COURT FILE NO.: 32-1871849 DATE: 20170627

SUPERIOR COURT OF JUSTICE – ONTARIO IN BANKRUPTCY AND INSOLVENCY

RE: IN THE MATTER OF THE CONSUMER PROPOSAL OF MUHAMMED SALMAN PATHAN OF THE CITY OF BRAMPTON IN THE PROVINCE OF ONTARIO

BEFORE: HAINEY J.

COUNSEL: Matthew R. Harris, for the Debtor, Muhammed Salman Pathan D.J. Miller and Deborah E. Palter, for University of Western Ontario

HEARD: May 29, 2017

ENDORSEMENT

Overview

[1] Muhammed Salman Pathan (“Pathan”), a consumer debtor under the Bankruptcy and Insolvency Act (“BIA”), and former student of the Richard Ivey School of Business at Western University (“Western”), has brought a motion for an order directing Western to confer an MBA degree upon him.

[2] Western opposes the motion on the two following grounds:

(1) The amount that Pathan owes to Western constitutes a debt in the nature of a student loan under s. 178(1)(g) of the BIA and is not released by Pathan’s consumer proposal; and

(2) Western is under no obligation to confer a degree on Pathan following the fulfillment of his consumer proposal. The decision to confer a degree is entirely within the discretion of Western. Western’s policy is not in conflict with the BIA.

Facts

[3] In 2006, Pathan was offered admission to the Graduate Program in Business Administration as an Executive MBA Student at Western.

[4] Western is governed by provincial legislation, An Act respecting The University of Western Ontario, Bill Pr14, 1982, as revised by Bill Pr37, chapter Pr26, S.O., 1988 (the “Act”), which gives Western the power to fix fees and confer degrees.

[5] Pathan accepted Western’s offer and agreed to abide by all of its policies and regulations. One of the policies he agreed to be bound by provides that Western shall “not issue a transcript or degree diploma” in situations such as “non-payment of any portion of prescribed fees/loans”.

[6] Pathan’s final semester at Western was expected to be September 2007 to January 2008. His first tuition payment was due on September 4, 2007. Pathan failed to make this payment. Western agreed to allow him to attend classes during the 2007 fall term but on condition that he make satisfactory arrangements to pay all outstanding fees before obtaining his degree.

[7] On December 31, 2007, Pathan acknowledged the debt he owed to Western and proposed a payment plan. On January 2, 2008, Western advised Pathan that he must pay his outstanding program fees in full by the end of March 2008 in order to attend convocation and graduate with his class in May 2008. Pathan undertook to pay all of his outstanding fees by March 31, 2008.

[8] Pathan failed a course in the fall 2007 term and did not fulfill the academic requirements to graduate. He re-wrote and passed the examination and then agreed to another payment plan in May 2008. He did not make payments under this second payment plan and Western did not confer a degree upon him.

[9] In response to a request by Pathan, Western gave him a letter confirming he was registered as a student in the Executive MBA Program and had successfully completed all academic requirements as of April 5, 2008.

[10] In December 2009, Pathan agreed to another payment plan that he failed to comply with. As a result, Western assigned responsibility for collecting his debt to a collection agency, Shellco Credit Systems Ltd. (“Shellco”). In March 2016, Shellco received payment of $6,085.41 under the terms of Pathan’s consumer proposal. The balance of his unpaid fees to Western, including interest, is $32,419.84.

[11] Western has declined to confer an MBA degree upon Pathan unless he pays his outstanding tuition fees.

Positions of the Parties

[12] Pathan submits that his debt to Western has been discharged as a result of the completion of his consumer proposal. As a result, he maintains that Western is obligated to confer his MBA degree upon him.

[13] Western submits that because the amount he owes is in the nature of a student loan it was not released by his consumer proposal because of s. 178(1)(g) of the BIA. Further, Western maintains that it is under no obligation to confer a degree upon him because the decision to confer a degree is entirely within Western’s discretion.

Analysis

Is Pathan’s Debt to Western Released by his Consumer Proposal?

[14] Section 178(1)(g) of the BIA provides as follows:

178(1) An order of discharge does not release the bankrupt from

(g) any debt or obligation in respect of a loan made under the Canada Student Loans Act, the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred

(i) before the date on which the bankrupt ceased to be a full- or part-time student, as the case may be, under the applicable Act or enactment, or

(ii) within seven years after the date on which the bankrupt ceased to be a full- or part-time student;

[15] According to the Court of Appeal for Ontario in Buland Empire Development Inc. v. Quinto Shoes Import Ltd., 1999 CarswellOnt 2312 at para. 15, this section of the BIA should be given a broad interpretation as long as that interpretation is “anchored in the conduct proscribed by the provision”. The “conduct” referred to in s. 178(1)(g) is the loaning of money to students to pay for their tuition pursuant to legislative authority.

[16] Western submits that it is a university created by a provincial statute which is “an enactment of a province”. The debt owed by Pathan arises from a loan extended by Western to him as a student for his tuition. Pathan admits this in his factum at para. 23 as follows:

In February 2010, he was contacted by a collection agency seeking to recover the funds that Ivey had advanced to him by allowing him to remain in the program.

[17] Western submits that the survival of Pathan’s debt to Western is consistent with the policy objectives underlying s. 178(1)(g) of the BIA which is to protect the public interest and reflect an appropriate balance between the rights of the debtor and its creditors. In applying s. 178(1)(g) of the BIA courts have observed that it does not seem right to allow a bankrupt to be discharged when he or she has acquired a life-time asset (i.e. an education in an MBA program at a publicly funded university in Canada) largely at public expense.

[18] Pathan submits that Western’s position is inconsistent with the main purpose of the BIA which is to give an honest but unfortunate debtor a “fresh start”. The fresh start principle relied upon by Pathan has its limits. The Supreme Court of Canada made this clear in Alberta (Attorney General) v. Moloney, 2015 SCC 51 at paras. 37 and 83 as follows:

37. Although it is an important purpose of the BIA, financial rehabilitation also has its limits. Section 178(1) of the BIA lists debts that are not released by discharge and that survive bankruptcy. … These provisions demonstrate Parliament’s attempt to balance financial rehabilitation with other policy objectives,…

38. The rehabilitative purpose of s. 178(2) is not meant to give debtors a fresh start in all aspects of their lives. Bankruptcy does not purport to erase all the consequences of a bankrupt’s past conduct. …

[19] I accept Western’s submissions. Applying a broad interpretation of s. 178(1)(g) of the BIA, and bearing in mind the conduct referred to in the section, I am satisfied that the section applies to Pathan’s debt to Western.

[20] I have therefore concluded that Pathan’s debt to Western is not released as a result of his consumer proposal.

Is Western Required to Confer a Degree upon Pathan?

[21] I agree with Western’s submission that it has sole discretion to confer a degree. The Act empowers Western’s Senate to “confer and award diplomas and certificates in any branch of learning, taught in the University or in any affiliated college …” The Act does not create a positive obligation upon Western’s Senate to confer a degree upon Pathan following acceptance of his consumer proposal or at any time. Pathan has provided no authority to support his position that Western has an obligation to confer a degree upon him. It appears clear that this is entirely within Western’s discretion.

[22] Pathan had no ability to require Western to confer a degree upon him before his consumer proposal and he similarly has no ability to require that Western do so after his consumer proposal. Pathan relies upon the Supreme Court of Canada’s decision in 407 ETR Concession Co. v. Canada (Superintendent of Bankruptcy), 2015 SCC 52 (“407 ETR”). However, his case is distinguishable for the following reasons:

• In 407 ETR, the debtor was denied a vehicle permit – a permit he had enjoyed the benefit of before bankruptcy;
• The denial of the vehicle permit was punitive in nature because it went beyond the balancing of the rights between the debtor and creditor. The debtor was prohibited from driving his vehicle on any road in Ontario, not just Highway 407 that was owned by the creditor; and
• The denial of the vehicle permit was found to be a “significant deprivation” with potential to create “great hardship”, thus offending the “fresh start” principle.

[23] Pathan seeks an order requiring Western to confer a degree upon him – a degree that he did not have before his consumer proposal. Pathan was well aware of Western’s policy not to confer a degree upon a student who has not paid the prescribed university fees. This policy was clearly set out in the Handbook of Academic and Scholarship Policy (“Handbook”). Pathan agreed to be bound by the policies contained in the Handbook as a term of his acceptance as a student at Western. In my view, his consumer proposal does not change the terms he agreed to when he was accepted as a student at Western.

[24] I am satisfied that Western’s decision not to confer a degree upon Pathan is not punitive in nature and does not conflict with the BIA. Pathan continues to enjoy the benefits of his education at Western and the university has provided him with a letter confirming that he has fulfilled all of the academic requirements for an Executive MBA.

[25] The denial of a degree is not comparable to the denial of a vehicle permit which amounts to a permanent restriction on a debtor driving his or her own vehicle on any road in Ontario. The failure to confer a degree upon Pathan does not prevent him from utilizing his business education in his day-to-day life. Further, he can confirm to prospective employers that he has fulfilled all of the academic requirements for an Executive MBA. I am satisfied that Western’s decision not to confer a degree upon Pathan does not create a “significant deprivation” or “great hardship” for him and it does not conflict with the fresh start principle.

Conclusion

[26] I have concluded for these reasons that Western does not have an obligation to confer a degree upon Pathan.

[27] Pathan’s motion is therefore dismissed.

Costs

[28] If the parties cannot settle costs they may submit written submissions of not more than 3 pages with costs outlines.

HAINEY J. Date: June 27, 2017