Court File and Parties

COURT FILE NO.: 31-1605962

DATE: 2018/09/28

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Kara Jones (now Carley), Moving Party

AND:

H.M.Q. (Canada) and H.M.Q. (Ontario), Responding Parties

BEFORE: Justice A.D. Grace

COUNSEL: B. Blay, for the Moving Party

R. Danter, for the Responding Parties

HEARD: September 15, 2018

Released: September 28, 2018 (Transcribed October 16, 2018)

ENDORSEMENT

A. Background

[1] Ms. Carley made an assignment in bankruptcy on March 26, 2012. At that time her debts included amounts borrowed through the National Student Loans Service Centre in July, 2007 and July, 2008 to assist in defraying some of the costs of the Dental Hygiene Program in which she was then enrolled.

[2] Although automatically discharged on December 27, 2012, the loans were not released. Section 178(1)(g) of the Bankruptcy and Insolvency Act (‘BIA’) reads in part:

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…

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

[3] For reasons I will come to, Ms. Carley now seeks an order under s. 178(1.1) of the BIA. In part it provides:

At any time after five years after the day on which a bankrupt who has a debt referred to in paragraph (1)(g)… ceases to be a full or part-time student… under the applicable Act or enactment, the court may, on application, order that subsection (1) does not apply to the debt if the court is satisfied that

(a) the bankrupt has acted in good faith in connection with the bankrupt’s liabilities under the debt; and

(b) the bankrupt has and will continue to experience financial difficulty to such an extent that the bankrupt will be unable to pay the debt.

[4] Those making the student loans that remain outstanding – Her Majesty the Queen in Right of Canada (‘Canada’) and Her Majesty the Queen in Right of Ontario (‘Ontario’) oppose the application (the ‘motion’).

B. Preliminary Issue

[5] This matter was originally before the Deputy Registrar in Bankruptcy in London, Ontario on August 22, 2018. It was adjourned from time to time. Unfortunately, the Deputy Registrar retired. A replacement has not yet been named despite the fact the retirement was planned and known for months.

[6] The motion was scheduled to be heard by the judge presiding in motion’s court. A criminal trial I was to hear was adjourned unexpectedly and this matter was moved to my courtroom. I concede my focus was on the material before me, the specific paragraphs referenced in the case law and the submissions made by counsel.

[7] Decision was reserved. Having re-read the applicable sections of the BIA, I questioned my jurisdiction to make – and Ms. Carley’s standing – to seek an order under s. 178(1.1) at this time given its reference to “bankrupt” and to the definition of that word in s. 2.

[8] However, I am satisfied that the merits of the application should be considered for two reasons.

[9] First and importantly, the responding parties did not suggest that the court lacked jurisdiction or that Ms. Carley did not have standing.

[10] Second, the issue was addressed in some detail in Re Minto, 1999 CanLII 13045 (Sask. Reg.). Registrar Herauf concluded that relief could be granted under s. 178(1.1) in favour of a former bankrupt. There are Ontario examples too although the same analysis was not undertaken: see, for example Re Fournier, 2009 CarswellOnt 3522 (Reg.) and Re Kelly, 2000 CanLII 22497 (Ont. Dep. Reg.).

[11] Furthermore, I did not raise the issue with counsel because, bluntly, it had not come to mind and did not arise from the portions of the cases I reviewed during oral argument. I turn to the evidence.

C. The Evidence

[12] Two affidavits were sworn by Ms. Carley and filed. Canada and Ontario did not cross-examine her nor did those parties serve and file a responding affidavit.

[13] While I have concerns with respect to the sufficiency of some of the moving party’s evidence, it is uncontroverted.

[14] The basis for the relief sought by Ms. Carley follows.

[15] Ms. Carley’s student days ended in December, 2010. Three attempts had been made to fulfill the requirements of Durham College’s Dental Hygiene Program. All ended in failure.

[16] Beyond the 2012 bankruptcy, little is known by the court about the intervening years leading up to 2018. Loan statements from the National Student Loans Service Centre for the 2011, 2012, 2013 and 2015 calendar years are attached to Ms. Carley’s first affidavit sworn July 15, 2018. Some payments on account were made in 2011 and 2012. None were made in 2013. Two small payments aggregating just over $400 were credited to her account in 2015. In 2016, Ms. Corley’s $917.72 income tax refund was applied to the outstanding student loans. A $493.50 G.S.T. credit was similarly utilized earlier this year. While not entirely self-explanatory, other documents were filed concerning the balance owing, interest payments made and communications sent during periods of alleged delinquency.

[17] That brings me to the present day. Ms. Carley has cohabited with Christopher Mackie for over a year. She is forty years old. She has no children. She is employed by Shoppers Drug Mart as a Pharmacy Assistant. She describes her employment as part-time. Her monthly after tax income approximates $2,200. Mr. Mackie, she said, is “sporadically employed”. It appears he worked for the Best Western Stoneridge Inn and Conference Centre in 2016 and 2017 earning $2,223 and $20,446.62 respectively. At para. 5 of her supplemental affidavit sworn September 19, 2018, Ms. Carley said:

My partner is presently not employed. He has no income nor is he receiving any form of social assistance. He is presently dealing with a series of unexpected deaths in his family and I do not know when he will return to seeking employment.

[18] Ms. Carley maintains that she covers the monthly expenses attributable to her and to Mr. Mackie. She deposed they total approximately $3,057 including $600 for “entertainment, tobacco, alcohol”. The monthly deficiency would then be about $857. Ms. Carley’s counsel notes that in a bankruptcy scenario the moving party’s income would fall below the level that would trigger a ‘surplus’ to be paid to the bankruptcy trustee.

[19] With that background I turn to the applicable principles.

D. Legal Principles

[20] As mentioned, s. 178(1.1) contains two elements:

(a) the bankrupt must have acted in good faith in connection with the outstanding student loan(s); and

(b) the bankrupt’s financial difficulty must be in existence at the time and continue in the future to such an extent that the student loans cannot be repaid.

[21] The bankrupt bears the onus of proof: Re Rendely (2003), 2003 CanLII 28992 (ON SC), 3 C.B.R. (5th) 136 (Ont. S.C.J.)

[22] With respect to good faith, I will apply rather than list the relevant factors. The considerations have been set forth many times and need not be repeated yet again. See, for example, Re Minto, supra at para. 62; Re Kelly, 2000 CanLII 22497 (Ont. S.C.) at paras. 16 and 17; Re Cote, 2010 BCSC 490, 2010 CarswellBC 868 (S.C.) at para. 21.

[23] In this case the evidence establishes that:

(a) the borrowed money was used for the intended purpose;

(b) Ms. Carley tried but failed to complete the program three times;

(c) Ms. Carley, therefore, has not been and cannot be employed as a dental hygienist;

(d) Payments have been made on account of the student loans voluntarily and seemingly, as a result of efforts undertaken by or on behalf of Canada and/or Ontario;

(e) The account statements suggest that Ms. Carley sought and received – at least pre-bankruptcy – some interest relief;

(f) As noted, her bankruptcy took place almost six years ago;

(g) Ms. Carley seems, at present, to have a modest lifestyle.

[24] I am prepared to agree that the good faith requirement has been met.

[25] I am also prepared to accept, with some trepidation, that Ms. Carley is in present financial difficulty that makes it impossible to pay the outstanding loans.

[26] However, s. 178(1.1)(b) also requires that same “continue”. That is where this motion fails even though the opposing creditors did not cross-examine Ms. Carley on her affidavits or file an affidavit of their own.

[27] As noted, she bears the onus of proof. The standard must be on a balance of probabilities. The problem is that Ms. Carley has provided limited information on topics that must be within her knowledge or ability to know. For example, what does “part-time” mean? Two pay stubs were included in the material but are they typical or atypical of her hours and remuneration? Why is the moving party working part-time? Is that all she wants to work or all she can do? If the latter, what is the issue(s)? If the former, why? Has full-time employment been sought? If so, what are the details? Why does the record she assembled not include income tax returns and notices of assessment? What assets, if any, does she own?

[28] Questions abound concerning Mr. Mackie too. When did he cease to be employed? Has he not earned any income in 2018? Further details concerning the “series of unexpected deaths” are needed. The court is sorry for his loss or losses but how have they affected him? Why is he receiving no income? What are the limitations he faces in seeking future employment? If psychological, is he receiving counselling or treatment? Where are his income tax returns and notices of assessment? What assets, if any, does he possess or own? Does he have an expectation of inheritance?

[29] The creditors were not bound to fill in gaps in the evidentiary record. In my view, they are plentiful and obvious. Further, why is $600 per month being spent on entertainment, alcohol and tobacco? Some expenditure is, of course, understandable but on its face, the sum of $600 is concerning. Yet no explanation was volunteered. A reduction in that item would not extinguish the deficit, but its true impact is unknown given the number of other unanswered questions that remain.

[30] On this record, I am unable to agree with the moving party’s assertion that she will continue to experience financial difficulty to such an extent that “she would be unable to retire the remaining student loans.

[31] The motion (the method by which applications are brought under the BIA – see rule 11 of the General Rules under the BIA) necessitates the granting of the relief sought or dismissal. There is no middle ground: Re Martinson, 2013 MBQB 88 at para. 7; Re Bremner (2011), 2011 NBBR 244, 380 N.B.R. (2d) 217 (Reg).

[32] Even if it were otherwise, the record is insufficient to ground an alternative disposition.

[33] For the reasons given, Ms. Carley’s motion is dismissed.

“Justice A.D. Grace”

Justice A.D. Grace

Date: Released September 28, 2018 (Transcribed October 16, 2018)