COURT FILE NO.: 5059/15 (Walkerton) DATE: 2019 06 11
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: JEFFREY JACOB JURRIUS (Applicant) and KELLY LYNN GARCIA (Respondent)
BEFORE: Kumaranayake J.
COUNSEL: R. H. Thomson, Counsel for the Applicant Matthew R. Harris, Counsel for the non-party, David Sklar & Associates Inc., Licensed Insolvency Trustee of Kelly Lynn Garcia, Respondent to the motion only
HEARD: January 18, 2019
E N D O R S E M E N T
NATURE OF THE MOTION
[1] The Respondent Kelly Lynn Garcia made an assignment into bankruptcy on September 29, 2018. The Applicant has brought a motion to annul the bankruptcy and to set aside the conveyance of a vacant property from the Respondent to a non-party, Jessica Lynn Marginson. This conveyance occurred on August 10, 2018.
[2] This motion was originally returnable on December 19, 2018, and heard on January 18, 2019.
BRIEF BACKGROUND
[3] The Applicant and the Respondent are involved in family law litigation. The Application was commenced on March 11, 2015. At the beginning of the proceedings, the Respondent swore a Financial Statement, dated May 11, 2015, in which she indicated that she had no debts.
[4] One of the outstanding issues in this matter is equalization. The Applicant asserts that the Respondent has not been forthcoming with financial disclosure. He asserts that the Respondent has had involvement in two businesses for which he has been seeking financial disclosure: 2059162 Ontario Limited operating as Serenity Blenheim (“Serenity Blenheim”) and 1411693 Ontario Limited operating as Serenity Durham “(Serenity Durham”).
[5] On July 25, 2018, Baltman J. ordered that the Respondent provide, by August 22, 2018, disclosure with respect to these businesses.
[6] On September 19, 2018, Gibson J. made a further order for the Respondent to produce information from her accountant. The Respondent was also ordered to pay $5000 in costs.
[7] On September 29, 2018, the Respondent made an assignment into bankruptcy.
[8] The Applicant asserts that the Respondent has not fulfilled her financial disclosure obligations and has not paid the costs as ordered by Gibson J.
MATERIALS FILED
[9] The Applicant filed an affidavit, two affidavits from his counsel’s law clerk, a factum and book of authorities for consideration in this motion
[10] The Respondent did not file any material. She was served with the Applicant’s motion by mail at her address (46 Airport Road, R. R. #1 Walkerton, Ontario, N0G 2V0) and has not responded. She did not appear today although she was paged. The motion material was mailed to her on December 5, 2018, and I am satisfied that she has had adequate notice of this motion.
[11] The non-party, David Sklar & Associates Inc., Licensed Insolvency Trustee of Kelly Lynn Garcia, filed a responding affidavit, a factum and two books of authorities for consideration in this motion. I shall refer to this non-party as the Insolvency Trustee.
[12] The non-party, Jessica Lynn Marginson, received a copy of the motion materials; a copy was left for her at her residence. As she is a non-party, she should have been served by special service. However, she acknowledged receiving the motion materials by correspondence to the Court, dated December 12, 2018. Therefore, despite the irregular manner in which she was served, I am satisfied that she received the motion materials and validate the irregular service. Ms. Marginson did not attend for the motion, although she was paged.
THE POSITIONS OF THE PARTIES
[13] The moving party submits that the bankruptcy should be annulled on the basis of that the Respondent does not meet the definition of an insolvent person. The Applicant argues that the Respondent’s assets were sufficient to cover her obligations and there is no evidence that she was not meeting her obligations as they came due.
[14] The Applicant also submits that the Respondent did not disclose her interest in Serenity Blenheim and Serenity Durham when she made the assignment into bankruptcy.
[15] The Applicant submits that the bankruptcy should be annulled on the basis that the Respondent has abused the court process and that she made this assignment into bankruptcy as a means to avoid making an equalization payment to the Applicant, which in the Applicant’s view, the Respondent will likely be required to make.
[16] With respect to the property, which is described as Pt 2 Lt 66 Con 2 NDR Brant, Pt 2, 3R8057, Brockton being PIN 33195-0349 (LT) (“the property”), the Applicant asserts that this property was given to the Respondent by her father. The Applicant and Respondent had planned to build a house on the property. While they took steps toward obtaining a building permit, they did not build a house.
[17] The Applicant states that the Respondent gifted the property to Ms. Marginson and that the value of the property was $200,000. He states that he does not know Ms. Marginson, what relationship she has to the Respondent or why the Respondent would gift the property to her. The Applicant challenges the legitimacy of this transfer of ownership of the property.
[18] The Insolvency Trustee submits that the Respondent does meet the definition of an insolvent person and that the Respondent could not meet her obligations as they came due.
[19] The Insolvency Trustee acknowledges that there was no mention of the property in the Respondent’s documentation for the assignment into bankruptcy. It was argued that part of the role of the Insolvency Trustee is to investigate and that the Insolvency Trustee would take steps to get the property back.
[20] It was also submitted that any equalization payment owing to the Applicant was protected as it would have priority status.
[21] The Insolvency Trustee’s position is that the motion should be dismissed and submitted that the Applicant did not meet the test for annulment of bankruptcy. It was also argued that the creditors did not have notice of the motion.
[22] The Insolvency Trustee also raised a preliminary issue and submitted that I do not have jurisdiction to hear this motion.
[23] Both counsel agreed that I would hear the argument on jurisdiction as well as on the merits of the motion. If I determined that I had jurisdiction, then I would decide on the motion on its merits.
ISSUE OF JURISDICTION
[24] The first issue I must determine is whether I have jurisdiction to hear this matter. The Insolvency Trustee submits that I do not have jurisdiction as I am not sitting as a judge in the Bankruptcy Court. In its factum, the Insolvency Trustee submitted that this motion
is to be brought in a bankruptcy Court, and if it is brought in an ordinary court it shall be dismissed. This motion is being brought in a Superior Court, sitting in Family law, with specific family law designation and file number. Not a bankruptcy Court or general civil Court. An action requesting this relief should be brought in the Commercial List in Toronto, or to a Bankruptcy Registrar (also in Toronto) based on Section 183(1) and 192(2) of the BIA and the 2014 Practice Direction. [Citations omitted.]
[25] Although counsel for the Insolvency Trustee conceded that I was not sitting in Family Court Branch of the Superior Court of Justice and he maintained that I did not have jurisdiction by the fact that I was not sitting in Toronto in the Bankruptcy Court. Counsel for the Applicant submitted that I did have jurisdiction.
[26] Both counsel rely on the case of Wale, Re, [1996] O.J. No. 4489 (Gen. Div.) to support their position. Wale was in the context of family law. Mr. Wale had filed an assignment into bankruptcy just days before the trial of the family law matter was to be heard. Ms. Wale brought a motion requesting that bankruptcy be annulled. O’Connor J. annulled the bankruptcy of Mr. Wale and ordered that title to the matrimonial home vest in Ms. Wale, pending its sale and distribution as ordered by O’Connor J. in his judgment of the family law matter.
[27] Section 183 (1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, (“the BIA ”) outlines which courts have jurisdiction
Courts vested with jurisdiction
183 (1 ) The following courts are invested with such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during their respective terms, as they are now, or may be hereafter, held, and in vacation and in chambers:
(a) in the Province of Ontario, the Superior Court of Justice;
(b) [Repealed, 2001, c. 4, s. 33 ]
(c) in the Provinces of Nova Scotia and British Columbia, the Supreme Court;
(d) in the Provinces of New Brunswick and Alberta, the Court of Queen’s Bench;
(e) in the Province of Prince Edward Island, the Supreme Court of the Province;
( f) in the Provinces of Manitoba and Saskatchewan, the Court of Queen’s Bench;
(g) in the Province of Newfoundland and Labrador, the Trial Division of the Supreme Court; and
(h) in Yukon, the Supreme Court of Yukon, in the Northwest Territories, the Supreme Court of the Northwest Territories, and in Nunavut, the Nunavut Court of Justice.
Superior Court jurisdiction in the Province of Quebec
(1.1) In the Province of Quebec, the Superior Court is invested with the jurisdiction that will enable it to exercise original, auxiliary and ancillary jurisdiction in bankruptcy and in other proceedings authorized by this Act during its term, as it is now, or may be hereafter, held, and in vacation and in chambers.
Courts of appeal — common law provinces
( 2) Subject to subsection (2.1), the courts of appeal throughout Canada, within their respective jurisdictions, are invested with power and jurisdiction at law and in equity, according to their ordinary procedures, except as varied by this Act or the General Rules , to hear and determine appeals from the courts vested with original jurisdiction under this Act.
Court of Appeal of the Province of Quebec
(2.1) In the Province of Quebec, the Court of Appeal, within its jurisdiction, is invested with power and jurisdiction, according to its ordinary procedures, except as varied by this Act or the General Rules , to hear and determine appeals from the Superior Court.
Supreme Court of Canada
(3) The Supreme Court of Canada has jurisdiction to hear and to decide according to its ordinary procedure any appeal so permitted and to award costs.
[28] Section 185 of the BIA sets out the legislative authority for judges to be assigned to hear bankruptcy matters.
Assignment of judges to bankruptcy work by Chief Justice
185 (1) The Chief Justice of the court, and in the Province of Quebec the Chief Justice or the Associate Chief Justice in the district to which he was appointed, may , if in his opinion it is advisable or necessary for the good administration of this Act, nominate or assign one or more of the judges of the court to exercise the judicial powers and jurisdiction conferred by this Act that may be exercised by a single judge, and the judgment, decision or order of a judge so nominated or assigned shall be deemed to be the judgment, decision or order of the court, and a reference in this Act to the court applies to any judge exercising the powers and jurisdiction of the court.
[Emphasis added.]
[29] Section 192(1) of the BIA sets out the powers of a registrar:
192 (1) The registrars of the courts have power and jurisdiction, without limiting the powers otherwise conferred by this Act or the General Rules ,
(a) to hear bankruptcy applications and to make bankruptcy orders if they are not opposed;
(b) to hold examinations of bankrupts or other persons;
(c) to grant orders of discharge;
(d) to approve proposals where they are not opposed;
(e) to make interim orders in cases of urgency;
(f) to hear and determine any unopposed or ex parte application;
(g) to summon and examine the bankrupt or any person known or suspected to have in his possession property of the bankrupt, or to be indebted to him, or capable of giving information respecting the bankrupt, his dealings or property;
(h) to hear and determine matters relating to proofs of claims whether or not opposed;
(i) to tax or fix costs and to pass accounts;
(j) to hear and determine any matter with the consent of all parties;
(k) to hear and determine any matter relating to practice and procedure in the courts;
(l) to settle and sign all orders and judgments of the courts not settled or signed by a judge and to issue all orders, judgments, warrants or other processes of the courts;
(m) to perform all necessary administrative duties relating to the practice and procedure in the courts; and
(n) to hear and determine appeals from the decision of a trustee allowing or disallowing a claim.
[30] While section 192(1) of the BIA sets out the powers of a registrar, those powers are not the exclusive jurisdiction of the registrars as clearly set out in section 192(2):
May be exercised by judge
(2) The powers and jurisdiction conferred by this section or otherwise on a registrar may at any time be exercised by a judge.
[31] As set out in section 185(1) of the BIA , the assignment of judges to bankruptcy matters is not mandatory, but is permitted. The language used in section 185(2) clearly indicates Parliament’s intention that all judges of the courts set out in section 183(1) have jurisdiction to deal with bankruptcy matters:
No diminution of powers
(2) Nothing in this section diminishes or affects the powers or jurisdiction of the court or of any of the judges thereof not so specially nominated or assigned.
[32] Therefore, I do not accept the Insolvency Trustee’s argument and I find that I do have jurisdiction to hear this motion.
ISSUE OF ANNULMENT OF BANKRUPTCY
[33] The Insolvency Trustee submitted that the case before me was different from Wale, where the annulment motion was served on the parties, the trustee, and all creditors, whereas in this case the creditors have not been served and therefore the motion must fail.
[34] Counsel for the Applicant concedes that all the creditors were not served.
[35] While the grounds relied upon by the Applicant for annulment of the bankruptcy and setting aside the conveyance of the property may have merit, I make no determination of the merits of the motion.
[36] As the creditors have not been given notice, I must dismiss the motion and do so without prejudice to the Applicant.
ORDER
[37] After carefully considering the submissions of counsel and reviewing the materials which have been filed for this motion and for the reasons outlined above, I make the following temporary order:
Service of the Applicant’s motion originally returnable on December 19, 2018, on the non-party Jessica Lynn Marginson is validated and service is effective December 13, 2018.
The Applicant’s motion is dismissed without prejudice to bring the motion again on proper notice to the Respondent Kelly Lynn Garcia; David Sklar & Associates Inc., Licensed Insolvency Trustee of Kelly Lynn Garcia ; all the creditors; and the non-party Jessica Lynn Marginson.
A copy of the decision shall be mailed to the Respondent Kelly Lynn Garcia at the following address: 46 Airport Road, R. R. #1 Walkerton, Ontario, N0G 2V0.
Counsel for the Insolvency Trustee shall also email a copy of this decision to the Respondent Kelly Lynn Garcia at the email address that counsel has for her.
With respect to costs, if counsel cannot agree, then written costs submissions shall be filed as follows: a. On or before July 19, 2019, anyone seeking costs shall file written submissions that are in 12-point font and no more than three pages. b. Responding submissions shall be filed on or before August 9, 2019, and shall be in 12-point font and no more than two pages. c. There shall be no written reply submissions d. All written submissions shall be faxed to the Trial Coordinator at fax number 519-370-2454. e. The parties do not need to file their respective Bills of Costs as those were filed at the hearing of the motion. f. Any offers to settle that were served should be filed with the written submissions.
Kumaranayake J.
DATE: June 11, 2019