CITATION: DeFilippis (Re), 2007 ONCA 153

DATE: 20070309

DOCKET: C45592

COURT OF APPEAL FOR ONTARIO

RE:

IN THE MATTER OF THE BANKRUPTCY OF GIULIO DEFILIPPIS OF THE CITY OF VAUGHAN IN THE REGIONAL MUNICIPALITY OF YORK, IN THE PROVINCE OF ONTARIO, SALESMAN

BEFORE:

LASKIN, FELDMAN and ROULEAU JJ.A.

COUNSEL:

Ronald B. Moldaver, Q.C.

for the appellant, Guilio DeFilippis

Catherine Francis

for Schwartz, Levitsky, Feldman Inc. Trustee in Bankruptcy of Guilio DeFilippis

HEARD:

March 6, 2007

On appeal from the order of Justice Cumming of the Superior Court of Justice dated June 12, 2006.

E N D O R S E M E N T

[1] The appellant made an assignment in bankruptcy in 1994 and was discharged in 1996. The appellant’s trustee in bankruptcy, the respondent, was discharged in 1997. As a result of recent litigation, the trustee learned that the appellant may have failed to disclose that he held a valuable interest in real property at the date of bankruptcy.

[2] The bankruptcy judge accepted the trustee’s submission that the bankrupt owned an interest in the property at the date of bankruptcy and that this interest had not been disclosed. As a result, the bankruptcy judge granted the trustee’s motion and made an order under s. 41(11) of the Bankruptcy and Insolvency Act reappointing the respondent as trustee in bankruptcy of the appellant for the purpose of completing the administration of the estate of the bankrupt. The order also provided that the reappointment of the trustee was without prejudice to any claim that may be brought pursuant to s. 81(1) of the Bankruptcy and Insolvency Act by the appellant’s spouse, Rachelle Chetty, 675590 Ontario Limited or by anyone else claiming an interest in the property.

[3] On appeal to this court, the appellant maintains that the bankruptcy judge’s order is based on a finding that the appellant failed to disclose his interest in a valuable asset and amounts to a finding of fraud, and that such a finding ought not to have been made in a summary proceeding where, as here, there was conflicting evidence. The appellant maintains that the interest in the property is not his but rather that of his wife. His wife is not a party to this proceeding and the bankruptcy judge’s finding is prejudicial to her interest.

[4] The trustee takes the position that the material clearly established a prima facie case that the bankrupt owned an interest in the property. The finding of the bankruptcy judge was therefore fully supported by the evidence and ought not to be interfered with. The appellant’s spouse is not prejudiced since the order specifically provides that it was made without prejudice to her rights, the rights of 675590 Ontario Limited in which she has a 50% interest, and the rights of others that may claim an interest in the property.

[5] In our view, the bankruptcy judge ought to have ordered the trial of an issue pursuant to s. 187(8) of the Bankruptcy and Insolvency Act. The allegation of the trustee was, in effect, that the appellant had hidden and failed to disclose his interest in the property from bankruptcy. This was disputed by the appellant and affidavit and documentary evidence in support of both positions was filed. In light of the issues of credibility raised squarely by the parties and the significance of the issue, it ought not to have been decided in a summary proceeding.

[6] Further, the appellant’s spouse was not a party to the proceeding. Although the order was made without prejudice to her rights and the rights of others wishing to challenge the appellant’s ownership of an interest in the property, the decision nonetheless finds under s. 41(11) that the court was “satisfied” that the appellant owned the property and, for practical purposes, the onus is then on those seeking to challenge his ownership to prove otherwise.

[7] By proceeding by way of the trial of an issue, those claiming an interest will be made parties and all of the relevant evidence will be put before the court in one proceeding. Findings of credibility, where required, can be made on vive voce testimony.

[8] In conclusion, we allow the appeal, set aside the decision of the bankruptcy court and order the trial of an issue. The parties may speak to a judge sitting on the Commercial List for directions on how the trial of the issue is to proceed. Costs reserved to the judge hearing the trial of the issue.

“John Laskin J.A.”

“K. Feldman J.A.”

“Paul Rouleau J.A.”