COURT FILE NO.: 33-2391513 DATE: 2018/08/15 ONTARIO SUPERIOR COURT OF JUSTICE IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF: THOMAS GREGORY ASSALY BANKRUPT
BEFORE: Justice Stanley Kershman
HEARD AT OTTAWA: July 18, 2018
COUNSEL: Rodrigo Escayola for Creditors G. Assaly and R. Assaly in their capacity as Estate Trustees Thomas G. Assaly, Self-Represented Andrée Laurencelle, Trustee in Bankruptcy
REASONS FOR DECISION
Introduction
[1] The Creditors, Gloria Assaly and Robert Assaly, as Estate Trustees, (“Plaintiffs”) seek for an order pursuant to s. 69.4 of the Bankruptcy and Insolvency Act (R.S.C. 1985, c. B-3) (“BIA”) declaring that the Stay of Proceedings in relation to the bankruptcy of Thomas G. Assaly (“Second Stay of Proceedings”) arising from the operation of s. 69.2 of the BIA no longer operates in a Civil Action commenced at Ottawa, Ontario in Court File No. 15-66598 (“Civil Action”).
Factual Background
1) Thomas G. Assaly
[2] Mr. Assaly is in his early 60s and recently moved to Ottawa from Florida. He currently resides in an Airbnb. Mr. Assaly is divorced and engaged to a woman who currently lives in Florida. He is attempting to bring her here to Canada.
[3] Mr. Assaly is currently receiving benefits from the Ontario Disability Support Program (“ODSP”).
2) United States Bankruptcy Filing
[4] According to Mr. Assaly, he filed a Chapter 11 Reorganization in the United States Bankruptcy Court in the Southern District of Florida on November 28, 2017, as Case File #17-24179-EPK. In November 2017, Mr. Assaly said that he resided at 8265 99th Court, Vero Beach, Florida, 32967. The filing also indicated the phrases “dba Drive Thru Discount Liquor” and “dba KJA-SIRD-LLC”.
[5] While the acronym “dba” is not defined, the Court finds it to mean “doing business as”.
[6] No evidence was provided as to when Mr. Assaly moved to Canada, but it appears to have been shortly after his United States Bankruptcy filing and at least by April 30, 2018.
3) Civil Action and Consumer Proposal
[7] The Plaintiffs in the Civil Action started in 2015 are Gloria Assaly and Robert Assaly, in their capacity as Estate Trustees for the Estate of Thomas C. Assaly against the Defendant, Thomas G. Assaly (“Defendant” or “Mr. Assaly”). The Plaintiffs in that action seek damages as a result of the Defendant’s actions, a declaration that he is a vexatious litigant, and other relief.
[8] The Plaintiffs brought a motion which was returnable on April 19, 2018 to strike Mr. Assaly’s defence and for default judgment (“Civil Motion”).
[9] On April 16, 2018, three days before the Civil Motion, the Plaintiffs received a Notice of Stay of Proceedings (“First Stay of Proceedings”) from Raymond Chabot Inc., the proposal trustee in Mr. Assaly’s consumer proposal. Mr. Assaly had filed a consumer proposal on March 22, 2018 and pursuant to s. 69.2 of the BIA, the Civil Action was stayed.
[10] At the return of the Civil Motion on April 19, 2018, the Defendant requested an adjournment to allow his creditors to vote on his consumer proposal. A meeting of creditors was scheduled for May 24, 2018. McLean J. granted the adjournment of the Civil Motion on strict terms, adjourning it to June 21, 2018, pre-emptory to the Defendant. The Defendant was ordered not to file any further materials on the Civil Motion, but was allowed to file materials at the motion in relation to the First Stay of Proceedings. Granting the adjournment was intended to provide ample time for the meeting of creditors to take place and a vote to be held.
[11] On May 28, 2018, the Plaintiffs were advised that the meeting of creditors was postponed to July 10, 2018, which was after the pre-emptory return date of the Civil Motion.
[12] The Plaintiffs brought a motion in the consumer proposal to lift the First Stay of Proceedings to allow the Civil Motion to proceed on June 21, 2018 at 11:00 a.m. The motion to lift the First Stay of Proceedings was heard on June 20, 2018. On that date the Court advised that it would provide an oral decision on June 21, 2018 at 10:10 a.m. in relation to the lifting of the First Stay of Proceedings.
[13] On June 21, 2018, prior to providing its oral decision, the Court received the Second Stay of Proceedings from Collins Barrow Brown Inc. (“Collins Barrow Brown”) as trustee in bankruptcy in the Estate of Mr. Assaly.
[14] According to the evidence, Mr. Assaly first visited David Brown, a trustee at Collins Barrow Brown, to enquire about his options of declaring bankruptcy on June 18, 2018—two days before the hearing of the motion to lift the First Stay of Proceedings. He completed an application form at the trustee’s office on June 18, 2018.
[15] One of the questions in the trustee’s application form was, “Have you previously filed a bankruptcy or a proposal in Canada or elsewhere?” The item circled was “Bankruptcy” naming Surgeson Carson with a bankruptcy date of 2002 and a discharge date of 2003.
[16] Mr. Assaly signed the sworn Bankruptcy Statement of Affairs on June 20, 2018 very shortly after the motion to lift the First Stay of Proceedings was argued. According to the trustee, he signed the bankruptcy papers on June 20, 2018 at approximately 4:00 p.m. Due to Mr. Assaly having filed a consumer proposal with Raymond Chabot, the Official Receiver’s Office did not automatically accept the bankruptcy assignment. Ms. Andrée Laurencelle, a trustee at Collins Barrow Brown, contacted the Official Receiver’s office and the documents were filed at approximately 4:30 p.m. on June 20, 2018.
4) Motion to Lift First Stay of Proceedings in Consumer Proposal Proposal
[17] On June 21, 2018 when the Court received a copy of the Second Stay of Proceedings in the bankruptcy, Kershman J. made the following endorsement:
“The motion to lift the stay of proceedings was fully argued on June 20, 2018. The decision was to be given at 10:10 a.m. this morning (June 21, 2018). At approximately 4:30 p.m. on June 20, 2018, Mr. Assaly filed an assignment in bankruptcy with Collins Barrow Brown who issued a notice to stay of proceedings in the bankruptcy.
The Court did not give its judgment because of the notice of stay of proceedings in the bankruptcy.
The Court orders that the Plaintiff bring an amended notice of motion in the bankruptcy file to lift the stay of proceedings with fresh affidavit evidence based on the proceedings to date to lift the stay of proceedings.
The matter is returnable on July 18, 2018, at 3:30 p.m. for 1 hour before Kershman J. The Plaintiffs are to serve their materials by June 19, 2018. Respondents, including Thomas G. Assaly and the Trustee, to serve their materials by July 6, 2018. No further motion materials to be filed after that date. Factums are to be filed in accordance with the Rules.
The matter is pre-emptory to the Trustee and Mr. Assaly.
Service on Mr. Assaly is by regular mail at 2102 Bergamot Circle, Ottawa, Ontario, K4A 4R4. Costs of the motion to be dealt with at the hearing on July 18, 2018. Order accordingly”.
Issues
1) What is the Status of the Consumer Proposal?
Plaintiffs’ Position
[18] The Plaintiffs argue that the First Stay of Proceedings should be lifted in the consumer proposal as well as the Second Stay of Proceedings in the bankruptcy.
Thomas G. Assaly Position
[19] Mr. Assaly argues that the consumer proposal is at an end by virtue of the bankruptcy and that the Court is therefore unable to lift the First Stay of Proceedings.
Trustee Position
[20] The trustee takes the same position as Mr. Assaly. He argues that the consumer proposal is at an end by virtue of the bankruptcy and therefore the Court cannot lift the First Stay of Proceedings.
Analysis
[21] The consumer proposal was in existence as long as there was no bankruptcy. Once Mr. Assaly filed for bankruptcy, the consumer proposal ceased to exist. The Court finds that by virtue of Mr. Assaly filing for bankruptcy, the consumer proposal ceased to exist. On that basis the Court is not in a position to lift the First Stay of Proceedings with respect to the consumer proposal.
[22] The Court is aware that a bankrupt can make a proposal after bankruptcy but in the Court’s view that would be a new filing. It would not revive Mr. Assaly’s previous consumer proposal. The Court makes a finding to this effect.
2) Should the Bankruptcy be Annulled?
Plaintiffs’ Position
[23] The Plaintiffs argue that Mr. Assaly is not bankrupt and that his assets far exceed his liabilities. As such, the Plaintiffs argue that Mr. Assaly’s filing for bankruptcy is not appropriate and is rather an attempt to avoid defending the Civil Action, thereby avoiding a potential judgment. They claim that a parcel of land leased by Mr. Assaly in Kemptville (“Kemptville Land”) together with the monies held in court and some other assets, result in Mr. Assaly’s assets exceeding his liabilities.
[24] The Plaintiffs also argue that the bankruptcy filing is an abuse of process, claiming that Mr. Assaly did not accurately disclose all of his assets and liabilities.
[25] In particular the Plaintiffs argue that Mr. Assaly did not disclose the following assets:
a. $450,000 held in court pursuant to the order of Aston J. dated March 31, 2009; b. his 22.2% interest in the Thomas C. Assaly Estate, which he claims is valued at somewhere in the range of $160,000 to $186,000; c. his interest in Kemptville Land.
[26] In addition, the Plaintiffs claim that Mr. Assaly attempted to stay the Civil Action by filing a Chapter 11 Bankruptcy in the State of Florida.
[27] According to the Endorsement of Master Champagne (as she then was) dated November 29, 2017, Mr. Assaly was ordered to produce the documents with respect to the US Bankruptcy filing. The evidence is that he did not comply.
[28] On March 22, 2018, Mr. Assaly filed his consumer proposal and did not list the Plaintiffs as creditors in his Statement of Affairs in the consumer proposal.
[29] On April 18, 2018, the motion to strike Mr. Assaly’s Statement of Defence was stayed, pursuant to the First Stay of Proceedings. The matter was adjourned to June 21, 2018. The adjournment was granted to provide the parties the opportunity to vote on the consumer proposal at the meeting of creditors to be held on May 24, 2018.
[30] The May 24, 2018 meeting was adjourned to July 10, 2018. At the May 24, 2018 meeting, Mr. Assaly disclosed for the first time that he had a 22.2% interest in his late father’s Estate valued at approximately $186,000.
[31] On June 20, 2018, the motion to lift the First Stay of Proceedings was argued. The Court was advised that the Plaintiffs’ motion to strike the defence was being heard the next day, on June 21, 2018. After hearing the motion to lift the First Stay of Proceedings on June 20, 2018, the Court advised the parties that it would render its decision the next day on June 21, 2018 at 10:10 a.m., so that the motion to strike could be heard at 11:00 a.m.
[32] On June 20, 2018, the Court was provided with the Second Stay of Proceedings. On June 21, 2018 at 10:10 a.m. the Court advised the parties of the Second Stay of Proceedings and adjourned the matter to July 18, 2018 to deal with a motion to lift the Second Stay of Proceedings.
[33] According to the evidence, Mr. Assaly signed an assignment in bankruptcy on June 20, 2018 at 4:00 p.m. A Second Notice of Stay of Proceedings was issued pursuant to this assignment.
[34] On July 18, 2018, the Court heard the motion to lift the Second Stay of Proceedings.
[35] Lastly, the Plaintiffs argue that Mr. Assaly did not provide the trustee in the consumer proposal with a complete financial picture in terms of his assets and liabilities. The Plaintiffs argue that since Mr. Assaly’s liabilities exceed $250,000, he would not have been entitled to file a consumer proposal.
[36] The Plaintiffs rely on Mr. Assaly’s affidavit filed in the consumer proposal motion and sworn June 19, 2018. In this affidavit, Mr. Assaly admits that the principal reason why he filed the consumer proposal was to stay the action. The Plaintiffs quote paragraph 24 of this affidavit, which reads as follows:
I do not have the financial ability to retain a lawyer to continue to defend the action. If Robert and Gloria were to obtain a stay of action it would be impossible for me to satisfy it. The debt would be over me for the rest of my life. I am now 60 years old and this is the principle reason I decided to file a Consumer Proposal so that the action would be stayed as well as any action by the CRA to enforce this debt.
[37] In the transcript of the hearing of this motion on June 20, 2018 at page 27, Mr. Assaly repeated the objective behind this stay:
In the United States, so, I declare Chapter 11. I was told that it would stay all of the actions against me, which I admit that’s what I was seeking, because I could not afford to defend against those actions.
Especially the one brought by my mother and my brother who have an inexhaustible fund of money that they’ve been using from my father’s estate. It’s not their own money, so, they can hire Mr. Escayola all they want, and have them do everything that they want. I cannot afford to do so – defend it. So, if there’s no possible way that I can pay that back, there’s no possible way that I can get out from underneath an oppressive debt or a claim, it makes sense to file for bankruptcy.
Thomas G. Assaly Position
[38] Mr. Assaly argues that his debts far exceed his assets and he has no ability to pay them. He says that the Plaintiffs cannot argue that he has monies in court when they are looking to seize those monies from him.
[39] In any event, Mr. Assaly argues that he has already assigned the monies in court to the Thomas C. Assaly Charitable Foundation Inc. (“Charitable Foundation”).
[40] Mr. Assaly also argues that even if he were to exercise the option to purchase the Kemptville Land, the cost of the option would be approximately $400,000. In addition, approximately $250,000 would be required to prepare the land to be severed and approximately $100,000 would be required for legal fees. Mr. Assaly says that he does not have the money to pay either the option or the expenses. He reminded the Court that he was a recipient of ODSP benefits.
[41] Lastly, Mr. Assaly argues that his bankruptcy should not be annulled since his liabilities are far greater than his assets.
Trustee Position
[42] The trustee’s position is that the bankrupt’s liabilities are far greater than his assets and that he has no income available to pay these liabilities. The trustee argues that assignment in bankruptcy should stand and should not be annulled.
Analysis
[43] The evidence is clear that Mr. Assaly is trying to stay one step ahead of the Plaintiffs in the Civil Action by: (1) filing a Chapter 11 Bankruptcy in Florida; (2) filing a consumer proposal; and, (3) filing for bankruptcy. The Court makes a finding to this effect.
[44] The Court finds that Mr. Assaly did not disclose various items of information to the consumer proposal trustee and/or the bankruptcy trustee. Although not exhaustive, the Court makes findings of the following as examples of information that Mr. Assaly did not disclose:
a. in his application for bankruptcy to Collins Barrow Brown, Mr. Assaly did not disclose his Chapter 11 Bankruptcy filing; b. in his consumer proposal, Mr. Assaly did not disclose his interest in his father’s Estate in the range of $160,000-$186,000; c. in his consumer proposal sworn Statement of Affairs, Mr. Assaly did not disclose the assignment of monies held in court in the Civil Action, which were claimed to be assigned to the Charitable Foundation within five years of the consumer proposal contrary to part 10 of his Statement of Affairs; d. in his bankruptcy sworn Statement of Affairs, Mr. Assaly did not disclose the assignment of monies held in court in the Civil Action which were claimed to be assigned to the Charitable Foundation within five years of his filing for bankruptcy contrary to part 10 of his Statement of Affairs; and, e. in his consumer proposal Statement of Affairs, Mr. Assaly did not list the Plaintiffs as creditors, notwithstanding that there was an ongoing matter that would be stayed by the filing of the consumer proposal.
[45] The Court notes that in the consumer proposal documentation, which Mr. Assaly filed in March 2018, the Plaintiff said his income was $3,700 per month, which appeared to be from consulting fees. When Mr. Assaly filed for bankruptcy some three months later in June 2018, he indicated that he was a recipient of ODSP benefits, earning $1,200 per month. The Court has no information as to when Mr. Assaly moved back to Canada or when he applied for ODSP.
[46] The Plaintiffs argue that the Kemptville Land has value after the payment for the lease option, the surveying fees, and the legal fees because the lots would sell for much more than the $750,000 of expense claimed. No evidence was provided as to what the value of the land would be either before or after severance.
[47] The Court rejects the Plaintiffs’ argument that the Kemptville Land has value. Based on the evidence before the Court, the cost will be in excess of $650,000 to render the property ready for sale. The Court finds that Mr. Assaly does not have the monies either now or in the foreseeable future. There is no evidence that he will turn the Kemptville Land into serviceable lots.
[48] As to the $450,000 currently in Court pursuant to the order of Aston J., Mr. Assaly says that those monies have been assigned to the Charitable Foundation and that he is no longer the owner of those monies. The Court finds that this issue is a matter to be determined at a later date. Even if he did have the monies, his liabilities would still exceed his assets.
[49] As to Mr. Assaly’s claim of monies owing to him from his father’s Estate in the rage of $160,000-$186,000, the Plaintiffs argue that there is no money owing to him. If that is the case, how can the Plaintiffs argue that those monies are available to him to satisfy his creditors?
[50] Based on these findings the Court finds that Mr. Assaly’s liabilities exceed his assets.
[51] Section 181(1) of the BIA states that:
181 (1) If, in the opinion of the court, a bankruptcy order ought not to have been made or an assignment ought not to have been filed, the court may by order annul the bankruptcy.
[52] The Court finds that the wording of this section makes the annulment discretionary.
[53] In the case of Edell v. Canada (Revenue Agency), 2011 ONSC 1943, 2011 CarswellOnt 1991, the bankrupt brought a motion to annul or stay his assignment with the bankruptcy and to approve his proposal, which was rejected by the sole creditor, Canada Revenue Agency. The Court relied on the case of TNG Services Inc., Re, (2009) 50 C.B.R. (5th) 194 at para. 6 which said that the remedy of annulling a bankruptcy is to be used sparingly, in special circumstances, and that the discretion to be exercised by the Court must take into consideration and balance all of the interests of the creditors, the bankrupt, and third parties. In Edell, the court declined to use its discretion to annul the bankruptcy.
[54] The Civil Action Plaintiffs rely on the case of Warner v. Warner, 2013 ONSC 1726, 2013 CarswellOnt 4036. In that case a motion was brought by the wife for an annulment of an assignment in bankruptcy on the grounds that it was commenced by the husband for the purposes of staying family law proceedings and avoiding an equalization payment and, thereby, constituted an abuse of process.
[55] In that case, the Court held that Mr. Warner was solvent when he had made the assignment in bankruptcy. The Court said that:
The motivation for it was to stay the family law proceedings and avoid his equalization payment; therefore the assignment was an abuse of process.
[56] The Court notes that the major difference in Warner was that the bankrupt had a pension and an RRSP, both of which were exempt assets in bankruptcy proceedings. Mr. Assaly has neither a pension nor an RRSP. Therefore the Court finds that the present case can be distinguished from Warner.
[57] The Plaintiffs also rely on the case of Tarasenko (Re), 2018 BCSC 285, 2018 CarswellBC 417. In that case, Mr. Balfour, was an unsecured judgment creditor of Mr. Tarasenko. Mr. Balfour applied to have Mr. Tarasenko adjudged bankrupt and a bankruptcy order made. The Court in that case relied on Warner to annul the bankruptcy.
[58] In Tarasenko the Court rejected the creditor’s submission that the bankrupt’s application should be dismissed as an abuse of process.
[59] Based on s. 181(1) and the case law, the Court finds that it is discretionary to annul an assignment in bankruptcy. Having balanced the interests of the creditors, the bankrupt, and any potential third parties, the Court will not use its discretion to annul the bankruptcy. The Court finds that Mr. Assaly’s bankruptcy should stand.
3) Should the Second Stay of Proceedings be Lifted to allow Action No.15-66598 to proceed and, if so, to what extent?
The Plaintiffs’ Position
[60] As set out sequentially in the Statement of Claim, the Plaintiffs seek the following relief:
a. General damages; b. In the alternative, special damages; c. In the alternative, an indemnification payment from Mr. Assaly; d. Aggravated and punitive damages; e. An order that the monies paid into court pursuant to the order of Justice D. Aston, dated March 31, 2009, together with accrued interest be paid out to the Plaintiffs; f. A declaration that Mr. Assaly is a vexatious litigant; and, g. An order that Thomas G. Assaly, Karen Floyd Assaly, and their children and any corporation or foundation they control shall not be authorized to proceed or continue any proceedings against the Estate of Thomas C. Assaly, Gloria Assaly, Robert Assaly or Doug Assaly and their families, either directly or indirectly or through any corporation, foundation or entity they control, except with leave of a judge of the Superior Court of Justice of Ontario, pursuant to s. 140 of the Courts of Justice Act, R.S.O. 1990 c. C.43; h. Prejudgment interest; i. Post-judgment interest; j. Costs.
[61] The Plaintiffs argue that they should be able to proceed with the Civil Action in its entirety, because some of the claims are claims provable in bankruptcy, while other claims are not provable in bankruptcy.
[62] They argue that at least the claims that are not provable in bankruptcy should be allowed to proceed.
Thomas G. Assaly Position
[63] Mr. Assaly argues that the only reason that the Second Stay of Proceedings should be lifted is to allow the Plaintiffs to quantify their claim for the purposes of filing a proof of claim in the bankruptcy. He argues that the amount being claimed by the Plaintiffs, which is in excess of $600,000, is not an amount that the trustee in bankruptcy is prepared to accept based on the trustee’s review of the Plaintiffs’ proof of claim.
[64] Mr. Assaly argues that with respect to the claims not provable in bankruptcy, the Second Stay of Proceedings should remain in place and should not be lifted.
Trustee Position
[65] The trustee argues that it is not prepared to accept the Plaintiffs’ proof of claim as filed. It is prepared to allow the Second Stay of Proceedings to be lifted for the purpose of quantifying the amount of the claims provable, which will then be included in the proof of claim to be filed with the trustee. The trustee argues that it can only put forward a position in relation to claims provable in bankruptcy and that it takes no position with respect to claims that are not provable in bankruptcy.
Analysis
[66] Pursuant to s. 69.3 of the BIA, there is an automatic stay of proceedings upon the bankruptcy of a debtor.
[67] Pursuant to s. 69.3(1) of the BIA, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceeding, for the recovery of a claim provable in bankruptcy.
[68] A “claim provable in bankruptcy” is defined under s. 2 and includes any claim or liability provable in proceedings under the BIA by a creditor.
[69] Section 121(1) defines “claims provable” as follows:
121 (1) All debts and liabilities, present or future, to which the bankrupt is subject on the day on which the bankrupt becomes bankrupt or to which the bankrupt may become subject before the bankrupt’s discharge by reason of any obligation incurred before the day on which the bankrupt becomes bankrupt shall be deemed to be claims provable in proceedings under this Act.
[70] The word “liability” is very broad and includes all obligations to which the bankrupt is subject to on the day when he or she becomes bankrupt, except for contingent and unliquidated claims, which are dealt with in s. 121(2).
[71] Lifting a stay of proceedings is covered under s. 69.4 of the BIA. It allows a creditor to apply to the Court for a declaration that the section no longer applies with respect to that creditor or person. The Court may make such a declaration, subject to any qualifications that the Court considers proper, if the Court is satisfied:
a. that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or b. that it is equitable on other grounds to make such a declaration.
[72] The Court has reviewed the claim in the Civil Action and notes that some of the claims are claims provable in bankruptcy. The Court finds that the following claims are claims provable in bankruptcy:
a. General damages; b. In the alternative, special damages; c. In the alternative, an indemnification payment from Mr. Assaly; d. Aggravated and punitive damages; e. An order that the monies paid into court pursuant to the order of Aston J. dated March 31, 2009, together with accrued interest, be paid out to the Plaintiffs; and h. Pre-judgment interest
[73] The Court will not comment on the claim for post-judgment interest and costs, as the Court finds that those are not applicable at this stage of the Civil Action.
[74] As to the monies held by the Accountant of the Superior Court of Justice of Ontario, the Court orders that the Stay of Proceedings will remain in effect.
[75] The Court notes that there are several claims in the Civil Action that are not claims provable in bankruptcy because they are not debts or liabilities of Mr. Assaly. They are non-monetary claims and have no effect on Mr. Assaly’s bankruptcy. They include the following:
f. A declaration that Mr. Assaly is a vexatious litigant; and, g. An order that Thomas G. Assaly, Karen Floyd Assaly, and their children and any corporation or foundation they control shall not be authorized to proceed or continue any proceedings against the Estate of Thomas C. Assaly, Gloria Assaly, Robert Assaly or Doug Assaly and their families, either directly or indirectly or through any corporation, foundation or entity they control, except with leave of a judge of the Superior Court of Justice of Ontario, pursuant to s. 140 of the Courts of Justice Act, R.S.O. 1990 c. C.43;
[76] Therefore, the Court finds that claims (f) and (g) as set out in the Statement of Claim are not claims provable in bankruptcy. On that basis those claims are not stayed by s. 69.2 of the Bankruptcy and Insolvency Act. The Court does not need to lift the stay in relation to those two remedies because they are not covered by the Bankruptcy and Insolvency Act.
[77] In the event that the Court is incorrect as to the finding in the previous paragraph and the stay is required to be lifted in relation to the claims set out in (f) and (g) of the Statement of Claim, the Court finds that pursuant to s. 69.4 (a) the creditors are likely to be materially prejudiced by the continuation of the stay and, as such, that the Second Stay of Proceeding should be left in relation to claims (f) and (g). The Court’s finding is based on the facts of this case.
[78] Based on a review of the Statement of Claim, the Civil Action appears to be a complex action. In the case of 382231 Ontario Ltd. v. Wilanour Resources Ltd. [1982] 43 C.B.R. (N.S.) 153 (Ont. S.C.) the Court held that if claims being asserted are complex in nature and clearly cannot be disposed of in a summary fashion, leave will be granted so the matter can be litigated in the ordinary civil courts with the procedure applicable in those courts.
[79] At the motion to lift the Second Stay of Proceedings both Mr. Assaly and the trustee agreed that the Civil Motion could proceed for the purpose of quantification of the Plaintiffs’ claim in the bankruptcy.
[80] Based on the reasoning set out in 382231 Ontario Ltd. and the consent of the parties, the Court lifts the Second Stay of Proceedings for sub-sections (a), (b), (c), (d), (e), and (h) of the Statement of Claim for the purpose of quantification of the Plaintiffs’ claim so that they can file a proof of claim in Mr. Assaly’s bankruptcy.
Assignment of Monies Held in Court
[81] Mr. Assaly advised the Court at the motion that the funds paid into Court pursuant to the order of Aston J. dated March 31, 2009, total approximately $450,000, inclusive of interest. He argues that these monies were previously assigned by him and that they are not his property and therefore do not fall into the bankrupt estate.
[82] In support of this allegation, he provided an email dated January 23, 2013, from himself to John Smith at the email address of johnesmith2002@hotmail.com in which he says:
Further to our discussions, now that it’s been more than the two years statute barred since my distributive share was placed into court and no claim has been made against them, I hereby transfer all rights, tile and interest to my children. Furthermore, I’ll be setting up a formal Foundation to put these funds into trust for the children, incorporated in the State of Florida. Once completed, a more formal assignment will be signed and sent to you.
[83] Mr. Assaly also provided an Assignment Agreement dated January 31, 2014 (“Assignment Agreement”) between himself and the Thomas C. Assaly Charitable Foundation Inc. (“Charitable Foundation”), a Florida not-for-profit corporation whereby he purports to assign funds held by the Accountant of the Superior Court of Ontario to the Thomas C. Assaly Charitable Foundation Inc.
[84] The Court notes that Mr. Assaly completed a Statement of Affairs in his consumer proposal. The following question was asked of Mr. Assaly under oath:
Within five years prior to the date of the initial insolvency event, have you, either in Canada or elsewhere
10(a) Sold or disposed of any property? Answer, “No.” (a) Made gifts to relatives or others in excess of $500?” Answer, “No.”
[85] When completing the Statement of Affairs in his bankruptcy Mr. Assaly replied “No” to the same two questions, under oath.
[86] The Court finds that the Assignment Agreement is an assignment of Mr. Assaly’s property which was made within the five year time limit prior to both the consumer proposal and the bankruptcy. The Court is not making a finding as to the validity of the Assignment Agreement.
[87] The Court orders that the bankruptcy trustee contact the United States Bankruptcy Court in the Southern District of Florida to obtain copies of Mr. Assaly’s Bankruptcy filing documents, including a list of his creditors.
Conclusion
[88] For the reasons set out above the First Stay of Proceedings in the consumer proposal will not be lifted.
[89] The Court will not use its discretion to annul the bankruptcy filing.
[90] The Second Stay of Proceedings is lifted in relation to the claims provable in bankruptcy to allow the Civil Motion to proceed for the purpose only of quantifying the Plaintiffs’ Claim and for no other purpose.
[91] In relation to the claims that are not provable in bankruptcy, (f) and (g) in the Statement of Claim, those matters will be allowed to proceed and a Stay of Proceedings is not required to be lifted because those claims are not claims provable in bankruptcy. In the event that the Court is incorrect that the Second Stay of Proceedings claims in (f) and (g) are considered to be provable claims, the Court lifts the Second Stay of Proceedings in relation to those claims.
Other Matters
a) Mitchell Rowe
[92] The Plaintiffs’ claim that Mr. Assaly owes Mitchell Rowe the sum of $5,582.42 pursuant to a Report and Certificate of Assessment in Court File #12-55899.
[93] The Court pointed out to the Plaintiffs’ counsel that the Report and Certificate of Assessment named Karen Assaly as the Respondent. The Plaintiffs acknowledged it and confirmed that this money was not owed by Mr. Assaly.
b) U.S. Bankruptcy Proceedings
[94] The endorsement of Master Champagne, as she was then, dated November 29, 2017, ordered Mr. Assaly to produce documentation from his US Bankruptcy Filing. The evidence is that no such documents were produced by Mr. Assaly. Therefore, there will be a finding that Mr. Assaly did not comply with the November 29, 2017, endorsement and did not provide any further US Bankruptcy documentation.
[95] In addition, the debtor is required to disclose all of his debts worldwide, not just in Canada.
[96] The Court believes that Mr. Assaly has other debts in addition to those owed to Capital One Bank, the Canada Revenue Agency, RBC Visa, and the Plaintiffs. This belief is premised on Mr. Assaly’s US Chapter 11 Bankruptcy in Florida where he listed “dba Drive-Thru Discount Liquor” and “dba KJA-SIRD-LLC”. The Court has previously found that “dba” means “doing business as”.
[97] Therefore, the Court finds that Mr. Assaly had other creditors in the United States which he did not disclose to either the consumer proposal trustee or the bankruptcy trustee. He is ordered to disclose all of his creditors worldwide to the bankruptcy trustee within the next 21 days.
[98] In relation to the consumer proposal, the Court has reviewed the Statement of Affairs. The Court notes that among his assets, Mr. Assaly never included his 22.2% ownership interest in the Thomas C. Assaly Estate, which he claims has a value of approximately $160,000-$186,000. The document was sworn on March 22, 2018.
[99] Mr. Assaly first revealed his interest in his late father’s estate at the first meeting of creditors in the consumer proposal on May 24, 2018. At that meeting, Mr. Assaly “estimates that he will be receiving $186,585 from the estate sometime in the future”. This quotation is taken from the minutes of the first meeting of creditors dated May 24, 2018 as prepared by the Office of the Superintendent of Bankruptcy and chaired by Patrick Wolfe, the Official Receiver.
[100] Therefore, based on the evidence, the Court finds that Mr. Assaly did not disclose his interest in his father’s estate to the consumer proposal trustee or his creditors when he filed his consumer proposal.
[101] A review of the consumer proposal Statement of Affairs does not show any debt to RBC Visa. That Statement of Affairs is sworn on March 22, 2018. A new Statement of Affairs in the bankruptcy sworn June 20, 2018 shows the debt to RBC Visa to be $13,000.
[102] The Court finds that Mr. Assaly did not disclose the RBC Visa credit card debt to the consumer proposal trustee.
[103] The application form in the bankruptcy used by Collins Barrow Brown and completed by Mr. Assaly asks the question “Have you previously filed a bankruptcy or a proposal in Canada or elsewhere?” Mr. Assaly answered that he had filed for bankruptcy in 2002 with Surgeson Carson and received a discharge in 2002. Nowhere does he state that he had filed a Chapter 11 Bankruptcy in the State of Florida.
[104] While there is nothing specifically set out in the Statement of Affairs in the bankruptcy relating to insolvencies outside of Canada, the Court finds that it is important for proposal trustees, bankruptcy trustees, and creditors to know if insolvent persons have any outstanding insolvency proceedings elsewhere other than in Canada.
[105] The Court finds that Mr. Assaly did not disclose his Chapter 11 Bankruptcy Filing to the bankruptcy trustee.
c) Kemptville Land
[106] In relation to the Kemptville Land the Court orders that the bankrupt provide a written consent to the trustee to contact persons that may have knowledge of the land lease documents. Mr. Assaly claims that he does not have a copy of the land lease document.
[107] Mr. Assaly claims to have an interest in the Kemptville Land by way of lease. The Court orders the trustee to research this matter further and, if necessary, register their interest on title, notwithstanding the fact that the lease may not come due until 2023 as there may be value in this asset. The Court orders that the trustee report to the Court by way of letter as to the status of this land lease within the next 120 days.
d) Case Management
[108] The Court orders that both the consumer proposal file and the bankruptcy file be managed by Kershman J. for the following reasons:
- Mr. Assaly filed a consumer proposal previously which he turned into a bankruptcy;
- Mr. Assaly was bankrupt in the United States and provided no additional documentation about it, except for the one sheet of paper that was provided to Master Champagne at the November 29, 2017 hearing; and,
- Mr. Assaly was previously bankrupt in Canada in 2002.
[109] By virtue of the first bankruptcy of Mr. Assaly, the consumer proposal of Mr. Assaly, the bankruptcy of Mr. Assaly in the United Stated and this bankruptcy, this Court orders that the Bankrupt is not to file any proposal or other reorganization under the Bankruptcy and Insolvency Act or any other similar legislation without having first obtained leave of the Court in writing to do so.
e) Monies held in Court
[110] The Court orders that the monies presently held in court with the Accountant of the Superior Court of Ontario in Court File # 15-66598 shall remain in court pending further order of this Court.
Costs
[111] The issue of costs of the June 20, 2018 hearing was not addressed at the July 18, 2018 hearing as was previously ordered. By virtue of the bankruptcy filing on June 20, 2018, the Court finds that it is not able to deal with the matter of costs of the June 20, 2018 hearing because the matter was not adjudicated prior to the bankruptcy.
[112] As to the July 20, 2018 hearing, if any party is seeking costs that party shall contact the Bankruptcy Trial Coordinator who will arrange a date and time to argue the issues of costs. Each side will have 10 minutes to argue their position. Costs Outlines are to be exchanged and filed at least 3 days prior to the hearing date.
[113] Order to issue accordingly.
Mr. Justice Stanley J. Kershman
Date: August 15, 2018