Court File and Parties

COURT FILE NO.: BK-22-02846670-0032 DATE: 20221115

ONTARIO SUPERIOR COURT OF JUSTICE (COMMERCIAL LIST)

B E T W E E N:

Tran v. Royal Bank of Canada

Howard Floyd Manis, for Mai (Cindy) Anh Tran

HEARD: November 15, 2022

Endorsement

osborne j.

[1] The Bankrupt, Mai (Cindy) Anh Tran, moves for an order rescinding the Bankruptcy Order issued on June 28, 2022, or in the alternative, an order annulling that Bankruptcy Order.

[2] For the reasons that follow, I decline to grant the relief sought.

[3] The background is this. RBC obtained judgment against the Bankrupt on November 5, 2018 (CV-18-590793) in respect of indebtedness owed. The Bankrupt was ordered to pay RBC the sum of $488,871.04 plus interest and costs.

[4] Almost one year later RBC filed a writ of seizure and sale with the Office of the Sheriff in both Toronto and Peel. RBC sent written demands to the Bankrupt and ultimately, when the demands were not satisfied, applied for a bankruptcy order on August 23, 2021. RBC was the sole petition creditor of the bankrupt.

[5] On June 28, 2022, Dietrich, J. adjudged the individual to be bankrupt and granted that order (the “Bankruptcy Order”).

[6] Thereafter, the father of the Bankrupt took an assignment of the claim from RBC in exchange for the payment of $400,000.

[7] The position of the Bankrupt today is that that assignment represents a fundamental change in circumstance in this bankruptcy proceeding since RBC was the sole petition creditor and has now been paid out. Since the assignee, the father of the Bankrupt, has no intention of acting as judgment creditor against his daughter, she now seeks the order today rescinding or annulling the Bankruptcy Order.

[8] The Trustee, Harris & Partners Inc., does not oppose the relief sought. The Bankrupt has filed an email [although no sworn affidavit] from counsel for RBC to counsel for the Bankrupt advising that RBC takes no position on the motion.

[9] The Bankrupt relies on sections 181(1) and 187(5) of the Bankruptcy and Insolvency Act (“BIA”), and files in support of the relief sought, an affidavit from each of herself and her father, the assignee of the debt.

[10] The power of the Court to annul a bankruptcy is founded in the first statutory provision on which the Bankrupt here relies, section 181(1) of the BIA. It provides that, if, in the opinion of the court, a bankruptcy order ought not to have been made, or an assignment ought not to have been filed, the court may by order annul the bankruptcy.

[11] Section 187(5) provides that every court may review, rescind, or vary any order made by it under its bankruptcy jurisdiction.

[12] Counsel for the Bankrupt provided me with two authorities, neither of which, by his candid admission, is relevant here.

[13] The discretion pursuant to section 181(1) should be exercised sparingly, and special circumstances, and must take into account and balance the interests of all stakeholders including third parties. (Houlden & Morawetz, 2022 Annotated Bankruptcy and Insolvency Act, Thomson Reuters Canada Limited, 2022 at p. 1060, and Re TNG Services Inc., 2009, CarswellOnt 897).

[14] In Edell v. Canada (Revenue Agency), (2011) ONSC 1943, the court declined to annul a deemed assignment. In noting that the remedy under section 181(1) is discretionary, it accepted the framework as set out in TNG.

[15] In Re Hervias, 2018 CarswellBC 2441, 2018 BCSC 1579, the British Columbia Supreme Court considered a request for annulment, and stated the applicable test in a manner with which I agree: there are two broad considerations on an application under section 181(1) and the applicant must succeed on both. The first is whether the bankruptcy assignment ought not to have been filed. The second is whether the Court ought to exercise its discretion to annul the bankruptcy in the circumstances of the specific case. (para. 11).

[16] The Court in that case went further to observe that it was also common ground that, in deciding whether the bankruptcy assignment ought not to have been filed, the court must have regard to events as they existed when the assignment was filed and that post-assignment events cannot be used to support an application. (See para. 12, citing with approval Im v. Im (Trustee of), [2011] O.J. No. 3112, 2011 ONSC 3993 at para. 6 and Giesbrecht, Re, 1998 13558 (SK QB), 1998 CarswellSask 609).

[17] I agree with those observations also. The fact that post-assignment events ought not to be relevant to the assignment since they had not yet occurred, is both obvious from the statutory provision itself and relevant to this case.

[18] Finally, the court in R v. Hervias also quoted with approval the statement from Houlden & Morawetz, 4th Edition, that in the course of determining whether a bankruptcy should be annulled in various special and unusual circumstances, the rights that the Court must consider are not only those of the creditors and the bankrupt but also the public. The conduct of the bankrupt is important. (Re Hervias, at para. 23).

[19] In her affidavit, the Bankrupt here states that all of her debts are current and she continues to meet her liabilities as they come due, with the result that no creditor will be prejudiced by the relief sought, if granted.

[20] The challenge for me, flowing from section 181(1), is that there is no evidence before me to support a finding that the Bankruptcy Order of Dietrich, J. ought not to have been made at the time. Rather, the evidence is entirely to the contrary. The Bankrupt failed to repay the sums owing to RBC. The bank was required to and did obtain judgment against the Bankrupt. The judgment was not satisfied. Writs of seizure and sale were filed in two jurisdictions. They were not successful in yielding any assets to satisfy the judgment. It was only then that RBC obtained the Bankruptcy Order having commenced a bankruptcy proceeding.

[21] In her affidavit filed in support of this motion, the Bankrupt fully confirms this chronology but offers no evidence whatsoever as to any explanation as to why the Bankruptcy Order ought not to have been made. The affidavit includes no statement whatsoever about, for example, the Bankrupt not being aware of the numerous steps taken, of challenging any of them, or indeed of any facts whatsoever other than that they occurred as set out above.

[22] Her position, simply, is that her father ultimately took an assignment of the RBC claim, albeit at a discounted amount, and since he has no intention of taking any steps against his daughter [the Bankrupt] as a judgment creditor, the Bankruptcy Order should be rescinded or annulled as if it had never been made. The position of the Bankrupt in her affidavit (see para. 15) is only that she will be hindered in her ability to work as a mortgage broker.

[23] As the authorities make clear, there is a public interest to be considered. The jurisdiction of the Court, and the bankruptcy regime, were both engaged here. The Bankrupt, a mortgage broker, seeks relief that amounts to an order expunging from the record the entire proceeding as if it had never occurred.

[24] In the result, I decline to annul or rescind the Bankruptcy Order.

[25] First, there is no evidence before me on which I am able to conclude that the Bankruptcy Order ought not to have been made, and none is even offered by the Bankrupt.

[26] Second, I would in any event decline to exercise my discretion here. It is not enough for the Bankrupt to simply confirm the chronology, offer no explanation why RBC was forced to go through all of the steps that it did, and then seek the rare and unusual remedy of annulment or recission simply on the basis that her father ultimately purchased the debt by way of assignment at a discounted amount, there are no other creditors, and the Bankruptcy Order hinders her work as a mortgage broker.

[27] The motion is dismissed. I make no order as to costs.

Osborne J.

Released: November 15, 2022