Harry Mendel Fogul

The Receiver of two insolvent real estate brokerages (TRP and TRP Realty) sought the court's advice and direction on whether approximately $3.7 million in commissions owed to the brokerages' agents were held in trust for the agents or formed part of the general assets available to secured creditors.

The court applied the "three certainties" test for a valid trust, focusing on certainty of intention.

Despite some ambiguous indicators like bank account names and standard form documents, the court found that the agents' contracts and the brokerages' audited financial statements did not objectively demonstrate an intention to create a trust.

Consequently, the commissions were deemed unsecured debts, not trust funds, and thus available to the secured creditors.

The bankrupt, Emmanuel Diena, sought an absolute discharge from bankruptcy.

Two creditors, Kohl & Frisch Limited and Joddes Limited (the "Objecting Parties"), opposed the discharge, alleging misrepresentation of assets in a personal financial statement and efforts to shield assets and income.

The court found that the bankrupt intentionally misrepresented the ownership of corporate shares and a Florida condominium in his financial statement and had structured his affairs to have no assets in bankruptcy.

While the Objecting Parties' reliance on the misrepresentation was limited, the court determined that the bankrupt's actions offended commercial morality.

Balancing the interests of the bankrupt, creditors, and the public, the court granted a conditional discharge, requiring the bankrupt to pay $100,000 to the trustee, as he failed to establish an inability to satisfy such a payment.

The court considered a motion to approve a debtor proposal under the Bankruptcy and Insolvency Act after creditor approval.

It held the proposal terms were not reasonable because key records were not produced, the trustee could not provide an opinion on exclusion provisions, and the proposed structure risked prejudice to creditor recovery rights.

The court also found statutory grounds requiring security were proved and concluded the offered funding did not satisfy the required security threshold.

The motion to approve the proposal was dismissed to protect creditor interests and the integrity of the insolvency process.