Court Information

Ontario Court of Justice Old City Hall - Toronto

Between: Her Majesty the Queen And: Thi Duc Le

Counsel:

• D. Frost for the Crown
• D. Heath for the Defendant

Heard: January 21 and 22 and March 26, 2013

Reasons for Judgement

MELVYN GREEN, J.:

A. INTRODUCTION

[1] The defendant, Thi Duc Le, declared bankruptcy in September 2007. In a "Statement of Affairs" filed in aid of her bankruptcy application, she swore that she had no cash and did not expect to receive any sums of money other than her normal income over the next 12 months. She was discharged in bankruptcy and released of close to $100,000 in outstanding debts in June 2007.

[2] In July 2008, the defendant applied to recover approximately $40,000 in cash seized during the execution of a search warrant in Markham, Ontario in January 2007. The warrant was executed at the home of the former husband of the defendant's daughter. In her application, the defendant swore that the seized money was hers and that she had given it to her daughter to hold it for her, the defendant, in anticipation of her purchase of a salon. These monies were ordered returned to the defendant that same month. That order was set aside the following month, August 2008, and, but for legal fees, the monies were recovered by the trustee in bankruptcy. The defendant's discharge from bankruptcy was annulled in March 2011.

[3] The defendant was subsequently charged with three offences under the Bankruptcy and Insolvency Act (BIA), R.S.C., c. B-3, as amended:

• Making a material omission in the Statement of Affairs she filed on September 10, 2007, contrary to s. 198(1)(c) of the BIA;

• Failing to comply with her duty to make discovery of and deliver all the property under her possession or control to the trustee between September 10, 2007 and August 11, 2008, and in particular, failing to inform the trustee that she was the owner of approximately $40,000 held by her daughter, contrary to s. 198(2) of the BIA; and

• Failing to comply with her duty by failing to disclose in her September 10, 2010 Statement of Affairs that she was the owner of approximately $40,000, contrary to s. 198(2) of the BIA.

[4] The trial proceeded by way of an Agreed Statement of Facts as supplemented by documentary records and the testimony of two witnesses associated with the trustee in bankruptcy. The defendant did not testify. As the BIA offences charged are criminal or quasi-criminal in nature, any convictions depend on the Crown establishing the requisite physical and mental elements of each offence to the venerable standard of proof beyond reasonable doubt.

B. EVIDENCE

(a) Introduction

[5] The defendant's Trustee in Bankruptcy (hereafter, the Trustee) was Grant Thornton Ltd. The defendant first attended the Trustee's offices on August 28, 2007, approximately seven months after the police seized the money from her former son-in-law's premises. Ann Lakeram, an employee of Grant Thornton, interviewed the defendant for the purpose of gathering the information necessary to complete the "Statement of Affairs" so the defendant could file for an assignment in bankruptcy. Lakeram took notes of the interview but she did not believe they were verbatim. These notes included the following notation:

Took money (cash advances) from creditors to try and start a business with [her] daughter and with a partner in January 2007. Partner was charged with a crime and she [the defendant] lost all her money ($50K).

The defendant appears to have said nothing about the "lost" money being seized or held by the police nor, it appears, were any inquiries made of her in this regard. The defendant's daughter, who (according to Lakeram) speaks fluent English, served as interpreter during the interview in August 2007.

[6] The defendant returned with her daughter on September 10, 2007 to review and swear the Statement of Affairs, a document prepared by the Trustee's staff based on Lakeram's initial interview. The portion of the template Statement devoted to the "reasons for financial difficulty" read: "Borrowed funds to assist daughter in setting up business, which did not materialize; suffers depression and used some funds for gambling". Lakeram testified she did not know the source of the assertions respecting depression and gambling as they formed no part of her interview with the defendant on August 28, 2007. There is no evidentiary basis to reasonably infer that this information derived from any information conveyed by the defendant.

[7] The defendant also formally assigned all her property to the Trustee for the general benefit of her creditors on September 10, 2007. She was provided with a dense, multi-page, written notice of a bankrupt's "duties", as imposed by the BIA, after signing-off on the Statement. The defendant said nothing more about the "lost" money during the course of two subsequent mandatory counseling meetings with Lakeram nor, it appears, was she asked.

[8] The matter proceeded by way of "summary" administration resulting, as is ordinarily the case, in her being formally discharged in bankruptcy "and released from all debts". This occurred on June 13, 2008. Less than a month later, on July 8, 2008, she swore an affidavit in support of her application to recover the "approximately $40,000" seized during the execution of the search warrant in January 2007. She averred that she was "the owner of this money", that she had "accumulated it through cash advances from credit cards", that she "was going to use this money to purchase" a salon in Toronto, and that she had "asked [her] daughter … to hold it for [her]". As noted earlier, on July 17, 2008 the seized money was ordered returned to the defendant. This order of the Ontario Court of Justice was effectively quashed by the Superior Court of Justice on August 11, 2008, and but for $3,000 (which was to be directed to the defendant's counsel) the monies (some $37,000) were ordered returned to the Trustee, Grant Thornton.

[9] On the application of the Trustee, on October 7, 2008 the status of the defendant's bankruptcy estate was changed from summary administration to an ordinary administration, as there were now assets in the estate to distribute to creditors. The defendant's automatic bankruptcy discharge was ordered annulled on January 27, 2011.

C. ANALYSIS

(a) Introduction

[10] The defendant is charged with three offences under s. 198 of the BIA. The first and third counts allege, respectively, an omission and failure to disclose by the defendant that she owned approximately $40,000 in cash when she completed and filed her Statement of Affairs on September 10, 2007. The second count alleges that she failed to inform the Trustee of essentially the same fact at any time between September 10, 2007 and August 11, 2008. I first turn to the two counts particularizing an offence date of September 10, 2007.

(b) The Alleged September 10, 2007 Offences (Counts 1 and 3)

[11] The first and third counts effectively allege the same delict: that the defendant, in her Statement of Affairs of September 10, 2007, failed to disclose that she owned approximately $40,000 in cash, thus committing the offence of making a material omission under s. 198(1)(c) of the BIA and, as well, the offence of failure to disclose such ownership, as required by s. 158 of the BIA, in violation of s. 198(2) of the same Act.

[12] The Crown's position is that the defendant, in her affidavit of July 8, 2008, swore both that she was the "owner" of the $40,000 and that she had been the owner when the search was executed and the monies seized in January 2007 and, although not expressly set out in the affidavit, that she retained undisturbed ownership (and thus "control" if not "possession") of these same monies on September 10, 2007 when she failed to assert such ownership or advise the Trustee that these funds had been seized and were being held by the police. Section 158 of the BIA imposes a duty on bankrupts to, inter alia, "make discovery of … all his property that is under his possession or control to the trustee". In short, then, the Crown theory is that the defendant knew about a state of affairs she was duty-bound to disclose to the Trustee and she failed to make that requisite disclosure, thus satisfying the requirements of these two offences.

[13] I have some difficulty with this theory. More to the point: based on the evidence I have earlier reviewed and the circumstances preceding and surrounding the particularized date of September 10, 2007, I am not satisfied beyond reasonable doubt that the defendant either knew that she was the owner of the "lost" $40,000 on that date or that she had failed to make adequate disclosure of the relevant circumstances. To be clear, I make no finding that the defendant positively believed she no longer owned the seized money or that she frankly disclosed the material facts. I am, however, left in doubt as to both critical elements. My doubts derive from a combination of the following considerations:

• The defendant, as portrayed in Lakeram's testimony, does not present as a sophisticated economic actor;

• The defendant was in substantial debt in September 2007, the assets she had accumulated had been seized by the police, and the evidence from which it may be inferred that she then (as opposed to 10 months later) appreciated that she still owned, controlled or otherwise had any claim to the seized monies is ambiguous at best;

• The defendant appears to have made substantial disclosure of the circumstances surrounding the "loss" of the $40,000 at her preliminary interview with the Trustee's agent, Ms. Lakeram, in August 2007;

• Lakeram's notes and memory fail to afford a sufficiently reliable account both of what the defendant said and what she did not say in the August 2007 interview to permit me to confidently accept her narrative and recall. More than five years had passed since that interview and Lakeram's testimony. Further, Lakeram agreed that her notes of the interview were not verbatim, and she could not account for the references to gambling and depression that appear in her firm's transcription of those notes in the Statement prepared for the defendant's signature; and

• The defendant, I find, cannot be faulted for swearing to the veracity of the incomplete and facially misleading "reasons for financial difficulty" in a Statement for which she had provided more detailed information, that was prepared for and tendered to her by the Trustee in whom she reposed her confidence, and especially, as she was not provided with an inventory of her duties pursuant to the BIA until after the Statement was executed.

Accordingly, I find the defendant not guilty of these two counts.

(c) The Alleged Continuing Offence (Count 2)

[14] The defendant, in her affidavit in support of her claim for return of the police-seized money, swore that she was, in effect, always the owner of the $40,000. She may not have known this on September 10, 2007, but at some point prior to July 8, 2008, as set out in the affidavit she swore on that date, she became aware that her ownership of the money survived its seizure. Once fixed with this knowledge, she had a duty to disclose this to her Trustee. As noted earlier, and as expressly particularized in the second count, s. 158 of the BIA obliges bankrupts to "make discovery of and deliver all her property that is under her possession or control to the trustee". The same provision requires bankrupts to "inform the trustee of any material change in [his or her] financial situation".

[15] It was not as though the defendant had won the lottery or came into an inheritance or other windfall after her discharge in bankruptcy. There were substantial funds that, as she averred, she owned on September 10, 2007. They should have been available for settlement of her debts. Further, as she had assigned all her assets to her Trustee who acted for the benefit of her creditors, the defendant, consistent with her legal duties, was obliged to disclose this to the Trustee when she learned that she owned these monies so that he could then have moved to recover them. She did not make this disclosure. Instead, the defendant sought to claim the money for herself, without notifying the Trustee, in violation of her duties under the BIA, and to the potential prejudice of her creditors. Indeed, she did not even disclose her ownership of the monies upon securing a court order returning them to her in July 2008.

[16] To condone or excuse the defendant's conduct would defeat one of the primary objects of the statutory bankruptcy regime: the restitution of creditors, to the degree possible, of the money they in good faith extended the bankrupt. As said in Re Lannigan (2008), 2008 NSSC 348, 271 N.S.R. (2d) 361 (S.C.), at para. 28 and, in particular, at para. 18:

A discharge in bankruptcy discharges the debts of a bankrupt at the time of the assignment. It does not discharge a bankrupt from the responsibilities imposed by the BIA.

See, also, S. Boyd and J. Sarra, "Out in the Cold: Schreyer v. Schreyer's Call for Law Reform" (2011), 27 Can. J. Fam. L. 97, at para. 26.

[17] In the end, I am satisfied beyond reasonable doubt that the second count (that of failing to inform the trustee that she was the owner of approximately $40,000 held by her daughter at any time between September 10, 2007 and August 11, 2008, when the Superior Court quashed the order returning the impugned funds to her) is made out. I cannot, on the evidence, find that the defendant knew of her ownership of these funds at the time she swore her Statement in September 2007 or that she intended to criminally defraud her creditors, but I am convinced to the requisite standard that the defendant failed to comply with her duty under the BIA.

D. CONCLUSION

[18] Consistent with these reasons, I find the defendant guilty of the single offence set out in the second count upon which she was arraigned.

Released on May 14, 2013

Justice Melvyn Green