COURT FILE NO.: BK-22-02566012-0031 DATE: 20220506 SUPERIOR COURT OF JUSTICE ā ONTARIO (COMMERCIAL LIST)
RE: In the Matter of the Bankruptcy of Hyungjong Kim (a.k.a.) Hyung Jong Kim)
BEFORE: Kimmel J.
COUNSEL: Brandon Jaffe, for the Trustee Tara Vasdani, for the Debtor
HEARD: April 26, 2022
Endorsement
[1] Hyungjong Kim (the ādebtorā or ābankruptā) filed an assignment in bankruptcy on October 2, 2019. A. Farber & Associates, the trustee in bankruptcy, opposed the bankruptās automatic discharge from bankruptcy because arrangements satisfactory to the trustee for dealing with the increase in the realizable equity in the debtorās house, located at 9 Angel Court, Etobicoke Ontario (the āpropertyā), since the date of bankruptcy had not been made. Negotiations between the trustee and the bankrupt did not result in an agreement.
[2] The trustee brings this motion for vacant possession of the property and for leave to issue a writ of possession. The trustee seeks this order under its statutory duty to realize on its interest in the realizable equity in the property for the benefit of the bankruptās creditors.
Factual Background
[3] The chronology of events, and positions asserted as between the parties, relevant to the determination of this motion is as follows:
a. The bankrupt made a previous assignment into bankruptcy on April 3, 2003 and was automatically discharged nine months later on January 4, 2004.
b. The bankruptās wife, Mrs. Kim, is also a discharged bankrupt. She made an assignment into bankruptcy on May 13, 2011 and was automatically discharged on February 14, 2012.
c. Mrs. Kim purchased the property on June 23, 2004. The property was identified on her statement of affairs as an asset with no realizable value. She transferred title to the property to the bankrupt on March 11, 2013.
d. The bankrupt and his wife live at the property.
e. Before deciding to make an assignment into bankruptcy, the debtor engaged a debt consultant, Gabriel Lee (āLeeā). Lee eventually referred him to the trustee once the debtor decided to go the bankruptcy route. Lee worked for the debtor before and during his bankruptcy, he was the debtorās/bankruptās agent.
f. On October 1, 2019, the day before his assignment into bankruptcy, the debtor signed an acknowledgement in which he stated at para. 8: āI have been advised that any assets I acquire prior to my discharge from bankruptcy (including appreciation in the value of any real estate I may own) are after acquired assets and may be realized upon by the Trustee.ā
g. The debtor made an assignment into bankruptcy on October 2, 2019.
h. The bankrupt disclosed unsecured debts of $514,533 and has had no declared income as of, or since, the date of bankruptcy.
i. The debtorās assignment into bankruptcy identifies him as the sole registered owner of the property that he valued at $635,000, with secured debt of over $590,551.75 in the aggregate. Based upon these assessments, as of the date of bankruptcy, property effectively had no realizable value (accounting for costs of disposition).
j. The trusteeās internal checklist prepared at the time of bankruptcy (with no suggestion that it was shared with the bankrupt) indicated the property to be āexemptā from realization (having no disclosed realizable value). Certain other assets of the bankrupt were also noted on the checklist to be statutorily exempt, such as his RSP and life insurance policy.
k. After his assignment into bankruptcy, the bankrupt signed two documents that state that he attended counselling at the offices of the trustee on October 24, 2019 and January 14, 2020. The bankrupt acknowledges he signed these documents but says that they are untrue and that he did not attend counselling with the trustee and never attended at the trusteeās offices.
l. On July 23, 2021, in anticipation of the bankruptās potential eligibility for automatic discharge from bankruptcy under s. 168.1 (b)(i) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the āBIAā) in October 2021, the trustee wrote to the bankrupt seeking information about the current value of the property and mortgage (secured) debt. The trustee indicated that this information was sought in furtherance of its obligation to realize upon the equity in real property up to the date of the bankruptās discharge. The trustee also indicated a willingness to work with the bankrupt in advance of the discharge date with a view to his discharge from bankruptcy.
m. In its July 23, 2021 letter, the trustee asked the bankrupt for a current opinion of value for the property. The bankrupt obtained three valuations of the property, but only provided the trustee with the lowest one dated September 17, 2021, which indicated a value of $604,500.
n. The trustee insisted on a formal appraisal, which valued the property at $830,000 as of September 14, 2021. This value was approximately $200,000 more than the value that the bankrupt had ascribed to the property at the date of his bankruptcy two years earlier in October 2019.
o. Attempts to negotiate an agreement acceptable to both the bankrupt and the trustee regarding the value to be paid by the bankrupt to the trustee for the increase in the net realizable value of the property since the date of bankruptcy were unsuccessful.
p. The debtor claimed to have entered into an oral agreement with his wife, after the date of his bankruptcy, that she would continue to pay the mortgage on the property while the couple continued to live there, in exchange for a 50% beneficial interest in the property. The trustee had not approved this agreement and was not prepared to accept that it affected the trusteeās interest in the realizable value of the property that had accrued since the date of bankruptcy.
q. The bankrupt has testified that since the date of bankruptcy his wife and other family members have been contributing to the mortgage payments, but they did not do so before his assignment into bankruptcy.
r. Mrs. Kim has not filed a proof of claim in the bankruptcy under s. 81 of the BIA and has never attempted to prove a trust or equitable claim in or to the property or against the debtor. Nor is there any evidence of any other family members having done so.
s. The trustee sent a letter dated November 3, 2021 to Mrs. Kim at the property asking her, among other things, to provide any proof of the agreement alleged by Mr. Kim, indicating that the request was being made pursuant to section 164 of the BIA, which required her to produce to the trustee any book, document or paper of any kind relating in whole or in part to the bankrupt, his dealings or property. The bankrupt asserts that this letter was not received by his wife at or about its date.
t. The trustee also disputed the bankruptās assertion that credit should be given for the mortgage payments that have been made since the date of bankruptcy as a dollar for dollar deduction against the trusteeās interest in the increase in the net realizable equity in the property since the date of bankruptcy. The trusteeās position was, and still is, that the mortgage payments cannot be viewed as direct contributions to equity in the property (since monthly payments are on account of both interest and principal). Further, the trustee advised that monthly costs for accommodations would have been incurred by the bankrupt and his wife to live somewhere else if not at the property and those are not properly characterized as contributions to equity.
u. The bankrupt was only prepared to acknowledge that the trustee had an interest in a small amount of the increase in the net realizable equity in the property since the date of bankruptcy. The bankruptās offered to value the trusteeās interest at $50,000 (made in November 2021) and $85,000 (made in February 2022).
v. The bankrupt offered to pay such amount to the trustee for the benefit of his creditors, after deducting for the 50% interest in the property that he claimed to have agreed to give his wife as well as for the aggregate total monthly mortgage payments that his wife had paid since the date of bankruptcy; the trustee did not accept the premise of these deductions.
w. The amount that the bankrupt offered to resolve this issue was not acceptable to the trustee.
x. The deadline for the trustee to oppose the bankruptās discharge was September 27, 2021.
y. The trustee opposed the granting of an unconditional discharge because the issue of the value to be ascribed for post-bankruptcy increase net realizable equity in the property had not been resolved to the trusteeās satisfaction.
z. As of December 1, 2021, the trustee has indicated that the property was valued at in excess of $1 million. The property still has three mortgages registered against it (represented by the declared mortgage indebtedness as of the date of bankruptcy).
aa. The bankrupt disclosed during his cross-examination on this motion conducted on March 18, 2022 that, after his October 2019 assignment into bankruptcy, the business the he had been operating prior to his bankruptcy continued in his wifeās name. The bankrupt has never claimed to be earning any income during his bankruptcy.
Issues to be Decided
[4] The following issues must be decided:
a. Does the equity in the property from the date of bankruptcy vest in the trustee under the BIA such that the trustee is entitled to an order for possession and leave to issue a writ of possession of the property to realize on its interest in the property for the benefit of the bankrupt's creditors?
b. Does the assertion by the bankrupt that Mrs. Kim may have an interest in the property affect the trustee's entitlement to vacant possession of the property and/or the courtās decision about whether to grant leave for the issuance of a writ of possession?
[5] I find that the trustee has a vested interest in the increase in the net realizable equity in the property that has accrued since the date of bankruptcy. There are no equities raised in this case that cause me to decline to grant leave for the issuance of a writ of possession. Additionally, I find that no interest in favour of Mrs. Kim has been established that interferes with or affects the trustee's entitlement to vacant possession of the property and/or the courtās decision to grant leave for a writ of possession to issue.
Analysis
The Trusteeās Entitlement to an Order for Possession
[6] The first issue regarding the trusteeās entitlement to an order for possession and the granting of a writ of possession is addressed on the basis of the following series of questions, which arise based on the assertions of the parties in this case:
a. Does the trustee have a vested interest in the increase in the net realizable equity in the property since the date of bankruptcy?
b. Is the trustee entitled to an order for possession?
c. Should the court grant leave to issue a writ of possession, and if so, when should it be implemented?
d. Are there equitable or other considerations that would cause the court to deny the trusteeās request?
a) Does the trustee have a vested interest in the increase in the net realizable equity in the property since the date of bankruptcy?
[7] The law applicable to the determination of this issue is summarized in the trusteeās factum:
a. Prior to a bankrupt's discharge from bankruptcy, the increase in equity in property is after-acquired property that vests in the trustee for the benefit of the bankrupt's creditors under ss. 67, 68, and 71 of the BIA.
b. The leading authority on this in Ontario is Lepage (Re), 2016 ONCA 403.
[8] The Court of Appeal for Ontario addressed the following issues in Lepage:
a. The increase in net realizable equity in a debtorās property after the date of bankruptcy is after-acquired property vested in the trustee for the benefit of the bankruptās creditors. The Court of Appeal stated at para. 18 that:
During the period that he was an undischarged bankrupt, Mr. Lepage was not entitled to build up and keep any assets acquired after his bankruptcy. As the motion judge correctly recognized, all after acquired assets were vested in the Trustee for the benefit of Mr. Lepage's creditors.
b. Mortgage payments are not deducted from equity. The Court of Appeal stated at paras. 20 and 21 that:
... Mr. Lepage was not entitled to credit for his reasonable living expenses because, if Mr. Lepage had not continued to live at his residence, he would have incurred living expenses elsewhere.
There was no basis for the motion judge to distinguish between the mortgage principal payments and the other payments related to mortgage interest and maintaining the house, because, as stated by Mr. Lepage in his monthly statements to the Trustee, they were all reasonable living expenses. Mr. Lepage was not entitled to be effectively reimbursed for his reasonable living expenses from the increased equity in his house.
[9] In the latter respect, the trustee has indicated that if there was reason to believe that the monthly mortgage payments in this case (approximately $3,000) were more than what would have been paid for market rent, that could be determined on a reference. The trustee maintains that this would be a nominal amount, which it might be prepared to credit to the bankrupt once it is determined (or agreed to).
[10] The bankrupt argued that the court should not follow the Lepage case. The bankrupt submits that the case is distinguishable because it arose in the circumstances of a debtor who was found to have committed tax fraud. The bankrupt urged the court to follow a British Columbia decision of a registrar in bankruptcy, who decided not to apply Lepage: see Gwizd (Re), 2017 BCSC 1975. In that case, the bankrupt was permitted to retain the entire benefit of the increase during the period of bankruptcy in the net realizable equity of a property he owned at the time of bankruptcy.
[11] There was no opposition to the bankruptās discharge in the Gwizd case, although counsel for the bankrupt brought the Lepage decision to the attention of the court: Gwizd, at para. 28. The registrar distinguished it on the basis that the bankrupt in Lepage had committed tax fraud and his bankruptcy was tax driven. It was also distinguished on the basis that the Lepage decision was not in the context of an application for discharge from bankruptcy. The registrar indicated that the decision to grant the discharge requested in Gwizd was discretionary and there were other factors that favoured granting the discharge: see paras. 37 and 44.
[12] The bankrupt in this case also referred to decisions (considered by the court in Gwizd) that pre-date Lepage in support of his submission that the court should not follow Lepage in this case: see for example, Mackay (Re), 2002 ABQB 598 and In Hazin (Re), 2011 ABQB 197.
[13] The bankrupt further suggested that the law in Ontario, specifically whether to apply Lepage or find a way to distinguish it and instead follow the reasoning in Gwizd when it comes to individual consumer bankruptcies, remains undetermined. The bankrupt argued that because similar arguments (in favour of distinguishing Lepage and following Gwizd) were made and rejected by Gorman J. in the decision of Ouellette et al (Re), 2022 ONSC 1698 (unreported), that is under appeal reinforces the suggested that the issue remains undetermined in Ontario.
[14] The decision of a registrar in bankruptcy in British Columbia is not binding in Ontario. A decision of our Court of Appeal is binding. I do not accept the bankruptās submission that the reasoning in Lepage is limited to circumstances of fraud and should be distinguished in other circumstances. The same argument was made and rejected in Ouellette, in which the court applied and followed Lepage: Ouellette, at para. 15. I am not persuaded of any reason why Lepage should not be followed and applied in this case.
[15] I find that the trustee has a vested interest in the increase in the net realizable equity in the property that has accrued since the date of bankruptcy (estimated to be approximately $200,000).
b) Is the trustee entitled to an order for possession?
[16] Sections 16(3) ā 17 of the BIA provide for the powers of the trustee to take possession of the property.
[17] The trustee has an obligation, pursuant to s. 16(3) ā 17 of the BIA, to take possession of the bankrupt's property as soon as possible: see: Machalovitch (Re) (1921), 1 C.B.R. 451 (Que. S.C.). These duties and powers of the trustee are aligned with the duty of the bankrupt to deliver all property in his possession to the trustee under s. 158 (a) of the BIA: see Ouellette, at para. 14.
[18] In the absence of an agreement with the bankrupt for a negotiated payment to the trustee on account of the value ascribed for the post-bankruptcy increase in the net realizable equity in the property, the trustee is entitled to an order for possession of the property and to take possession of the property for the benefit of the bankruptās creditors.
c) Should the court grant leave to issue a writ of possession, and if so, when should it be implemented?
[19] Rule 60.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides that an order for the delivery of the possession of land may be enforced by a writ of possession under r. 60.10. Rule 60.10 provides that a writ of possession may only be issued with leave of the court. The court may only grant leave to issue a writ where it is satisfied that all persons in actual possession of any part of the land have received sufficient notice of the proceeding in which the order was obtained to enable them to apply to the court for relief.
[20] Notice may be established by formal service, but the court can also be satisfied through other evidence that a person in possession has received sufficient notice of this proceeding. The evidence discloses that the bankrupt and his wife are the only persons in possession of the property.
[21] In this case, the bankrupt is on notice of this motion (and opposes it). Although counsel for the bankrupt maintains that she does not represent the other occupant of the property, Mrs. Kim, and Mrs. Kim did not appear on this motion, the notice of motion dated January 3, 2022 record indicates that it was sent to her at the property. Further, Mrs. Kimās bank statements and evidence of payments she made towards the mortgage were tendered as evidence by the bankrupt on this motion.
[22] Counsel for the bankrupt represented to the court on this motion that Mrs. Kim did not receive an earlier letter dated November 3, 2021 from the trustee dealing with the issues raised on this motion and asking her to provide proof of the agreement she may have made with her husband granting her an interest in the property. That letter was addressed to Mrs. Kim at the property. The representation made to the court that Mrs. Kim did not receive this specific letter could only be made on the basis of someone having shown her the letter and asking her if she received it. Thus, I infer that at some point before the motion, Mrs. Kim became aware of it.
[23] I am satisfied that both persons in actual possession of the property, Mr. and Mrs. Kim, have received sufficient notice of this motion and of the trusteeās request for a writ of possession for the property.
[24] Pursuant to r. 60.10, I find that the court should grant leave to issue a writ of possession. As determined later in this endorsement, I find that it would be appropriate for the trustee to begin enforcement steps 60 days afterwards, to allow time for the parties to deliver up vacant possession or negotiate some other outcome with the trustee.
d) Are there equitable or other considerations that would cause the court to deny the trusteeās request?
[25] As in any situation where the court has a discretion to grant leave, there might be a residual discretion in the court to refuse to grant leave for the issuance of a writ of possession to a trustee in bankruptcy if the equities of a case are such that it is not in the interest of justice to do so. The bankrupt asserts that:
i. There were representations made to the bankrupt that his property would not be affected by any assignment into bankruptcy; and
ii. The trustee breached its duties or failed to adhere to its code of conduct such that it should be denied the relief sought.
[26] First, the alleged representations were made to the debtor by his agent, Lee, not by the trustee. If the bankrupt was under a misapprehension that his property would not be affected by the bankruptcy that is not attributable to any act or omission or conduct of the trustee and should not impact the equities as between the bankrupt and the trustee (or the bankruptās creditors on whose behalf the trustee is acting).
[27] Immediately prior to his assignment in bankruptcy, the debtor signed an acknowledgment that he had been advised that any assets he acquired prior to his discharge from bankruptcy (including appreciation in the value of any real estate he may own) are after acquired assets and may be realized upon by the trustee. This is inconsistent with the alleged representation and/or misapprehension that the bankrupt says he was operating under. This acknowledgment not only undermines the bankruptās assertion that he was under any misapprehension about this, but it stacks the equities strongly in favour of the trustee in this case.
[28] Further, the detriment said to be suffered by the bankrupt as a result of this alleged misrepresentation is that he would have considered an alternative to an assignment in bankruptcy and filed a proposal instead. However, the trustee points out that the bankrupt was ineligible to make either a Consumer or Division I Proposal because his declared assets at the date of bankruptcy exceeded the $250,000 statutory threshold, and he had no declared income at or during the bankruptcy.
[29] The bankrupt asserts that the trustee should not be allowed to profit from any increase in value of the property from the date of bankruptcy because he claims that the trustee was negligent for waiting to ask for the property appraisal until July 2021 and also for having initially treated the property as āexemptā from seizure, and then changing its position. The bankrupt argues that ss. 34 and 36 of the Trusteeās Code of Ethics under the BIA required the trustee to take steps to realize upon the equity in the property before July 2021.
[30] I find no negligence or fault in the actions of the trustee in this regard. The property was initially considered āexemptā from seizure because of the value that the bankrupt attributed to it, which after accounting for secured mortgage debt and the costs of realization, would have left insufficient equity in the property to make it worth seizing. As the discharge date approached, the trustee asked the bankrupt for updated information as to value (which, in consultation with his debt consultant, Lee, the bankrupt sought to establish at a lower value than market). I agree with the trusteeās contention that a couple of months before potential automatic discharge is exactly the right time to revisit the value of real property, obtain appraisals, and attempt to negotiate a resolution of any claim that the trustee has to the increase in realizable value of such property since the date of bankruptcy.
[31] In this case, the trustee tried to negotiate a compromise with the bankrupt but was unable to do so because of positions asserted by the bankrupt regarding his wifeās beneficial interest and contributions to the property post-bankruptcy, which the trustee did not accept. These assertions have not been substantiated on the record before the court and the court does not accept them (this is discussed further below). The bankruptās offers to value the trusteeās interest at $50,000 (made in November 2021) and $85,000 (made in February 2022) are significantly less than the approximately $200,000 increase in the realizable equity in the property indicated by the formal appraisal obtained in September 2021. There is an even larger discrepancy if the trusteeās more current estimate of value in excess of $1 million is considered.
[32] Second, the bankrupt alleges that the trustee breached its code of ethics or some industry standard or practice in the following ways: (1) by engaging in an arrangement with Lee (the debt consultant) and allegedly delegating responsibilities to Lee (such as the counselling sessions and investigation of assets and liabilities); by failing to meet with and counsel the bankrupt; (3) by failing to understand that the bankrupt believed (as a result of discussions with Lee) that the property would not be affected by his bankruptcy; and (4) by failing to discover that the bankrupt had made an agreement granting a beneficial ownership interest in the property to his wife after the date of bankruptcy. (5) It is also suggested that the trustee should have, but failed to, approach Mrs. Kim and invite her to file a proof of claim or assert an equitable interest in the property.
[33] These allegations are misguided and/or not substantiated with any proof:
(1) There is no evidence of any financial arrangement between Lee and the trustee. The court has not been provided with any authority to suggest that the agreement permitting Lee to share documentation with the trustee was improper.
(2) If Lee misled the debtor before or during his bankruptcy, it was not the trusteeās job to ascertain that, especially in the face of the debtorās signed acknowledgment immediately prior to his assignment in bankruptcy wherein he said that he was aware that any appreciation in the value of any real estate he owned may be realized upon by the trustee.
(3) The debtor also signed acknowledgments of having attended counselling sessions with the trustee at the trusteeās offices, which he now seeks to disavow. I do not accept his evidence about not attending counselling sessions, given the documents he himself signed.
(4) If the debtor entered into an agreement without the trusteeās consent purporting to grant an interest in real property that had vested in the trustee as of the date of bankruptcy, it is the debtor, not the trustee, who is offside of his obligations.
(5) Lastly, for the reasons discussed below, the record does not support a finding that Mrs. Kim has a viable claim to a beneficial interest in the property based upon the evidence of the bankrupt, and in particular the timing of the alleged agreement after his assignment into bankruptcy. Additionally, counsel for the bankrupt was invited to direct the court to some authority for the proposition that the trustee had a duty, after learning of the alleged post-bankruptcy agreement between Mrs. Kim and the bankrupt and her post-bankruptcy contributions to the mortgage payments, to seek out and invite Mrs. Kim to assert an interest in the property and/or file a proof of claim in the bankruptcy. No such authority was provided. Instead, counsel relies upon what she says she was told about the obligations and duties of trustees in bankruptcy by another trustee in bankruptcy who she spoke to about this case. This is not proof that the court can have regard to or rely upon. What counsel suggested would have to be established through evidence, likely from an expert on the common practice of trustees in bankruptcy in such circumstances. There was none.
[34] There are no equities raised in this case that cause me to decline to grant leave for the issuance of a writ of possession.
[35] The trustee asks for an order that enforcement steps may be taken if vacant possession of the property is not delivered by the bankrupt within 30 days of this endorsement. The bankrupt argued that this was not enough time and asked the court to extend it to 90 days. I consider 60 days to be a reasonable amount of time for the bankrupt and his wife to find alternative accommodations if an agreement satisfactory to the trustee cannot be reached in the interim that would enable them to remain at the property.
Does Mrs. Kim Have an Interest in the Property that Should be Recognized?
[36] The final issue arises from the assertion by the bankrupt that his wife has a beneficial interest in the property. No such interest has been directly or formally asserted by her.
[37] I have difficulty with the alleged agreement granting a beneficial interest in the property to Mrs. Kim for the following reasons:
a. She has not provided any evidence of such and has never asserted this position in the bankruptcy.
b. No corroborating evidence of any such agreement has been provided by the bankrupt, except evidence of his wifeās bank statements demonstrating that she made payments on the mortgage after his assignment into bankruptcy. Payments towards the mortgage(s) do not automatically mean that the payor has become a beneficial owner of a property. An occupant of the property might just as likely agree to pay carrying costs, such as mortgage payments, so that she and her husband could continue to live there, rather than face foreclosure proceedings.
c. Mrs. Kim did not respond to the trusteeās letter requesting evidence of the agreement. Mr. Kim did not seek out any of the information or documents requested in the letter, instead preferring to focus on the assertion that Mrs. Kim never received the letter at or about the time it was sent.
d. Even if such an agreement was reached as between the husband and wife, it is acknowledged to have been made after the date of bankruptcy and without the trusteeās consent, so it cannot supersede, or diminish, the trusteeās interest in the property.
e. Although the bankrupt asserts that there were discussions about Mrs. Kimās contributions towards the mortgage with Lee prior to the bankruptcy (that the trustee ought to have been aware of because of the permission it obtained to receive documentation from Lee), the bankrupt testified on cross-examination that Mrs. Kim was not making payments towards the mortgages before his bankruptcy.
[38] It is acknowledged that title to the property was, at the time of bankruptcy and since 2013 has been, in the bankruptās name alone and it was not jointly held. The debtor affirmatively stated during argument that the basis for Mrs. Kimās alleged interest in the property is from her bank statements showing post-bankruptcy mortgage payments. However, no authority was offered for the bald proposition that merely paying the mortgage gives rise to an interest in the property.
[39] Counsel for the bankrupt referred during oral argument to family law cases in the area of constructive trusts. However, these constructive trust cases do not stand for the bald proposition that counsel has asserted. There are specific requirements for establishing a constructive trust which are not met on the evidentiary record. Further, no constructive trust claim has ever been asserted by Mrs. Kim and the bankruptās evidence does not support such a finding. He asserts that there was an agreement that was not disclosed to or approved by the trustee.
[40] Counsel for the bankrupt made the further assertion during oral argument that, as a spouse, Mrs. Kim was entitled to a 50% interest in the property under family law principles. Mr. and Mrs. Kim are not separated and there is no evidence of any family law claim by Mrs. Kim against the bankrupt. The court indicated to counsel that the proposition she asserted (that a spouse has a claim to a beneficial interest in property owned by the other spouse) was not sound at law or in equity and invited further submissions if the bankrupt intended to pursue this. Nothing further was indicated, and counsel reverted to the constructive trust argument, which has not been established.
[41] The bankrupt complains that the trustee ignored Mrs. Kimās interest in the property; however, she has no recognizable interest, so the trustee cannot be faulted for that. Nor can the trustee be faulted for the unwillingness to credit all of the mortgage payments Mrs. Kim made after the date of bankruptcy against equity in the property (for the reasons set out in the Lepage case referred to earlier). If the bankrupt wishes to establish that some portion of the mortgage payments made by his wife and/or other family members should be counted as a contribution to the net realizable equity in the property, I will direct a reference so that this determination can be made if the parties cannot agree on the correct amount after reviewing the detailed mortgage statements and the allocation between principal and interest for each mortgage payment, among any other relevant factors.
[42] There is no other interest that has been established on the record before me in favour of Mrs. Kim that interferes with or affects the trustee's entitlement to vacant possession of the property and/or with the courtās decision to grant leave for the issuance of a writ of possession.
Costs and Final Disposition
[43] The trusteeās Bill of Costs indicates the all-inclusive partial indemnity costs of this motion to be $25,259.93. After hearing submissions, including the bankruptās persistent accusations that the trustee behaved improperly and in breach of its code of conduct, the trustee asked to be awarded substantial indemnity costs in the all-inclusive amount of $37,908.59 if successful on this motion.
[44] The bankruptās Bill of Costs indicates all-inclusive partial indemnity costs of $9,185.86 and all-inclusive full indemnity costs of $16,121.82. No amount is indicated for substantial indemnity costs although they could be extrapolated.
[45] It is not the role of the court to do an item by item review of the Bills of Costs submitted to determine whether the amounts claimed are justified. The total number of hours for lead counsel for the trustee and counsel for the bankrupt are similar. The trustee is entitled to engage senior counsel whose hourly rate is higher than opposing counselās hourly rate. The trusteeās counsel also involved some other lawyers, which accounts for some of the difference in the total fees claimed.
[46] The trustee was entirely successful on this motion and is entitled to costs under r. 57 of the Rules of Civil Procedure and s. 131 of the Courts of Justice Act, R.S.O. 1990, c. C.43. There are no factors that mitigate against an award of costs in the trusteeās favour.
[47] The bankrupt pursued unsubstantiated allegations of professional misconduct against the trustee. That is not something that the court condones. However, in the exercise of my discretion, having regard to the principles of proportionality and the reasonable expectations of the bankrupt of what he might be ordered to pay in costs if he lost this motion, I am awarding the trustee partial indemnity costs of this motion, fixed in the all-inclusive amount of $25,000. This is more than the full-indemnity costs claimed by the bankrupt, but roughly equal only to the trusteeās partial indemnity costs. Given the nature of the allegations against the trustee in this case, while I have not decided to award substantial indemnity costs, the trustee should be awarded its claimed partial indemnity costs, even if higher.
[48] Costs fixed in the all-inclusive amount of $25,000 are payable by the bankrupt to the trustee within 30 days.
[49] The trusteeās motion for an order for possession and for a writ of possession is granted. The trustee shall be entitled to take enforcement steps on the 61st day after the date of this endorsement.
[50] This endorsement and the orders contained in it shall have the immediate effect of a court order without the necessity of formal issuance and entry. Either party may take out an order by following the procedure provided for under r. 59 if so advised.
Kimmel J. Date: May 6, 2022