Executive Summary: Key Legal and Evidentiary Issues

• The Court of Appeal for British Columbia dismissed both an application to strike the appeal and the appeal itself in Smith v. Royal Bank of Canada, 2026 BCCA 287.
   
• Robert Kyle Smith and Craig Allen Smith had challenged a bankruptcy order made against them under section 43(7) of the Bankruptcy and Insolvency Act.
   
• Royal Bank of Canada sought summary dismissal of the appeal, alleging the Smiths breached a chambers order restricting the disposition of assets.
   
• Justice Gomery found no breach of that order because the mortgaged property was not directly or beneficially owned by the Smiths themselves.
   
• Evidentiary shortcomings, including outdated and unverified financial statements, undermined the Smiths' claim that they could pay their debts.
   
• Certain errors in the chambers judge's description of the evidence were identified but did not disturb her overall conclusion that the evidence was insufficient.
   

Facts of the case

Robert Kyle Smith and Craig Allen Smith are brothers who ran a business together through two holding companies, Bastian Holdings Ltd. (owned by Craig) and Krystle Holdings Ltd. (owned by Kyle). The venture failed, and judgments were obtained against them by Royal Bank of Canada and other creditors. Their debt to the Bank stood at approximately $590,000, while their total indebtedness to all creditors was roughly $5 million. The Bank applied to the Supreme Court of British Columbia to have the Smiths declared bankrupt on the basis that they had ceased meeting their liabilities as they came due. The application was heard by Justice Fitzpatrick, who adjudged the Smiths bankrupt in reasons indexed at 2025 BCSC 1099. The Smiths appealed, and the notices of appeal stayed the bankruptcy order under section 195 of the BIA. Because the Smiths did not take timely steps to advance the appeal, they required an extension of time, which Justice Harris granted on December 23, 2025, subject to a term prohibiting them from disposing of or encumbering any direct or beneficial interest in any assets or property. The Bank later argued that the Smiths breached this term when a company they controlled mortgaged property as security for a $200,000 loan on January 6, 2026, and asked the Court of Appeal to dismiss the appeal summarily on that basis.

Policy and legislative provisions at issue

Two statutory provisions were central to the appeal. Section 43(1) of the BIA sets out the basic requirements for a bankruptcy application, namely that the debt owed amounts to at least $1,000 and that the debtor committed an act of bankruptcy within the preceding six months; the Smiths conceded these requirements were met. Section 43(7) allows a court to dismiss a bankruptcy application despite those requirements being satisfied if the debtor proves an ability to pay their debts, or if "other sufficient cause" exists why no order should be made. Sections 28 and 36 of the Court of Appeal Act were also invoked by the Bank, as they authorize a justice or the Court to summarily dismiss an appeal for non-compliance with a prior court order — here, the December 23, 2025 order restricting the Smiths from encumbering assets in which they held a direct or beneficial interest.

Reasoning and analysis

Justice Gomery first addressed the Bank's application to dismiss the appeal summarily. He found no breach of Justice Harris's order because the mortgaged property was not shown to be held in trust for the Smiths; beneficial ownership requires a trust relationship, and indirect ownership through a chain of companies does not meet that standard. He noted that although Justice Harris's oral reasons suggested a broader prohibition covering subsidiary assets, it is the entered order — not the reasons — that governs, and the entered order was narrower. Turning to the appeal itself, the Smiths raised four alleged errors by the chambers judge. Gomery J. rejected the first, finding that even if the judge spoke too broadly in treating holding-company assets as "held by others," this did not affect her core finding that the Smiths had not shown an ability to pay within a reasonable time. He rejected the second, concluding the judge did not impose a blanket requirement for audited statements but was instead unsatisfied with the specific, incomplete, and outdated financial materials provided. On the third ground, he acknowledged the judge made some overstatements — for instance, incorrectly stating that a trial balance did not match a balance sheet — but held these errors did not undermine her broader conclusion that the evidence fell short of the "clear and independent evidence" standard required under Braich v. Clarke. Finally, he found no palpable error in the judge's treatment of the property sale timeline, since she was entitled to weigh the Smiths' delay in listing the River Road Property against their claim of an imminent ability to pay.

Ruling and overall outcome

The Court of Appeal for British Columbia dismissed both the application to summarily dismiss the appeal and the appeal itself, with Justice Gomery's reasons concurred in by Madam Justice Fisher and Justice Mayer. Royal Bank of Canada was the successful party, and the bankruptcy order against Robert Kyle Smith and Craig Allen Smith made by Justice Fitzpatrick was upheld. The decision does not order or award any new monetary sum; it confirms the existing bankruptcy adjudication rather than granting damages or costs, so no specific dollar amount was awarded in this judgment.