although profits before tax were modest, they were nonetheless positive. This evidence indicated that the debtor remained capable of operating and generating some profit. The Court therefore concluded that the debtor did not satisfy paragraphs (a) or (b) of the BIA definition of “insolvent person”—it had not ceased to meet its obligations as they became due in the ordinary course and was not unable, for any reason, to honor them as they fell due. A key element of the case was the value of the debtor’s principal asset, an immovable property. In its own filings at the time of the notice of intention, the debtor valued the property at $900,000. However, a more recent appraisal placed the property’s market value between $1,800,000 and $2,200,000, while the debtor’s total liabilities were established at $1,283,005. On this evidence, the Court found that, if the property were sold in a properly conducted judicial sale, the proceeds would be sufficient to discharge all of the debtor’s debts. Consequently, the debtor did not meet paragraph (c) of the “insolvent person” definition, which requires that the entirety of the debtor’s property be insufficient, on a fair estimate, to enable payment of all obligations, whether due or to become due.

Arguments about excluding the immovable

The debtor sought to avoid this conclusion by arguing that the immovable should be excluded from the solvency analysis. It relied on a passage from the decision of Alary J. in Technologie Bio-Cogni Sauvé (BCS) inc. (Syndic de), in which the Court discussed whether certain specialized assets, such as technology, could be considered realizable in the ordinary course. The debtor maintained that, because it would not ordinarily sell the immovable in the course of its real estate management business, the property was analogous to a non-ordinary-course asset that should be disregarded in determining insolvency. The Superior Court rejected this analogy. First, the facts in BCS differed materially from those before it. Second, Scotiabank, the first-ranking hypothecary creditor on the immovable, had already begun exercising its security by starting its own realization process. In light of the much higher market value of the property compared with the debtor’s total liabilities, the Court observed that a sale would generate equity in favor of the debtor even after payment of hypothecary creditors, including the Crown and Scotiabank. Because this equity would be available to pay unsecured and other creditors, the immovable could not be ignored in the solvency analysis. As a result, the Court held that the debtor was not an “insolvent person” within the meaning of section 2 BIA, and that the very condition for accessing the protection of a notice of intention was absent.

Assessment of good faith and extension of delay

Even though this finding was sufficient to dispose of the matter, the Court went on to consider the debtor’s request for an additional extension of time to file a proposal. In its motion, the debtor alleged that it only learned, toward the end of November 2025, of the true nature and basis of the tax assessments. It asserted that it filed the notice of intention precisely to allow time to obtain and understand the reasons for assessments exceeding $400,000, and that its initial lawyer had failed to obtain the CRA’s underlying explanations or to contest the assessments in a timely manner. The debtor explained that it had recently retained a new lawyer specializing in tax litigation to seek permission to object to the assessments out of time. According to the debtor, this request had been submitted to the CRA and a decision was pending; thus, additional time under the BIA was necessary. The Court was not persuaded by this narrative. It emphasized that “no one may invoke their own turpitude” and pointed out that the debtor had remained silent throughout the CRA’s recovery process, from the issuance of assessments on 3 July 2025 through Federal Court certification, registration of hypothecs, seizure and the order for surrender of the immovable on 8 October 2025. All notices and proceedings had been duly served, yet the debtor took no meaningful action to understand or contest them until it was effectively too late. On this record, the Court found it likely that the debtor would have known the basis of the assessments had it genuinely sought to do so. Instead, the timing of the notice of intention and the extension requests revealed an attempt to delay the inevitable enforcement of tax debts.

Legal test under section 50.4(9) BIA

Section 50.4(9) BIA allows an insolvent person to seek extensions of the 30-day period following a notice of intention, but only on strict conditions. For each extension, the Court must be satisfied that: (a) the person has acted, and continues to act, in good faith and with due diligence; (b) it is likely to be able to make a viable proposal if the extension is granted; and (c) the extension will not cause serious prejudice to any creditor. The Court held that the debtor’s conduct failed to meet these criteria. Its passivity during months of tax enforcement, coupled with its later invocation of ignorance about the assessments, was inconsistent with good faith and diligence. Moreover, given that the company owned an asset whose value substantially exceeded its total debts, the premise of needing insolvency protection in order to generate a viable proposal was undermined. Further delay would prejudice the Crown and other secured creditors by continuing to stall realization on the immovable after a lengthy and procedurally proper enforcement process. Consequently, even if the debtor had qualified as an insolvent person, the statutory conditions for an extension would not have been met.

Ruling and outcome

In the result, the Superior Court of Québec allowed the Attorney General of Canada’s application and annulled Gestion Valiquette Oakes inc.’s notice of intention to make a proposal. The Court also dismissed the debtor’s motion for an extension of time under section 50.4(9) BIA, concluding that the notice of intention had been used primarily to delay execution of valid tax enforcement measures and that the debtor had neither established insolvency nor satisfied the good-faith and diligence requirements for an extension. The Court ordered costs (“avec frais de justice”) against the debtor in favor of the Attorney General of Canada, who is therefore the successful party in this proceeding.