SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 33-1926106 DATE: 2022-Oct-25
RE: IN THE MATTER OF THE CONSUMER PROPOSAL OF SHAREEF ZAHRAWI
BEFORE: ASSOCIATE JUSTICE KAUFMAN
COUNSEL: Pascal Gagnon, for the Administrator, Ginsberg, Gingras and Associates Laura Daly, for EOS Canada Inc., a creditor.
HEARD: 14-Oct-2022
E N D O R S E M E N T
[1] Ginsberg, Gingras and Associates (the Administrator) brings this motion to revive Mr. Shareef Zahrawi’s consumer proposal.
Background
[2] Mr. Zahrawi made a consumer proposal on October 14, 2014, which was deemed accepted by his creditors on December 13, 2014, and deemed approved by the court on December 28, 2014 pursuant to s. 66.22(2) of the Bankruptcy and Insolvency Act[^1] (“BIA”). Under the proposal, Mr. Zahrawi was to make 60 monthly payments of $300 (totaling $18,000). At the time of his proposal, Mr. Zahrawi owed $32,325 in unsecured debts.
[3] Mr. Zahrawi’s consumer proposal was deemed annulled on September 28, 2017, pursuant to s. 66.31 of the BIA, because he had accumulated three months of arrears. Mr. Zahrawi’s consumer proposal, however, was automatically revived effective on November 27, 2017.
[4] On February 28, 2018, Mr. Zahrawi’s consumer proposal was deemed annulled for a second time because he was, once again, in default for an amount equal to three monthly payments.
[5] Mr. Zahrawi is an engineer. He explains that he fell into arrears in 2017 because of being laid off. He subsequently started his own firm but had difficulty collecting his receivables, which led to his second default in 2018.
[6] Mr. Zahrawi has paid $11,100 into the proposal, leaving a balance of $6,900.
[7] A considerable portion of Mr. Zahrawi’s unsecured debt at the time of the consumer proposal was owed to Canadian Tire Bank: $14,000 out of the $32,325. Canadian Tire Bank assigned this debt to EOS Canada Inc., a debt collection agency. EOS Canada Inc. opposes the administrator’s motion to revive Mr. Zahrawi’s consumer proposal. It argues that too much time has elapsed since the proposal was deemed accepted, and that Mr. Zahrawi should be making a new proposal.
Applicable Law
[8] Subsection 66.31(9) of the BIA authorizes an Administrator to apply to the court for an order reviving a consumer proposal. The court may grant the order if it considers it appropriate in the circumstances:
66.31(9) The administrator may at any time apply to the court, with notice to the official receiver and the creditors, for an order reviving any consumer proposal of a consumer debtor who is not a bankrupt that was deemed to be annulled, and the court, if it considers it appropriate to do so in the circumstances, may make an order reviving the consumer proposal, on any terms that the court considers appropriate.
[9] An order reviving a consumer proposal is discretionary. While the wording of subsection 66.31(9) of the BIA does not specify the criteria for exercising its discretion, the court should exercise it in compliance with the language, rationale, and purview of the applicable statutory scheme.
[10] The statutory scheme governing consumer proposals strongly suggests that the timing of the application is an important factor. Pursuant to subsection 66.12(5) of the BIA, a consumer proposal must provide that its performance is to be completed within five (5) years. Moreover, under subsection 66.24(3) of the BIA, the court must refuse to approve a consumer proposal if it does not provide for completion within a five-year period. By enacting these provisions, Parliament gave a clear signal that consumer proposals, which take generally longer to complete than a bankruptcy, must nevertheless provide for the fair and orderly distribution of funds to creditors within five (5) years.
[11] Moreover, the word “revive” suggests that the consumer proposal is being resurrected, with its original terms. One of the mandatory statutory terms is that it be completed within five (5) years.
[12] Having said that, I am of the view that the court may order the revival of a consumer proposal after its fifth anniversary, when it is appropriate to do so in the circumstances. I come to this conclusion because subsection 66.31(9) of the BIA provides that the application to revive may be brought “at any time”. It would be appropriate to grant the order, for example, where a proposal is near complete, the debtor defaulted shortly before the proposal’s fifth anniversary, and the debtor is able to cure the default shortly thereafter. On the other hand, where the application is brought many years after the proposal’s fifth anniversary, as is the case here, this would militate against granting the order. Each case must be decided on its own facts.
[13] In addition to the timing of the application, other relevant factors include:
a) The reason for the consumer proposal’s annulment – the court is more likely to exercise its discretion where a debtor defaults for reasons beyond his or her control, such as sickness or job loss;
b) The amount that has been paid under the proposal – the court is more likely to revive the proposal where the proposal’s terms are nearly completed, and a relatively small amounts remain owing; and
c) Whether there is any creditor opposition. A large creditor’s opposition would militate against granting the order compared to a creditor who was owed relatively small sums.
[14] This list of factors is not exhaustive, and no single factor is determinative.
Disposition
[15] Having regard to these factors, I am of the view that the administrator’s motion to revive Mr. Zahrawi’s proposal should be dismissed.
[16] The consumer proposal was deemed accepted on October 14, 2014, and it should have been completed by October 14, 2019. This application is brought three (3) years after the consumer proposal’s fifth anniversary. This lengthy delay militates against the granting of the order sought.
[17] Moreover, Mr. Zahrawi defaulted under the proposal twice. He states that the reasons for the default were that he lost his employment, and that he had trouble collecting receivables after he started his own business. Mr. Zahrawi provides no evidence to substantiate these facts. However, this suggests that his proposal was not a viable one and that it ought not to be revived at this late stage.
[18] With respect to the amounts paid under the proposal, Mr. Zahrawi had a considerable amount left to pay under the proposal when he defaulted the second time; $6,900 out of $18,000. Finally, the creditor opposing the revival was owed 43% of Mr. Zahrawi’s total unsecured debts ($14000 / $32,365), and this creditor’s views should be given due consideration.
[19] For the foregoing reasons, this application is dismissed.
Alexandre Kaufman
___________________________
Associate Justice Kaufman
DATE: October 25, 2022
COURT FILE NO.: 33-1926106 DATE: 2022-Oct-25
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: IN THE MATTER OF THE CONSUMER PROPOSAL OF SHAREEF ZAHRAWI
BEFORE: Associate Justice A. Kaufman
COUNSEL: Pascal Gagnon, for the Administrator, Ginsberg, Gingras and Associates Laura Daly, for EOS Canada Inc., a creditor
ENDORSEMENT
Associate Justice A. Kaufman
DATE: October 25, 2022
[^1]: RSC 1985, c B-3.