Correction Notice
CORRECTION ISSUED: 2021-12-01
Line 3 of paragraph 44 reads as follows:
44…There was acknowledgment by all involved that the Bankrupt’s beneficial interest had no value….
The correction to line three of paragraph 44 to read as follows:
44… There was an acknowledgement by the Bankrupt in these proceedings that his beneficial interest had no value..…
The Honourable Madam Justice Gilmore December 1, 2021.
Court File and Parties
COURT FILE NO.: 32-1098451
DATE: 2021-11-03
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF THE BANKRUPTCY OF VITTORIO JOSEPH VETRO, ALSO KNOWN AS VICTOR VETRO OF THE CITY OF MISSISSAUGA, IN THE PROVINCE OF ONTARIO
BEFORE: C. Gilmore, J.
COUNSEL: Rolf Piehler for the Appellant Linda Montanari Matthew R. Harris for the Appellant Victor Vetro Patrick Bernard for the Respondent Crowe Soberman Inc.
HEARD: October 21, 2021
ENDORSEMENT on appeal
INTRODUCTION
1The Claimant, Linda Montanari (“the Claimant”) and Victor Vetro (“the Bankrupt”) appeal two decisions of the Registrar in Bankruptcy dated October 29, 2020 and June 11, 2021 respectively.
2The Bankrupt supports the position of the Claimant on this Appeal.
3The Trustee in Bankruptcy, Crowe Soberman Inc. (“the Trustee”) requests that the Appeals be dismissed. The Trustee also raises other issues related to the Bankrupt’s standing in this matter and the timing of the second Appeal.
BACKGROUND
4In 2008 the Bankrupt filed an Assignment in Bankruptcy and the Trustee was appointed as the Trustee of his estate. In his Statement of Affairs, the Bankrupt declared that he transferred his 100% ownership interest in 114 Sleepy Hollow Road, the Blue Mountains, Ontario (“the Property”) to the Claimant (his former common law spouse).
5In January 2015 the Bankrupt was granted a conditional discharge on certain conditions including the payment of $76,000 to the Trustee by way of $1,000 monthly instalments. The Bankrupt did not make the payments and on August 10, 2017 the Trustee was discharged from the Bankrupt’s estate.
6The Claimant is a creditor of the Bankrupt. The Claimant claims a beneficial interest in the Property.
7The Bankrupt held his beneficial interest in trust (either express or constructive) for the benefit of the Claimant. The Bankrupt’s beneficial interest is conceded to be possessory with no monetary value.
8The Claimant obtained ownership of the Property on August 3, 2005 by way of a transfer from the Bankrupt. The Claimant lost the Property due to Power of Sale proceedings and it was transferred by Home Trust to Ms. Gail Barbour (“Ms. Barbour”) on February 1, 2013. Ms. Barbour owned the Property but had no beneficial interest in it. The Claimant’s evidence is that she has been the beneficial owner of the Property since February 1, 2013. She provided the down payment and deposit for the Property and has paid all associated costs of the Property to date including the mortgage, utilities, taxes and some renovations.
9Between 2014 and 2018 the Bankrupt signed annual Declarations of Trust acknowledging that he held the Claimant’s interest in trust. The Claimant’s evidence was that she requested these Declarations from the Bankrupt to protect her interest in the Property given that she was paying all of the expenses. The Declarations were prepared by a lawyer.
10In October 2018 the Claimant and the Bankrupt brought an Application challenging Ms. Barbour’s ownership interest in the Property. Specifically, the Co-Applicants sought an Order that Ms. Barbour transfer title to the Claimant. The Application was brought because Ms. Barbour refused to renew the existing mortgage on the Property and the Co-Applicants had arranged new financing.
11The Application was served on the Trustee in November 2018. In January 2019 Justice Perell adjourned the hearing of the Application to April 10, 2019 as he determined that the Application was not ready to proceed. He permitted time to allow the Trustee to obtain its reappointment and assert a claim against the Property.
12On January 22, 2019 the Trustee obtained an Order for re-appointment to complete its administration of the Bankrupt’s estate. On March 19, 2019 the Trustee issued its cross-application seeking an Order removing Ms. Barbour from title to the Property and a declaration that the Bankrupt’s beneficial interest vest in the Trustee for the general benefit of the Bankrupt’s creditors.
13On April 10, 2019 Justice Perell issued two judgments. The first judgment dismissed the Application of the Claimant and the Bankrupt. The Claimant and the Bankrupt submit that the dismissal came about when Ms. Barbour agreed to remove herself from title so the Claimant could pursue the mortgage renewal. In fact, the Claimant obtained new private financing in her own name and paid out the existing mortgage.
14The second judgment related to the Trustee’s cross-application. That judgment stipulated that Ms. Barbour was to be removed as Trustee of the Property and that:
Marilyn G. Barbour transfer title to the Trust Property to Crowe Soberman Inc. in its capacity as licensed insolvency Trustee for Victor Vetro, a Bankrupt.
The Respondent Victor Vetro’s interest in the Trust property be vested in Crowe Soberman for the general benefit of Vetro’s creditors.
15In early November 2019 the Trustee’s counsel and Mr. Piehler entered into negotiations with respect to the amounts the Claimant sought with respect to her contributions to the Property. On November 29, 2019 the Claimant served on the Trustee a Reclamation of Property in which the Claimant claimed that the Property was held in trust by the Bankrupt for the Claimant who was the beneficial owner of the Property. The Claimant attached documentation by way of proof of her contributions to the Property.
16On December 6, 2019 the Trustee issued a Notice of Disallowance of Claim in relation to the Claimant’s Reclamation of Property. The Trustee took the position that the Claimant had failed to establish legal ownership to the Property in that she had failed to prove that she had made the payments towards the Property as alleged. The Claimant’s counsel received the Notice on December 10, 2019.
17On December 23, 2019 counsel for the Claimant contacted counsel for the Trustee to request an extension of the time to appeal the disallowance. Counsel for the Claimant attached to his email further documentation in support of the Claimant’s claim related to contributions to the Property.
18Counsel for the Trustee advised that he would seek instructions but due to the upcoming holidays might not receive instructions until the New Year. On January 8, 2020 the Trustee received a draft Notice of Motion from the Claimant seeking an appeal of the Disallowance of Claim, an Order permitting the Claimant to file further evidence in support of her claim, an extension of time to file the appeal and a declaration that any interest in the Property held by the Bankrupt was held in trust for the Claimant.
19Counsel agreed that the Claimant’s motion for time to extend her appeal of the disallowance would be heard in March 2020 and the Trustee scheduled its cross-motion for directions with respect to the sale of the Property on the same date. The Trustee took the position that the Claimant was out of time to appeal the disallowance under s. 81(2) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (“the BIA”) and that the Trustee was free to proceed with the sale of the Property. The Trustee also submitted that the Claimant had already consented to a judgment in April 2019 in which it was agreed that the Bankrupt had a beneficial interest in the Property and did not appeal those judgments. The Trustee’s position was that as a result of the consent judgments, the Claimant was barred from claiming a beneficial interest in the Property.
20The Claimant’s affidavit in support of her motion set out that the Trustee’s cross-motion for directions on a sale was premature as the Trustee had not established any interest of the Bankrupt in the Property.
21There was disagreement between counsel with respect to the nature of the discussions that took place in court on April 10, 2019 leading up to the consent judgments. The Trustee’s position is that there was never any discussion about transferring the property to the Claimant as she had not asserted a claim to the Property at that point. The only discussion related to the possibility of the Bankrupt obtaining financing to buy out the equity as valued by the Trustee. The Trustee’s position is that the Appellants’ version of events cannot be true or the Claimant’s alleged interest in the Property would have been mentioned in the Trustee’s judgment or the Claimant would have appealed the Perell judgments. The Appellants’ position on this Appeal, the Trustee contends, is simply a collateral attack on the judgments.
22The Appellants’ position is that on April 10, 2019, the Trustee and his counsel agreed to a settlement of the equity in the Property for $76,000. The Bankrupt’s evidence at his cross-examination on September 10, 2020 was that Mr. Piehler (who was his counsel at that time) called him from court that day to discuss the settlement. That was the reason the judgments were agreed upon. The Bankrupt deposed that the Application and cross-application would have proceeded on a contested basis if not for the settlement, which the Trustee has since “reneged” on. The Trustee denies that any such settlement was reached.
23The Claimant’s motion was heard on July 28, 2020. However, at that time the Bankruptcy Registrar only heard the motion with respect to an extension of time to appeal the disallowance. By way of reasons dated October 29, 2020 the Registrar dismissed the Claimant’s motion and found that she had not complied with the prescribed timeline for the Appeal pursuant to the BIA.
24The Claimant sought to bring the balance of the motion for a hearing at a case conference on February 18, 2021. The Trustee sought to schedule its motion for directions at the same conference. On June 11, 2021 the Registrar released reasons dismissing the balance of the Claimant’s motion and granting the Trustee’s motion for directions.
The Appeal to Extend the Time to File the Notice of Disallowance of Claim and the Standing Issue
25As set out above, the Notice of Disallowance was served on the Claimant’s counsel on December 10, 2019. Section 81(2) of the BIA establishes a 15-day deadline to appeal the disallowance.
26While no formal Notice of Appeal was received by the Trustee until January 8, 2020, Mr. Piehler requested an extension of the time to appeal by way of an email dated December 23, 2021. The Trustee advised that he would seek instructions but likely would not receive them until after the holiday period. Not having heard anything from the Trustee, counsel for the Claimant served their Notice of Motion to extend the time to appeal the disallowance and the appeal of the disallowance on January 8, 2020. The Trustee advised that it opposed the motion, did not consent to any extension of time and would bring a cross-motion to sell the Property.
27Bankruptcy Registrar Jean (“the Registrar”) heard the motion on July 28, 2020. However, at that time the Registrar only heard the Claimant’s appeal to extend the time to appeal the disallowance. The Registrar noted in her reasons dated October 29, 2020 that the time to appeal expired on December 24, 2019 and that no formal Notice of Appeal was served during the prescribed time.
28The Registrar also noted that the Court retained the discretion to extend the time to appeal pursuant to s. 187(11) of the BIA. The Registrar then applied the test in Issasi v. Rosenzweig, 2011 ONCA 112, 277 O.A.C. 391, and found that the Claimant had not formed an intention to appeal during the prescribed time, that there was no explanation for the delay and that there was substantial prejudice to the Trustee given the settlement of all matters by way of the Perell judgments in April 2019.
29The authority for this Court to hear appeals from a Registrar is found at s. 192(4) of the BIA. That section sets out that a person who is dissatisfied with an Order or decision of a Registrar may appeal to a Judge. In the case of Global Marine Products Inc., Re, 1996 NSSC 5436 the Court gave the term “dissatisfied person” a broad meaning which can include someone other than a party who has an interest in the outcome of the proceedings.
30At the beginning of this Appeal, the Trustee raised the issue of whether the Bankrupt had standing in the Appeal given that he was not a party to the Reclamation of Property and that the Claimant was the only person who would derive a benefit from the appeal by obtaining an ownership interest in the Property.
31I find that the Bankrupt does have an interest in the outcome of this proceeding albeit a different one from that of the Claimant. The Bankrupt’s beneficial interest at its highest is a possessory or “sweat equity” one. However, the Bankrupt’s interest, even if a non-financial one, remains to be determined. I further find that he meets the test of a person who is “dissatisfied” with a decision of the Registrar and who has some (perhaps nominal) interest in the outcome. The Bankrupt therefore has standing with respect to this Appeal.
32There is no difference in the standard of review applicable to the decisions of a judge and a Registrar of Bankruptcy. As the Divisional Court set out in Zeitoun v. Economical Insurance Group (2008), 2008 ONSCDC 20996, 91 O.R. (3d) 131, aff’d 2009 ONCA 415, 96 O.R. (3d) 639, at para. 36:
There is no functional value in assigning a task to a particular judicial officer with the reservation that a different judicial officer at a higher point in the hierarchy may substitute his or her view solely by reason of his or her place in the hierarchy and without some demonstrated deviation in the original decision from the applicable legal principles or some misapprehension of the facts and the evidence that affects the soundness of the result.
33Accordingly, the applicable standard of review for findings of fact by the Registrar is “palpable and overriding error”: Zeitoun, at paras. 40-42; see also Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 10. Applying this standard of review, I find that while the Registrar correctly stated the legal test for permitting an extension for an appeal under s. 187(11) of the BIA, she made errors of fact, which led to incorrect legal conclusions.
34First, with respect to the intention to appeal, the Registrar did not fully take into account the clear email of the Claimant’s counsel to the Trustee’s counsel on December 23, 2021 sent at 12:26 p.m. which says as follows:
Hi Patrick:
Please find attached some further documentation that Linda [Montenari] intends to rely on in this matter.
We are requesting an extension of time required to serve and file the notice of motion appealing from the disallowance. I would also like to discuss alternatives to that procedure which would be less costly.
35The response to that email from the Trustee’s counsel to the Claimant’s counsel some three hours later was as follows:
Hi Rolf,
The Trustee will seek instructions from the inspector. Unfortunately, the Trustee’s office is closed until January 2, 2020 and I have no estimate as to when the Trustee will be able to get a hold of the inspector.
36While the Registrar did advert to the December 23, 2019 email in her reasons, she stated that “Montenari has not at any point in time adduced any evidence that she formulated an intent to appeal within the 15-day time frame.” In fact, the intention set out in the December 23, 2019 email was within the 15-day time frame, the Notice of Disallowance having been served on the Claimant’s counsel on December 10, 2019. The Claimant’s counsel, not having heard anything from the Trustee after the December holiday closure, served a Notice of Motion requesting the extension on January 8, 2020.
37The Registrar relied on those facts to conclude that the first Issasi factor, with respect to the formation of an intention to appeal within the relevant period, favoured the Trustee.
38The Registrar also rejected the Claimant’s explanation for the delay because the Claimant did not explain why she did not deliver an appeal within the time prescribed. The Registrar did not consider the fact that the Claimant’s counsel was told that the Trustee’s office would be closed until after January 2, 2020 and that no instructions about a consent to an extension of time could be obtained until then. Counsel for the Claimant heard nothing about a consent and then served their motion on January 8, 2020.
39I find that the Registrar erred in finding there was no explanation for the delay. She then made a finding that this factor favoured the Trustee. The evidence was clear that the explanation for the delay was:
a. The Claimant’s counsel waiting to hear if there would be a consent to an extension of the time to appeal after January 2, 2020; and,
b. The Claimant’s counsel then taking the action of serving a motion not having heard as to any consent with respect to an extension of time.
40The Registrar also found that there was no merit to the underlying appeal because of the Perell judgments and the finding that the Property had already been transferred to the Trustee as a result of those judgments.
41This conclusion did not advert to the factual disputes about what occurred on April 10, 2019 in court, and the Appellants describing the Trustees actions thereafter as “reneging” on a settlement upon which the Appellants relied.
42Further, the Registrar concluded that as the Claimant did not assert any rights at the time of the April judgments, she would dismiss the Claimant’s claim. The Claimant has not had an opportunity to have her claims heard on the merits which includes her arguments in relation to the Trust Declarations, and her contributions to the Property. The result of the Registrar’s Order is that the Claimant could lose all of the contributions she has made to the Property since 2013 without any opportunity to have a hearing on the merits with respect to her interest in the Property.
43The Claimant need only show that the claim is not “frivolous” or “bound to fail”: National Telecommunications Inc. v. Stalt Telcom Consulting Inc., 64 C.B.R. (6th) 169 (Ont. C.A.), at para. 18; Braich (Re), 2007 BCCA 641, at para. 14. The Claimant need not show that she would be successful, only that she could be. The Claimant has already filed significant documentation in support of her various affidavits including proof of payment of insurance, mortgage documents and bank statements which she says are proof that she made mortgage and utility payments. While these documents are questioned by the Trustee, there is no evidence that anyone else has been paying the expenses for this property since February 2013.
44The judgment dismissing the Appellants’ claim against Ms. Barbour does not resolve the Claimant’s claim against the Trustee. The judgment vesting the Bankrupt’s interest in the Trustee for the benefit of the Bankrupt’s creditors also does not resolve that claim. There was an acknowledgement by the Bankrupt in these proceedings that his beneficial interest had no value. As such, it would have meant a windfall for the Trustee of the entire equity in the Property accumulated by the Claimant’s payments.
45I find that the Registrar did not adequately consider the merits of the appeal by simply relying on the Perell judgments without further reference to how matters had unfolded after the judgments were signed. Indeed, in the fall of 2019 there is evidence that the Trustee and the Claimant’s counsel were negotiating with respect to the Claimant’s interest in the Property. Only after the Claimant served her Reclamation of Property did the Trustee take steps to file the disallowance and then its cross-motion to sell. In the interim the Trustee was content to have the Claimant continue to make all payments in relation to the Property. The Registrar was aware of this, but only considered the facts up to the time of the April judgments.
46The Registrar considered the final Issasi factor with respect to whether the justice of the case required an extension. The Registrar concluded that the Claimant’s claim was an abuse of process. While the Trustee raises issues of sham trust declarations and mortgage fraud, and while there is a history of the exchange of beneficial interests as between the Bankrupt and the Claimant since 2005, those are allegations which must be heard on a full record before any finding of abuse of process can be made.
47In summary, I find that the Registrar either misconstrued or did not adequately consider all of the facts before her, thereby resulting in an erroneous conclusion when weighing the relevant factors for granting an extension to the time limits under the BIA.
48The decision of the Registrar dated October 29, 2020 is therefore set aside. Accordingly, leave to extend the time to appeal the Notice of Disallowance is allowed and the time to appeal is extended to November 30, 2021.
The February 18, 2021 Conference and the June 11, 2021 Reasons
49On February 18, 2021 the parties attended a scheduling conference before the Registrar to schedule the Trustee’s cross motion for directions in relation to the sale of the Property. On June 11, 2021 the Registrar released reasons. In those reasons she dismissed the balance of the Claimant’s motion on the grounds that she was precluded from bringing any appeal because her appeal of the time to extend her appeal of the disallowance had been dismissed. The Registrar’s view was that the Claimant’s failure to appeal within the prescribed time, and failure to obtain an extension of that time meant that the Claimant was deemed to have abandoned or relinquished all right to the property pursuant to s. 81(2) of the BIA. The Registrar ordered that the Trustee could sell the Property free of any claim from the Claimant.
50Additionally, the Registrar refused to allow the balance of the Claimant’s motion because she deemed it was effectively her entire appeal and an indirect attack on the Perell judgments.
51Counsel for the Claimant then sought an adjournment which was denied.
52It is not clear from the Registrar’s reasons that she actually heard the Trustee’s motion for directions. Certainly the materials were before her. Rather it appears that she granted the relief in that motion, without argument, because the Appellants’ motion was dismissed. The Trustee’s motion for directions should be heard in the context of the Trustee’s obligations to determine the Bankrupt’s and the Claimant’s interest in the Property.
53Given my decision on the extension to the time to appeal the disallowance, the decision of the Registrar dated June 11, 2021 is hereby set aside.
Orders
54Given all of the above, I make the following orders:
a. The decisions of Bankruptcy Registrar Jean dated October 29, 2020 and June 11, 2021 are hereby set aside.
b. The Claimant’s time to file an appeal of the Notice of Disallowance is hereby extended to November 30, 2021.
c. The hearing of the appeal in relation to the Notice of Disallowance shall be scheduled as soon after November 30, 2021 as practicable and before a different Registrar.
d. If required and following the reasons on the appeal in relation to the Notice of Disallowance, the parties to attend a scheduling conference to schedule the Trustee’s Motion for Directions. The Appellants may file a cross-motion with respect to a determination of their interest in the Property if the matter has not been resolved by that time.
e. Counsel to provide written submissions on costs of no more than three pages double-spaced, exclusive of any Bill of Costs or Exhibits. All references to cases must be hyperlinked. Costs to be submitted on a 7-day turnaround starting with Mr. Piehler and Mr. Harris 7 days from the date of release of these reasons. If no costs submissions are received within 35 days of the date of release of these reasons, costs will be deemed to be settled.
C. Gilmore, J.
Date: November 3, 2021