SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY
COURT FILE NO.: 33-1248793
DATE : 20120208
Ontario
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY
IN THE MATTER OF THE PROPOSAL OF
FREDERICK WOODBURN BARRIGAR
OF THE CITY OF OTTAWA
IN THE PROVINCE OF ONTARIO
JOHN DEMPSTER,
DEPUTY REGISTRAR IN BANKRUPTCY
HEARD: October 11, 2011
APPEARANCES: David H. Brown, Trustee, Collins Barrow Brown Inc.;
REASONS FOR DECISION
[ 1 ] Pursuant to the provisions of Division I of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3 (the “BIA”), Frederick Woodburn Barrigar (the “Debtor”) made a Proposal to his creditors on August 20, 2009 and an Amended Proposal to his creditors on September 16, 2009. The Amended Proposal was accepted by his creditors and was approved by the Court on October 27, 2009 (the “Court Approved Proposal”). Collins Barrow Brown Inc. (the “Trustee”) was appointed Trustee under the Court Approved Proposal. The Trustee brings this motion to obtain a Court Order amending the Court Approved Proposal.
[ 2 ] Clause 3(b) of the Court Approved Proposal provided that if the Net Sale Proceeds from the sale of the Debtor’s home were less than $10,000, then the Debtor was to pay the difference between $10,000 and the Net Sale Proceeds within 2 years of Court Approval; in this case on or by October 27, 2011. As it turns out there were no Net Sale Proceeds and therefore pursuant to the terms of the Court Approved Proposal, the debtor is required to pay $10,000 on or by October 27, 2011. Until recently the Debtor was not in a position to make payments towards this amount, due to unemployment or insufficient income. However in April, 2011 the Debtor secured full time employment and is now able to make regular payments. The Amendment sought by the Trustee is essentially to obtain an extension until October 27, 2013, in other words to allow the Debtor an additional 2 years to make the payments totalling $10,000.00. The proposal is not currently in default as this motion has been brought in advance of the current payment deadline of October 27, 2011.
[ 3 ] In Re Northmore 2010 CarswellOnt 1342 , Registrar Nettie held that this Court has jurisdiction, by way of motion on notice to all proven creditors and the Office of the Superintendent in Bankruptcy (the “OSB”), to grant an order amending a court approved proposal. I agree with Registrar Nettie that this Court has that jurisdiction. While I note that s. 92 of the BIA Rules provides the Court with very limited jurisdiction to amend a proposal on an application for court approval pursuant to s. 58 of the BIA , in my view this is because the creditors do not have notice of the proposed amendments or an opportunity to oppose or make submissions. On the other hand, the creditors have wide powers under s. 54(1) to agree to amendments to the proposal at a meeting of creditors and they are given wide powers to waive defaults under the proposal pursuant to s. 62.1. It is clearly the aim and intent of the provisions of the BIA to provide the creditors, subject to the approval of the Court in its supervisory capacity, the ability to accept or amend proposal terms as they are the beneficiaries of the proposal.
[ 4 ] As Registrar Nettie notes in Re Northmore, this Court has jurisdiction pursuant to s. 192(1) (k) of the BIA to determine its own practice and procedure. There is an absence of legislated procedure on how a proposal can be formally amended following court approval. A motion to amend on notice to all proven creditors and the OSB provides the creditors with the opportunity to oppose or make submissions on the proposed amendments, and provides that any amendments receive court approval. The court hearing the motion would also have the ability to adjourn the motion to allow a creditors’ meeting to occur, if necessary, to facilitate any negotiations between the creditors and the debtor before returning for court approval.
[ 5 ] Where I respectfully differ with Registrar Nettie is when such a motion is necessary, and who may bring it. As to who may bring the motion, in my view it may be brought by either the Debtor or the Trustee on the Debtor’s behalf. There is no reason to require that only the Debtor may bring the motion.
[ 6 ] As to when such a motion is necessary, in my view simply because the Trustee has issued a Notice of Default does not mean that the only way the Debtor can cure the default and obtain a Certificate of Full Performance is by bringing a motion for court approval of an amendment. Pursuant to s. 62.1 of the BIA , if there is a default in the proposal which is not waived by either the inspectors or the creditors or cured by the Debtor within 30 days, the Trustee is required to notify the creditors and the OSB by way of Notice of Default within a further 30 days. However this does not mean that the proposal is at an end. The proposal is still alive and capable of being fully performed by the Debtor unless an application is brought pursuant to s. 63(1) of the BIA to annul the proposal.
[ 7 ] In my view the purpose of s. 62.1 of the BIA is simply to give notice to the creditors and the OSB so that they may pursue an application to annul the proposal under s. 63(1) of the BIA if they wish. If they do not, then the proposal is still alive and capable of being fully performed. If the Debtor cures the default and fully performs the proposal, then the Trustee is required, pursuant to s. 65.3 of the BIA, to give the Debtor and the OSB a Certificate of Full Performance.
[ 8 ] Section 65.3 of the BIA is a mandatory provision. It states that where a proposal is fully performed the Trustee “shall” give a certificate to that effect in the prescribed form to the Trustee and the OSB.
[ 9 ] In my view it is only where the Debtor seeks, following court approval of a proposal, to make a material change going to the substance of the proposal that a motion to amend the court approved proposal is necessary on notice to the creditors and the OSB. This is because the original court approved proposal is not going to be fully complied with, therefore there must be a court approved amendment obtained in a manner that involves the creditors. If there is no material change going to the substance of the proposal and the proposal is fully complied with, then no motion is necessary.
[ 10 ] As to what constitutes a material change going to the substance of a proposal, an accelerated or delayed payment of the full return to the creditors set out in the proposal is not, in my view, a material change going to the substance of the proposal. If all of the payments set out in the proposal are made, whether early or late, and no motion to annul the proposal has been brought and no order annulling the proposal has been obtained, then the Trustee is required to give the Debtor and the OSB a Certificate of Full Performance pursuant to s. 65.3 of the BIA .
[ 11 ] However even if it is not necessary, there would be nothing to prevent the Debtor or the Trustee on the Debtor’s behalf to bring a motion to obtain court approval of a non-material change in the timing of payments under the proposal before default if they wanted to avoid default, or after default if they wanted to obtain a formal amendment to cure default and avoid the risk of annulment. Similarly if the Debtor or the Trustee were unsure whether or not a change was a material one going to the substance of the proposal, they could bring the motion for court approval on notice to the creditors and the OSB.
[ 12 ] For these reasons the motion for court approval of the amendment is granted.
February 8, 2012
John D. Dempster
Deputy Registrar
File No. 33- 1248793
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE PROPOSAL OF
FREDERICK WOODBURN BARRIGAR
OF THE CITY OF OTTAWA
IN THE PROVINCE OF ONTARIO
REASONS FOR DECISION
Released: February 8, 2012