ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
COURT FILE NO.: BK-13-1694403
DATE: 2013-03-21
IN THE MATTER OF THE BANKRUPTCY OF THE CONSUMER PROPOSAL OF
EVELYN GERALDINE MATTHEWS
OF THE CITY OF OTTAWA
IN THE PROVINCE OF ONTARIO
BEFORE: Mr. Justice Stanley J. Kershman
HEARD IN OTTAWA: February 21st, 2013
APPEARANCE:
Evelyn Geraldine Matthews, Debtor
Michael Carson, for Surgeson Carson Associates Inc.
Stefan Cyr, for the Caisse Populaire Trillium Inc.
reasons for decision
Introduction
[1] A motion was brought by Caisse Populaire Trillium Inc. (the “Caisse”) a creditor in the consumer proposal of Evelyn Geraldine Matthews (“Matthews” or “Debtor”) seeking a declaration pursuant to the provisions of ss. 62(2.1) and 178 (1)(e) of the Bankruptcy and Insolvency Act, R.S.C. 1985 c. B-3 (“BIA”) that the debt owed by Ms. Matthews to the Caisse, in the amount of $26,687.60, is a debt not released by the consumer proposal notwithstanding that it was accepted by the creditors and approved of by the court.
Factual Background
[2] On April 29th, 2009, Ms. Matthews purchased a 2010 Keystone Outback 2030 RS Travel trailer from Roulottes Mansfield RV in Mansfield, Quebec for $29,500.00. She signed a Convention de Vente Conditionnelle (“Convention”) in which the total obligation was $57,948.80 inclusive of interest. The principal amount of the loan was $29,267.00. According to the documents, it appears that the purchase was 100% financed.
[3] In a separate document called a Demande de Crédit (Financement au point de Vente) dated April 29th, 2009, Ms. Matthews indicated that her gross monthly income was $4,729.00 and that her assets consisted of a home valued at $210,000.00 and RRSP’s of $10,000.00.
[4] The Demande de Crédit further specified she made monthly payments of $938.00 under the heading “Loyer ou vers. hypothécaire mensuel”.
[5] On December 6th, 2012 the Debtor filed a consumer proposal pursuant to s. 66.13 of the BIA. The Trustee is Surgeson Carson Associates Inc.
[6] The proposal was approved of by the creditors and deemed approved by the court.
[7] The Caisse Populaire did not vote in favor of the proposal.
Position of the Caisse
[8] The Caisse argues that Ms. Matthews failed to disclose any mortgage or liabilities other than a credit card of $3,500 and a line of credit of $15,000.00.
[9] The Caisse argues that based on the information provided by Ms. Matthews, it performed a risk assessment and approved the loan.
[10] The Caisse argues that the Debtor did not disclose a mortgage in favour of TD Bank, registered on August 22nd, 2007 in the amount of $160,140.00. It argues that the Debtor made a fraudulent misrepresentation in the Demande de Crédit by omitting to disclose her mortgage.
[11] The Caisse argues that it would not have approved the loan to Ms. Matthews had it known of the $160,000.00 mortgage.
Position of Ms. Matthews
[12] Ms. Matthews argues that she completed and signed both the Convention and the Demande de Crédit at the RV dealership, not at the Caisse.
[13] Her evidence is that both the Convention and the Demande de Crédit were completed by a representative of Roulottes Mansfield RV on a computer.
[14] She also argues that her mortgage payment was disclosed in the Demande de Crédit under the heading “Loyer ou vers. hypothécaire mensuel” of $938.00.
Analysis
[15] The court has reviewed the documents and notes that both the Demande de Crédit and the Convention were completed, not by a member of the Caisse and not by the Debtor but by a representative of Roulottes Mansfield.
[16] The court translates the words “Loyer ou vers. hypothécaire mensuel” as “rent or monthly mortgage payment”. The court also notes that under the heading “Passif” there is no amount listed for any mortgage or monthly payment.
[17] The court notes that at the bottom of the Demande de Crédit, there is a statement that all of the information contained in the document is true.
[18] The Caisse argues that the Debtor made a fraudulent misrepresentation, used concealment or strategic silence about her mortgage to obtain the loan from the Caisse under false pretences or fraudulent representation under s. 178(1)(e) of the BIA.
[19] Section 62(2.1) of the BIA reads as follows:
A proposal accepted by the creditors and approved by the court does not release the insolvent person from any particular debt or liability referred to in subsection 178(1) unless the proposal explicitly provides for the compromise of that debt or liability and the creditor in relation to that debt or liability voted for the acceptance of the proposal.
[20] Section 178(1)(e) of the BIA reads as follows:
any debt or liability resulting from obtaining property or services by false pretences or fraudulent misrepresentation, other than a debt or liability that arises from an equity claim;
[21] Section 62(2.1) deals with a situation where a proposal explicitly provides for the compromise of a debtor’s liability referred to in s. 178(1) and that particular creditor voted in favor of the proposal.
[22] The Court notes that the Matthews proposal does not mention any compromise of a debt in relation to s. 178(1). Her proposal specifically deals with the Caisse’s debt in s. 1(III) which reads as follows: “[t]his does not include Caisse Populaire for its secured debt on the Keystone Outback 2010 Trailer as the debtor will be returning the asset. Any encumbrance’s that result in a shortfall from the sale of the property will be deemed to form part of this proposal as an unsecured debt.”
[23] Furthermore, the Caisse did not vote in favor of the proposal.
[24] Therefore, this court finds that the consumer proposal did not intend to compromise the Caisse’s debt in relation to s. 178 of the BIA.
[25] Section 178(1)(e) specifies that an order of discharge does not release the bankrupt from a debt or liability for obtaining property or services by false pretences or fraudulent misrepresentation other than a debt or liability that arises from an equity claim.
[26] In relation to s. 178(1)(e), the court acknowledges that property was obtained by Ms. Matthews. The question then becomes: was it by false pretences or fraudulent misrepresentation?
[27] In order for a claim to fall within s. 178(1)(e), there must be some form of dishonesty and the dishonesty must be acted upon by the creditor, Saskatchewan Wheat Pool v. Ewing Lake Farms Ltd. (1998), 1998 ABQB 172, 231 A.R. 3 (Q.B.).
[28] The essential test for both “false pretences” and “fraudulent misrepresentation” under s. 178(1)(e) is that the property was obtained by “deceit”, whether by positive act or failing to disclose material facts : Iroquois Falls Community Credit Union ltd. (Liquidator of) v. Miljours (2009), 2009 935 (ON SC), 52 C.B.R. (5th) 231 (Ont. Sup. Ct.); McKee (Re) (1997), 1997 14966 (AB KB), 203 A.R. 283 (Q.B.).
[29] In the case of Berger (Re), 2010 ONSC 4376, 70 C.B.R. (5th) 225 (Sup. Ct.), Registrar Nettie held that the elements of a fraudulent misrepresentation for the purposes s. 178(1)(e) of the BIA are as follows:
the existence of a representation;
that the representation was false;
that the bankrupt knew the representation was false and intended the creditor to act on it so as to enable the bankrupt to obtain the credit sought;
that the creditor relied on the false representation and extended credit.
Existence of a Representation
[30] A representation was made in the Demande de Crédit that there was no mortgage. However, in a separate part of the Demande de Crédit, it indicated that there was “Loyer ou vers. hypothécaire mensuel - $938.00”. The document indicated that Ms. Matthews was the owner of the property because the box “Propriétaire” was checked off. There was another box marked “Locataire” which was unmarked.
[31] The court translates “Loyer ou vers. hypothécaire mensuel” as “rental or monthly mortgage payment”. Based on this information, the court finds that the Debtor did disclose that she had a monthly payment as a property owner. If the Caisse was not sure of what the $938.00 was for, they could have sought clarification from Ms. Matthews.
[32] The home is indicated as having a value of $210,000.00. The indication under the heading “hypothèque” is left blank except where it says “solde”, or balance, which is zero.
[33] Notwithstanding the fact that the “hypothèque” box was left blank, the court finds that Ms. Matthews stated that she was the owner of the property because it showed that she was the “Propriétaire’ and it indicated that she was making monthly payments of $938.00. The fact that the amount of the mortgage and the mortgage particulars were not listed in the mortgage box, does not mean that she did not disclose that she had a mortgage payment.
[34] The court finds that Ms. Matthews did disclose to the Caisse that she had a mortgage and made mortgage payments.
[35] Another reason for this conclusion is that the Convention and the Demande de Crédit were not prepared by a representative of the Caisse but by a representative of the party that was selling the vehicle that had a vested interest in selling the vehicle and ensuring the loan application was successful.
[36] The court acknowledges that there is a portion of the Demande de Crédit which says that the document is true and correct. The court finds that notwithstanding this statement, Ms. Matthews did represent to the Caisse that she had a mortgage against the property and was making mortgage payments.
Representation was False
[37] Ms. Matthews indicated that she did have a mortgage payment and provided the amount. That representation was not false. As to disclosing the name of the mortgagee and the balance outstanding on the mortgage, the court finds that that information was not provided. The court does not know whether it was not provided by the person preparing the loan documentation or not provided by Ms. Matthews. There is no affidavit from anyone at the Caisse. There is an affidavit from the Caisse’s lawyer. The court finds Ms. Matthews did provide the information because she indicated that her monthly mortgage payment was $938.00. If she did not have a mortgage payment, that box would have been left blank. It would appear that for whatever reason, the person preparing the document did not include the information about the mortgage, notwithstanding the fact that the mortgage payment amount was included. Therefore, this court finds that the representation that was made by the debtor was not false.
That the bankrupt knew the representation was false and intended the creditor to rely upon it so as to enable the bankrupt to obtain credit.
[38] The court finds that, based on the evidence, the representation was not false. Therefore the bankrupt did not intend the creditor to rely upon this information to enable her to obtain the necessary credit.
The creditor did rely upon the false representation and extend the credit
[39] While the creditor did rely upon the representation and did extend the credit, the court has found that the representation was not false. As such, this criterion is not met.
[40] The Caisse is a sophisticated lender and should have obtained a credit report or a credit score against the Debtor which would have shown that there was a mortgage against the property. The creditor provided no information as to whether it obtained her credit report or her credit score.
[41] Therefore, this court finds that the bankrupt did not obtain this credit by fraudulent misrepresentation or by false pretences. In addition, the court finds that Ms. Matthews did not act dishonestly.
[42] Accordingly, the Caisse’s motion fails.
[43] There will be no order as to costs.
[44] Order accordingly.
Kershman J.
Date: 2013-03-21
COURT FILE NO.: BK-13-1694403
DATE: 2013-03-21
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
THE CONSUMER PROPOSAL OF
EVELYN GERALDINE MATTHEWS
OF THE CITY OF OTTAWA
IN THE PROVINCE OF ONTARIO
BEFORE: Mr. Justice Stanley J. Kershman
HEARD IN OTTAWA: February 21st, 2013
APPEARANCE:
Evelyn Geraldine Matthews, Debtor
Michael Carson, for Surgeson Carson Associates Inc.
Stefan Cyr, for the Caisse Populaire Trillium Inc.
REASONS FOR DECISION
Kershman J.
Released: 2013-03-21