SUPERIOR COURT OF JUSTICE – ONTARIO
(IN BANKRUPTCY AND INSOLVENCY)
RE: In the Matter of the Consumer Proposal of Angella Christine Briscoe
BEFORE: Associate Justice Rappos
COUNSEL: Bruce Simpson, for msi Spergel Inc. and Colin Boulton Osborne Barnwell, for Angella Briscoe Marie-Josée Sicard, representative of the Office of the Superintendent of Bankruptcy
HEARD: March 26, 2024 (virtually)
E N D O R S E M E N T
Overview
1Angella Briscoe filed a consumer proposal with msi Spergel Inc. named as administrator. Colin Boulton is a licensed insolvency trustee with Spergel, and he had carriage of Ms. Briscoe’s consumer proposal on behalf of Spergel.
2Canada Revenue Agency (“CRA”) is effectively Ms. Briscoe’s only creditor, at it holds over 98% of the unsecured debt. CRA voted against the original proposal. Ms. Briscoe subsequently amended the proposal, which was approved by CRA at the meeting of creditors.
3Ms. Briscoe was required to make monthly payments under the amended proposal. Ms. Briscoe missed three payments and the proposal was deemed to be annulled pursuant to subsection 66.31 of the Bankruptcy and Insolvency Act (the “BIA”).
4Ms. Briscoe commenced a claim against Spergel and Mr. Boulton (collectively, the “Administrator”) in Small Claims Court. Ms. Briscoe seeks damages of $35,000 for negligence, breach of good faith and inconvenience. Ms. Briscoe is also seeking a Court order rectifying her credit profile and removing the “annul” entry with respect to the consumer proposal.
5In response to being served with the claim, the Administrator brought a motion for an order staying the action unless and until the Court grants leave pursuant to section 215 of the BIA. Section 215 provides that no action lies against a trustee with respect to any report made under, or any action taken pursuant to, the BIA except through leave of the Court.
6Ms. Briscoe takes the position that leave is not required for her to continue with her claim, as the Administrator failed to meet their statutory duties. In the alternative, Mr. Briscoe has brought a cross motion requesting that the Court grant her leave to continue the action. The Administrator argues that leave is required, as the allegations are for actions or omissions with respect to the administration of the amended consumer proposal. It further argues that leave should not be granted, as Ms. Briscoe’s claim is frivolous, vexatious, and/or unmeritorious.
7For the reasons that follow, I conclude that (a) Ms. Briscoe requires leave of the Court to continue her claim; and (b) Ms. Briscoe’s request for leave to continue her claim is dismissed.
Does Section 215 Apply to Ms. Briscoe’s Claim?
8Section 215 of the BIA states: “Except by leave of the court, no action lies against the Superintendent, an official receiver, an interim receiver or a trustee with respect to any report made under, or any action taken, pursuant to this Act”.
9The central question in deciding whether section 215 applies is whether the connection contemplated by the section (“any report made under, or any action taken, pursuant to the BIA”) is present, and this question is answered by examining the relationship between the alleged wrongdoing complained of in the lawsuit and the role of a trustee. [1] Whether the claim falls within section 215 is to be assessed on the basis of the core claims in the statement of claim, not claims that are “incidental to the main complaint”. [2]
10A claim falls within section 215 where a person sued was involved in the acts complained of as a trustee, is alleged to have been performing duties incidental to the administration of the estate, and is alleged to have owed the plaintiff duties as a trustee. [3]
11In Flight (Re), 2022 ONCA 526, the Court of Appeal held that section 215 does not apply to an action premised on the failure of a trustee to do an act specifically and expressly required by the BIA. [4] The reason for this is because such a failure results in a trustee not acting “pursuant to” the BIA. [5]
12The Court of Appeal referred to the Supreme Court of Canada’s decision in Mercure v. Marquette & Fils Inc., [1977] 1 S.C.R. 547, where the Supreme Court held that leave was not required to sue a trustee. In that case, the then titled Bankruptcy Act expressly required a trustee to insure the debtor’s property, and the trustee had failed to do so. [6]
13The Court of Appeal did not support an extended reading of Mercure beyond the specific circumstances of that case, since to do so would “put any claim that could characterized as asserting some omission as part of the wrongdoing outside of the application of s. 215, even if the omission does not relate to something specifically and expressly required by the BIA.” [7] Such an interpretation would rob the section of its screening function for such claims, and subject trustees to the type of claims it is designed to weed out. [8]
14As well, the Court of Appeal acknowledged that an extended reading would be contrary to many decisions that have applied section 215 to actions in which the claims could be seen as asserting, in whole or in part, some omission on the part of the trustee. [9]
15The Court of Appeal did note that there is nothing in the language of the section that requires similar effect to other kinds of alleged omissions. An action can be in relation to anything done pursuant to the BIA, even if it involves an alleged omission in the course of acting pursuant to the BIA that is said to make the trustee’s performance of its role under the BIA wrongful and therefore actionable. [10]
16In Flight (Re), 2022 ONCA 526, the claims made against the trustee (misfeasance, negligence, fraud, and breach of fiduciary duty) were grounded in, and alleged to flow from, his role and responsibilities as trustee. [11] The Court of Appeal concluded that the central omissions asserted were not omissions to do things specifically and expressly required by the BIA akin to the duty to insure the debtor’s property in Mercure. They were omissions asserted as breaches of common law duties arising from the role of the trustee, making aspects of the performance of the trustee role wrongful and actionable. As a result, section 215 applied. [12]
17Ms. Briscoe argues that the Administrator failed to comply with sections 66.13(2)(a) and (b) of the BIA, which provide that:
(2) An administrator who agrees to assist a consumer debtor shall
(a) investigate, or cause to be investigated, the consumer debtor’s property and financial affairs so as to be able to assess with reasonable accuracy the consumer debtor’s financial situation and the cause of his insolvency;
(b) provide, or provide for, counselling in accordance with directives issued by the Superintendent pursuant to paragraph 5(4)(b).
18Ms. Briscoe’s core claim against the Administrator is that they were negligent due to their failure, at the initial meeting and thereafter, to question her about how her CRA debt came about. She says that they never provided any counselling and did not inquire about her situation and if they had put their minds to how the CRA debt came about and the possibility of challenging it, she would never have had to file a consumer proposal. The secondary claim is that the Administrator failed to advise her that her consumer proposal could be annulled if she missed three monthly payments, and that the Administrator acted in bad faith in its attempt to have Ms. Briscoe go to its lawyer to get the consumer proposal revived.
19The Administrator objects to Ms. Briscoe’s characterizations of the situation. Mr. Boulton’s evidence is that it was his understanding and belief that Ms. Briscoe had filed all her tax returns and that the claimed debt was not due to arbitrary assessments. He says he was aware that Ms. Briscoe was meeting with accountants with the intention to file amended returns for the allowance of some disallowed expenses, but the remaining debt with penalties and interest was in excess of the amount agreed to on the amended proposal. To his knowledge Ms. Briscoe was seeking the advice and direction from accountants to address her tax arrears.
20The Administrator relies on OSB Directive No. 6R5 “Assessment of an Individual Debtor” issued on January 27, 2022 (“Directive 6R5”). It argues that their actions were in accordance with what was required of them in terms of assessment of Ms. Briscoe’s financial affairs.
21In oral submissions, a representative of the Office of the Superintendent of Bankruptcy (the “OSB”) noted that the OSB does not expect a licensed insolvency trustee to re-do a debtor’s taxes. Counsel to Ms. Briscoe objected to the OSB making oral submissions when they did not file any written submissions prior to the hearing. As the OSB supervises the administration of all estates and matters to which the BIA applies, is the regulator of trustees, and may intervene in any matter or proceeding in court, [13] the OSB was entitled to make oral submissions at the hearing even in the absence of filing written materials.
22In my view, the allegations made by Ms. Briscoe are not omissions to do things specifically and expressly required by the BIA akin to the duty to insure the debtor’s property in Mercure. The parties have put no other case before the Court where a plaintiff’s claim was permitted to proceed without leave of the Court due to an omission as was done in Mercure.
23The language of section 66.13(2)(a) did not specifically and expressly require the Administrator to review and determine whether CRA’s claim against Ms. Briscoe had merit and provide her with advice on that point. The statutory language and requirements are not equivalent to that which was at issue in Mercure.
24Ms. Briscoe’s alleges common law wrongdoing (negligence) in relation to actions taken by the Administrator pursuant to the BIA, being the intake and administration of Ms. Briscoe’s consumer proposal. The Court of Appeal was clear in Flight (Re), 2022 ONCA 526 that these types of claims (an action in relation to something done pursuant to the BIA where it involves an alleged omission that is said to make the trustee’s performance of its role under the BIA wrongful) fall within the ambit of section 215.
25As a result, section 215 applies to Ms. Briscoe’s Small Claims Court action.
Should Leave Be Granted?
26Section 215 serves as a gatekeeping function. It allows the Bankruptcy Court to screen out or prevent actions that are frivolous or vexatious or do not disclose a cause of action, or for which there is no factual support so that the trustee need not respond to them. [14]
27The section focuses on screening out only “manifestly unmeritorious claims”, ensuring that legitimate claims can be advanced for adjudication in forums, other than the Bankruptcy Court, that have jurisdiction over the merits of the claim. [15]
28A frivolous claim is one that is lacking in legal basis or legal merit, or is not serious or reasonably purposeful. [16] A vexatious claim is one that is instituted without any reasonable ground. [17]
29The threshold for granting leave to commence an action is not a high one. Essentially, unless the claim is without merit, the gate to a litigated determination has usually been opened under section 215. [18]
30An action should not be allowed to proceed if the evidence filed in support of the motion does not disclose a cause of action against the trustee. The evidence typically will be presented by way of affidavit and must supply facts to support the claim sought to be asserted. The Court is not required to make a final assessment of the merits of the claim before granting leave. [19]
31The question before me is whether the evidence provides the required support for the cause of action sought to be asserted. The evidence must disclose a prima facie case. [20] On a continuum of evidence ranging from no evidence to evidence which is conclusive, the evidence requires to support an order under section 215 must be sufficient to establish that there is a factual basis for the proposed claim and that the proposed claim discloses a cause of action. [21]
32Ms. Briscoe’s claim is one in negligence. To succeed with her claim, Ms. Briscoe must establish that: (a) the Administrator owed her a duty of care; (b) that the Administrator’s conduct breached the standard of care; (c) that she sustained damage, and (d) that the damage was caused, in fact and in law, by the Administrator’s breach. [22]
33I believe that the Administrator owed Ms. Briscoe a duty of care in this case, as the administrator of her consumer proposal under the BIA. The parties did not argue this point in their submissions.
34On the facts relating to the breach of the standard of care, Ms. Briscoe claims that the Administrator failed, as required under the BIA, to investigate, or cause to be investigated, her property and financial affairs so as to be able to assess with reasonable accuracy her financial situation and the cause of her insolvency. She says that Mr. Boulton never questioned her about her CRA debt came about, and there were no detailed questions about her ability to pay $450 a month for the amended proposal. She also denies that she was ever informed that missing payments could result in her proposal being annulled.
35Mr. Boulton presents a very different story. Mr. Boulton alleges that Mr. Briscoe was involved in the negotiation of the amended proposal that increased the monthly payment amount from $300 to $450. He states that Ms. Briscoe was informed of the fact that missed payments could result in her proposal being annulled, and that she signed an acknowledgement confirming this. Ms. Boulton says that to his knowledge Ms. Briscoe was seeking advice and direction from accountants to address her tax arrears. He claims that Ms. Briscoe has taken no steps to address her issues with the CRA to date, and any negative impact due to the annul on her credit report is solely the result of her default in payment.
36Based on my review of the evidence, I am satisfied that Ms. Briscoe has overcome the low bar and put sufficient evidence before the Court that there is a factual basis for the allegation that the Administrator breached their obligations under the BIA and Directive 6R5, which required the Administrator to, among other things: (i) discuss with Ms. Briscoe the Administrator’s views respecting her immediate problems, evaluate the extent and nature of the problems facing Ms. Briscoe, and review approaches for dealing with those problems; and (ii) identify and discuss, in general, the options available to Ms. Briscoe for resolving financial difficulties, including a discussion of the rights and responsibilities of Ms. Briscoe and her creditors under a number of options, including non-legislative debt-settlement arrangements.
37Moving on to the remaining two components of a claim for negligence, Ms. Briscoe’s claim is for $35,000. This amount is not broken down in her claim. She alleges that there was an immediate impact due to the annulment on her credit record. She claims that the interest rate on her car loan was 18% and should have been 10%. She also says she has not been able to secure any credit on goods and services. She claims in her affidavit that she is concerned about the negative impact the annul may have on her ability to review her insurance broker’s license.
38In her statement of claim, Ms. Briscoe also seeks “repayment of the amounts she paid into the account of the Defendants” as part of her claim for damages.
39Ms. Briscoe fails to provide any evidence in support of her claims for damages in her affidavit, other than vague references to increased costs to obtain goods as a result of the annul on her credit report. The materials show that she paid $9,900 to the Administrator under the terms of the consumer proposal. However, there is nothing in the record that sets out how much of that amount was paid to Ms. Briscoe’s creditors and how much was retained by the Administrator on account of its fees and disbursements as permitted under the BIA and the Bankruptcy and Insolvency General Rules.
40Even if Ms. Briscoe was able to establish that she has suffered damages, I do not see how those damages were caused by any breach committed by the Administrator.
41The annul on Ms. Briscoe’s credit report is due to her failing to make payments under her consumer proposal. The evidence shows at the time when Ms. Briscoe wanted to recommence payments, the Administrator referred Ms. Briscoe to their lawyer to discuss the annulment and a potential revival of the proposal. Ms. Briscoe claims that, as the lawyer was asking her to pay $800, she was subject to a “shakedown” and did not proceed with it. This was in July 2021. There is no evidence that she took any other steps to try to revive the annulled consumer proposal. She commenced her action in March 2023.
42Additionally, the Administrator has produced an Acknowledgement by the Debtor signed by Ms. Briscoe that clearly states that she had been notified that if the payments are in default to the extent of three months the proposal would be deemed annulled. The Administrator also notes that Ms. Briscoe signed the amended proposal that provided for payment of $450 a month, and produced an email from Ms. Briscoe that says she can handle $450 a month.
43Based on my review of the record, I am of the view that Ms. Briscoe has failed to put forward any evidence that any damages that she may have sustained were caused, in fact and in law, by the Administrator’s breach. As a result, Ms. Briscoe has not submitted evidence that supports the claim sought to be asserted. There is no factual support for the cause of action contained in the Small Claims Court action, such that leave of the Court to continue with the claim is not warranted.
Disposition and Costs
44For the reasons above, Ms. Briscoe is not entitled to continue with her Small Claims Court action without leave of the Court, and her request for leave is dismissed. I strongly urge the parties to come to an agreement on costs. If they are unable to do so, they may contact the Bankruptcy Court Office for direction regarding written costs submissions.
Associate Justice Rappos DATE: September 13, 2024
Citations
[1] Flight (Re), 2022 ONCA 526, para. 47. [2] Flight (Re), 2022 ONCA 526, para. 60. [3] Flight (Re), 2022 ONCA 526, para. 49. [4] Flight (Re), 2022 ONCA 526, paras. 5 and 58. [5] Flight (Re), 2022 ONCA 526, para. 58. [6] Flight (Re), 2022 ONCA 526, para. 51. [7] Flight (Re), 2022 ONCA 526, para. 57. [8] Ibid. [9] Ibid. [10] Ibid. [11] Flight (Re), 2022 ONCA 526, para. 35. [12] Flight (Re), 2022 ONCA 526, para. 59. [13] Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 5(2), 5(3) and 5(4)(a). [14] Flight (Re), 2022 ONCA 526, para. 38; GMAC Commercial Credit Corporation - Canada v. T.C.T. Logistics Inc., 2006 SCC 35, para. 58. [15] Flight (Re), 2022 ONCA 526, para. 38, citing GMAC Commercial Credit Corporation - Canada v. T.C.T. Logistics Inc., 2006 SCC 35, paras. 55-61 and 66. [16] Currie v. Halton (Region) Police Services Board, para. 14. [17] Ibid., para. 15. [18] GMAC Commercial Credit Corporation - Canada v. T.C.T. Logistics Inc., 2006 SCC 35, paras. 55-56. [19] GMAC Commercial Credit Corporation - Canada v. T.C.T. Logistics Inc., 2006 SCC 35, para. 57. [20] GMAC Commercial Credit Corporation - Canada v. T.C.T. Logistics Inc., 2006 SCC 35, para. 59. [21] GMAC Commercial Credit Corporation - Canada v. T.C.T. Logistics Inc., 2006 SCC 35, para. 60. [22] Metropolitan Toronto Condominium Corporation No. 1100 v. A. & G. Shanks Plumbing & Heating Limited, 2020 ONCA 67, para. 12.