COURT FILE NO.: 33-2374550
DATE: 2021/05/26
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE CONSUMER PROPOSAL OF
CHRISTOPHER FRANCIS ARSENAULT
OF THE CITY OF IROQUOIS
IN THE PROVINCE OF ONTARIO
BEFORE: Justice Stanley J. Kershman
HEARD IN OTTAWA: May 3, 2021 by Zoom at Ottawa
APPEARANCE: Philip J. Gertler, for Goldhar & Associates Ltd.
Murray Ferron, for the Office of the Superintendent of Bankruptcy
endorsement on motion
Introduction
[1] The Consumer Proposal Administrator (“Administrator”) brings this motion seeking to tax its Final Statement of Receipts and Disbursements so that it can proceed to its discharge. The Office of the Superintendent of Bankruptcy (“OSB”) opposes the motion.
Factual Background
[2] The facts are not in dispute.
[3] Christopher Francis Arsenault (“Consumer Debtor”) filed a consumer proposal (“Consumer Proposal”) naming Goldhar & Associates Ltd. as the Administrator on May 3, 2018. The Consumer Debtor passed away on June 13, 2018. The Consumer Proposal went into default when the Administrator stopped removing the pre-authorized payments from the Consumer Debtor’s bank account.
[4] The Administrator brought a motion to revive the Consumer Proposal (“Revival Motion”) before the Court on March 25, 2019. The Revival Motion was brought on notice to the OSB and to the creditors of the Consumer Debtor. The motion record in respect of the Revival Motion (the “Motion Record”) included a claim for “[a]n Order that the Administrator’s costs of this motion be payable out of the receipts in the Consumer Proposal.”
[5] The OSB acknowledges having been served with the Motion Record on March 12, 2019.
[6] Neither the OSB nor any other party contacted the Administrator to object to the Revival Motion or the aforementioned order sought. At the return of the Revival Motion on March 25, 2019, neither the OSB nor any other party attended before the Court to object to the Revival Motion or the order sought.
[7] As such, on March 25, 2019, Master Fortier granted the order for the Revival Motion, including the aforementioned order that the motion costs be payable out of the receipts in the Consumer Proposal.
[8] The signed Revival Order was e-filed with the OSB on March 29, 2019. The OSB did not appeal the Revival Order; nor did any other party. Accordingly, that order is a final order.
[9] In accordance with the Revival Order, the Administrator paid the bill of costs for services rendered by the Administrator’s lawyer in the amount of $2,463.40 out of the receipts in the Consumer Proposal.
[10] The Administrator provided the OSB with its final Statement of Receipts and Disbursements (“SRD”) dated April 4, 2019.
[11] On April 12, 2019, the OSB issued a negative comment letter in respect of the SRD on the basis that the motion costs could not be paid out of the Consumer Proposal receipts notwithstanding the Revival Order. It argues that pursuant to Re Rousseau, 2016 ONSC 962, 35 C.B.R. (6th) 122, a Consumer Proposal Administrator’s fees are only as outlined in r. 129 of the Bankruptcy and Insolvency General Rules, C.R.C., c. 368 (“Bankruptcy Rules”), and the amount claimed by the Administrator is in excess of that amount and accordingly is not allowed.
Issues
Should the Administrator be allowed to recover the amount ordered by the Registrar in Bankruptcy in the Court Order dated March 25, 2019?
What should the Administrator’s Final Receipts and Disbursements be taxed at, so it can proceed to its Discharge?
Issue #1: Should the Administrator be allowed to recover the amount ordered by the Registrar in Bankruptcy in the Court Order dated March 25, 2019?
Administrator’s Position
[12] The Administrator argues that when a question is litigated, the judgment of the court is a final determination as between the parties and their privies. Any right, question or fact distinctly put into issue and directly determined by a court of competent jurisdiction cannot be retried in a subsequent suit as between the same parties even though it is for a different cause of action. The right, question or fact, once determined, must, as between them, be taken to be conclusively established so long as the judgment remains: Barcham v. Barcham, 2017 ONSC 813, 26 E.T.R. (4th) 147, at para. 26; Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at para. 24.
[13] The Administrator argues that there are two branches of res judicata, one being Cause of Action Estoppel and the second being Issue Estoppel.
Cause of Action Estoppel
[14] This is a bankruptcy taxation which the Administrator is statutorily required to bring once the OSB issues a negative letter of comment.
[15] The Administrator submits that the principles of res judicata must be adopted to the bankruptcy context.
[16] The Administrator cites four pre-conditions required for Cause of Action Estoppel to apply, as set out in Erschbamer v. Wallster, 2013 BCCA 76, 41 B.C.L.R. (5th) 160, at para. 15:
(a) There must be a final decision of a court of competent jurisdiction in the prior action;
(b) The parties to the subsequent litigation must have been parties to or in privy with the parties to the prior action;
(c) The cause of action in the prior action must not be separate and distinct; and
(d) The basis of the cause of action and the subsequent action was argued or could have been argued in the prior action if the parties had exercised reasonable diligence.
[17] The Administrator argues that the Revival Order was made by Master Fortier sitting as a Registrar in Bankruptcy with the authority to hear the motion under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”).
[18] The Administrator argues that (1) technically it was the moving party in both proceedings (i.e., the Revival Motion and the within taxation motion), and (2) the OSB, as the responding party served with notice of both proceedings, was entitled to respond to both proceedings. The OSB did not oppose the Revival Motion.
[19] One of the issues before the Court today, namely the legal costs on the motion being paid out of the Consumer Proposal, was the same issue that was previously decided at the Revival Motion. It was open to the OSB to object in that proceeding.
[20] The Administrator argues that the OSB was served with the notice of the Revival Motion and the relief being sought by the Administrator. It did not object to the Revival Motion or the order sought.
Issue Estoppel
[21] In the alternative, the Administrator argues that Issue Estoppel applies to preclude relitigation of issues that have already been decided. The three preconditions to the operation of Issue Estoppel are as follows, as indicated by Barcham, at para. 25, and Danyluk, at para. 25:
(a) The same question has been decided;
(b) The judicial decision said to give rise to the estoppel is final; and
(c) The parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel was raised or their privies.
[22] The Administrator argues that the decision relied upon by the OSB in Re Rousseau is not binding on this Court. It argues that a Master sitting as a Registrar in Bankruptcy is in no higher position than a Master sitting in ordinary civil court. Decisions of the Registrar are appealed to a single Judge of the Superior Court which places a Judge at a higher level than the Master/Registrar in Bankruptcy, and a Judge is not bound by the decisions of a Registrar: Bankruptcy Rules, r. 30(1); CIBC Mortgages Inc. (Firstline Mortgages) v. Tuchsen, 2015 ABQB 241, 24 C.B.R. (6th) 303, at para. 36.
[23] Lastly, it argues that the decision of the Master in Re Rousseau would not be binding on the Master hearing the Revival Motion, though it may have been persuasive: R. v. Chan, 2019 ONSC 783, 428 C.R.R. (2d) 81, at paras. 39-44 and 60.
The OSB’s Position
[24] The OSB argues that the fees payable to a Consumer Proposal Administrator are prescribed by s. 66.12(6)(b) of the BIA and the tariff pursuant to r. 129 of the Bankruptcy Rules. It argues that the rule does not allow for payment of anything over and above the tariff.
[25] The OSB states that the Administrator is trying to obtain monies in addition to what is allowed pursuant to r. 129.
[26] The OSB argues that if the Court does in fact allow such amounts, it would be open to other Administrators to do the same thing and would be setting an improper precedent.
[27] The Trustee relies on the case of Re Rousseau, and argues that Master Mills (as she was then) determined that r. 129 was a complete framework for the payment of the trustee’s fees and disbursements.
[28] The OSB was not prepared to provide a clear letter of commitment even though the Court ordered those fees and disbursements to be paid.
Analysis
[29] Rule 129 of the Bankruptcy Rules reads as follows:
129 (1) For the purposes of paragraph 66.12(6)(b) of the Act, the fees and expenses of the administrator of a consumer proposal that must be provided for in a consumer proposal are as follows:
(a) $750, payable on filing a copy of the consumer proposal with the official receiver;
(b) $750, payable on the approval or deemed approval of the consumer proposal by the court;
(c) 20 per cent of the moneys distributed to creditors under the consumer proposal, payable on the distribution of the moneys;
(d) the costs of counselling referred to in subsection 131(1);
(e) the fee for filing a consumer proposal referred to in paragraph 132(c);
(f) the fee payable to the registrar under paragraph 3(b) of Part II of the schedule; and
(g) the amount of applicable federal and provincial taxes for goods and services.
(2) Subsection (1) applies to consumer proposals in respect of which proceedings are commenced on or after April 30, 1998.
[30] Section 66.12(6) (b) of the BIA reads as follows:
(6) A consumer proposal must provide …
(b) for the payment of all prescribed fees and expenses
(i) of the administrator on and incidental to proceedings arising out of the consumer proposal, and
(ii) of any person in respect of counselling provided pursuant to paragraph 66.13(2)(b)….
Cause of Action Estoppel – Analysis
[31] From the Court’s perspective:
The decision made by the Registrar in Bankruptcy was a final decision involving the same parties.
Both the Administrator and the OSB were parties to or in privy with the prior action. The OSB was served with the Notice of Motion and the Order.
The cause of action in the prior action was not separate and distinct from this taxation, since in the Revival Motion, the Administrator sought payment of its fees and disbursements as set out in the Notice of Motion.
The OSB could have opposed the Revival Motion or at least could have attended at the Revival Motion and made submissions in relation to the costs relief sought in relation to r. 129 of the Bankruptcy Rules. The OSB did not attend and did not contact the Administrator in advance of the hearing of the motion to express its concerns about the costs sought. No reason was given by the OSB as to why it remained silent. Master Fortier did grant the relief as requested, including the claim for costs.
[32] The Court finds that the four requirements for Cause of Action Estoppel are met.
Issue Estoppel – Analysis
[33] In the alternative, Issue Estoppel can apply to preclude the relitigation of the issues. In the case at bar, the analysis of the three pre-conditions required for Issue Estoppel to apply is as follows:
In this case, the “same question” to be decided is the issue of costs. That issue was raised at the Revival Motion and is again being raised here;
The decision given by the Registrar in Bankruptcy was not appealed by the OSB or any other party to the motion and therefore was final; and
The parties to the decision in the Revival Motion are in part the same as the parties involved in this motion. The other parties were the creditors.
[34] Once these pre-conditions are met, the application of Issue Estoppel is a matter of discretion for the Court.
[35] The Court finds that this is a very narrow, fact-specific issue. Based on the facts of this case, there was no appearance by the OSB at the hearing or notice to the Administrator of the OSB’s objection to costs being sought at the Revival Motion. Furthermore, there was no appeal taken from the decision of the Registrar in Bankruptcy.
[36] As to the decision in Re Rousseau, the Court finds that the present case is distinguishable from the Re Rousseau case on the following basis.
[37] In Re Rousseau, the Official Receiver (OSB) did not request that the Administrator apply to the Court to have the proposal reviewed as per s. 66.22(1). The proposal was deemed to have been approved by the Court: at para. 7.
[38] In the present case, this matter did go to a Revival Motion Court and notice was given to all the creditors, including the OSB. No one, including the OSB, objected to the order being sought. That order was approved, and a copy was provided to the OSB, which did not appeal that decision.
[39] The Court finds that the motion was a Revival Motion and was not a motion to approve or refuse to approve a consumer proposal, since the Consumer Proposal had already been approved. The Administrator sought to revive the proposal.
[40] The Consumer Proposal went into default because the Administrator stopped taking the pre-authorized payments after the debtor passed away. There was no direction from the representative of the estate to stop the payments. The Administrator assumed that the debtor did not wish to proceed further with the Consumer Proposal because of his passing. This turned out to be an incorrect assumption on behalf of the Administrator. The deceased’s estate wanted to have the Consumer Proposal completed, which it subsequently was.
[41] The Court exercises its discretion and finds that on the facts of this case the Issue Estoppel applies.
Issue #2: What should the Administrator’s Final Receipts and Disbursements be taxed at, so it can proceed to its Discharge?
Administrator’s Position
[42] In an affidavit filed by Richard Goldhar, sworn on February 28, 2019 as part of the Revival Motion, the Administrator stated that the Consumer Debtor agreed to pay $15,000 over 60 months at a rate of $250 per month commencing at the end of July 2018.
[43] The Consumer Proposal was deemed accepted by the creditors pursuant to the BIA.
[44] The Consumer Proposal was deemed approved by the Court pursuant to the BIA.
[45] The Consumer Debtor made pre-payments for the Consumer Proposal on May 31, 2018 and June 30, 2018 totalling $500.
[46] The Consumer Debtor passed away on June 13, 2018. The funeral director’s certificate was sent to the Administrator.
[47] The Administrator was advised on or about June 26, 2018 that the Consumer Debtor had passed away. The Administrator assumed that, given the death of the Consumer Debtor, the Consumer Proposal would not be continued and the pre-authorized payments from the debtor’s bank account were stopped by the Administrator. The stopping of the payments put the Consumer Proposal in default. A Notice of Annulment dated December 4, 2018 was issued.
[48] On or about January 11, 2019, the Administrator was contacted by the estate lawyer who expressed his concern that the Consumer Proposal had been annulled given that there were sufficient funds in the late Consumer Debtor’s bank account to cover the monthly payments.
[49] At the time, the estate lawyer provided the Administrator with a copy of the letter that he had sent to a Consolidated Credit on July 4, 2018. Unfortunately, that letter was never provided by Consolidated Credit to the Administrator so that the Administrator could contact the estate lawyer to determine the estate’s intentions with respect to the Consumer Proposal.
[50] As it turned out, there were sufficient funds available to complete the Consumer Proposal and the Consumer Proposal was in fact completed far sooner than the 60 months as set out in the terms of the Consumer Proposal.
[51] The Administrator is seeking the payment of the full tariff amount as set out in r. 129 of the Bankruptcy Rules.
The OSB’s Position
[52] The OSB argues that the Administrator should not receive any further remuneration over and above that amount as set out in r. 129 of the Bankruptcy Rules whether it be for the administration of the estate or for any other matter, including the Revival Motion.
Analysis
[53] In the usual case in which there are inspectors, after the final Statement of Receipts and Disbursements and the dividends sheet have been approved by the inspectors, the documents are sent to the OSB: BIA, ss. 28(2) and 152(3). No inspectors were appointed in this case. Pursuant to s. 5(3)(g), the OSB is given authority to examine the Administrator’s final statement. The OSB has a right to comment on the statement and, if the OSB sees fit to do so, the comments are placed before the court official for their consideration when taxing the Administrator’s accounts: s. 152(4).
[54] When the OSB objects to the final Statement of Receipts and Disbursements, the onus is on the Administrator to justify the items shown in the statement, including the amount claimed for the remuneration.
[55] In the present case, the OSB issued a negative letter of comment because the claim by the Administrator for the legal fees and disbursements, as ordered by the Court on the Revival Motion, was in excess of the r. 129 tariff in the Bankruptcy Rules.
[56] The effect of the negative letter of comment is to require the Administrator to proceed to taxation before the Court. It is then up to the Court to determine whether the fees and disbursements claimed by the Administrator, including the legal fees, disbursements and HST, are appropriate.
[57] In this case, the remuneration for a Consumer Proposal is governed by s. 66.12(6)(b) of the BIA and r. 129 of the Bankruptcy Rules.
[58] The Court notes that had the Administrator continued to collect the payments due under the Consumer Proposal, the Consumer Proposal would not have gone into default, it would not have been annulled and the Revival Motion would not have been required.
[59] Apparently, the money was available for the payments to be taken notwithstanding the fact that the Consumer Debtor had passed away.
[60] It was the Administrator who assumed that due to the death of the Consumer Debtor, the Consumer Proposal would not proceed to completion. This assumption was not correct which resulted in the Consumer Proposal going into default and the Administrator issuing a Notice of Annulment.
[61] Had the Administrator checked with the estate, it would have realized that the Consumer Proposal payments were not to be stopped and the Consumer Proposal would have been paid.
[62] As it turned out, the Consumer Proposal was paid off in far less time than the five years that were originally contemplated in the Consumer Proposal.
[63] While one of the issues on this motion was to determine the whether the payment of the Administrator’s legal expenses for the Revival Motion should have been paid, the second issue was the taxation of the Final Statement of Receipts and Disbursements.
[64] The Court finds that the Administrator’s assumption that the estate did not wish to continue with the Consumer Proposal was an error, which resulted in the default and subsequent annulment of the Consumer Proposal.
[65] The Court finds that had the Administrator not made this incorrect assumption about stopping the payments, the Revival Motion would never have been brought.
[66] Furthermore, the Consumer Proposal was completed in a much shorter time than was anticipated.
[67] Considering the specific circumstances of this case, the Court reduces the amount claimed by the Trustee pursuant to r. 129 and fixes that amount as follows:
To the Official Receiver
$100
To the Court
$50
Administrator Fees
On Filing of the Proposal with the Official Receiver
$750
On Approval or Deemed Approval by the Court
$750
Balance of fee for Monies Distributed by Administrator
$400
Other
Legal Fees/Disbursements Inclusive of Taxes
$2,463.40
Applicable Taxes
$247
Total Amount as Approved
$4,760.40
[68] In the event that there are any issues relating to the calculations, either party can write to the Court within 10 days after receiving this decision to request a case conference to resolve any calculations issue.
Conclusion
[69] The Court finds that this is a novel case. The Court finds that s. 66.12(6)(b) of the BIA and r. 129 of the Bankruptcy Rules define the Administrator’s remuneration in a Consumer Proposal. However, based on the facts of this case, including the Revival Motion as well as the OSB not appearing and not appealing the Registrar in Bankruptcy’s order, the Court finds that the amounts ordered above shall be paid.
[70] The Court finds that the above findings made in this decision do not open this door to Administrators in the future to recover more than the r. 129 tariff amount.
Costs
[71] Since this was a novel matter, the Court, using its discretion, orders that each party bear their own costs.
[72] Order accordingly.
Justice Stanley J. Kershman
Released: May 26, 2021
COURT FILE NO.: 33-2374550
DATE: 2021/05/26
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE CONSUMER PROPOSAL OF
CHRISTOPHER FRANCIS ARSENAULT
OF THE CITY OF IROQUOIS
IN THE PROVINCE OF ONTARIO
BEFORE: Justice Stanley J. Kershman
HEARD IN OTTAWA: May 3, 2021 by Zoom at Ottawa
APPEARANCE: Philip J. Gertler, for Goldhar & Associates Ltd.
Murray Ferron, for the Office of the Superintendent of Bankruptcy
endorsement on motion
Kershman J.
Released: May 26, 2021