COURT FILE AND PARTIES
COURT FILE NO.: BK-33-1296555
DATE: 2013/11/13
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
BARBARA GRACE BUOTE
OF THE CITY OF OTTAWA
IN THE PROVINCE OF ONTARIO
BEFORE: Mr. Justice Stanley J. Kershman
HEARD IN OTTAWA: October 18, 2013
APPEARANCE:
Barbara Grace Buote, Bankrupt
Roch Dupont, Office of the Superintendent of Bankruptcy
Sylvie Lyons, Ginsberg Gingras & Associés/Associates Inc., Trustee in Bankruptcy
Priya Sankarapapa, Counsel for Canada Revenue Agency
reasons for decision
Introduction
[1] Barbara Buote, the Bankrupt (“Bankrupt”), applies for a discharge from her bankruptcy. The discharge is opposed by three parties:
The Attorney General of Canada, acting on behalf of the Canada Revenue Agency (“CRA”);
Ginsberg Gingras & Associés/Associates Inc., Trustee in Bankruptcy (“Ginsberg Gingras” or “Trustee”); and
The Office of the Superintendent of Bankruptcy (“OSB”).
[2] The grounds for the oppositions to discharge are set out later in this decision.
Factual Background
[3] The Bankrupt is 59 years of age. She lives in Ottawa and has been a licensed mortgage broker for 28 years.
[4] The Bankrupt filed a Proposal on December 8, 2009, offering to pay monthly payments of $2,185.00 for 60 months for a total of $131,100.00. At that time, the Bankrupt owed income tax, interest and penalties of $733,500.18. Ginsberg Gingras was the Proposal Trustee.
[5] CRA, being the only creditor, refused the Proposal on the following grounds:
this was the Bankrupt’s fourth insolvency event;
the insolvency was tax‑driven;
CRA was the only creditor;
the Bankrupt had been non‑compliant with the filing of her tax returns; and
the Bankrupt was a high-income tax earner.
[6] The Proposal was defeated by the sole creditor, CRA, and the Bankrupt was deemed a bankrupt as of January 21, 2010.
[7] In her Statement of Affairs, the Bankrupt lists the reason for her financial difficulties as “income tax debt and garnishment.”
[8] This is the Bankrupt’s fourth bankruptcy. The following is the insolvency history:
OSB Number
Filing Date
Discharge Date
Liabilities
Discharge Status
33-038197
Aug. 19, 1987
Feb. 25, 1988
$ 38,051.00
Absolute
33-055997
Aug. 30, 1991
June 17, 1992
$218,100.00
Absolute
33-093714
Mar. 17, 1997
Jan. 22, 2008
$191,593.00
Absolute
33-1296555
Dec. 8, 2009
Proposal
$733,500.18
The Proposal was defeated and there was a deemed bankruptcy
[9] The Bankrupt testified that she lives alone in a three‑bedroom townhouse, for which she pays rent of approximately $1,400.00 per month, and that she drives a 2001 motor vehicle.
[10] The Bankrupt says that she is bipolar and that she has a gambling problem. In September 2013, she barred herself from the Casino du Lac Leamy (“Casino”) for a period of one year. A review of the Casino self‑barring form indicates that she could have barred herself for up to five years, but that she choose to do so for only one year. She testified that she would only go to the Casino to gamble and that, once there, she would play the slots. She testified that she did not go to any other gambling establishment and that she does not do any other form of gambling. She said that she would gamble away between $400.00 and $1,000.00 per week.
[11] The Bankrupt says that she has been attending Gamblers Anonymous and she is on a waiting list for the Lifestyle Enrichment for Senior Adults (LESA) Program. LESA is a substance abuse and problem gambling counselling service for seniors which is offered across the City of Ottawa. Support is provided for men and women aged 55 and older who are concerned about their alcohol or drug use or about their problem gambling.
[12] CRA filed a proof of claim dated May 13, 2011, showing that the Bankrupt owed $799,316.43 in income taxes, including interest and penalties, for the 12 taxation years from 1999 to 2010. The following is a break‑down of those amounts:
Date of
Assessment
Taxation
Year
Tax
Penalty
and Interest
Total
June 12, 2006
1999
$ 5,072.58
$5,072.58
February 2, 2007
2000
33,425.20
58,154.79
91,579.99
June 8, 2006
2001
36,970.56
56,294.17
93,264.73
June 8, 2006
2002
69,556.63
94,090.31
163,646.94
June 8, 2006
2003
34,246.30
40,908.90
75,155.20
June 8, 2006
2004
37,374.51
29,149.58
66,524.09
June 8, 2006
2005
57,928.74
15,924.80
73,853.54
July 6, 2007
2006
48,660.44
13,724.07
62,384.51
July 10, 2008
2007
34,051.10
6,801.61
40,852.71
July 9, 2009
2008
62,478.47
4,577.07
67,055.54
May 9, 2011
2009
51,338.57
8,253.63
59,592.20
May 9, 2011
2010
334.43
334.43
TOTAL
$466,364.95
$332,951.51
$799,316.46
[13] The total amount of tax owing, exclusive of interest and penalties from 1999 to 2010 was $466,364.95. The penalties and interest total an additional $332,951.51.
[14] The Bankrupt had post‑bankruptcy income for the years from 2010 to 2012 as follows:
Year
Taxable Income
Tax Owing
2010
$136,166.50
$47,427.92 (post-bankruptcy)
2011
$123,180.34
$41,543.37
2012
$94,447.12
$29,152.29
Total
$353,793.96
[15] The Trustee has issued an Amended s. 170 Report, dated October 12, 2013, showing a surplus income, owing to the Bankrupt’s Estate, of $108,111.84. The original amount claimed by the Trustee for surplus income was $188,657.52. This was subsequently revised downwards, in light of new information received by the Trustee from the Bankrupt. The Trustee’s evidence is that no monies have been paid to the Trustee from 2009 to date on account of this surplus income, notwithstanding that, in her Proposal, the Bankrupt offered to pay $2,185.00 per month. It was only in July 2013 that the Bankrupt told the Trustee that she had a gambling problem, approximately 3.5 years after she went bankrupt.
Oppositions to Discharge
[16] Three oppositions to discharge were filed.
Opposition to Discharge by CRA
[17] CRA opposes the discharge of Ms. Buote from her bankruptcy pursuant to s. 172.1 of the Bankruptcy and Insolvency Act (“BIA”), part of which reads as follows:
Exception – personal income tax debtors
172.1 (1) In the case of a bankrupt who has $200,000 or more of personal income tax debt and whose personal income tax debt represents 75% or more of the bankrupt’s total unsecured proven claims, the hearing of an application for a discharge may not be held before the expiry of
(a) if the bankrupt has never before been bankrupt under the laws of Canada or of any prescribed jurisdiction,
(i) 9 months after the date of bankruptcy if the bankrupt has not been required to make payments under section 68 to the estate of the bankrupt at any time during those 9 months, or
(ii) 21 months after the date of bankruptcy, in any other case;
(b) if the bankrupt has been a bankrupt one time before under the laws of Canada or of any prescribed jurisdiction,
(i) 24 months after the date of bankruptcy if the bankrupt has not been required to make payments under section 68 to the estate of the bankrupt at any time during those 24 months, or
(ii) 36 months after the date of bankruptcy, in any other case; and
(c) in the case of any other bankrupt, 36 months after the date of the bankruptcy.
Appointment to be obtained by trustee
(2) Before proceeding to the trustee’s discharge and before the first day that the hearing could be held in respect of a bankrupt referred to in subsection (1), the trustee must, on five days notice to the bankrupt, apply to the court for an appointment for a hearing of the application for the bankrupt’s discharge.
Powers of court to refuse or suspend discharge or grant conditional discharge
(3) On the hearing of an application for a discharge referred to in subsection (1), the court shall, subject to subsection (4),
(a) refuse the discharge;
(b) suspend the discharge for any period that the court thinks proper; or
(c) require the bankrupt, as a condition of his or her discharge, to perform any acts, pay any moneys, consent to any judgments or comply with any other terms that the court may direct.
Factors to be considered
(4) In making a decision in respect of the application, the court must take into account
(a) the circumstances of the bankrupt at the time the personal income tax debt was incurred;
(b) the efforts, if any, made by the bankrupt to pay the personal income tax debt;
(c) whether the bankrupt made payments in respect of other debts while failing to make reasonable efforts to pay the personal income tax debt; and
(d) the bankrupt’s financial prospects for the future.
[18] CRA opposes the discharge of the Bankrupt on the following additional grounds:
this is the Bankrupt’s fourth bankruptcy;
the Bankrupt has brought on, or contributed to, the bankruptcy by gambling; and
for reasons which the Bankrupt can justly be held responsible, the Bankrupt’s assets are not of a value equal to 50 cents on the dollar on the amount of the Bankrupt’s unsecured liabilities.
[19] As a condition of her discharge, the CRA seeks the following sanctions:
a refusal of the discharge;
that the stay of proceedings pursuant to s. 69.4 of the BIA be lifted prior to the Trustee’s discharge so that the CRA can collect the amount of post-bankruptcy taxes owing;
in the event that the discharge is not refused, an order pursuant to s. 68(10) of the BIA to allow the Trustee to collect payments on surplus income; and
in the event that the discharge is not refused, that the discharge be suspended until such time as the surplus income is paid.
(continued verbatim through the remainder of the judgment)
Mr. Justice Stanley J. Kershman
Date: November 13, 2013
COURT FILE NO.: BK-33-1296555
DATE: 2013/11/13
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
BARBARA GRACE BUOTE
OF THE CITY OF OTTAWA
IN THE PROVINCE OF ONTARIO
BEFORE: Mr. Justice Stanley J. Kershman
HEARD IN OTTAWA: October 18, 2013
APPEARANCE:
Barbara Grace Buote, Bankrupt
Roch Dupont, Office of the Superintendent of Bankruptcy
Sylvie Lyons, Ginsberg Gingras & Associés/Associates Inc., Trustee
Priya Sankarapapa, counsel for Canada Revenue Agency
REASONS FOR DECISION
Kershman J.
Released: November 13, 2013