COURT FILE NO.: 31-2512742
DATE: 2023 03 13
SUPERIOR COURT OF JUSTICE – ONTARIO
IN BANKRUPTCY
IN THE MATTER OF THE BANKRUPTCY OF
GRZEGORZ BISKUPSKI (AKA GREGORY BISKUPSKI)
OF THE CITY OF VAUGHAN
IN THE REGIONAL MUNICIPALITY OF YORK
IN THE PROVINCE OF ONTARIO
BEFORE: Associate Justice Ilchenko, Registrar in Bankruptcy
COUNSEL:
R. Charles, LIT, (“Charles”) for Trustee, Charles Advisory Services Inc. (the “Trustee”), opposing discharge
Philip Gertler (“Gertler”) for Trustee
James P. McReynolds (“McReynolds”) and Christopher H. Kozlowski for Bankrupt, Grzegorz Biskupski (the “Bankrupt”)
No Creditors Opposing
Superintendent of Bankruptcy not appearing
HEARD: Trial of Bankrupt’s Discharge heard by Zoom on September 8, 2022 as a hybrid trial with written Affidavit evidence being used for in chief testimony of the Trustee and the Bankrupt, and cross-examination of the Bankrupt
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 filed a voluntary assignment in Bankruptcy on May 21, 2019. (the “Assignment Date”). The Bankrupt had not previously been bankrupt and had not previously filed a Proposal.
[3] The Trustee opposed the Bankrupt's Discharge.
[4] I attempted to case manage this Discharge Hearing as a Special Appointment, issuing directions to the parties in endorsements dated January 19, 2022, and May 31, 2022, ultimately scheduling to be heard before me on September 8, 2022 (the “Scheduling Endorsements”).
[5] The only witness actually called for cross-examination at this hearing was the Bankrupt.
[6] All underlined text in these reasons is emphasis added by me for these reasons.
[7] 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
[8] The Trustee has opposed the discharge of the Bankrupt under the provisions of s.173(1)(o) of the BIA. Specifically, the Trustee has stated in its Notice of Opposition dated January 30, 2020 (the “Trustee’s Opposition”):
“The bankrupt has not performed his duties contrary to paragraph 173(1)(0) of the Bankruptcy and Insolvency Act. Further, the bankrupt has failed to attend his second counselling session.”
[9] The Trustee has filed for this discharge hearing the Trustee's Supplementary Report (the “Supplementary Report”) which also contains the Bankrupt's Application for Discharge (Subsection 170(1)), dated January 30, 2020 (the “Original s.170 Report”), the Trustee’s Second Supplementary s.170 Report dated July 13, 2022 (the “Second Supplementary Report”), the Trustee's Supplementary Report dated August 31, 2022 (the “Third Supplementary Report”), (collectively the “s.170 Report”).
[10] The Supplementary Report, attaches, inter alia, the Original S.170 Report, and the Trustee’s Opposition, and the Statement of Affairs dated May 21, 2019, sworn by the Bankrupt (the “Statement of Affairs”) at Tab 5
[11] The Second Supplementary Report attaches, inter alia, correspondence relating to the central issue of this discharge, whether the Bankrupt fulfilled his duties under the BIA, which is the sole ground of opposition being pursued by the Trustee.
[12] The Third Supplementary Report attaches, inter alia, the notes of the initial meeting between the Bankrupt and Charles on or about April 30, 2019 (the “Trustee Notes”) and the information form filled out by the Bankrupt and provided to the Trustee as well as other documents provided by the Bankrupt to the Trustee prior to the date of Assignment (the “Trustee Information Form”), as well as the General Ledger for the Estate as at August 25, 2022 (the “General Ledger”) and the Claims Register for the Estate current to August 25, 2022 (the “Claims Register”).
[13] The Original s.170 Report states:
- (a} Did the bankrupt fail to perform any of the duties imposed on him/her under the Act? The bankrupt failed to perform the following duties:
Yes
• Deliver all his property to the trustee
• Deliver all documents relating to his property or affairs
• Give all the assistance within his power to the trustee in making an inventory of his assets
• Attend other meetings of creditors, inspectors or attend on the Trustee
• Aid in the realization of his property and distribution of the proceeds
• Keep the trustee advised at all times of his place of residence or address until discharge
The bankrupt stated on his Statement of Affairs: 'A 47 foot Delphi 2016 boat was seized by my home club for non-payment of docking fees.' In fact, the boat, named the Opoka had been sailed away from his home club and moved to Grenada by someone we believe-to be a friend of the bankrupt who also works as a sales representative I broker in the boating industry. The Trustee had to spend considerable time to find the location of the boat, and we do not believe the bankrupt helped us in this process to the extent he was capable of helping us.
Further, the bankrupt no longer resides on Siderno Crescent in Woodbridge, but he has not provided us a current address. We also have not received monthly income and expense information from the bankrupt, nor has he attended his second counselling session
(b) Can the bankrupt be justly held responsible for any of the facts referred pursuant to section 173 of the Act?
Yes The bankrupt can be held responsible for the following:
Bankrupt failed to perform the duties imposed under this act or to comply with any order of the court
The bankrupt has not performed his duties, and has not attended his second counselling session.
D. DISCHARGE OF THE BANKRUPT
- (a) Is it the intention of the trustee to oppose the bankrupt's discharge?
Yes
The bankrupt has not performed his duties contrary to paragraph 173(1)(o) of the Bankruptcy and
Insolvency Act. Further, the bankrupt has failed to attend his second counselling session.
(b) Does the trustee have reasonable grounds to believe that a creditor or the Superintendent will
oppose the bankrupt's
No discharge for a reason other than those set out in section 173(1)(m)
or (n) of the Act?
- Did the bankrupt refuse or neglect to receive counselling pursuant to the Directive No. 1R4
(Counselling on Insolvency
Matters)? Yes
- Are there other facts, matters or circumstances that would justify the Court in refusing an
absolute order of discharge?
Yes The Trustee now has possession of the boat, the Opoka. It is currently listed for sale at approximately $370,000.00 U.S.
Given the value of the asset, and the bankrupt's conduct to-date, we do not believe the bankrupt
should receive a discharge until the boat is sold.
- Other pertinent information? No
[14] By the Second Supplementary Report the Trustee’s position on the discharge was amended in Paragraph 2, leaving solely the issue under s.173(1)(o) relating to duties:
“The Bankrupt has since completed his second counselling session.”
[15] According to the Claims Register, the total Proven Unsecured Claims in the estate are a total of $2,070,302.48.
[16] The largest unsecured creditor of the Estate is the Bank of Montreal (“BMO”) with a proven claim in the amount of $1,522,667.50. This was a claim on a guarantee given by the Bankrupt to BMO of its loan to the Bankrupt’s corporation Ula-Matic Inc. (“Ula-Matic”).
[17] The Bankrupt declared in the Statement of Affairs the following as the reasons for his Assignment into Bankruptcy:
“14. Give reasons for your financial difficulties:
The family business ceased operating in April 2019 and the loss of income and the persona! guarantees of some of the business debts are beyond my ability to repay.”
[18] It was not disputed at this hearing by the Bankrupt the following from the Trustee’s Second Supplementary Report:
- The Bankrupt was initially referred to the Trustee after the Court appointment of Grant Thornton as the Receiver of Ula-Matic, the Company (business) owned by the Bankrupt, by Receivership Order dated April 8, 2019 on the application of Bank of Montreal (“BMO”).
[19] No opposition to discharge was filed by the largest creditor BMO, but a representative of BMO was an Inspector of the Estate and approved the Trustee’s opposition. Neither the Trustee nor any other creditor, including BMO, opposed the Bankrupt’s discharge on the grounds of s.173(1)(a).
[20] The remainder of the proven unsecured claims are appear to be a claim by Business Development Bank of Canada (“BDC”) in the amount of $246,943.10, also apparently related to the Bankrupt’s guarantee of the obligations of Ula-Matic, and BDC’s representative was the other inspector. In addition there was a American Express Credit card debt in the amount of $225,277.88 also apparently related to the failure of Ula-Matic, and other assorted credit card and line of credit debt owing to RBC, TD Waterhouse/TD Wealth, MBNA, and BMO, Capital One.
[21] As unproven unsecured claims declared were a possible CRA Director liability claim in the amount of $77,88865.36 (again arising from the failure of Ula-Matic), vehicle loans for Honda and Mercedes vehicles and unproven claims declared for Navipro Yachts Inc. in the amount of $8,357.00 (“Navipro”) and Quality Custom Painting in the amount of $87,000 (“Quality”), creditors who shall feature prominently in these reasons.
[22] The Bankrupt declared further secured amounts owing to BMO in the amount of $1,037,870 and Tembo Financial in the amount of $110,250, but neither of these claims were admitted at the time of the hearing. These were related to the Mortgages on the 48 Siderno Crescent Woodbridge home of the Bankrupt (the “House”), which had been sold and the equity secured by the Trustee by the time of the Discharge.
[23] 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 at Appendix A to the Second Supplementary Report:
“1. Cash on Hand 0
Furniture $5000- claimed exempt
Personal Effects - claimed exempt
Policies & RRSPs Life Insurance - 0
Securities 0
Real Property or Immovable 48 Siderno Crescent – Woodbridge – ON $1,200,000.00 Secured client $1,148,120.00
Motor Vehicles 0
Recreational Vehicles 0
Taxes Pre - 0
TOTAL $1,206,000 Liens $1,148,120 Estimated net realizable dollar value $0.00”
[24] The total recoveries in the estate to the date of the hearing were $363,951.77 consisting of $131,705.73 recovered from the equity in the House, $227,566.50 from the sale of the Yacht (as defined below), the circumstances of which are central to this discharge hearing and will be dealt with in detail in these reasons, and a pre-bankruptcy tax refund in the amount of $4,679.54. As of the date of the Discharge the Trustee had $228,259.23 available in the estate.
[25] The Trustee determined that no surplus income was owing by the Bankrupt.
[26] The realization phase of the administration of the Estate has been completed and the Discharge is the last significant possible realization for creditors that may occur for this Estate.
[27] This estate has dividend amounts distributable to creditors, and the additional amounts requested as conditions to the hearing of the discharge of the Bankrupt by the Trustee are significant and could result in a significant recovery to the unsecured creditors, and the Discharge could aid in the completion of the administration of the Estate and the making of a significant final distribution to the unsecured creditors. Therefore I prioritized the hearing of this Discharge.
BASIS FOR THE TRUSTEE’S OPPOSITION AND DISCHARGE ORDER REQUESTED
[28] The “Three Hour Tour” of the hearing of this Discharge arises from the circumstances of the alleged failure by the Bankrupt to properly declare the Bankrupt’s ownership of a 47 Foot 2016 Delphi Yacht named the “Opoka” (unintentionally ironically “anchor” or “rock” in Polish) (the “Opoka” or the “Yacht”), and the alleged failure by the Bankrupt to assist the Trustee’s realization on that Yacht.
[29] By the time of the hearing of the Discharge, the Yacht had been recovered and sold by the Trustee and, as noted above, proceeds of sale were recovered in the amount of $227,566.50.
[30] The entirety of the Trustee’s Opposition relates to the single s.173(1)(o) fact, and the alleged failure of the Bankrupt to fulfill his duties under s.158 of the BIA, specifically in relation to the Trustee’s attempts to realize on the Yacht.
[31] The Trustee is requesting (as stated in the Factum of the Trustee dated September 1, 2022 (the “Trustee’s Factum”):
“…a conditional order of discharge in the range of $75,000 to $90,000 on the basis that the Bankrupt did not perform his duties under the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3 as amended (the “BIA”)-- in particular in respect of the Bankrupt’s 47 foot Delphia sailboat named “Opoka” (“Opoka”) and, as such, is not entitled to receive an absolute order of discharge”.
[32] The Bankrupt denies these allegation and is requesting an absolute discharge (as stated in the Factum of the Bankrupt dated August 18, 2022 (the “Bankrupt’s Factum”):
“3. It is Biskupski’s position that he performed his duties as a bankrupt fully and
correctly. Opoka was brought to the attention of the Trustee in a timely way. Biskupski
cooperated fully with the Trustee. The Trustee should look to himself with regard to the
time it took to sell Opoka and the price obtained for it. No condition should be placed
on the discharge of Biskupski, or, in the alternative, only a nominal condition should be
imposed.”
Pre-Bankruptcy The Statement of Affairs and the Yacht
[33] The lengthy discourse between the Bankrupt, his counsel, the Trustee and it’s counsel Gertler on the topic of the Yacht is detailed and granular, and is set out in the three volumes of the S.170 Report and in the extensive Affidavit of the Bankrupt sworn November 29, 2021 (the “Bankrupt’s Affidavit”) and in the Bankrupt’s Supplementary Affidavit sworn August 15, 2022 (the “Bankrupt’s Supplementary Affidavit”).
[34] However the beginning of this issue were the following statements made in the sworn Statement of Affairs of the Bankrupt as part of the service affidavits at Tabs 2 and 3 of Supplementary Report (the Statement of Affairs identified as the Bankrupt’s Statement of Affairs as Exhibit A to the Second Supplementary Report is the Statement of Affairs of Urszula Biskupska, the Bankrupt’s wife, who also filed for Bankruptcy with this Trustee, and who has similar creditors and amounts owing, but lacks the feature of the Yacht):
9C. Had any property seized by a creditor? Yes
- If you answered Yes to any of questions 9, 10 and 12, provide details:
9C:
A 47 foot Delphi 2016 boat was seized by my home club for non-payment of docking fee
[35] In the Trustee Notes it appears from the handwriting that Charles wrote the following on this Topic after meeting with the Bankrupt:
“Sailing Boat > 47 ft Delphi 2016
listed at 437,000 U.S.
-registered in Ontario (papers on the boat) Opoka
27 ft [illegible] trailer > ownership changed to [illegible- Son in Law?]
[36] On the Trustee Information Form the Bankrupt wrote relating to the Yacht:
“Boat/Trailer OPOKA – Lost Control due to not pay to broker 437,000 US”
[37] And on a chart attached to the Trustee Information Form (which the Bankrupt identified in his cross-examination at the hearing as an excel spreadsheet prepared by him for the Trustee):
“Sailing Boat Personal [sic] lost in Carabien [sic] $500,000 not pay insurance and docking. Try sell for three mnths [sic]”
[38] In another document attached to the Trustee Information Form, and signed by the Bankrupt wrote in answer to the question “Within the last twelve (12) months, have you had any assets seized by a creditor, either in Canada or elsewhere?”:
“Asset seized ULA-Matic Inc.
Date seized April 8, 2019,
Name of party seized by BMO-Grant Thornton
Was the party whom seizure a secured creditor Yes
Form of Security $1,500,000”
[39] The Trustee’s evidence on the swearing of the Statement of Affairs in the Second Supplementary Report was:
“6. The Bankrupt swore his statement of affairs on May 21, 2019, (the "SOA") a copy of which is annexed as Appendix "A" to this Second Supplementary Report. The Bankrupt does not include Opoka as one of his assets. Rather, in respect of Opoka and in response to question 9C "had any property seized by a creditor" replied "Opoka was seized by my home club for non-payment of docking fees".”
[40] In a Supplementary Report sworn on November 19, 2021 (the “Adjournment Report”) requesting an adjournment of the Discharge hearing, which I granted pending completion of realization on the Yacht, the Trustee states:
“6. The bankruptcy was filed as a Summary Administration estate as the bankrupt declared his assets as comprising Household Furniture valued at $5,000.00, Personal Effects valued at $1,000.00, both being exempt assets pursuant to the provisions of the Execution Act of Ontario and a 50% interest in real property located at 48 Siderno Crescent, Woodbridge, Ontario valued at $1,200,000.00 with mortgages against the property valued at $1,148,120.00. The property was estimated to realize $0.00 for the unsecured creditors. The Opoka sailboat was not disclosed as an asset on the Statement of Affairs. The bankrupt disclosed on the Statement of Affairs at question 9C that: "a 47 foot Delphi 2016 boat was seized by my home club for non- payment of docking fees." A copy of the bankrupt's Statement of Affairs is attached hereto as Exhibit "B".
- Subsequent to the filing of the bankruptcy, the Trustee was contacted by legal counsel to the Bank of Montreal, Mr. Gary Feldman of Chaitons LLP asking for further information about a sailboat they believed was owned by the bankrupt. The Trustee was further advised the sailboat had been subject to security in favour of BMO, but this loan had been paid in full prior to the bankruptcy by way of the bankrupt drawing on a line of credit secured against 48 Siderno Crescent.”
[41] The Bankrupt’s evidence in the Bankrupt’s Affidavit on this issue of the initial information relating to the Yacht that was provided to the Trustee was:
“5. Prior to my bankruptcy, I advised the Trustee that I believed that the Opoka was in St. Maarten as they would have asserted a claim against the boat for unpaid dockage fees which I was unable to pay due to my insolvency. The Trustee asked me via email on May 29, 2019, if Il knew what club the boat was berthed at in St. Maarten, and I advised him the same day May 29, 2019, that it was at Port du Plesant. Attached hereto and marked as Exhibit "B" to this my Affidavit is a true copy of the said email exchange between the Trustee and myself.
- Prior to my bankruptcy, I discussed my vessel with the Trustee, which would need to be looked into given the size and value of the vessel, and that the vessel was unencumbered, other than any claims of the marina docking the boat in St. Maarten, and apparently a Marine lien by Slavek, the boat's captain (which Marine lien the Trustee apparently proposes to challenge at some point). The Trustee candidly indicated he did not have much experience with oceangoing sailboats, but apparently had a friend who could help him with that and was comfortable taking on the bankruptcy. By on or about June 24, 2019, the Trustee had rightly transferred title to the vessel into the name of the Trustee. Attached hereto and marked as Exhibit "G" to this my Affidavit is a true copy of the Transport Canada Ship Registration Computer System showing the new ownership registration for the Opoka in favour of the Trustee. Once I forwarded the new location of the Opoka from Slavek to the Trustee on or shortly after July 2, 2019, the Trustee had legal title to the vessel and constructive possession of the vessel, no doubt immediately writing to the marina, although that correspondence was not shared with myself or my lawyer. At that point, there was practically no further assistance that the Trustee required of me, nor that the Trustee desired.”
[42] In the Bankrupt’s Supplementary Affidavit the Bankrupt states the following regarding the information he provided to the Trustee pre-bankruptcy:
“Pre-Bankruptcy Meeting With Trustee
As set out in the Second Supplementary Report of the Trustee, I met with Robert Charles on or around April 30, 2019. I told the Trustee about Opoka during that bankruptcy meeting. I explained that I had neither the ability nor the money to move Opoka and that I could no longer pay insurance or dock fees. I explained that Slavek had control over Opoka, as had been normal. I explained that Slavek had the original documentation for the boat and my standing permission to move it, as required, for safety and insurance purposes. I also advised that I had not paid Slavek recently and that, since he already had physical control over Opoka, he would likely be exerting a lien over the boat.
After advising the Trustee about Opoka prior to making an Assignment in Bankruptcy, I filled in my Statement of Affairs. I stated that Opoka had been seized by a creditor because I understood that either the marina would hold it for unpaid docking fees, or Slavek, having paid the fees, would exert control over Opoka for the same fees.
Prior to my bankruptcy, I advised the Trustee about Opoka. I gave him the information he needed to take possession and control over it. I assisted the Trustee to the best of my ability with information about Opoka, in a timely way. My discharge has already been delayed significantly. I have been bankrupt to 39 months, which has significantly impacted the kind of employment I can take and the kind of income I can make. Accordingly, I seek an absolute discharge from the Court.”
[43] The issue of whether the BMO, or perhaps Tembo Financial, who were the secured creditors on the House, had a security interest on the Yacht (if what BMO’s counsel Mr. Feldman advised the Trustee was true), namely:
“…that the sailboat had been subject to security in favour of BMO, but this loan had been paid in full prior to the bankruptcy by way of the bankrupt drawing on a line of credit secured against 48 Siderno Crescent”,
was never dealt with by the parties.
[44] From the proceeds of the sale of the House, it would appear that these secured creditors were paid in full, as the Trustee has obtained the equity for the property that it has recorded in the Trial Balance. Accordingly, it would appear that the reduction of the value of the equity in the House by the paying out of the loan to BMO to pay for the purchase by the Bankrupt of the Yacht, has resulted in a reduction of the equity of the House that is divisible amongst the unsecured creditors of the Bankrupt.
[45] The only security registrations made against the Yacht in the Transport Canada Ship Registration Database as at August 13, 2021 at Exhibit “G” to the Bankrupt’s Affidavit were by the Trustee, and Hillmount Capital Inc., the “Special Purpose” Lender that advanced funds in the apparent amount of $65,000 to the Trustee secured by the collateral of the Yacht to finance its upkeep pending sale.
[46] As a Canadian registered vessel, this registry would be expected to contain all properly registered security interests and Marine Mortgages under the Canada Shipping Act RSC 1985, c S-9, (the “Canada Shipping Act”) as the Yacht, at approximately 15 Gross Tonnes, may fall under the mandatory requirement in s.17(1)(c) as well, which could collectively make the Canada Shipping Act applicable. The Canada Shipping Act states:
Mortgage of ship or share
- (1) The owner of a ship registered under this Part, of a share in one or of a ship recorded as being built in Canada may give the ship or share, as the case may be, as security for a mortgage to be registered under this Part.
Filing of mortgage
(2) A mortgage is to be filed with the Chief Registrar in the form and manner specified by the Chief Registrar.
Date and time of registration
(3) A mortgage is to be registered in the order in which it is filed, indicating the date and time of the registration.
R.S., 1985, c. S-9, s. 37; 1998, c. 16, s. 3.
[47] On this issue of how the Yacht was financed, at the Discharge the Bankrupt disagreed with what was told to the Trustee by counsel for BMO regarding the financing of the Yacht (throughout the Transcript of the hearing “Opoka is misspelled “Opalka”, Slavek is misspelled “Slavic”, “lien” is misspelled “lean” and “Ula-Matic” is misspelled “Olematic”):
[pages 14-16] MR. GERTLER: Q. When did you purchase Opalka?
A. This was October 20th and register was the
25th.
Q. Okay. What year?
A. 2016.
Q. Alright. And what was the purchase price for Opalka?
A. it’s difficult to because this was a deal
coming down from, actually I purchased this boat in 2014, where there was a deal I had smaller boat and the value of this boat was transferred to the value of this bigger one, which Slavicsold the smaller one. In total, I would say the estimation, I would have to look at the report. I do not remember of my head, but this was in the range of, just below $600,000.
Q. Canadian or U.S.?
A. Canadian.
Q. Okay. And how did you pay for Opalka?
A. There was, I paid instalments. $20,000,
$40,000 since 2014 to 2016 and I paid with the old boat, which, you know he sold.
Q. But how much, did you have to borrow any money to buy the boat?
A. For this boat, I haven’t borrowed the money.
Q. You paid cash for this boat?
A. Yes I paid cash for this boat.
Q. Was any of it financed with the Bank of
Montreal?
A. It was financed with the old boat, which was
financed in about 2000 when I purchased the first one. The
finance was about $160,000.
Q. Now was that transferred to Opalka?
A. No most of it was paid. There was some shadow
of it maybe $20-$50,000 part of it was transferred, no more.
Q. So why would the trustee had been informed by
Bank of Montreal that you drew down on your credit line on your house to pay off the loan on Opalka?
A. That’s not true because the boat was dropped
as collateral and the line of credit there was everything we shared because bunk (ph) took extra $200,000 from my line of credit. I had to put into the business in order to secure the loan for the Olematic. And it is, I just take more mortgage and then I took the line of credit that I had available and this was on the card. The major cost of the line of credit was money transferred to Olematic.
Q. Not to pay for the boat?
A. No. This was, I had the mortgage renewal and
mortgage renewal, the whole key element, exercise at that time was to increase my line of credit for Olematic because I knew it was growing.
Q. Okay. So is it fair to say that when you filed
your assignment in bankruptcy, in May of 2019, no one had any lean on Opalka?
A. No.
Q. Okay. In other words, there was no lean on
Opalka?
A. No.
Q. Okay. Thank you. Was Opalka your first boat? I
think you mentioned….
A. Second.
Q. And what was the first one?
A. It was a also Delphia-40. It was seven feet
shorter.
Q. And when did you purchase that one?
A. It was in about 2008.
Q. And you traded it in for Opalka in 2016?
A. Yes.
[48] Whatever the distinction in the Bankrupt’s mind, it appears that from the Bankrupt’s evidence that:
the Yacht was paid off, or the unpaid portion between the trade-in value of the prior Yacht and the purchase price of this Yacht was paid,
by the refinancing of the House,
to increase the amounts owing to BMO that were secured by the equity of the House,
as further collateral required by BMO to the increase the amounts advanced by BMO to Ula-Matic,
including the amount used to pay off the BMO loan specifically for the Yacht,
and that this resulted in the release of the BMO security interest in the Yacht.
[49] Even after the Bankrupt’s testimony above, it is not altogether clear to me how the Bankrupt ended up with the Yacht, allegedly worth up to $500,000 in the Bankrupt’s estimation at the date of Bankruptcy, being free and clear of the BMO security interests that were formerly registered against the Yacht, and that this unencumbered asset exists while the BMO and the BDC have filed unsecured claims in the Bankruptcy in the total amount of almost $1.8 million on the unpaid guarantees given by the Bankrupt and his wife for the debts of Ula-Matic to BMO and BDC.
[50] Gertler questioned the Bankrupt on the discrepancies between the evidence of the Bankrupt in his Affidavits, and what was recorded by Charles in the Trustee Notes of the Pre-Bankruptcy Meeting, the Trustee Information Form and the documents that the Bankrupt provided to the Trustee or signed appended thereto, as compared to the Statement of Affairs:
[page 23-24 ] Q. Right. And do you recall when your first meeting with Mr. Charles was?
A. 29th April.
Q. 29th or 30th?
A. I think it was the 29th. Maybe 30. One of those
days.
Q. I think in your affidavit you actually say the
30th. And what did you tell him about Opalka at that time?
A. Really because my state of mind wasn’t right.
I wrote excel spreadsheet and I wrote Opalka and Opalka is not accessible because I owe money to broker. I didn’t know how to call broker and boat operator and so really the dockage, I didn’t pay my dues.
Q. Did you tell Mr. Charles at that point where
Opalka was?
A. Yeah. I told him it where it would be at some
point.
Q. So why did he have to write you an email on
May 29th to ask you where Opalka was?
A. He never asked.
Q. Sorry….
A. He asked me only where it is but never asked me a specific place.
Q. I see alright. Did you complete an information
form?
A. I submitted, but the formal submitted by
Charles.
Q. Whose writing is on that form?
A. One form which is submitted, I wrote some
form, one form and later another one was done by Charles who signed it.
[relating to the Trustee Information Form]
[page 25] Page MR. GERTLER: Q. You see that form?
A. Yes I do.
Q. Alright. Well we are further ahead, Your
Honour than with registration. And do you recognize this form Mr. Biskupski?
A. Yes.
Q. And is that your handwriting?
A. Yes it is.
[page 27-29]
Q. Okay. Alright. Yeah. Thank you Your Honour. So
Mr. Biskupski, you are on page five of that supplementary
report?
A. Yes.
Q. We’ve already established that that is your
handwriting. Is that correct? Okay. And if we look at the third page on page seven, you see that?
A. Yes.
Q. Alright so, in terms of Opalka you wrote,
Opalka lost control due to not paying the broker.
A. Yes.
Q. See that? And I am assuming the best estimate
of present value, that’s $437,000 U.S.?
A. No this was the price listed when I tried to
sell. The value of the boat was about $100,000 more.
Q. Okay. Interesting, okay. But you recorded it…
A. Yes.
Q. …as being 437 not 537. You are trying to sell
the boat, and you indicated, so you’re telling us that that 437 was the list price for the boat?
A. Yes.
Q. Okay. It turn out it was actually 448, but we
will get to that. So you Opalka lost control due to not paying the broker, correct?
A. Yes.
Q. And that was the information you provided to
the trustee at the time?
A. Yes
Q. Okay. And who was the broker you were referring to?
A. That’s Slavic.
Q. Okay.
A. NaviPro.
Q. Okay and how much did you owe NaviPro at that
time?
A. As far as I knew, he didn’t bill me for that
winter season. At that point I didn’t know. I knew this would be the range close, because at that point it was up to $100,000.
Q. So why did you reference on your statement of
affairs that you only owed NaviPro $8,300?
A. Sorry?
Q. On your statement of affairs, you listed NaviPro as a creditor but you said that you only owe NaviPro $8,300.
A. Because this was just in the beginning which I
had at the time. But usually he invoiced me and I know I owed him more.
Q. When was the last time you received a bill
from them, from Slavic?
A. I don’t recall at that point. At that point I
don’t have record due to missing e-mails from Olematic I lost the records.
Q. And where was Opalka at this time?
A. It was in Saint Martin.
[page 31-34] Q. So the bottom of page 13, sorry the bottom of that page, paragraph 13, you say, “I also advise that I have not paid Slavic recently and since he already had physical control over Opalka he would likely be exerting a lean over the boat. Do you see that?
A. Yes.
Q. Okay so, how is this consistent with the
statement made on the information form that you had lost control due to not paying a broker? From what I’m reading in paragraph 13 you didn’t know at that time whether you had or hadn’t lost control.
A. Yes I did.
Q. How so?
A. Yes I did. I lost control because I couldn’t
pay the boat with money. I don’t use the boat if I don’t pay the bills. That’s simple.
Q. Did you ask the marina to release the boat?
A. No.
Q. So then how would you know they wouldn’t
release the boat to you?
A. Because I wasn’t in a state of mind. That’s
why, I ask trustee in the, the trustee helped me with that.
Q. No but you now told the trustee on the one
hand you had lost control due to not paying a broker?
A. Yes.
Q. You’ve now said under oath that you were not
concerned about the broker, you were worried about the marina not releasing the boat to you. And then you said in paragraph 13 of your affidavit that it was likely he was going to reserve a lean. Well which was it?
A. Well can you do more specific question please
because it is not straight-forward.
Q. I am pointing out….
A. This was written two months ago with the staff
which I learned a lot of it…
Q. I’m sorry?
A. …at that point I even, I just didn’t because
when I talk to trustee, to Charles, Advisory…
Q. Right.
A. …I was assuming that he would take all my
affairs in control and just I hadn’t done anything with it.
That’s the point. And I called him and I didn’t pay the
brokerage and for sure I am not able to do anything with the boat. It’s not accessible to me because the brokerage was paid by Slavic anyway.
Q. But you just told me…
A. …no brokerage….
Q. Mr. Biskupski you just told us that you never
contacted the marina to ask them…
A. Yes.
Q. …what was going on. So then how would you
think…
A. How can I contact them and ask what’s going
on?
Q. …how can you make that. You make a statement
to the trustee that you’ve lost your boat, you’ve lost control of your boat…
A. Yes.
Q. …by the way you say you’ve lost control of the
boat because of the broker, not because of the marina. You then say, or sorry, you may lose control of the boat in paragraph 13 of your affidavit. You say in the information sheet, I have lost control. And now under oath you’re saying well actually I lost control because of the marina, but you just told us you never called the marina to find out if they were asserting a lean on your boat. I mean, is that a proper summary of what we are hearing from you sir?
A. Yeah, well it’s not right how you think
because the dockage was always paid by the broker, not me direct for the marina. Everything went through him. And in my mind of state, it was pretty much the same that the marina and the Navy Prop [sic] it was like one. He paid insurance, he paid the docking fee and that’s how I treat it. This is what is, this was my mindset.
Q. It might be your mindset, but we are looking at a series of documents and a series of affidavits where you
appear to be making inconsistent statements about the same
topic.
A. I don’t agree.
[page 35-36]
Q. Okay. So at the beginning of that paragraph
you say, prior to my bankruptcy I discussed my vessel with the trustee, which would need to be looked into given the size and value of the vessel and that the vessel was unencumbered other than any claims of the marina docking the boat in Saint Martin and apparently a marine lean by Slavic the boat’s captain. See that?
A. Yes.
Q. Okay. So I’ll take you back again to the
information form you filled out that is now an exhibit where you talk about Opalka. Is there any reference in your own handwriting to a lean being claimed by the marina against Opalka?
A. No.
Q. Okay.
A. I didn’t know.
Q. Why the difference? Why are you saying now
that in November they might have had a lean but at the time you prepared the information sheet you didn’t reference a lean?
A. Just this was my assumption.
Q. Okay well, that was a pretty big assumption as we are about to see.
A. You do all time assumptions.
Q. Not when you are swearing documents, sir.
A. Yeah well that’s….
Q. Your Honour if we can now, or Mr. Biskupski do
you recall completing a statement of affairs in connection with your bankruptcy?
A. Sorry?
Q. Do you recall preparing a statement of affairs in connection with your bankruptcy?
A. To a certain extent as much as I can remember,
yes.
[page 37-47] MR. GERTLER: Q. Sometimes it’s not so good.
Especially when you’ve got a whole bunch of different documents that we have. So do you see Mr. Biskupski Exhibit B to that report is a document entitled Statement of Affairs?
A. Yes.
Q. Okay. And it says on it, In the Matter of the
Bankruptcy Grezegorz Biskupski aka Gregory Biskupski, and it’s dated March 21, 2019, is that your signature in the bottom right hand corner?
A. Yes it is.
Q. And as you carry your way through pages one to
three, four and five, those are all your signatures at the
bottom right-hand corner. So is it fair to say this is a
statement of affairs that you swore on May 21, 2019?
A. Yes. Q. Okay. Your Honour, for the record in my
friend’s factum, he references the date of bankruptcy was May 20th and that the statement of affairs was sworn on May 21st and I think Your Honour will see from the materials that the assignment is actually dated May 21st. So the statement of affairs was prepared on the day of the assignment. Frankly, Mr. McReynolds I don’t think anything turns on it, but…
THE COURT: I don’t think so either.
MR. GERTLER: Okay.
MR. MCREYNOLDS: I agree. If the Court will accept
that as a typographical error. It’s hard enough as it is….
MR. GERTLER: Q. Oh it’s fine. Absolutely. So Mr.
Biskupski lets look at the front page of the statement of
affairs. That’s the one under assets. Is it fair to say that Opalka is not listed as an asset?
A. Pardon me?
Q. Sorry, I can’t hear you Mr. Biskupski.
A. I’m not sure. This was probably filled by
trustee, part of it, but….
Q. Is it fair to say that Opalka is not mentioned
as an asset on page one on your statement of affairs?
A. Because as far as I know that’s what I was
told to do.
Q. Can you please answer the question? Is it fair
to say that Opalka is not….
A. Yes. I don’t see it.
Q. Okay. Then let’s turn to page four of five.
Got that?
A. Yes.
Q. Okay. In response to question 9© within 12
months prior to the initial bankruptcy event, have you either in Canada or elsewhere, 9© had any property seized by a creditor, you responded yes. And if you go down the page to 13, it says 9C, if you answered yes, provide details. At 9(c) you said a 47 foot Delphia 2016 boat was seized by my own club for non-payment of docking fees. Do you see that?
A. Yes I do.
Q. Okay. And that is your signature just below…
A. Yes.
Q. …the bottom right hand corner? And you
understand that this was a document, a sworn document?
A. Yes.
Q. You were sworn under oath?
A. This form was filled by Charles Advisory.
Q. Whose statement of affairs is it Mr.
Biskupski?
A. This is mine.
Q. Okay. Did you review it before you signed it?
A. As much as I could, yes. Yes, as much as I
understood.
Q. Okay, well, it’s pretty clear on the
paragraph, at number 13, you’re saying that the boat had been seized for non-payment of docking fees.
A. This was filled by my trustee and I trusted
and I believed that the least that at 13, this 9© kind of it works kind of together.
Q. No, no. You are absolutely correct they go
together. But you stated, if I may say so, rather categorically that the boat was seized, not might be seized or could be
seized, but was seized by my own club for non-payment of docking
fees.
A. This was written by Charles Advisory and he
filled this form. I signed it. Yes, it looks like more diligent of that.
Q. But when you filled out the information form….
A. This was not filled by me.
Q. No, no.
A. Yeah.
Q. But the information form, where would the
trustee have received the information that the boat had been seized? Your information form said, maybe the broker is going to have a lean, or the broker, I’ve lost control because the broker has the boat. How do we go from there to the boat has been seized? Did the trustee make it up? Where did the trustee get the information to include that?
A. I submit my excel spreadsheet where I said I
owe money to the broker who paid the fees to the boat and this was my assumption. My knowledge of the legal is limited and at that point I didn’t understand some, I call it play words or just interpretation. I’m an engineer.
Q. Well, yes but you can obviously read. Did you
complain to the trustee that that statement was wrong?
A. No. I did too much trust in it.
Q. Did you sign the statement of affairs?
A. Yes.
Q. And you swore the statement of affairs?
A. Yes.
Q. Okay. Do you remember when you filled out the
information forms?
A. I filled out different form but this was a
type electronically where I wasn’t able to do it. That’s why I know, I came couple times in between, I was, I think before 21st.
Q. But do you recall when you completed that
information form where you said Opalka had been….
A. I didn’t, this specific form, because they are not my words. The home [indiscernible] I would never ever come
up with.
THE COURT: I think he is asking about the
previous information form on the statement of affairs.
MR. GERTLER: Correct.
GREZEGORZ BISKUPSKI: A. The first, which I came
with an excel spreadsheet. That’s what I filled on I think this was April 13th.
Q. No but I’m talking about that information form
that you filled out that we marked as an Exhibit. The one where you said, sorry I’m just trying to find it here. The one where you said that Opalka lost control due to not paying a broker and you said she was worth $437,000.
A. Yes.
Q. Do you remember when you filled that out?
A. Yes.
Q. What date? Obviously somewhere between April
30th and May 21st do you have an idea when?
A. No.
Q. No? Okay. But it’s fair to say that you
couldn’t have done it any earlier than April 30th?
A. No.
Q. And you couldn’t have done it any later than
May 21st?
A. No.
Q. And by the time you signed the first one, the
status of Opalka went to lost control due to not paying a
broker, to boat seized by marina by own club for non-payment of docking fees. Is that correct?
A. To me, it meant the same.
Q. Okay. Interesting. What was the basis for
making the statement in the statement of affairs that the boat had been seized?
A. Because I didn’t have control of it, I
couldn’t call because I owed money.
Q. Did you….
A. I didn’t call anybody else.
Q. Did you call the marina to ask them if they
seized the boat?
A. No. I told you. I knew I owed the money and I
didn’t call anybody, I owed them money.
Q. So you didn’t contact the marina…
A. No.
Q. …to ask them if they had seized the boat. Did
you contact Slavic?
A. No because I owed him money.
Q. Yeah, but so, so Mr. Biskupski, so what you’re
saying to us is you made a statement under oath that someone had seized your boat and you had no direct knowledge of whether that was correct or not?
A. In my mind at that point, it was.
Q. Did you have any direct knowledge that your
boat had been seized?
A. This was my assumption.
Q. Your assumption?
A. Yes.
Q. But you swore under, you didn’t say I think
it’s been seized. You said, categorically this boat has been seized for non-payment of docking fees.
A. Yes again you play with words where I’m not
good at.
Q. I’m not playing with words. I’m just repeating
to you what you said.
A. Yes. I did this with my assumption.
Q. That was your assumption, okay.
A. That’s like your statements constantly are
assume, assume.
Q. Well no I’m just…
A. Yes.
Q. …trying to understand why you said what you
said. Wouldn’t you agree that there is a huge difference between saying that the boat had been seized versus that it might have been seized?
A. At that point no.
Q. So….
A. My state of mind was very flat and blank.
Q. Okay.
A. I didn’t want to talk to people. I just, for
me this was the same.
Q. And are you aware that the statement of
affairs is a sworn document and that you are swearing to the
accuracy of the information that you set out in the statement of
affairs?
A. Yes.
Q. Then how do you explain the reality of what
was truly going on with Opalka against what you said was going
on in your statement of affairs?
A. My reality was I approached trustee, in my
belief I am not familiar with those technologies. Then this is the person whom I can trust 100% and help me go through this hard time. That’s what it was my approach because if someone would say that my name is Joe Doe, I probably would sign at that time. I was really under serious mental problem for over a year until Olematic collapsed because this was like I lost a baby.
Q. Mr. Biskupski did anyone force you to sign the
statement of affairs? A. No. But you have to, this is my life problem I approached the people, I go there and I go with the full trust. And my, at that point my sensibility of approaches, it was very limited, I just, yes I made mistakes if you call it, but I wasn’t aware of it and it wasn’t intentional because even I didn’t know. Sometimes my assumptions, they were as a given.
Q. You certainly made it very clear on the statement of affairs that as far as you were concerned, Opalka
had been seized by the club and you told us now you had no
independent information to confirm that or deny that one way or another, you assumed it.
A. I disclosed this to Mr. Charles then I was
hoping he takes care of it for me.
Q. Well he takes care of things based on what’s
in your statement of affairs that you swore, that you are
responsible for. He’s not responsible for your statement of affairs. When did Opalka get to Saint Martin in 2019, do you know?
A. 2019 it got somewhere around beginning of
December.
Q. Beginning of December so she was there from
Dec, Jan, Feb, March, April, five months.
A. Yes.
THE COURT: Dec 2019 or 2018?
MR. GERTLER: That would be 2018, Your Honour.
THE COURT: Okay, good.
GREZEGORZ BISKUPSKI: Yeah 2018, yes.
MR. GERTLER: Q. The sailing season is over the
two years. And are you suggesting to us that the boat sat for Saint Martin for five months and they never asked to get paid for their docking fees?
A. I think it was paid because Slavic was taking care of it and usually this is like, if they have the retainer of the boat, those e-mails I never ever was getting like direct because they dealt with Slavic not direct with me.
Q. Right. But when would you normally, when would
you expect the docking fees for the season to be paid? Wouldn’t they be paid when the boat got there?
A. Before the end of the season, usually.
Q. How about before, they didn’t require payment
when the boat got there?
A. It’s possible then Slavic sooner rather than
later. He submit the bill. I don’t know.
Q. Okay. So we are going to come to that bill
now. So that will take me to that quite nicely. So in your, I think it’s the November affidavit, your November affidavit, do we have a page number? It’s what? No I know it’s B80 and B19. Let’s see if I can figure this out here. There we go. Mr. Biskupski if you can look at your November affidavit, and I think Mr. McReynolds we’ve already marked that as an Exhibit have we?
THE COURT: Yes, we have.
MR. GERTLER: So that was Exhibit B. And then I am referring you to page 19.
GREZEGORZ BISKUPSKI: Yes.
MR. GERTLER: Q. Let me know when you’re there. So the second last item on that page, sorry, the fourth item
from the bottom of the page: docking in Saint Martin from Dec 15th to May 15th, $3,900 U.S. or $5,437 Canadian, you see that?
A. Yes I do.
Q. When, and this was an invoice from NaviPro to
you correct?
A. Yes.
Q. When did you get this invoice? A. I believe I got this beginning of June.
Q. Beginning of June?
A. 2019.
Q. Okay.
A. By e-mail.
Q. And does….
A. When he found out then I unbanked it I guess.
Q. Does NaviPro normally not date their invoices?
A. Yes because I can see a boat that from Saint
Martin, yeah sometimes he would lump like three or four months.
Q. But what I was wondering I guess is that when
I look at this invoice, if I look at the invoice number 040519, in your experience was that the date he issued the invoice, do you know?
A. I was looking at it, I don’t know.
Q. You don’t know. So on your page 21, you have
another invoice from NaviPro and it’s invoice number 151118, which would almost suggest that that’s the date of that invoice. When did you get that one?
A. I got them both together.
Q. Both together okay. So according to the
invoice on page 19, Slavic has paid the docking fees at Saint Martin correct?
A. I think so.
Q. Okay.
A. Assumption sorry. I think so.
Q. When you say I think so, I think that’s an
assumption. And did NaviPro pay the docking fees in Saint Martin in 2018?
A. Yes and later I reimbursed him for it.
Q. Okay so if our friend Slavic has paid the
invoice for the docking fees, which could have been paid as early as December 2018 or sometime….
A. It could be.
Q. Okay it could be. I hear you, you don’t know
exactly but certainly Slavic could have paid it when he showed up or it could have waited to the end, I guess. Again, how do you make a statement on your statement of affairs that the boat
has been seized for non-payment of docking fees?
A. Because I didn’t pay it.
Q. But you just told us that you knew that in
previous years Slavic had paid it?
A. Because I hadn’t seen his invoices either.
Q. Fair. And then I’m going to show you, what
we’re going to have to find for you now, is Your Honour, it’s on page A322 or A252, which is part of the trustee’s July record. Do you have a page on that?
Page 48 – referring to Appendix C to the Second Supplementary Report].
Q. Appendix C. This is an e-mail from the yacht
club Port de Plaisance to my office on June the 4th, 2013. Your Honour, I guess actually what we have to do is introduce this report, which is the trustee’s June, sorry June 13 report as an Exhibit as well.
THE COURT: I think it’s Exhibit F right Mr. McReynolds?
MR. MCREYNOLDS: That’s correct.
THE COURT: We will make that the trustee’s second
supplementary report dated…
MR. GERTLER: July 13.
THE COURT: …July 13, 2022. Exhibit F.
EXHIBIT F: TRUSTEE’S SECOND SUPPLEMENTARY REPORT
Q. I guess perhaps Mr. Charles had a really good
year in 2021 and he just kept going back to it. No he’s not
smiling Your Honour, so maybe not. Okay. So Mr. Biskupski you have that e-mail in front of you then?
A. Yes I do. This is an Exhibit again, I repeat
appendix C yes?
Q. Okay. So this is an e-mail from the yacht club
to my office and they say, “According to our records the vessel left on May 11, 2019 and all of the bills have been paid.” Do you see that?
A. Yes I do.
Q. So if the boat left on May the 11th and all
the bills have been paid, again what’s the basis for making a sworn statement on May 21st that the boat had been seized by the club? By that point it was actually out of the club for 10 days and clearly it had not been seized.
A. I wasn’t aware of it.
Q. But you took no steps to find out about it?
A. Like I said before, I wasn’t in the state to
do it.
Q. Okay. How much did you think Opalka was worth
at this point? Was it still the $437,000 U.S. that you had on your information sheet?
A. Yes it was actually worth more than that.
Q. Okay. And how much did you think the
outstanding docking fees were?
A. In the range of I estimate $6,000.
Q. Okay.
A. $7,000 Canadian.
Q. Alright. And were you not a little concerned
that you were losing an asset worth half a million-dollars
Canadian over a $7,000 docking fee?
A. I lost everything. All of it.
Q. Were you not concerned that you were losing a
half a million-dollar asset over a $7,000 docking fee?
A. I told you I lost everything. I knew then,
after this is….
Q. Okay.
A. Yeah. I lost everything and I knew I had
nothing.
Q. And then on your statement of affairs you
indicated that you owed NaviPro $8,300. Were you not concerned about losing a half a million-dollar asset over $8,300 broker fee?
A. I told you. I lost everything at that time
Q. Okay.
A. Even I didn’t know how or why.
Q. In June of 2019 you didn’t tell the trustee
where Opalka had been moved because you did not, you said you did not know that?
A. Yes, sir.
Q. Okay. So, but in paragraph 11 of your August affidavit, if we can go to that please Mr. McReynolds?
MR. GERTLER: Q. So you swore, in your affidavit,
you said that “In December 2018 I discussed relocating Opalka with Slavic. The reason for doing so was to reduce the cost of moving, insurance and dockage, all of which I was running out of money to pay. There were two potential locations Grenada, and Trinidad and Tobago.” Do you see that?
A. Yes.
Q. Did you ever advise the trustee when the
trustee was looking for the boat that one of the potential
locations was Grenada, Trinidad and Tobago?
A. I think thereby I said so. Yes. I cannot state
it, but I indicated that it would be moved south.
Q. Okay. So hang on.
A. It’s the….As noted in your own affidavit there are a lot of islands between Saint Martin, south. That’s not my question. Did you ever tell the trustee that you and Slavic had discussed moving the boat from Grenada or Trinidad or Tobago?
A. No.
Q. No. Okay.
A. Because it wasn’t asked.
Q. And then, with respect Mr. Biskupski the
trustee spent a month asking you where the boat was. The entire month of June in 2019, what was the trustee’s focus? Where’s the boat? So you had information as to where the boat might be, being in Grenada or Trinidad or Tobago and you chose not to share that information with the trustee.
A. While I, I did, and I immediately asked Slavic
by e-mail and I got the bills from him and later he disclosed to me where it is.
Q. Yeah on July the 2nd after the trustee
threatened the RCMP involvement.
A. No. That’s it. He was threatened by RCMP. You
know….
Q. Actually with respect Mr. Biskupski he wasn’t
threatened, both of you were threatened.
A. Yes.
Q. But you just indicated to us that even though
you knew there were two potential places where this boat could be, either Grenada, Trinidad or Tobago, you did not divulge that information to the trustee?
A. You see, the question was, where is Opalka and I said I don’t know.
Q. But you didn’t say it could be at one of these
two places?
A. Well, okay. Could be, you guys you bite me of
my tongue and I say could be and now you are using this could be. Let’s draw the line please.
[51] So, to summarize the following statements were made by the Bankrupt regarding the status of the Yacht, the largest unencumbered asset in this Estate, in the Statement of Affairs:
“A 47 foot Delphi 2016 boat was seized by my home club for non-payment of docking fee”
In the Trustee’s Notes:
“Sailing Boat > 47 ft Delphi 2016 listed at 437,000 U.S.
-registered in Ontario (papers on the boat) Opoka”
In the Chart prepared by the Bankrupt and given to the Trustee as part of the Trustee Notes:
“Sailing Boat Personal [sic] lost in Carabien [sic] $500,000 not pay insurance and docking. Try sell for three mnths [sic]”
in the handwritten Trustee Information Form prepared by the Bankrupt:
“Boat/Trailer OPOKA – Lost Control due to not pay to broker 437,000 US”
[52] To summarize the Bankrupt’s Gale Force maelstrom of testimony under cross-examination from Gertler on the issue of his pre-bankruptcy conduct relating to the Yacht, when confronted with these contradictions the approach of the Bankrupt was:
Deny the contradictions, stating that the failure to pay docking fees to either to Slavek or the “home club” were the same thing “in his mind” or the failure to pay the “Broker” who the Bankrupt meant, “in his mind” was Slavek (as defined below) and the failure to pay Slavek was the failure to pay the “home club”;
For documents prepared by the Bankrupt, blame his “State of Mind” or “Blank Mind” resulting from his “losing everything”;
For documents prepared by the Trustee, blame Charles, and express disappointment at Charles breaching his “Trust”;
Admitting he didn’t tell Charles the location of the Yacht at the time of the swearing of the Statement of Affairs because “He never asked”;
For Statements in Affidavits, blame the “staff”, presumably the staff of his legal counsel;
Admitting he didn’t advise the Trustee that he had discussed with Slavek moving the Yacht to Grenada or Trinidad and Tobago to avoid hurricane season because “Because it wasn’t asked.”
If none of the above were applicable, blame “Slavek” for “seizing” the Yacht, but he was only assuming “Slavek” had seized it because the Bankrupt hadn’t paid “Slavek”, who was also the “Broker”, but without actually finding out if “Slavek” had seized the Yacht or not before swearing that the “Home club” seized the Yacht in the Statement of Affairs.
[53] So, on the date of Bankruptcy, the Trustee was aware of the following facts:
possibly the most valuable unencumbered asset in the Estate, the Yacht;
possibly worth $437,000 US or $500,000 US in the estimation(s) of the Bankrupt;
was in the most mobile state possible;
was located outside of Canada and the direct jurisdiction of the BIA or the Bankruptcy Court;
had been for sale with a “Broker” for three months prior to the Bankruptcy;
may have been seized by the “Home Club” for non-payment of docking fees; or
the Bankrupt had “Lost Control due to not pay to broker 437,000 US”; or
the Yacht was “lost in Carabien [sic] $500,000 not pay insurance and docking.”; but
the Yacht was certainly in the control of third parties;
at an unknown location.
[54] Few fact situations could create a greater liability peril for a trustee than this one.
The Hunt for the Opoka
[55] Sensing this peril, after the Assignment Date of May 21, 2019 the Trustee and Gertler took immediate steps to attempt to locate and secure the Yacht. As timing matters, I have set out the chronology of the Tale of the Opoka at Schedule “A” to these reasons.
[56] In the Second Supplementary Report the Trustee states (“Slavek” misspelled as “Slavic” throughout):
“14. On May 30, 2019 Mr. Philip Gertler, the estate legal counsel (“Gertler’'), wrote to the Yacht Club, to confirm this was the "'home club’’" of Opoka and that Opoka was still at the Yacht Club. Before Gertler’s letter was completed and sent, Gertler spoke to Kiwana who worked at the Yacht Club office. Kiwana advised Gertler that (i) Greg took Opoka away on May 11; (ii) the last email from the Yacht Club to Greg was on May 15, 2019; (iii) Opoka had left for the season; (iv) Kiwana did not know where Opoka went to; (v) Gregory was the only contact person and that; (vi) the contact back and forth was by way of email.
- Gertler's office received an email from the Yacht Club dated June 4, 2019 wherein the Yacht Club advised that Opoka had left the Marina on May 11 2019 and that all of the bills had been paid. A copy of this email is attached to as Appendix "C" to this Second SupplementaryReport. This information was inconsistent with the Bankrupt’s sworn statement of affairs wherein he indicated that Opoka '"was seized by my home club for nonpayment of docking fees''.
LISTING OF OPOKA
The Trustee determined that Opoka had been listed for sale with S&J Yachts ("S&J”) in Annapolis, Maryland. Gertler wrote to S&J on June 12, 2019, a copy of which letter as attached as Appendix “D” to this Second Supplementary Report. In this letter, Gertler notes it is unclear who listed the sailboat with your brokerage given that the Bankrupts ownership interest in the sailboat has vested in the Trustee.
On June 13, 2019 Gertler spoke to Jack Malatich of S&J. Mr Malatich advised Gertler that Opoka had been listed by Slavic (of Navipro Yachts) and that S&J was not in contact with the owner. The involvement of Navipro Yachts is set out in paragraphs 20 through 28 herein. Malatich confirmed to Gertler that he was aware ‘‘'that nothing can happen on the sale of Opoka without the Trustee's consent".
Gertler sent a confirming letter to S&J on June 27, 2019, a copy of which is attached as Appendix “E” to this Second Supplementary Report.
A copy of S&J’s listing for Opoka is attached as Appendix “F” to this Second Supplementary Report. On the first page of the listing there is reference to the (then) current list price as being $448,200 US (12/18). This would suggest that Opoka had been listed for sale since at least December, 2018. Further, on the last page of the listing there is reference to the last revision to the listing as having been June 5, 2019. This would suggest that the listing was revised after the date of the Bankrupt’s assignment. It is trite to say that the broker would not have been able to sell Opoka without the participation of the Bankrupt as the registered owner thereof.
Thereafter the Bankrupt was asked to provide us the (new) location of Opoka. He told the Trustee he was not aware of the exact location of Opoka, but that Mr. Slavek Kroliewicz, of the firm Navipro Yachts had possession of Opoka. attached as Appendix “G” to this Second Supplementary Report is a copy of the email exchange between the Bankrupt and the Trustee in respect of the location of Opoka.
On June 12, 2019 Gertler wrote to Navipro, a copy of the letter is attached as Appendix H” to this Second Supplementary Report indicating that "'The Trustee understands from the Bankrupt that you have possession of the sailboat and that you have issued invoices in respect of the sailboat... in the aggregate amount of $37,875.74. We also understand from the Marina in St. Marteen [sic] that you have moved the sailboat to an undisclosed location. The Bankrupt has advised the Trustee that he is not aware of this location.... Kindly advise forthwith the location (island and marina) of the Sailboat”
[57] On May 29, 2019 Charles sent an email to the Bankrupt (thread at Exhibit B to the Bankrupt’s Affidavit):
“Do you know what club your boat is berthed at in St Maartens?”
[58] It appears (possible time zone issue) the Bankrupt responded 12 minutes later:
“Hi Robert,
Port du Pleasant”
[59] To which Charles responds (although for reasons unknown the top of the email with the time of sending is cut off in the Bankrupt’s Exhibit B leaving only the following text):
“We just talked to Port du Plesant, according to them on May 11, 2019 you, Gregory moved the boat and they do not know where it was moved to.
Please let me know what is happening with the boat, or who has this boat or who other than you would have moved the boat from Port du Plesant as we really need to know where this boat is.”
[60] The Bankrupt provides no further correspondence after this exchange in answer to the Trustee’s very important question, until an email was received by the Bankrupt a week later from Slavek on June 7, 2019.
Enter Slavek
[61] The unusual aspect of this discharge and the Trustee’s opposition was the involvement in this tale of Slavek Krolikiewicz, (“Slavek”) the principal of Navipro Yachts Inc. whose address appears to be in Mississauga, within the jurisdiction of this Court (“Navipro”) and apparently the “broker” referred to in the Bankrupt’s testimony.
[62] On June 7, 2019 Slavek advised the Bankrupt by email:
“Hi Gregory,
Attached is the two final invoices for the boat, let me know if you have any questions.
Because of the total amount and some large incurred cost from last year, I will appreciate if this can be paid asap.”
[63] On June 8, 2019 the Bankrupt advised Charles by email that Slavek had the Yacht:
“Hi Robert,
This is an answer for the guy retaining the boat.
I was afraid, that he had more charges but never invoiced me before I pay the old one.”
[64] That email may be in response to an email that the Bankrupt says that he sent to Slavek in the below cross-examination testimony, but that email from the Bankrupt to Slavek is nowhere in evidence, as the above email string between the Bankrupt Slavek and Charles at Exhibit G to the Second Supplementary Report includes no prior communications with Slavek by the Bankrupt:
A. While I, I did, and I immediately asked Slavic
by e-mail and I got the bills from him and later he disclosed to me where it is.
[65] On June 13, 2019 Slavek responded to Gertler’s June 12, 2019 correspondence:
“Mr. Lee,
The boat was under my care from the fall 2016 and I was assigned on the biat insurace [sic] policy and was resposible [sic] for safety when sailing as well when in ports and in storage.
I was making all those arrangements including insurance coverage.
The boat had to be moved from St.Maarten due to hurricane season and the stipulation in policy that she can't be left in this zone from July 1st to November 1st.
She was move from St.Maarten only for this reason. She is store on ground [sic] and secured and insured until April 202 [sic] I received the first information about the bankruptcy after I send the invoices to Gregory for my services and costs of marinas, storage and insurance.
As per you letter I will instruct the broker in Maryland to remove the listing this boat from Yacht World, and I will still monitor her condition when stored and she will not be moved from there until I receive instruction from the Trustee.
I would like to know when I can expect for the invoices to be paid as the amount is quite large and she of the charges goes back to last year. Notice after i send the last invoice that I didn't include cost of my flights to and from the boat.
Please let me know what plans the trustee has relating to the boat and how we can work together to solve this issue.
Regards, Slavek Krolikiewicz”
[66] On June 17, 2019 in response to requests from Gertler for the ownership documents of the Yacht, Slavek wrote:
“Phil,
I'm outside in marina now, will get to my laptop after lunch.
When would I be able to get the listing agreement back as this is only
security I will have to get paid for the invoice.”
And
“Can the trustee send me promissory note that NaviPro Yachts will be the broker on
record and will pay the outstanding invoice ?”
[67] The same email string in the Bankrupt’s Affidavit at Exhibit “D” on June 17, 2019 continues:
Slavek: “I you see until now I don't have any guaranties that what we agree over the phone will actually happen. I don't understand why he can sign the agreement or promissory note stating that?”
[68] On June 18, 2019 Gertler again wrote to Slavek:
“Slavek,
I have forwarded your email to Mr. Charles, the trustee.
He confirms that on the condition that you provide to us the ownership for Opoka (so that we may confirm (i) the bankrupt's ownership and (ii) the fact that there are no liens against Opoka), the trustee will list Opoka for sale with you and, upon the successful sale of Opoka you will be entitled to deduct from the purchase price your commission and your outstanding invoice.
I trust this satisfies your concerns.
Please forward to me the ownership for Opoka.”
[69] On June 20, 2019 Slavek responds:
“Phil,
Sorry for late reply , but was out of town.
I don't understand why the trustee can put this what you wrote in email in writing and signed.
As you can see I want to work with you and the trustee to sell her, but I need assurance (in writing).”
[70] On June 21, 2019 at 11:26 AM EDT Gertler responds:
[71] Interestingly, in the version of this email correspondence that is at Exhibit “D” to the Bankrupt’s Affidavit, the Bankrupt attaches this string of correspondence between Slavek and Gertler, because Slavek forwarded the string to the Bankrupt on June 21, 2019 at “12:41 PM” (time zone unknown) with the message: “To dostalem dzisiaj” (in Polish meaning “I got this today”).
[72] When no ownership papers were received, on June 25th the Trustee sent a Demand under s.164 of the BIA to Navipro and Slavek requesting the ownership documents for the Yacht and the location of the Yacht.
[73] On June 28, 2019 Slavek responded:
“Robert,
Unfortunately for un know [sic] two [sic] me reason you did want to give any sign promissory note or sign the listing agreement you lawyer agreed to it in emails.
NaviPro Yachts or myself are not in possession of the boat, she was moved from St.Maarten for safety reason due to hurricane season to location that is much safer.
Gregory Biskupski has now the copy of Vessel Registry as well the location of the boat as he was my client, please contact him for this information.
Please be advised that NaviPro Yacht did stop payment for the boat storage as well cancel the payment for boat insurance.”
[74] Charles, having received this new alarming information from Slavek inquired of the Bankrupt on June 28, 2019 as to the location of the Yacht, given that Slavek advised that the Bankrupt was in possession of the ownership documentation and the location of the Yacht.
[75] It should be noted that of the Navipro invoices at Exhibit “C” to the Bankrupt’s Affidavit that the Bankrupt received from Slavek on June 8, 2019 totaling $33,832.61 and $4,043.14, some $9613 was for the “Insurance Coverage” and $4552.94 was for storage at the new Marina, that Slavek reported that he had somehow issued a “stop payment” with respect to in his June 28, 2022 email.
[76] No response having been received from the Bankrupt, Gertler tried again with the Bankrupt on July 2 asking:
“Slavek's June 28, 2019 email to Robert Charles Included the following statement:
Gregory Biskupski has now the copy of Vessel Registry as well the location of the boat as he was my client, please contact him for this information.
We are contacting you for this information.”
[77] An hour later the Bankrupt responded:
“Hi Philip,
I am in Mexico now and I don't get all emails on my gmail account. I don't have this email. Same as my sent emails don't got thru as well. I face this problem all time for last three weeks.
I will follow up with NaviPro now.”
[78] Two days later on June 30th the Bankrupt responded:
“Hi Robert, I requested information from him. Hpefully [sic] he will provide it for me. As soon I get it I will forward it to you.”
[79] Having had enough of this seeming three-card-Monte game being run by the Bankrupt and Slavek, on July 2 at 7:58 AM Charles emailed the Bankrupt, Slavek and Gertler stating:
“Gregory,
It is nice you have requested information from Slavek that he says he has already told you.
For the last time. WHERE IS THE OPOKA?
If I do not have an answer from one or both of you and Slavek by 5 p.m. Eastern time today, Mr. Gertler, the estate counsel will be arranging examinations under oath of one or both of you and i will be referring the matter to the RCMP Commercial Crime unit for its investigation under charges of theft, several bankruptcy-related criminal offences and whatever else they decide.
Govern yourselves accordingly,”
[80] At 10:56 AM on July 2, the Bankrupt responded:
“Hi Robert,
I don't understand where you read that I have the information. I don't like to "play" the words.
I suspect he wants to register the lean [sic] against the boat to protect his money. I thing [sic] as soon he does it {might be today) I will get the full information. I had Opoka registration document in my emails at work and it was lost due to taken over by
receiver. I hope to get accurate location of Opoka today.
I lost everything from the company by acting honestly as well home and the boat personally. I try help you as much as I can. The statement which you make is absolutely not fair or correct. I never steal anything in my life and I don't plan to do it.”
[81] On July 2, 2019 at 1:11 AM, 42 days after the Bankrupt assigned himself into Bankruptcy, the Bankrupt forwarded to Charles and Gertler an email he received from Slavek at apparently 10:16 AM (although there may be time zone issues) that the Yacht was at “Spice Island Marine, True Blue, Grenada” stating:
“Hi Robert,
I am really disappointed how this turn around. I asked Slavek to resend me his email and I haven't received it as yet. I have access to this email only periodically and it tells me that I am not connected to Gmail. Hopefully you will get it.”
[82] That afternoon Gertler spoke with the Spice Island Marina in Ste. George’s Grenada and confirmed that the Yacht was at that Marina. At this point the Trustee states it took possession of the Yacht and registered its interest in the Yacht, some 42 days after the assignment, and approximately 64 days after the Bankrupt first darkened the Trustee’s door.
[83] After all of this Parlay, it does not appear that either Slavek, or the Bankrupt ever provided the Yacht’s original ownership papers to the Trustee, despite Slavek’s many and varied attempts a leveraging those ownership papers and the location of the Yacht into a payment of the amounts that he claimed were owing to him by the Bankrupt, ultimately telling the Trustee that the Bankrupt had the papers, which the Bankrupt then claimed that somehow the original ownership papers that the Trustee had been seeking from Slavek, had been lost by the Bankrupt in his “emails at work” when Grant Thornton took over as Receiver of Ula-Matic.
[84] But that was not the end of this attempt at Privateering by Slavek, as during the high seas drama of the “Hunt for the Opoka” set out above, a digital boarding party made the following registrations against the Bankrupt (all after bankruptcy) and the Opoka under the Repair and Storage Lien Act (Ontario) (the “RSLA”) and the Personal Property Security Act (Ontario) (the “PPSA”):
a. File number 75278823; registration number 20190627 1514 1901 7294 in favour of Quality Custom Painting Renovation and Contracting Ltd. (“Quality Custom Painting”). The collateral classification is indicated as being consumer goods and equipment with the amount secured of $87,000. The general collateral description states: “DELPHIA YACHT 47 HULL NO? PL-DELMR038H617 HST INCLUDED IN LIEN AMOUNT”;
b. File number 752747967; registration number 20190626 18321902 9021 in favour of Navipro Yachts Inc. registered under the RSLA and the general collateral description reads: “SAILBOAT DELPHIA 47 HUL NUMBER PL-DELMR038H617 NAME ?0POKA?”; and
c. File number 752618673; registration number 20190624 1150 1901 5984 in favour of Wojtek Makarski . (“Makarski”) The collateral classification is indicated as being consumer goods, equipment with the amount secured of $35,000. The general collateral description states “DELPHIA 47- BOAT VESSEL NAME? OPOKA”
[85] From the registrations, it would appear that they were made on June 24, 26 and 27, 2019 in the period after the first position taken by Slavek linking provision of ownership documents with payment on June 17, and around the making of the s.164 Demand by Charles, but before Slavek responded to the s.164 Demand on June 28, and before the Bankrupt stated, on July 2:
“I suspect he wants to register the lean [sic] against the boat to protect his money. I thing [sic] as soon he does it {might be today) I will get the full information.”
[86] What was the basis of the Bankrupt’s “suspicion”? How did he know about the purported timing of Navipro registering a “lean”?
[87] Eventually it appears that after demands were made by Gertler to discharge these liens, Quality Custom Painting and Makarski discharged their registrations against the Yacht and the Bankrupt having been for amounts allegedly owing for work done by them, prior to bankruptcy on the Bankrupt’s House, and registered after Bankruptcy, making applicable, inter alia, the provisions of s.20 of the PPSA.
[88] It is unclear from the Second Supplementary Report whether Navipro, of the City of Mississauga in the Region of Peel, has discharged its purported RSLA lien. However, given the provisions of the Canada Shipping Act, as well as issues related to the global application of the RSLA as well as ss.7(5), 9, 10, 12 (and specifically 12(5)), Part IV generally and specifically s.24, and s.28(6), and the provisions of ss.4.2, 69.3, 201, 203, and 204.3 of the BIA, I would hope that Slavek is a better sailor than he is a lawyer, given the utter ineptitude of this nautical escapade.
[89] The Bankrupt’s evidence on this saga in the Bankrupt’s Supplementary Affidavit sworn in August 2022, after the recovery and sale of the Yacht states:
Subsequent to delivery of the Statement of Affairs, I answered every question of the Trustee as swiftly and as accurately as I could. In May, 2019, I did not know where Opoka was and was wholly dependent on Slavek for such information, a fact that I reported to the Trustee. I note from the Exhibits to the Second Supplementary Report that the Trustee had Slavek's name and contact information and knew that Slavek was exerting control over Opoca by no later than June 8, 2019 and that Slavek and the Trustee's lawyer were in direct contact as early as June 13, 2019.
Despite the Trustee being in contact with Slavek, I also communicated with Slavek in an attempt to obtain the location of Opoka. When he finally advised me that it was at Spice Island Marina in Granada, I advised the Trustee within hours.
In June and July, 2019, I was in Mexico working on a job. I had limited access to email and this was known to the Trustee. Despite this, when he raised an issue with liens on Opoka and when the Trustee asked me questions about the lien applicants, I provided him with all the information I had to assist him in resolving those outstanding liens.
Sale of the Boat
In his Second Supplementary Report, the Trustee advised that he has finally sold Opoka, but that he only obtained approximately 40% of the appraised value of the boat.
I note that the Trustee knew that Opoka was in the control of Slavek by June, 2019 and by his own admission, had possession of Opoka by July, 2019. He blames both me and Covid for the low sale price.
20.With respect to Covid, it did not start to seriously impact sales transactions until March, 2020. By that time, the Trustee had possession and control of Opoka for 8 months.
- The Trustee also blames Opoka being situate in Granada as a reason why it did not sell more quickly and for a better price. As stated above, I had nothing to do with Opoka being in Granada. Second, once the Trustee had possession of Opoka, if the Trustee believed he could get a better sale price for Opoka in Miami or another port, then it was surely up to him to move Opoka, over which he had control, to a better sales location.”
[90] A differently worded version of this tale, and the Bankrupt’s role in it, is in the Bankrupt’s Affidavit sworn in November 2021, in the “best defence is a good offence” spirit:
“4.Fundamental among the allegations against me, is the false claim that I moved the Opoka from St. Maarten to Grenada after the date of my assignment in bankruptcy on May 21, 2019. Attached as Exhibit C to the Trustee's Supplementary report dated November 19, 2021, is a copy of a letter from the lawyer for the Estate that he confirmed with the marina in St. Maarten that the Opoka left St. Maarten on or about May 11, 2019, - a full ten (10) days before my assignment in bankruptcy.
Prior to my bankruptcy, I advised the Trustee that I believed that the Opoka was in St.Maarten as they would have asserted a claim against the boat for unpaid dockage fees which I was unable to pay due to my insolvency. The Trustee asked me via email on May 29, 2019, if I knew what club the boat was berthed at in St. Maarten, and I advised him the same day May 29, 2019, that it was at Port du Plesant. Attached hereto and marked as Exhibit "B" to this my Affidavit is a true copy of the said email exchange between the Trustee and myself.
Although insurance plans were finalized by at least April 2019, for the annual move of the vessel out of the hurricane region, in this case from St. Maarten to Grenada to save on expenses, I was not aware that the boat had already been moved until I was advised by the Trustee or his lawyer.
From the time that I purchased the Opoka, and prior to that with a smaller vessel, Slavek Krolikiewicz ("Slavek") of NaviPro Yachts had day-to-day care and control of the vessel including all repairs, maintenance and upgrades, locating and recommending suitable docking and storage, and most importantly, piloting the vessel over open waters, especially annual moves of the vessel into and out of the Caribbean hurricane zone as required by the applicable insurance policies. Slavek was the only licensed captain qualified to pilot the vessel in open ocean, which gave him a significant amount of autonomy.
Some time prior to declaring personal bankruptcy, the relationship with Slavek deteriorated when he learned that I would be unable to pay his outstanding charges for Marine services rendered, which I knew would be significant, although I had not yet received a formal invoice or invoices. Attached hereto and marked as Exhibit "C" to this my Affidavit is a true copy of the invoices I received some Slavek via email on or about June 7, 2019. I note that his invoice 040519 includes an amount for docking in St. Maarten in amount of $5,437.00, which he must have paid to secure the release of the vessel.
Once Slavek realized that my bankruptcy was going to interfere with me paying his outstanding charges, he never disclosed to me where the Opoka had been moored in Grenada fearing that the location of the boat would be his only security to ensure that the Trustee paid his outstanding charges.
10 Slavek and the lawyer for the Trustee, Philip J. Gertler, embarked upon an exchange of emails between June 17, 2019, and June 21, 2019, which made it clear that Slavek was in possession of the boat and the ownership papers for the boat, not myself, that he knew the current location of the boat, and was withholding its location in an exchange for satisfactory assurances about getting paid. Apparently the assurances given by the Trustee's lawyer were insufficient, and no immediate disclosure of the new docking location of the Opoka was provided by Slavek to the Trustee and/or their lawyer. Attached hereto and marked as Exhibit "D" to this my Affidavit is a true copy of the said exchange of emails above mentioned.
In response to the apparent lack of progress, the Trustee issued a demand under Section 164 of the Bankruptcy and Insolvency Act, solely addressed to NaviPro Yachts Attn: Mr. Slavek Krolikiewicz dated June 25, 2019, attached as Exhibit "D" to the Trustee's Supplementary Report of November 19, 2021. By email dated June 28, 2019, from Slavek to the Trustee, Slavek simply deflected, alleging that he had now provided me with a copy only of the vessel registry and the current location of the boat, although he had not, but alleging he was no longer in possession of the boat and making no disclosure as to the location of the original ownership documents nor the location or the boat, which he was clearly aware of. In response the Trustee issued a final email to both myself and Slavek demanding the location of the boat by 5:00PM Eastern Standard Time, July 2, 2019, or he would be referring the matter to the RCMP Commercial Crime unit for investigation. This latter exchange of emails is set out in Exhibit "F" to the Trustee's Supplementary Report of November 19, 2021.
In response to this demand, Slavek emailed me the location of the Opoka, namely Spice Island Marine in True Blue, Grenada, on July 2, 2019, which I forwarded to the Trustee shortly after that, which was the first time I was made aware of the marina to which the Opoka was moved on or about May 11, 2019. Attached hereto and marked as Exhibit "E" to this my Affidavit is a true copy of the aforesaid email to me with the new location of the Opoka and my forwarding email to the Trustee, together with a copy of the Certificate of Registration now provided by Slavke [sic] to myself.
By email dated April 17, 2021, Slavek wrote to Spice Island Marine clearly stating that he was "the captain who grind the boat to your yard in 2019". The marina responded confirming that he was the individual who dropped off the boat at Spice Island Marine. Attached hereto and marked as Exhibit "F" to this my Affidavit is a true copy of the email exchanges of April 17, 2021, and April 19, 2021, between Slavek and Spice Island Marine with respect to the above.
Based on the May 11, 2019, departure date of the Opoka from St. Maarten, as stated in the Trustee's materials, the approximate distance of 400 miles from St. Maarten to Grenada would only require a sail of two (2) days, putting the arrival date at Spice Island Marine, in Grenada, at May 13, 2019, at least eight (8) days prior to my bankruptcy.
Even if I had possession of the vessel and the cooperation of the captain, Slavek, who by this point had his own agenda to secure his unpaid charges, I did not have the resources to pay for the maintenance, preparation and crew charges, including the captain, for a major voyage in open waters of at least 2200 miles from St. Maarten to Miami, let alone the unpaid docking charges in St. Maarten, which appear to have been paid by Slavek to secure the release of the vessel (although Slavek states in his email of June 28, 2019, to the Trustee that he stopped payment for the boat storage (presumably in St. Maarten) as well as cancelling payment for the boat insurance - as included at Exhibit "E" to the Trustees Supplementary Report of November 19, 2021).
Despite the fact that it would have been usual to move the vessel annually before hurricane season, and despite the fact that the vessel was in fact moved before my assignment in bankruptcy, the Trustee now alleges significant increased disposition charges for which it is unjustly and unfairly attempting to hold me responsible. The fact is that the Opoka is an oceangoing vessel and it is still in the same general area of the Caribbean and disposition costs anywhere in that vicinity would likely be comparable. I believe that any complications relating to the disposition of the vessel are more likely attributable to the COVID-19 pandemic which nobody could have predicted would occur approximately ten (10) months after my assignment in bankruptcy.
Prior to my bankruptcy, I discussed my vessel with the Trustee, which would need to be looked into given the size and value of the vessel, and that the vessel was unencumbered, other than any claims of the marina docking the boat in St. Maarten, and apparently a Marine lien by Slavek, the boat's captain (which Marine lien the Trustee apparently proposes to challenge at some point). The Trustee candidly indicated he did not have much experience with oceangoing sailboats, but apparently had a friend who could help him with that and was comfortable taking on the bankruptcy. By on or about June 24, 2019, the Trustee had rightly transferred title to the vessel into the name of the Trustee. Attached hereto and marked as Exhibit "G" to this my Affidavit is a true copy of the Transport Canada Ship Registration Computer System showing the new ownership registration for the Opoka in favour of the Trustee. Once I forwarded the new location of the Opoka from Slavek to the Trustee on or shortly after July 2, 2019, the Trustee had legal title to the vessel and constructive possession of the vessel, no doubt immediately writing to the marina, although that correspondence was not shared with myself or my lawyer. At that point, there was practically no further assistance that the Trustee required of me, nor that the Trustee desired.
At paragraphs 15 and 16 of the Trustee's Supplementary Report of November 19, 2021, and in particular Exhibit "G" of the said Trustee's Supplementary Report is a thinly veiled suggestion that I was somehow assisting the two (2) PPSA lien claimants to make improper PPSA claims, intended to somehow make it more difficult to deal with the vessel. At no time did I assist, counsel or suggest either PPSA lien claimant, Quality Custom Painting Renovation & Contracting Ltd ., and/or Mr. Wojtek Makarski, to make false, and ineffective PPSA registrations after the date of my bankruptcy, or any time prior thereto. These two (2) PPSA lien claimants knew each other and it was no secret that I owned a large sailboat that would have been registered with Transport Canada where details of my boat were publicly available. The Trustee however correctly recites in paragraph 16 of its Supplementary Report of November 19, 2021, that I promptly advised the Trustee that these two (2) parties had not done any work on my sailboat, but had performed renovation work to my residence (which was already heavily encumbered and which would have been disclosed by the most rudimentary of title searches). In any event, I understand that both of these PPSA liens were released by the PPSA lien claimants after demand by the lawyer for the Trustee, so any impact of these withdrawn PPSA liens would appear to have had little or no effect upon my bankrupt estate.
The lawyer for the Trustee explicitly stated in his letter of November 2, 2021, in the third paragraph that "We do not intend to answer the questions posed by you relating to the Opoka save and except to note the following ..... " (which all relate to the alleged conduct of myself, and gives no helpful information as to when or if the Opoka will be sold). Despite this complete lack of transparency, the Trustee still wishes to delay my discharge until the Opoka is sold with no indication of when that might be, or how that sale might be effected. The Trustee has now had almost 29 months from the time that the current location of the Opoka was conveyed to the Trustee by me (after I received it from the boat's captain), without any disposition of the Opoka, nor any indication at all as to when the boat will be sold.
[91] As summarized above, Gertler cross-examined the Bankrupt with respect to some of the contradictions between what information the Bankrupt provided to the Trustee prior to bankruptcy, which belies his statement at paragraph 17 of the Bankrupt’s Affidavit that :
“Prior to my bankruptcy, I discussed my vessel with the Trustee, which would need to be looked into given the size and value of the vessel, and that the vessel was unencumbered, other than any claims of the marina docking the boat in St. Maarten, and apparently a Marine lien by Slavek, the boat's captain”
[92] Similarly Gertler explored other contradictions in the Bankrupt’s conduct post-bankruptcy relating to the locating and securing of the Yacht from the piratical machinations of Slavek:
[at page 52 referring to paragraph 9 of the Bankrupt’s Affidavit]
MR. GERTLER: Q. Okay. Page four. You see at the
top of the page paragraph nine? “When Slavic realized that my bankruptcy was going to interfere with paying his outstanding charges, he never disclosed to me where Opalka had been moved to me in Grenada. Fearing that the location of the boat would be his only security to assure that the trustee paid his outstanding charges. That paragraph suggests Mr. Biskupski that, and this is your sworn affidavit, that you knew the boat was in
Grenada.
A. No.
Q. Did you ever advise the trustee….
A. To me it could be true.
Q. Well but that, in your affidavit you said that
he had never disclosed to me where the Opalka had been moved in Grenada, suggesting you knew the boat was in Grenada.
A. I knew when I wrote this document that it was
in Grenada, but at that time I didn’t know.
Q. So when did you first become aware that the boat was actually in Grenada?
A. When he sent me an e-mail in Grenada, it was
July I think 2nd or 4th. And I replied right away, July 2019.
That’s when I learned where the boat is.
Q. So not until July 2nd.
A. Probably July 2nd. Yes.
Q. Okay.
A. E-mails were quickly exchanged.
Q. So tell me, circling back a little bit, in the
NaviPro invoice we talked about earlier, the first line item was boat delivered to Annapolis to Saint Martin, the cost was $5,250. So you’re saying to us that in 2016 and, sorry 2017, 2018 Opalka spent the, call it the off-season, in Annapolis?
A. Yes.
Q. Wasn’t that pretty expensive?
A. Yes it was.
Q. Was she in the water or was she on the….
A. She was on the water. You ask this already.
Q. Yes. But you also said she’d been hauled. You
said she had been hauled, the boat had been hauled when
obviously it hadn’t been.
A. Well it depends how you interpret words. How
the holding or the putting out of the water, if you say, I would say no.
Q. Hauling about, and as a sailor I would suggest
to you, and Your Honour I would apologize because I’m giving evidence but hauling a boat suggests it’s been taken out of the water.
A. I didn’t know that.
Q. Okay. So Opalka was in Annapolis for the, in
the fall of 2018 is that correct?
A. Fall 2018 yes.
Q. Alright and I’d like to refer you now to the S
& J Yachts listing for Opalka, which is found at A33. Do we have a page number on that?
MR. GERTLER: Q. Yes. When was Opalka listed?
A. This was a process by Slavic but we discussed
this beginning of December 2018.
Q. So when it says, I’m going to show you where
it says 47-foot Delphia, year 2017 current price $448,200, then it says 12/18, do you see that?
A. Yes.
Q. So that’s when you listed the boat?
A. That’s when I decided to list it…
Q. Okay.
A. …through a trial company.
Q. Sorry I didn’t catch that last part.
A. To help the company.
Q. Oh to help the company. Okay. And who chose
the S&J Yachts?
A. That’s Slavic’s. They incorporate together. They were both Delphia representatives in the past and they
incorporate together.
Q. And did you speak to the people at S&J Yachts
when the boat was listed?
A. No. It was through Slavic.
Q. Who signed the listing agreement?
A. Probably Slavic.
Q. So you listed your asset, that you’re listing
worth $448,200, you, with S&J Yachts and you never speak to
them?
A. No.
Q. Never speak to them at all?
A. No I did. I met with them because when I went
to Annapolis they were there.
Q. And what did….
A. They knew me. I knew them.
Q. Oh you did know them?
A. Yes. Because they were beside this marina
where the boat was docked.
Q. Which explains perhaps why they got the
listing. And did you discuss the listing with them?
A. No. I discussed only with Slavic that I need
money and that’s all.
Q. So when you met the people with S&J what did
you talk to them about?
A. I met them before that date not after. I met
them in summer when I was in Annapolis. Because they were taking care of a little bit of the boat as well, sometimes.
Q. They were taking care of the boat? So, and how
long did the listing, so you think Slavic was the one who chose this broker?
A. Yes.
Q. And Slavic was the one in contact with this
broker?
A. Yes.
Q. And what was your understanding with NaviPro
about the listing? Like what was he going to get out of this?
A. I didn’t discuss this part at all.
Q. Again, Mr. Biskupski I understand that you were having pressures at work, but this was an asset with a substantial value. You just left this all with Slavic to deal
with?
A. Yes.
Q. Okay. And after you filed your assignment, did you contact S&J to say look you have to cancel the listing because I’m now bankrupt?
A. No.
Q. Why not?
A. Because I didn’t know even the boat was listed. I just, it didn’t cross my mind.
Q. You just told us the boat was listed.
A. Yes, it was but I didn’t know. Slavic was the one to contact them. I didn’t contact them because I didn’t contact the marina.
Q. Okay. Then I’m looking at the last page of that listing. Can you go to that page?
A. Yes.
Q. It says last revised June 5, 2019. You see that on the last page?
A. Yes.
Q. This is after the date of your bankruptcy isn’t it?
A. Yes.
Q. Any idea what the revision was?
A. No.
Q. Was there a revision made with your authority?
A. No.
Q. Okay. So we get to June of 2019, trustee’s looking for the boat, you don’t know where it is, what kind of discussions are you having with our friend Slavic at that point?
A. I really didn’t discuss with him. He sent me
only once e-mail, forward from his phone, which is attached
document and he got letter from you that had been threatening about the boat. And I see then, you guys were trying to engage in the discussion between and I sat on the side because he is supposed to be that guy who settles the boat.
Q. Right.
A. I hoped that everything was right.
Q. And when was the last time that you had
communication with him?
A. By when?
Q. Well I guess, sorry, you are in communication
with July 2nd because…
A. Yes.
Q. …he finally tells you where the boat is.
Before then?
A. He sent me one of your, it’s also attached in
my document and he attached, sent to me, your letter sent to him looking for the boat.
Q. And that was the e-mail of June 21st I think it
was?
A. Yes I think so.
Q. Okay. With the, what he said, his e-mail to
you, referring to my e-mail was in Polish.
A. Yes it was.
Q. And what does it mean in English?
A. It says “That’s what I’ve got.”
Q. Okay. Alright. So last item I want to talk to
you about Mr. Biskupski, is in July of 2019, NaviPro registers a financing statement against Opalka. We can sort of understand where they’re coming from, but there’s also financing statements registered by, bear with me Your Honour, Quality Custom Painting Renovation Contracting. Do you know who they are?
A. Yes.
Q. Who are they?
A. He did the renovation of my home.
Q. What work did he do?
A. He finished my basement and reshape a little
bit the sunrooms and we also, we were going to church together.
Q. Sorry to what?
A. To church.
Q. Oh to church. Okay. And on June 27th of 2019 he
registered a financing statement claiming Opalka as collateral for some security interest he had. How did he even know about Opalka?
A. He had been on it.
Q. He had been on….when had he been on it?
A. Just when, actually not on Opalka he’d been on
the previous boat with me. We talk a lot. We were in church
together and then we knew each because we were active in church and also part of it I, when I was approaching Charles Advisory, at certain point he expressed interest to buy my home.
Q. You are talking about Quality Custom?
A. Yes.
Q. Okay. What….
A. And he later said he bought another property.
He cannot do it. In this case, he was well aware of my
situation.
Q. But how was he well aware of the fact that you
had a boat that was in the Caribbean?
A. He knew because I always be proud and I go on
my boat and I go sailing and I sail from there, the parking and storage, we were friends. Q. I appreciate you were friends, but how is it that your friend, and you pointed out this to the trustee, who did work at your house is suddenly claiming a security interest in your boat.
A. He knew another partner, Mr. McCartsky (ph)he
knew also and he talked to, he knew Slavic as well. Each other they knew together.
Q. Was he friends with Slavic?
A. I wouldn’t say they’re friends but he knew him
well too.
Q. Okay. So you really have no idea of knowing
why this gentleman would have registered a financing statement?
A. No.
Q. Okay. What about Mr. McCartsky (ph) because he
also registered a financing statement against you?
A. I found because I asked him recently…
Q. Yeah.
A. …and I found then that Slavic called him to
help him register his loan. Against the boat and that’s how he learned and he called Roman because they know and they did all three together. This is the, that’s what I found probably a month ago.
Q. And why didn’t you….
A. That’s the true story.
Q. Okay, but….
A. I didn’t know by then.
Q. But why didn’t you put that in your affidavit
in mid-April?
A. I just, like I said, just April, I didn’t
know.
Q. Sorry mid-August.
A. I found this after….
Q. You swore on an affidavit….
A. …after the affidavit.
Q. Sorry, I thought you said you found out about
a month ago, which would have been before.
A. Yeah I just, I talked to him a couple weeks
ago, a few weeks ago.
Q. Okay.
A. And I found out.
Q. So you had nothing to do with it?
A. Nothing. That’s why I responded to trustee
right away that I had nothing to do with the boat in timely
fashion and I did the best with what I could at the time.
Q. Okay thank you.
THE COURT: When you mentioned Roman, I take it
Roman is the Quality Custom Painting and
Renovation right?
GREZEGORZ BISKUPSKI: Yes.
THE COURT: What’s his last name?
GREZEGORZ BISKUPSKI: Roman Korus.
THE COURT: Just for the sake of spelling how do
you spell Korus?
GREZEGORZ BISKUPSKI: K-O-R-U-S.
THE COURT: Okay. All right. Because you
mentioned, you mentioned Roman but you didn’t sort
of relate it to anybody.
GREZEGORZ BISKUPSKI: He’s the owner of Custom
Painting.
MR. GERTLER: And for the record Your Honour, as
noted in the trustee’s materials, all of those
registrations, or the two registrations were
ultimately discharged…”
[93] Despite the statements in the Bankrupt’s Affidavit in paragraph 16 that:
“…Despite the Trustee being in contact with Slavek, I also communicated with Slavek in an attempt to obtain the location of Opoka. When he finally advised me that it was at Spice Island Marina in Granada, I advised the Trustee within hours.”
what struck me in reviewing the Bankrupt’s Affidavit and the Bankrupt’s Supplementary Affidavit and the exhibits thereto, to prepare the chronology for the Tale of the Opoka, is that, nowhere in those affidavits, or exhibits, does the Bankrupt point to any details of any specific communication by telephone or email of any kind FROM the Bankrupt TO Slavek, much less any specific communication asking his “friend” Slavek “Where is my $500,000 US Yacht?- I need you to cooperate with the Trustee”. Not one.
[94] Another oddity is that in response to the following statements in the Trustee’s Supplementary Report:
“8. The Bankrupt was initially referred to the Trustee after the Court appointment of Grant Thornton as the Receiver of Ula-Matic, the Company (business) owned by the Bankrupt, by Receivership Order dated April 8, 2019 on the application of Bank of Montreal (“BMO”). At the initial meeting between the Bankrupt and Robert Charles of the Trustee's office (“Charles”) held on April 30, 2019 the Bankrupt advised Charles that he had opposed the appointment of the Receiver and the Court had adjourned the application and given the Bankrupt a period of thirty (30) days to find another lender to replace or take-out BMO. The Bankrupt further told Charles he had found another lender, but they would not lend the same amount of money as had BMO. The Bankrupt told Charles he was $20,000 short, and that resulted in his inability to replace BMO, and the appointment of the Receiver by the Court.
As noted in paragraph 30 herein, the Trustee obtained a search under the Personal Property Registry system and determined there were no registered financing statements in Ontario in respect of Opoka in favour of BMO.. Further, the Trustee was advised by a representative of BMO (who was acting as one of the estate inspectors) that the Bankrupt had used a line of credit on his house to pay out the original loan on Opoka. In other words, as at the date of the Bankrupt's assignment. Opoka was an unencumbered asset that was valued by the Bankrupt’s yacht broker as being worth $448,200 (USD) in December 2018.
Given the difficult financial situation the Bankrupt was in as described in paragraph 8 herein, it is not clear to the Trustee why the Bankrupt did not try to use the value of Opoka, listed for $448,200 (USD) in December 2018 (see paragraph 19 below) and unencumbered, to obtain the additional financing he needed to keep Ula-Matic in business by replacing the BMO financing.”
[95] The Bankrupt’s response in the Bankrupt’s Affidavit was:
“10. At paragraph 8 of the Second Supplementary Report of the Trustee, the Trustee suggests that I told him I was $20,000.00 short of being able to obtain alternate financing and keep Ula-Matic out of bankruptcy. I do not know where he gets this from. My shortfall was a lot closer to $2,000,000.00 due to cash flow and short sales issues. In the end, nothing I could have done with Opoka would have saved Ula Matic or prevented by own assignment in bankruptcy.”
[96] If that was the case, why was the Yacht listed for sale in December 2018 if the situation with Ula-Matic was hopeless? The Bankrupt’s testimony was that he was using his home as additional collateral to prop up Ula-Matic. The Bankrupt also states in his cross-examination:
Q. Yes. When was Opalka listed?
A. This was a process by Slavic but we discussed
this beginning of December 2018.
Q. So when it says, I’m going to show you where
it says 47-foot Delphia, year 2017 current price $448,200, then it says 12/18, do you see that?
A. Yes.
Q. So that’s when you listed the boat?
A. That’s when I decided to list it…
Q. Okay.
A. …through a trial company.
Q. Sorry I didn’t catch that last part.
A. To help the company.
[97] I was similarly puzzled as the Trustee as to why a very valuable unencumbered asset, in the sole name of the Bankrupt, was not used as additional collateral to obtain refinancing of Ula-Matic, given it appears that the Court had granted the Bankrupt and Ula-Matic an indulgence from granting the Receivership Order to obtain refinancing. Why was that option not explored instead of trying to sell the Yacht? There is no information in Paragraph 10 of the Bankrupt’s Affidavit or anywhere else in the Bankrupt’s court materials or testimony.
[98] This is not the specific issue to be determined on this Discharge, but it further weighs heavily on the Bankrupt’s explanations for his conduct in relation to his BIA duties in his testimony.
[99] I note that, despite my making the issue of Slavek attending as a witness at this hearing part of my endorsements relating to the scheduling and time allocation for this hearing, no party called Slavek as a witness, or of the other PPSA/RSLA Buccaneers Makarski and Korus.
[100] The Bankrupt denied in his affidavits and in his testimony that he played any role in this attempted Freebooting, squarely identifying Slavek as the ringleader of this attempted conspiracy to digitally commandeer the Opoka.
[101] It will be interesting to see, if Navipro persists in claiming its RSLA lien on the Yacht, whether in those proceedings Slavek will agree to “go down with the ship” and admit that all of the activity relating to the flight of the Opoka was his own doing, without any involvement of the Bankrupt. If he refuses to do so, an issue under the provisions of s.180(2) of the BIA may arise.
[102] But I have none of that evidence of Slavek’s own version of this tale before me on this Discharge. I have just the evidence of the Bankrupt.
[103] In relation to Slavek, I am faced with the Bankrupt’s testimony that, in dealing with the $448,000-$600,000 US Yacht:
that represented the vast majority of the Bankrupt’s unencumbered net worth,
that he was hoping would be sold to “help” Ula-Matic, his and his wife’s sole source of income,
where the BMO loan to Ula-Matic was secured by his House, and which House he ultimately lost, and which BMO loan had been personally guaranteed by both the Bankrupt and his wife, who also went bankrupt,
during the time period where the BMO put Ula-Matic in Special Loans and was bringing a receivership application, and
the Bankrupt had been given a month to stave off that Receivership to refinance,
the Bankrupt’s testimony on Cross-examination was:
Slavek picked S&J Yachts as the broker;
Slavek “probably” signed the listing agreement;
He didn’t deal with S&J only Slavek and never spoke to S&J regarding the listing, the sale price or its terms, testifying “No. I discussed only with Slavic that I need money and that’s all”;
Never discussed with Slavek what Navipro would receive from assisting with the listing;
Never contacted S&J after the Bankruptcy; but also testified
A. Because I didn’t know even the boat was
listed. I just, it didn’t cross my mind.
Q. You just told us the boat was listed.
A. Yes, it was but I didn’t know. Slavic was the
one to contact them. I didn’t contact them because I didn’t contact the marina.
[104] There was no contractual documentation put into evidence between the Bankrupt and Navipro that would set out, with any precision, what contractual rights Slavek and Navipro could exercise over the Yacht, including the listing for sale of the Yacht and the terms of that listing.
[105] It appears that Navipro’s business from its website is also chartering yachts, likely on behalf of owners such as the Bankrupt, but there is also no evidence before me that the Opoka was one of the Yachts that Slavek used to generate charter income, and whether the Bankrupt received a split of any income earned from chartering the Yacht prior to bankruptcy, or whether any such revenue was accounted for by Slavek prior to issuing the May Navipro invoices.
[106] Having heard the testimony of the Bankrupt under oath by Gertler and myself, which I have endeavored to reproduce in these reasons, I find that the Bankrupt was evasive and when questioned turned to the all-purpose answer of “Slavek, Slavek, Slavek” or his “blank mind” or the repeated mantra “I lost everything and I knew I had nothing”, or blaming Charles to explain inconsistencies between his affidavit testimony and the occurrences regarding the swearing of the Statement of Affairs, and the high-seas drama regarding the Opoka.
[107] This is reminiscent of the cross-examination testimony cited by (now) Justice Mills in Re: Wolf Rubin, Bankrupt, 2018 ONSC 501 (“Wolf Rubin”):
“[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.”
[108] It should be noted however, that in this case, after the recovery of the Yacht in July of 2019, that the Trustee is of the view that the Bankrupt did fulfill duties under the BIA, so this is not a case such as Wolf Rubin or Mancini where the Bankrupt has failed to fulfill his duties throughout the Bankruptcy, justifying a refusal of discharge. The Trustee, in his Second Supplementary Report, indicates that this is not an appropriate case for a prosecution under s. 198(2) of the BIA. The Trustee’s opposition is focused on the Bankrupt’s conduct and cooperation before the Bankruptcy and during the “Hunt for the Opoka”.
[109] The Bankrupt prior to Bankruptcy, by his own testimony was an engineer running the multi-million Ula-Matic international business of engineering and producing automated production lines for, inter-alia, the automobile industry.
[110] I have a very, very hard time reconciling the Bankrupt’s background, education, professional qualifications, experiences and skills with the Bankrupt’s testimony before me, and in particular his forgetfulness, inertness and helplessness in dealing with and assisting the Trustee with the depredations of his former “friend” Slavek, his “friend from church” Makarski and Korus.
[111] On these issues the jurisprudence, as well summarized by Re Crowley, cited below, requires that I provide deference to the findings of the Trustee in a s.170 Report and I do so.
LAW AND ANALYSIS
General Law related to determination of discharge of the Bankrupt
[112] In this case, the issue is not a binary decision as to whether or not the Bankrupt has fulfilled a particular duty imposed by the BIA, such as the attendance at a discharge hearing, or the failure to provide a sworn statement of affairs.
[113] In this case the issue is the DEGREE of compliance with the duties imposed on Bankrupts by the BIA. As a result the general principals underlying the discharge provisions of the BIA are particularly important to the making of this determination.
[114] The general discharge principals related to discharge were summarized by Hallett, J. in Re Crowley 1984 Carswell, NS 25:
“[40] 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 (SCC), [1952] 2 S.C.R. 109, 32 C.B.R. 191, [1952] 3 D.L.R. 348, 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.
[41] 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.
[44] 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.).
[45] 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.
[46] 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.
[47] 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., 1922 365 (SK KB), 3 C.B.R. 734, [1923] 1 W.W.R. 966, [1923] 1 D.L.R. 1201 (Sask.). This concept was well stated by Wetmore L.J.S.C., in Re Abbott; Abbott v. Royal Bank of Can.(1983), 1983 592 (BC SC), 50 C.B.R. (N.S.) 182, 48 B.C.L.R. 387 (S.C.), 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".
[48] 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, 1939 513 (BC SC), 54 B.C.R. 428, 21 C.B.R. 180, [1940] 1 W.W.R. 31.
[49] 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.
[50] 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 230 (QC CA), [1944] R.L. 405, 26 C.B.R. 52 (C.A.).
[51] Fifth, if the application for discharge is opposed, the bankrupt should be available for cross-examination: Re Hood(1975), 1975 1976 (ON SC), 21 C.B.R. (N.S.) 128 (Ont.).
[52] 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.
[53] 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 5 (SCC), [1934] S.C.R. 230, 15 C.B.R. 253, [1934] 2 D.L.R. 316; 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.
[54] 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. Richter, supra. This approach has most recently been followed by the Ontario Court of Appeal in Re Gigault, supra, and Re Balson(1982), 46 C.B.R. (N.S.) 319. In the Gigault case, the judge who heard the application in the first instance had required as a condition of discharge that the bankrupt consent to judgment in a very nominal amount and in the Balson case an absolute discharge had been granted. The Ontario Court of Appeal in both cases imposed meaningful payments as a condition of discharge.
[55] Ninth, where a bankrupt takes a reasonable risk in embarking on a new adventure which fails because of economic factors over which he has no control, the bankrupt has satisfied the onus under s. 143(1)(a) of proving that the fact that his assets were not of a value equal to 50 cents in the dollar arose from circumstances for which he cannot justly be held responsible: Re Bayliss and Doerksen, supra.
[56] Tenth, the Act provides no guidelines for the exercise by the judge of his discretion whether to suspend or impose conditions where a factor mentioned in s. 143 is proven. The discretion of the judge is very broad and should not be interfered with on appeal unless the judge, in arriving at his decision, has omitted the consideration of or misconstrued some facts or violated some principle of law: Indust. Accept. Corp. v. Lalonde, supra.
[57] In recent years there has been a trend by this court to impose conditions of payment on the bankrupt as the price for his discharge. This reflects the feeling of the public as stated through the decisions of this court that abuses of the bankruptcy process are perceived. While the vast majority of the public are wrestling with their finances to make ends meet, there is a small percentage, albeit a large number of persons, who are availing themselves of the provisions of the Bankruptcy Act and, in particular, the discharge provisions, to walk away from the debts which they have accumulated. Imposing a condition that a bankrupt consent to judgment in a reasonable percentage of his unsecured liabilities under certain circumstances is not to frustrate the object of the Bankruptcy Act. In fact, not to do so in many cases may offend the integrity of the discharge procedure. Where a debtor owes a substantial number of creditors, it is reasonable that he be freed from their harassment and get on with earning a living under peaceful conditions but subject to a reasonable judgment in favour of the trustee who, based on his knowledge of the debtor's circumstances, can exercise a sensible discretion in collection procedures; it being understood that under no circumstances should a judgment be entered against a bankrupt which he would be unable to pay over a reasonable period of time. Each case must be judged on its own facts as to the causes of the bankruptcy and a decision made as to whether it is appropriate under the circumstances to impose conditions of payment on the bankrupt as a price for his discharge.”
[115] As noted by the Court of Appeal in the leading case on the issue of refusal of discharge Bank of Montreal v. Giannotti 2000 16928 (ON CA), 2000 CarswellOnt 4110, [2000] O.J. No. 4272, 104 A.C.W.S. (3d) 26, 138 O.A.C. 316, 197 D.L.R. (4th) 266, 21 C.B.R. (4th) 199, 51 O.R. (3d) 544 (“Giannotti”):
“11 There is no question that a principal purpose of the Bankruptcy and Insolvency Act (”BIA”) is the rehabilitation of unfortunate debtors. As expressed by Houlden and Morawetz in their treatise, Bankruptcy Law of Canada (3rd ed., rev., Vol. 1, 1998) at p. 1-5:
The Act permits an honest debtor, who has been unfortunate in business, to secure a discharge so that he or she can make a fresh start and resume his or her place in the business community.
12 However, the rehabilitation of the debtor must be balanced with the interests of creditors who have lost money because of the bankrupt’s conduct. This requirement of a balanced approach in discharge hearings was well articulated by Adams J. in Re Goodman (January 19, 1995), Doc. 31-267911 (Ont. Bktcy.), at para. 1:
The rehabilitative purpose of bankruptcy legislation is well understood. See Re Willey (1981), 38 C.B.R. (N.S.) 24 (Ont. S.C.). Individuals and society generally benefit from a process by which the crushing burden of financial debt can be lifted, thereby permitting a bankrupt to resume the life of a useful and productive citizen. See Re Shakell . . . (1988), 70 C.B.R. (N.S.) 270 (Ont. S.C.) Equally important, however, is the integrity of the bankruptcy process itself. While the central purpose of the statute is to enable the honest but unfortunate debtor to make a fresh start, parity of treatment between debtors and fairness to creditors need to be kept in mind.
13 Both Adams J. and Houlden and Morawetz use two adjectives to describe a debtor who should be entitled to the relief of a discharge - “unfortunate” and “honest”. I have no doubt that Mr. Giannotti has been unfortunate. The downturn in the real estate market in the late 1980s and early 1990s ruined many developers. Mr. Giannotti, with millions of dollars in personal guarantees behind his companies, was one of them.
14 However, I do not think that the adjective “honest” applies to the manner in which Mr. Giannotti conducted himself in this proceeding. My review of his testimony at the discharge hearing leads to the inevitable and overwhelming conclusion that Mr. Giannotti has not told the truth to his creditors, his trustee in bankruptcy, or the court at the discharge hearing. In Re Gestetner (November 25, 1996), Sharpe J. (Ont. Gen. Div.) said, at para. 7:
An honest but unfortunate debtor is entitled by the law to have a fresh financial start. The applicants may have been unfortunate, but I find that they have not been honest. In my view, they are not entitled to have the fresh start the law allows them unless they are prepared to be honest with their creditors and with the court. The court has an obligation to ensure that the integrity of the bankruptcy law is maintained. The applicants have refused to provide the court with the information required to make an appropriate judgment. In light of the evidence the applicants have offered and the level of disclosure they have made as to the true state of their financial affairs, I find that they are not entitled to discharges on any terms.
15 I agree entirely with the philosophy manifest in this passage - a dishonest debtor, and a debtor unwilling to make full disclosure of his financial affairs, is entitled to no relief under the BIA. For several reasons, I find that every word of the above passage applies to Mr. Giannotti and, therefore, like the bankrupts in Re Gestetner, he was entitled to no relief at his discharge hearing.
16 First, Mr. Giannotti did not co-operate with his trustee in bankruptcy as the trustee sought to administer his estate. Pursuant to s.170 of the BIA, the trustee filed a report on February 19, 1999 in which he criticized Mr. Giannotti in a number of aspects, including his refusal to provide information about a family trust, his inability to explain why he disclosed different years of birth on his statement of affairs and during his examination by the official receiver, and his failure to co-operate in appearing for an examination pursuant to s.163 of the BIA.
17 In a supplementary report dated June 1, 1999, filed three weeks before the discharge hearing, the trustee expanded on his criticism of Mr. Giannotti. According to the trustee, Mr. Giannotti was continuing in his refusal to provide information about a family trust, he had put the trustee to unnecessary expense by frivolous and vexatious actions regarding his s.163 examination, he had refused to comply with undertakings after the s.163 examination, and he refused or was unable to answer questions about how rent and office expenses were being paid for a business in which Mr. Giannotti appeared to be involved after he became bankrupt.
18 In my view, the integrity of the bankruptcy system requires a bankrupt to co-operate with the trustee. See Mancini (Trustees of) v. Mancini (1987), 63 C.B.R. (N.S.) 254 (Ont. S.C.), Re Adelman(1945), 26 C.B.R. 152 (Ont. S.C.), and Re Rahall(1997), 1997 14970 (AB KB), 49 C.B.R. (3d) 268 (Alta. Q.B.). The trustee is appointed by order of the court. After a receiving order is made by the court, the trustee administers the bankrupt’s estate on behalf of the court. Accordingly, a bankrupt who seeks relief, by way of discharge, from the court must co-operate fully with the trustee before seeking that relief. Mr. Giannotti did not comply with this obligation.”
25 The factors and conduct that I have summarized clearly placed Mr. Giannotti within s. 173 of the BIA. The bankruptcy judge could not have granted him an absolute discharge; his options were to grant either a suspended discharge or a conditional discharge, or to refuse to order any kind of discharge. The bankruptcy judge chose a combination of a suspended discharge and a conditional discharge.
26 The case law establishes that a complete refusal of any type of discharge is an unusual order given the BIA’s emphasis on rehabilitation of the debtor. In Re Adelman, Urquhart J. said that a refusal of discharge “is a harsh step . . . which should be resorted to only in extraordinary cases” (supra, at p. 153). However, in this case, given Mr. Giannotti’s conduct and testimony, a refusal of any kind of discharge was, in my view, required. Mr. Giannotti was simply too unco-operative, evasive and untruthful with both the trustee and the bankruptcy judge.
27 The BIA seeks to provide relief to honest and unfortunate debtors. The word ‘honest’ introduces a strong element of integrity into the administration of the Act. In my view, a reasonable member of the public would seriously question the integrity of the BIA if Mr. Giannotti was given any form of relief at this juncture. He has not been honest with the trustee or the bankruptcy court. He is free to re-apply for a discharge, but he must co-operate with the trustee and make full disclosure of the relevant facts.”
[116] By citing the Court of Appeal in Giannotti, I do not find that the conduct of this Bankrupt is similar to the conduct of the bankrupt in Giannotti, but the principal in Giannotti the integrity of the bankruptcy system requires a bankrupt to co-operate with the trustee, is certainly applicable in this case.
[117] On the general considerations for discharge the Trustee cites in the Trustee’s Factum the Alberta decision of G. A. Campbell, J. of Re Dykes, 2014 CarswellAlta 878, 2014 ABQB 323, [2014] A.W.L.D. 2887, 14 C.B.R. (6th) 98, 240 A.C.W.S. (3d) 548, where the Court states in the context of a discharge opposed by creditors on the basis of s.173(1)(a) but where the Trustee did not oppose under s.173(1)(o) and found that Bankrupt had fulfilled her duties:
“25 The purpose of the BIA is to give an honest debtor who has been unfortunate in their financial affairs a new start in life absent the burden of past debts. Thus, when considering the discharge of a bankrupt the court will examine the circumstances of the debtor's bankruptcy to determine if the debtor is honest but unfortunate and is not bankrupt because of inappropriate or wrongful conduct.”
s.173(1)(o) “the bankrupt has failed to perform the duties imposed on the bankrupt under this Act or to comply with any order of the court”
[118] The Duties under s.158 of the BIA that the Trustee argues are at issue at this hearing are the following:
(a) make discovery of and deliver all his property that is under his possession or control to the trustee or to any person authorized by the trustee to take possession of it or any part thereof;
(d) within five days following the bankruptcy, unless the time is extended by the official receiver, prepare and submit to the trustee in quadruplicate a statement of the bankrupt’s affairs in the prescribed form verified by affidavit and showing the particulars of the bankrupt’s assets and liabilities, the names and addresses of the bankrupt’s creditors, the securities held by them respectively, the dates when the securities were respectively given and such further or other information as may be required, but where the affairs of the bankrupt are so involved or complicated that the bankrupt alone cannot reasonably prepare a proper statement of affairs, the official receiver may, as an expense of the administration of the estate, authorize the employment of a qualified person to assist in the preparation of the statement;
(k) aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors;
And I also find that the most general of the s.158 duties, (o) is also applicable:
(o) generally do all such acts and things in relation to his property and the distribution of the proceeds among his creditors as may be reasonably required by the trustee, or may be prescribed by the General Rules, or may be directed by the court by any special order made with reference to any particular case or made on the occasion of any special application by the trustee, or any creditor or person interested;
[119] With respect to discharges where a ground of opposition under s.173(1)(o) is proven, (now) Justice Mills in Wolf Rubin stated:
“[31] There is no question the bankrupt has failed to perform the duties imposed upon him under the BIA. He has failed to deliver all books, records, documents, writings and papers which in any way relate to his property or affairs. He failed to submit a properly sworn Statement of Affairs that discloses full particulars of his assets and liabilities, the names and addresses of his creditors, the cause of his insolvency and the disposition of his assets.
[32] In considering the bankrupt’s discharge application, I am guided by the principles set out by Anderson J. in Re Raftis[3] wherein the court must have regard not only to the interest of the bankrupt and his creditors, but also to the interests of the public in ensuring the integrity of the bankruptcy and insolvency system is at all times protected. While the honest but unfortunate debtor is to be provided the opportunity of a new start, the bankruptcy courts are not to be considered clearing-houses or viewed as charitable institutions for relief from debt, however incurred. Certainly, discharge from bankruptcy is not a matter of right.
[33] A dishonest debtor and a debtor unwilling to make full disclosure of his financial affairs, is entitled to no relief under the BIA.[4]”
[120] As I noted previously, this case is not factually the same with the bankrupt in Wolf Rubin, where there was a total lack of cooperation by the Bankrupt. The Trustee is not seeking a refusal on this discharge, but rather a discharge conditional on payment of an amount in the range of $75,000-$90,000.
[121] In his Factum, the Bankrupt asserts:
“47. An analysis of the facts of this case strongly indicates that the opposite occurred. Namely, that Biskupski disclosed his assets to the Trustee early and without delay, andparticipated as fully as possible in the process.
Biskupski, pre-bankruptcy, advised the Trustee of the existence of Opoka and the fact that it was under the possession and control of another person.
Biskupski prepared his SoA the day after he made his assignment in bankruptcy.
Biskupski clearly identified Opoka as an asset in the control of one of his creditors in his SoA.”
[122] I disagree. The evidence, and in particular the correspondence I have summarized and cited, as well as the cross examination testimony of the Bankrupt I have also cited, does not “strongly indicate” that the Bankrupt fulfilled his duties.
[123] From his testimony and the documents provided to the Trustee at the time of the April 29 attendance and prior to the signing of the Statement of Affairs on May 21, 2019, the Bankrupt advised the Trustee, alternately that:
-the Yacht had been seized by his “Home Club” which he did not name prior to Bankruptcy, for non-payment of docking fees; or
-had been seized by a “Broker” that had not been paid,
-which “Broker” in his mind was Slavek, not S&J,
-because he assumed, but did not know, that Slavek had incurred costs,
-but Slavek was yet to invoice for those costs until June 7, 2019,
-or that the Yacht had been “lost in Carabien $500,000 not pay insurance and docking”
-He didn’t tell Charles the location of the Yacht at the time of the swearing of the Statement of Affairs because “He never asked”; and
-He didn’t advise the Trustee that he had discussed with Slavek moving the Yacht to Grenada or Trinidad and Tobago to avoid hurricane season “Because it wasn’t asked.”
[124] What the Bankrupt did not clearly advise the Trustee prior to Bankruptcy, while fulfilling his duty in preparing a Statement of Affairs, based on information that he knew in April of 2019, as was elicited in his testimony and the affidavits that he filed, which I have paraphrased as:
“I listed my Yacht Opoka with S&J in December 2018 for $438,000. The Yacht is in the control of my friend Slavek Krolikiewicz of Navipro in Mississauga, who is the captain of the boat with the ability to move it on my arrangement with him. He listed it for sale on my behalf with S&J. Navipro is an unsecured creditor for $8,357, but there may be more charges, and Slavek may claim a lien. We would usually move the yacht ahead of hurricane season because the insurance requires it. The Yacht is at the Port du Pleasant Marina on Saint Martin, but I had talked to Slavek about moving it south during Hurricane season to Grenada or Trinidad and Tobago.”
[125] But he did not clearly provide to the Trustee any of this information that he was aware of in April of 2019. Gertler was eliciting some of this information for the first time during the cross-examination at the discharge hearing, 3 years later.
[126] The Bankrupt cites Re: O’Reilly 2001 Carswell BC 2045 (S.C.) at paras 9 – 13 where the Registrar was considering a discharge opposed by the Trustee under s.163(1)(o) for the failure by the bankrupt to pay the Trustee’s fees. The Registrar did not find that a s.173(1)(o) fact had been proven because he determined that a failure to pay the Trustee’s fees was not a “duty” stating:
“12 In my view, the failure of a family of three to pay monthly administrative fees to the trustee of $250 on an income considerably less than the Superintendent’s Guidelines for a family unit of one person, noting that no payment is required for a family unit of three persons until the monthly net income is $2,449, is neither reasonable, nor qualifies as a failure to perform duties.”
The Bankrupt states that this case stands for the proposition that:
“The determination of whether a bankrupt has performed his or her duties under Section 158 of the BIA can only be determined by an analysis of the facts of the particular case.”
[127] I can find no finding by Registrar Dunn of this principle in the text of the case, but as a general principle underlying the application of the facts to the determination of whether a bankrupt has fulfilled his s.158 duties cannot be disputed, and I have, in great detail, applied those facts.
[128] The Bankrupt also cites Re: Schreyer 2014 CarswellMan 1992 (Q.B.) (“Schreyer”) at para 16 for the proposition:
“48. Where a bankrupt failed to disclose an outstanding action, and spouse’s claims
against the bankrupt when he made his assignment in bankruptcy, and again, when he
applied for his discharge, those omissions constituted a breach of the provisions of
Section 173(1)(o).”
[129] In Schreyer the Court was dealing with an appeal from the decision of the Registrar annulling the Absolute Discharge of the Bankrupt in the wake of the decision of the Supreme Court in Schreyer v. Schreyer, 2011 SCC 35, [2011] 2 S.C.R. 605 (S.C.C.).
[130] The Court states the deception alleged as the basis of the annulment motion was:
“6 In support of his application for a discharge the husband swore an affidavit on July 5, 2002 wherein he deposed to the effect that he was “separated” since November 1999 and that he was “not applying for an equalization payment” under the FPA. Whether this statement found in paragraph 6 of the husband’s affidavit could be categorized as a deliberate attempt to deceive the wife and (or) the trustee, it was unquestionably deceptive. He was, in fact, seeking relief under the FPA. According to the “Answer” that he filed in the Family Division proceeding, he, like the wife, was seeking an equalization (albeit using or advancing significantly different values or amounts for the family assets and debts).”
[131] In the paragraph 16 cited by the Bankrupt the Court in Schreyer states:
“16 Although the learned Registrar concluded that the husband had not committed “fraud’ as that term is used in s. 180 of the BIA, I have no hesitation in concluding that the husband’s failure to disclose the outstanding action and claims of the wife when he made his assignment in bankruptcy (and again when he applied for his discharge), was clearly a breach of the provisions of s. 173(1)(o) of the BIA, which reads:
Facts for which discharge may be refused, suspended or granted conditionally
- (1) The facts referred to in section 172 are:
(o) the bankrupt has failed to perform the duties imposed on the bankrupt under this Act or to comply with any order of the court. [Emphasis added]”
The Court in Schreyer finds:
“17 To proceed as he did (without notice to the trustee or his wife) with his assignment and subsequently in obtaining the discharge is, in my opinion, an abuse of process. Section 121(1) of the BIA provides:
Claims provable
- (1) All debts and liabilities, present or future, to which the bankrupt is subject on the day on which the bankrupt becomes bankrupt or to which the bankrupt may become subject before the bankrupt’s discharge by reason of any obligation incurred before the day on which the bankrupt becomes bankrupt shall be deemed to be claims provable in
proceedings under this Act.
18 By failing to comply with his legal obligations to provide notice to the trustee of his wife’s claims (which would require the trustee to give her notice at the material time) and to continue by applying for and obtaining a discharge without disclosing her claims, if the discharges are allowed to stand any rights which the wife has remaining in her existing action would, by virtue of s. 178(2) of the BIA, be and remain released by the order of discharge.”
[132] Again, as noted with the refusal cases of Mancini, Wolf Rubin and Giannotti, in Schreyer there was a clear failure to provide the information relating to the claim to the wife and the Trustee. As I noted previously, in this case the issue is whether, looked at as a whole, on the totality of the Bankrupt’s conduct, and how long it took the Trustee to obtain the information from the Bankrupt is the issue, did this Bankrupt fulfill his duties?
[133] The Bankrupt in his Factum does not jurisprudentially delve into the specifics of s.158, only s.173(1)(o).
[134] The Trustee in its factum, cites no particular cases, but does cite the provisions of Houlden & Morawetz “Bankruptcy and Insolvency Law of Canada, 4th Edition” (“Houlden & Morawetz”) in relation to s.173(1)(o), and in particular the following:
“The failure of a bankrupt to list his or her property completely, to provide sufficient information as to his or her financial affairs, or to aid his or her trustee and creditors in mitigating the damage caused by the assignment amounted to a failure to perform duties under s. 173(1)(o), justifies the imposition of a conditional order for payment and a suspension of discharge for 6 months following the payment: Re Jefferson (2004), 2004 BCSC 144, 2004 CarswellBC 378, 1 C.B.R. (5th) 209 (B.C. S.C.).”
[135] In Jefferson Registrar Baker was dealing with the discharge of a Bankrupt opposed by his ex-wife who was a creditor by virtue of orders made in their divorce proceedings. In dealing with the degree of disclosure made by the Bankrupt to the Trustee, the Registrar states:
“[36] In my view Mr. Jefferson has not complied with those
duties enumerated in s. 158 above. While the existence and
operation of his company, J.W. Hydraulics Ltd., may have been
obvious to his Trustee at the outset, Mr. Jefferson did not
take care to properly list and value his shareholding or
interest in the company in his Statement of Affairs, except
where the disclosure might benefit him (as, for example,
listing only his shareholder’s loan with the company).
[37] Mr. Jefferson did not deliver, nor did he make any
realistic effort to deliver, the books and records of the
company or its successor proprietorship either to his Trustee
or to counsel for Ms. Larsen so that an accurate understanding
of his financial affairs and prospects could be achieved.
When asked to obtain information or records from third
parties, he rarely did so, and did not execute or offer an
appropriate release or authority to permit the information to
be obtained.
[38] In short, Mr. Jefferson did not actively aid his Trustee
or his creditors in mitigating the damage wrought by his
assignment. He seemed content to remain passive and hope that
the financial storm would blow over.
[39] As far as the offences considered by s. 173(1), I am
satisfied that, quite possibly, Mr. Jefferson’s assets may
have exceeded 50% of the value of his unsecured debts. I have
already expressed considerable doubt as to the value of his
company’s inventory and his (apparent) view of his shares in
the company as being worthless. Based on his own telling,
however, the assets are not greater than 50%. In any event,
he has not accounted satisfactorily for the radical reduction
in value of his company’s worth since his divorce proceedings,
less than one year before his assignment.
[40] Certainly Mr. Jefferson did not keep (or produce)
sufficient books of account as are appropriate or even in
keeping with the history of his company. His facile assurance
that the source documents “went missing” and that his computer
records are not accessible is simply incredible.
[41] It is possible that, had he approached the matter
responsibly and with reasonable candour, that Mr. Jefferson
could have made a viable proposal. To be fair, of course, and
given the rancour engendered by Mr. Jefferson’s divorce
[42] In short, it is, to paraphrase s. 173(1)(o), clear that
Mr. Jefferson has failed to perform his duties while in
bankruptcy. Section 172 therefore presents several options:
the application for discharge may be refused, or it may be
suspended and/or granted on conditions.
[44] Mr. Jefferson has not been as forthright as, apparently,
Mr. Bobyk was. He should not be permitted to shed his court ordered
obligations as he might a dirty shirt. A condition on
his discharge should reflect that and the fact that his income
can support a substantial payment to his Trustee. Moreover, a
suspension is required so that his lack of cooperation and
candour be recorded.”
[136] In that regard Houlden & Morawetz states, inter alia, the following with respect to duties of a Bankrupt generally under s.158(d):
“Section 158(d) imposes a duty on the bankrupt to advise the trustee of all his or her assets and liabilities. The disclosure of liabilities is essential so that creditors will be advised of the bankruptcy and may prove their claims: Re Handelman (1997), 1997 12409 (ON SC), 48 C.B.R. (3d) 29, 1997 CarswellOnt 2891 (Ont. Gen. Div.).”
[137] In Re Handelman (“Handelman”) Farley, J. was dealing with a bankrupt’s appeal of a s.69.4 Order issued after discharge lifting the stay to proceed against the bankrupt as a result of the Bankrupt not naming a creditor in the Statement of Affairs. He states the following regarding the duty of a bankrupt to provide an accurate statement of affairs:
“2 The BIA must be given efficacy in the insolvency context. That is, the language of the Act must be given a reasonable interpretation which supports the framework of the legislation. Unless the language is unambiguous, an absurd result should be avoided.
3 S. 158(d) creates a duty upon the bankrupt to advise the trustee of all assets and liabilities. As for the liabilities aspect, this is internal to the creditors being alerted so that they may prove their claims in bankruptcy. What would this system devolve into if creditors were put in a position of having the bankrupt released from liabilities to the creditors in cases where the trustee was not advised and the creditors remained in the dark as to the person going into bankruptcy? Would creditors have to constantly review the status of bankruptcy proceedings? I am of the view that if the only remedy were the penalty sanction for not living up to the requirements of section 158(d) - or the task of proving fraud (given the hurdles that entails) then the system would be open to the worst form of abuse. The creditor must be alerted in some way either through the assistance of the bankrupt living up to his duties, or through the diligence of the trustee or if it otherwise comes to the attention of the creditor or ought to have.”
[138] If in Handelman, Farley, J. found that if the s.158(d) duty was not fulfilled and Bankrupts did not properly advise of liabilities “…then the system would be open to the worst form of abuse” , is it not even MORE critical for the duty under s.158(d) that Bankrupts accurately and expeditiously provide details of their assets, to enable Trustee’s to preserve the estate’s interests in those assets and realize upon them for the benefit of creditors. If Bankrupts fail do so, again “…the system would be open to the worst form of abuse”.
[139] In Giroux v. Giroux 1985 CarswellOnt 201, 57 C.B.R. (N.S.) 127 cited in O’Reilly, a bankrupt’s discharge was opposed by a creditor, in part, on the basis that she had made a false answer on her statement of affairs that she had not transferred any real estate in the past five years when in fact she had. Henry, J. stated on this issue the following, in finding that a fact had been proven under, inter alia, s.173(1)(o) and issuing a suspended discharge order:
22 Third, Mrs. Giroux in fact gave an incorrect answer to the Official Receiver on an examination under s. 132 in January 1985 in that she said that she did not own any property within the past five years, and on her statement of affairs sworn 11th December 1984 she said that she had not disposed of real estate within the past five years. In fact, she owned her house on Yorkridge Road until the end of August 1980 when she sold it. She ought to have disclosed that. Her explanation is that she did not put her mind to the dates but I do not overlook the casual attitude she adopted in providing what is intended to be important information. I do not find that she was dishonest but that she was clearly careless. Her lack of care and precision is also characteristic of her evidence in court as I have already said.
[140] Giroux was followed by Registrar Schwann in MacFarlane, Re 2008 CarswellSask 693, 2008 SKQB 417, 176 A.C.W.S. (3d) 597, 322 Sask. R. 171, 48 C.B.R. (5th) 244, where on discharge allegations were made by the opposing creditor that the bankrupt had failed to properly disclose all known assets to his trustee and provide documentation of transactions. The Registrar states:
“44 The RBC further grounds its opposition to discharge on the basis that MacFarlane swore to false information in clause 9a of his Statement of Affairs in relation to the swather. His Statement of Affairs was prepared by the trustee with input and information provided by him: Unlike documents which could be reviewed or searches undertaken, only MacFarlane knew that he had disposed of the swather in 2006. In spite of that, he swore that he had not sold or disposed of any property in 12 months prior to the bankruptcy event. By his own admission at this hearing, that was untrue.
45 MacFarlane admitted to having made an incorrect entry in clause 9a of his Statement of Affairs which is prohibited by s. 198(1)(c) of the Act. MacFarlane's counsel downplays the significance of this error suggesting that it was unintentional and in any event, cured by accurate disclosure given in clause 10a to the Statement. (There he admitted to having disposed of property within five years preceding bankruptcy while knowing to be insolvent.)
46 Incorrect disclosure can also amount to a breach of a s. 158 duty. Section 158(f) expressly requires bankrupts to make disclosure of property disposed of within the period beginning on the day that is one year before the date of the initial bankruptcy event. There was no evidence as to what MacFarlane said or didn't say to the trustee concerning the swather sale other than his forthright admission that it slipped his mind. From this I conclude that he did not disclose this sale to the trustee, and hence breached one of his s. 158 duties as the sale occurred one year prior to his assignment.
47 Unintentional oversight seems unlikely given the proximity of the sale to the assignment, his ongoing depletion of assets and the active collection efforts by the RBC. Taken at its best, this oversight reflects an indifference to the process and the rights of creditors. In Giroux v. Giroux(1985), 57 C.B.R. (N.S.) 127 (Ont. S.C.), the Court took a very dim view of a cavalier approach taken by the bankrupt in that case where it observed at p. 133:
Her explanation is that she did not put her mind to the dates but I do not overlook the casual attitude she adopted in providing what is intended to be important information. I do not find that she was dishonest but that she was clearly careless.
48 An absolute discharge would condone indifference and in my judgment seriously call into question the bankruptcy system. The fact that clause 10a was accurate but 9a not, is neither here nor there. Bankrupts have an obligation to truthfully disclose the full picture of assets, liabilities and prior transactions. Anything less places creditors at a disadvantage and seriously undermines the bankruptcy system. In sum, I find clause 9a to be untrue thereby constituting a breach of duty and hence a s. 173 fact.
[141] The findings of (now) Justice Mills in Wolf Rubin are also applicable:
“16 The Bankruptcy and Insolvency Act ("BIA") is intended to provide the honest but misfortunate debtor an opportunity to become financially rehabilitated without an overwhelming burden of debt. In exchange for this opportunity, a bankrupt is required to fully, faithfully and honestly complete a Statement of Affairs that outlines the bankrupt's assets and discloses any assets that have been disposed of prior to the assignment, provides a listing of all liabilities, discloses the bankrupt's employment/business history and any prior insolvency filings, and identifies the cause of the financial difficulties which have led to the assignment.
17 The bankrupt was careless and indifferent to his obligations of truthful and complete disclosure on his Statement of Affairs. The errors and omissions are so pervasive, I must conclude the bankrupt either deliberately concealed information or was entirely reckless in completing and then swearing as to the truth of the contents of his Statement of Affairs.”
[142] I do not accept that it was Charles that was responsible for the formulation of the wording of the Statement of Affairs with respect to the description of the Opoka. As I have repeatedly identified, the Bankrupt provided a number of mutually contradictory wordings of the status of the Yacht, then swore a statement of affairs with another version, then claimed that he based that information on his assumptions that the “home club” and/or Slavek had seized the Yacht, but had no actual information of the seizure at the time he swore that it had been seized.
[143] However it was that the precise word formulation “A 47 foot Delphi 2016 boat was seized by my home club for non-payment of docking fee” actually appeared in the sworn Statement of Affairs, it is clear from the evidence and the Bankrupt’s own admissions on cross-examination that the Bankrupt did not actually know that the Yacht had been “seized” by either the “home club” or “Slavek”, when he swore that it had.
[144] At best in the Giroux formulation of the test this was evidence of the Bankrupt’s “…casual attitude…in providing what is intended to be important information” and that this Bankrupt was “…clearly careless” or on the Macfarlane formulation “Taken at its best, “this oversight reflects an indifference to the process and the rights of creditors”, by this Bankrupt.
[145] At worst, this behavior by this Bankrupt prior to Bankruptcy regarding the cooperation with the Trustee could lead to a conclusion under the Wolf Rubin formulation of the test that “…the bankrupt was careless and indifferent to his obligations of truthful and complete disclosure

