CITATION: Koenne (Re) , 2010 ONCA 524
DATE: 20100723
DOCKET: C51630
COURT OF APPEAL FOR ONTARIO
Goudge, Sharpe and Armstrong JJ.A.
In the Matter of the Bankruptcy of Hans Peter Koenne of the City of London, in the County of Middlesex in the Province of Ontario
In the Matter of the Bankruptcy of Eleanor Lorraine Koenne of the City of London, in the County of Middlesex in the Province of Ontario
Harry Van Bavel, for the Trustee
Wade Sarasin, for Peter and Lorraine Koenne
Heard: May 19, 2010
On appeal from the order of Madam Justice Kelly A. Gorman of the Superior Court of Justice, dated January 19, 2010.
Goudge J.A.:
[1] The appellant is the trustee in bankruptcy of the respondent, Hans Peter Koenne. The issue in this appeal is whether the appellant is estopped from obtaining a declaration that the respondent’s interest in his father’s estate, acquired during bankruptcy, vested in the trustee.
[2] The motion judge found that estoppel applied and dismissed the trustee’s motion. For the reasons that follow, I conclude that estoppel has no application on the facts of this case. I would therefore allow the appeal and grant the declaration sought by the trustee.
[3] The facts are not in dispute. On June 21, 2004, Mr. Koenne made an assignment in bankruptcy and the appellant was appointed the trustee of his estate.
[4] On December 16, 2006, Mr. Koenne’s father died, leaving a will dividing his estate equally between Mr. Koenne and his brother. While a codicil to the will purported to alter this, both parties now agree that the codicil is invalid and has no legal effect.
[5] In the summer of 2008, the trustee was advised that Mr. Koenne’s father had passed away and that Mr. Koenne might be a beneficiary under the will. On December 8, 2008, Mr. Koenne advised the trustee that the only asset of his father’s estate was a cottage property.
[6] The trustee unsuccessfully requested on a number of occasions that Mr. Koenne supply a copy of the will. Finally, on January 21, 2009, the trustee obtained a court order requiring him to do so.
[7] On February 19, 2009, the trustee wrote to Mr. Koenne’s brother – the executor of their father’s estate - setting out its position that Mr. Koenne’s interest in his father’s estate vested in the trustee for the benefit of creditors, and requiring him to account for any assets received from the estate. Mr. Koenne’s brother responded on February 27, 2009, confirming that the cottage property was the only asset of the estate.
[8] On June 17, 2009, Mr. Koenne was granted an absolute discharge from bankruptcy.
[9] The cottage property became the subject of litigation between a third party and, inter alia, Mr. Koenne. The litigation was set to proceed to trial when the trustee served its motion, returnable September 2, 2009. The litigation was eventually settled on terms that are irrelevant to the issue in this appeal.
[10] Mr. Koenne opposed the trustee’s motion on the basis that the trustee should be estopped from obtaining the declaration it sought, namely that his interest in his father’s estate vested while he was a bankrupt and therefore vested in the trustee.
[11] The motion judge agreed. The entirety of her reasons is as follows:
Motion heard and dismissed. In my view the Trustee is estopped from claiming the asset. Absolute discharge was granted June 17, 2009. At that time the Trustee was aware of Will and Codicil and took no step to discharge bankrupt with conditions.
ANALYSIS
[12] In this appeal there is no debate about the following legal propositions:
The Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 as amended (the BIA) provides, in s. 71, that once an assignment in bankruptcy is made, the property of the bankrupt vests in the trustee in bankruptcy.
Section 67(1)(c) provides that this includes any property acquired by the bankrupt before discharge.
The definition of “property” in s. 2 includes an interest in the estate of a deceased person.
The discharge of the bankrupt does not affect the provisions of the BIA that vest the property of the bankrupt in the trustee. These assets remain vested in the trustee for the general benefit of the creditors: see Houlder and Morawetz, Bankruptcy and Insolvency Law of Canada (loose-leaf)(Toronto: Carswell, 2009), at p. 3-450.
[13] The issue in dispute is the applicability of the doctrine of estoppel to the facts in this case. There is no doubt that a trustee can be barred from claiming an asset on the ground of estoppel: see Houlder and Morawetz, 2010 Annotated Bankruptcy and Insolvency Act (Toronto: Carswell, 2009), at p. 553.
[14] However, in order to rely on estoppel, a bankrupt must establish that:
a) The trustee, by words or conduct, made a promise or assurance that was intended to affect its legal relationship with the bankrupt and intended the bankrupt to act upon the representation; and
b) The bankrupt, relying on the representation, acted on it or in some way changed its position. See Deloitte and Touche LLP v. Marino (2005), 2004 CanLII 4324 (ON CA), 72 O.R. (3d) 274 (C.A.), at para. 32.
[15] In this case, there is no evidence of any representation by the trustee other than its asserted position on February 19, 2009 that Mr. Koenne’s inheritance vested in the trustee. While the trustee could have asked for a condition that confirmed its right to the inherited property as a term of the discharge, the fact that the trustee did not do so cannot be taken as a representation that it would not rely on the legal position provided by the BIA, which it asserted on February 19, 2009. The respondent can point to nothing else that might constitute the necessary representation.
[16] Nor is there any evidence that the bankrupt changed his position concerning the inheritance on the basis of anything done or said by the trustee.
[17] In short, there is simply no evidence of either a representation on the part of the trustee or reliance on the part of the bankrupt. Estoppel has not been made out in this case.
[18] The appeal must be allowed. The trustee is entitled to the declaration sought. It is entitled to costs of $4,700, inclusive of disbursements and GST, payable out of the estate.
RELEASED: JUL 23 2010 (“S.T.G.”)
“S. T. Goudge J.A.”
“I agree. Robert Sharpe J.A.”
“I agree. Rob P. Armstrong J.A”