Court File and Parties

Court File No.: 33-1930849 Date: 20220222

Superior Court of Justice - Ontario

Re: Re Terence Paul Thompson

Before: Associate Justice Kaufman

Counsel: Allan MacLeod, Licensed Insolvency Trustee Yannick Michelin, Counsel for the Superintendent of Bankruptcy

Endorsement

[1] The Superintendent of Bankruptcy (“Superintendent”) intervenes in the taxation of the Licensed Insolvency Trustee’s (“Trustee”) fees. She asks the Court to reduce the Trustee’s fees on the ground that he failed to fulfill his statutory duties in a timely manner, as per s. 39(5) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c B-3.

[2] The administration of the bankrupt’s estate proceeded as follows: on November 11, 2014, Terence Paul Thompson filed an assignment in bankruptcy. He was a first time bankrupt. Under the Superintendent’s standards, Mr. Thompson was required to pay surplus income. The Trustee opposed Mr. Thompson’s discharge because he had not made all the required monthly surplus payments. Mr. Thompson received an absolute order of discharge on December 20, 2016.

[3] The Trustee realized on Mr. Thompson’s assets, including a TFSA. On February 24, 2017, the administration was converted from a summary to an ordinary administration because the bankrupt’s realizable assets exceeded $15,000.

[4] It appears that the Trustee did not perform substantive activities on this estate after December 20, 2016. The Trustee submitted his final Statement of Receipts and Disbursements (“SRD”) on July 15, 2021. The Trustee’s fees and disbursements total $18,427.81 resulting in a dividend of $3,928.68. The creditors did not oppose the taxation of the Trustee’s accounts.

Superintendent’s position

[5] On August 19, 2021, the Superintendent of Bankruptcy (“Superintendent”) issued a letter of comment and requested that the Trustee proceed to taxation. The Superintendent contends that the Trustee did not perform his duties in a timely manner, contrary to Rule 36 of the Bankruptcy and Insolvency General Rules, C.R.C., c. 368. The Superintendent does not allege that the Trustee failed to carry out his functions with the requisite competence, honesty, integrity or due care. Rather, she submits that the Trustee should be disentitled to his full fees for failing to administer this estate in a timely manner.

Trustee’s position

[6] The Trustee submits that this estate was administered in accordance with the Bankruptcy and Insolvency Act, that it resulted in dividends, and that the creditors have not objected to his fees and disbursements. He disputes the Superintendent’s conclusion that there has been inordinate delay in closing the estate.

[7] The Trustee submits that on June 15, 2021, the Superintendent advised LITs in a town hall that they should focus on closing estates that were 10 years of age or older. The Trustee explains that the delay in closing this estate is in part explained by the fact that he was focused on closing these older estates. The Trustee also says that on March 19, 2021, he concluded an agreement with the Superintendent by which he undertook to close four ordinary estates per month starting in May 2019. The Trustee argues that he has honoured this agreement, that the Superintendent was aware of the delays associated with this estate at the time of the agreement, and that the Superintendent is estopped from relying on these delays as a ground to reduce the Trustee’s fees.

Analysis

[8] Rule 36 of the Bankruptcy and Insolvency General Rules provides that LITs must perform their duties in a timely manner and carry out their functions with competence, honesty, integrity and due care. The Superintendent is entitled to intervene on the taxing of a Trustee's SRD to dispute the remuneration sought by the Trustee. To maintain the general credibility of the bankruptcy system, a Registrar may approve a lower amount than the creditors have approved, as seen in cases like Bankruptcy of John Edward Los, 2000 BCSC 951, Brune (syndic) (Re), [1999] J.Q. No.2318 (C.A.), L'Heureux (syndic) (Re), Société de gestion Michel Douville Inc. (syndic) (Re), [1997] A.Q. No. 2348 (C.A.), and Re Hess (1977), 23 C.B.R. (N.S.) 215 (Ont.S.C.).

[9] The Superintendent provided authority for the proposition that a failure to perform statutory duties in a timely manner was a relevant consideration in the taxation of a Trustee’s fees.

[10] In Bankruptcy of John Edward Los, the British Columbia Supreme Court upheld a Registrar’s decision to reduce the Trustee’s fees where there was a six-year delay in the administration of the estate. The Registrar concluded that a reduction in the Trustee’s remuneration was warranted to offset interest lost to the creditors and to reflect the Court’s disapproval of the inordinate delay. The Registrar reduced the Trustee’s fee by $2,553.50, which represented almost 30% of the Trustee’s fees.

[11] In Bankruptcy of Gilbert Nelson and others, 2006 ONSC 23396, this Court upheld the Registrar’s decision to reduce the Trustee’s fees by $200 per estate where the Trustee filed s. 170 reports late. The delays ranged between 6 months and three years and 5 months. Lax J. agreed with the Registrar that a Trustee’s failure to fulfill statutory duties on a timely basis was a proper consideration by the court on taxation. The Court held that a Trustee’s failure to fulfill his or her statutory duties impairs the integrity and objectives of the insolvency system as a whole. The Court approved the Registrar’s reduction of the Trustee’s fees as a method of encouraging the efficient and conscientious administration of bankruptcies.

[12] Finally, in Re Harms, 2011 BCSC 379, the Trustee submitted his SRD two years late. The Registrar found that the Trustee could not offer a satisfactory explanation for the delay and reduced his fees from $13,334 to $9,000.

Disposition

[13] I am not persuaded that the Superintendent’s request that LITs focus on closing estates that are 10 years and older, or the closing agreement it reached with the Trustee, explain the four-year delay in submitting his SRD. Rather, these are examples of the Superintendent’s efforts to encourage Trustees to carry out their duties in a timely manner. The Superintendent did not create the situation at hand, where an SRD is submitted four years after the administration of the estate was completed. Rather, it appears that the situation is the result of less than perfect office practices.

[14] In Bankruptcy of Gilbert Nelson and others, Lax J. held that a Trustee who does not perform his statutory duties is at risk of having a Registrar reduce fees on taxation, and that this result will occur in most cases. The reduction in fees is not intended to be a fine or penalty and should be proportionate to the gravity and nature of the dilatory conduct.

[15] The bankrupt’s creditors were delayed in receiving their dividends for four additional years, which is a substantial amount of time. I agree with the Superintendent that a reduction in fees will strengthen the objectives of the insolvency system by incentivizing the timely and efficient administration of estates.

[16] In the circumstances of this case, I reduce the Trustee’s fees by $750 and fix the Trustee’s fees and disbursements in the amount of $17,677.81.

Alexandre Kaufman Associate Justice Kaufman

DATE: February 22, 2022