ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY AND INSOLVENCY
COURT FILE NO.: 33-1309261/2
DATE: June 21, 2012
RE: IN THE MATTER OF THE BANKRUPTCY of Robert Dabeka and Kanokwarn Saensgakorn
BEFORE: Mr. Justice Albert Roy
APPEARANCES:
Leah Garvin, counsel for the Superintendent of Bankruptcy (Moving Party)
Robert Dabeka, the Bankrupt
Chantal Mercier-Ouellette, counsel for the Trustee Ginsberg Gingras and Associates
HEARD: February 17, 2012
ENDORSEMENT
This is an amendment to the Endorsement originally released March 9, 2012. The amendment occurs at paras. 1,5 and 6. December 14, 2001 was changed to December 14, 2011and January 14, 2000 was changed to January 14, 2010.
Preamble
[ 1 ] This is an appeal by the Superintendent of Bankruptcy from the Deputy Registrar’s decision dated December 14, 2011, where he granted the Bankrupt an absolute discharge. The hearing of this appeal took place on February 17, 2012. Present at the hearing were the solicitors for the Superintendent, the Bankrupt, and a representative of the Trustee. The only party who filed written material was the Superintendent of Bankruptcy. All other parties present were given an opportunity to make submissions. The Deputy Registrar did not file any material at the hearing nor was there any one present to make submissions on his behalf. Following completion of the hearing, I reserved my decision with the intentions of giving reasons as requested by the Superintendent of Bankruptcy.
[ 2 ] To my surprise, I received unsolicited correspondence from the Deputy Registrar dated February 29, 2012, in which he included a copy of his decision dated February 22, 2012, in another bankruptcy matter dealing with issues similar to the ones presently under appeal. Needless to say, I find that initiative on the part of the Deputy Registrar to be quite improper. Having elected not to make any submissions at the hearing, this appeared to be an attempt on the part of the deputy registrar to retroactively justify his decision of December 14 which obviously was intended to influence my decision.
[ 3 ] On March 5, 2012, I received correspondence from counsel for the superintendent of bankruptcy indicating that they would not be making any further submissions on the appeal. The correspondence went on to say: “it is highly irregular for a decision-maker to see k to make submissions to the appellate body reviewing his or her decision. The time to explain the reasoning is in the reasons of the decision-makers issues, not in the after-the-fact correspondence.’’ I agree with those comments.
[ 4 ] On March 5, 2012, I received a lengthy fax which contained a letter addressed to counsel for the Superintendent of Bankruptcy from the Bankrupt. Given that the Bankrupt was afforded the opportunity, at the hearing, of making submissions, I have disregarded his correspondence and written material.
[ 5 ] The reason that I reserved my decision was that the Deputy Registrar, in his decision of December 14, 2011, appears to have totally disregarded a decision of this Court dated October 21, 2011 setting aside the Deputy Registrar’s decision dealing with similar issues and dated August 24, 2011. The Superintendent of Bankruptcy justifiably requested a written decision.
Facts
[ 6 ] The Bankrupt made a joint filing for bankruptcy on January 14, 2010. Ginsberg Gingras and Associates were appointed trustees. They determined that the Bankrupt were required to contribute a portion of their surplus income to the various estates for the benefit of the creditors in an amount of $676.62 per month for 21 months. No objection was made by the Bankrupt and they did not seek any mediation pursuant to s.68 of the Bankruptcy Insolvency Act (BIA). Later the Trustee filed a report indicating that the bankrupt did not comply with the surplus income payment and had a balance owing of $10,240.45.
[ 7 ] The bankrupt application for a discharge was heard by the Deputy Registrar on December 14, 2011. The Bankrupt did not attend the hearing nor did they dispute the Trustees’ report. Transcripts from the hearing indicate that the Deputy Registrar took issue and criticized the legislative scheme for treatment of surplus income. After considering a number of factors, the deputy registrar proceeded to grant an absolute discharge to the Bankrupt.
Issues and Argument
[ 8 ] The Superintendent of Bankruptcies argues that an absolute discharge is not an available remedy when the Bankrupt has outstanding surplus income obligations.
[ 9 ] In accordance with the provisions of s.172 (2) of the BIA , when there is proof that the Bankrupt has failed to comply with a requirement to pay, imposed under s.68, then the Court shall:
• refuse the discharge of a bankrupt;
• suspend the discharge for such period as the court thinks proper; or
• require the bankrupt, as a condition of his discharge, to perform such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.
S.172 (2) is clear, unequivocal and mandatory; yet the Deputy Registrar ordered an absolute discharge.
[ 10 ] S.68 (1) reads as follows:
The Superintendent shall, by directive, establish in respect of the provinces or one or more bankruptcy districts or parts of bankruptcy districts, the standards for determining the surplus income of an individual bankrupt and the amount that a bankrupt who has surplus income is required to pay to the estate of the bankrupt.
The section also provides a process for the Bankrupt and Trustee to follow where there is disagreement as to surplus income. They can attend mediation or, if mediation fails, the matter can be determined by the Court. At no time did the Bankrupt initiate this process.
Decision
[ 11 ] Given the clear and unequivocal language of s. 172(2) of the BIA , it's obvious that the deputy registrar exceeded his jurisdiction in giving the bankrupt an absolute discharge. The review of the transcripts of previous hearings confirms that the deputy registrar has very strong views about the Surplus Income Guidelines. He is of the opinion that they are not fair. I'm not in a position to determine whether or not he is right on the issue of Surplus Income Guidelines. What I can say is that because of his views on the Guidelines, he cannot just proceed to contravene the statute and ignore relevant case law.
[ 12 ] I can appreciate the Superintendent’s of Bankruptcy concern. He has to administer the Bankruptcy Act across the whole country. The Act , regulations and guidelines are meant to provide consistency, balance and fairness throughout Canada. Individuals such as the Deputy Registrar who are given jurisdiction and power to work with the public, and apply the statute are obligated to follow the statute. One can just visualize the chaos across the country if other Deputy Registrars copied the initiative of this registrar and advised Bankrupts appearing before them to default in their payments of surplus income obligations, forget about mandatory mediation, and bring the matter before him where he will disregard the BIA and wave surplus income obligations. The integrity of the insolvency would be threatened. The Deputy Registrar has gone on to say that he is not bound by decisions of other deputy registrar and further has ignored a decision of this Court. The Deputy Registrar appears to consider that the provisions of s.170 (2) and s.68 (1) of the BIA are and all or nothing proposition. Alternative remedies are available which could be of assistance to the Bankrupt such as mediation or bringing the matter back before the court. To follow the process suggested by the deputy registrar would undermine the cooperation between the trustee and the Bankrupt in the mediation process, would encourage additional litigation and forum shopping. Unfortunately, the consequences of the Deputy Registrar’s initiative would end up being exactly the opposite of what was intended by the statute. Reward those who ignore the statute and punish those who comply with the BIA .
Order as follows:
An order annulling the absolute discharge
An order referring the matter to mediation and if mediation is unsuccessful, to a judge pursuant to s.170.1 (3) and s.192 (7) for a rehearing on the merits.
Mr. Justice Albert Roy
Date: June 21, 2012
COURT FILE NO.: 33-1309261/2
DATE: June 21, 2012
ONTARIO ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY AND INSOLVENCY In the matter of the Bankruptcy of Robert Dabeka and Kanokwarn Saenspsakorn BEFORE: Mr. Justice Albert Roy APPEARANCES: Leah Garvin, counsel for the Superintendent of Bankruptcy (Moving Party) Robert Dabeka, the Bankrupt Chantal Mercier-Ouellette, counsel for the Trustee Ginsberg Gingras and Associates HEARD: February 17, 2012 ENDORSEMENT Mr. Justice Albert Roy
Released: June 21, 2012