CITATION: Re Chang, 2021 ONSC 3483
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
TIM LONG CHANG (A.K.A. CHENG BOON CHANG)
OF THE TOWNSHIP OF BRAESIDE
IN THE PROVINCE OF ONTARIO
BEFORE: Justice Stanley J. Kershman
HEARD IN OTTAWA: October 8, 2020 and March 30, 2021 by Zoom
APPEARANCE: Jonathan Collings, for the Bankrupt
Jeffrey Webb, for the Trustee Randy Schliemann, for Bank of Montreal
reasons for decision
- Introduction
1Tim Long Chang a.k.a. Cheng Boon Chang (“Bankrupt”) seeks discharge from his bankruptcy. The discharge is opposed by J. Webb and Associates, Trustee in Bankruptcy (“Trustee”) and Bank of Montreal (“BMO”). This is Mr. Chang’s second bankruptcy.
2. Factual Background
2The bankrupt is 65 years of age and has been a chartered professional accountant (“CPA”) and a chartered management account (“CMA”) for approximately 30 years. He filed for bankruptcy on July 12, 2018. Prior to his bankruptcy, he ran several businesses including Accountable Solutions (which according to the Bankrupt, closed on May 1, 2018), Leach Bradbury Accounting Professional Corp. (which according to the Bankrupt, closed on June 30, 2018), DT Financial Planning and Management Inc. (which according to the Bankrupt, closed on December 31, 2015) and Accountants and Financial Planners (which according to the Bankrupt, closed on October 31, 2015).
3The Bankrupt said that the reasons for his financial difficulty was business failure and health-related problems. The Court notes that the Bankrupt has provided no evidence of his health-related problems. The Court makes a finding to this effect.
4At the time of his bankruptcy, the Bankrupt stated he was married and unemployed. There were two people in the household family unit, being his spouse and himself. The Bankrupt’s spouse, Jane Chang, filed for bankruptcy at the same time and has since been discharged.
5In his Statement of Affairs, the Bankrupt stated:
a) That he had sold or disposed of property at 2501 South Ocean Drive, Unit 1515, Hollywood, Florida in November 2017 and received approximate $50,000 in Canadian Funds which were used to pay legal fees, pay bills and live.
b) Listed his liabilities to secured creditors at $616,000. The Trustee advises that secured creditors totalling $501,084.55 have filed proofs of claim to date.
c) Listed his liabilities to unsecured creditors of $591,759.32. According to the Trustee, unsecured creditors totalling the amount of $2,114,158.41 have filed proofs of claim to date, all of which were all admitted.
d) Disclosed his liabilities to contingent creditors totalling $1,273,670. The contingent creditors have filed that proof of claim, totalling $1,808,642.91.
e) Disclosed his assets with an estimated dollar value of $621,005; of that amount, $616,000 of security was held.
6The Bankrupt and his spouse live in a home at 10 Wrangell Road, Braeside, Ontario (“Property”) which is a waterfront property on the Ottawa River. The Bankrupt purports that he and his spouse are now separated, although they live in the same house as they did prior to bankruptcy.
7According to the Notice of Intended Opposition to Discharge filed by the Trustee dated June 11, 2020, the anticipated rate of dividends is 0%.
3. Trustee’s Notice of Opposition to Discharge
8The Trustee filed a Notice of Opposition to Discharge to the Court dated June 11, 2020. The Trustee indicated that he would be opposing the bankruptcy discharge on the following grounds:
Section 161 pertaining to s. 173(1)(l), s. 173(1)(o), s. 158 (a), (f) and (g) of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (“BIA”) as they pertain to the debtors obligations to fully disclose assets, gifts and the disposition of same to the Trustee. In addition, the Trustee said that the Bankrupt failed to file all required monthly income and non-discretionary expense reports with the Trustee nor to properly substantiate and prove the veracity of the reports that had been filed.
9In the Trustee’s Report, the Trustee indicated that the Bankrupt failed to perform the following duties under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“BIA”):
Deliver all his property to the trustee pursuant to s. 158(a)
Deliver all documents relating to his property or affairs pursuant to s. 158(b)
Disclose to the trustee all property disposed of within the period one year before the date of the initial bankruptcy pursuant to s. 158(f)
Disclose to the trustee all property disposed of by gift or settlement without adequate valuable consideration pursuant to s. 158(g)
Generally do all such acts and things in relation to his property and the distribution of the proceeds pursuant to s. 158(o)
10The Trustee also found that the Bankrupt could be justly held responsible for certain facts pursuant to s. 173 of the BIA:
a) The assets are not 50 cents on the dollar on unsecured liabilities pursuant to s. 173(1)(a)
b) Bankrupt omitted to keep books of account pursuant to s. 173(1)(b)
c) Bankrupt failed to account for loss or deficiency of assets pursuant to s. 173(1)(d)
d) Bankrupt has been bankrupt before or made a proposal before pursuant to s. 173(1)(j)
e) Bankrupt has committed an offence under this Act pursuant to s. 173(1)(l)
f) Bankrupt failed to perform the duties imposed under this act or to comply with any order of the court pursuant to s. 173(1)(o)
11The Trustee also said that the Bankrupt committed offences in connection with the bankruptcy, in that he refused or neglected to answer proper questions at the examination of the Office of the Superintendent of Bankruptcy (“OSB”) and that he obtained a credit or property by false pretenses.
4. BMO Opposition to Discharge
12BMO filed a Notice of Opposition to discharge listing the following grounds:
(a) The assets of the Bankrupt are not of a value equal to fifty cents on the dollar on the amount of the Bankrupt' s unsecured liabilities in circumstances for which the Bankrupt can justly be held responsible;
(b) The Bankrupt granted mortgages in favour of 10627496 Canada Ltd. and Go Get Holding Inc. for nominal or no consideration;
(c) The Bankrupt has omitted to keep such books of accounts as are usual and proper in the business carried on by the Bankrupt and as sufficiently disclose the business transactions and financial position of the Bankrupt within the period beginning on the day that is three (3) years prior to his July 12, 2018 date of bankruptcy;
(d) The Bankrupt continued to trade after becoming aware of being insolvent;
(e) The Bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet the Bankrupt's liabilities;
(f) The Bankrupt has failed or refused to comply with his duties under the Bankruptcy and Insolvency Act in his capacity as the Officer and Director of his Bankrupt corporation, Accountable Solutions Accounting Professional Corporation.
5. Examination by the OSB
13The OSB conducted an examination of the Bankrupt under oath pursuant to s. 161 of the BIA and filed an Official Receiver Report (“OR Report”).
14The Bankrupt was asked a series of questions and provided a series of answers. The OR Report made the following observations:
Monthly income and expense statement of the bankrupt and the family unit
The Bankrupt' s wife, Jane Chang, also filed an assignment into bankruptcy on July 12, 2018. When they filed for bankruptcy, both the bankrupt and his wife did not have any type of income and relied on family and friends in order to pay for all of the household expenses. Since then, the bankrupt' s wife has been able to find employment and is making $3,000 gross per month. The family unit’s expenses have stayed the same at approximately $6,900.00 per month. The bankrupt has confirmed that he is receiving funds from his mother, Siew Yin NG, in order to cover his living expenses. She deposits the funds into his account and he uses them to pay the expenses. The bankrupt says that he is keeping track of the funds that he is receiving and that he is in essence borrowing against his future inheritance. The bankrupt and his wife live in a large house which is fully secured. They pay $2,600 in monthly mortgages 10 be able keep the house. The bankrupt owns a Mercedes Bens 550 that is fully secured and for which he is making monthly payments of $850. The bankrupt's wife owns a Lexus 350 that was bought in 2017, which brings the total car payments to $1,660.00 every month. The bankrupt and his wife continue to live above their means and rely on the bankrupt's mother to support their lifestyle.
Facts for which discharge may be refused, suspended or granted conditionally
173 (1) (1) the bankrupt has committed any offence under this Act or any other statute in connection with the bankrupt’s property, the bankruptcy or the proceedings thereunder;
- (1) Any bankrupt who
(b) refuses or neglects to answer fully and truthfully all proper questions put to the bankrupt at any examination held pursuant to this Act,
is guilty of an offence and is liable, on summary conviction, to a fine not exceeding five thousand dollars or to imprisonment for a term not exceeding one year or to both, or on conviction on indictment, to a fine not exceeding ten thousand dollar to imprisonment for a term not exceeding three years, or to both.
At question 34 of his examination, the bankrupt was asked if he had any other assets that he had not disclosed on his statement of affaires and his answer was: NO. At question 33 of the examination, the bankrupt was asked if he had any investments, bank accounts, assets, property or other possession outside of Canada and his answer was: Not anymore. At question 35 of the examination, the bankrupt was asked if he had held any investments, bank accounts, assets, property or other possessions outside of Canada in the past five (5) years and his answer was: Only the two properties in the states. He was referring to the property at 2501 Ocean Drive that he had mentioned on his statement of affaires and at question 23 as well as the property mentioned at question 24 that he bought and sold in 2011. It is only when he was specifically asked about the properties at 23514 Macbeth and 631 Pine Street in Florida that the bankrupt provided admitted to still being the owner of one property and having sold the other in 2017. When asked why he had not provided this information at questions 33 and 35, the bankrupt's response was: "I am a business man and there are a lot of things that I don’t remember".
(1) (o) the bankrupt has failed to perform the duties imposed on the bankrupt under this Act or to comply with any order of the court.
[Duties of bankrupt] A bankrupt shall
(a) make discovery of and deliver all his property that is under his control to the trustee or to any person authorized by the trustee to take possession of it or any part thereof;
The bankrupt admitted during his examination that he did not disclose that he owns a lot located at 23514 Macbeth Court in Florida. [Question 36]
(e) make or give all the assistance within his power to the trustee in making an inventory of his assets;
The bankrupt did not inform the trustee of the property located at 23514 Macbeth in Florida and it was therefore not included in the statement of affaires. [Question 36]
(f) make disclosure to the trustee of all property disposed of within the period beginning on the day that is one year before the date of the initial bankruptcy event or beginning on such other antecedent date as the court may direct, and ending on the date of the bankruptcy, both dates included, and how and to whom and for what consideration any part thereof was disposed of except such part as had been disposed of in the ordinary manner of trade or used for reasonable personal expenses;
The bankrupt admitted during his examination that he sold a Lexus 350 and received $7,000.00 sometime in 2017. He used $2,000.00 as a down payment for his wife's new Lexus and used the remaining $5,000.00 in the business. When asked why this had not been identified in his statement of affaires, the bankrupt responded that the trustee did not ask him about cars, he was only asked about real property. [Questions 27, 29]
The bankrupt also admitted during his examination that he sold a property located at 631 Pine Street in Florida. He sold the property for $3,000.00. After paying $500.00 to the lawyer and broker, he received $2,500.00 which he deposited into his bank account. When asked why this had not been identified in his statement of affaires, the bankrupt responded that he was not asked and that the asset has no value. [Question 37]
(g) make disclosure to the trustee of all property disposed of by transfer at undervalue within the period beginning on the day that is five years before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included;
During his examination, the bankrupt admitted having sent $15,000.00 to his mother in 2015 to help pay for her heart surgery. The bankrupt's mother was able to afford this surgery however, the bankrupt explained that it is traditional in the Asian culture that, out of respect for their parents, the kids contribute to the health expenses of their parents. The bankrupt did not include this information in his statement of affair and indicated instead, at question 10 B, that he had not made any gifts to relatives or others in excess of $500.00 within the five (5) years prior to the date of the initial bankruptcy event.
6. Relevant Sections of the BIA
15Sections 158(a), (b), (e), (f), (g), (o) and 167 of the BIA read as follows:
158 A bankrupt shall
(a) make discovery of and deliver all his property that is under his possession or control to the trustee or to any person authorized by the trustee to take possession of it or any part thereof;
(b) deliver to the trustee all books, records, documents, writings and papers including, without restricting the generality of the foregoing, title papers, insurance policies and tax records and returns and copies thereof in any way relating to his property or affairs;
(e) make or give all the assistance within his power to the trustee in making an inventory of his assets;
(f) make disclosure to the trustee of all property disposed of within the period beginning on the day that is one year before the date of the initial bankruptcy event or beginning on such other antecedent date as the court may direct, and ending on the date of the bankruptcy, both dates included, and how and to whom and for what consideration any part thereof was disposed of except such part as had been disposed of in the ordinary manner of trade or used for reasonable personal expenses;
(g) make disclosure to the trustee of all property disposed of by transfer at undervalue within the period beginning on the day that is five years before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included;
(o) generally do all such acts and things in relation to his property and the distribution of the proceeds among his creditors as may be reasonably required by the trustee, or may be prescribed by the General Rules, or may be directed by the court by any special order made with reference to any particular case or made on the occasion of any special application by the trustee, or any creditor or person interested; and
167 Any person being examined is bound to answer all questions relating to the business or property of the bankrupt, to the causes of his bankruptcy and the disposition of his property.
16In s. 173(1), the facts referred to in s. 172 of the BIA are:
(a) the assets of the bankrupt are not of a value equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities, unless the bankrupt satisfies the court that the fact that the assets are not of a value equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities has arisen from circumstances for which the bankrupt cannot justly be held responsible;
(j) the bankrupt has on any previous occasion been bankrupt or made a proposal to creditors;
(l) the bankrupt has committed any offence under this Act or any other statute in connection with the bankrupt’s property, the bankruptcy or the proceedings thereunder;
(o) the bankrupt has failed to perform the duties imposed on the bankrupt under this Act or to comply with any order of the court.
7. Issues
17The issues are as follows:
Should there be any findings under ss. 158 and 173 of the BIA?
Based on the findings made, what type of discharge should the Bankrupt receive?
8. Review of the Evidence
a) First Bankruptcy
18In order to determine these issues, the Court will review some of the evidence that was put forth at the discharge hearing.
19The Bankrupt filed his first bankruptcy in 1992 with the D. & A. MacLeod Company Ltd. and received his discharge in 1993.
20At the present discharge hearing, the Trustee advised the Court that in the Bankrupt’s first bankruptcy, the Statement of Affairs listed unsecured creditors of $730,000. The Trustee advised that the actual amount of unsecured claims of approximately $4,000,000 was filed in the first bankruptcy. The Bankrupt’s counsel objected to this information being put into evidence. No real reason was given for the objection. The Court did not uphold the objection.
21The Court finds that the Trustee’s evidence about information related to the first bankruptcy was the best evidence as to the proper amounts of total unsecured debt in the first bankruptcy and accepts that evidence.
22The Court finds that the information about the first bankruptcy is relevant to this proceeding as it shows that there was a prior bankruptcy and how much debt discharged in the first bankruptcy.
23In the current bankruptcy, the Bankrupt disclosed unsecured claims totalling $591,759.32. The Trustee has reported that he has admitted unsecured claims totalling $2,114,158.41.
24The Court finds a pattern between the first and second bankruptcy in terms of the debts declared in the Statement of Affairs filed by the Bankrupt and the dollar value of the claims in fact filed. In both bankruptcies, once the creditors filed their claims, the dollar value of the unsecured creditors amounts admitted was actually twice as high, if not higher, as the amounts disclosed by the Bankrupt. The Court finds that in each bankruptcy, the Bankrupt significantly underestimated the value of his liabilities.
b) The Bankrupt’s Marital Status
25The Bankrupt testified that when he filed for bankruptcy he was married to his spouse, Jane Chang, who went bankrupt at approximately the same time as he did. Both the Bankrupt and his spouse had the same Trustee. The Bankrupt now says that they are separated. There is no other evidence before the Court that these parties are separated. They still live in the same Property. The only evidence of the separation is the Bankrupt’s evidence.
26In addition, there is no evidence that the Bankrupt informed the Trustee that he had separated from his spouse. It was the Bankrupt’s duty to advise the Trustee of this purported change in his financial situation in accordance with s. 158 (n.1) of the BIA.
27The Court rejects the evidence that the Bankrupt and his spouse separated. The Court makes a finding to this effect.
c) Living Expenses of the Bankrupt and his Spouse
28The Trustee’s evidence is that the Bankrupt and his spouse have average monthly expenses of approximately $6,900 per month. At the same time, their combined income is supposedly $3,000 per month. The difference between the two figures is approximately $3,900 dollars per month.
29The Trustee submits that the Bankrupt and his wife have not changed their living style from prior to bankruptcy until now; they live in the same home and they each drive expensive leased vehicles. The Bankrupt drives a Mercedes Benz 550 and pays a monthly lease payment of approximately $850 per month. His spouse drives a Lexus 350 and pays a monthly lease payment of approximately $810 dollars per month. The total of the monthly payments is $1,660 per month.
30When asked how the shortfall in expenses was being made up, the Bankrupt testified that his mother, who lived in Malaysia and who he described as “very rich,” provided him with the shortfall on a monthly basis as a loan.
31The Bankrupt testified that the loan from his mother was received over the period of time from the date of bankruptcy in July 2018 until October 2019, when his mother passed away.
d) Bankrupt’s Mother’s Estate
32The Bankrupt testified that he is a beneficiary under his mother’s will (“Will”) and is one of seven children. At the OSB examination held on September 11, 2018, the Bankrupt said that his mother’s estate (“Estate”) is valued at approximately $2,000,000 and that his share would be worth approximately $300,000.
33The Bankrupt also testified that the Estate is being disputed by at least one or two of his siblings.
34The Trustee testified that the Bankrupt did not advise him that the Bankrupt’s mother had passed away nor that the Bankrupt was a beneficiary under the Will.
35The Bankrupt undertook to the Court to provide the name and address of the law firm which was handling the Estate. This has since been provided.
36Between the two hearing dates, the Trustee advised that Malaysia, where the mother resided and passed away, does not appear to have any reciprocity or recognition of foreign orders in favour of Canada. As a result, it is the Trustee’s opinion that it is unlikely they will receive any cooperation from the lawyers or executors in Malaysia and that no money from the Estate will flow to the Bankrupt’s creditors.
37The Trustee also advised that apparently three different wills were produced for probate in three different areas in Malaysia.
38No evidence was given as to how the Bankrupt and his spouse’s shortfall is being made up since October 2019, which was approximately 18 months ago. The Court notes that there has been no change in the living arrangements nor the lifestyle of the Bankrupt since the date of bankruptcy, notwithstanding the fact that there does not appear to be a loan from the mother since October 2019.
39The Court finds that the Bankrupt has not changed his lifestyle from prior to the date of the bankruptcy until now.
40Based on the evidence, the Court finds that there is a budget shortfall of monthly expenses is $3,900 and there is no evidence as to how that shortfall is being made up but that it is somehow being made up.
41In addition, the Court finds that the Bankrupt did not disclose that he had been borrowing his mother’s money since the date of bankruptcy until she passed away.
42The Court also finds that the Bankrupt did not advise the Trustee that he was a beneficiary under the Estate. The Estate can be classified as an after acquired asset under s. 67(1)(c) of the BIA. Furthermore, the Court finds that the Bankrupt did not advise the Trustee of him being a beneficiary under his mother’s will, this represents a material change in the Bankrupt’s financial position.
e) Mortgages in Favour of 10627496 Canada Inc. and Go Get Holdings Ltd.
43BMO submitted that the Bankrupt and his then bankrupt spouse, obtained a second mortgage in favour of 10627496 Canada Inc. (“Second Mortgagee”) and a third mortgage in favour of Go Get Holdings Ltd. (“Third Mortgagee”) for nominal or no consideration which reduced or wiped out the equity in the Property.
44An examination of the Bankrupt was held before Master Kaufman on March 15, 2019 in the bankruptcy of Accountable Solutions Accounting Professional Corporation (“ASAPC”) which was a corporation owned by the Bankrupt.
45Various documentation was requested in relation to these two mortgages. According to BMO, the documentation was not provided. However, undertakings were provided by the Bankrupt pursuant to an examination under oath.
46The Trustee advised that they did not have any evidence as to what the proceeds of the second and third mortgage were used for.
47The Bankrupt’s evidence is that the mortgages were given for valuable consideration and that, at least in the case of the second mortgage, the net proceeds were put into Leach Bradbury. He argues that they are both valid mortgages.
48The Court accepts the evidence of the Trustee that it did not have any evidence as to what the proceeds of the second and third mortgage were used for and makes a finding to this effect.
49The Court also finds that the Bankrupt did not satisfy his undertakings given in relation to these mortgages.
50According to the Bankrupt’s sworn Statement of Affairs:
a) he is a half owner of the Property. The other half is owned by his spouse;
b) the Property value is approximately $600,000; and
c) there is a first mortgage in favour of TD Canada Trust.
51At that examination before Master Kaufman, various information was given with respect to the mortgages. According to the transcript, TD Canada Trust registered the first mortgage for $520,000 on February 15, 2017. According to the proof of claim filed by the first mortgagee, the mortgage had been paid down to approximately $484,000 or by $36,000 by July 2018.
52Based on the Court’s calculations, this means that approximately $2,570 of principal was paid down on the first mortgage every month. It appears that monthly payments are still being made to the First Mortgagee in similar amounts.
f) Second Mortgage
53The second mortgage was for $100,000. According to the answers given by the Bankrupt at the examination, the officer and director of that corporation is Weepang Chang. According to the Bankrupt’s evidence, Weepang Chang is not related to him, although the person has the same last name. The Bankrupt testified that “Chang” was a common surname like “Smith.”
54Weepang Chang said in his proof of claim that he is the son of the Bankrupt.
55The evidence given was that the Bankrupt was asked on at least three different occasions as to whether Weepang Chang was related to him. Each time the Bankrupt replied that he was not related. It was not until the proof of claim was received from the Second Mortgagee, that the Trustee found out that the officer and director of the Second Mortgagee was the son of the Bankrupt.
56The Second Mortgagee were registered sometime between February 12, 2018, and April 14, 2018. The evidence is that the payments are being made by the Bankrupt’s spouse, Jean Chang.
57The Trustee testified that the Bankrupt did not provide any information about the advances made under either the second mortgage although requested to do so.
58The Court made a Preliminary Endorsement dated October 21, 2020 ordering the Second Mortgagee to file a proof of claim in relation to their mortgage together with all supporting documentation and if they did not do so in a timely basis, the Trustee has the authority under the BIA to disallow secured claims, if necessary.
59The Trustee has disallowed the claim of the Second Mortgagee because the Second Mortgagee has not provided sufficient back up documentation to the Trustee of the particulars of the advances made. The Trustee has provided the Second Mortgagee with additional time to provide the paperwork. The disallowance of the Second Mortgage still stands unless the back up documentation is provided to the Trustee and the Trustee is satisfied with it.
60According to the evidence, there has been no appeal of the Notice of Disallowance by the Second Mortgagee.
g) Third Mortgage
61The evidence at the examination is that there was a third mortgage in favour of Go Get holdings Ltd. for $16,000.
62According to the examination of the Bankrupt, the third mortgage was registered on April 13, 2018.
63Similar to the second mortgage. the Trustee testified that the Bankrupt did not provide any information about the advances made under the third mortgage although requested to do so.
64In the aforementioned Preliminary Endorsement dated October 21, 2020 it was also ordered that the Third Mortgagee file a proof of claim in relation to their mortgage together with all supporting documentation.
65By the time the matter returned to Court on March 30, 2021 the Bankrupt’s evidence was that the mortgage has been paid off by the Bankrupt doing consulting work for the principal of the Third Mortgagee, Mr. Vincent Gobuyan.
h) Appraisal of 10 Wrangell Road, Braeside, Ontario
66In the Court’s endorsement of October 21, 2020, the Court ordered the Trustee to obtain an appraisal from an AACI or equivalent appraiser and provide it to the Court. Since then, an appraisal has been obtained from Carty Gwillan Real Estate Appraisal Services. In their letter dated March 25, 2021, a value of $710,000 was placed on the property as of April 1, 2019. As of March 24, 2021, the value of the property was $835,000.
i) Leach Bradbury Professional Accounting Corp.
67The Bankrupt owned and ran a company called Leach Bradbury Accounting Professional Corporation at 3-1145 Hunt Club Road, Ottawa, Ontario. In the Statement of Affairs, the Bankrupt said that the landlord terminated the lease which the business closed on June 30, 2018.
68The Trustee provided an affidavit sworn on April 4, 2019 in which he said the following:
a) The Bankrupt, Tim Long Chang, is a Chartered Professional Accountant who, in accordance with his Statement of Affairs, owned and operated an accounting firm providing accounting, tax and financial advice services to he general public;
b) The Bankrupts’ Ottawa business was known as Leach Bradbury/Leach Bradbury Accounting Professional Corporation which operated from premises located at 1145 Hunt Club Road, Suite 3, Ottawa, Ontario;
c) On April 4, 2019 at the hour of 11:30 a.m. I attended the afore-mentioned premises with a view to confirming the status of this corporation as the debtor had stated that the landlord had terminated his lease to these premises prior to his bankruptcy;
d) A company by the name of Leach Bradbury & Associates (“LBA”) was listed on the tenant directory for this building;
e) A corporate search for LBA indicates that the LBA name is registered under 10677019 Canada Inc. which registration date was September 14, 2018 and whose director is noted as one Mr. Gobuyan who is a personal friend and business associate of the Bankrupt;
f) He proceeded to the lower level and a sign noting LBA directed me to the LBA premises;
g) At the premises, Suite 3, a LBA sign was affixed and he took photographs confirming the signage;
h) He entered the physical office allocated to LBA which space was a fully functioning office with 2 people working in the reception area at workstations with computers, desks, chairs and other office equipment;
i) While internal office spaces were noted he did not proceed past the reception area as he did not want to arouse suspicion as to the purpose of his attendance;
j) He asked the receptionist, who was not wearing any identification, if he was at the “Leach Bradbury” location and if it was an accounting and tax office to which the receptionist provided her confirmation that same was the case;
k) He asked the receptionist who the accountant in charge was to which she responded very clearly “Tim Chang”;
l) He asked the receptionist if he could have one of Mr. Changs’ business cards. The receptionist enquired as to why he wanted a business card and he was informed by the receptionist that they had no cards available;
m) When queried again as to whether any cards were available, the receptionist informed him that there were “no cards left”.
69None of information in Mr. Webb’s affidavit was contested by the Bankrupt.
70At the continuation of the Bankrupt’s discharge hearing on March 30, 2021, the Trustee testified that Leach Bradbury filed for bankruptcy on February 27, 2020. The Trustee is Ginsberg, Gingras. The Statement of Affairs indicated that the company had no assets and liabilities of approximately $67,000.
71The Court finds that after Mr. Chang’s bankruptcy, Leach Bradbury Professional Accounting Corp. continued to operate whether under its actual name or a slightly different version of the same name notwithstanding that he said the business had closed. The business effectively continued to carry on the same business after its supposed closure as it did prior to closure and was run by the Bankrupt, at least until February 2020 when it filed for bankruptcy.
j) Share Purchase Agreement dated June 15, 2018 for 10199052 Canada Inc.
72Mr. Chang filed for bankruptcy on July 12, 2018.
73Approximately, four weeks earlier, on June 15, 2018, the Bankrupt entered into a share purchase agreement with Gray Johnson and himself as the vendors, and Rippon Ahmed as the purchaser for all of the outstanding shares of 10199052 Canada Ltd. (“Share Purchase Agreement”). The business involved was a restaurant operation located at 13-2010 Trim Road, Ottawa, Ontario. The Share Purchase Agreement was signed, with a purchase price was $240,000 plus the cost of inventory. The balance of the purchase price was to be paid on closing which was to occur on June 30, 2018.
74The Court notes that pursuant to paragraph 1(f) of the Share Purchase Agreement, there are issued and outstanding shares in the corporation in the name of the Bankrupt.
75Paragraph 14(f) of the Share Purchase Agreement reads as follows: “[The] [p]urchaser agrees that Leach Bradbury shall remain the accountant for the corporation until the RBC debt is paid in full.”
76The Share Purchase Agreement includes a provision that notices are to be delivered to the corporation at 3-1145 Hunt Club Road, Ottawa, Ontario K1V 0Y3, which is the address of Leach Bradbury.
77Apparently, the transaction did not close, meaning that the Bankrupt was still the owner of shares of 10199052 Canada Inc. at the date of his bankruptcy.
78A review of the Statement of Affairs does not make any mention of his ownership of 10199052 Canada Ltd.
79The Court finds that the Bankrupt did not disclose his interest in 10199052 Canada Inc. to the Trustee at any time.
80In addition, the Court finds that the Share Purchase Agreement transaction was not disclosed to the Trustee.
k) Emails and Invoices from Accountable Solutions Accounting Professional Corporation (“ASAPC”)
81Invoice number 8488 from Accountable Solutions Tax Planning was introduced into evidence. The reference line in the email indicates that the invoice was from ASAPC. The invoice is dated February 28, 2019 and is to the “Original Dog House.”
82The covering email came from Jane Chang at jchang@lb-ca.ca and is dated March 1, 2019.
83There is a second email and invoice. At the top of the email, it reads “Invoice 8466 from Accountable Solutions Accounting Professional Corporation.”
84The second email is from Jane Chang at the same email address as noted above. At the bottom of the email, it says that it is from Accountable Solutions Tax Planning.
85The actual invoice 8466 is from Accountable Solutions Tax Planning and is to the “Original Dog House” for bookkeeping services for December 2018. The invoice is dated January 31, 2019.
86It is clear to the Court that ASAPC or a variation of that name is being used long after the Bankrupt says that he closed the businesses in April or May of 2018. The Court makes a finding to this effect.
l) Accounting Fee Increases for ASAPC
87An email was introduced into evidence from “Tim Chang – LB (tchang@lb-ca.ca)” dated March 28, 2019 to various people some of whom had @lb-ca.ca email addresses and some of whom had @accountablesolutions.ca email addresses. The email read as follows:
“Subject: Accounting Fee Increase
Dear Associates
Effective April 1, please increase accounting fees by 5% for monthly fixed fee clients
For those yearly clients, also 5% increase
Tim”
88Nayana De Silva responds to the email as follows:
“Hi Tim,
How about T-1?
Thanks”
89Nayana De Silva is listed in the email as a Vice President of Leach Bradbury & Associates.
90The Court finds that this email is evidence that in March 2019, Leach Bradbury is a variation of the company name and is still in operation and run by the Bankrupt. This evidence runs contrary to the evidence given by the Bankrupt, that these businesses have closed approximately 10 months earlier. The March 28, 2019 email is addressed to at least 13 individuals.
91The Court finds that, based on this evidence alone, Accountable Solutions and Leach Bradbury or same variations of those names were still in operation in March 2019 and that the Bankrupt was running these businesses contrary to his assertion that the businesses have been closed by April or May 2018.
m) Invoices from P.H. Holdings
92According to the Bankrupt’s sworn Statement of Affairs, ASAPC operated until the end of April or early May 2018. Until that time, it was providing various accounting and bookkeeping services to clients.
93The Bankrupt’s evidence was that he had been unemployed since his bankruptcy in July 2018. He testified that he is in receipt of the Canadian Emergency Response Benefit (“CERB”).
94At the discharge hearing, BMO presented evidence by way of a series of invoices from P.H. Holdings (“PH”) to ASAPC for services rendered by PH.
95The invoices were sent by PH to various businesses entities with similar names:
Accountable Solutions Corp.;
Accountable Solutions Accounting Professional Corporation;
Accountable Solutions CPA & Tax Planner; and
Accountable Solutions Accounting P. C.
96The address for all of these businesses’ entities were the same – 227 Eagle Street, Unit 202, Newmarket, Ontario.
97Numerous of these invoices were put into evidence and some of them were dated after the date that ASAPC purportedly closed its business.
98The following are some examples:
| Date | Invoice No. | From | To | Client |
|---|---|---|---|---|
| June 26, 2015 | 111059 | PH | Accountable Solutions Corp. | College Dental Original Dog House |
| August 4, 2015 | 111055 | PH | Accountable Solutions Accounting P.C. | College Dental Original Dog House |
| November 10, 2017 | 111178 | PH | Accountable Solutions CPA & Planners | College Dental Original Dog House |
| March 7, 2016 | 111089 | PH | Accountable Solutions Accounting P.C. | College Dental Original Dog House |
| May 7, 2018 | 111207 | PH | Accountable Solutions Tax Planners | College Dental Original Dog House |
| January 6, 2017 | 111133 | PH | Accountable Solutions Creative Prof Corp. | College Dental Original Dog House |
| June 5, 2018 | 111212 | PH | Accountable Solutions Tax | College Dental Original Dog House |
99The Bankrupt says that these invoices were not from him but from his spouse.
100The Court finds that based on the evidence, whoever is running the bookkeeping business, the Bankrupt is a part of it and knows exactly what is going on in these businesses. The Court finds that the Bankrupt is a sophisticated businessperson with a CPA and a CMA with over 30 years of experience in accounting, tax and the investment business.
101The Court finds that the ASAPC business name, or variations thereof, are being used to operate the business after Mr. Chang’s bankruptcy and that he was directly involved in those businesses.
n) 1019987 Canada Corp.
1021019987 Canada Corp. traded under the name of Accountable Solutions (Tax Planning). It was incorporated federally on April 19, 2017.
103The following items which were part of the evidence, is a partial list of filings that have taken place with the Government of Canada:
| Date | Form | Particulars |
|---|---|---|
| April 23, 2018 | Business Nuans Report | Accountable Solutions (Tax Planning) Registration Date April 23, 2018 Expiry April 12, 2023 It is a corporate name under 10199087 Canada Corp. 3-1145 Hunt Club Road, Ottawa, ON |
| March 19, 2019 | Corporate Overview | Company incorporated April 19, 2017 Directors Tim Chang and Gray Johnston Entities with same directors |
| Undated | Government of Canada Form 2 | Additional address for Corp. 40 “LBCPAS” 3-1145 Hunt Club Road, Ottawa, ON |
| April 24, 2017 | Government of Canada Form 6 | Change regarding Directors for Corp. Add Nayana De Silva as additional Director with Christine Baskin Declaration “I certify that I have relevant knowledge of the Corporation and I am authorized to sign this form.” (“Declaration”) “Original signed by Tim Chang” |
| October 13, 2017 | Change of Registered Office Address Form 3 | Registered office address changed to 3-1145 Hunt Club Road, Ottawa, ON “Declaration” made and signed by Tim Chang |
| August 28, 2018 | Change of Registered Office Address Form 3 | Registered office address changed to 10 Wrangell Road, Braeside, ON “Declaration” made and signed by Tim Chang |
| October 13, 2017 | Change of Directors Form 6 | New Directors added New Directors / Effective Date Gray Johnston 2017/10/12 Tim Chang 2017/10/12 De Silva and Baskin no longer Directors “Declaration” made and signed by Tim Chang |
| January 1, 2017 | Change of Directors Form 6 | New Director added New Director added: Christine Baskin 10/12/2017 No longer Directors: Gray Johnston 01/01/2018 and Tim Chang 10/12/2017 “Declaration” made and signed by Tim Chang |
| February 9, 2018 | Changes Regarding Directors | New Directors added Gray Johnston 2018/02/01 Tim Chang 2018/02/01 No longer a Director Christine Baskin 02/08/2018 “Declaration” made and signed by Tim Chang |
| March 1, 2018 | Changes Regarding Directors Form 6 | No longer a Director Tim Chang 2018/02/20 “Declaration” made and signed by Tim Chang |
| March 21, 2018 | Changes Regarding Directors Form 6 | New Director added Christine Baskin 2018/03/01 “Declaration” made and signed by Tim Chang |
| March 23, 2018 | Changes Regarding Directors Form 6 | New Director added Vincent Gobuyan 2018/03/01 No longer a Director Gray Johnston 2018/03/01 “Declaration” made and signed by Tim Chang |
104The evidence at the discharge hearing, entered by way of documentation was that the Bankrupt was the director of the following companies:
| Corporation Directors Name | Address |
|---|---|
| Tim Chang | 10 Wrangell Road, Braeside ON K0A 1G0, Canada |
| Entities with the same directors Name | Director Name | Director Address |
|---|---|---|
| J&T Chang Construction and Property Management Inc. (https://opengovca.com/corporation/9795715) | Tim Chang | 1145 Hunt Club Road, Suite, Ottawa ON K1V 0Y3, Canada |
| 6981453 Canada Inc. (https://opengovca.com/corporation/4497619) | Tim Chang | 10 Wrangell Road, Braeside ON K0A 1G0, Canada |
| 6981453 Canada Ltd. (https://opengovca.com/corporation/6981453) | Tim Chang | 14A Woodvale Green, Nepean ON K2G 4G8, Canada |
| 6499082 Canada Incorporated (https://opengovca.com/corporation/6499082) | Tim Chang | 5 Long Gate Court, Nepean ON K2J 4E9, Canada |
| 10199052 Canada Ltd. (https://opengovca.com/corporation/10199052) | Tim Chang | 10 Wrangell Road, Braeside ON K0A 1G0, Canada |
105The Court finds that these filings are evidence that the Bankrupt had specific knowledge of the business affairs of the companies and was very involved as a director until February 20, 2018. The companies continued operating after that date and are presumably still operating. The are numerous other forms filed in the Government of Canada for the corporation all of which have the same “Declaration” as above and all are signed by the Bankrupt.
9. Trustee’s Position on the Discharge of Mr. Chang
106The Trustee argues that the Court should make a finding in accordance with ss. 158(a), (f) and (g) and ss. 173(1)(a), (j) and (o) of the BIA.
107The Trustee argues that the Court should impute income to the Bankrupt based on incorporating various companies for clients and charging disbursements without fees. The Trustee asserts that a proper fee would be $600 per incorporation. The Bankrupt testified that he has been doing incorporating for no fee since the date of his bankruptcy. The Bankrupt is also receiving income through the CERB.
108The Trustee argues that the Bankrupt’s income should also be imputed because he is a CPA and a CMA with over 30 years of experience and who ran an accounting practice until the date of his bankruptcy, and even after his bankruptcy.
109The Trustee argues that the Bankrupt has the ability to earn an income with 30 years of experience. His CPA designation has not been taken away, notwithstanding that there is an ongoing CPA investigation which is not related to his bankruptcy.
110The Trustee argues that prior to bankruptcy when the Bankrupt was going to sell a portion of his accounting practice for $380,000, he had agreed to repay BMO $200,000 at the rate of $4,000 per month.
111The Trustee argues that with creditors being owed over $2,400,000 in this bankruptcy and no dividends are being made available to them, the Bankrupt should receive a conditional discharge upon paying to the Trustee between $5,000 – $10,000 per month for 60 months for a total of $300,000 – $600,000. The Trustee argues that the Bankruptcy has the capacity to pay the amount sought.
10. BMO’s Position on the Discharge of Mr. Chang
112BMO argues that the Bankrupt is not an honest or unfortunate debtor; he continues to live the same lifestyle as before bankruptcy and continues to operate as if he were not bankrupt evidenced by him having has the same house and the same vehicle.
113BMO argues that a conditional order of discharge should be made wherein the Bankrupt pays $300,000 at the rate of $5,000 per month to the Trustee for the benefit of the creditors.
114BMO also argues for the Bankrupt to provide a complete accounting of any assets received by him or his spouse from any entity or corporation, which would have been received from the date of bankruptcy to until now together with other relief.
115BMO further seeks to have the Bankrupt deliver the books and records for the businesses that he has been operating from the date of bankruptcy until now.
116BMO also seeks to have the Bankrupt abide by the conditions of the discharge granted by the Court failing which he may be held in contempt.
11. Bankrupt’s Position on His Discharge
117The Bankrupt argues that the bulk of the allegations made against him are based on conjecture.
118He argues that he wants to get back into his accounting practice and that the bankruptcy will not allow him to do so.
119The Bankrupt argues that while he did not satisfy the undertakings at his examination before Master Kaufman, BMO did not bring a motion to require the Bankrupt to fulfill those undertakings because it appears BMO did not consider the undertakings to be important.
120The Bankrupt argues that there was no pattern of deceit on his part and that he had acted appropriately throughout his bankruptcy.
121At the first discharge hearing of this bankruptcy on October 8, 2020, the Bankrupt argued that he should receive a conditional discharge on paying the Estate the sum of $24,000 at the rate of $1,000 per month and that he should be allowed to become a productive member of society.
122At the second discharge hearing, the Bankrupt argued that he should have to repay less than $100,000 to the Trustee, by way of monthly installments.
12. Issue #1: Should There be any Findings Under Section 158 and Section 173 of the BIA?
123In Lloyd W. Houlden, Geoffery B.Morawetz & Janis P. Sarra, 2020-2021 Annotated Bankruptcy and Insolvency Act, (Toronto: Carswell, 2021), at p. 928, a Trustee s. 170 report is evidence of the statements contained in it and it is unnecessary for the trustee to give oral evidence of what is contained in the report: Lefebvre (Re) (1932), 13 C.B.R. 396 (Que. Sup. Ct.). Unless contradicted by other evidence, the court must accept the statements contained in the report: Barrick (Re) (1980), 36 C.B.R. (N.S.) 286 (B.C.C.A.); Crowley (Re) (1984), 54 C.B.R. (N.S.) 303, (N.S.T.D.). However, the court is not bound by the trustee’s report: Young (Re) (1928), 10 C.B.R. 53 (N.B.S.C.); Kemper (Re), [1961] 2 C.B.R. (N.S.) 130 (Ont. S.C.). The report is, however, entitled to considerable weight: Barrick; Crowley; Simpson (Re) (1984), 50 C.B.R. (N.S.) 109 (B.C.S.C.).
124The bankrupt can contest the statements contained in the trustee’s report and must, under s. 170(6) of the BIA, at or before the time appointed for the hearing of the application of discharge, give notice in writing to the trustee specifying the statements in the report that he proposes at the hearing to dispute.
125If the bankrupt does not give notice in writing as required by s. 170(6) of the BIA, the court will take the facts as stated in the report as being established: Roy (Re) (1987), 66 C.B.R. (N.S.) 280 (Ont. S.C.); Grenier c. Bolduc (1957), 37 C.B.R. 162 (Que. C.A.). Similarly, if the bankrupt calls no evidence to contradict what is contained in the report, the court will accept the facts as stated in the report: Upham (Re) (1985), 57 C.B.R. (N.S.) 134 (N.S.S.C.).
Section 173(1)(a) – Assets not as Valued at $.50 on the Dollar
126Section 173(1)(a) of the BIA reads as follows:
(a) the assets of the bankrupt are not of a value equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities, unless the bankrupt satisfies the court that the fact that the assets are not of a value equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured liabilities has arisen from circumstances for which the bankrupt cannot justly be held responsible;
127The Bankrupt filed a Statement of Affairs in which he listed his assets as being valued at $621,005 with security against it of $616,000 leaving a net asset value of $5,005.
128He also listed his unsecured creditors at $591,759. The actual proven claims are $2,114,158.
129His Statement of Affairs listed contingent creditors of $1,273,670. The actual contingent claims filed were $1,808,642.
130If the Trustee reports that the assets of the Bankrupt are not equal to $.50 on the dollar, then the onus falls on the Bankrupt to satisfy the Court that the failure has arisen from circumstances for which he cannot be he held responsible: Lougheed (Re) (1939), 1939 CanLII 513 (BC SC), 21 C.B.R. 180 (B.C.S.C.); George (Re), 2008 NSSC 304, 49 C.B.R. (5th) 193 (N.S.S.C.).
131In this particular case, the Trustee in his report has noted BIA s. 173(1)(a) as a reason to oppose the discharge. The Court finds that the onus has shifted to the Bankrupt. The Court also finds that the Bankrupt has not satisfied the onus based on the evidence provided by him. Notwithstanding his evidence, his bankruptcy would have occurred if BMO had not taken the action that it did, the Court does not find that the Bankrupt has not satisfied the onus under s. 173(1)(a).
132There will be a finding under s. 173(1)(a) of the BIA.
Section 173(1)(b) – Omitting to Keep Proper Books
133Section 173(1)(b) of the BIA reads as follows:
(b) the bankrupt has omitted to keep such books of account as are usual and proper in the business carried on by the bankrupt and as sufficiently disclose the business transactions and financial position of the bankrupt within the period beginning on the day that is three years before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included;
134BMO argues that the Bankrupt’s books and records as well as those of ASAPC were not made available to the Trustee and the creditors for review.
135The Bankrupt’s evidence is that there was a hard drive that kept all of his books and records that had been corrupted and that he was no longer able to recover the information contained on it. His evidence was that he had tried to have the hard drive repaired but without success. An invoice was provided as evidence of the attempt to repair the hard drive.
136Having heard the evidence throughout this discharge hearing and having made various findings, the Court does not accept the evidence of the Bankrupt in that there was no way to retrieve the books and records sought.
137The Court finds that the Bankrupt, with over 30 years of experience in the accounting field, would either of kept a back up or would have made some other provision to retrieve the data.
138Based on the aforesaid, there will be a finding under s. 173(1)(b) of the BIA.
Section 173(1)(c) – Continuing to Trade After Being Aware of Insolvency
139Section 173(1)(c) of the BIA reads:
(c) the bankrupt has continued to trade after becoming aware of being insolvent;
140BMO argues that even though Mr. Chang filed for bankruptcy on July 12, 2018, that he continued to trade after that date based on the following:
The affidavit of the Trustee sworn in April 4, 2019 wherein Mr. Webb swore that he went to the offices of Leach Bradbury/Leach Bradbury Accounting Professional Corporation and found that was still operational. At the same time, an employee confirmed to Mr. Webb that Mr. Chang was the accountant in charge.
That various emails and invoices related to ASAPC or a name variation thereof were being produced and business was being carried on after the bankruptcy.
141Mr. Chang argues that he was not involved in the business.
142Houlden, Morawetz & Sarra at p. 970, says that the section can only apply to a trader, being someone who is either a merchant or retailer or someone who is in business of buying and selling goods, hopefully for a profit.
143According to the strict interpretation of the section, Mr. Chang is not a trader as he is not a merchant or a retailer.
144The Court notes that Mr. Chang is an accountant and that he would still have the right to earn an income as one.
145Based on the aforesaid, there will be no finding under s. 173(1)(c) of the BIA.
Section 173(1)(d) – Failure to Account for a Deficiency of Assets
146Section 173(1)(d) of the BIA reads:
(d) the bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet the bankrupt’s liabilities;
147According to Houlden, Morawetz & Sarra at p. 928, the Trustee’s s. 170 report specifically states that the Bankrupt can be held responsible for his failure to account for the loss or deficiency of assets. No evidence was given to contest this statement. Accordingly, since it was no contradictory evidence, the Court must accept the statement in the report: Barrick.
148As stated previously in this case, there was no such notice in writing from the Bankrupt. Furthermore, the evidence provided by the Bankrupt at the hearing to contradict the aforesaid statements made by the Trustee in its report was insufficient. Based on the Statement of Affairs and the evidence at the hearing, the Bankrupt only had assets of approximately $5,000, proven liabilities of $2,114,158.41 and proven contingent liabilities of $1,808,624.91. Based on these figures, the Court finds that the Bankrupt has not satisfactorily accounted for the deficiency in his assets.
149Therefore, there will be a finding under s. 173(1)(d) of the BIA.
Section 173(1)(j) – Previous Bankruptcy
150Section 173(1)(j) of the BIA reads:
(j) the bankrupt has on any previous occasion been bankrupt or made a proposal to creditors;
151The evidence is that Mr. Chang filed for bankruptcy in Ottawa 1992 and was discharged in 1993. There is no dispute about this fact.
152Therefore, the Court makes a finding under s. 173(1)(j) of the BIA.
Section 173(1)(l) – Committing an Offence
153Section 173(1)(l) of the BIA reads as follows:
(l) the bankrupt has committed any offence under this Act or any other statute in connection with the bankrupt’s property, the bankruptcy or the proceedings thereunder;
154No evidence was introduced that the Bankrupt has been charged with any offence or been found guilty of any offence under the BIA or any other statute.
155Therefore, there will be no finding under s. 173(1)(I) of the BIA.
Section 173(1)(o) – Failure to Perform Duties
156Section 173(1)(o) of the BIA reads:
(o) the bankrupt has failed to perform the duties imposed on the bankrupt under this Act or to comply with any order of the court.
157The duties of a bankrupt are set out in s. 158 of the BIA. The duties that the Trustee and BMO claim are not complied with include ss. 158(a), (b,), (f), (g) and (o).
158Those sections read as follows:
158 A bankrupt shall
(a) make discovery of and deliver all his property that is under his possession or control to the trustee or to any person authorized by the trustee to take possession of it or any part thereof;
(b) deliver to the trustee all books, records, documents, writings and papers including, without restricting the generality of the foregoing, title papers, insurance policies and tax records and returns and copies thereof in any way relating to his property or affairs;
(f) make disclosure to the trustee of all property disposed of within the period beginning on the day that is one year before the date of the initial bankruptcy event or beginning on such other antecedent date as the court may direct, and ending on the date of the bankruptcy, both dates included, and how and to whom and for what consideration any part thereof was disposed of except such part as had been disposed of in the ordinary manner of trade or used for reasonable personal expenses;
(g) make disclosure to the trustee of all property disposed of by transfer at undervalue within the period beginning on the day that is five years before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included;
(o) generally do all such acts and things in relation to his property and the distribution of the proceeds among his creditors as may be reasonably required by the trustee, or may be prescribed by the General Rules, or may be directed by the court by any special order made with reference to any particular case or made on the occasion of any special application by the trustee, or any creditor or person interested; and
159Pursuant to s. 198(1)(b), where a bankrupt refuses or neglects to fully answer and truthfully answer all proper questions put to the bankrupt, then the bankrupt could be found guilty of the offence.
160The OSB stated that at question 34 of the examination, the Bankrupt was asked if he had any other assets other than the ones disclosed on a Statement of Affairs and his answer was no. He was also asked if he had any investments, bank accounts, assets, property or other possession outside of Canada and his answer was not anymore.
161The Bankrupt was then asked a question 35 if he had held any investments, bank accounts, assets property or other possessions outside of Canada in the last five years and his answer was, “only the two properties in the United States.” He was referring to the property at 2501 Ocean Drive that he had mentioned in a Statement of Affairs and a property mention it question 24 that he bought and sold in 2011.
162It was only when he was specifically asked about the properties at 23514 Macbeth and 631 Pine Street in Florida that the Bankrupt admitted to still being the owner of one property and having sold the other property in 2017. When asked why he did not provide that information previously his response was, “I am a businessman and there are a lot of things that I don’t remember.”
163The Court finds the aforesaid is evidence that the Bankrupt did not fully disclose his assets that either he owned, or he had owned within the last five years.
164Furthermore, the Bankrupt did not deliver the property that he still owned being a lot at 23514 Macbeth in Florida to the Trustee. The Court notes that no city was given as to where this property is located which is why that information is not included in this decision.
165In addition, the Court finds that the Bankrupt did not deliver all of the documents related to the Macbeth Court property to the Trustee, which he should have done.
166Based on the aforesaid, the Court finds that the Bankrupt did not comply with ss. 158(a), and 198(1)(b) of the BIA.
167In addition, the Court finds that the Bankrupt did not assist the Trustee and making a truthful inventory of his assets because he did not inform the Trustee of the property at 23514 Macbeth and it was therefore not included in the Statement of Affairs.
168Based on the aforesaid findings, the Court finds that the Bankrupt did not deliver all of his books and records to the Trustee. There shall be a finding under s. 158(b) of the BIA.
169In relation to s. 158(f) of the BIA, where the Trustee must have disclosure to all of the property disposed of within the year before the bankruptcy, the Bankrupt did not tell the Trustee that he had sold a Lexus 350 in 2017 for $7,000. He used $2,000 of this as a down payment for his spouse’s new Lexus and put the remaining $5,000 in his business. This was not disclosed in the Bankrupt’s Statement of Affairs. When asked why not, the Bankrupt responded that the Trustee did not ask him about cars, only about real property.
170The Bankrupt also admitted in his examination that he sold the property located at 631 Pine Street in Florida for $3,000 of which he paid $500 to the lawyer and the broker and he received $2,500 which he deposited into his bank account. When asked why he had not included this on his Statement of Affairs, the Bankrupt responded that he was not asked and that it had no value.
171Based on the aforesaid evidence, the Court finds that the Bankrupt did not comply with s. 158(f) of the BIA.
172Pursuant to s. 158(g) of the BIA, the Bankrupt was to make disclosure to the Trustee of all property disposed of at undervalue within five years of the bankruptcy.
173The Bankrupt, at his examination, admitted to having sent $15,000 to his mother in 2015 to help pay for her heart surgery. The Bankrupt said that his mother was able to afford the surgery but he explained that it was a tradition in the Asian culture that, out of respect for the parents, the children contribute to the health expenses of their parents. The Bankrupt did not include this information to indicate that he had made a gift to relatives in excess of $500 within the five years prior to the date of the initial bankruptcy event.
174The Court makes a finding that the Bankrupt did not comply with s. 158(g) of the BIA.
175Pursuant to s. 158(o) of the BIA, the Bankrupt was to file all of his required monthly income and non-discretionary expense reports with the Trustee and to properly substantiate and provide the veracity of the reports they had been filed. The Trustee in its notice of opposition to discharge states at the Bankrupt did not do these things.
176The Bankrupt states that he in fact did them.
177The Court prefers the evidence of the Trustee to that of the Bankrupt and finds that the information as required was not provided.
178Based on the aforesaid findings under s. 158 of the BIA, the Court finds that the Bankrupt has not complied with s. 173(1)(o) of the BIA.
179Therefore, the Court makes a finding under s. 173(1)(o) of the BIA.
13. Credibility of Witnesses
180The only witnesses that provided any evidence were Mr. Webb and the Bankrupt.
181The Court finds that Mr. Webb’s evidence to be credible and believable.
182The Court finds that the Bankrupt’s evidence was evasive and untruthful. Furthermore, the Bankrupt did not comply with his duties under the BIA.
183Section 167 of the BIA states: “any person being examined is bound to answer all questions relating to the business or property of the bankrupt, to the causes of his bankruptcy and the disposition of his property.” The Court finds that the Bankrupt did not and all of the questions as required.
184The Court has reviewed the bankruptcy documents and the evidence given at the discharge hearing. Based on the findings made, the Court finds that the Bankrupt has not complied with s. 167 in the BIA, in that he has not been truthful in his answers to the Trustee and/or BMO in relation to various matters in this bankruptcy.
185The Court finds that the Bankrupt is a sophisticated debtor; he is a CPA and a CMA, he was previously bankrupt and he is self-employed as a controlling mind of at least three businesses all related to accounting, tax, tax planning and investment services to the public.
186In the case of Assaly (Re), 2021 ONSC 3155, the Court discussed the issue of a bankrupt’s conduct and the concept of the honest and unfortunate debtor. The Court stated the following at paras. 63–67:
63From the Court’s perspective, the Bankrupt’s conduct in this bankruptcy has been very poor, which in turn makes a mockery of the integrity of the BIA.
64The BIA legislation is intended to be rehabilitative of honest but unfortunate debtors who have financial difficulties.
65In the case of Re Berthiaume, 2019 ONSC 2727, 70 C.B.R. (6th) 278, the Court found that the bankrupt’s conduct was such that it shows contempt for and derision of the integrity of the BIA.
66The Court said, at paras. 121-123, as follows:
121A fundamental purpose of the BIA is to provide for financial rehabilitation of insolvent persons (see: Ramgotra (Trustee of) v. North American Life Assurance Co., 1996 CanLII 219 (SCC), [1996] 1 S.C.R. 325 (S.C.C).
122The integrity of the BIA must be maintained so that honest or an unfortunate debtors can obtain a discharge in order to make a fresh start and resume their place in the business community (see: Irwin (Re) (1994), 1994 CanLII 1723 (BC CA), 89 B.C.L.R. (2d) 114 (C.A.)).
123Based on the aforesaid, it cannot be said that Mr. Berthiaume, is an honest or an unfortunate debtor. He is not. At the very least, he misled the Trustee and his creditors about the numerous items, including his income, that assets were disposed of or transferred prior to bankruptcy and his extravagant lifestyle.
67Similar discussions about the integrity of the BIA were dealt with in the cases of Saran (Re), 2018 ONSC 6045, 68 C.B.R. (6th) 114; Hardtke (Re), 2012 ONSC 4662, 91 C.B.R. (5th) 237; and Re O’Dea, 2017 ONSC 5148.
187Based on the evidence in this case the Court finds that the Bankrupt is not an honest or unfortunate debtor; he has misled his creditors about various matters. He has not provided complete disclosure about his assets, when and how they were disposed of. Furthermore, he has not been truthful about his business dealings.
14. Issue #2: Based on the Findings made, what type of Discharge Should the Bankrupt Receive?
188Pursuant to s. 172(2) of the BIA, the Court can grant a discharge in accordance with that section as follows:
172(2) The court shall, on proof of any of the facts referred to in section 173, which proof may be given orally under oath, by affidavit or otherwise,
(a) refuse the discharge of a bankrupt;
(b) suspend the discharge for such period as the court thinks proper; or
(c) require the bankrupt, as a condition of his discharge, to perform such acts, pay such moneys, consent to such judgments or comply with such other terms as the court may direct.
189The Court has made findings under ss. 173(1)(a), (b), (d), (j) and (o) of the BIA. Therefore, the Bankrupt shall be granted a conditional discharge in accordance with s. 172(2)(c) of the BIA and the case law.
190The Court orders that the Bankrupt receive a discharge conditional on the following:
- The Bankrupt shall pay a total of $325,000 to the Trustee for the benefit of the creditors as follows:
a) Commencing July 1, 2021, the Bankrupt shall pay the sum of $2,000 per month for a period of 12 months;
b) Commencing July 1, 2022, the Bankrupt shall pay the sum of $5,000 per month until such time as the balance is paid in full; and
c) Provided that the Bankrupt makes the payments as set out above, no interest will be charged. In the event that the payments are not made, interest will accrue on the outstanding balance at the rate of 3% per annum on the unpaid balance.
191In the event that the Bankrupt defaults on the payment of any six payments, whether consecutive or not, the Trustee shall apply for its discharge. Once the Trustee is discharged, the Bankrupt will no longer benefit from the stay of proceedings under s. 69 of the BIA. Thereafter, any creditor having a claim against the Bankrupt will be able to resume its legal proceedings.
192While these conditions may appear harsh, the Court considers them appropriate given the level of debt, the Bankrupt’s conduct and the evidence in this case.
193There will be an additional condition that if, in the future, the Bankrupt seeks protection under the BIA or any similar legislation, the Bankrupt is required to obtain leave from the Court prior to obtaining such protection. This paragraph shall be included the absolute order of discharge when granted.
194BMO sought relief that if the Bankrupt did not comply with the court ordered conditions, the Bankrupt would be deemed in contempt of court. Based on the conditions ordered by the Court, the conditions will either be complied with or the Trustee will be discharged and the stay of proceedings pursuant to s. 69.3 of the BIA will be lifted. On that basis, the Court will not grant this relief sought by BMO.
195This Court further orders that upon the Court being satisfied that all of the conditions have been satisfied an Order of Discharge shall issue.
15. Costs
Positions of the Parties
- Trustee
196The Trustee did not make any submissions in relation to costs. The Court notes that the Trustee’s accounts are subject to taxation in the normal course in a bankruptcy.
- BMO
197BMO requests that it receive costs of $16,500 payable out of the Estate as a first charge in priority to any of the creditors receiving a dividend.
- Bankrupt
198The Bankrupt argues that the Bankrupt should receive costs of $3,000 payable from the Estate.
- Analysis of Costs
199Both the Trustee and BMO were successful on this discharge hearing. The Bankrupt was not successful. The general rule is that costs are at the discretion of the Court and that successful parties can be entitled to their costs.
200The Court orders that the Trustee’s costs should be a first charge payable out of the bankrupt estate after taxation.
201The Court assesses the BMO costs at the sum of $10,000 shall be payable as a second charge out of the bankrupt estate prior to the payment of any dividends and after the payment of the Trustee.
202As the unsuccessful party, the Court finds that the Bankrupt is not entitled to any costs.
16. Miscellaneous
203This case shall be case managed by Kershman J.
204Order accordingly.
Justice Stanley J. Kershman
Released: May 25, 2021
CITATION: Re Chang, 2021 ONSC 3483
COURT FILE NO.: 33-2398821
DATE: 2021/05/25
ONTARIO
SUPERIOR COURT OF JUSTICE
IN BANKRUPTCY and INSOLVENCY
IN THE MATTER OF THE BANKRUPTCY OF
TIM LONG CHANG
(A.K.A. CHENG BOON CHANG)
OF THE TOWNSHIP OF BRAESIDE
IN THE PROVINCE OF ONTARIO
BEFORE: Justice Stanley J. Kershman
HEARD IN OTTAWA: October 8, 2020 and March 30, 2021 by Zoom
APPEARANCE: Jonathan Collings, for the Bankrupt
Jeffrey Webb, for the Trustee Randy Schliemann, for Bank of Montreal
reasons for decision
Kershman J.
Released: May 25, 2021