COURT OF APPEAL FOR ONTARIO

DATE: 2005-01-21

DOCKET: C40695

RE: SUPERIOR CRANE (CANADA) INC. (Plaintiff (Respondent))

• and - STANLEY ALLAN KINSMAN (Defendant (Appellant))

BEFORE: MacPHERSON, CRONK and LANG JJ.A.

COUNSEL: Miles D. O’Reilly, Q.C. and Cecilia Fearon-Forbes for the appellant Angela Assuras for the respondent

HEARD AND RELEASED ORALLY: January 18, 2005

On appeal from the judgment of Justice Todd L. Archibald of the Superior Court of Justice, sitting without a jury, dated September 25, 2003.

ENDORSEMENT

[1] This appeal primarily raises an issue whether the appellant’s conduct amounted to a breach of trust of such a nature that the debt survives his discharge from bankruptcy. A secondary issue arises as to the quantum of money found by the trial judge to be owing on the five projects.

[2] On the secondary issue, although the appellant admits that there was a breach of trust on two of the five projects, he contends that there was no breach of trust with respect to the other three projects. He says that, for those three projects, payments to subcontractors exceeded gross receipts. The difficulty with the appellant’s contention rests with his failure to keep detailed records, particularly job site records, and his accounting practice of averaging expenses for wages and project management fees among the five projects. The trial judge concluded that the appellant did not discharge the legal onus upon him to account for each project’s expenses and revenues. That conclusion is sustainable on the evidence.

[3] On the primary issue, the trial judge was persuaded that this was not an innocent breach of common law trust but, rather, resulted from Mr. Kinsman’s “reprehensible conduct”, including his filing of signed declarations that all subcontractors had been paid in full, a statement that the trial judge found to be a “bald lie”. As found by the trial judge, when the appellant filed those declarations, he did so with “intent to deceive”. The trial judge inferred from this deceit that the appellant knowingly and recklessly obtained the funds for himself rather than for his creditors. In addition, the trial judge relied on the appellant’s conduct in paying his own expenses and, during the last days of his business, in writing cheques when he knew there were insufficient funds to satisfy those cheques.

[4] Section 178.1(d) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 provides that a discharge from bankruptcy does not release debts arising out of “fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity”. The trial judge considered and applied the appropriate authorities including Simone v. Dailey, (1999), 1999 3208 (ON CA), 8 C.B.R. (4th) 143 (Ont. C.A.). That case established that, for a debt to survive discharge under the Bankruptcy and Insolvency Act, there must be an element of dishonesty, wrongdoing or misconduct on the part of the fiduciary. In this case, the trial judge was entitled to conclude that the appellant’s conduct exhibited a significant element of dishonesty and that, accordingly, the debt should survive bankruptcy.

[5] The trial judge’s factual findings and inferences from those findings are sustainable on the evidence. We see no palpable and overriding error in his findings or any error in his application of the correct law to those findings. Accordingly, this appeal cannot succeed and is dismissed. Costs of the appeal are awarded to the respondent in the amount of $5,640.02, inclusive of disbursements and Goods and Services Tax.

Signed: “J.C. MacPherson J.A.” “E.A. Cronk J.A.” “S.E. Lang J.A.”