In the Matter of the Bankruptcy of Vukosav Zivic, 2022 ONSC 3604

COURT FILE NO.: 31-1998780

DATE: 2022 06 13

SUPERIOR COURT OF JUSTICE – ONTARIO

IN BANKRUPTCY

IN THE MATTER OF THE BANKRUPTCY OF

VUKOSAV ZIVIC (AKA VUK ZIVIC)

OF THE CITY OF TORONTO IN THE PROVINCE OF ONTARIO

(SUMMARY ADMINISTRATION)

BEFORE: Associate Justice Ilchenko, Registrar in Bankruptcy

COUNSEL:

I. Kibel, LIT, (“Kibel”) for Trustee, BDO Canada Limited (the “Trustee”)

H. Manis (“Manis”) for Bankrupt, Vukosav Zivic (the “Bankrupt”)

R. Kostyniuk (“Kostyniuk”) for Opposing Creditor, Sandra Zivic (“Sandra”)

Superintendent of Bankruptcy not appearing

HEARD: Trial of Bankrupt’s Discharge heard on October 6 and 7, 2021 and further legal submissions argued on December 8, 2021

E N D O R S E M E N T

[1] The Bankrupt appears on his discharge hearing (the “Discharge”) seeking an Absolute Discharge.

[2] The Bankrupt assigned himself into Bankruptcy on May 29th, 2015 (the “Assignment Date”). The Bankrupt had not previously been bankrupt, or filed a proposal, and was absolutely discharged on February 28, 2016, automatically.

[3] The Opposing Creditor, Sandra Zivic, the ex-wife of the Bankrupt, filed a motion to annul the Bankrupt’s discharge (the “Annulment Motion”). On January 5, 2018 Associate Justice Jean granted an order that the Bankrupt's automatic discharge be annulled (the “Annulment Order”) and extended the time for Sandra to file a notice of opposition to discharge to February 8, 2018. I will deal in greater detail with the findings of fact made by Associate Justice Jean at that hearing. The Bankrupt was not represented by counsel at the Annulment Motion. I am attaching the endorsement of Associate Justice Jean on the Annulment Motion as Appendix A to this Endorsement (the “Annulment Endorsement”).

[4] Both Sandra and the Trustee oppose the Bankrupt's Motion for Discharge.

[5] Associate Justice Jean has attempted to case manage this Discharge Hearing as a Special Appointment, issuing directions to the parties in endorsements dated December 16, 2019, March 8, 2021, March 23, 2021, May 20, 2021, and June 23, 2021 scheduling this matter to be heard before me on October 6-7 (the “Scheduling Endorsements”).

[6] Among the Orders made by Associate Justice Jean, is that the Opposing Creditor was to file her proof of claim by June 30, 2021 as she had not done so previously, and that all materials to be used at the hearing hade to be uploaded to Caselines at least three days prior to the hearing date.

[7] The witnesses anticipated by the parties at various points to be called included the Bankrupt, Sandra, a representative of the Trustee being either Michael Krieger (“Krieger”) or Eugene Migus, now both former members of BDO, the Bankrupt’s mother Dusanka Zivic (“Dusanka”) and Radislav Simic (“Simic”) a business associate of the Bankrupt, who’s involvement will be discussed in greater detail below.

[8] The only witnesses actually called at this hearing were Sandra and the Bankrupt.

[9] All underlined text in these reasons is emphasis added by me for these reasons.

[10] The Court has considered all materials and arguments raised by the parties on this Motion. Any failure by the Court to refer in these reasons to specific arguments and materials raised does not reflect that the Court has not considered those arguments.

Trustee’s Materials: S.170 Report and Supplementary Reports and Opposition

[11] The Trustee has opposed the discharge of the Bankrupt under the provisions of s.173(1)(d) and (o) of the BIA. Specifically, the Trustee has stated in its Notice of Opposition dated February 28, 2018 (the “Trustee’s Opposition”):

“The Bankrupt failed to assist in the realization of his assets and the Bankrupt failed to account for the loss of his assets. The Bankrupt failed to provide the Trustee with an accurate statement of affairs. He intentionally provided the Trustee with incorrect contact mailing information for a creditor such that the creditor did not receive the notice of bankruptcy.”

[12] The Trustee has filed for this discharge hearing the Trustee's Report on the Bankrupt's Application for Discharge (Subsection 170(1)), dated February 28, 2018 (the “Original s.170 Report”), and the Trustee's Supplementary Report (the “Supplementary Report”), the Trustee’s Second Supplementary s.170 Report dated March 18, 2021 (the “2nd Report”), and the Trustee’s Third Supplementary Report dated October 6, 2021 (the “3rd Report”) (collectively the “s.170 Report”).

[13] The Trustee’s Supplementary Report attaches the Trustee’s Opposition, the Original S.170 Report, the Notice of Opposition to Discharge of Sandra dated January 26, 2018 (the “Sandra Opposition”), which also attaches the Annulment Endorsement.

[14] The Original s.170 Report states:

“D. DISCHARGE OF THE BANKRUPT

9. (a) Is it the intention of the trustee to oppose the bankrupt's discharge? Yes

The Bankrupt failed to assist in the realization of his assets and the Bankrupt failed to account for the loss of his assets. The Bankrupt failed to provide the Trustee with an accurate statement of affairs. He intentionally provided the Trustee with incorrect contact/mailing information for a creditor such that the creditor did not receive the notice of bankruptcy.

(b) Does the trustee have reasonable grounds to believe that a creditor or the Superintendent will oppose the bankrupt's discharge for a reason other than those set out in section 173(1)(m) or (n) of the Act? Yes

The creditor Sandra Zivic will oppose on the grounds: The Bankrupt failed to disclose on his Form 79 at least $300,000.00 in assets held by his mother, as determined by Justice Stevenson in her Reasons for Decision delivered December 15, 2014.

The Bankrupt falsified this creditor's claims, in addition to failing to disclose assets specifically available for satisfaction of this creditor's judgement for equalization, arrears of support, pre-judgement interest and costs, in priority to any other creditor's claims.

The Bankrupt deliberately misled the Trustee in Bankruptcy as to the address of the Creditor, Sandra Zivic, as a result of which the Creditor was unaware of the Assignment. Had she been aware, she would have immediately instructed her lawyer to challenge the Assignment as presented by the Assignee.

The Creditor was denied opportunity to file a proper claim, oppose the Assignment, examine the Debtor under oath, and make submissions to the Trustee prior to the Trustee's Report and recommendations issuing.”

[15] The Trustee’s Second Supplementary Report attaches a claims register and a General Ledger for the Estate current to March 2021, and several of the Procedural Endorsements.

[16] The Trustee’s 3d Report attaches as exhibits an updated Claims Register (the “Claims Register”), the updated General Ledger (the “General Ledger”), the Sandra Opposition, the Annulment Endorsement, the corrected Proof of Claim of Sandra dated September 22, 2021 (the “Sandra Proof of Claim”) and the Notices of Assessment for the Bankrupt for the Tax Years 2015, 2016, 2017, 2018, and 2019, with the 2020 Notice of Assessment being filed prior to the hearing of the Discharge after it was assessed. (collectively, the “Notices of Assessment”).

[17] According to the Claims Register, the total Proven Claims in the estate are a single preferred claim for Sandra in the amount of $58,289.26 and a total of $284,406 in proven unsecured claims.

[18] Of the proven unsecured claims is a proven claim for Sandra in the amount of $170,036.50, and an as-yet unproven unsecured claim for Sandra’s legal costs in the amount of $40,000, which may be duplicative of her preferred claim.

[19] The remainder of the proven unsecured claims are what appear to be credit card and line of credit accounts, with American Express, Bridgewater Bank, Capital One Mastercard, HBC Mastercard, 3 accounts at Royal Bank, Rogers, and 3 accounts at TD Canada Trust.

[20] The Bankrupt declared further amounts owing to Marmer Penner, a further account at Royal Bank, the City of Brampton, Federal Express, 2 further accounts at TD Canada Trust, and Toronto Hydro, but proofs of claim were not filed to date.

[21] Also declared are collection accounts listed as contingent creditors for Capital One Mastercard, Bridgewater Bank, Amex, RBC, Gatestone & Co., the City of Brampton and Fedex which may or may not be duplicative of the above declared and proven claims.

[22] As a result, the Bankrupt owes at least approximately $110,000 in proven claims owing to unsecured creditors other than Sandra, and may owe thousands more if the declared claims ultimately are proven.

[23] These approximately $110,000 in non-Sandra proven claims constitute what appear to be at least fourteen declared credit cards and unsecured lines of credit, some with significant proven balances owing such as Amex with $16,103.59, Capital One with $7,208.67, RBC with three separate proven claims of $11,614.51, $18,157.96 and $8,156.84 and TD with separate proven claims of $8,443.43 and $11,118.35, and further declared but not proven claims of $8443.43 and $9,491.03.

[24] The total assets declared by the Bankrupt on the sworn Statement of Affairs is as follows from the Statement of Affairs in the Creditor Package that was made Exhibit E to this hearing:

“1. Cash on Hand 0

2. Furniture 0

3. Personal Effects Clothing & Personal Effects (Exemption $5,650) 200 00 claimed exempt

4. Policies & RRSPs Life Insurance - Bank of Montreal [Preferred Beneficiary) $1.00

5. Securities 0

6. Real Property or Immovable 0

7. Motor Vehicles Automobile 2006 Mazda 3 GT 183,000kms 3,600.00 (claimed exempt)

8. Taxes Pre - Federal - 2015 1.00

Post - Federal - 2015 1.00 X 0.00 1.00

TOTAL 3,803.00 Estimated net realizable dollar value $2.00”

[25] The total recoveries in the estate to the date of the hearings were $3,565.04 consisting of $2,000 paid by the Bankrupt, a further $88.45 tax refund, and $1,405.19 in HST refunds for the years 2011-2014 totalling $4,058.89, of which $1525.00 is on account of a GST refund and interest on deposits. As of the date of the hearings the Trustee had $2,287.44 available in the estate.

[26] To summarize, even without Sandra’s claims, the Bankrupt declared at least $110,000 in Non-Sandra claims, mostly on credit cards and unsecured lines of credit that, with the amounts declared for Sandra, totaled more than $284,000 and declared no non-exempt assets. None.

[27] No inspectors were appointed in this estate.

[28] Based on the eight income and expense statements for the period June 2015 to January 2106 provided by the Bankrupt to the Trustee the Trustee has determined that there is currently no surplus income owing.

[29] The Notices of Assessment indicate the following regarding the income declared by the Bankrupt for the period 2015-2020:

2015 $4572 Nil Balance

2016 $13,004 $131 refund

2017 $11,992 Nil Balance

2018 $29,396 $269.00 refund

2019 $17,560 $392 refund

2020 $17,580 $525 refund

[30] In the Stevenson, J. Endorsement dated December 15, 2014, and made Exhibit B to this to the testimony of the Bankrupt in this discharge hearing (the “Stevenson, J. Endorsement”) and which I am attaching as Appendix B to this Endorsement, given its central role in this discharge hearing, and discussed in detail below, Stevenson, J. found by way of comparison:

“[87] The following is the line 150 income of Mr. Zivic as reflected on his Income Tax Returns from 2008 to 2012:

2008 - $22,500

2009 - $25,000

2010 - $18,000

2011-$18,000

2012 -$10,000

[88] Mr. Zivic did not provide his 2013 Income Tax Return. The only documentation provided relating to Mr. Zivic's income for 2013, is his sworn Financial Statement of September 18, 2014 wherein Mr. Zivic states that his 2013 income was $10,000. Mr. Zivic's Notice of Reassessment from 2005 was also filed as an exhibit which shows a line 150 income of $51,566. This reflects the income earned by Mr. Zivic while employed by the Canada Revenue Agency Customs Branch (the "CRA").

[89] Mr. Zivic testified that he is currently not earning an income and has not earned an income since he resigned as a director from his company, Absolute Motor Specialties Inc. ("AMS"), on January 7, 2013.”

[31] Stevenson, J. stated the following with respect to the Bankrupt’s pre-bankruptcy income in the Stevenson, J. Endorsement, and imputed income for the purposes of determining the Bankrupts child and spousal support obligations:

“[120] I do not accept that Mr. Zivic's income since separation is as stated by him. At times I found Mr. Zivic's evidence on this issue to be contradictory. He contradicted the evidence of his accountant on a few occasions, including Mr. Zivic testifying that he never received funds from AMS. Mr. Laskaris testified that Mr. Zivic did receive all profits or the majority of the profits from AMS. Mr. Zivic also testified that any monies or benefits received were shared with Mr. McCutcheon, the other shareholder. However, Mr. Laskaris testified that it was Mr. Zivic who was the major player in the business and that no income was attributed to Mr. McCutcheon and that he had never met Mr. McCutcheon.”

[32] Stevenson, J., after lengthy calculations, and after hearing testimony from Mr. Lascaris, the accountant for the Bankrupt and for AMS (“Lascaris”) regarding aggressive accounting and claiming of personal expenses by the Bankrupt, imputed actual income of $60,000 to the Bankrupt for the years 2011, 2012, and 2013. Lascaris did not testify at this discharge hearing.

[33] I also note from the Stevenson, J. Endorsement the Bankrupt and Sandra estimated their Net Family Property in their sworn Net Family Property statements as:

“[196) Both parties provided Net Family Property Statements. Mrs. Zivic's Net Family Property Statement states her net family property value as $113,839 while Mr. Zivic's net family property value is $611,416. Mr. Zivic's Net Family Property Statement states Mrs. Zivic's net family property value as $123,840 while Mr. Zivic's net family property value is $152,163.”

[34] The OSB has not been involved in this estate and no s.161 examination had been conducted prior to the hearings.

[35] The sworn Statement of Affairs of the Bankrupt was identified and made part of Exhibit “E” to this hearing states:

“8. Have you operated a business within the last five years? Yes

Absolute Motor Specialties Inc. Sale of Car Parts 01-Jan-2008

to 07-Jan-2013

13. If you answered Yes to any of questions 9, 10 and 12, provide details:

9A: November 2014; Sold 2009 898 Ducati Sport bike and received $2,000. Used proceeds for living expenses.

Paid funds in court of $52,000 to the Family Responsibility Office for future support payments to ex-spouse as part of court order. 10A:

2013; Cashed Investment with TD Brokerage and received approximately $2,400. Proceeds used for living expenses. See 9a

See 10B)

January 2014; Transferred ex-fiancé’s 2004 Chevrolet Malibu, back to her. Was registered in my name for insurance purposes.

October 2013; Transferred 2001 Chevrolet Cavalier to ex-spouse pursuant to family court Order.

January 2013; Resigned from my company and Transferred shares to partner for assumption of company debts.

November 2012; Sold 1992 Nissan 300ZX and received approximately $15,000. Proceeds used for living expenses.

2012; Sold 1998 Pace American trailer and received approximately $3,500. Proceeds used to pay for children's school expenses. 2009-2010;

Sold jointly owned real property located at 69 Rathburn Road, Etobicoke, ON. Used proceeds to pay down debt and purchase jointly owned property at 4-1 Bradbrook Rd., Etobicoke, ON in 2011. Bradbrook property sold in August 2012 and funds have been paid into court. I have not received any of the proceeds and the balance available is approximately $52,000.

See 10b)

10B: December 2013; Gifted a 1990 Nissan 300ZX to brother-in-law which was valued at approximately $2,500.

14. Give reasons for your financial difficulties:

Marital separation. Unable to work due to medical related issues. Used credit to supplement income and unable to repay debts. Legal fees spent but no proceeds from separation.”

[36] In particular, in the 3rd Supplementary Report the Trustee states:

“5. Further to the Trustee's Report on the Bankrupt's Application for Discharge (Subsection 170(1)), dated February 28, 2018, our prior Trustee's Supplemental Report dated July 31, 2018 and May 10, 2021 and the Court hearing disposition sheet dated August 9, 2018 and Court endorsement dated June 23, 2021, the Trustee can now advise the court that:

a. On January 5, 2018, upon Motion of the Creditor Sandra Zivic, the Court issued an Order annulling the Bankrupt's automatic discharge;

b. On January 26, 2018 the Creditor Sandra Zivic, filed a Notice of Opposition to the discharge of the Bankrupt. We attach hereto and mark as Exhibit "C" the Notice of Opposition;

c. On February 28, 2018, the Trustee opposed the discharge of the Bankrupt;

d. the Bankrupt has failed to assist the Trustee in the realization of his assets and the Bankrupt failed to account for loss of his assets. Attached as Exhibit "D", is Mr. Zivic's Counsel's response to the status of his assets.

i. With respect to the Lamborghini, no evidence has been provided as to the loan made by the bankrupt's mother to the bankrupt. Further with respect to the asset having been transferred more than 5 years ago. Mr. Zivic filed for bankruptcy protection on May 17, 2015 and according to the information provided the asset was transferred in 2011, which is 4 years prior to his filing.

ii. With regards to the transfer of the shares and resignation as a director. According to the attached Exhibit "D", the transfer was done in 2013, which is within 5 years of filing for bankruptcy. In addition, no evidence has been provided as to the value of the business at the time of the transfer;

e. the Bankrupt intentionally failed to provide proper contact information for a creditor, therefore the creditor did not receive notice of the bankruptcy;

f. We attach hereto and mark as Exhibit "E" the Notices of Assessments for 2016 to 2020;

g. based on eight monthly income and expense statements provided, June 2015 to January, 2016, the Trustee determined there is no surplus income obligation.

h. the Bankrupt has paid $2,000.00 to the Estate.

i. the opposing creditor filed a Proof of Claim on June 30, 2021, however upon review and follow up discussions with Mr. Kostyniuk, the Proof of Claim required correction and a Schedule "A" provided. The corrected proof of claim and Schedule "A" was filed on September 21, 2021 with the Trustee's office. We attach hereto and mark as Exhibit "F" the Proof of Claim.

6. A Consumer Proposal was discussed with the Bankrupt: however the Bankrupt felt unable to commit to a long term payment plan. Accordingly, the Trustee recommends the Bankrupt NOT BE DISCHARGED.”

[37] The “Mr. Zivic's Counsel's response to the status of his assets” dated June 17, is attached as Exhibit “D” to the 3rd Supplementary s.170 Report is addressed to Kibel and Kostyniuk and states:

“Gents, As I understand there are 3 outstanding issues to resolve:

1. Lamborghini - I am advised that the car was transferred back to the bankrupt's mother in lieu in repayment of her loan to him to enable him to purchase the car for marketing purposes for his business at the time. As he had no money to transfer to her and she was worried she would lose the funds advanced from her loan to the bankrupt, she demanded the car back instead which the bankrupt agreed to. From my recollection as to my review of the Endorsement of the Family Court, this was referenced therein and discussed by the Judge. Moreover, the transfer was made in 2011 which is well outside the 5 year review period. As such, I believe that this issue is satisfactorily resolved;

2. With regards to the bankrupt's resignation and transfer of shares with respect to the corporation, we are advised that that happened in 2013 and forward today. Our client advises that he received no money for same as his debts and obligations owed to the company exceeded the value of his shares. My understanding is that this issue was resolved in the Family Court too. Copies of the relevant documents in respect of this transaction are attached herewith;

3. With respect to our client's income for the past few years, we attach herewith his Notices of Assessment from CRA for the years 2015 to 2019 which demonstrate that he has minimal income. The 2020 Notice will be provided as soon as it is received;

Please let me know if we can discuss this ahead of our conference call with Master Jean next week as I still hope that we can resolve it amongst us and I have some ideas in this regard.”

[38] Attached to the email from Manis to Kibel and Kostyniuk is a copy of an agreement between the Bankrupt, Simic, Absolute Motor Specialties Inc. (“AMS”) and Stephen McCutcheon (“McCutcheon”) dated January 6, 2013 (the “Share Transfer Agreement”).

[39] Under the terms of this agreement the Bankrupt:

1. resigned as President and Director of AMS being replaced by Simic, and McCutcheon was appointed Vice-President;

2. Transferred his 50 Common Shares of AMS to Simic;

3. As consideration for this transfer of his shares, in addition to the nominal price of $50, also included an assumption by Simic of all of the Bankrupts debts and obligations in relation to AMS:

“2. In addition to Zivic's 50 Common Shares, Simic will assume all financial obligations currently held by Zivic to AMS as it pertains to Zivic's 50% shareholder interest in AMS. This includes and is not limited to current bank obligations held by AMS (i.e. operating Line of Credit), debt to personal lenders to AMS, and suppliers to AMS.

3. The parties acknowledge and agree that the exchange of shares for liabilities is a fair and reasonable exchange.

4. The parties acknowledge and agree that the exchange of shares for debt obligations was arrived at by the parties, via negotiations between themselves (each of whom consulted their financial advisor and/or chartered accountant).

5. In the event that Zivic becomes liable personally for any of the aforementioned obligations, Simic shall indemnify and save harmless Zivic from any such obligations, including any interests, costs and actual legal fees and disbursements incurred by Zivic.

FINANCIAL DISCLOSURE

8. Zivic and Simic:

a) has disclosed to the other the nature, extent, and probable value of all AMS assets, significant debts or other liabilities existing at the date of this contract,

b) is satisfied with the information and particulars received from the other; and c) acknowledges that there are no requests for further information or particulars that have not been met to his complete satisfaction.

9. Simic and his solicitors, accountants, appraisers and other advisors have had full and complete access to the books and records of the corporation. Zivic makes no representations or warranties concerning the books and records of the corporation.”

[40] Nowhere in the Share Transfer Agreement is the actual total amount of debts and obligations of AMS and the Bankrupt that Simic assumed, and also does not describe the “...debt to personal lenders to AMS” stated in the Share Transfer Agreement as owing to Dusanka, as found by Stevenson, J., and possibly to the Bankrupt, given the finding by Stevenson, J. that the Bankrupt testified he was keeping AMS afloat with cash infusions as shareholder.

[41] In his testimony before me the Bankrupt confirmed that he did not personally guarantee the debts of AMS:

(October 7- page 29-30 Examination in Chief by Manis)

“A. The company was heavily indebted and the understanding was they would assume all the company debts and I would be able to at least rid myself of the company debts.

Q. Did you have personal guarantees for some of the company debts?

A. No, no.”

[42] That raises the issue, if there were no debts of AMS that he had guaranteed, what was the consideration that Simic paid for the Bankrupt’s shares, as AMS was an incorporated entity, with the Bankrupt not owing any:

“… financial obligations currently held by Zivic to AMS as it pertains to Zivic's 50% shareholder interest in AMS. This includes and is not limited to current bank obligations held by AMS (i.e. operating Line of Credit), debt to personal lenders to AMS, and suppliers to AMS”

[43] To uncomplicate, it appears that from the Bankrupt’s sworn testimony, in both the proceedings before Stevenson, J. and before me, that at least a portion of the “debts and obligations” of AMS allegedly assumed by Simic on the assignment of the AMS shares by the Bankrupt, was the “...debt to personal lenders to AMS”, being Dusanka and possibly the Bankrupt, but also that he had not guaranteed any obligations of AMS.

[44] The Bankrupt did not, as far as I can tell in the materials and testimony before me, advise his Trustee that he could have a shareholder loan receivable owing to him by AMS, for the amounts that the Bankrupt testified before Stevenson, J. he loaned to AMS to buy inventory, and therefore an asset of his Bankruptcy Estate which he may have failed to declare.

[45] Stevenson J. reported the Bankrupt’s testimony on the topic of his possible shareholder loans to AMS as follows:

“[121] Mr. Zivic explained the drop in sales for AMS in 2012, which was after the date of separation, as being attributed to a major customer not purchasing as much from AMS and the downturn in the US economy. He did not provide any evidence from third parties regarding this issue. When cross-examined on the business bank statements, and why there was an approximately $50,000 discrepancy in the sales that were reported in the financial statements for the year ending September 30, 2012 of $146,500 (counsel for Mrs. Zivic indicated in cross-examination that the AMS bank records showed funds received of $194,876), Mr. Zivic attributed this to monies that had been deposited into the AMS business bank account that should not be treated as income. This included the GST rebate, what he testified was the sale of some of his personal vehicles and the constant infusion of funds by him to keep AMS afloat.

[122] As Mr. Laskaris testified, some of the inconsistency could be due to the GST rebate which was not income, however, this would only be $5,000 or $6,000. Mr. Laskaris also testified that if a shareholder were to advance monies to the company, this would be reported by the shareholder to him and recorded as a shareholder loan. This was not done by Mr. Zivic during this fiscal period when it was done previously. I do not accept that this was the infusion of Mr. Zivic's own funds into the company in order to keep it afloat. In his evidence he kept repeating that this was a small business and this is what a small business owner does to keep the company going. However, I do not accept that Mr. Zivic is an unsophisticated businessman. He had been in business for a substantial length of time and had previous shareholder loans recorded in the financial statements. There is no reason for Mr. Zivic to exclude these from his financial statements. He took care to ensure that all business expenses were deducted and it is unlikely that he would fail to report to his accountant the infusion of his own personal funds into the company.

[123] On re-examination on this issue, Mr. Zivic kept referring to the fact that "we" infused personal funds into the business and at times he asked his mother to also do so. It was unclear as to who the "we" was that he was speaking about. He indicated that almost all of the sales were from the US and that he used PayPal. He also indicated that he used PayPal to sell his personal belongings and at times this money was put into the account to keep the business going.

[46] Stevenson J., relying on an expert’s report of value provided by Sandra, as the Bankrupt had provided no valuation report of his own, valued the shares of AMS at $55,500 and the Bankrupts 50% interest therefore at $27,750.

[47] The jurisprudence requires that I provide deference to the findings of the Trustee in a s.170 Report and I do so.

Opposition by Sandra

[48] Sandra filed an opposition to the Bankrupts discharge dated January 26, 2018 (the “Sandra Opposition”) on the following grounds:

“TAKE NOTICE THAT Sandra Zivic, a Creditor of the Estate of Vukosav Zivic (aka Vuk Zivic), a Bankrupt intends to oppose the discharge of the Bankrupt on the following grounds:

1. On January 5, 2018, upon Motion of the Creditor Sandra Zivic, Master M. Jean issued an Order annulling the Bankrupt's automatic discharge, and provided the Creditor until February 8, 2018 to serve and file a Notice of Opposition to Discharge. Annexed hereto are the Reasons for Decision of Master M. Jean dated January 5, 2018.

2. The facts are the Bankrupt made an Assignment Into Bankruptcy on May 27, 2015 without notice to the Creditor, and received a Discharge on February 28, 2016 also without notice to the Creditor or the Creditor's lawyer, who was well known to the Bankrupt, and was actively involved in pursuing collection of the Judgments referenced below.

3. The Creditor, Sandra Zivic, Is by far the Bankrupt's most significant creditor. At the date of the Bankrupt's discharge, he knew the results of Sandra Zivic's family law action, which kept him liable for support, support arrears, are large equalization, and legal costs, pursuant to the Judgments of Justice Stevenson of the Superior Court of Justice (Toronto) issued on December 15, 2014 and February 17, 2015. Copies are available if required.

4. The Bankrupt failed to disclose in his Form 79 at least $300,000 in assets held by his mother, as determined by Justice Stevenson in her Reasons for Decision delivered December 15, 2014.

5. The Bankrupt falsified this creditor's claims, in addition to failing to disclose assets specifically available for satisfaction of this creditor's judgment for equalization, arrears of support, pre-judgment interest and costs, in priority to any other creditor's claims.

6. The Bankrupt deliberately misled the Trustee in Bankruptcy as to the address of the Creditor, Sandra Zivic, as a result of which the Creditor was unaware of the Assignment. Has she been aware, she would have immediately instructed her lawyer to challenge the Assignment as presented by the Assignee.

7. The Creditor was denied an opportunity to file a proper claim, oppose the Assignment, examine the Debtor under oath, and make submissions to the Trustee prior to the Trustee's Report and recommendations issuing.

8. At the very least, the Creditor would have secured an Order to pursue her claims against the Bankrupt, regardless of the disposition of the Bankrupt's other creditor claims.”

[49] The wording of the Sandra Opposition does not specifically state the s.173 Facts that Sandra was opposing on, but at the hearing Kostyniuk confirmed to me prior to proceeding that the grounds of opposition were under s.173(1)(a),(d) and (o), which all counsel and the Trustee agreed were the s.173 Facts that would be adjudicated by me.

[50] Sandra’s Opposition is based on factual findings made by Stevenson, J. in the Stevenson, J. Endorsement and by Associate Justice Jean in the Annulment Endorsement. The Annulment Endorsement is attached to the Sandra Opposition.

Annulment of Bankrupts Automatic Discharge:

[51] As noted above, the Bankrupt had been automatically discharged, but that discharge was annulled by Associate Justice Jean, who, after a hearing where Sandra was represented by Kostyniuk, and the Bankrupt represented himself, made findings of fact and stated the following in the Annulment Endorsement:

“Re Vukosav Zivic (aka Vuk Zivic)

Court File No. 31-1998780

R. Kostyniuk, counsel for the creditor/moving party

V. Zivic, bankrupt in person

REASONS FOR DECISION

For the reasons that follow, I grant the creditor's motion. Orders to go that the bankrupt's automatic discharge be annulled and that the time to serve and file a notice of opposition to discharge be and is extended to February 8, 2018.

The motion is brought by the creditor, who is the former spouse of the bankrupt. The bankruptcy was filed after threats to do so during the course of acrimonious and contentious matrimonial litigation between the bankrupt and the creditor/former spouse. The assignment in bankruptcy was filed on May 27, 2015 following the release of the decision of Stevenson J. dated December 15, 2014 and the release of the costs decision of Stevenson J. dated February 17, 2015. Both decisions favoured the creditor/former spouse.

The motion is brought on the grounds that the creditor did not have notice of the bankruptcy and that the bankrupt failed to disclose assets in his statement of affairs.

The jurisdiction to annul the discharge is found in section 180(1) of the BIA which provides as follows: "where a bankrupt after his discharge fails to perform the duties imposed on him by this Act, the court may, on application, annul his discharge." In addition, section 180(2) of the BIA provides as follows: "where it appears to the court that the discharge of a bankrupt was obtained by fraud, the court may, on application, annul his discharge."

The bankrupt, in my view, failed in his duty to provide an accurate statement of affairs.

First, I find that the bankrupt failed to disclose the correct contact information for the creditor. In my view, the bankrupt intentionally provided the trustee with incorrect contact/mailing information for the creditor such that the creditor did not receive notice of the bankruptcy.

The creditor deposed in her affidavit that the bankrupt provided her former address to the trustee, that she had moved and that the bankrupt had picked up or dropped off their children at her new address.

The bankrupt denies that he was aware that the creditor had moved. He claimed that he learned of the new address when he attended at the children's doctor's office and that upon learning of the cancellation of the children's health cards, the bankrupt claimed that a Service Ontario worker provided the creditor's address to him.

In my view, the bankrupt was aware from the matrimonial litigation that the creditor intended to move, Indeed, the location of the creditor's residence as it affected the children's education supports was an issue, Further, the bankrupt was aware at all material times that the creditor was represented by a lawyer. In my view, the bankrupt knew the creditor was an interested party and ought to have provided her lawyer's address for service at a minimum.

In addition, while it is clear that the creditor and her lawyer became aware of the bankruptcy at some point, the bankrupt failed to inform his creditor of the identity of his trustee and did not provide the relevant bankruptcy documents to the creditor or her lawyer until after the discharge date.

Second, the bankrupt failed to make full and meaningful disclosure of his assets and/or the disposition of assets in the pre bankruptcy period. I find that the bankrupt failed to fully disclose the disposition of the Rathburn property proceeds, the disposition of the bankrupt's shareholding in Absolute Motor Specialties Inc. ("AMS") and the transfer of the Lamborghini to the bankrupt's mother.

Regarding the Rathburn property, the bankrupt's statement of affairs is misleading in that the bankrupt does not disclose the total net proceeds of sale at $368,000 and that of this amount, $200,000 was transferred to the bankrupt's mother on October 28, 2010, within 5 years of the date of bankruptcy and on the eve of the bankrupt's separation from his creditor/former spouse. The bankrupt claimed that the transfer of funds was repayment of a debt owed to his mother. However, in the matrimonial proceedings, Stevenson J. found that the funds advanced by the mother to the bankrupt were not loans. Stevenson J. also found that there was no expectation that the advances be repaid and that the only reason that the bankrupt provided the funds to his mother was to defeat the creditor's equalization claim.

Regarding AMS, the bankrupt claimed in his statement of affairs that he transferred his shares to his partner and resigned. However, Stevenson J. did not accept that the bankrupt had no association with AMS and drew an inference that the bankrupt remained a shareholder. Stevenson J. valued this shareholding at $25,000. These facts were not disclosed in the bankrupt's statement of affairs.

Regarding the Lamborghini, Stevenson J. found that the Lamborghini was owned by the bankrupt. The bankrupt transferred title to the vehicle to his mother when matrimonial difficulties arose. The vehicle has remained in the bankrupt's mother's garage and had not been sold as of matrimonial trial. The transfer of the Lamborghini was not disclosed in the bankrupt's statement of affairs. In the matrimonial proceedings, the Lamborghini was valued at $95,000.

The total value of these assets is in excess of $300,000, an amount that exceeded the disclosed debts of $284,530.

Lastly, the decision of Stevenson J. reveals that the bankrupt was involved in a motor vehicle accident and that he had made a claim for income replacement benefits and health expenses. The bankrupt received $25,647 in July 2014 (within 12 months of the date of bankruptcy) which he converted to cash and kept in his bedroom. Stevenson J. referenced the bankrupt's reasoning that intended to declare bankruptcy and that he converted the payment to cash because he did not want his creditors to receive any of these funds. The receipt of these funds and an accounting for the same was not disclosed in the bankrupt's statement of affairs. Further, it may be that the bankrupt has a claim for lost wages, as one of the stated reasons for financial difficulty was inability to work due to medical related issues. It does not appear from the statement of affairs that this potential claim was disclosed to the trustee.

Taking the circumstances as a whole, it is my view that the bankrupt failed to properly and accurately disclose his statement of affairs, failed to bring the fact of bankruptcy to the attention of his creditor/former spouse, whom the bankrupt knew or must have known would be a particularly interested creditor, failed to assist in the realization of assets and failed to account for the loss of assets.

In my view, the jurisdiction to annul the discharge is discretionary and on balance, it is my view that the discretion be exercised in this case, To my mind, the interests of the creditors generally and not only the moving creditor/former spouse and the integrity of the insolvency system demand that annulment of the bankrupt's discharge.

Furthermore, the circumstances of this case are suspicious and hints of fraud, however, for the purposes of this motion, I need not make any conclusions on this issue given my findings that the bankrupt failed to perform his duties.”

[52] So, in addition to annulling the discharge on the basis of her factual finding that the Bankrupt had “…intentionally provided the trustee with incorrect contact/mailing information for the creditor such that the creditor did not receive notice of the bankruptcy”, namely Sandra, Associate Justice Jean also annulled the discharge on the basis that the Bankrupt had failed to properly disclose to the Trustee:

1. the disposition of the Rathburn property proceeds;

2. the disposition of the Bankrupt's shareholding in AMS;

3. the transfer of the Lamborghini to the Bankrupt's mother; and

4. the receipt of $25,647 in July 2014 (within 12 months of the date of bankruptcy) for a personal injury settlement that the Bankrupt converted to cash and kept in his bedroom, with Stevenson J. mentioning the Bankrupt’s testimony that he intended to declare bankruptcy and that he converted the payment to cash because he did not want his creditors to receive any of these funds.

[53] The Annulment Order was not appealed.

[54] With respect to the issue of the $25,647 payment noted above, the Bankrupt’s testimony before me was as follows:

“(October 6 page 91- Cross examination by Kostyniuk)

MR. KOSTYNIUK: Q. So 25,647 received on July or in July of 2014. That, was that noted on your Statement of Affairs in your assignment into bankruptcy?

A. I discussed that with Michael, and that was for therapy, and that was not income. That was money to be used for therapy, which I have used for physiotherapy, and that was treated as such.

Q. The question is whether it was reported and then (indiscernible) is how it works. Was it reported on your assignment into your bankruptcy?

A. I don’t know what Michael put on the assignment in bankruptcy. That’s – I did discuss that with him and that was – I don’t know how this works. So I discuss that with him. He deemed it was not income because it was money for physiotherapy, which was used for physiotherapy.

Q. Her Honour’s evidence or decision says the bankrupt, that’s you, received $25,647 in July of 2014(ph), which he converted to cash and kept in his bedroom. Justice Stevenson referenced the bankrupt’s reasoning that he intended to declare bankruptcy and converted(ph) the payment in cash because he did not want his creditors to receive any of these funds. That’s in Her Honour’s decision. Do you disagree with that?

A. I can't recall verbatim. I know I discussed this with Michael and I discussed this with BDO, the money that I did receive and what I used the money for and the circumstances of the settlement.”

[55] The Stevenson, J. Endorsement actually states the following regarding the Bankrupt’s testimony on what the Bankrupt testified to on the issue of the $25,647 before her:

“He also testified that as the result of a motor vehicle accident, he received income replacement benefits and expenses toward medical costs. He testified that the funds received by him in July of 2014 totalling $25,647 have been converted into cash. He testified that he used some of the funds for ongoing expenses including the children's expenses. The remaining funds are being kept in his bedroom at his mother's home. His reasoning for this is that as he is declaring bankruptcy, he does not want his creditors to receive any of these funds as they will take anything in his name.”

[56] On Exhibit F at page G87 in Caselines on the handwritten application with BDO dated April 30, 2013, in answer to the question “Have you been or are you involved in Civil litigation from which you may receive monies or property” the answer is “No” with the written notes “MVA-injury in 2012 – in discussion – not pursued” and then the entire entry is scribbled over. That is the only mention of this in the documentation presented to me at the hearing of this possible $25,647 asset of the Bankruptcy Estate.

[57] No other evidence was provided to me that substantiates the Bankrupt’s statement that Krieger knew all about the cash settlement funds and deemed it to have not been assets to be declared on the Statement of Affairs. Krieger, who now works for a different Trustee firm was not called to testify by any party.

[58] The Parties confirmed to me that there is no Transcript of the hearings before Stevenson, J. that lead to the Stevenson, J. Endorsement that could determine what, precisely, the Bankrupt testified to under oath on this and many other issues.

[59] Much of the hearing dealt with the testimony of the Bankrupt similarly re-litigating these factual issues already determined by Associate Justice Jean, based on the findings of Stevenson, J. I asked counsel to return for a third day of hearings to argue the issue of whether the findings of Stevenson, J. in the Stevenson J. Endorsement and the Associate Justice Jean in the Annulment Endorsement were res judicata and subject to issue estoppel with respect to the finding of a s. 173 Facts at this discharge hearing by me. I will discuss that legal issue separately below.

Stevenson J. Endorsement and Proof of Claim of Sandra

[60] This bankruptcy is inextricably entwined with the Family Law Proceedings involving the Bankrupt and Sandra. Sandra is currently the largest individual creditor. She is the only creditor opposing this discharge, joining the Trustee. The basis of her proof of claim in this Bankruptcy is the Stevenson J. Endorsement and the Stevenson J. Order. It was on her Motion that Associate Justice Jean annulled the Bankrupt’s automatic discharge.

[61] The Stevenson J. Endorsement and the Annulment Endorsement were relied upon by Sandra as the evidentiary basis for the proof of claim filed by Sandra and the Sandra Opposition.

[62] As noted above, the Stevenson J. Endorsement dated December 15, 2014 was entered into evidence as Exhibit B to this hearing, the Order implementing the Stevenson J. Endorsement was dated December 15, 2014, but only entered on April 14, 2016 was entered into evidence as Exhibit C to this hearing (the “Stevenson, J. Order”) and the Costs Order of Stevenson, J. dated February 17, 2015 but only entered April 6, 2016 in the amount of $65,000 with $40,000 being ordered by Stevenson J. to be enforced by the Family Responsibility Office as an incident of support, was entered into Evidence as Exhibit D to this hearing (the “Stevenson J. Costs Order”).

[63] Neither the Stevenson, J. Order nor the Stevenson, J. Costs Order were appealed.

[64] The Bankrupt assigned himself into Bankruptcy on May 27, 2015, 163 days after the issuance of the Stevenson, J. Endorsement.

[65] The corrected Sandra Proof of Claim (the “Sandra Proof of Claim”), totaling $228,325.76, which the Trustee has admitted, is entirely based on the findings in the Stevenson, J. Endorsement and the Stevenson, J. Costs Order, with the Schedule A stating:

“SCHEDULE A

No Priority Claim

1. Equalization pursuant to Judgment dated December 14, 2014 $ 145,036.50

2. Costs award pursuant to Judgment dated February 17, 2015 $ 25,000.00

TOTAL $ 170,036.50

Priority Claim

1 Lump sum awarded under Judgment dated December 15, 2014 $ 8,692.26

2. Cost award under Judgment dated February 17, 2015 $ 40,000.00

3. Periodic payments awarded December 15, 2014 (November 1/14 to May 1/15) x 7 months at $1,371.00 $ 9,597.00

TOTAL $ 58,289.26”

[66] Briefly, the Bankrupt and Sandra married in 2004, separated in February 2011 and a Divorce Order was granted on May 30, 2014. They have two sons, now approximately 17 and 16 years of age.

[67] The Stevenson J. Endorsement was issued after a 10 day hearing in September and October 2014. Kostyniuk represented Sandra and the Bankrupt was represented by Evan Chang. It runs 269 paragraphs, and makes numerous findings of facts after a very thorough examination of the situation of the parties and weighing of the evidence given by the Bankrupt, Sandra, Dusanka the Bankrupt’s brother-in-law, Srdjan Stanojevic, the Bankrupt’s doctor, Dr. Grant de Groot, Lezah Ursomarzo, who is Mr. Zivic's former fiancée, Pauline Flanagan, a clinical investigator appointed by the Office of the Children’s Lawyer, Lascaris the accountant for the Bankrupt, and Dyson, the Business Valuator hired by Sandra.

[68] Stevenson, J. was hearing the Application by Sandra seeking custody of the children of the marriage, child support retroactive to February 4, 2011, section 7 expenses, spousal support commencing December 1, 2011, equalization of net property and costs.

[69] The Bankrupt was seeking sole custody of the children of the marriage, or alternatively, joint custody, arrears of child support as he contends the children have been primarily in his care, ongoing child support, equalization of net family property and costs.

[70] In addition to making a determination that Joint Custody, on the terms set out in the Stevenson, J. Endorsement, there were a number of factual determinations made by Stevenson, J. that are very relevant to this Discharge Hearing.

Spousal and Child Support and Bankrupt’s Imputed Income

[71] As noted above, Stevenson, J. imputed actual income of $60,000 to the Bankrupt for the years 2011, 2012, and 2013, notwithstanding his reported income, in the context of determining the income of the Bankrupt and Sandra for child and spousal support purposes.

[72] This was despite the Bankrupts testimony:

“[95] Mr. Zivic testified that he has not been working due to depression and anxiety and since his resignation from his business for health reasons on January 7, 2013. His position is that he never earned a significant income from AMS nor had he earned a significant income from his previous company, Absolute Motorsports Inc. He states that his business was always a part-time endeavour. He supplemented that income by flipping houses which was his primary source of earning funds. The parties were able to afford their lifestyle from the monies he earned from flipping homes and from the generosity of his mother who had always allowed the parties to live rent-free and who had always paid for groceries. He testified that he has earned no income from flipping homes since prior to the date of separation. Mr. Zivic states that he currently has no income; he has appealed his denial of CPP disability benefits and that appeal may take some time.”

[73] In addition at [147] Stevenson J. also found with respect to the Bankrupt’s earning capacity:

“…While I do accept that this ongoing litigation has been difficult for both parties and that Mr. Zivic has had to obtain medical assistance and medication to assist him with depression and anxiety, I do not find on the evidence as a whole that Mr. Zivic has been completely incapacitated and unable since January 2013 to work.”

[74] After all of this testimony Stevenson, J. determined the following in ordering that the Bankrupt had sufficient means to pay spousal and child support despite the Bankrupt’s protestations of penury, and claims for child and spousal support from Sandra despite her documented $15,942 gross income per year at the time of the hearing, stating:

“[193] I also find that Mrs. Zivic continues to suffer an economic hardship as a result of the breakdown of the marriage. There is a significant disparity in the parties' incomes and Mrs. Zivic continues to be in need of support. Mrs. Zivic is not self-sufficient with an income of only $15,942 gross per year but is making efforts to achieve self-sufficiency by seeking full-time employment. As indicated, her means are limited while Mr. Zivic continues to live rent-free and to have all of his groceries paid for by his mother. His debts will be cleared as he has testified that he will be declaring bankruptcy imminently. In addition, on an imputed income of $60,000 and very limited expenses (restricted to those of the children excluding groceries), Mr. Zivic has the means to pay spousal support.

[194] As no adjustment to spousal support has been requested by Mr. Zivic in his draft order and the evidence supports that Mr. Zivic did not pay appropriate expenses as ordered by Czutrin J. in December 2011 including car insurance, mortgage, property taxes, HI common expenses and other payments, there should be no adjustments made back to December 2011 for spousal support. On an ongoing basis, Mr. Zivic's income has been imputed at $60,000 while Mrs. Zivic's income is $15,942 gross. I have ordered that child support be paid in the amount of $892 per month by Mr. Zivic on an ongoing basis. Factoring in the child support obligation, this results in a monthly spousal support range under the SSAGs of a low of $151, a mid of $307 and a high of $479. The SSAGs also suggest that support be payable for an indefinite (unspecified) duration, subject to variation and possibly review, with a minimum duration of 3.25 years and a maximum duration of 14 years from the date of separation.

[195] Taking into consideration the factors and the objectives as set out in the Divorce Act and referred to earlier, the length of time that support has already been paid, the length of the parties' relationship, Mrs. Zivic's age, the disparity in incomes, the fact that Mrs. Zivic has significantly higher ongoing costs, and using the SSAGs as a tool, Mr. Zivic shall pay spousal support to Mrs. Zivic commencing November 1, 2014, in the amount of $479 per month. I am not prepared to place a termination date on support at this time but given the short duration of the marriage, a review is warranted. Once Mrs. Zivic secures full time employment or a significant change in her part-time employment (ie. she is working two part-time jobs or has a significant increase in her part-time income or hours) spousal support shall be immediately reviewed and, shall be reviewed in any event, no later than November 1, 2017.”

[75] I note that after Stevenson, J. calculated the income and expenses of the Bankrupt on the basis of the factual finding that he was living for free with his mother, who also suppled groceries, when the Bankrupt swore his Form 65 Surplus Income declaration 5 months after the Stevenson, J. Endorsement he was claiming that he was paying $500 per month rent. This sleight of hand may have reduced the Bankrupt’s Surplus income payment requirement significantly to $225 per month.

[76] Other than expressing outrage at Kostyniuk daring to question him on his ability to work and earn income, the Bankrupt presented no compelling evidence at this hearing that refutes the findings of Stevenson, J. that the Bankrupt has not been completely incapacitated and unable to work since January 2013.

Net Family Property Determination and Bankrupt’s Asset Values on V-Date

[77] On the issue of the equalization of Net Family Property values and whether any equalization payment was owing between the parties, Stevenson J. determined that the Bankrupt owed a property equalization payment in the amount of $145,036.50 to Sandra based on a valuation date of February 4, 2011 (the “V-Date”), which is 4 years and almost 4 months from the date of Bankruptcy of May 29th, 2015, being within the 5 year look-back period for certain related party transactions under s.95-101 of the BIA.

[78] The Net Family Property statement created by the Court after making these determinations of property values owned by the Bankrupt on that date is appended to the Stevenson, J. Endorsement, and indicates that as at the V-Date Stevenson, J. determined that for the purposes of valuation for NFP, the Bankrupt’s assets had a value of $535,093.

[79] Included in this determination were the Bankrupt having:

1. a $245,000 interest in the Bradbrook Property along with Sandra,

2. $95,000 of his interest in a Lamborghini,

3. $15,000 with respect to a 1992 Nissan 300ZX,

4. $5000 for a 1997 Audi A8, Chevy Cavalier and Pace American Trailer,

5. Funds held by Dusanka and owned by the Bankrupt in the amount of $105,000,

6. $41,600 in a chequing account, and

7. a $27,750 interest in the shares of AMS.

[80] I note that at the date of Bankruptcy, 4 years after the V-Date and the Bankrupt in his sworn statement of affairs valued all of his assets at “TOTAL 3,803.00 Estimated net realizable dollar value $2.00”, a difference of $531,290. I also note that the Statement of Affairs was sworn only 165 days after the release of the Stevenson J. Endorsement, where those asset values were imputed to the Bankrupt by Stevenson, J., and 101 days from the Release of the Stevenson, J. Costs Order.

Value of Real Property:

[81] Stevenson, J. found the following with respect to the Bankrupt’s interest in the 4-1 Bradbrook Road, Etobicoke, Ontario property (“Bradbrook”):

“[197] There is no dispute with respect to the Bradbrook property. Both parties list the value of the property at $490,000 and the mortgage at $262,360 on the valuation date. Both also list Mr. Zivic's Lamborghini motor vehicle as having a value of $95,000 as of the valuation date. The parties are also agreeable that Mr. Zivic had $41,600 in his bank account and that Mrs. Zivic had $20 in her bank account as of the valuation date.”

[129] I also have concerns as to how Mr. Zivic was able to qualify for financing to purchase the property at Bradbrook (owned jointly with Mrs. Zivic at the time of separation) if his income was as reported on his income tax returns. The outstanding mortgage was $253,476 at the time of sale on August 30, 2012. Mr. Zivic testified that this property was purchased in the fall of 2010. The evidence shows that on August 30, 2010, Mr. Zivic received proceeds of sale from the sale of his Rathburn property in the amount of $368,809. On October 28, 2010 he gave his mother $200,000 that he said was partial payment owing to his mother for loans previously advanced to him (dealt with further in the equalization of net family property section of these Reasons). As such, he did not have all of the funds available from the sale of Rathburn to purchase Bradbrook.

[130] Mr. Zivic further testified that he probably paid the down payment as reflected in his bank statements of $76,292 towards the Bradbook property. The Bradbrook property was purchased for $349,000. Mr. Zivic testified that he spent at least $80,000 on renovations for the Bradbrook property which would have left him with little funds on which to live if he was receiving the nominal income as claimed on his income tax returns. He also claims that he paid for a significant amount of these renovations in cash including at least $15,000 in cash for a kitchen renovation.

[131] Mr. Zivic would have had to qualify for the mortgage on Bradbrook but no evidence was provided as to the application for the mortgage which would have indicated the incomes used by the bank to determine if Mr. Zivic and Mrs. Zivic were eligible to qualify for financing.

[132] I had another concern with respect to Mr. Zivic's credibility on a number of these financial issues. When pressed on cross-examination, Mr. Zivic often stated that he "did not recall" particular events or expenses whereas he seemed to have a perfect recall when the evidence would support him.”

[183] Given Mr. Zivic continues to not have any housing or food costs while Mrs. Zivic will continue to have ongoing significant housing costs, I find that it is reasonable for Mr. Zivic to pay full table child support for the two children in the amount of $892 per month to Mrs. Zivic based on an imputed income of $60,000 commencing November 1, 2014 and monthly thereafter until further order of the court. I am concerned that Mr. Zivic will not pay this amount of support given that court orders were needed in the past to ensure that these payments were made out of Mr. Zivic's proceeds from the sale of the Bradbrook property. In order to ensure that ongoing support payments are made, any funds remaining in trust from the sale of the Bradbrook property shall be paid to the Family Responsibility Office and used towards the payment of Mr. Zivic's ongoing monthly support obligations.

269 Any funds remaining in trust from the sale of the Bradbrook property (which represents Mr. Zivic's one-half interest in the property) shall be paid to the Family Responsibility Office forthwith and used towards the payment of Mr. Zivic's ongoing monthly support obligations;”

[82] At the date of the hearing, the Bankrupt testified that he had consented, after bankruptcy, without informing or obtaining the permission of the Trustee, to pay these proceeds of sale of Bradbrook to the Family Responsibility Office (“FRO”) to use to pay his child and spousal support, and that approximately $32-33,000 remained at the FRO (the “FRO Fund”).

[83] As noted in the Statement of Affairs on this issue:

“Paid funds in court of $52,000 to the Family Responsibility Office for future support payments to ex-spouse as part of court order. 10A:”

[84] What this statement in the Statement of Affairs does not say is the source of those funds.

[85] As noted succinctly by Associate Justice Jean in the Annulment Endorsement, and with which I concur based on my review of the Statement of Affairs and the Stevenson J. Endorsement, and as was confirmed in the Bankrupt’s testimony before me:

“Regarding the Rathburn property, the bankrupt's statement of affairs is misleading in that the bankrupt does not disclose the total net proceeds of sale at $368,000 and that of this amount, $200,000 was transferred to the bankrupt's mother on October 28, 2010, within 5 years of the date of bankruptcy and on the eve of the bankrupt's separation from his creditor/former spouse. The bankrupt claimed that the transfer of funds was repayment of a debt owed to his mother. However, in the matrimonial proceedings, Stevenson J. found that the funds advanced by the mother to the bankrupt were not loans. Stevenson J. also found that there was no expectation that the advances be repaid and that the only reason that the bankrupt provided the funds to his mother was to defeat the creditor's equalization claim.”

[86] Nowhere in his statement of affairs does the Bankrupt disclose the $200,000 payment of a portion of the proceeds of Rathburn to this mother, and a portion of the proceeds of which were used to purchase the Bradbrook property, which is reported as the FRO Fund, but not as an asset of the Bankrupt. In the Statement of Affairs the Bankrupt states with respect to these transactions:

“2009-2010; Sold jointly owned real property located at 69 Rathburn Road, Etobicoke, ON. Used proceeds to pay down debt and purchase jointly owned property at 4-1 Bradbrook Rd ., Etobicoke, ON in 2011. Bradbrook property sold in August 2012 and funds have been paid into court. I have not received any of the proceeds and the balance available is approximately $52,000.”

[87] What the Bankrupt does not disclose is that the “pay down of debt” was a $200,000 payment to his mother, a related party, and that, three months prior to the swearing of the Statement of Affairs, Stevenson, J. had found that the funds advanced by the mother to the bankrupt were not loans.

[88] The BDO Factum states the following with respect to what the Bankrupt advised Krieger with respect to the $200,000 paid to Dusanka within 5 years of the Bankruptcy:

“13. Based on a review of email correspondence from Mr. Zivic to Mr. Michael Krieger, formerly of BDO, the BDO application form and notes and Mr. Zivic's SOA, there is no mention regarding the $200,000 transferred to Ms. Dusanka Zivic.”

[89] The Bankrupt’s evidence on this issue was as follows:

(At P.17 October 7) MR. MANIS: Rathburn Road, approximately five years, repaid debts, used to purchase 4-1 Bradbrook.

THE COURT: Okay. So let – so, let me ask the following question. Where in all of this is a notation that says, I paid $200,000 to my mother three years ago.

MR. MANIS: The only note that I found is the one that we saw earlier.

THE COURT: Yeah, that’s, that’s going back, I believe, to G87, Mr. Riley?

MR. MANIS: Yes, G87 and there was some handwriting in dark ink, and then there’s changes in blue ink, and it’s the blue ink where it said approximately five years repaid debts.

THE COURT: So, the documentary evidence I have before me is that he said he repaid debts but not to who.

(at p.20 October 7) MR. MANIS: Well I – unfortunately I don’t think he can be blamed for that, and I'm not looking to blame Mr. Krieger obviously, but he signed the Statement of Affairs that they prepared based on the information he gave them and this is what it is. But he said he paid debts. I don’t know if in 2012 they asked him who he paid or how much or when, but he, he gave the judgment to BDO, and on that page that we last looked at, 101, G101, the reference said Judgment – right at the top – Judgment Family Court. So I can only assume that they knew about the judgment, which came in late 2014.

(at p.21 October 7) VUKOSAV ZIVIC: If I could answer that, Your Honour, if that’s....

THE COURT: Sure.

VUKOSAV ZIVIC: I, I was there, not Mr. Kostyniuk.

THE COURT: Yeah.

VUKOSAV ZIVIC: So basically, the house on Rathburn was a matrimonial home. We sold that well – maybe a year, year and a half – I'm not sure the exact timeline – before any divorce was discussed or initiated. Sandra and I....

THE COURT: Well but I'm looking for an exact timeframe.

VUKOSAV ZIVIC: Okay, yes. So it’s, it’s about a year, Your Honour. I don’t have all the paperwork in front of me. So it was a matrimonial home. We sold it. Sandra knew what was going on. We went to Goldstein, paid back my mother, bought Bradbrook together. It’s a matrimonial home. Once again Bradbrook was bought before any divorce. Sandra and I went shopping together. We bought the house with the understanding I'm going to do what I, what I was doing, buying homes, flipping, renovating. That’s – I, I was making my 100K, maybe more, per house. Your Honour, this was my third house I bought through a loan of my mother way back when. Anyway, so we, you know, we bought the house together, and this was all discussed with Mr. Krieger, I mean everything - point blank I told him what was going on from day one. How he treated it, I mean, I don’t know what – you know, how he wrote the documents, what have you, I know I disclosed everything. There’s nothing to hide. Sandra knew what was going on with the houses. She knew what...

MR. KOSTYNIUK: Well....

VUKOSAV ZIVIC: ... (indiscernible) was doing, you know.

[90] Also the Bankrupt stated the following, which is reproduced in greater detail below, that a portion of the $200,000 paid by the Bankrupt to Dusanka from the Rathburn proceeds was then readvanced by Dusanka to AMS to buy inventory stating:

“A. Yeah, I, I think there was, from that 200,000 I gave her maybe she did pay for a purchase order. I was short some money. So that, that might have happened. I forget the date.

THE COURT: Is it your testimony you don’t know how much the business owes your mom? That you...

A. It probably – I would say 20/30 grand if I had to guess, you know? Twenty, 30,000, a couple of POs for inventory.”

[91] Between the hearing dates, the Trustee gave notice to FRO of the Trustee’s position that these funds were the proceeds of sale of an asset of the Bankrupt, the Bradbrook property, that upon Bankruptcy became an asset of the Bankrupt’s estate, and that the Trustee was claiming an interest in the remaining funds in the FRO Fund in the amount of approximately $32-33,000, on behalf of all of the creditors, not just Sandra. Sandra has opposed the Trustee’s position, claiming the FRO Fund entirely to herself. I am not determining this priority issue on this hearing.

[92] As best as I can understand from the statements made by the Bankrupt, Kostyniuk and Sandra at this hearing, there is currently a Motion by the Bankrupt for variation of the Stevenson, J. Order for his payment of child and spousal support, on the basis of Sandra allegedly having more income, and he having less, and that somehow the Bankrupt being undischarged is holding this variation motion up.

[93] A discharge order does NOT re-vest any property in the Bankrupt. If parties are operating on the supposition that ownership of the FRO Fund will revest in the Bankrupt, and this supposition is what is motivating this maneuvering, let me disabuse all parties of that supposition.

[94] If these proceeds of Bradbrook were the Bankrupt’s property on the date of his assignment, they will remain the property of the Bankruptcy Estate, unless some explicit trust was established for them.

[95] Ordinarily, support claims are treated as unsecured, preferred claims in terms of the priority of payment of dividends by the Trustee of the Bankruptcy Estate, under s.136(1)(1)(d.1) for the accrued amount of spousal and child support for one year prior to the Bankruptcy, plus any lump sum amount payable, and are treated as ordinary unsecured claims otherwise. Unpaid amounts for spousal and child support may be debts not released by an Order of discharge under s.178(1)(c) of the BIA, but that does not affect the possible proprietary claim of the Trustee to the FRO Fund.

[96] If the battle by the Bankrupt and Sandra for the ownership of the FRO Fund is what was driving this discharge, then that strategy was misguided by both sides.

The Lamborghini

[97] As noted in the quote above, the Bankrupt and Sandra both put the value of the Lamborghini at $95,000 on their NFP statements. Stevenson J. determined the following with respect to the Lamborghini.

“[128] I also note that despite AMS being a part-time endeavour, Mr. Zivic spent significant funds on expensive vehicles including Porches, a Lamborghini and others which he drove. Mr. Zivic testified that some of the vehicles were purchased with funds from insurance proceeds or, the Lamborghini with funds borrowed personally from his mother. He testified that he needed the vehicles for marketing purposes. I find that some of the expenses claimed for vehicles on Mr. Zivic's financial statements have a personal component. When reviewing the evidence as a whole, Mr. Zivic was enjoying a lifestyle which afforded him many privileges gained by deducting expenses from his income that were not solely business-related and I do not accept that they were solely for the purpose of expanding his part-time business. These deductions are not reasonable and to allow the full amount of these deductions would be to the detriment of the children.”

[213] Dusanka also identified a document titled "Loan Agreement", dated December 2, 2010, between herself and Mr. Zivic. In this document she agrees to lend Mr. Zivic the sum of $110,000. Mr. Zivic agrees to pay Dusanka 3% interest per annum and to pay the principal sum and interest in full within 60 days of demand in writing. She further identified a demand promissory note dated December 2, 2010 wherein Mr. Zivic unconditionally promises to pay her the sum of $1 10,000 at the rate of 3% interest per annum commencing December 2, 2010. She testified that the funds were for the purchase of a Lamborghini motor vehicle for Mr. Zivic to use for his company. When questioned as to whose Lamborghini it was, she testified that it was for the company but that her son, Mr Zivic, had possession of it. She indicated that she always supported Mr. Zivic with his company before the parties were even married. If the company was in jeopardy, she wanted to lend the company money.

[214] Dusanka explained that she was now the owner of the Lamborghini motor vehicle. She had lent Mr. Zivic $110,000 and as he was having problems with his wife, she asked him to return the money. If he was unable to do so, she asked that the vehicle be transferred into her name. She was unsure as to when she asked Mr. Zivic to do this. She indicates that the vehicle is still in her garage but it has engine problems. She has not attempted to sell the vehicle and she is not sure when she will sell the vehicle.

[215] Dusanka testified that on her son's date of marriage to Mrs. Zivic (as stated on her Financial Statement filed in these proceedings in July 2012 when she was an added party), she was owed $237,500 from Mr. Zivic but $200,000 had been repaid to her by Mr. Zivic during the marriage. This left a balance of $37,500 owing on the valuation date. She also indicated that she was owed $110,000 from Mr. Zivic with respect to the monies loaned to Mr. Zivic for the Lamborghini on the valuation date, but that this had been partially satisfied by transferring the vehicle to her. She further indicated that AMS currently owed $59,079.73 to her for funds advanced to pay Chinese suppliers for automotive parts.

[226] When notes or loan agreements were prepared on monies advanced prior to separation, including the $110,000 advanced for the purchase of the Lamborghini, the principal sum and interest was payable in full within 60 days of demand in writing by Dusanka. There was no evidence that any demand was made in writing by Dusanka with respect to any of the monies advanced. Mr. Zivic testified that when he repaid his mother $200,000 via bank draft in October 2010, this represented a partial repayment of the loans advanced for the Drew Road property. Mr. Zivic denied on cross-examination that he transferred these monies to his mother in order to avoid sharing any monies with Mrs. Zivic. He testified that this transfer took place before the date of separation and that the marriage was not over yet.

[227] I do not accept Mr. Zivic's evidence on this issue. Mrs. Zivic testified that the parties travelled to Serbia in the fall of 2010 and while in Serbia they spoke to both Dusanka and Mrs. Zivic's mother to advise them that they were separating. On cross-examination Mr. Zivic indicated that it could be possible, but he was not certain, that they travelled in late August and early September 2010. He did not dispute that the conversation with the parties' mothers took place. The repayment of this alleged loan takes place shortly thereafter. There had been no demand for payment prior to the parties travelling to Serbia and no partial repayment had been made. The fact that the payment of $200,000 from Mr. Zivic to Dusanka occurred prior to the official date of separation, does not support that these monies were a loan. A separation was discussed and clearly in the minds of both Mr. Zivic and Dusanka. They took steps to ensure that little money was in Mr. Zivic's name prior to separation.

[228] The same actions took place with the Lamborghini. Dusanka testified that as there were problems between Mr. Zivic and Mrs. Zivic, she asked that her money be repaid. Mr. Zivic testified that this was completed once Mrs. Zivic commenced litigation. This resulted in the transfer of the vehicle to Dusanka. Mr. Zivic testified that his mother never drove the vehicle, the engine was damaged and it sits in his mother's garage. No attempts were made to sell the vehicle by Dusanka, from which I infer, the vehicle is considered to be Mr. Zivic's vehicle.

[229] Mr. Zivic also testified on cross-examination that the $200,000 was the first payment towards any monies advanced to him by his mother. He indicated that he "did not recall" if his mother had made a demand for payment but as his mother is retired, on a pension and he had made money, he felt the timing was right to repay her. I note that Mr. Zivic had also made money back in 2005 but he chose not to repay his mother. The timing of this payment of $200,000 to Dusanka with the date of separation imminent is concerning and I accept that it was done in order to defeat any equalization payment owed to Mrs. Zivic. Part of these funds were then advanced back to Mr. Zivic to buy the Lamborghini. Dusanka's evidence is that she would loan money to Mr. Zivic and his company to assist if the company was in jeopardy. If that were the case, one wonders why she would lend Mr. Zivic $110,000 to purchase a Lamborghini to use for marketing purposes (as stated by Mr. Zivic) for his part-time endeavour. If the company was in jeopardy, these funds would have been used to pay down debt and for other expenses. Additionally, the monies were allegedly loaned to Mr. Zivic and not to AMS. The vehicle was owned by Mr. Zivic and not AMS.

[230] There is also no security held for any of these loans. When Dusanka Zivic was cross-examined on this issue, she acknowledged that there were no mortgages on any of the properties held by Mr. Zivic to protect her monies including properties he owned on Stewart Street in Milton, and the Rathburn or Bradbrook properties.

[232] Further, I find that there was no expectation, or likelihood, of repayment. The only reason that Mr. Zivic provided $200,000 to his mother prior to separation was to defeat any claim to an equalization payment by Mrs. Zivic. Mr. Zivic's evidence was that AMS was struggling, Mrs. Zivic was not earning a substantial income and flipping houses was his main source of income. Given this evidence, it was not logical for Mr. Zivic to give his mother $200,000 at the time he did.

[233] I accept that any monies advanced by Dusanka to Mr. Zivic would not have been repaid if the parties had not been contemplating a separation. Additionally, although Dusanka is retired and in receipt of a pension, she was the owner at one point of three properties and derived rental income. She is financially stable and did not need the funds.

[234] Taking all of these factors into consideration, the sum of $105,000 should be included as an asset of Mr. Zivic's on the valuation date as these monies were held by Dusanka Zivic on his behalf. The sum of $95,000, as stated by both parties to be the value of the Lamborghini, is also to be included as an asset of Mr. Zivic's on the valuation date. These two figures total $200,000, representing the funds inappropriately transferred by Mr. Zivic to Dusanka to defeat any equalization payment that he would owe to Mrs. Zivic.

[98] In this context Stevenson J. deemed the $95,000 Lamborghini to be an asset of the Bankrupt for the purposes of determining his equalization payment.

[99] Accordingly, in the Bankruptcy context, had the Lamborghini not been transferred to Dusanka, and was still in the possession of the Bankrupt on the date of assignment, any “loan” paid by Dusanka would have been an ordinary unsecured claim, subordinate in priority to the interest of the Trustee in the $95,000 Lamborghini, as it was acknowledged that no security had been taken by Dusanka for repayment of this “loan”, so s.20 of the Personal Property Security Act would deem the Trustee’s interest superior.

[100] The Bankrupt makes no mention of this transfer of the Lamborghini in his sworn Statement of Affairs. On this issue Associate Justice Jean found:

“Regarding the Lamborghini, Stevenson J. found that the Lamborghini was owned by the bankrupt. The bankrupt transferred title to the vehicle to his mother when matrimonial difficulties arose. The vehicle has remained in the bankrupt's mother's garage and had not been sold as of matrimonial trial. The transfer of the Lamborghini was not disclosed in the bankrupt's statement of affairs. In the matrimonial proceedings, the Lamborghini was valued at $95,000.

The total value of these assets is in excess of $300,000, an amount that exceeded the disclosed debts of $284,530.”

[101] The s.170 Report states as follows with respect to the Lamborghini:

“…c. On February 28, 2018, the Trustee opposed the discharge of the Bankrupt;

d. the Bankrupt has failed to assist the Trustee in the realization of his assets and the Bankrupt failed to account for loss of his assets. Attached as Exhibit "D", is Mr. Zivic's Counsel's response to the status of his assets.

i. With respect to the Lamborghini, no evidence has been provided as to the loan made by the bankrupt's mother to the bankrupt. Further with respect to the asset having been transferred more than 5 years ago. Mr. Zivic filed for bankruptcy protection on May 17, 2015 and according to the information provided the asset was transferred in 2011, which is 4 years prior to his filing.”

[102] The BDO Factum summarizes the following from the BDO Application Form (as defined below) that evidences that the Bankrupt advised Krieger of the following with respect to the disposition of the Lamborghini:

“17. In addition, on page 10 of 15 of a BDO insolvency application form dated August 16, 2012 provided by Mr. Zivic's lawyer, under the question "Have you sold, disposed or transferred any real property or other assets in the past five years? (Provide Details), there is a typed response as follows:

"MMM, YYY: Returned leased Lamborghini that was used for business promotion to lessor when demanded back. Vehicle had no equity"

[103] In the handwritten notes to the Bankrupt’s first meeting with BDO dated April 30, 2013 at Exhibit F to this hearing, on page G96 in Caselines is the following note:

“Had Lamborghini loaned from Mom in personal name”

[104] The Bankrupt’s relevant evidence before me on this issue of the Lamborghini was as follows:

“(at p.32-33 October 6 by Manis in Chief)

Q. Okay. Now, if we move on to the Lamborghini, how was the Lamborghini paid for?

A. It was paid for by my mother.

Q. Okay. And was it her vehicle or your vehicle?

A. She had provided the funds for the vehicle for marketing purposes for the company back in 2000 – I don’t remember the exact date – 2010/2011.

Q. Okay. And when you say it was for marketing purposes for the company, was it a company vehicle or was it your vehicle?

A. We had put it in my name because the company’s small and to try and get corporate insurance on a company, it, it didn’t make sense. It was way too much paperwork.

Q. So, it was in your name.

A. Correct.

Q. And did your mother gift you the money or lend you the money?

A. She lent me the money.

Q. Okay. And is there any paperwork or was there any paperwork evidencing the loan from your mother to yourself?

A. Well, I think in Family Court we only discussed it. We did meet with a lawyer, her lawyer regarding making – drawing up paperwork for it. He highly recommended it. At the time I said it’s more expenses that we need to incur, and if he ever needed the money back, you know, you could ask and I’ll either sell the vehicle or give the vehicle back. So she was, she was content with that answer.

Q. Okay. So, the simple answer is there’s no documentation but you met with a lawyer and decided not to spend the money...

A. Correct.

Q. ...to prepare the documents.

A. Correct. Yeah, not to make a lien out of it. It’s just more paperwork. It just didn’t make sense considering the business was so small.

Q. Okay. And what I've gathered from the Family Law decision, the court – the Family Law Court decision, is that it’s your position that your mother wanted repayment of the loan?

A. Correct.

Q. And in turn, you gave her back the car.

A. Yeah, I had no money. Like I mean I had no, no cash to actually give her and the car was the only thing I had of value.

Q. And so did you formally transfer the car back to her?

A. Yes, I did.

Q. And that was through the Ministry of Transportation?

A. Correct.

Q. And so following the completion of that transaction, the vehicle is registered in your mother’s name?

A. Correct.

Q. Okay. And that – the value of the vehicle was determined by Madam Justice Stevenson, and that amount formed part of the equalization as well, correct?

A. Correct.

(P.87 October 6 Cross-Examination by Kostyniuk)

Q. Do you agree with Justice Stevenson’s finding in her decision regarding the Lamborghini?

A. I don’t agree with any of that, but I couldn’t...

Q. Okay.

A. ...I couldn't afford it an appeal. That’s just the way life is. I have to accept the circumstances with my position.

(P. 107 Cross-examination by Kibel)

MR. KIBEL: Q. If I recall, if we had to go back, which you indicated that Mr. Krieger said because of your income a consumer proposal is not an option. So we have to go back and look at that. The Lamborghini in previous correspondence (indiscernible) with Mr. Manis it was stated that the Lamborghini was transferred five years prior to your bankruptcy and then sold. There is no (indiscernible) transferred on the value for consideration. If I recall correctly, when was the actual Lamborghini transferred to your mother?

A. It was in 2011, and I brought that up with Mr. Krieger and (indiscernible).

Q. Approximately when in 2011?

A. I believe it was November.

Q. And you filed a....

A. (indiscernible) 2011. Was it 2011? I'm trying to remember. It was before our first motion in Family Court, like before anything started.

Q. Okay. And you filed in May of 2015, so...

A. (indiscernible)

...OVERTALKING

Q. ...that, that was in the five-year period. So that was the reason we’re looking at that asset as an asset.

A. Yeah.

Q. ...if you realize....

A. Yes, and I did declare that with the intake sheet with my first meeting with Mr. Krieger. I believe you, you’ll see mention that the car was transferred in less than five years.”

[105] With respect to what the Bankrupt told Krieger about the Lamborghini the Bankrupt’s evidence in chief was:

“(p.35-36 by Manis in Chief)

Q. Okay. All right, well let’s talk now – sorry, one last question about the vehicle. When you met with the trustee, did you tell them about the Lamborghini and the transfer to your mother?

A. Absolutely. I had – well in my first physical meeting with Michael Krieger I had – we had filled out preliminary assessment, whatever the paperwork is that – and it was mentioned to him. I explained to him in detail that the funds came from my mother. It was used as a promotion vehicle, and the circumstances of me giving it back to her because she demanded the money back and I gave her the vehicle instead. So I believe Michael Krieger treated it as a lessee returning to the lessor. I'm not sure of the jargon, but that was what he indicated in the application form.

Q. Okay. I presume that trustee has that application form if it becomes necessary.

A. I hope so.

Q. And Mr. Krieger or anybody at BDO presumably never took issue with the transfer of shares of the business or the release of the vehicle to your mother because they did not oppose your initial automatic discharge.

A. Correct.”

[106] At no point in the evidence before me does the Bankrupt advise the Trustee that at the time of assignment the alleged transaction was not a lease, that the “lessor” was his mother, that Stevenson, J. had found that the transaction was not a loan and the transfer was done to defeat Sandra’s equalization claim, and that the Lamborghini was at the time of assignment, and continues to be to the date of this hearing, safely ensconced in the garage beneath the Bankrupt’s feet.

[107] I also note that Stevenson, J. specifically finds that the Bankrupt transferred the Lamborghini to Dusanka with the specific purpose of defeating Sandra’s equalization claim. As noted above, she also found that the payment to Dusanka of $200,000 in 2010 out of the Rathburn proceeds to also have been inappropriately transferred to defeat the equalization claims of Sandra.

[108] In the Bankruptcy context, that equalization claim is accorded no priority in payment under the BIA. But at the same time the Stevenson, J. found that the Bankrupt and Dusanka had schemed to defeat the Sandra equalization, the effect was also to defeat the claims of the other creditors of the Bankrupt, which the bankrupt admitted to running up while impecunious, which in the context of the Bankruptcy discharge is very relevant.

[109] The Bankrupt on the issue of the Lamborghini, continued to insist before me, despite the findings of Stevenson, J., and Associate Justice Jean, that the providing of the Lamborghini to his mother, in repayment of her loan was legitimate.

[110] The flaw with that bold strategy was that I was not determining the ownership of the vehicle, but determining that on the totality of the evidence, whether he had sufficiently accounted for the disposition of his assets to the Trustee, and whether in my estimation, his bankruptcy occurred for reasons for which he should not justly be held to be responsible, and that he was a rehabilitated Bankrupt, deserving of a discharge.

[111] At this hearing the Bankrupt provided no documentary or other evidence that contradicted the findings of Stevenson, J., and substantiated the validity of the “loan” for the Lamborghini by Dusanka, that the Bankrupt testified he was forced to repay by giving his mother the car, but he did confirm that the Lamborghini is still in Dusanka’s possession, parked in the garage of her house.

Shares of AMS

[112] As noted in several quotes above, Stevenson J. also found that the shares of AMS transferred to Simic, were also to be imputed to be owned by the Bankrupt at the V-Date for the purposes of calculating his net family property, and valued at $27,750.

[113] In determining that the shares should still be considered part of the property of the Bankrupt for NFP calculation, Stevenson, J. found:

“[248] The difficulty the court has is that despite the onus being on Mr. Zivic to provide a valuation of his business, a valuation was not completed by any expert retained by him. Mrs. Zivic then had to retain an expert to prepare a valuation. As a result, the information available to Mr. Dyson was somewhat limited, but he testified that he did have the financial statements of the business from 2007 to 2012. Given the financial position of Mrs. Zivic and the information available to her regarding AMS, it is not reasonable to expect that she would be able to retain Mr. Dyson to prepare a Comprehensive Valuation Report or an Estimate. It was not incumbent upon her to produce any report; it was Mr. Zivic's obligation.

[249] The report by Mr. Dyson is the best evidence that the court has to determine the value of the shares of AMS as of the valuation date. Mr. Dyson admitted to the limitations that he faced (through no fault of his own) and to the assumptions made. I have already indicated when determining Mr. Zivic's income that some of the expenses deducted by him for trade shows, conventions and sponsorships should be added back on to his income for support purposes. Mr. Dyson, on the instructions of counsel for Mrs. Zivic, did not include these expenses in his calculations. He indicated that a value of 100% of the shares would be approximately $71,000. If he adjusted those numbers to add in approximately $50,000 in unreported revenue and assuming expenses associated with that unreported revenue, the value would be approximately $100,000. If he did not make the assumptions he was asked to make - that is, that the trade shows and conventions and sponsorships are business-related expenses - the value would be $40,000.

[250] Some but not all of these expenses related to trade shows, conventions and sponsorships should be allowed, as indicated earlier in these Reasons. There should be no adjustment for unreported revenue as this pertained to the latter part of 2011 and 2012 and not to the fiscal period ending on September 30, 2010 which is the date at which Mr. Dyson determined the estimated fair market value of the shares of AMS. Taking these adjustments into consideration, a reasonable value for 100% of the shares would be approximately the mid-range of the figures provided by Mr. Dyson ($71,000 and $40,000) which is $55,500. As Mr. Zivic was a 50% shareholder at the valuation date, a reasonable value for his shares on valuation date would be $27,750.”

[114] In the Statement of Affairs, all that the Bankrupt states with respect to the AMS share transaction is:

“January 2013: Resigned from my company and Transferred shares to partner for assumption of company debts.”

[115] Again, as noted succinctly by Associate Justice Jean in the Annulment Endorsement, and with which I concur based on my review of the Statement of Affairs and the Stevenson J. Endorsement, and as was confirmed in the Bankrupt’s testimony before me:

“Regarding AMS, the bankrupt claimed in his statement of affairs that he transferred his shares to his partner and resigned. However, Stevenson J. did not accept that the bankrupt had no association with AMS and drew an inference that the bankrupt remained a shareholder. Stevenson J. valued this shareholding at $25,000. These facts were not disclosed in the bankrupt's statement of affairs.”

[116] The Bankrupt’s testimony before me on this topic was as follows:

“(p.31 in Chief by Manis) Q. Okay. And you know that at the end of the day the conclusion by Madam Justice Stevenson was that the value of your 50 percent share of the business was determined to be 27,500. Correct?

A. That sounds correct.

Q. And that amount factored into the equalization that forms the basis, or substantially forms the basis for the debt that you owe to Sandra Zivic. Correct?

A. Correct.”

[117] At the hearing on examination by Kibel, the Bankrupt explained the following as to why he continued to use the email address for AMS even after bankruptcy in 2015, and years after having allegedly disposed of the shares of AMS to Simic in 2013:

(p.109-111) Q. However, all the correspondence we have from you right now, even after 2015, has email coming from AMS. Did you still continue operating or working for AMS, the fact that you were using their email address and company name?

A. Which email is that? The Absolute....

Q. Well if I look at the....

THE COURT: Today’s emails.

MR. KIBEL: Q. Yeah, I have an email here dated May, May 23rd, 2015, ASM Sports Inc., and you signed off as Vuk, so I assumed that....

A. Yeah that, yeah that email I had for over 15 years I think, so that – the correspondence with Michael was always there, so I, I still have access to that email. It’s not a corporate email. It’s just a....

Q. Well, I challenge that because if you’re reading the disclaimer or copyright notice,...

A. Mm-hmm.

Q. ...it says all information contained in this email is confidential and (indiscernible) authorized by AMS Absolute Motor Sport Solutions Specialties Inc. which....

A. Yeah. That’s (indiscernible). I've never stopped using that in terms of up to that point. If, if you want a corporate email you have to go through, you know, on the website and (indiscernible) took it from email. That’s, that’s the corporate email. This email I've had for over 15 years, and I was corresponding with Michael from day one with the same email.

Q. But if you no longer represent AMS, how do you have the authority to use their company information and email address?

A. That wasn’t the official email. The official email is off of the website. They, they have a different email system.

Q. So you completely separated from any of this. You have nothing to do with it,...

A. Not (indiscernible).

Q. ...no (indiscernible) control, no....

A. But that email has nothing to do with any of the functions or anything. That email I opened up before – I think 15 years ago I’ve opened up that email.

Q. Yeah, but I just – I think that that makes the assumption you’re still associated with the company and the general public wouldn't know that you're not, based on that.

A. Yeah, I never – I only opened my personal email I think – I don’t know when, but it’s vzivic@hotmail. I thought it was a Hotmail account. I, I still use that to a certain point. It just – the public – if you go on the website – if you go on corporate website you're going to see – I don’t think you're going to see any Hotmail accounts over there. I know that we used, at the time, there was different emails for actual sale inquiries and everything else. This was just....

Q. So it’s your testimony that you have nothing to do with AMS.

A. Correct.

Q. Even though you have the disclaimer from their company on your emails.

A. Yeah, I mean, maybe I’ll be in trouble for that. I mean I, I've never been told not to use that Hotmail account by Steve or anybody else.”

[118] At this hearing the Bankrupt provided no documentary or other evidence that contradicted the findings of Stevenson, J., that the value of the shares transferred to Simic were $27,750 or substantiating that the consideration for the transfer was appropriate, being the quantum of the liabilities of AMS attributable to Zivic.

Bankrupt Threatening Bankruptcy during hearing before Stevenson J.

[119] I note that Stevenson J. mentions several times in the Stevenson, J. Endorsement the sheer brass of the Bankrupt repeatedly threatening an imminent bankruptcy in his testimony at the very hearing where Stevenson, J. is determining Sandra’s Application for child and spousal support and property equalization claim, to the point of actually filing his Bankruptcy paperwork with the Court, such as:

“[180] There is a significant difference in the financial situations between the parties due to the difference in their means and the fact that only Mrs. Zivic had to pay ongoing housing and food costs. Mr. Zivic did testify that he incurred significant credit card debt as a result of ongoing legal fees and other fees associated with this litigation. He repeated several times that he is going to declare bankruptcy immediately after a decision is rendered by this court. He testified that he has already met with a trustee in bankruptcy and as proof of this, he filed paperwork prepared by a trustee in bankruptcy supporting his evidence that he is preparing for bankruptcy. He also testified that as the result of a motor vehicle accident, he received income replacement benefits and expenses toward medical costs. He testified that the funds received by him in July of 2014 totalling $25,647 have been converted into cash. He testified that he used some of the funds for ongoing expenses including the children's expenses. The remaining funds are being kept in his bedroom at his mother's home. His reasoning for this is that as he is declaring bankruptcy, he does not want his creditors to receive any of these funds as they will take anything in his name.”

[120] As noted by Associate Justice Jean in her Annulment Endorsement, the Bankrupt did NOT declare the receipt, possession or disposition of these settlement funds in July of 2014 totaling $25,647 on his sworn statement of affairs, received less than a year prior to his bankruptcy.

Testimony of the Bankrupt

[121] Despite the Herculean efforts of Manis throughout this hearing to prepare the Bankrupt, to conduct an effective examination in chief and to control and focus his client’s testimony on the matters at issue in this Discharge Hearing, which latitude I permitted when it became obvious it was required, the Bankrupt was an appallingly bad witness, prone to self-pitying speeches and taunting behavior, similar to the brassiness Stevenson, J. experienced with the Bankrupt where, amazingly, he threatened bankruptcy on multiple occasions during his hearing to determine his child and spousal support obligations and property equalization payment obligations.

[122] An example of a self-pitying soliloquy from this Bankrupt:

“A. It is not my understanding, based on my Family Law lawyer. It’s a motion to vary. So it’s – there’s no reason to appeal an entire order by Stevenson. A motion is varied which would deal with my current medical condition, updated right after trial, 2014 to 2016. There’s a bit of a gap. A lot of things could happenings, a lot of new findings. I've qualified for ODSP after being on social works for about a year, maybe a little longer. We had tried to do a motion to vary, which you struck down, which you argued in front of a judge that we need to proceed with this discharge hearing or a motion to discharge. I don’t even know anymore what’s going on. I just know that it was stalled, and the motion to vary obviously was never heard and it’s still pending before Family Court until this matter is resolved. So unfortunately, I can't – my hands are tied, have been tied for over five years now. I cannot do anything with Family Court nor deal with my medical condition, my income, Sandra having been working since 2014 full time. A lot of issues – full-time custody of my child, which she hasn’t paid support for. There’s so many issues outstanding in Family Court that are not being addressed because we cannot address them as per your request in front of the judge in Family Law because we have to deal with this bankruptcy court. And that’s, that’s where we are. So I don’t know what you're trying to say. If you're trying to say I'm faking my psychiatry reports, my medical conditions – you know what? Get a life, you know? Don’t be pathetic.

MR. KOSTYNIUK: Q. (indiscernible) a life?

...OVERTALKING

Q. Would you just please answer the question.

THE COURT: Excuse me.

A. You know?

THE COURT: There is not going to be insults in this court.

MR. KOSTYNIUK: (indiscernible)

THE COURT: (indiscernible) This is your discharge, Mr. Zivic.

A. I understand, Your Honour. I've been dealing with this psychological torment for ten years. I'm a ruined man, financially, medically. This guy just keeps pursuing because he’s working for free. I mean I'm – I don’t know how anybody would feel in my position, losing everything they’ve worked for and being under this scrutiny. And this guy’s, you know, it – I don’t know, I don’t know how one would feel. It’s, it’s a bit frustrating to say the least, Your Honour, and for him to accuse me of lying about medical conditions, that’s pathetic. I'm, I'm sorry, but that’s – he’s not a doctor. I'm not a doctor.

[123] The Bankrupt taunted Sandra at this hearing, advising that Kostyniuk would take any money that was ever recovered in these proceedings, stating:

“(October 6 – Page 88) MR. KOSTYNIUK: Q. So the only reason you didn’t appeal was ‘cause Legal Aid wouldn’t pay. Is that your evidence?

A. There are a lot of - I, I would have loved to appeal it and do things differently and call a lot of different witnesses. However, you know, I can't go backwards in time. I wish I had done a lot of things differently, listen to my lawyers, listen to my mum, and I wouldn't be in this mess.

Q. The only person in a mess, would you not agree, is Sandra. She hasn’t received five cents from the equalization or the costs or the – when’s the last time you paid child support?

A. I disagree. I said the only person in a mess is yourself, sir. You have a $300,000 legal bill with Sandra. You’ve worked for free for ten years, and you continue to start fishing for money. And that’s why we’re here. Sandra’s not going to get a penny of whatever you get here. You and her signed an agreement which is in the Family Court that whatever you get, every penny, does not go to my kids, does not go Sandra. It goes directly in your pockets. You....”

(And at October 6, page 95)

A. You want to get paid. You want to get paid. Let’s be honest.

Q. She needs to get paid because she has a judgment (indiscernible).

A. She’s not going to get a penny. We all know that.

Q. And you....

A. She owes you $300,000. You're not going to let her get out of that. She....

Q. Where did you ever get all this information from?

A. In Family Court. How much does my ex-wife owe you? Is it $300,000? Am I lying?

Q. No but you owe me. I reckon it’s 300 from you but this is just ridiculous that....

A. Okay, so she owes you $300,000.

Q. Please answer....

A. You work for free.”

[124] He also blamed Sandra and Kostyniuk for the Bankruptcy as a result of their winning the proceedings before Stevenson, J. and obtaining the Stevenson, J. Order:

“MR. KOSTYNIUK: Q. Now, I'm concerned, Mr. Zivic, about the passage of time from when you started the inquiries about bankruptcy, whether that was tactical as opposed to necessary, since when you started the inquiries it was 2013 apparently, at least a year before the actual trial, and two years before the actual application. So you didn’t – you hadn’t had any judgment against you at that point for a lump sum. It was only an interim order, correct?

A. (indiscernible) going through all the court transcripts I had mentioned that I was going to bankrupt to you from the onset of trial. I said if this continues and I keep bleeding and I can't continue an income by flipping, buying, and selling homes, that’s what – that was my primary income stream at the time – I said I'm going to have no choice. I'm bleeding dry. I'm going to have to bankrupt. I mentioned that to you continuously throughout...

Q. Oh, I didn’t believe it.

A. ...2011.

Q. And I don’t believe you now. I didn’t believe you, so....

A. Okay, you didn’t

A. ...2011.

Q. And I don’t believe you now. I didn’t believe you, so....

A. Okay, you didn’t believe I was going to bankrupt and here we are.”

[125] Interchanges in Kostyniuk’s cross examination of the Bankrupt were marked with rancor and personal attacks by the Bankrupt on Kostyniuk, raising spurious ethical issues about his representation of Sandra, as well as personal attacks on Sandra.

[126] The Bankrupt, when questioned under oath by Kostyniuk, myself and even Manis, was argumentative, evasive and combative, insisting on retelling his versions of facts where Stevenson, J. and Associate Justice Jean had already found the opposite.

[127] I was reminded by the Bankrupt’s testimony of the following quote from (now) Justice Mills in Re: Wolf Rubin, Bankrupt, 2018 ONSC 501 (“Re Wolf Rubin”) although in this case Manis also had his challenges in examination in chief and redirect with this Bankrupt:

“[6] The bankrupt provided his evidence in chief in a direct and forthright manner, answering all questions put to him in a thoughtful and compelling way. He appeared as a knowledgeable and intelligent businessman with extensive international import-export businesses in various sectors. He is now 66 years old, still employed and intends to work for as many more years as he is able to carry on.

[7] Then commenced the cross-examination and it was as though an entirely different person took occupation of the seat. The bankrupt, although unfailingly polite, became difficult, obstructionist, painfully literal and obfuscated on the most simple and direct inquiries. Even if one was to give allowance for the fact that English is not the bankrupt’s first language, the disparity in the manner of his evidence between examination in chief and cross-examination was too significant to be anything other than a deliberate and continued attempt to thwart the efforts of the Opposing Creditors to challenge the conduct and affairs of the bankrupt.

[8] When asked if he sat down to discuss with BDO the obligation to fully and truthfully complete the statement of affairs upon his assignment, the bankrupt’s response was that he did believe he was sitting in a chair at the time he met with BDO. When asked if certain statements were true, the bankrupt requested a definition of the word “truth” as though it was a concept unknown to him. The bankrupt claimed not to understand the meaning of simple words and phrases such as “frequent”, “for some time”, “bounced checks”, “financially overextended”, “authorized”, and “insolvent”. The bankrupt refused to accept simple propositions when put to him, frequently claiming not to understand the nature of the question.

[9] It quickly became apparent during the cross-examination, the bankrupt was simply refusing to answer any questions he felt might call into question the manner in which he conducted his business affairs prior to the assignment and his conduct throughout the administration of the estate. The bankrupt operated multimillion dollar international businesses and yet he claimed not to understand simple terms of commerce.

[10] Any credibility the bankrupt established in his examination in chief was thoroughly eviscerated by his conduct throughout the cross-examination. Any self-serving evidence respecting his conduct in dealing with his creditors, and in the handling of his personal and business affairs is simply not to be believed in the absence of corroborating evidence. In the circumstances, I would adopt the comments of Mr. Justice Steele in Mancini (Trustee of) v. Mancini[1] as equally applicable to this bankrupt:

“… His attitude and appearance in the witness box indicated that he had something to hide and was being very careful not to incriminate himself in any way. He did not impress me as being an honest debtor who should be relieved of his debts. The great majority of his answers to questions were evasive or forgetful and in fact not answers at all. …

I am convinced that the bankrupt has never cooperated with his Trustee, or fulfilled his general obligations under the Act, with a few minor exceptions. He is gone through a fiction of pretending to co-operate, but in fact has been evasive, forgetful or unwilling to answer.”

[128] Because there was no transcript produced for the hearing before Stevenson, J. on multiple occasions the Bankrupt attempted to recast his testimony from the hearing, without the ability for other parties to properly impeach his testimony.

[129] Even simple questions found the Bankrupt bobbing and weaving, such as this example of questions from me regarding the Bankrupt’s assertions on the topic of whether he had ever discussed filing a Consumer Proposal with Krieger from the Trustee, prior to assigning himself into Bankruptcy, made in correspondence by his counsel Manis, on his behalf:

“(Page 106-107 October 6- Examination by Kibel) Q. And – but in a previous correspondence with your lawyer I think you mentioned that a proposal was never ever discussed with you.

A. No, I don’t recall that conversation.

MR. KIBEL: Okay, so I just – this is where you can help me, help me on the other email from Mr. Zivic’s lawyer dated – when was this – 10th of May, I believe it was, 2021, where it stated that the client heartily(ph) disputes that it was ever discussed with him about a consumer proposal. So I just wondered what that email, that, that – there’s a little bit of contradiction where Mr. Zivic now claims that it was discussed with him.

THE COURT: Well is, is that lawyer Mr. Manis?

MR. KIBEL: Yes it is, Your Honour.

THE COURT: Okay. So I, I guess I'm going to have to depose you, Mr. Manis. Maybe you shouldn’t – and maybe I want to assess your credibility. I mean what’s the meaning of that distinction, Mr. Manis?

THE COURT: Oh, they’re still mute.

A. May I can I – if I could answer. I mean that...

THE COURT: Well...

A. ...what I....

THE COURT: This is - hang on. This is your lawyer’s statement, so.

MR. MANIS: Well presumably my information in my note was incorrect, but I think it’s safe to say that he couldn't have made a proposal because he had no income.

A. But that was my understanding with Mr. Krieger. It was never discussed because of my income. I had no assets and no income. I don’t know. Maybe I answered the question wrong but...

THE COURT: No, I just....

A. ...you know, I had no assets or income.

THE COURT: I believe Mr. Kibel’s distinction on this is was it ever discussed or was it discussed and turned down because he had no income.

A. Okay, okay.

THE COURT: Which is a distinction.

A. Okay, okay. So if I could clarify that, it was never discussed because it wasn’t deemed an option. I don’t know if that clarifies everything. It doesn’t....

THE COURT: Well like how do you know it wasn’t even an option if it was never discussed?

A. He asked for – well he asked for my income and my assets. So that wasn’t – if I had zero that wasn’t an option. That’s how, that’s how we talked. I mean that was the discussion we had in person.

THE COURT: So you had a discussion.

A. Well like, do you have any assets? No. Do you have any income or means of offering anything to anybody? I said no.

THE COURT: Well, so the trustee’s question is did you discuss doing a consumer proposal, not whether or not it was successful.

A. Based on my discussions and recollection with Mr. Krieger it was – that was not even an option because....

THE COURT: That’s still not an answer to the question. Did you...

A. Okay, so I will....

THE COURT: ...discuss a...

A. No.

THE COURT: ...consumer proposal...

A. It was not discussed in terms of hey, can you pay A, B, or C because I had nothing to give.

THE COURT: Again, did you discuss a consumer proposal?

A. No. That was never, never discussed. Or just....

MR. KIBEL: Q. If I recall, if we had to go back, which you indicated that Mr. Krieger said because of your income a consumer proposal is not an option. So we have to go back and look at that…”

[130] Another issue was the Bankrupt stating what his testimony and documentary production was in the hearing before Stevenson, J., getting caught out on the basis of Stevenson, J. stating was the Bankrupt’s testimony or documentary production actually was, then reversing himself immediately. As an example, the Trustee examining the Bankrupt regarding the valuation by Stevenson, J. of the shares of AMS transferred to Simic by the Bankrupt:

“(Page 114-115 October 6 – Examination by Kibel)

MR. KIBEL: Q. I know there was a lot of talk, Mr. Zivic, in the paperwork that there was a specialist that reviewed the value, but if I recall reading correctly, no financial statements were provided at the time that you actually assigned the shares over to your friend. So it’s difficult for us to know if there was or wasn’t a value other than that individual did an assumption as to – or estimate as to the value of the business. Did you not have any financial statements, seeing you were the controlling individual in that business at that point in time?

A. From what I recall, they questioned and received their information from the accountant.

Q. That was....

A. (indiscernible) up until the Family Court and up until my resignation. Yes. I did see some, so that’s why I'm able to...

Q. (indiscernible) this is...

...OVERTALKING

A. ...come by (indiscernible)....

Q. But we have no evidence of that. That was never provided on to us.

A. I was never asked. I don’t think I have any reference from Michael Krieger or yourself asking for financial statements up until 2014 or ‘13, my resignation. If you can provide that – I've, I've provided everything I was asked for, so I don’t think....

KIBEL: All right. I don’t imagine - Mr. Kostyniuk may have asked for those previous matters but....

A. Yeah, I'm, I'm pretty sure whatever he asked for was all provided in Family Court and to the experts.

Q. Okay.

A. They requested all that.

THE COURT: I think the findings of Madam Justice Stevenson learned that Mr. Kostyniuk (indiscernible) was forced to use the valuation because you didn’t.

A. What did I – what – I, I can't – I – there’s so much documents I submitted I don’t know – and I know he questioned the accountant. So I, I don’t know what was provided.”

[131] In fact, Stevenson, J. took an adverse inference on this very issue, stating:

“[148] Taking into consideration the absence of evidence from Mr. McCutcheon and Mr. Simic to corroborate Mr. Zivic's evidence that he is no longer working at AMS and that the shares have been transferred to Mr. Simic which leads me to draw an adverse inference, the failure by Mr. Zivic to produce the financial statements of AMS for 2013 despite their availability, added to the fact that I do not find that Mr. Zivic is incapacitated and unable to work in any manner, it is reasonable to impute an income to Mr. Zivic for the calendar years 2013 and 2014 in the same amount as 201 1 and 2012, being $60,000 gross per year.”

[132] The most unsavory aspect of the Bankrupt’s testimony was his propensity to blame others for his problems. This was particularly true of the professionals who had attempted to provide assistance to him.

[133] With respect to his lawyer at the family law proceedings before Stevenson, J., Evan Chang (“Chang”), in the context of questioning as to whether the Bankrupt had appealed the Stevenson, J. Endorsement that he was now relitigating before me, the Bankrupt in part blamed the outcome on his “legal aid lawyer” stating:

“(October 6, page 74-75 Cross-examination by Kostyniuk)

Q. Did you, did you apply for Legal Aid to (indiscernible)?

A. I was on Legal Aid, yeah.

Q. Well....

A. They would not cover it. I appealed it. They said they do not cover appeals. Legal Aid does not cover appeals. It’s too expensive.

Q. Who told you that?

A. Legal Aid.

Q. Mr. Chang or Legal Aid?

A. Legal Aid.

Q. Oh, so you did apply.

A. I was on Legal Aid if you recall.

Q. I, I know. And when we(ph) tried to find out how we were unable to find out how. In any event, you were represented by competent counsel who did (indiscernible). Is that correct?

A. Yes.

Q. And he was very competent. He did a great job. Did you not – do you not agree?

A. He did a fair job, I think, you know, other – you know, you could only pick certain lawyers when you're on -how would I put it – when you're on Legal Aid. You can't pick the – you can't pick your lawyer per se. It’s who wants to take your case on. Unfortunately, that’s the way it is with Legal Aid. Not many lawyers want to work with Legal Aid.”

[134] Given the number of parties who, are now are forced to be self-represented litigants in Family Law proceedings dealing with the custody of their children and property issues due to the inability to afford counsel and limited access to Legal Aid Certificates, counsel like Chang who are willing as their contribution to access to Justice to accept Legal Aid Certificates, in addition to having an extensive private for-profit practice, should be commended for doing a service to the administration of Justice in Ontario, not condemned for being “bargain lawyers” by entitled respondents like this Bankrupt.

[135] Given the evidentiary detail contained in the Stevenson, J. Endorsement, the requirement for Chang to often defend the indefensible as found by Stevenson, J., and witnessing Manis’ mighty attempts to keep the Bankrupt on evidentiary track for less than a full day of testimony before me, it appears to me that Chang had a 10 day hearing with a difficult self-sabotaging client, on difficult facts, and with weight of the apparent 37 prior Orders obtained in the Family Law proceeding bearing on him, and consequently I believe Chang earned every penny of the scarce taxpayer dollars that Legal Aid paid him to represent this Bankrupt, found by Stevenson, J. to be living for free on taxpayer-paid social assistance in his mother’s house a 2 minute walk from the 8th hole of St. George’s Golf and Country Club (which he admitted before me) with his former Lamborghini, that he gave to his mother, still slumbering quietly in the garage.

[136] When questioned by me about his former house flipping business, the Bankrupt sloughed off his failing to register for HST and periodic living in the renovated houses to avoid capital gains tax, as approved by his accountant Lascaris, stating:

“THE COURT: So in each case, if you, if you go back to – scroll up a little bit, Mr. Riley – we’re looking at G20, paragraph [93], the last sentence of the paragraph. [As Read]It depends how much of the income was not taxable because it was from the sale of a residential home. Mr. Zivic testified that the homes were only resided in briefly by the family so as to qualify as a principal residence and be exempt from capital gains.[End] So that was why you were doing that. You were moving in, you were buying it, you were renovating it, you were selling it to, to – and then because it’s a residential property and a principal residence, you, you were exempt from a capital gains exemption. Is that correct?

VUKOSAV ZIVIC: Correct. And I was using the proceeds for the next house and for a living as well. Like a lot of that money was living expenses as well.

THE COURT: Well and, and as a fact, Madam Justice Stevenson said that this was, you know, your business effectively.

VUKOSAV ZIVIC: I guess you could consider house flipping a business even though it’s a principal residence. I mean....

THE COURT: So let’s – let me ask you a question. Were you ever an HST registrant?

VUKOSAV ZIVIC: Personally? No.

THE COURT: Did you ever remit HST on any of those transactions?

VUKOSAV ZIVIC: There was never considered income based on, you know, a principal home. So I, I didn’t think that was necessary. I did talk to the accountant at the time, so that wasn’t, you know, ever brought up. As long as you lived in the house for a year my understanding is you’re okay.

THE COURT: Okay. So, but the answer’s no.

VUKOSAV ZIVIC: No, I never – I don’t recall ever paying HST on – like as income on, on those proceeds.

THE COURT: Okay. Mr. Kibel, I think that there is no tax debt on this file that’s been declared on the Statement of Affairs.

MR. KIBEL: No, there is none, Your Honour.”

[137] For the sake of the Record, with the assistance of Kibel during the hearing, these “flipped” properties were identified as 1788 Drew Road (“Drew”) formerly owned by Mr. Zivic’s undisclosed corporation 1402395 Ontario Inc., and 62 Stewart Crescent Milton (“Milton”), 69 Rathburn Road, Etobicoke (“Rathburn”) and Bradbrook owned together with Sandra (collectively the “Flipped Properties”).

[138] I note from the Stevenson, J. Endorsement, it appears that Lascaris in his testimony provided less-than-wholehearted support for the Bankrupt’s aggressive tax planning and deductions of personal expenses, and warned him of a possible CRA audit, which appears to have occurred at least once:

“[108] On cross-examination, Mr. Laskaris stated that he was concerned about the large figures for sponsorships and trade shows and that he advised Mr. Zivic these large figures would be a "red flag" for the CRA. Mr. Zivic should expect an audit and be prepared to back up the figures. His concern was that there was a GST receivable claimed of approximately $5,000 to $6,000 a year and the CRA does not easily allow these credits. He stated that there was subsequently an audit (no date was given) and Mr. Zivic was required to provide copies of his invoices, his lease agreement and back up documents figures.”

[139] With respect to the failure to provide an updated address for Sandra, that became the fault of Krieger, and other persons he dealt with at the Trustee’s office. He also suggested that the failures to provide information to the disposition of the Lamborghini, the shares in AMS, other payments to his mother and the failure to advise of the disposition of the proceeds of the personal injury settlement, that he advised Stevenson, J. that he had turned into cash and hid to avoid sharing them with his creditors, were also the Trustee’s fault, stating:

(October 6 -page 92) MR. KOSTYNIUK:

Q. No, do you agree that he would have (indiscernible)?

A. No. Absolutely not. That was, that was treated in the equalization payments. I don’t know why you're trying to keep adding these figures onto something that Stevenson already calculated in the equalization payment which,...

Q. Well....

A. ...which BDO, which BDO – let me finish – which BDO did have a final copy of Stevenson’s decision and the bankruptcy was filed. So I mean what BDO does and what Michael did with the application I have no idea. I disclosed everything, and how they filled out the paperwork – I came in there, I did my due diligence by signing the papers, attending all their meetings in person to give my T4s to discuss my bank accounts and everything. So I did everything that was asked of me. Now how they proceeded with the paperwork, I cannot attest to that. I also find it very strange, now that I have to add it, how BDO has lost my file. I find that very intriguing but BDO, and I have that in email from Suzanne Wordworth(ph), in an email where she said we cannot locate your file with BDO. I mean how does BDO lose somebody’s file?”

[140] Some variation of “I told Michael/Krieger” or “I told BDO” was used as an answer by this Bankrupt to questions asked by Myself, Manis, Kostyniuk and Kibel at least, by my count, thirty times, notwithstanding that in the majority of those cases that evidence contradicted the sworn Statement of Affairs or other documents relating to the bankruptcy application process made exhibits to this hearing.

[141] Krieger was not called as a witness by the Bankrupt to corroborate this all-purpose answer. Krieger is easily locatable as he now has his own Trustee firm, Krieger & Company, with offices in Markham, Downsview, Vaughan and North York.

[142] I have had Krieger appear before me on other matters, and found him to be a competent and careful LIT. The use by the Bankrupt of Krieger as an all purpose excuse and punching bag, without an opportunity for Krieger to provide evidence to refute and explain the Bankrupt’s allegations of carelessness on the part of the Trustee, in conversations only Krieger was allegedly a part of with the Bankrupt, is unacceptable. This Court will not tolerate the drive-by reputational smearing of the Court’s Officer.

[143] The Bankrupt’s failure to call Krieger as a witness leads me to draw an adverse inference that Krieger’s evidence would not have corroborated the Bankrupt’s testimony in relation crucial issues on this hearing, based on the oppositions filed by the Trustee and Sandra regarding the omissions allegedly made by the Bankrupt in the Bankruptcy materials, like the Sandra address, the Lamborghini, the $200,000 Rathburn proceeds payment to Dusanka, and the $25,647 personal injury settlement that Stevenson J. stated that the Bankrupt testified that he converted to cash because he did not want his creditors to receive any of these funds.

[144] On these issues the jurisprudence requires that I provide deference to the findings of the Trustee in a s.170 Report and I do so. In the words of Justice Mills I find that, from the review of the demeanor and forthrightness of this Bankrupt before me that:

“…Any credibility the bankrupt established in his examination in chief was thoroughly eviscerated by his conduct throughout the cross-examination. Any self-serving evidence respecting his conduct in dealing with his creditors, and in the handling of his personal and business affairs is simply not to be believed in the absence of corroborating evidence.

And Justice Steele in Re Mancini, [1987] O.J. No. 327 at p. 9 quoted by (now) Justice Mills in Re Wolf Rubin:

“… His attitude and appearance in the witness box indicated that he had something to hide and was being very careful not to incriminate himself in any way. He did not impress me as being an honest debtor who should be relieved of his debts. The great majority of his answers to questions were evasive or forgetful and in fact not answers at all.”

[145] Even Mr. Manis, a highly skilled Barrister with three decades of experience, could not alchemistically spin legal gold out of the leaden evidence pouring from the Bankrupt’s mouth at this hearing, as set out here, and throughout this endorsement.

[146] None of this extraordinarily chippy sworn testimony by the Bankrupt before me was indicative of a rehabilitated Bankrupt, quite the opposite. From the Bankrupt’s demeanor before me, and the nature of his testimony, of which I have provided readers with only a tiny taste, I find the Bankrupt to be utterly incapable of accepting his own personal responsibility for the situation that he finds himself in, blaming everyone other than himself, and having found significant credibility issues with the Bankrupt’s testimony, cannot accept his testimony on any issue where there is no corroboration.

[147] The utter impudence of the Bankrupt in:

1. testifying multiple times before Stevenson, J. about his impending bankruptcy and waving his bankruptcy paperwork at the Court, essentially advising Stevenson, J. as to the futility of any order that she would grant in favor of Sandra, then

2. repeating those taunts to Sandra and Kostyniuk before me at the Discharge Hearing determining whether he was a rehabilitated Bankrupt, while

3. admitting to owing significant debts to creditors other than Sandra,

4. those debts being admittedly “maxed out” while claiming to be impecunious for the purposes of paying child and spousal support, and property equalization, after

5. making significant related party transfers of money and property to his mother, which can, at best, if the Bankrupt’s evidence could be believed, be characterized as a repayment of improperly documented unsecured loans to a related party, making himself impecunious,

6. while using taxpayer resources in an admitted attempt to secure a payment in the Family Law proceeding, then

7. going bankrupt when that attempt failed in order to evade the judgment of Stevenson, J. against him, as well as the $65,000 adverse costs award made against him, then

8. boasting about it before me,

is behavior that the Bankruptcy Court cannot countenance.

Sandra’s Testimony

[148] Sandra was not a good witness, sharing some characteristics of her ex-husband. She too was argumentative, evasive and combative, prone to talking over Kostyniuk, Manis and Myself, and prone to speculative testimony.

[149] Clearly she and the Bankrupt detest each other, and each blames the other for their woes. Each made allegations of abuse against the other.

[150] In one long stretch of cross-examination by Manis, he was able to successfully show that Sandra’s assertion that the Bankrupt must be working, and earning undeclared income, was entirely based on a multi-part speculative deduction that because the Bankrupt allegedly had a girlfriend, and the alleged girlfriend would only exist if allegedly the Bankrupt had money, so he must therefore be working to have an alleged girlfriend. That circularly-speculative testimony is entitled to no weight.

[151] In similarly interminable stretch, due to Sandra evading, arguing and talking over Manis, Kostyniuk and Myself, Manis was successful in proving that Sandra’s awareness of the alleged working by the Bankrupt came from friends of Sandra telling her that they saw the Bankrupt out driving around, so therefore again, Sandra deduced he must be working. Multiple level hearsay testimony like that is of no value.

[152] Manis also obtained a significant admission under oath from Sandra that she learned of the Bankruptcy in 2015 not 2017, as she had apparently sworn in her materials before Associate Justice Jean at the Annulment Motion. Kostyniuk attempted to rehabilitate that testimony, but the evidentiary damage was done.

[153] Based on that testimony Manis argued that the finding of Associate Justice Jean that the Bankrupt had deliberately failed to provide the proper address for Sandra did not result in the failure by Sandra to file a proof of claim and oppose the discharge. But as I specifically enumerated above, the Annulment Order was granted and not appealed, and Associate Justice Jean found in the Annulment Endorsement, many, many, many other reasons to annul the Bankrupt’s discharge, in addition to the address issue that Manis had successfully obtained evidence to muddy.

[154] Sandra was a poor witness with some credibility issues, but not to the degree that I have found with respect to the Bankrupt.

LAW AND ANALYSIS

Preliminary Legal issue- Are the factual findings of Stevenson, J. in the Stevenson, J. Endorsement and Associate Justice Jean in the Annulment Endorsement subject to Res Judicata or Issue Estoppel.

[155] As noted none of the Stevenson, J. Endorsement and Stevenson J. Order, Annulment Endorsement and Annulment Order were appealed. In order to be fair to the Bankrupt and to Sandra, I asked the parties to provide further submissions on the issue of how I should deal with the large number of facts that have been previously found by Stevenson, J. and Associate Justice Jean with respect to the matters at issue in this discharge hearing, and how further testimony on these issues was not a collateral attack on the findings by Stevenson, J. and Associate Justice Jean.

[156] In the Bankrupt’s Factum, the Bankrupt states:

“20. As clarified by the Supreme Court in Angle v. Canada (Minister of National Revenue -M.N.R.) the doctrine of Res Judicata can be distinguished between "cause of action estoppel" where another action is brought for the same subject of previous adjudication, and "issue estoppel" where the cause of action is different but some point or issue of fact has already been decided.

Reference: Angle v. M.N.R., [1975] 2 SCR 248

21. The Bankrupt is not automatically estopped from re-litigating a finding of fact made in a past proceeding. Rather, a moving party must demonstrate that the other party’s pleadings are issue-estopped. Should the Creditor wish to rely on Res Judicata, they will have to establish the following three pre-conditions:

a) that the same question has been decided;

b) that the judicial decision which is said to create the estoppel was final; and

c) the parties are the same.

Reference: Angle v. M.N.R., [1975] 2 SCR 248

22. Even if the Creditor demonstrates that the three pre-conditions to issue estoppel are met, the Court must determine whether applying issue estoppel may give rise to an injustice. A Judge must be open to considering an open-ended list of considerations going to whether a potential injustice may occur. Some specific considerations are set out in Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc. and Danyluk Ainsworth Technologies Inc. which include:

a) the nature and expertise of the specific decision maker,

b) the parties,

c) the decision-making process,

d) the wording and purpose of the statute and statutory scheme and the underlying legislative objectives,

e) availability of an appeal,

f) safeguards available to the parties in the administrative procedure,

g) circumstances giving rise to the prior administrative proceedings, including whether the party was vulnerable at the time of the proceeding.

Reference: Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc., 2011 ONSC 5445,at paras 63-64

Reference: Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 SCR 460 at paras 64-81

23. Associate Justice Ilchenko has highlighted that the Creditor may choose to rely on the Annulment Order and the Family Law Decision (collectively the “Prior Decisions”) to argue that the Bankrupt is issue-estopped from re-litigating the disposition of the Disputed Assets.

24. If the Creditor is able to establish the pre-conditions for issue estoppel regarding the disposition of the Disputed Assets, the Bankrupt submits that it would be an injustice to apply issue-estoppel in this case.

25. First of all, the nature of family law proceedings and bankruptcy proceedings are different. In including the Lamborghini and the Rathburn Proceeds in the Bankrupt’s assets for purposes of calculating equalization owed by the Bankrupt to the Creditor, the Prior Decisions relied on common law tests and the presumption of advancement that were to be applied in the context of matrimonial property disputes. These legal principles gave rise to a presumption that when a parent advances money to a child, those amounts are gifts. The onus was therefore on the Bankrupt to demonstrate that the advancements from Dusanka were in fact loans and not gifts.

Reference: Zivic v. Zivic, 2014 ONSC 7262, at paras 221-234.

Reference: Mildren v. Mildren, 2013 ONSC 1435 at para 61.

26. In contrast, within the bankruptcy and insolvency context, the transfers of the Disputed Assets are governed by the Bankruptcy and Insolvency Act (the “BIA”), the Assignments and Preferences Act (the “APA”) and the Fraudulent Conveyances Act (the “FCA”). Under these statutes, due to the length of time between the transfers and the Bankrupt’s assignment in bankruptcy, it is possible that the Creditor would have the onus of establishing that the transfer of the Disputed Assets was fraudulent or that it was an unjust preference in favor of a particular creditor (namely Dusanka).

Reference: Assignments and Preferences Act, R.S.O. 1990, c. A.33, s. 4.

Reference: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 s. 95.

Reference: Fraudulent Conveyances Act, R.S.O. 1990, c. F.29 ss. 2 and 3.

27. It would therefore be improper and unfair to waive the requirement that the Creditor demonstrate the Disputed Assets should belong to the Bankrupt and/or that the transfers of the Disputed Assets are fraudulent or an unjust preference of a creditor.

28. Moreover, in including the AMS Shares in the Bankrupt’s assets, the Prior Decisions relied on the negative inference that neither the Bankrupt’s business partner, Mr. McCutcheon (“Mr. McCutcheon”) nor Simic testified. However, Mr. McCutcheon did not testify because he was residing in British Colombia at the time. and was unwilling to incur the expense to travel to Toronto to testify. As to Mr. Simic, he was not called as a witness in that proceeding.

Reference: Zivic v. Zivic, 2014 ONSC 7262, at para 144.

29. Moreover, the Bankrupt was suffering from depression and anxiety during the family law proceedings. Given the already difficult and traumatic nature of family law proceedings and the Bankrupt’s poor mental health at the time, the Bankrupt was in a vulnerable position. As a result of this vulnerable position, the Bankrupt was unable to adduce full and complete responses and evidence regarding the disposition of the Disputed Assets leading to negative inferences and conclusions against him.

Reference: Zivic v. Zivic, 2014 ONSC 7262, at paras 221-234.

30. Finally, the Creditor has not properly raised issue-estoppel in her Notice of Opposition nor made submissions to that effect.

31. When taking all of the aforementioned factors into consideration, the Bankrupt submits that it would create an injustice to bind him to the findings made in the Prior Decisions.”

[157] Later in the Factum, in the context of the proving of. 173 Facts the Bankrupt argues:

“33. It is well settled law that the discharge application is not the proper forum for the Court to determine whether the bankrupt has been involved in fraudulent preferences or fraudulent conveyances. Such types of findings should only be made after a full trial where the Bankrupt may have the opportunity to present a full defence to the claims.”

[158] That is in response to the statements made in the Factum of the Trustee regarding the use of Bankruptcy reviewable transaction remedies to recover the “Disputed Assets”.

[159] Houlden & Morawetz “Bankruptcy and Insolvency Law of Canada”, 4th Edition- The Bankruptcy and Insolvency Act) (“Houlden & Morawetz”) states the following at § 7:75 with respect to the nature of discharge hearings.

“The hearing of the application is summary in nature: Re Markel (1986), 63 C.B.R. (N.S.) 3 (B.C. C.A.); Re King (1993), 19 C.B.R. (3d) 107, 1993 CarswellBC 547 (B.C. S.C.). The purpose of the hearing is to determine whether the bankrupt should be discharged and, if so, whether the discharge should be suspended or a conditional order should be made.

On the hearing of the application, the court will restrict itself to the facts bearing on the application for discharge; thus, it will not determine the rights and obligations arising out of a sale or real estate prior to bankruptcy by the bankrupt to the creditor opposing the discharge; Re Riley (1989), 76 C.B.R. (N.S.) 298 (Ont. S.C.); nor will it determine whether the claim of a creditor is released by the discharge: Re Kierdorf (1990), 80 C.B.R. (N.S.) 6, 1990 CarswellOnt 185 (Ont. S.C.).”

[160] I am not determining the claims by the Trustee or Sandra, if any, to set aside any transactions relating to the “Disputed Assets” at this hearing, and whether those transactions can or should be set aside.

[161] What I am however determining is whether, on the evidence before the Court, s.173 facts have been proven, and specifically whether facts have been proven for the purposes of s.173(1)(a),(d) and (o), and specifically whether the fact that assets of the Bankrupt are less than 50 cents on the dollar of his unsecured liabilities arose from circumstances for which the Bankrupt was responsible, whether the Bankrupt has satisfactorily accounted for the loss or deficiency of assets to meet the Bankrupt’s liabilities and whether the Bankrupt has fulfilled his duties under the BIA.

[162] Before going to the specifics of the Bankrupt’s argument, as discharge proceedings are summary in nature and not to be used to determine fraudulent conveyance issues, the Bankrupt’s argument above works against him.

[163] If the suggestion is that at a Bankruptcy Discharge hearing the Bankrupt is free to re-litigate prior Judicially determined, un-appealed issues, that would cause chaos in the Bankruptcy system, and cannot be correct, as the BIA is organized as a business-person’s statute, where Trustees administering the estate have been given broad powers to determine claims on a summary basis, without the involvement of the Courts, and should be able to accept at face value un-appealed Orders and findings of the Civil Courts without having to relitigate those issues in each case.

[164] In this case specifically, the entirety of the Sandra Proof of Claim is determined by the Orders made by Stevenson, J. As noted in the Stevenson, J. Endorsement, the Bankrupt specifically advised her, on multiple occasions during the hearing, that he would be going bankrupt. Clearly, he was anticipating going bankrupt to deal with Sandra’s claim against him granted in the Stevenson, J. Order and Stevenson, J. Costs Order. The orders made in the Family Law Proceeding were the reason that the Bankrupt made the assignment into Bankruptcy. He admitted that before me.

[165] I am supported in this in reviewing the Re Bobyk and Re Richardson cases, that I cite more completely below, where the Bankruptcy discharge Court has specifically accepted the factual findings of the Family Court in making determinations of whether s.173 Facts have been proven, including relating to factual determinations made in those contexts dealing with the dispositions of the Bankrupt’s assets with family members, and in determining the proper conditions of discharge.

[166] In addition, many of the statements made in the Stevenson, J. Endorsement are not specific findings of fact, but rather recitations by Stevenson, J. of the Bankrupt’s own testimony to her. Since there is no transcript of that hearing before me, and apparently a transcript may not exist, the ONLY evidence I have before me of what the Bankrupt SAID under oath, rather than what findings of fact that Stevenson MADE, is the Stevenson, J. Endorsement, and given the Bankrupt’s propensity to recast his testimony before Stevenson, J., until caught, it is one of the only tools available to me to assess the Bankrupt’s credibility before me, based on his prior testimony.

[167] No law or argument was placed before me that the summary of the Bankrupt’s testimony in the Stevenson, J. Endorsement is not available to me.

[168] With respect to the Bankrupt’s specific arguments, as I have related in painful detail above, the fact that the payment of the $200,000 of the Rathburn proceeds to Dusanka to repay an alleged loan, the transfer of the $95,000 Lamborghini registered in the Bankrupt’s name to Dusanka to repay an alleged loan, and the transfer of the AMS shares to Simic in exchange for the alleged assumption of the Bankrupt’s liabilities relating to AMS, are not denied by the Bankrupt. He testified to each of these things before me, but denying that the Lamborghini was his property, but rather his mother’s.

[169] What I understand the argument to be by the Bankrupt, is that the determination by Stevenson, J. that these assets were the property of the Bankrupt on the V-Date, and thus included in the calculation of the equalization payment, should not be determinative for the purpose of discharge that this was the property of the Bankrupt with respect to making declarations for the purposes of his duties, as well as with respect to the recoverable assets of the estate.

[170] However, other than the Bankrupt’s oral testimony, no documentary or other evidence whatsoever was provided at this hearing of the Bankrupt’s discharge that would refute the findings of Stevenson, J. on these issues, where Dusanka and Simic had testified, and Dusanka had filed her loan documentation, despite which Stevenson, J. found, applying family law principles of advancement, that the loans were not loans. Dusanka and Simic did not testify at this hearing and that documentation was not entered into evidence. The Share Transfer Agreement was entered into evidence, but as noted above, raised a host of other issues that the Bankrupt could not explain.

[171] However, as it appears that as the Bankruptcy promised by the Bankrupt occurred, for the purpose of dealing with the orders made by Stevenson, J. against the Bankrupt, the Sandra Proof of Claim is based on the Orders made by Stevenson, J. and admitted by the Trustee, and the opposition of both the Trustee and Sandra proceed in part, not on the basis that these transfers of the “Disputed Assets” were reviewable transactions, but that the Bankrupt has failed to provide as satisfactory accounting for the loss or deficiency of assets to meet the Bankrupt’s liabilities, I cannot see how the Bankrupt’s argument that I cannot look to the factual findings of Stevenson, J. pertinent to these issues in determining the s.173 Facts can succeed, particularly in the situation where I have an obligation to be deferential to the Orders made by a Superior Court Justice.

[172] I find that, on the totality of the evidence before me, and employing my discretion as Registrar that, for the purposes of determining the s.173 Facts at this hearing, namely whether the Bankrupt has satisfactory accounted for the loss or deficiency of assets to meet the Bankrupt’s liabilities, or met his duties under the BIA, that the question of the ownership of the “Disputed Assets”, being the Rathburn funds, the Lamborghini, and the AMS shares has been decided by Stevenson J. and has not been refuted by the Bankrupt in any way in evidence presented before me, that the decision of Stevenson, J. on this issue was final and was not appealed, and the Sandra Proof of Claim is based on this decision, and the parties are the same for the purposes of the Angle test cited by the Bankrupt.

[173] In addition, I find for the reasons set out throughout this endorsement that the Bankrupt confirmed in sworn testimony before me that it was his money that he used to repay a loan to his mother from the Rathburn proceeds, who then readvanced $95,000 from those monies to the Bankrupt to purchase the Lamborghini, which had been registered in his name, and that he gave the Lamborghini to his mother to allegedly repay that advance, and the he did transfer the AMS shares to Simic for no monetary consideration paid.

[174] With respect to the test cited by the Bankrupt in MTCC 1352 v Newport Beach Development Inc. and Danyluk v. Ainsworth, after reviewing the totality of the evidence before me, and employing my discretion, I do not find that an injustice would occur by my accepting the factual findings of Stevenson, J. and Associate Justice Jean.

[175] As exhaustively stated, Stevenson, J. after a 10 day hearing, after hearing numerous witnesses, and after reviewing documentary evidence that was not presented to me, with acknowledged expertise in the Family Law area, made findings of fact within the jurisdiction of the Family Law court, based on the detailed legislative and jurisprudential matrix in Family law proceedings.

[176] The Bankrupt was represented by Chang at all of these hearings, and did not appeal the findings or Orders of Stevenson, J. The Bankrupt now raises in his factum his alleged psychological vulnerability, but medical evidence that was before Stevenson, J. on the Bankrupt’s condition was rejected for the purposes of his employability. No medical evidence whatsoever was presented to me on this issue.

[177] Accordingly, I find that I can rely on the findings of Stevenson J. on these issues related to the proving of s.173 Facts at this discharge hearing. However, as I specifically cite below, the Bankrupt, through his own testimony before me, provided abundant evidence to corroborate many of these factual findings, and to allow me to separately make my own factual determinations.

Law related to determination of discharge of the Bankrupt

[178] Both Sandra and the Trustee are asking that the discharge of the Bankrupt be refused.

[179] The general principals related to discharge were summarized by Hallett, J. in Re Crowley 1984 Carswell, NS 25, a summary which has been cited with approval or followed 67 times in other jurisprudence, including by many Judges and Registrars in Bankruptcy of the Ontario Superior Court of Justice:

“1 What are the principles that the court should apply in considering an application for discharge by a bankrupt? There are very few Supreme Court of Canada decisions on the subject and the sections of the Bankruptcy Act, R.S.C. 1970, c. B-3, provide little guidance as to how the judge who hears an application for a discharge is to exercise his discretion. The only clear guideline is that if one of the facts mentioned in s. 143 is proven, then the court cannot grant an absolute discharge. Where the difficulty comes in is under what circumstances should a bankrupt who does not qualify for an absolute discharge be ordered to pay money to the trustee or consent to a judgment as a condition of his discharge or merely have the inconvenience of having his discharge suspended for a period of months. There seem to be two basic and conflicting themes that run through the decisions of the courts on this subject. On the one hand, the courts emphasize the purpose of the Bankruptcy Act is not only to provide for an orderly scheme of distribution of the assets of a bankrupt amongst his creditors but to allow a bankrupt to get on with his life unfettered by the burden of debt which he had incurred. Typical of such statements is that contained in Indust. Accept. Corp. v. Lalonde, [1952] 2 S.C.R. 109, where Estey J., in a unanimous decision of the court, stated at pp. 356-57:

The purpose and object of the Bankruptcy Act is to equitably distribute the assets of the debtor and to permit of his rehabilitation as a citizen, unfettered by past debts. The discharge, however, is not a matter of right and the provisions of ss. 142 and 143 plainly indicate that in certain cases the debtor should suffer a period of probation. The penalty involved in the absolute refusal of discharge ought to be imposed only in cases where the conduct of the debtor has been particularly reprehensible, or in what have been described as extreme cases. The conduct of the debtor in this case, while not sufficient, with great respect, to justify the absolute refusal, does justify his discharge only subject to the imposition of terms.

It is to be noted that in the Lalonde case the Supreme Court of Canada allowed an appeal and imposed a condition on the bankrupt that he consent to judgment in the amount of $5,000 as the cost of obtaining his discharge.

2 While one of the principal purposes and objects of the Bankruptcy Act is to permit the rehabilitation of a debtor as a citizen, unfettered by his past debts, there are many cases in which a bankrupt in modest circumstances and with dependents is ordered to consent to a judgment in a percentage of his indebtedness. Typical of this class of cases is Kozack v. Richter, [1974] S.C.R. 832. The [C.B.R. (N.S.)] headnote adequately summarizes the fact of that case as follows:

The appellant suffered injuries in a motor vehicle accident which was caused by the wilful and wanton misconduct of the bankrupt. After the appellant recovered judgment for $12,909.03 plus costs of $1,194, the respondent filed an assignment in bankruptcy. The bankrupt was a wage-earner with a large family in modest circumstances. The Judge of the Court of Queen's Bench hearing the application for discharge of the bankrupt suspended the discharge for three months. The Court of Appeal for Saskatchewan varied the order and required the bankrupt to consent to judgment for $1,800 without interest payable at the rate of $50 per month.

Held (ABBOTT J. dissenting), the bankrupt was required to consent to judgment in the amount of $7,200 plus the costs of the hearing in the Supreme Court of Canada as a condition of his discharge. This amount was payable at the rate of $50 per month. The application of the provisions of the Bankruptcy Act should result in a plaintiff receiving recovery for personal injuries caused by the gross negligence of the bankrupt. The Bankruptcy Act was not intended to enable a judgment debtor to get rid of a judgment for damages. Abbott J. would have dismissed the appeal on the ground that the judicial discretion exercised by the Court below was reasonable and should not be interfered with by a second appellate Court. He also found that no distinction exists under the Bankruptcy Act between a bankruptcy arising out of trade debts and one arising out of the commission of a tort.

3 Pigeon J., writing for the majority of the court (there was one dissent), stated at p. 225:

In the present case, respondent's bankruptcy was precipitated by his condemnation to pay damages to the appellant. This being due to a finding of "wilful and wanton misconduct" on his part, certainly his financial predicament cannot be said to have arisen "from circumstances for which he cannot justly be held responsible". The Courts below did not ignore this provision. However, the sanction meted out in the first instance was purely nominal. In the Court of Appeal, respondent was in effect ordered to make payments that would hardly cover more than appellant's costs in the trial Court and in the Court of Appeal. Although respondent is a wage-earner with a large family in very modest circumstances, I cannot agree that the proper application of the provisions above quoted should result in a plaintiff making no recovery for personal injuries caused by gross negligence. It would mean that motorists in respondent's situation would be able to tell such a claimant: "There is no use suing me, if you lose you will have to pay the costs, if you win I will make an assignment in bankruptcy and you will get nothing."

4 The dilemma facing a judge in considering an application for discharge is reflected in the following two quotations from Bankruptcy Law of Canada (1984), vol. 1, by Houlden and Morawetz, at pp. H-18 and H-19, para. H10:

It is incumbent upon the court to guard against laxity in granting discharges so as not to offend against commercial morality. It is nevertheless the duty of the court to administer the Bankruptcy Act in such a way as to assist honest debtors who have been unfortunate: Re Beerman and Sands(1925), 5 C.B.R. 781 (Ont. S.C.)...

The purpose of the Bankruptcy Act is to enable someone who has had financial misfortune or a series of misfortunes to be purged or relieved of the consequences and to obtain a new start financially. It is not to be considered as a process which can be resorted to on a regular basis with a view to washing out one's debts: Re Lebel(1979), 31 C.B.R. (N.S.) 320 (Ont. S.C.).

5 Despite the inherent difficulty created by these two conflicting themes, the case law does provide some firm footing to assist a judge in the exercise of his discretion when determining how to apply the provisions of s. 142 of the Bankruptcy Act in any particular case. The following are some principles, procedures and evidentiary considerations that a judge might follow on a discharge application in determining whether or not to impose conditions of payment as a cost of the discharge. I take the view that a mere suspension in any case is pointless although authorized. Therefore, in most cases the court will be choosing between granting an absolute discharge or imposing a condition that requires some payment by the bankrupt.

6 First, each case must be decided on its own facts. That statement has been made in countless cases. Re Gigault(1981), 37 C.B.R. (N.S.) 119 (Ont. C.A.), is but one. That is a simplistic statement but nevertheless very true, as is evident from a reading of the cases. This is so because s. 142 of the Bankruptcy Act provides no guidance for the exercise of the judge's discretion except that he must refuse an absolute discharge if a s. 143 fact is proven against the bankrupt. The court must look carefully at the causes of the bankruptcy.

7 Second, in considering the application for discharge, the court must have regard to not only the interests of the bankrupt and his creditors but also to the interest of the public: Re Sceptre Hardware Co., 3 C.B.R. 734. This concept was well stated by Wetmore L.J.S.C., in Re Abbott; Abbott v. Royal Bank of Can.(1983), 50 C.B.R. (N.S.) 182, where he said [p. 184], "The court must always balance the public interest in commercial morality with its interest in the re-establishment of the debtor".

8 Third, if, as is usually the case, the assets of the bankrupt are not of a value equal to 50 cents in the dollar of the bankrupt's unsecured liabilities, the onus of proving that this fact arose from circumstances for which the bankrupt cannot justly be held responsible is on the bankrupt: Re Lougheed, 54 B.C.R. 428.

9 Fourth, the court is not bound by the trustee's report but it is prima facie evidence with respect to the facts contained therein: Re Hoerner, Williamson & Co.(1925), 5 C.B.R. 613 (C.S. Que.). The trustee's report should be carefully considered by the court. The trustee should be in attendance at the discharge hearing so that he can be called by either the bankrupt or a party opposed to the application to explain the basis for his conclusions, be they favourable or unfavourable to the bankrupt. Pursuant to s. 140(5) of the Act the statements in his report to the court are prima facie evidence but often no reasons are given for the opinions expressed. For example, in the case before me the trustee's report simply says the causes of the bankruptcy were "misfortune" and that the conduct of the debtor was not subject to censure. While the trustee was present in court, he was not called. It might have been helpful had he been cross-examined as to the "misfortune" he perceived so that the court could assess the reliability of his opinion.

10 Unless contradicted by the evidence, the court must accept the statements in the trustee's report: Re Barrick(1980), 36 C.B.R. (N.S.) 286 (B.C.C.A.). The onus is on the party opposing the application for discharge to adduce sufficient evidence to justify the court disregarding a trustee's report that is favourable to the bankrupt. By producing a favourable report the bankrupt has met the initial burden of proving that the fact that the assets are not equal to 50 cents in the dollar of his unsecured liabilities arose from circumstances for which he cannot justly be held responsible. It is then up to the creditor opposing to bring before the court evidence upon which the court could come to a contrary conclusion: Dawson Auto Parts Ltd. v. Dorais, [1944] R.L. 405.

11 Fifth, if the application for discharge is opposed, the bankrupt should be available for cross-examination: Re Hood(1975), 21 C.B.R. (N.S.) 128 (Ont.).

12 Sixth, an order for discharge should only be outrightly refused if the debtor's conduct has been "particularly reprehensible, or in ... extreme cases". What is meant by this statement in Indust. Accept. Corp. v. Lalonde [at p. 200] is that only rarely will there be an outright refusal of a discharge but rather the court will consider one of the other alternatives of suspension or attaching conditions to the discharge where an absolute discharge cannot be granted because a s. 143 fact has been proven unless the debtor's conduct has been particularly reprehensible or in extreme cases.

13 Seventh, in considering if an order should be made that involves the payment of money by the bankrupt as a condition of his discharge, the court must bear in mind that he is entitled to have available for the maintenance of himself and his family a reasonable amount out of his after-acquired income: Clarkson v. Tod, [1934] S.C.R. 230; Re Bayliss and Doerksen(1982), 40 C.B.R. (N.S.) 16 (Ont. H.C.). Accordingly, it is generally necessary for the court to have before it evidence of the bankrupt's income and living expenses so the court's discretion can be rationally exercised.

14 Eighth, the court does not view with favour assignments made to avoid paying a large claim of a single judgment creditor where judgment was obtained as a result of the discreditable conduct of the debtor. Under such circumstances, the courts have generally imposed a condition that the bankrupt consent to judgment in a partial amount of the claim: Kozack v.