Court File and Parties

District of Ontario Division No. 09 - Toronto Court File No.: BK-22-02840415-0031 Date: 2023-08-25 Ontario - Superior Court of Justice – In Bankruptcy and Insolvency

In the matter of the Bankruptcy of Robert Simpson, deceased Of the city of Toronto, Province of Ontario

Re: Glenna Green, Julie Sheardown, and Gillian Simpson, Claimants And: Albert Gelman Inc. in its capacity as Licensed Insolvency Trustee of the Estate of the late Robert Simpson

Before: Peter J. Osborne J.

Counsel: Erin E.M. Ellis, for the Claimants Denise Cooney, for Albert Gelman Inc. in its capacity as Licensed Insolvency Trustee of the Estate of the late Robert Simpson Apolonia D’sa, Trustee, Albert Gelman Inc. Lou Brzezinski, for the Children’s and Family Services for York Region James Doyle, for the Estate Trustee, Jill Dorothy Tate

Heard: April 13, 2023

Endorsement

[1] The Licensed Insolvency Trustee of the Estate of the late Robert Simpson (“Simpson”) in this bankruptcy proceeding moves for an order imposing a claims bar date for the filing of any Proof of Claim with the Trustee, and approving a proposed process for the Trustee to provide notices of any order made on this motion to potential claimants.

[2] The Trustee relies upon the First Report of the Trustee dated January 12, 2023, together with Appendices thereto.

[3] The facts giving rise to this motion are unusual, and tragic.

[4] On August 23, 2016, Simpson was convicted of 25 counts of child sexual abuse during the period between 1967 to 1979. Simpson died incarcerated while serving his sentence on June 12, 2019.

[5] Three of those victims commenced claims against the Estate and others on December 14, 2019.

[6] The Executor of the Estate appointed pursuant to Simpson’s will obtained an order dated June 6, 2022 authorizing it to file on behalf of the Estate an assignment into bankruptcy, based on the then outstanding claims against the Estate, the uncertainty of the Executor regarding any other potential victims and/or claims which may exist as against the Estate, and the fact that the known liabilities, at face value, exceeded the realizable assets of the Estate.

[7] The Trustee was appointed with respect to the Estate of Simpson on June 20, 2022. As of that date, the total assets of the Estate were $1,890,893.

[8] As of the date of this motion, the only individuals who have filed Proofs of Claim with the Trustee are the claimants who commenced the claims referred to above. Each has commenced a claim for $2,880,000 such that their claims total, in the aggregate, $8,640,000.

[9] The Trustee is of the view that there may be other potential claimants against the Estate, given what the Trustee understands to be the possible scope of the abuse by Simpson, based on information and materials in the possession of the Trustee including the transcripts from the criminal proceedings resulting in the convictions against Simpson, and the reasons for judgment rendered in that proceeding.

[10] The Trustee has already taken steps to identify and advise potential other victims of abuse by Simpson, and any other claimants, of the bankruptcy and claims process. These steps include publishing advertisements in Toronto newspapers; speaking with the police officer involved in the investigation (who apparently advised the Trustee of one additional specific potential claimant who did not wish to make a claim); and hiring a private investigator to locate any potential claimants identified in the transcripts referred to above.

[11] The Trustee has spoken directly with two potential claimants, neither of which has filed a Proof of Claim. One has indicated expressly that they do not wish to file a Proof of Claim.

[12] The Trustee is anticipating a claim from the Executor and her counsel relating to unpaid executor fees, legal fees and other testamentary expenses. The quantum is unknown at this time.

[13] The Trustee seeks the relief sought today in order to bring certainty to the quantum of potential liabilities of the Estate so that it can discharge its duties, determine the universe of claims and consider potential distributions to creditors.

[14] The Trustee proposes that the Court imposed by order a claims bar date of 45 days following the date of any order made, following which the Trustee will immediately provide notice of the Court-ordered bar date to all potential claimants of whom it is aware or who it has been able to identify, and will post further notices in local newspapers with the objective of bringing the claims bar date to the attention of any other unknown potential claimants.

[15] While the motivations and objective of the Trustee are clear, the motion presents a novel issue in that the Trustee is seeking the imposition of a claims bar order in a bankruptcy proceeding by which any and all Proofs of Claim must be filed, failing which such claims will be forever barred and extinguished.

[16] As noted by Associate Justice Ilchenko, sitting as Registrar in Bankruptcy, in his endorsement dated March 21, 2023 adjourning this motion to a judge of the Commercial List because he lacked the requisite jurisdiction, the Trustee “has properly taken all statutory steps available to the Trustee under the BIA to identify other claims, but given the dilemma of possible unidentified claims ….. the Trustee is hampered from making distributions to existing identified creditors of the Estate and completing its administration.”

[17] Cognizant of the obvious prejudice to potential claimants who did not file a claim by the bar date, the Trustee has taken the proactive steps summarized above to notify potential claimants and proposes to provide further notice also as summarized above.

[18] Notwithstanding the well-intentioned proposed course of action by the Trustee, however, I have concerns about granting the relief sought.

[19] The first concern is that civil sexual assault claims and/or claims based on any other misconduct of a sexual nature involving a minor or by a person in a position of trust or authority in Ontario are not subject to any limitation period.

[20] The Trustee submits that s. 38(3) of the Trustee Act, R.S.O. 1990, c. T-23, imposes a limitation period for actions against estate executors of two years from the date of death of the deceased. Section 19 of the Limitations Act, 2002, S.O. 2002, c.24 expressly provides that s. 38(3) of the Trustee Act remains in effect.

[21] In Fox v. Narine, 2016 ONSC 6499 (“Fox”), Lederer, J. of this Court addressed the intersection between s.38 (3) of the Trustee Act and s. 16 (1) (h) as clarified by s. 16(1.3) of the Limitations Act. The Court concluded that s. 38 of the Trustee Act did not operate so as to extinguish or bar a claim against an estate trustee based on sexual assault, since s. 16 (1)(h) as clarified by s. 16(1.3) of the Limitations Act, provided that there is no limitation period for sexual assault claims, and the nature of the action does not change because the victim subsequently died. The death does not remove the liability, and the provisions of the general statute (the Trustee Act) must yield to those of a special or specific one (in the case of claims based on sexual assault, the Limitations Act).

[22] The Trustee here submits, however, that the decision in Fox did not expressly consider s. 19 of the Limitations Act, on which it relies here, and which provides that: “a limitation period set out in or under another Act that applies to a claim to which this Act applies is of no effect unless: (b) the provision establishing it incorporates by reference a provision listed in the Schedule to this Act.” The Schedule expressly references s. 38(3) of the Trustee Act. Accordingly, the Trustee submits, the decision in Fox, if followed, is not fatal to the relief it seeks on this motion.

[23] In my view, I need not decide that question to properly dispose of this motion for the reasons set out below.

[24] The second concern is that the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”) provides a complete and comprehensive code for bankruptcy proceedings. There is no statutory provision in the BIA giving the Court express statutory jurisdiction to impose a claims bar date. The Trustee concedes that it is not aware of any precedent for such an order being made.

[25] However, the Trustee urges the Court to rely on its inherent jurisdiction to make the order sought since it would be just and equitable to do so in the extraordinary circumstances of this case.

[26] The BIA expressly preserves the inherent jurisdiction of the Court through s. 183 which vests this Court with “such jurisdiction at law and in equity as will enable them to exercise original, auxiliary and ancillary jurisdiction”.

[27] This is consistent with the expression of inherent jurisdiction by the Supreme Court of Canada as “a residual source of powers, which the court may draw upon as necessary whenever it is just or equitable to do so”, and which is derived “not from any statute or rule of law, but from the very nature of the court as a superior court of law”: R. v. Caron, 2011 SCC 5, [2011] 1 S.C.R. 78, at para. 24.

[28] The Trustee submits that the Supreme Court of Canada has confirmed that the powers granted to this Court under the BIA are extremely broad:

On the face of it, the intent of this provision [s. 183] is “to confer on the bankruptcy court powers and duties coextensive with Parliaments jurisdiction over “Bankruptcy” under s. 91(21) of the Constitution Act, 1867, except insofar as that jurisdiction has been limited or specifically assigned elsewhere by Parliament itself.

The broad scope of authority conferred on Parliament has been passed along to the bankruptcy court in s. 183(1) of the Act, which confers a correspondingly broad jurisdiction.

See Sam Levy & Associes Inc. v. Azco Mining Inc., 2001 SCC 92 at paras. 19 and 38.

[29] The Trustee further submits that the test for reliance on inherent jurisdiction in BIA proceedings, to which resort should be had only sparingly, is met here. That test requires that first, the BIA must be silent on a point or not have dealt with the matter exhaustively; and second, after balancing competing interests, the benefit of granting the relief must outweigh the relative prejudice to those affected by it: Re Residential Warranty Company of Canada Inc. (Bankrupt), 2006 ABQB 236 at para. 26, appeal dismissed 2006 ABCA 293; and Samji (Re), 2013 BCSC 2101, at para. 20.

[30] The Trustee submits that the test is met here since the BIA is silent on the issue of claims bar orders, and the balancing of competing interests clearly favours the imposition of a bar date so that distributions can be made to known creditors who are the victims of Simpson’s abuse.

[31] The Trustee also relies by way of analogy, on proceedings bought pursuant to the Companies Creditors Arrangement Act, R.S.C. 1985, c. c-36 and /or the Class Proceedings Act, 1992, S.O. 1992, c.6, in which claims bar dates (or the functional equivalent of a deadline by which any claim against the debtor companies or the defendants, as the case may be, must be filed) are regularly imposed.

[32] Such proceedings include numerous examples of situations where the courts have imposed a claims bar orders, for the same or similar reasons to those present here, including in proceedings arising from allegations of historic sexual abuse against minors.

[33] In imposing such bar dates, the courts strive to balance, to the greatest extent possible, the competing interests and ensure that there are safeguards in place. The safeguards include the requirement for notice, and in class actions the opportunity to opt out, and finally, the requirement for court approval which in turn necessitates a finding that the settlement is fair, reasonable, and in the best interests of the class.

[34] Examples of cases in which Ontario courts have approved settlements releasing and barring future claims arising from historic assaults include: Seed v. Ontario, 2012 ONSC 2681 and 2017 ONSC 3574 (claims of physical, emotional and sexual abuse at a residential school for the visually impaired); Johnston v. The Sheila Morrison Schools, 2010 ONSC 3334 and 2013 ONSC 1528 (claims of physical, sexual, emotional and psychological abuse at an educational facility for children with learning disabilities); and Welsh v. HMQ, 2018 ONSC 3217 (claims of physical, emotional and sexual abuse at residential schools for the Deaf).

[35] In determining whether to approve settlements of historical sexual abuse claims, Canadian courts have specifically noted the obvious prejudice to potential claimants who have not filed claims by the claims bar dates imposed, and proceeded to attempt to balance the relative prejudice to the parties in the circumstances of each individual case. (See, for example, Liptrot v. Vancouver College Limited, 2023 BCSC 346, beginning at para. 206; and Lakes v. MacDougall, 2012 BCSC 49 at para. 8).

[36] Having considered the issue and the submissions of the Trustee, I have no difficulty concluding that any balancing of interests and competing prejudices would favour the imposition of a claims bar date, provided that appropriate notices and safeguards were included (to which the Trustee would readily consent). The lack of any claims bar date, or deadline, prevents the Trustee from administering the Estate and most importantly, prevents a timely distribution to creditors with proven claims.

[37] The known claimants who have already submitted Proofs of Claim are the victims of his abuse. I can scarcely think of a group of creditors or claimants more deserving of a timely distribution of whatever assets may be available.

[38] Equally, if this motion were brought in a proceeding under the CCAA or the Class Proceedings Act, approval of a settlement and the imposition of a claims bar date might well be appropriate.

[39] However, I cannot conclude that reliance can be had on the inherent jurisdiction of this Court, on the basis that the BIA is silent on the point or has not dealt with the matter exhaustively.

[40] In my view, ss. 148 to 154 of the BIA provide a comprehensive and complete code in respect of dividends in bankruptcy proceedings. Those sections of the BIA, read together, set out the comprehensive statutory regime pursuant to which Trustees are to declare and distribute dividends, deal with disputed claims, and provide notice of a final dividend. They provide for the rights of creditors who have not proved their claims before the declaration of a dividend.

[41] Accordingly, those statutory provisions of the BIA can and do apply to the circumstances underlying this motion, and their effect substantially achieves the objectives sought by the Trustee on this motion.

[42] In particular, a. pursuant to s. 149(1), the Trustee may, after the first meeting of creditors (which according to the First Report has already occurred here), send in the prescribed manner, to every person with a claim of which the trustee has notice or knowledge but whose claim has not been proved, a notice that the final dividend will be made; b. the notice must inform the person that, if the person does not prove the claim within a period of 30 days after the sending of the notice, the trustee will proceed to declare a dividend or a final dividend without regard to that person’s claim; c. pursuant to s. 150, a creditor who has not proved his claim before the declaration of any dividend is entitled on proof of his claim to be paid, out of any money for the time being in the hands of the trustee, any dividend he may have failed to receive before that money is applied to the payment of any future dividend, but he is not entitled to disturb the distribution of any dividend declared before his claim was proved for the reason that he has not participated therein, except on such terms and conditions as may be ordered by the court; d. pursuant to s. 151, when the trustee has realized all the property of the bankrupt or all thereof that can, in the joint opinion of himself and of the inspectors, be realized without needlessly protracting the administration, and settled or determined or caused to be settled or determined the claims of all creditors, he shall prepare a final statement of receipts and disbursements and dividend sheet and, subject to this Act, divide the property of the bankrupt among the creditors who have proved their claims.

[43] In summary, these provisions of the BIA provide for the statutory regime pursuant to which the Trustee here can give notice that a final dividend will be made, and then proceed to declare a dividend or final dividend 30 days after the sending of the notice.

[44] The First Report satisfies me that the claims already submitted constitute those of which the Trustee has notice or knowledge.

[45] Out of an abundance of caution, however, and in an effort to ensure to the greatest extent possible that any other potential claimant also has notice that a final dividend will be made, I direct the Trustee to provide notice to potential other claimants through the newspaper publication of this order and of the Notice issued pursuant to s. 149 of the BIA, as the Trustee proposes to do.

[46] After the expiry of the applicable period of time, the Trustee can proceed to declare a dividend or final dividend. Any claims received by the Trustee thereafter will not be barred or extinguished by this order, but pursuant to s.150, such claimants will be entitled to recover only as against funds, if any, that remain in the hands of the Trustee. They will not be permitted to disturb the distribution of any dividend already declared before such a claim was proved.

[47] In my view, proceeding in this manner is consistent with the comprehensive statutory regime for dealing with dividends and distributions set out in the BIA, while at the same time providing for the certainty and timely distribution to those known victims of Simpson with proven claims.

[48] Order to go in accordance with these reasons. Counsel for the Trustee should prepare a draft order for signing and submit it through my judicial assistant, Ms. Mary Sibenik, at mary.sibenik@ontario.ca. If the Trustee requires advice or directions with respect to the implementation of the order, counsel may schedule an appointment before me through the Commercial List Office.

[49] I am grateful to counsel for the Trustee for their helpful submissions in respect of this unusual situation.

Addendum: This Endorsement was revised on October 13, 2023 to ensure that there was no disclosure of the identity, or of facts which would inform the identity, of the victims of the abuse. Those revisions have the consent and agreement of all parties. No other changes were made.

Osborne J.