COURT FILE AND PARTIES

COURT FILE NO.: C-9753/06
DATE: 20120416
SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Christina Morasch, Plaintiff/Applicant

AND:

Brian Gauvreau, Defendant/Respondent

BEFORE: The Hon. Madam Justice Patricia C. Hennessy

COUNSEL:
Erin Cullin, for the Plaintiff/Applicant

Daniel Dooly, for the Defendant/Respondent

HEARD: April 11, 2012

ENDORSEMENT ON MOTION

[ 1 ] The issue in this motion is whether the claim by the bankrupt for loss of future income in a motor vehicle action should be characterized as a property claim under s. 68(2) (a) of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 (BIA).

Background Facts

[ 2 ] In September 2006, the plaintiff commenced an action for damages arising from a motor vehicle accident which occurred in April 2006. The claim sought damages under a number of heads of damages including pain and suffering and loss of future income.

[ 3 ] The plaintiff has not returned to work since June 2007.

[ 4 ] In July 2007, the plaintiff filed an assignment in bankruptcy. The plaintiff asserts in an affidavit on this motion that at the time of her discussion with the Trustee, she disclosed her ongoing motor vehicle litigation. The Trustee was served on this motion and did not appear or respond.

[ 5 ] The plaintiff did not list the motor vehicle accident litigation as an asset on her Statement of Affairs in the bankruptcy matter. In October 2007, the plaintiff did disclose the bankruptcy proceeding to counsel for the defendant at the time of the examination for discovery.

[ 6 ] On July 30, 2008, the plaintiff was discharged from bankruptcy.

Position of the Respondent/Defendant in the motor vehicle claim

[ 7 ] The defendant takes the position that the loss of the ability to earn income in the future is the loss of a capital asset, which capital asset and the damages for its loss vest in the Trustee for the benefit of creditors: see Re Mostajo , 2006 35001 (Ont S.C.), at para. 21 . The defendant argues that the claim for future loss of income constitutes property under s. 2 of the BIA and that further, pursuant to s. 71 of the BIA , that the plaintiff/bankrupt ceases to have an ability to deal with that property once an assignment is made and that the property, i.e. the claim, vests in the Trustee.

[ 8 ] The defendant seeks a declaration that the claim for future loss of income is property and if necessary seeks a direction that the Trustee continue its duties pursuant to s. 40 of the BIA to deal with this property pursuant to the provisions of the BIA.

Position of the Bankrupt/Plaintiff in the motor vehicle claim

[ 9 ] The bankrupt takes the position that the issue was correctly analysed by Wilton-Siegel J. in Re Conforti , 2012 ONSC 199 , in which he found that a claim for future income loss should be treated as income for the purposes of the BIA .

Law and Analysis

[ 10 ] The decision in Re Conforti is recent and has not been considered in any of the cases relied upon by the defendant. Nor has it been considered by an appellate court. The decision in Re Conforti is in direct opposition to the decision of Registrar Nettie in Re Mostajo.

[ 11 ] I am persuaded that the reasoning in Re Conforti is correct and that it applies in this case. There is no material difference between the facts in Re Conforti and the facts in this case. Although a settlement of the motor vehicle claim had already been made in that case, the settlement was not relevant to the determination of the claim. Further, the fact that the claim in Re Conforti was a claim for loss of competitive advantage was addressed by the motion judge. He found that a claim for loss of competitive advantage was a component of a claim for loss of future income: see Re Conforti , at para. 46 .

[ 12 ] In Re Conforti , Wilton-Siegel J. relied on the decision in Wallace v. United Grain Growers Ltd. , 1997 332 (SCC) , [1997] 3 S.C.R. 701, to apply a purposive approach to the characterization of an award of damages for lost wages in a wrongful termination case. The Supreme Court indicated that the court should adopt a purposive approach in determining whether a particular receipt is income for the purposes of s. 68 of the BIA and stated that a payment on account of a wrongful termination was income for the purposes of s. 68(1): see Wallace , at paras. 65-66 . Justice Iacobucci, writing for the majority at para. 66, stated that an award that is akin to income does not lose that characterization because the award takes the form of a lump sum award.

[ 13 ] In his decision, Wilton-Siegel J. did a full analysis of the cases following Andrews v. Grand & Toy Alberta Ltd ., 1978 1 (SCC) , [1978] 2 S.C.R. 229, which had held that compensation for loss of earnings was rather a loss of earning capacity and thus a capital asset governed by s. 67 of the BIA . He distinguished these cases either on their facts or by virtue of the fact that they preceded the decision in Wallace or did not consider it.

[ 14 ] In Re Mostajo , Registrar Nettie found that the loss of ability to earn income is the loss of a capital asset. On the other hand he also stated at para. 21:

This is, in my view, consistent with the BIA in that the ability of a bankrupt to earn income post bankruptcy is scrutinized by trustees and courts in determining the proper amounts to be paid to the creditors as surplus income or on discharge.

[ 15 ] I agree with Wilton-Siegel J. that this statement suggests that the award for lost future wages could be subject to a determination and order with respect to the payment of surplus income. This approach would be consistent however, with the characterization that the award was akin to income not property. I agree with the Registrar on this point.

[ 16 ] The facts in this case are in all material respects the same as the underlying facts in Re Conforti . I agree with the analysis of the motion judge in that case and find that the analysis brings me to the same conclusion.

[ 17 ] There shall be a declaration that the claim for future income loss shall be considered as part of the total income under s. 68(2) of the BIA . This decision shall be served upon the Trustee and the Trustee may seek directions if that is deemed necessary.

[ 18 ] Counsel have advised that neither seek costs on this motion. There shall be no order as to costs.

Madam Justice P.C. Hennessy

Date: April 16, 2012