Ontario Superior Court of Justice
In Bankruptcy and Insolvency
COURT FILE NO.: BK-10-1419189-0033
HEARD: August 11, 2014
Ontario
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY AND INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
JOSEPH IVAN GOSTON LEMIEUX
OF THE CITY OF OTTAWA
IN THE PROVINCE OF ONTARIO
BEFORE: Master Pierre E. Roger
Registrar in Bankruptcy
APPEARANCES:
Allen MacLeod, Trustee
J. Alden Christian, counsel for the trustee
Joseph Ivan Goston Lemieux, bankrupt
REASONS FOR DECISION
[1] This is an opposition to the automatic discharge of an individual bankrupt by the trustee, under subsection 168.2 (1) (c) and subsection 172 (1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the BIA).
[2] The trustee filed a subsection 170 (1) report. The bankrupt did not give notice in writing to the trustee specifying what portion of the report, if any, was in dispute. To the contrary, at the outset of the discharge hearing, the bankrupt indicated that he agrees with and does not dispute any part of the 170 (1) report. He, however, blames the trustee for his decision to file an assignment in bankruptcy and blames the trustee for delays incurred with this hearing in 2014.
[3] The bankrupt is a dentist. He goes by the name of Gaston Lemieux despite an error on his birth certificate. He is 68 years old. He sold his dental practice in 2009 for approximately $400,000.00. He had debts roughly equivalent to that amount. Indeed, in the bankruptcy, debts of $424,388.00 were proven with the estimate of assets to be realized at $1,700.00.
[4] He admits that between September 2009 and June 2010, he disposed of items as outlined at Tab 6 of the trustee’s documents, for a total of about $228,000.00. He explains that his previous wife had acted as a financial brake, which was lost following their separation. He explains also that he enjoyed spending all of these funds and that he did so against the advice of his accountant, who had recommended that funds be kept for creditors, including for Revenue Canada.
[5] The evidence of Dr. Lemieux is that he worked only briefly in 2009 and 2010, earning minimal amounts. He was apparently incarcerated briefly and released on August 17, 2010. He filed for bankruptcy on October 19, 2010. He started working more seriously in April 2011 and his evidence is that he worked as an associate dentist earning between 85,000.00 and $90,000.00 per year for the last three years. He indicated, at the discharge hearing, that as an associate dentist his earning capacity is easily about $90,000.00 per year.
[6] Nothing prevents Dr. Lemieux from continuing to work as an associate dentist. However, his evidence is that he stopped working in mid-June 2014, indicating that he found it difficult working with employees over whom he had no control. He indicated that he resigned because he could not continue to work with his assigned dental assistant and that his employer was not receptive to accommodating his requests.
[7] His evidence during the discharge hearing is that he now plans to start a new dental practice. He has no business plan and he has to date spent no time or energy on that project. His plans are vague and include buying a building that would act as his house and business for about $500,000.00 plus equipment for about $300,000.00. He has not approached any financial institution. He estimates his gross earning potential, initially and probably for the first five years, to be in the range of about $175,000.00. His proposed business would see him employ one staff: his new wife, a citizen of Romania. He might also employ a dental hygienist, although this has yet to be decided. Starting this business would allow him to offer employment to his new wife, potentially facilitating her immigration to Canada.
[8] The bankrupt’s evidence is that he worked for over 43 years as a dentist and his plan, if discharged, is to start this business and continue to work as a dentist for as long as possible. If he is not discharged he indicated that he will have to stop being a Canadian citizen as he will not be able to sponsor his new wife to Canada. He understands that to be a sponsor, he has to be discharged and that his new wife needs investments or earning potential - he has not presented any evidence in that regard (other than his stated belief). With his new dental practice he indicated that he could offer her some undefined earning potential.
[9] In January 2013, the trustee obtained an order allowing for the examination of the bankrupt and his ex-spouse. Examinations were conducted and no evidence from these was filed by the trustee.
[10] The trustee submits that the bankrupt pays 33% of the $228,000.00 spent as a condition of his discharge. The bankrupt seeks a full discharge with no condition.
[11] Subject to the explanations of the bankrupt, as outlined above, the statements contained in the 170 (1) report are admitted as evidence pursuant to subsections 170 (5) and (6) of the BIA. These are, in any event, admitted by the bankrupt. The spending by the bankrupt outlined at Tab 6 of the trustee’s documents is also admitted by the bankrupt. I note that the bankrupt has been bankrupt since October 2010.
[12] The assets of the bankrupt are not of a value equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities and the bankrupt provided no evidence that this arose from circumstances for which he cannot be held responsible. To the contrary, he spent most of the proceeds resulting from the sale of his dental business contrary to the advice of his accountant without regard for any potential impact on his creditors. This is a fact for which a discharge may be refused under subsection 173 (1) (a). The cause of the bankruptcy listed in the 170 (1) report is unjustifiable extravagance and this was clearly the case – which is a fact for which a discharge may be refused under subsection 173 (1) (e). Indeed, as outlined at para. 6 of the 170 (1) report, the bankrupt can be held responsible for certain facts in section 173 : 173 (a), (b), (c) and (e) are all applicable. Further, the statement outlined at para. 6 (c) of the 170 (1) report that the bankrupt committed an offence under section 198 is in evidence and is not disputed by the bankrupt. As outlined above and as outlined and admitted at para. 11 of the 170 (1) report, the bankrupt has the potential to earn significant income (subject to the evidence outlined above). The facts outlined at para. 12 of the 170 (1) report are also considered.
[13] A discharge is not a matter of right and every application for a discharge that is opposed must be determined on its own specific facts. In this case, subsection 172 (2) is applicable as there has been proof of facts under section 173. In deciding how to proceed under subsection 172 (2), the court is mindful that one of the objectives of the BIA is to allow an honest but unfortunate debtor to obtain a discharge subject to reasonable conditions. The court is also mindful that this is a first bankruptcy, that the bankrupt has been bankrupt for some time and that at some point the bankrupt should receive a discharge. Factors considered by this court in the exercise of its discretion include: the necessity of providing relief for a bankrupt from his debt; the integrity of the bankruptcy process and the public perception of the integrity of the process; and, as well, the amounts received by creditors.
[14] In considering all of the circumstances of this matter, this court is concerned with the bankrupt’s disregard for the rights of his creditors. This disregard is obvious from the bankrupt’s conduct prior to his bankruptcy and, as well, from his many statements at the discharge hearing. This disregard has the potential to seriously undermine the integrity of the bankruptcy process and for this court it outweighs the leniency that would usually be offered to a first time bankrupt of the age and circumstances of this bankrupt.
[15] The bankrupt has the capacity and stated energy to earn a rather comfortable income of about $90,000.00. That should allow him to make some important contribution towards his creditors as a condition of discharge. Considering that he has spent, in the months prior to his bankruptcy, about $228,000.00, a reimbursement of less than one third for someone with his earning potential is quite reasonable and would protect the integrity of our bankruptcy process. Adding a condition allowing for the possibility of a discharge in the event of a consent judgment would greatly reduce any concern over his personal circumstances.
[16] Consequently, the following is ordered:
Subject to paragraph 2, the bankrupt shall be discharged upon payment of $50,000.00.
If the bankrupt is prepared to agree to a judgment on terms to be agreed upon or for the repayment of the above amount by monthly payments to the trustee of about $833.33 until payment of the above, then he or the trustee may forthwith upon such agreement or circumstances apply to this court seeking some form of discharge available under subsection 172 (2).
Otherwise, at the expiration of one year from today’s date, the bankrupt may, as provided under subsection 172 (3) of the BIA, apply to seek a discharge or other modification of these conditions.
Master Roger
DATE: August 19, 2014