Court File and Parties
Court File No.: 31-2782032 Date: 2024-10-31
Superior Court of Justice - Ontario
Re: In the Matter of the Bankruptcy of Eliatha Gregoriou
Before: Associate Justice Rappos
Counsel: Bruce Simpson, for Eliatha Gregoriou Matthew Moloci, for MNP Ltd., Trustee in Bankruptcy
Heard: July 31, 2024 (via videoconference)
Reasons for Decision
Introduction
1Eliatha Gregoriou is the bankrupt in this proceeding. She brings three motions before the Court. This Endorsement is with respect to Ms. Gregoriou’s motions for an order expunging the proof of claim of Angelo Zitella, and an order expunging Mr. Zitella’s notice of opposition to her discharge from bankruptcy. The third motion was to reduce the amount of Mr. Zitella’s proof of claim, which was dealt with in my Endorsement reported as Re Gregoriou, 2024 ONSC 4295.
2Mr. Zitella is the former spouse of Ms. Gregoriou. He is a creditor in this proceeding, as Ms. Gregoriou is required to make an equalization payment to him pursuant to a court order issued in their matrimonial proceeding.
3The hearing of the motions was scheduled to commence at 10:00 am. At that time, we went on the record, where it was noted that Mr. Zitella was not in attendance. In accordance with subrule 3.03(2) of the Rules of Civil Procedure, the hearing was stood down until 10:15 am. At 10:15 am, the hearing was recommenced. Mr. Zitella was still not in attendance.
4Mr. Zitella was aware that this motion was proceeding today. Mr. Zitella was consulted when the hearing date was scheduled. [1] Today’s motions were peremptory on Mr. Zitella. [2]
5As a result, the motions proceeded without him.
Background Facts
6Ms. Gregoriou filed for bankruptcy on November 12, 2021, and MNP Ltd. was appointed as trustee in bankruptcy (the “Trustee”).
7On her statement of affairs, Ms. Gregoriou listed $119,985.84 in unsecured liabilities. Mr. Zitella is listed as an unsecured creditor in the amount of $62,432.08. This is the equalization to be paid to Mr. Zitella pursuant to the Order of Justice Mullins dated June 26, 2019.
8Pursuant to my Endorsement dated July 31, 2024, the amount of Mr. Zitella’s claim was reduced from $62,432.08 to $44,673.01. To my knowledge, this decision has not been appealed.
9Mr. Zitella has been actively involved in this proceeding. Ms. Gregoriou’s first meeting of creditors was held on April 7, 2022. Prior to the meeting, Mr. Zitella provided a list of questions for Ms. Gregoriou to answer. Ms. Gregoriou delivered a Statutory Declaration dated April 11, 2022 that set out her answers to these questions.
10Ms. Gregoriou was examined by an Official Receiver of the Office of the Superintendent of Bankruptcy (“OSB”) on May 24, 2022. Mr. Zitella produced a list of 32 questions to the Trustee and OSB in connection with the examination. Ms. Gregoriou delivered another Statutory Declaration, this one dated May 20, 2022, in response to these questions.
11With respect to Ms. Gregoriou’s assets and liabilities, according to the Trustee, as of February 15, 2023: (i) the surplus income payment requirement for Ms. Gregoriou was determined to be $19,998; (ii); there were no other identifiable assets to be recovered; (iii) the total amount of proven unsecured claims was $96,094.87, which included Mr. Zitella’s claim of $62,432.08; and (iv) “there is unlikely to be any dividend distribution to the unsecured creditors due to the substantial costs already incurred and that will be incurred moving forward”.
12With respect to Ms. Gregoriou receiving her discharge from bankruptcy, she previously filed for bankruptcy on October 8, 1996, and received her discharge on July 9, 1997. Ms. Gregoriou also filed a consumer proposal with MNP dated August 12, 2020. Ms. Gregoriou did not default on her payments under the consumer proposal, but chose to file the assignment as Mr. Zitella was garnishing her wages.
13As a result of her prior bankruptcy, and due to her being required to make surplus income payments under section 68 of the Bankruptcy and Insolvency Act (the “BIA”), her eligibility for an automatic discharge was extended to November 12, 2024 because of the operation of subsection 168.1 (b)(ii) of the BIA.
14Mr. Zitella delivered a notice of his opposition to Ms. Gregoriou’s discharge from bankruptcy dated February 24, 2023. He opposes the discharge on the basis that, among other things, Ms. Gregoriou: (i) previously filed for bankruptcy; (ii) brought on or contributed to the bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, or by culpable neglect of her affairs; (iii) has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet her liabilities; and (iv) has been guilty of fraud and fraudulent breach of trust.
15Ms. Gregoriou’s application for discharge from bankruptcy has not proceeded to date.
Mr. Zitella’s Behaviour in this Proceeding
16In support of her motions, Ms. Gregoriou relies on three affidavits sworn by Laura Carbis, a law clerk that works for Bruce Simpson, Ms. Gregoriou’s lawyer in this proceeding.
17The affidavits paint a stark picture concerning Mr. Zitella’s conduct during this proceeding.
18In the affidavits, Ms. Carbis states that Mr. Zitella:
(a) has sent approximately 90 emails a month to Mr. Simpson since the first creditors’ meeting in April 2022; (b) has sent more than 600 emails to Mr. Simpson from July 10, 2023 to February 27, 2024; (c) has sent at least 92 e-mails from March 21, 2024 to May 23, 2024; (d) has called Mr. Simpson’s office phone more than 500 times; (e) has called Mr. Simpson at least 156 times from March 21, 2024 to May 23, 2024; and (f) has left voicemails that consistently contain loud laughter, profanity, and unsubstantiated allegations of fraud, lying and criminality.
19Ms. Carbis notes that most of the emails from Mr. Zitella are threatening in nature. Ms. Carbis has included as exhibits to her affidavit copies of e-mails sent by Mr. Zitella.
20In his e-mails, Mr. Zitella often includes statements that are in all caps. They are filled with references to Mr. Simpson, representatives of the Trustee, counsel to the Trustee, and representatives of the OSB, along with Ms. Gregoriou, as being “fraudulent” and “corrupt”, and have engaged in “lying” to the Court. He often refers to the parties as “criminals” and being in contempt of court. He has also claimed that Mr. Simpson and representatives of the Trustee are racist. His emails often contain many expletives.
21Ms. Carbis states that Mr. Zitella has never explained the basis for his unfounded allegations of fraud, lying and criminality.
22The e-mails are often copied to individuals who have nothing to do with this proceeding, including various media outlets, news reporting institutions, representatives from Ms. Gregoriou’s OPSEU pension, politicians, and governmental organizations.
23Ms. Carbis has provided a copy of an e-mail from Mr. Gregoriou’s sister Themoula dated September 24, 2023, which Mr. Zitella was copied on. In the e-mail, Themoula says that she spoke with Mr. Zitella and that he would remove her from the battle with her sister. She stated in the email that she has had no involvement in her sister’s financial affairs. However, on February 12, 2024, Mr. Zitella sent an e-mail to Themoula’s employer, where he said she was committing fraud with her sister. In one e-mail, Mr. Zitella threatened to seek costs of $250,000 against Themoula, who has had no involvement in this proceeding.
24On July 21, 2023, Mr. Zitella emailed the Law Society and indicated he wished to make a complaint against Mr. Simpson because he was high on marijuana and taking cocaine and drinking. On the following day, Mr. Zitella emailed the OSB and numerous media outlets and again alleged that Mr. Simpson has drug addictions with cocaine and alcohol addictions.
25Ms. Carbis says she overheard a conversation between Mr. Zitella and Mr. Simpson on February 26, 2024, where Mr. Zitella stated that he had recorded all previous telephone conversations and court hearings and that regardless of the outcome, Mr. Zitella had “won” since he had cost Ms. Gregoriou at least $150,000 in professional fees.
26Mr. Zitella has invited more than 50 people to join him at case conferences, notwithstanding that the Bankruptcy Court Office staff has advised him that case conferences are only for the parties involved in the hearing.
27Ms. Carbis believes this has been done to embarrass Ms. Gregoriou and fatigue her professional advisers. Ms. Carbis also believes that because of Mr. Zitella’s specious allegations, Ms. Gregoriou has incurred post-bankruptcy obligations to her lawyer in excess of $75,000.
28Mr. Zitella previously indicated his desire to serve 16 subpoenas with respect to an interim motion, to people with very little, if any knowledge of Ms. Gregoriou’s financial affairs, and who can contribute nothing of importance to the resolution of the matters in issue.
29On May 6, 2024, Mr. Zitella sent an e-mail to Mr. Simpson and others where he stated that that Mr. Simpson should “remember what I told you (I WON)”. On May 8, 2024, Mr. Zitella uploaded 34 images to CaseLines, which were pictures of a “Trump 2024” hat, pictures of Mr. Zitella and his girlfriend, a picture of a car, and pictures of a cat.
30On May 23, 2024, Mr. Zitella filed a Notice of Discontinuance in this proceeding. In it, he alleges that he has been discriminated against, and that he has been up against “a brotherhood, a cabal, a cult of protectionism of all concerned”. He states that he has “done my best to battle the continuing and accelerating, blatant fraud and corruption in most, if not all aspects of this case”.
31In addition, a representative from the OSB wrote to the Court on June 11, 2024 to inform the Court that he would not be attending a case conference in this proceeding as he has “been instructed not to attend by my Employer for and health and safety reasons”.
32I have been case managing this proceeding since November 2023. In just under one year’s time, I have presided over seven (7) case conferences and two hearings. Two case conferences have been scheduled by Mr. Zitella in November 2024. One of those case conferences is to schedule Mr. Zitella’s motion to request that I recuse myself from this proceeding.
33During each of the attendances before me, Mr. Zitella has acted inappropriately and with a total lack of respect for the court through his use of expletives and aggressive tone. On certain occasions, it was necessary to have the registrar mute his microphone given the content of his statements and his constant interruptions.
34I have issued six (6) endorsements in response to correspondence sent by Mr. Zitella to the Court. In January 2024, Mr. Zitella indicated he wished to bring a contempt motion against parties involved in this proceeding. In my Endorsement dated January 24, 2024, I raised the issue of whether Mr. Zitella should bring the contempt motion before a judge, as an associate judge may not have jurisdiction to issue an order of contempt. In my Endorsement dated February 14, 2024 released in connection with a case conference, I indicated that any contempt motion should be brought before a judge. To my knowledge, a contempt motion has not been scheduled.
35In my Endorsement dated March 28, 2024, I noted that Mr. Zitella “continues to inundate the Bankruptcy Court Office staff with e-mails, telephone calls and voicemails regarding his request that I recuse myself from this proceeding and that the case conference and hearing should not proceed as a result”. I noted in my Endorsement that Mr. Zitella would need to bring a recusal motion, and the scheduling of the motion could be discussed at a case conference.
36In my Endorsement dated April 25, 2024, I indicated that Mr. Zitella had informed the Bankruptcy Court Office that it should arrange for a member of the Toronto Police Service to attend a case conference and the July 31, 2024 hearing to investigate Ms. Gregoriou. I informed the parties that the Court would not be arranging for a police officer to appear at the virtual attendances, as the relief sought at the hearing did not involve the Toronto Police Service. I noted that Mr. Zitella was free to contact the police if he believed any party had acted in a fraudulent or criminal manner, or he could commence a civil proceeding.
37Mr. Zitella requested a case conference for May 6, 2024, and then failed to attend. Mr. Zitella also chose not to attend a case conference held on June 13, 2024 that was to deal with, in part, what his intention was when he filed his notice of discontinuance.
38I released an Endorsement dated June 5, 2024 in response to Mr. Zitella’s e-mail to the Bankruptcy Court Office where he indicated that he had recorded all case conferences and would be releasing them on Premier Ford’s X/Twitter account. In my Endorsement, I noted that section 136 of the Courts of Justice Act prohibits any person from recording court hearings, and that contravention of the section could lead to a possible fine and imprisonment. I directed Mr. Zitella to delete any recordings and to refrain from any further recordings. I also directed the matter to the Office of the Regional Senior Justice for Toronto.
39Notwithstanding my Endorsement, on July 9 and 10, 2024, Mr. Zitella sent audio recordings of January 23, 2024 and February 14, 2024 case conference via email to the parties, Premier Ford, Attorney General Downey, the Law Society, and others. He also indicated that he would be posting it on Premier Ford’s X/Twitter account. It is not clear if he did so.
40Mr. Zitella has also filed a notice of motion with the Commercial List, where he intends to request that a vexatious litigant order be issued against Mr. Simpson.
Analysis
41As a starting point, it is necessary to reflect on the purposes behind the bankruptcy system and the BIA. The Supreme Court of Canada has held that the purposes are the equitable distribution of the bankrupt’s assets among its creditors, the bankrupt’s financial rehabilitation, and protecting the public interest. [3]
42When considering discharge matters, the Court is also required to take into consideration the integrity of the bankruptcy process. [4] Ensuring and maintaining the integrity of the process includes taking into consideration the “demands of a creditor who may be seeking the discharge for a motivation outside of the purpose and objectives of the insolvency regime. It would be contrary to the bankruptcy regime to allow creditors to use the process to exact penance for such grievances.” [5]
43It is also necessary to consider how self-represented litigants are treated in the Court system. In the Statement of Principles of Self-represented Litigants and Accused Persons adopted by the Canadian Judicial Council in September 2006, it is noted that “self-represented persons are required to be respectful of the court process and the officials within it”. Counsel to the Trustee argued that Mr. Zitella’s egregious behaviour has been treated with latitude and indulgence to date given his self-represented status, and that similar conduct would not have been tolerated coming from a lawyer.
44Subsection 4.2(1) of the BIA provides that any interested person in any proceedings under the BIA shall act in good faith with respect to those proceedings. Subsection 4.2(2) provides that if the Court is satisfied that an interested person fails to act in good faith, on application by any interested person, the Court “ may make any order that it considers appropriate in the circumstances ” [emphasis added].
45The phrase “good faith” is not defined in the statute.
46Subsection 4.2 was introduced into the BIA in 2019. The purpose of the amendment was to ensure that all parties act honestly, reasonably, and candidly throughout bankruptcy proceedings, the failure of which may be appropriately sanctioned. [6] The amendment was said to “give courts another tool to ensure fairness” in the insolvency process. [7]
47In CWB Maxium Financial Inc. v. 2026998 Alberta Ltd., 2021 ABQB 137, Justice Mah considered the requirements of the section in the context of the actions of a secured lender and held that:
(a) the statutory requirement of good faith in the insolvency context requires that an interested party not bring or conduct proceedings for an oblique motive or improper purpose; (b) the common law relating to the organizing principle of good faith in contractual performance may be used to inform the good faith requirement in section 4.2; and (c) conduct of the party alleged to have breached the good faith requirement should be assessed in light of the intent and policy objectives of the BIA. [8]
48Ms. Gregoriou asks that the Court rely on the Supreme Court of Canada’s decision in Bhasin v. Hrynew, 2014 SCC 71 (“Bhasin”) in considering the requirement of good faith under section 4.2.
49Bhasin deals with good faith and contractual performance. The Supreme Court determined that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily. [10] That parties should conduct contractual performance in an honest, candid, forthright and reasonable manner. [11] The Supreme Court referred to the broad duty of good faith recognized by the Civil Code of Quebec. It noted that the duty includes determining whether conduct is unacceptable according to the standards of reasonable people. [12]
50Having taken into consideration Mr. Zitella’s conduct during this proceeding, and considered the concepts of good faith discussed above, I find that Mr. Zitella has failed to act in good faith throughout this proceeding. The e-mails and voicemails he sent to parties have been abusive. They were sent to pursue a strategy of harassment and intimidation. They were vexatious, meant to harass others and force them to incur unnecessary costs. Mr. Zitella is effectively conducting a war of attrition, which he appears to take pleasure in.
51His conduct has resulted in the use of an inordinate amount of judicial resources to address his constant demands. [13] He has openly flouted and acted against orders of this Court. He has failed time and time again to treat parties and this Court with respect and act in a civil manner that maintains the requirement of decorum in a courtroom. His actions have unfairly increased the costs incurred by Ms. Gregoriou and the Trustee, which have depleted the assets that would have been available to be distributed to creditors. He has compromised the integrity of the bankruptcy process through his attempts to delay matters in this proceeding.
52Given the finding that Mr. Zitella has not acted in good faith, I must decide what the ramifications of such behaviour should be. As previously noted, section 4.2 provides me with broad discretion to make any order that I consider appropriate in the circumstances.
53It is clear to me that in the absence of a strong order of the Court, Mr. Zitella will continue his abusive conduct.
54In my view, the striking Mr. Zitella’s claim and striking his notice of objection to Ms. Gregoriou’s discharge are appropriate consequences for the utter disregard with which Mr. Zitella has treated parties and the Court in this proceeding. These consequences further the principles of rehabilitation for a bankrupt and the integrity of the bankruptcy process, as it will permit Ms. Gregoriou to proceed to have her discharge hearing proceed without suffering further abuse and delay, and incurring unnecessary costs due to Mr. Zitella antics. As well, this will protect the interests of the other creditors and society as whole by “limiting the needless diversion of finite court resources to private vendettas”. [14] It will also reduce judicial and administration resources that would otherwise be wasted on Mr. Zitella’s abusive conduct, which will no doubt help free up court time for those with bona fide claims. [15]
Disposition and Costs
55For the reasons set out below, I have found that Mr. Zitella has failed to act in good faith in this bankruptcy proceeding, and have exercised the discretion afforded to me under section 4.2 of the BIA to expunge his proof of claim and his notice of objection to discharge.
56With respect to costs, Ms. Gregoriou shall serve her written costs submissions, which are to be no more than 5 pages in length (along with a Bill of Costs) by November 15, 2024. Mr. Zitella may serve responding written costs submissions of no more than 5 pages in length by November 29, 2024. The submissions shall be sent to the Bankruptcy Court Office by email for my review.
Released: October 31, 2024 Associate Justice Rappos
Footnotes
[1] See my Endorsement dated March 27, 2024. [2] See my Endorsements dated March 21, 2024, June 13, 2024, and June 28, 2024. [3] Scott v. Golden Oaks Enterprises Inc., 2024 SCC 32, para. 79. [4] Poonian v. British Columbia (Securities Commission), 2024 SCC 28, para. 23. [5] Nguyen (Re), 2023 BCSC 1611, para. 56. [6] Julien Morissette, Ilia Kravtsov, Cristina Cosneanu, “Being a Good Sport: A Comparative Analysis of Good Faith as a Statutory Obligation in Insolvency Proceedings”, Annual Review of Insolvency Law, vol 18, 2020) para. 59. [9] Bhasin v. Hrynew, 2014 SCC 71. [10] Ibid., para. 63. [11] Ibid., para. 66. [12] Ibid., para. 83. [13] For a similar analysis, see City of Toronto v. O’Herlihy, 2024 ONSC 4055. [14] Ibid., para. 43. [15] Gao v. Ontario WSIB, 2014 ONSC 6497, para. 5.