COURT FILE NO.: 31-952620

DATE: 20230920

SUPERIOR COURT OF JUSTICE – ONTARIO (IN BANKRUPTCY AND INSOLVENCY)

RE: In the Matter of the Bankruptcy of Susan Diana Strachan

BEFORE: Associate Justice Rappos

APPEARANCES: Sanj Mitra, lawyer for Petrie & Associates Inc.

Alison Petrie, representative of Petrie & Associates Inc.

Howard Manis, lawyer for Susan Arnem-Strachan

Susan Arnem-Strachan and James Strachan

HEARD: September 19, 2023 (via videoconference)

E N D O R S E M E N T

NATURE OF THE MOTION

[1] Petrie & Associates Inc., in its capacity as trustee in bankruptcy (the “Trustee”), seeks approval of its Amended Statement of Receipts and Disbursements dated February 5, 2023 (the “R&D Statement”).

[2] On February 6, 2023, the Office of the Superintendent of Bankruptcy (“OSB”) issued a letter to the Trustee that confirmed that, as required under subsection 152(4) of the Bankruptcy and Insolvency Act (the “BIA”), the OSB had reviewed the R&D Statement and requested that the Trustee proceed to seek court approval of the R&D Statement. This form of letter is known as a positive letter of comment.[^1]

[3] This matter was originally to be dealt with in writing on June 28, 2023, but at the request of Mr. Manis, counsel to the bankrupt, Susan Strachan, the matter was adjourned to a virtual hearing.

[4] In support of the Trustee’s application, Ms. Petrie swore an affidavit on March 23, 2023. The affidavit details the Trustee’s administration of the bankruptcy estate and includes time dockets from the Trustee. Ms. Petrie was not cross-examined on her affidavit.

[5] No responding materials were filed by Ms. Strachan. Although Mr. Manis attended the hearing as counsel to Ms. Strachan, Ms. Strachan made submissions on her own behalf.

[6] For the reasons set out below, I hereby approve the R&D Statement.

FACTS

Background

[7] Ms. Strachan made an assignment in bankruptcy on April 23, 2007. Ms. Strachan was entitled to an automatic discharge from bankruptcy on January 24, 2008, unless an objection was made under the BIA.

[8] On December 5, 2007, the Trustee issued a notice of objection to the discharge from bankruptcy under section 168.2 of the BIA due to Ms. Strachan’s failure to comply with the surplus income requirements and her failure to perform the duties imposed on her by the BIA.

[9] A “No Order” was issued at Ms. Strachan’s first bankruptcy discharge hearing held on May 28, 2008, due to Ms. Strachan not attending the hearing.

[10] On February 23, 2022, Associate Justice Jean granted Ms. Strachan a discharge from bankruptcy, which was suspended for one day. The discharge order was made on consent of Ms. Strachan, the Trustee and the OSB.

Sale of the Property

[11] Ms. Strachan’s sole asset of value was her interest in real property municipally known as 1462 Connery Crescent, Oshawa (the “Property”), which she co-owned with her former spouse, Thomas Strachan.

[12] The Property was sold and net proceeds of $297,243.39 was paid into the bankruptcy estate.

Funds in the Estate

[13] There were proven unsecured claims in the estate totaling $19,150. These creditors have received payment of their claims in full, with interest.

[14] Pursuant to the Order of Associate Justice Jean dated January 25, 2022, the Trustee has released $190,378.31 to Ms. Strachan.

[15] The Trustee currently is holding $84,831.11, which it was authorized to do under the Order of Associate Justice Jean.

[16] To date, the Trustee has not received payment of any of its fees and disbursements incurred in the administration of the bankruptcy estate.

Objections to the R&D Statement

[17] Ms. Strachan objects to the approval of the R&D Statement on the basis that the fees of the Trustee, in the amount of $47,919.91 (inclusive of HST) (the “Trustee’s Fees”), and the fees and disbursements of the Trustee’s lawyers, Aird & Berlis LLP (“A&”), in the amount of $26,010.81 (all inclusive) (“Counsel’s Fees”), are excessive and should be reduced.

[18] The A&B Bill of Costs was approved by Associate Justice Ilchenko on September 6, 2022.

[19] Ms. Strachan’s complaints are primarily focused on the fact that the Trustee and A&B were in contact with her children, along with her daughter’s boyfriend, regarding the sale of the Property, and did not contact her to discuss the Property. Ms. Strachan believes that this was improper and violated her privacy rights, and that the Trustee and A&B should not be paid for time spent on these discussions.

[20] The materials state that there was a separation agreement entered into between Ms. Strachan and Mr. Strachan, which dealt with how the Property was to be sold. A copy of the separation agreement was not provided to the Court.

[21] In Ms. Petrie’s affidavit, she states that the settlement agreement provided that the Property was to be sold on or about May 1, 2020 and the proceeds were to be split between the spouses.

[22] The Trustee and its counsel initially had discussions with Mr. Strachan to negotiate a sale of Ms. Strachan’s interest in the Property to him. No agreement was reached, and the Trustee decided to allow time to pass given the terms of the separation agreement.

[23] Mr. Strachan passed away on August 14, 2020. The Property was eventually sold by the Trustee and Mr. Strachan’s estate.

[24] Mr. Mitra and Ms. Petrie argued that it was appropriate for them to be in contact with Ms. Strachan’s children regarding the Property, given that Mr. Strachan was suffering from terminal cancer in 2020 when the issue of the sale of the Property was revisited, and the children were eventually appointed as executors in the estate.

[25] Additionally, Mr. Mitra noted that Ms. Strachan was not “out of the loop” on matters dealing with the sale, as he was in contact with her prior lawyer, Allan McCracken. References to Mr. McCracken are included in Mr. Mitra’s and Ms. Petrie’s dockets.

[26] It should also be noted that in Ms. Petrie’s dockets, there is a reference to Ms. Strachan’s children contacting the Trustee and/or A&B regarding the sale of the Property.

[27] Ms. Strachan also objects to the Trustee and A&B charging fees to the estate in dealing with the complaints she made to the OSB about the Trustee’s conduct. It also appears that Ms. Strachan made a complaint about the OSB employee who had investigated her prior complaints, which also required time to be spent by the Trustee and A&B.

[28] Mr. Mitra confirmed that all complaints made by Ms. Strachan to the OSB have been dismissed. As noted above, the OSB issued a positive letter of comment with respect to the R&D Statement.

[29] Ms. Strachan indicated that representatives of the OSB also shared her view that the Trustee’s Fees and Counsel’s Fees were excessive. However, no document or affidavit from a representative of the OSB was filed with the Court. Additionally, no one from the OSB appeared before the Court to take a position with respect to the Trustee’s application.

[30] Mr. Mitra argued that it was entirely appropriate for the Trustee and A&B to charge their time in dealing with the OSB complaints to the estate, as dealing with the complaints was part of the Trustee’s administration of the bankruptcy estate.

ANALYSIS

[31] Subsection 152(5) of the BIA requires that the R&D Statement be approved by the Court before the Trustee can take steps to seek its discharge.

[32] In Murphy v. Sally Creek Environs Corporation, 2010 ONCA 312, the Court of Appeal, at paragraph 110 of the decision, approved the following general principles for the Court to consider in determining a trustee’s fees:

(i) to allow the trustee a fair compensation for his services;

(ii) to prevent unjustifiable payments for fees to the detriment of the estate and the creditors; and

(iii) to encourage, rather than to discourage, efficient, conscientious administration of the bankrupt estate for the benefit of the creditors and, so far as the public is concerned, in the interests of the proper carrying out of the principles and objectives of the BIA.

[33] The Court of Appeal went on to note that a registrar in bankruptcy has “a wide discretion to set the appropriate amount of a trustee’s fees. There is no dispute that this includes the authority to reduce a trustee’s fees for specific acts of misconduct that have cost the estate quantifiable amounts” (paragraph 111).

[34] In Bank of Nova Scotia v. Diemer, 2014 ONCA 851, the Court of Appeal noted, in the context of an appeal of the lower court’s refusal to approve legal fees incurred by a court-appointed receiver, that fairness and reasonableness of the fees of the receiver and its counsel are the lynchpins of the analysis to be undertaken by the court (paragraph 33).

[35] The Court of Appeal went on to list the following factors as applicable to a review of a receiver’s compensation, which are to serve as a useful guideline but are not to be considered as exhaustive:

(i) the nature, extent and value of the assets;

(ii) the complications and difficulties encountered;

(iii) the degree of assistance provided by the debtor;

(iv) the time spent;

(v) the receiver’s knowledge, experience and skill;

(vi) the diligence and thoroughness displayed;

(vii) the responsibilities assumed;

(viii) the results of the receiver’s efforts; and

(ix) the cost of comparable services when performed in a prudent and economical manner.

[36] In my view, the Court of Appeal’s comments in Bank of Nova Scotia v. Diemer are equally applicable to approval of the fees and disbursements of a trustee in bankruptcy. Master Short came to the same conclusion in Re Khan, 2015 ONSC 4799 at paragraph 60.

[37] I have reviewed the Trustee’s affidavit, which contains a detailed description of the time spent by the Trustee in administering the bankruptcy estate. I have also reviewed A&B’s Bill of Costs, which has already been approved by Associate Justice Ilchenko as noted above.

[38] Based on my review of the materials, and consideration of the submissions made during the hearing, and taking into account the factors listed above by the Court of Appeal, I am satisfied that the Trustee’s Fees and Counsel’s Fees are fair and reasonable, and that the R&D Statement should be approved.

[39] The amount of time spent by the Trustee and A&B in this matter was proportionate and necessary given the complexities in dealing with the Property and the complaints filed against the Trustee by Ms. Strachan.

[40] It was also appropriate for the Trustee and A&B to be in contact with Ms. Strachan’s children with respect to the Property, given the health, and eventual passing, of Mr. Strachan in 2020, and his estate’s ½ interest in the Property.

[41] Additionally, I do not believe there is any issue with the Trustee and A&B seeking reimbursement from the estate for their time in dealing with Ms. Strachan’s complaints to the OSB, especially given that both complaints were dismissed by the OSB. The OSB has provided a positive letter of comment to the Trustee and has taken no steps to object to the Trustee’s approval of the R&D Statement. I infer from that the OSB does not take issue with how the Trustee has administered this bankruptcy estate.

DISPOSITION

[42] In the circumstances, I believe it is appropriate and in the interest of justice to exercise my discretion under subsection 152(5) of the BIA to approve the R&D Statement.

[43] With respect to costs for this motion, Mr. Manis suggests that the parties should bear their own costs. While Mr. Mitra noted that he has approximately $5,000 in unbilled time for this proceeding, he did not vigorously pursue costs against Ms. Strachan.

[44] In my view, this is a situation where it is appropriate to exercise the discretion afforded to me under section 197 of the BIA to refrain from making a costs award.

[45] I have signed the R&D Statement filed with the Court.

Associate Justice Rappos

DATE: September 20, 2023

[^1]: The Trustee had previously obtained a positive comment letter from the OSB with respect to its statement of receipts and disbursements dated September 11, 2022. The amended R&D Statement was necessary due to an increase of accrued interest from $16.87 to $762.74. That is the only difference in the numbers for the two statements.