The Alberta Court of Appeal did not permit an administrator working on contract for a construction business to relitigate an issue previously decided in a judgment that found him liable for misappropriation of funds while acting in a fiduciary capacity.
In Snake River Contracting Ltd v Cordwell, 2026 ABCA 177, the respondent construction company discovered that significant funds were missing or unaccounted for after it terminated its contract with the appellant administrator in June 2016.
The respondent brought an action against the appellant and others to recover the funds. In May 2019, a trial judge of the then-Alberta Court of Queen’s Bench found the appellant liable for $159,175.52, plus interest and costs.
Citing Valastiak v Valastiak, 2010 BCCA 71, a case interpreting misappropriation for the purposes of s. 178(1)(d) of the Bankruptcy and Insolvency Act, 1985, the trial judge determined that the appellant misappropriated the respondent’s funds while working for it in a fiduciary capacity.
In August 2019, the appellant made an assignment into bankruptcy. In November 2019, the respondent filed a writ of enforcement. The respondent gave a proof of claim to the appellant’s trustee in bankruptcy.
In May 2020, the appellant was discharged from bankruptcy, with the discharge certificate excluding matters referred to in s. 178(1).
In November 2024, the respondent applied for a declaration that the judgment survived the appellant’s discharge from bankruptcy. The respondent asserted that s. 178 excluded the appellant’s debt to the respondent from discharge.
In a cross-application, the appellant sought to remove the respondent’s writ of enforcement from his property title upon the payment of funds into trust. In December 2024, the court ordered the appellant to pay $160,000 into it.
In June 2025, the chambers judge granted the respondent a declaration that the discharge from bankruptcy did not release the appellant from the debt arising from the judgment because that debt fell within the scope of s 178(1), which listed specific debts that would survive bankruptcy because a discharge order would not release them.
The chambers judge ordered the release of the funds paid into court to the respondent. Citing res judicata, the chambers judge determined that the trial decision had already decided the issue.
The chambers judge explained that the trial judge had found that the appellant had misappropriated funds while acting in a fiduciary capacity and that the appellant’s liability to the respondent fell within s 178(1)(d).
The appellant, who did not appeal the trial decision, appealed the chambers judge’s order.
No error found
The Court of Appeal of Alberta dismissed the appeal upon finding no reviewable error on the part of the chambers judge.
Given the trial judge’s observation that the appellant might have misapprehended his role and might have negligently rather than deliberately taken the respondent’s funds, the appellant argued that the trial judge’s observation meant that the finding that he misappropriated funds while acting in a fiduciary capacity could not constitute misappropriation under s. 178(1)(d).
Rejecting the appellant’s characterization of the trial judgment, the appeal court noted that the trial judge cited case law interpreting misappropriation in light of s 178(1)(d), and clearly and conclusively found the appellant liable for misappropriation of funds while acting in a fiduciary capacity.
The appeal court added that the final judgment reflected the trial judge’s finding.