Executive Summary: Key Legal and Evidentiary Issues

• Myles Cordwell appeals a declaration that his debt to Snake River Contracting Ltd. survived his discharge from bankruptcy under s. 178(1)(d) of the Bankruptcy and Insolvency Act.
• Central to the appeal is whether the trial judge's finding of misappropriation while acting in a fiduciary capacity constitutes "misappropriation" within the meaning of s. 178(1)(d).
• Section 178(1)(d) excludes from discharge any debt arising from fraud, embezzlement, misappropriation, or defalcation while acting in a fiduciary capacity.
• The appellant argued that the trial judge's comment suggesting his conduct may have been negligent rather than deliberate negated the misappropriation finding for bankruptcy purposes.
• Res judicata was a determinative issue, as the trial judge had already conclusively found misappropriation while in a fiduciary capacity, precluding relitigation.
• The Court of Appeal dismissed the appeal, affirming that the judgment debt survived bankruptcy and that the $160,000 paid into court be released to the respondent.

Facts of the case

Snake River Contracting Ltd. is a construction business that engaged Myles Cordwell on contract as an administrator. After Snake River terminated its contract with Cordwell in June 2016, it discovered that significant funds were missing or unaccounted for. Snake River commenced an action against Cordwell and others to recover those funds. Following a five-day trial in 2019, Cordwell was found liable for amounts Snake River claimed he had wrongfully taken (Snake River Contracting Ltd v Cordwell, 2019 ABQB 382). The trial judge found that Cordwell had worked in a fiduciary capacity and had misappropriated Snake River's funds while acting in that capacity. Judgment was pronounced on May 23, 2019, in the amount of $159,175.52 plus interest and costs, with the preamble to the judgment expressly recording that Cordwell had misappropriated funds while acting in a fiduciary capacity. Cordwell approved the form of judgment and did not appeal.

On August 1, 2019, Cordwell made an assignment into bankruptcy. Snake River filed a writ of enforcement on November 22, 2019, and provided a proof of claim to Cordwell's trustee in bankruptcy asserting that the debt was excluded from discharge under s. 178 of the Bankruptcy and Insolvency Act. Cordwell was discharged from bankruptcy on May 2, 2020, with the certificate of discharge explicitly excluding matters referred to in s. 178(1). On November 4, 2024, Snake River filed an application seeking a declaration that the judgment survived Cordwell's discharge. Cordwell brought a cross-application seeking to have Snake River's writ of enforcement removed from title to his property upon payment of funds into trust. On December 9, 2024, Cordwell was ordered to pay $160,000 into court.

Statutory provision at issue

The operative provision is s. 178(1)(d) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3, which provides that an order of discharge does not release the bankrupt from "any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others." The Supreme Court of Canada has described s. 178(1) as setting out a specific list of debts that are not released by an order of discharge and that therefore survive bankruptcy (Poonian v British Columbia (Securities Commission), 2024 SCC 28 at para 25).

Court's reasoning and analysis

On June 13, 2025, the chambers judge granted Snake River's declaration, finding that the trial judge had already decided that Cordwell's liability fell within s. 178(1)(d) when he found misappropriation while acting in a fiduciary capacity — making the issue res judicata. On appeal, Cordwell argued that a comment made by the trial judge when denying punitive damages — that Cordwell may have misapprehended his role and acted negligently rather than deliberately — meant the earlier misappropriation finding could not satisfy s. 178(1)(d), which he argued requires some element of intentional wrongdoing.

The Court of Appeal rejected this argument. It held that the trial judge explicitly and clearly found Cordwell's liability to be for misappropriation while acting in a fiduciary capacity, doing so by reference to case law interpreting misappropriation in the context of s. 178(1)(d) — specifically Valastiak v Valastiak, 2010 BCCA 71 — which establishes that misappropriation connotes "some element of wrongdoing, improper conduct or improper accounting." The final form of judgment replicated that finding, and Cordwell had approved it without appeal. The Court found the trial judge's decision to be clear, final, and conclusive (Patrick Street Holdings Ltd v 11368 NL Inc, 2026 SCC 15 at para 40), and held that Cordwell could not relitigate the issue in the bankruptcy proceedings (Toronto (City) v CUPE, Local 79, 2003 SCC 63 at para 23).

Ruling and overall outcome

The Court of Appeal dismissed the appeal, affirming the chambers judge's declaration that the judgment debt was not released by Cordwell's order of discharge in accordance with s. 178(1)(d) of the Bankruptcy and Insolvency Act. Snake River Contracting Ltd. was the successful party. The $160,000 that Cordwell had been ordered to pay into court on December 9, 2024 was ordered to be released to Snake River. The underlying judgment that gave rise to the surviving debt was $159,175.52 plus interest and costs, as pronounced on May 23, 2019.