DATE: 20120821
DOCKET: BK-31-OR-906245
SUPERIOR COURT OF JUSTICE – ONTARIO
IN BANKRUPTCY AND INSOLVENCY
COMMERCIAL LIST
IN THE MATTER OF THE BANKRUPTCY OF
JEFFREY HARDING
OF THE CITY OF TORONTO
IN THE PROVINCE OF ONTARIO
MANAGER
RE: Harris & Partners Inc., Trustee of the estate of Jeffrey Harding, a bankrupt, Moving Party
AND:
Jacqueline Spicer, Responding Party
BEFORE: L. A. Pattillo J.
COUNSEL: Philip Gertler, for the Moving Party
Joy Casey, for the Responding Party
HEARD: August 8, 2012
ENDORSEMENT
[1] Harris & Partners Inc., the Trustee of the estate of Jeffrey Harding, a bankrupt, moves to strike portions of the affidavit of Jacqueline Spicer (“Spicer”) filed in opposition to the Trustee’s pending application for partition and sale of property (the “Application”). The property is located at 28 Harding Boulevard in the City of Toronto (the “Property”).
[2] Spicer is Harding’s estranged spouse. The Property was purchased by Spicer and Harding in 1989 as joint tenants and was their matrimonial home. In 1996, ownership of 50% of the Property was transferred to 1049795 Ontario Inc. (the “Company”), which was owned equally by Spicer and Harding. Harding moved out of the Property in July 1998. Harding filed for bankruptcy in November 2006. Spicer has continued to live at the Property and has paid all of the expenses for it since the separation.
[3] The Property is the sole remaining issue in the estate. In the absence of being able to resolve the issue of the Property with Spicer, the inspectors of the estate authorized the Trustee to commence the Application at a meeting on October 4, 2011.
[4] Spicer’s affidavit was sworn April 30, 2012 and is filed in response to the Application. It is 23 pages in length and contains 15 exhibits.
[5] The Trustee does not object to the portions of Spicer’s affidavit that deal with her relationship with Harding, the legal issues that arose between them, her relationship to the Company and the expenses she has incurred to maintain the Property since Harding left her. It submits, however, that the allegations of impropriety by the Trustee in the administration of the bankruptcy are irrelevant, scandalous, vexatious and inflammatory and should be struck. The Trustee further submits that the portions of Spicer’s affidavit that refer to settlement discussions in respect of the Property are privileged and confidential and should not be permitted to remain.
[6] While Rule 25.11 gives the court the power to strike all or part of an affidavit that is scandalous, frivolous or vexatious, the general rule is that issues concerning questions of admissibility of affidavits filed on a motion or application should be dealt with by the motions or applications judge and not in advance: 876502 Ontario Inc. v. I.F. Propco Holdings (Ontario) 10 Ltd. (1997), 1997 CanLII 12196 (ON SC), 37 O.R. (3d) 70 (Gen. Div.). Where, however, the material is clearly scandalous and vexatious such as where it is clearly irrelevant and impugns the behaviour of a party, the court will intervene in advance of the motion or application: Albert v. York Condominium Corp. No. 46, [2002] O.J. No. 1798 at paras. 28–29. See too: 1001411 Ontario Limited v. City of Toronto et al., August 9, 2001, (S.C.J.), unreported endorsement, Penny J.
[7] The scope of the court’s discretion to refuse an application for partition and sale under the Partition Act, R.S.O. 1990 c. P.4, is limited to circumstances of malice, oppression and vexatious intent. Hardship, to the extent it constitutes oppression, is also relevant: Re Greenbanktree Power Corporation (2004), 2004 CanLII 48652 (ON CA), 75 O.R. (3d) 478 (C.A.).
[8] Spicer submits the allegations in her affidavit concerning the Trustee’s alleged misconduct in the handling of the estate are relevant to the Application. In that regard, she submits the allegations of the Trustee’s misconduct are evidence of malice and vexatious conduct and are therefore relevant to the Application.
[9] In my view, those portions of the affidavit dealing with Harding’s conduct, as a husband, bankrupt, joint tenant and shareholder of the Company, are arguably relevant to the Application. So too is the Trustee’s conduct towards Spicer or the Property including discussions between Spicer and the Trustee concerning the Property. As a result, the admissibility of those allegations and whether privilege attaches to any discussions or correspondence are issues that should be left, in my view, to the judge hearing the Application.
[10] The allegations concerning the purported misconduct of the Trustee in the administration of the estate, however, stand on a different footing. They are contained in paragraphs 30, 34, 35 and 36 of Spicer’s affidavit.
[11] In paragraph 30, Spicer says that the Trustee has “facilitated what I firmly believe amounts to a fraud in the bankruptcy.” Paragraph 34 continues the attack. In paragraph 35, under the heading: “Trustee’s Misconduct”, Spicer states that the Trustee “acted improperly in several significant ways in his handling of Harding’s bankruptcy.” There follows 29 subparagraphs, many of which deal with events of alleged “misconduct” by the Trustee in the handling of Harding’s bankruptcy. While much of the alleged “misconduct” deals with the Trustee’s administration of the bankruptcy apart from the Property, a few of the subparagraphs refer to the dealings in respect of the Property. The attack concludes at paragraph 36, referring, in part, to the list of improprieties on the Trustee’s part as “astonishing” and alleging a lack of fair dealing and “what appears to be collusion with Harding.”
[12] Spicer’s complaints concerning the Trustee’s administration of the estate are not new. In October 2011, she filed a 19 page, single-spaced complaint with the Office of the Superintendent of Bankruptcy alleging the same misconduct. In June 2012, she filed a second complaint in response to the Application. The Superintendent has responded to Spicer’s allegations and has either dismissed them or not taken a position on Spicer’s complaints given they are before the court.
[13] In support of this motion, the Trustee has denied all but one of Spicer’s allegations concerning the administration of the estate. The Trustee admits that by inadvertence, it failed to send a copy of the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3 Section 170 report to the estate inspectors including Spicer at the time. The Trustee acknowledged the error when it was brought to its attention and forwarded the report to the inspectors. There is no question, given the serious nature of the allegations, if they are permitted to remain, the Trustee will be required to respond to them in detail, raising collateral issues which have no bearing on the Application and which will serve to deflect the court from the main issue, delaying the Application and increasing the costs for both sides.
[14] In my view, to the extent that Spicer’s allegations of the Trustee’s misconduct are a personal attack on the Trustee’s administration of the estate and have nothing to do with the Property or the Trustee’s dealings with the Property, they are not relevant to the issues on the Application. They are simply a serious personal attack on the Trustee and its administration of the estate which is both prejudicial to the Trustee and entirely collateral to the issues on the Application. In my view, those allegations are clearly scandalous and vexatious and must be struck.
[15] For the above reasons, therefore, the following paragraphs (and associated exhibits where applicable) should be struck from Spicer’s affidavit on the ground that they are scandalous and vexatious: paragraph 30 (except for the first two sentences), subparagraphs (k),(l) and (m) of paragraph 34, paragraph 35 (except for subparagraphs (g),(h),(j), the first two sentences in (k), subparagraphs (l),(m),(n),(o),(p),(q),(r) other than the word “negligently” which must be struck, subparagraphs (y),(aa), the first two sentences of (bb), and (cc) ) and paragraph 36.
[16] The Trustee is entitled to its costs of the motion. It seeks costs on a substantial indemnity basis of $13,537.07. Notwithstanding Spicer made allegations of fraudulent conduct on the part of the Trustee in her affidavit, I do not consider that substantial indemnity costs are appropriate. The Trustee claims $11,090.06 for partial indemnity costs. Spicer has no issue with the hourly rates claimed but submits that, given the issues, the time claimed is extremely high and unreasonable. Spicer’s costs outline claims partial indemnity costs of $4,750.00 including $1,000 for a counsel fee for the motion.
[17] There is no question that the motion required substantial time on the part of the Trustee’s counsel. The time spent by Spicer’s counsel is not an apt comparison. Having said that, however, I consider the Trustee’s counsel’s time claimed to be high.
[18] Having regard to the issues on the motion, in my view, a fair and reasonable award of costs for the motion on a partial indemnity basis is $7,500, inclusive of disbursements and taxes. Payable within 30 days.
L. A. Pattillo J.
Released: August 21, 2012