COURT FILE NO.: 31-1009335 DATE: 20231027
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: In the Matter of the Bankruptcy of MD Tajul Islam
BEFORE: Associate Justice Rappos
COUNSEL: Jane Martin, for Manku & Associates Inc., Trustee in Bankruptcy
HEARD: October 24, 2023 (via videoconference)
Endorsement
Nature of the Motion
[1] Manku & Associates Inc. (“MAI”) brings a motion under section 14.04 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended (the “BIA”), for an order removing MAI as trustee in bankruptcy in this bankruptcy estate, as well as eleven (11) other bankruptcy estates (collectively, the “Bankruptcy Estates”), and appointing Kunjar Sharma & Associates Inc. (“KSAI”) as trustee in place of MAI.
Facts
[2] Jagjit Manku, a licensed insolvency trustee with MAI, swore an affidavit in support of MAI’s motion. The affidavit details that MAI is the trustee in the Bankruptcy Estates, and Mr. Manku has carriage of the proceedings. Due to some health issues, Mr. Manku wishes to reduce his workload and become semi-retired. As a result, he proposes to transfer the Bankruptcy Estates to KSAI.
[3] Each of the Bankruptcy Estates is a summary administration estate under the BIA. They represent the only summary administration estates where MAI is the trustee. Each of the estates has not been fully administered, and MAI has not been discharged as trustee in any of them. Some of the bankrupts have conditional orders of discharge which are outstanding or are being paid over several years.
[4] Mr. Manku discussed the proposed substitution of MAI with KSAI with the Office of the Superintendent in Bankruptcy (the “OSB”). A representative of the OSB informed Mr. Manku that MAI needed a court order authorizing the substitution.
[5] The OSB has consented to the order sought by MAI at this motion. The OSB was served with the motion materials and did not appear at the hearing.
[6] KSAI agrees to being appointed as substitute trustee in the Bankruptcy Estates and has consented to the order. It did not appear at the hearing.
Jurisdiction and Service
[7] Section 14.04 of the BIA authorizes “the court” to remove a trustee. “Court” is defined under section 2 of the BIA to include “a registrar when exercising the powers of the court conferred on a registrar under this Act.”
[8] MAI relies on subsections 192(1)(f), (j) and (k) of the BIA in support of its motion. Those subsections authorize a registrar to “hear and determine any unopposed or ex parte application”, “hear and determine any matter with the consent of all parties”, and “hear and determine any matter relating to practice and procedure in the courts.”
[9] This motion was brought on notice to, and on consent of, the OSB and KSAI. MAI did not serve the bankrupts or the creditors in the Bankruptcy Estates.
[10] In Woodward, Re, 1940 CarswellOnt 62 (CA), the Court of Appeal allowed an appeal of a judge’s decision confirming the decision of a registrar in bankruptcy to appoint a new trustee on the death of the originally appointed trustee.
[11] Justice Riddell held that he could find no authority for the contention that the registrar could exercise the power of the court under the then equivalent of section 14.04 of the BIA.
[12] Justice Fisher noted that under subsection 159(1)(f) of then titled Bankruptcy Act, which is the equivalent to section 192 of the BIA, the registrar had jurisdiction “to make any order or exercise any jurisdiction which by any rule in that behalf is prescribed as proper to be made or exercised in chambers”. Justice Fisher held that this section does not mean that a registrar is given all the powers to which a judge has jurisdiction in chambers.
[13] Justice Henderson agreed with Justice Fisher’s interpretation of section 159(1)(f), and also held that the relief should not have been granted on an ex parte application.
[14] In my view, the case before me is distinguishable from Woodward, Re.
[15] Firstly, the power detailed in subsection 159(1)(f) of the Bankruptcy Act is not contained in section 192(1) of the BIA.
[16] Secondly, each of the Bankruptcy Estates are governed by the rules for summary administration estates, which are set out in, among other places, section 157 of the BIA. The summary administration provisions apply to estates where the realizable assets of the bankrupts, after the claims of secured creditors are deducted, will not exceed $15,000 (see subsection 49(6) of the BIA and rule 130 of the Bankruptcy and Insolvency General Rules, C.R.C. 1978, c. 368, as amended (the “Bankruptcy Rules”)).
[17] As described in the Inspectors’ Handbook for Inspectors Appointed Pursuant to the Bankruptcy and Insolvency Act published by the OSB (page 23):
“The Summary Administration of a bankruptcy estate is a simplified procedure in which, for example:
- there is no publication of the notice of bankruptcy in a local newspaper;
- a meeting of creditors is called only if requested by creditors and according to certain conditions;
- no inspectors are appointed unless the creditors decide to appoint them…
- the [trustee] is discharged without a court appearance, except when a creditor or the Superintendent opposes the discharge.”
[18] Summary administration estates are intended to be streamlined and proportionate to the potential recoverable amounts to the estate. In my view, the fact that the Bankruptcy Estates are summary administration estates supports the conclusion that notice of this motion is not required to be provided to the bankrupts and the creditors. It is not apparent that there was something akin to summary administration in 1940 under the Bankruptcy Act.
[19] Additionally, subrule 6(45) of the Bankruptcy Rules provides that, on an ex parte application, the court may exempt any person from service of materials and may “order any terms and conditions that the court considers appropriate.” In my view, in the circumstances before me, it was not inappropriate for MAI to seek relief from the court on a quasi ex parte basis given that the OSB and KSAI were served with the materials.
[20] Lastly, and perhaps most importantly, the motion was served on the OSB, who has consented to the terms of the draft order.
[21] The OSB “supervises the administration of all estates and matters” to which the BIA applies (subsection 5(2) of the BIA). The OSB has the ability to “intervene in any matter or proceeding in court, where the Superintendent considers it expedient to do so.” As the OSB has consented to the relief and process proposed by MAI, in my view that supports the view that MAI was not required to serve the bankrupts and creditors with its motion materials, as it served its regulator that oversees the entire bankruptcy and insolvency system.
[22] As a result, I am satisfied that I have jurisdiction under subsections 192(1)(f) and (j) of the BIA to hear this motion, and that MAI was entitled to proceed to bring this motion without notice to the bankrupts and the creditors in the Bankruptcy Estates.
Removal and Substitution Under Section 14.04
[23] Section 14.04 of the BIA provides that “the court, on the application of any interested person, may for cause remove a trustee and appoint another license trustee in the trustee’s place.”
[24] I am satisfied that MAI is an “interested person” and is entitled to bring a motion to have another licensed insolvency trustee replace it as trustee in the Bankruptcy Estates. See Martin, Re, 1990 CarswellOnt 156 (Gen. Div. In Bankruptcy) (“Re Martin”) and Philip’s Manufacturing Ltd., Re (“Philip’s Manufacturing”).
[25] The court may only remove a trustee “for cause”. “Cause” has been interpreted to include a trustee incapable of acting as trustee for any reason. See Philip’s Manufacturing at para. 26 and Herman, Re, 1930 CarswellOnt 3 (CA).
[26] I am satisfied, based on the evidence before me, that MAI is incapable of acting as trustee in the Bankruptcy Estates.
[27] As a result, I hereby grant MAI’s order for substitution. As a condition of the order substituting KSAI, I hereby order that KSAI send notice of its substitution, together with a copy of this Endorsement, to the bankrupts and all known creditors of the Bankruptcy Estates at their last known addresses by regular mail. To the extent any of the bankrupts or creditors take issue with the Court’s appointment of KSAI as substitute trustee in the Bankruptcy Estate, they are entitled to bring a motion under subsection 187(5) of the BIA and request that I review, rescind or vary my order.
[28] Order to go as electronically amended and signed by me.
Associate Justice Rappos
DATE: October 27, 2023