Re Gerstein. 2024 ONSC 6253

COURT FILE NO.: 31-454726

DATE: November 12, 2024

ONTARIO

SUPERIOR COURT OF JUSTICE

IN BANKRUPTCY AND INSOLVENCY

IN THE MATTER OF THE BANKRUPTCY OF

ELLIOT JOEL GERSTEIN

OF THE CITY OF THORNHILL, IN THE PROVINCE OF ONTARIO

(Ordinary Administration)

BEFORE: Associate Justice Ilchenko, Registrar in Bankruptcy

Matthew R. Harris (“Harris”) for the Bankrupt, who also appears - formerly represented by Sean Zeitz (“Zeitz”), and also previously represented by Fred Tayar (“Tayar”), Tanya Pagliaroli and also by Steven Graff (“Graff”)

Jake Wiebe, LIT (“Wiebe”) for Trustee in Bankruptcy (the “Trustee”), of the Bankrupt, Grant Thornton Limited (“GT”), previously Proposal Trustee of the Bankrupt (the “Proposal Trustee”), opposing discharge

Jason DiFruscia, counsel to the Trustee, (“DiFruscia”)

James McReynolds (“McReynolds”), for Opposing Creditors Dawn Trading Limited (“Dawn Trading”), other opposing creditors Brenthall Apartments Limited (“Brenthall”), and Faye Mintz (“Mintz”) not apparently specifically represented at the Discharge Hearing (collectively, the “Mintz Creditors”)

Tianjian Wang (“Wang”), Department of Justice (“DOJ”) for Opposing Creditor Canada Revenue Agency (“CRA”)

Superintendent of Bankruptcy not appearing

HEARD:

Initial short discharge hearing heard on January 19, 2022, with full day Discharge Hearing on May 2, 2024 with further materials to be filed by the Bankrupt by July 12, 2024, including all outstanding Statements of Income and Expenses not yet filed in the estate from 2007

endorsement

[1]

Overview

The Bankrupt appears on his discharge hearing (the “Discharge Hearing” or the “Discharge”).

2On February 20, 2007 the bankrupt filed a Notice of Intention to Make a Proposal ("NOI") and on March 19, 2007 the Bankrupt filed a Proposal (the “Proposal”) under Part III, Division I of the Bankruptcy and Insolvency Act, RSC 1985, B-3. (the "BIA").

3On April 25, 2007, at a reconvened meeting of creditors to consider the Proposal, the Proposal was rejected by the creditors and the debtor was deemed bankrupt, and has remained Bankrupt since April 25, 2007.

4This Discharge first appeared before me on January 19, 2022 on the Creditor Opposed Discharge List, and was adjourned to a Case Conference, in an endorsement that read:

“Adjourned to a Case Conference before me to obtain a special appointment. Given that the CRA debt is in excess of $5 Million, Trustee to determine from CRA/DOJ whether they will be participating in the Discharge hearing and whether the Mintz Creditors will be retaining counsel before scheduling the Case Conference so that their schedules can be determined for the scheduling of the Discharge hearing.”

5From the Bankruptcy Court Discharge Case Information Sheet, and the s.170 Reports of the Trustee dated December 18, 2007 (the “Original Report”), the Supplementary Report dated March 11, 2020 (the “Supplementary Report”), and the Second Supplementary Report of the Trustee dated July 14, 2022 (the “Second Supplement”)(collectively, being the “s.170 Report”), it appears that the January 19, 2022 Discharge Hearing was the first time this Discharge has appeared before the Court since the deemed assignment on April 25, 2007.

6The Bankrupt has now been Bankrupt for more that 17 years. The Trustee has been the Trustee of the Bankrupt (and previously Proposal Trustee) continuously since 2007.

7All underlined and bolded text in these reasons is emphasis added by me for these reasons.

8The Court has considered all materials and arguments raised by all of the parties on this Discharge Hearing. Any failure by the Court to refer in these reasons to specific arguments and materials raised does not reflect that the Court has not considered those arguments.

JUDGMENT BY CUMMING, J. IN FAVOUR OF BRENTHALL

[9]

Judgment by Cumming, J. in Favour of Brenthall

The central conflict in this Bankruptcy is summarized in the Endorsement of Cumming, J. issued on October 11, 2007 (the “Cumming, J. Endorsement”) granting Summary Judgment (the “Brenthall Judgment”) in favour Brenthall against the Bankrupt, in the amount of $1,283,028.00, pre-judgment interest of $213,102.05 and costs of $250,000, and declaring that this Judgment debt was a debt that arises out of fraud withing the meaning of s.178(1)(d) of the BIA:

“1. The Plaintiff, Brenthall Apartments Limited, brings a motion under Rule 20.01 (2)(a) of the Rules of Civil Procedure for summary judgment against the individual Respondent, Elliot Joel Gerstein ("Gerstein") in the amount of $1,283,028.00 plus applicable interest; a declaration that the Plaintiff has an equitable interest in a property (the so-called “21 Thornbank Property"); a declaration that Mr. Gerstein committed a fraud against the Plaintiff; and for costs on a full indemnity scale.

The Evidence

10The uncontested evidentiary record establishes that Mr. Gerstein was the employee of Grover Management Realty (“Grover”) responsible for reviewing, approving, paying and accounting for all expenses incurred by the Plaintiff in respect of the management of the Plaintiff’s residential apartment buildings. Mr. Gerstein was in a position of trust.

11The uncontested evidence of the forensic investigator, Glen Harloff establishes that Mr. Gerstein misappropriated S1,283,028.00 of the Plaintiffs monies by issuing cheques drawn upon the Plaintiff's bank account: payable to a non-existent entity, Acusah Energy Products, of some $470,297.00; payable to Royal Bank VISA accounts for the personal benefit of Mr. Gerstein and his wife totaling some $610,743.00; and payable to a CIBC VISA account for the personal benefit of Mr. Gerstein and his wife, totalling some $201,988.00. The evidentiary record establishes Mr. Gerstein fraudulently forged signatures, created fictitious entities, and altered invoices, cheques. documents of original entry, journal entries and computer records to hide his dishonesty and the misappropriation of the Plaintiff's monies. Mr. Gerstein admitted on his examination that he endorsed the back of a Plaintiffs cheque payable to VISA with his VISA number so as to misappropriate the Plaintiff’s funds to credit his own VISA account. Mr. Gerstein offers no explanation as to how exact amounts drawn on the Plaintiff's cheques on hundreds of occasions found their way into his accounts on virtually the same dates.

12At his examination it was determined that Mr. Gerstein, who earned $50,000,00 per year through his employment with Grover, declared to Canada Revenue Agency total income of less than $600,000.00 for the six year period from 2000 to 2005, without explanation spent over $6,000,000.00 through VISA expenditures over that period.

13Mr. Gerstein admits to spending over $2,000,000.00 on the 21 Thornbank property to purchase and commence construction of a 10,000 square foot house, but refuses to provide any explanation as to the source of the $2,000,000.00. He admits to spending over $1,000,000.00 on travel, clothes and jewelry but refuses to provide any explanation as to the source of the funds for such expenditures.

14On the motion of the Plaintiff Mr. Justice Colin Campbell of this Court on August 17, 2006 ordered the sale of the 21 Thornbank property through an agreed upon process, with the proceeds to be held in trust by a mutually agreed upon Trustee pending the outcome of this litigation.

15Mr. Gerstein filed an affidavit late yesterday which claims that an improvident sale process has been pursued with the consequence that the sale of the 21 Thornbank property will not result in a maximization of sale proceeds as would be seen through a fair and proper sale in the marketplace.

16Mr. Gerstein requests a stay order staying the enforcement of any judgment resulting from the motion at hand for summary judgment until the 21 Thornbank property has been sold and the proceeds been determined and his inchoate claim of an improvident sale process has been determined.

Disposition

17The Plaintiff has established on the evidentiary record that there is no genuine issue for trial with respect to the Plaintiffs claim or defence on the part of Mr. Gerstein.

Through his Agent at the hearing Mr. Gerstein took the position that he neither admits nor opposes the evidence put forward by the Plaintiff.

18Mr. Gerstein is required to provide a complete evidentiary record and put his "best foot forward" in responding to the motion at hand. Mr. Gerstein has failed to produce any sworn affidavit contesting the Plaintiff's evidence. (The affidavit filed late yesterday addresses only the question of an alleged improvident sale process in respect of the 21 Thornbank property,) Mr. Gerstein has not adduced any evidence at all to contradict the evidence put forward by the Plaintiff. Mr, Gerstein bas not raised any triable issue. He has failed to demonstrate any defence in respect of his fraud established by the evidentiary record. This Court draws an adverse inference from the failure of Mr. Gerstein to adduce evidence and bis failure to provide any evidence in respect of contradicting the evidence established by the Plaintiff.

19For the reasons given, summary judgment is given in favour of the Plaintiff against the Defendant Elliot Gerstein, for breach of trust and fraudulent misappropriation of funds in the amount of $1,283,028.00 plus pre--judgment interest in the amount of $213,102.05.

20The Plaintiff has an interest in the 21 Thornbank property as a judgment creditor of Mr. Gerstein. Title to the 21 Thornbank properly is in the name of Mr. Gerstein’s spouse. She acknowledges that all the monies used to purchase and improve the property came from Mr Gerstein. She makes no claim to the property herself. It may well be that some of the monies misappropriated from the Plaintiff were used by Mr. Gerstein to purchase or improve the 21 Thornbank property. However, it may also be that monies unlawfully taken from third parties was used by Mr. Gerstein toward the purchase and improvement of the: 21 Thornbank Property. Mr. Gerstein reportedly lists some $8,000,000 in liabilities on his Statement of Affairs in his bankruptcy proceeding. There may be a contest between two or more creditors as to which creditor or creditors has a legal right to the proceeds of sale of the 21 Thornbank property. The Trustee in bankruptcy will also have an interest in this issue. The eventual sale proceeds will have to remain in trust until a further Court order dealing with the issue of distribution of the proceeds. The Plaintiff, together with such other interested parties who may assert a like right, retains the right to pursue a tracing order or such other relief as may be appropriate in respect of such proceeds or in respect of other property (other than a property known as 35 Cantertrot Court, Vaughan. Ontario).

21Costs on a full indemnity scale are appropriate given the finding of fraud. Costs are awarded to the Plaintiff against Mr. Gerstein on a full indemnity scale which l fix at the consented to quantum of $250,000, inclusive of GST and all disbursements.

22I find that the Defendant, Elliott Gerstein, has committed a fraud against the Plaintiff and that the judgment (inclusive of the award of costs) on this summary judgment motion survives any proposal. application or otherwise, under s. 178 (1)(d) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3.

23I am not prepared to grant Mr, Gerstein’s request for a stay of enforcement of the judgment resulting from the summary judgment motion at hand pending the sale of the 21 Thornbank property and any determination of his allegations of an improvident sale process. The request for a stay because of an alleged issue unrelated to the judgment has no merit.”

24The Cumming Endorsement and the Brenthall Judgment were not appealed, and form the basis of the proof of claim filed by Brenthall in this Bankruptcy (the “Brenthall Proof of Claim”), which proof of claim was accepted by the Trustee as a Proven Claim in the Bankruptcy (the “Brenthall Claim”).

25The findings of fact and law made by Cumming, J., and the declaration that the indebtedness of the Bankrupt to Brenthall under the Brenthall Judgment constitutes a debt that cannot be discharged under the provisions of s.178(1)(d), are relevant to this discharge and binding upon this Court.

26Of particular relevance to this Discharge, and materials filed by the parties, particularly by the Bankrupt, are the words

“…(other than a property known as 35 Cantertrot Court, Vaughan. Ontario)”,

excluding this property (the “Cantertrot Property”) from the effects of the Brenthall Judgment.

CRIMINAL PROCEEDINGS INVOLVING BANKRUPT

[27]

Criminal Proceedings Involving Bankrupt

The Bankrupt was charged with seven counts of fraud over $5,000 on December 5, 2007. They related to (i) Brenthall Apartments Limited, Chelsandy Developments Limited, Luray Investments Limited, and 746190 Ontario Limited from January 1, 2000, to December 31, 2005; (ii) 375685 Ontario Limited and Pauldor Developments Limited from January 1, 1998, to December 31, 2005; and finally (iii) to Lilliana Buildings Limited from January 1, 2001, to December 31, 2005.

28As a result of an Application brought by the Bankrupt under, inter alia, s.11(b) of the Charter of Rights and Freedoms (the “Charter”) Quigley, J. ordered that the criminal charges be stayed as a result of the conduct of the Crown relating to providing disclosure to defence counsel, and the 75 month (or 6 year and 3 month) delay in getting to Trial.

29In R. v. Gerstein, 2014 ONSC 1617) (the “Quigley J. Endorsement”) Quigley, J. also made findings of fact and law that are relevant to the discharge of the Bankrupt, and binding upon this Court. Quigley, J. concluded that the Bankrupt’s rights under s.11(b) had been violated, and that a stay of the criminal charges should be issued on the following reasoning:

“[132] The fundamental problem in this case that contributed to the excessive delay was not substantive complexity. It was the decision of the Crown Attorney’s office, upon learning of an additional 60 to 90 boxes of material in the possession of LECG relating to the civil complaint against the accused, not to make a proper inquiry into those materials. Beginning in the autumn of 2008, it did not properly assess whether a significant disclosure obligation existed either at that time, or at any time leading up to the preliminary inquiry. The explanations provided for this misguided decision appear to flow from the constraints caused by a limited availability of human and mechanical resources, as well as an apparent misunderstanding by the TPS regarding alleged representations, denied by the parties themselves, made by LECG and GT accounting firms that the materials were not relevant.

[133] As a result, it was not until April, 2010, nearly three and half years after the charges were laid, that all that material was actually disclosed. Further time for review was required and then unpredictable and unfortunate events caused further delay resulting in this matter only coming to trial now. Three years of Crown and institutional delay is double the amount of delay that was accepted or excused under the guidelines established in R. v. Morin, above, as confirmed in R. v. Godin.[38] I have found on that basis that Mr. Gerstein's right to trial within a reasonable time as guaranteed to him under the Charter has been breached.”

30With respect to the Cumming Endorsement and the Brenthall Judgment, Quigley, J. stated:

“(v) The complainants’ efforts to obtain civil recovery

[65] As I previously noted, the Mintzs retained both Brian Heller and Larry Banack to seek recovery of the stolen monies. Mr. Banack was retained in November 2005, through Grover Realty and he understood that his job was to investigate the nature of the claim and to aggressively pursue civil recovery of the monies taken from Grover Realty. He pursued the file with vigour and determination. In the next six weeks he became satisfied that a significant amount of money had been misappropriated, in the range of $6,000,000 to $9,000,000. He called a meeting of the principals early in the New Year. He wanted everyone to know the information that had been discovered by that time, and to start to determine if restitution was possible.

[66] Mr. Banack testified that there were a number of discussions that took place between the parties concerning the magnitude of the defalcation and the range of companies within the corporate family that were affected, and how each of them had been victimized. At a meeting in January 2006, a meeting attended as well by Elliott Gerstein’s father, Sidney Gerstein, there was a discussion about resolution but no resolution was achieved. Shortly after, Mr. Sidney Gerstein's counsel, Rob Harrison resigned because of a conflict and he was replaced by Peter Roy.

[67] Mr. Banack testified that he was aggressively pursuing recovery. He became concerned, however, when Mr. Roy, as new counsel for Mr. Sidney Gerstein, allegedly stated that “nothing would keep Elliott out of jail.” That concerned Mr. Banack because he was adamant that the issue of criminal sanctions could not form any part of any discussions aimed at resolution. As he testified, “he would not be involved in any way” in pursuing settlement if Mr. Roy was suggesting by that reference that the settlement discussions were attached in any way to the prospect of charges being laid or not.

[68] By March, 2006, the dispute between the two families had intensified. Mr. Banack then received instructions to start an action on behalf of Brenthall Apartments, because the Gersteins had no interest in those properties. He was authorized by the Mintzs to sue on behalf of Brenthall. He commenced proceedings in July, 2006. He was trying to tie up accounts and obtain certificates of pending litigation to prevent the sale of any of Elliott Gerstein's real estate or properties in which he had an interest before the creditors’ interests were protected.

[69] By September 2006, the alleged fraud had been reported to TPS. Mr. Banack testified that his work and that of the forensic accountants had revealed what he described as “an enormous and persistent course of fraudulent conduct” by the applicant. However, Elliott Gerstein would provide no answers to undertakings in that civil litigation, so by November, 2006, with the consent of Grover Realty, steps were taken to obtain summary judgment against him.

[70] The day before that summary judgment motion was to be heard on February 21 or 22, 2007, the applicant filed a proposal in bankruptcy. That caused a statutory stay to arise in all civil litigation proceedings against Elliott Gerstein at that time. Mr. Banack was undaunted and continued to pursue the claims through the bankruptcy process. He specifically noted in his evidence that in Elliott Gerstein’s bankruptcy filing, the debt to Brenthall Apartments Ltd. was listed and acknowledged by Mr. Gerstein "to the penny." As well, those accounts contained a formal acknowledgment of indebtedness to the Canada Revenue Agency for tax on a very sizable amount of unreported income relating to the funds that had been misappropriated, consisting of many millions of dollars.

[71] Mr. Banack finally obtained summary judgment on an unopposed basis against Mr. Gerstein on October 11 and 12, 2007, albeit only in respect of the claim of Brenthall Apartments Limited. Justice Cumming presided that day. The summary judgment was unopposed, but Cumming J.’s strongly worded endorsement and consequential order confirms his finding of civil fraud against Elliott Gerstein. Not only did he grant civil judgment against Elliott Gerstein, but he also ordered that the applicants would have a full indemnity award of costs and that the claim arising out of Mr. Gerstein’s conduct would survive and continue to be collectible following his bankruptcy. Justice Cumming’s endorsement of October 11, 2007, stated in part as follows at paras. 4, 5, 11 and 12:

[4] At his examination it was determined that Mr. Gerstein, who earned $50,000 per year through his employment with Grover, declared to Canada Revenue Agency total income of less than $600,000 for the six year period from 2000 to 2005, without explanation spent over $6,000,000 through VISA expenditures over that period.

[5] Mr. Gerstein admits to spending over $2,000,000 on the 21 Thornbank property to purchase and commence construction of a 10,000 square foot house, but refuses to provide any explanation as to the source of the $2,000,000. He admits to spending over $1,000,000 on travel, clothes and jewelry but refuses to provide any explanation as to the source of the funds for such expenditures.

[11] Mr. Gerstein is required to provide a complete evidentiary record and put his "best foot forward" in responding to the motion at hand. Mr. Gerstein has failed to produce any sworn affidavit contesting the Plaintiff's evidence… Mr. Gerstein has not adduced any evidence at all to contradict the evidence put forward by the Plaintiff. Mr. Gerstein has not raised any triable issue. He has failed to demonstrate any defence in respect of his fraud established by the evidentiary record. This court draws an adverse inference from the failure of Mr. Gerstein to adduce evidence and his failure to provide any evidence in respect of contradicting the evidence established by the Plaintiff.

[12] For the reasons given, summary judgment is given in favour of the Plaintiff against the Defendant, Elliott Gerstein, for breach of trust and fraudulent misappropriation of funds in the amount of $1,283,028 plus pre-judgment interest in the amount of $213,102.05.[3]

[72] I wish to again emphasize that both Mr. Banack and Mr. Heller were insistent in their evidence that no suggestion was ever made in the course of the discussions with the Gerstein family about any resolution relative to the monies allegedly defrauded from the Grover Realty group of companies by Elliott Gerstein that the payment of monies would have or could have any impact relative to any criminal proceedings, whether they would be commenced or whether they would not be brought.

[73] Mr. Banack also testified that neither opposing counsel nor the Gersteins themselves ever complained, personally or through correspondence, that they were being extorted to settle by threats of criminal prosecution, at any time during this period from December 2005, until December 2007, when Elliott Gerstein was charged, or thereafter leading to the October 22, judgment entered against him in the civil collection litigation brought by Brenthall Apartments. Mr. Heller testified to the same effect but also, on the other side of that coin, that there was never any discussion whatsoever that the complainants would compound or conceal Elliott Gerstein’s fraud if monies were paid to them.[4] That is evidence from two highly experienced senior solicitors who are attorneys of impeccable and unquestionable integrity and reputation. It is evidence that I accept without reservation.”

31In addition to the s.11(b) Charter arguments, the Bankrupt also sought the exclusion of certain evidence from criminal trial led by GT, as the forensic expert hired by the Toronto Police Service (“TPS”) and the Crown, and LECG Forensic Accountants who did the initial work on behalf of certain of the Mintz Creditors. As Quigley, J. summarized:

“[4] Mr. Gerstein has also brought a second Charter application under ss. 7 and 24(1) in which he claims that the proceedings before this court ought to be stayed as an abuse of process. Alternatively, he asks the court to exclude the evidence at his trial of (i) the Grant Thornton (“GT”) forensic accountant who was retained by Toronto Police Services (“TPS”) in this matter and (ii) the LECG forensic accountant who did the initial forensic work on this matter for the civil complainants who sought to recover the embezzled monies from Mr. Gerstein. In both cases, apart from the abuse of process argument, the request to exclude evidence is based on Mr. Gerstein’s claim that both LECG and GT were in a conflict of interest position that irreparably taints their work product.

[5] These applications were heard at separate times but they are linked since the evidence regarding abuse of process and conflict relates to periods of time close to the beginning of the police investigation, a period of time that is significant for the purposes of the s. 11(b) application. Since the entire investigation was alleged to have been tainted, not only by the retention of the GT firm by TPS but also the reliance placed on the LECG work product, I heard the evidence relating to both applications in order to have a full understanding of the evidentiary context within which both requests for relief were made.

[6] In summary, looking first at the applicant’s claim of an abuse of process under ss. 7 and 24(1), I would dismiss that application. In my view the application was without merit. There was no reliable basis to conclude and I was not persuaded on this evidence that the TPS acted as a state agent for these civil complainants in proceeding with charges against Elliott Gerstein. On the contrary, I was satisfied that Detective Field conducted his own investigation and reached his own conclusions that were the foundation for his decision to lay charges against this applicant. He did not just rely on the information that was disclosed to TPS by the complainants and the independent forensic audit work of the GT firm supported the conclusions he had reached. The Gersteins may have hoped to avoid criminal prosecution of Elliott Gerstein by settling the claims of the complainants for monetary restitution, but I saw no reliable evidence that established or supported either threats of criminal prosecution or promises of immunity unless a substantial restitutionary amount was paid.

[7] Not only was that aspect of the application without merit, but neither in my view was there a conflict of interest here relative to Elliott Gerstein himself that could reasonably have required or called for the exclusion of either the LECG or the GT work product. LECG was not in a conflict relative to Elliott Gerstein, although they do appear to have been in a conflict relative to an unrelated third party as discussed further in these reasons. As for GT, it had no conflict in undertaking the TPS forensic retainer regardless of the fact that they acted as Mr. Gerstein’s trustee in bankruptcy. I reached that finding since Canadian bankruptcy law makes clear that the duty of the trustee is to the bankrupt estate, not the bankrupt. That point also is discussed further later in these reasons.”

32Quigley, J. made the following findings in relation to the Mintz Creditors and the Trustee regarding the Abuse of Process allegations raised by the Bankrupt in 2014:

“[137] In considering whether an abuse of process is made out, particularly in circumstances like this where the defence claims that threats of prosecution underlay the efforts of the Mintz family to obtain restitution from Elliott Gerstein, it is particularly important to remember that there is no bar to pursuing both civil remedies and criminal charges in cases of allegations of fraud.[40] There was nothing improper about the victims of the misappropriation seeking to recover the monies that were taken from them. However, it is and would be an abuse of process to pursue criminal charges solely for the purpose of civil debt recovery, and individuals do wrong if they threaten to pursue criminal charges if civil remedies are not paid. The blameworthiness of such a threat derives from it being potentially extortionate in nature.[41]

[138] Where individuals may have pursued both civil proceedings and reported the matter to police authorities, like in this case, what is important is that the police and Crown prosecutors pursue their public duty to investigate, to assess the facts after an investigation, to lay charges where there are reasonable and probable grounds to do so, and to pursue prosecution when there is a reasonable prospect of conviction and there is a public interest in doing so.[42] Thus, in circumstances where the authorities have independently assessed the viability of a charge and its prosecution and have decided to push forward in the public interest, the remedy of a stay for abuse of process will not be made out. The point is made clearly in the Supreme Court's decision in Finn at paragraphs 15-37 and the conclusion Sopinka J. reached in that case when he observed that:

…[t]he charges were laid after an independent investigation and decision by the authorities. It cannot therefore be said that the purpose of the prosecution was to advance the civil interest of the complainant to recover a debt.

[139] In this case, however, the questions raised in the abuse of process application are essentially moot given my disposition on the s. 11(b) Charter application. As such, I see no need to provide exhaustive reasons for my conclusion that it would have been dismissed. Nevertheless, it is important that they be addressed briefly, given the vehemence with which the claims were made, and the significance particularly of the conflict claim. In my view, however, the abuse of process application was without merit. Had the applicant not succeeded on the s. 11(b) application, the matter would have gone to trial because I would have dismissed the application under ss. 7 and 24(1) based on an alleged abuse of process.

[140] In my view there was no cogent basis to conclude on this evidence on a balance of probabilities that the TPS acted as a state agent for these civil complainants in proceeding with charges against Elliott Gerstein. Neither was I persuaded that it would be appropriate to draw the inference, having regard to the whole of this evidence, that the Mintzs threatened the Gersteins with the prospect that they would go to the police and have Elliott Gerstein charged with fraud, unless a substantial amount was paid to them in restitution, or that they would not report it if restitution was made.

[141] The materials generated by LECG were delivered to TPS in August 2006, at the instance of the Mintzs and their counsel, Mr. Heller and the forensic accountant, Mr. Harloff, and those materials were the foundation for the further investigation that was undertaken by Det. Field. This documentation, as supplemented by the product of Det. Field’s independent investigation, was the core evidentiary foundation that led Det. Field to arrest and charge Elliott Gerstein with seven counts of fraud in December of 2007. Notwithstanding the product of Det. Field’s further investigation, I acknowledge that the case could not be prosecuted solely on the basis of the further results generated by Det. Field in the course of his investigation, obtaining further documentation and interviewing witnesses. So it follows that the exclusion of the evidence that was initially delivered to TPS by Messrs. Heller and Harloff in August of 2006 would have effectively gutted the prosecution’s case at trial.

[142] Mr. Gerstein argued that in proceeding with criminal charges against him, the police and the Crown essentially acted as agents for the civil complainants, the members of the Mintz family and the other investors in the companies from whom funds were embezzled, in furtherance of the civil remedies in recovery and restitution that they pursued before these charges were laid.

[143] The defence claims that the Mintz family used the prospect of criminal proceedings to force the Gersteins to accept financial responsibility for the fraud perpetrated by Elliott Gerstein. It is claimed they used the threat of prosecution to obtain settlement terms under which the Gerstein family would pay back the Mintzs for much of the money allegedly embezzled by their son and family member, Elliott Gerstein.

[144] There was a sharp conflict in the evidence I heard on what transpired between the two families. Moreover, counsel for the defence essentially sought to turn the tables from defence to offence, going on the attack and accusing Al Mintz of having been the actual perpetrator of a fraud. At one point during defence counsel’s submissions, I observed that it was Elliott Gerstein and not Al Mintz who was on trial in these proceedings, but defence counsel corrected me on that. I was mistaken, he said, even though his claim seemed to ignore that there was evidence before the court of Elliott Gerstein’s appropriation of corporate funds to his own use and benefit.

[145] That is not to say and plainly no one can ever know whether Mr. Gerstein would have been found beyond a reasonable doubt to have committed the offences with which he is charged if the trial had proceeded. It cannot be said whether the charges would have been proven to the criminal standard. Moreover, Mr. Gerstein is presumed to be innocent of these criminal charges until proven otherwise. I do not deny that it is open to any defendant to seek to diffuse charges by pointing the finger at others.

[146] Regardless of Mr. Bains’ perspective however, and his plain determination to call the character of the complainants into question, that charge is vigorously rejected, not only by the members of the Mintz family and Al Mintz in particular, but also their counsel, Brian Heller and Larry Banack, both of whom are exceptionally experienced and highly respected members of the bar. They were careful, detailed and adamant in their evidence that there was no threat or holding out, express or implied or even hinted at, that Elliott Gerstein would not be charged if the Gersteins paid enough money to the Mintzs, or the reverse.

[147] It may be claimed or appear or be inferred from the testimony at the preliminary inquiry of Sidney Gerstein and the affidavit of Ira Gerstein and its astonishing and to date unfounded allegations against the Mintzs, that the Gerstein family hoped to avoid criminal prosecution for Elliott Gerstein by settling the claims of the complainant corporations. However, I agree with counsel for the Crown that nothing in the correspondence between them or their counsel and Larry Banack or any of the other counsel establishes either threats of criminal prosecution or promises of immunity. Further, I accept without reservation the evidence of Brian Heller, the criminal lawyer who helped prepare the presentation of the case to the Fraud Squad and who could not have been clearer in his testimony that the criminal and civil proceedings were kept completely and entirely separate and that neither threats nor promises were held out to the applicant.

[148] While TPS may not have engaged in a comprehensive review of the content of most of the boxes received from LECG in October 2008, and which were then passed on to GT for their forensic examination, audit and compilation work thereafter, and thus have forestalled a determination whether that material needed to be disclosed to defence counsel, that was almost 11 months after Elliott Gerstein had been charged. Mr. Gerstein was charged in December 2007. The initial materials obtained from the complainants were received by TPS in August 2006.

[149] From the late autumn or early winter of 2007 when Det. Field was assigned as the officer in charge, until the charges were laid against Elliott Gerstein in December 2007, Det. Field conducted his own independent follow-up and investigation relative to the fraud perpetrated by Elliott Gerstein. He created an investigation plan and in his evidence, which I accept, pursued that plan in order to gather the evidence that he required to make the case against Mr. Gerstein. Det. Field was an experienced police officer and fraud squad detective and he was confident that the investigation that he had conducted was complete in that it provided him, without question he said, with reasonable grounds to lay the charges that he did against Mr. Gerstein.

[150] Det. Field conducted his own interviews at Grover Realty and he came to his own conclusions – he did not simply rely upon the information that the complainants had disclosed and provided to TPS in the summer of 2006. He adamantly denied having acted as an agent for the complainants in their efforts to recover on the civil debts they claimed were due to them in respect of the monies taken from them by Elliott Gerstein.

[151] If this were not enough to persuade me that this is not an appropriate case for the applicant's abuse of process motion to be granted, I would simply add that in furtherance of ensuring the independence of its investigation of the charges that it laid against Mr. Gerstein, D/Sgt. Logan of TPS and Det. Field took steps to ensure that the GT firm, on general retainer to the Fraud Squad, would conduct an independent audit with its own forensic accountants of the source material obtained in August 2006 from LECG in 2008 to confirm that there was an independent foundation for the prosecution to proceed.

[152] The threshold for stay of proceedings under section 24(1) of the Charter based on abuse of process is a very high one. As the Supreme Court of Canada made clear in R. v. Regan 2002 SCC 12, [2002] 1 S.C.R. 297 at para. 54, it is a remedy that is reserved for “only the clearest of cases.” I have no doubt in concluding this is not one of them.

[153] In my view, the facts here make it plain that the police authorities and the Crown were alive to the dangers of being co-opted as participants by parties who wished to pursue an improper agenda. It is true that the TPS may not have dedicated countless months of investigation to this relatively simple and uncomplicated fraud on the exclusive basis that counsel for the defence seemed to think that the matter warranted or required. But the charges were laid against Elliott Gerstein after an independent decision by the Crown and the police authorities to push ahead with the prosecution, having verified the substance of and foundation for those charges through independent investigation and through an independent forensic audit and compilation of the amounts that were allegedly defrauded by the accused in this case. In those kinds of circumstances, as Sopinka J. concluded in Finn, above, where the authorities independently assess the viability of the charge and its prosecution and decide to push forward in the public interest, the claim of abuse of process will not be made out and a request for a stay of the charges on that basis will be denied.”

33With respect to the allegations of conflict of interest raised against the Trustee by the Bankrupt, Quigley, J. made the following binding findings of fact and law:

“[154] Finally, turning to the issue of conflict of interest, Mr. Gerstein claimed that the investigation of the allegations against him was irreparably compromised by conflicts of interest involving the GT firm and LECG, and thus the evidence they would have provided at his trial ought to be excluded.

[155] Relative to the complaints of alleged conflict of interest, while I accept that there may have been a conflict within the LECG firm when it accepted a retainer to perform a forensic examination on the books and records of Grover Realty and its related companies to identify the fraud allegedly perpetrated by Elliott Gerstein, in my view that potential conflict is irrelevant to this matter. It is irrelevant because the conflict did not relate to the Gersteins and the LECG firm owed no client duty of confidentiality or responsibility to Elliott Gerstein, or to anyone in his family.

[156] The Blackstein family, an unrelated party, certainly had a right to complain of a conflict: the LECG firm agreed to act for the Mintz family in that entirely unrelated and separate matter despite the Blacksteins having retained LECG to investigate on their behalf against the Mintzs. The Blacksteins’ consent was never sought when LECG accepted a retainer from the Mintzs. The only persons asked for a release from any conflict were the Mintzs. Hardly surprising, they readily agreed, but there was no equivalent duty owed to Elliott Gerstein. LECG’s potential conflict as between those other two parties cannot be said to have tainted any conclusions LECG might have reached relative to the accused’s conduct in allegedly defrauding Grover Realty and its related companies.

[157] In other words, it does not follow that the quality or impartiality of LECG’s work in their forensic investigation of Mr. Gerstein’s conduct is suspect merely because there may have been an apparent conflict relative to other clients in another matter, notwithstanding one of those other clients retained LECG to investigate the accused.

[158] The defence’s expert, Mr. Mark Gain, sought to persuade me that I should find this potential conflict was relevant for the purposes of the abuse of process application. While the possible existence or appearance of a conflict in that separate matter might have affected the weight that should properly be given to LECG’s evidence and work product on a stand-alone basis, in my view this was insufficient to create an all-embracing conflict that would have called for the rejection of the entirety of the LECG work product, notwithstanding Mr. Gain’s professional opinion, which I respect but do not accept.

[159] More importantly in the context of the case, I would dismiss the complaint of the applicant that there was a conflict of interest within the GT accounting firm when it took up the request of TPS to prepare a forensic compilation of the amounts embezzled from Grover Realty and each of the other seven corporate complainants. That claim is made as a result of the fact that Mr. Ray Godbold, a licensed Trustee in Bankruptcy, and a partner of the GT firm, had previously been appointed by the court as the Trustee in Bankruptcy for Elliott Gerstein’s bankrupt estate, before GT took on the TPS retainer.

[160] Mr. Gain’s evidence for the defence tried to establish the existence of a duty of client confidentiality between a Trustee in Bankruptcy and the bankrupt himself but I reject that claim, or at least the claim that there was a conflict created by that relationship. I was instead persuaded on the basis of the expert evidence adduced by the Crown’s expert, Mr. Jonathan Kreiger, and by the applicable provisions of the Bankruptcy and Insolvency Act, which regulates the conduct of trustees in bankruptcy, that there was no duty owed to Elliott Gerstein, either by Mr. Godbold or the GT firm which was violated as a consequence of Mr. Melamed's forensic investigation into the fraud.

[161] The provisions of the Bankruptcy and Insolvency Act cause trustees in bankruptcy to have responsibility not only to the estate of the bankrupt but also to the court. But they create no specific responsibility to the bankrupt person. Those provisions set out the duties and responsibilities of trustees in bankruptcy, and explain to whom their professional and fiduciary responsibilities are owed. The evidence outlining the scope and operation of those provisions showed that GT could not have had a conflict in this particular case. The trustee’s client is “the debtor's estate,” and the stakeholders to whom the trustee owes responsibility are the creditors and the estate itself, not the bankrupt debtor. Moreover, the duties as set out in that statute show that no consent of the debtor is required for any actions undertaken by the trustee in bankruptcy and it is plain on the basis of the statutory language that the “debtor's estate” does not mean the debtor as an individual person.

[162] Mr. Kreiger addressed the problematic aspects of the expert report prepared for the defence by Mr. Gain and refuted the suggestion that a trustee in bankruptcy owed a fiduciary duty to the bankrupt, rather than to the bankrupt estate to which that obligation is owed, or that there is a duty of care to the bankrupt that could have created a conflict. Defence counsel complains that he is not objective because he is a partner of GT, but that is not a complaint I accept here given that the predominance of his evidence simply outlined the applicable statutory framework and frankly contained little opinion of his own.

[163] Moreover, it was evident that David Melamed of GT was already well engaged in his role to review the books and records from Grover Realty and to compile a report on the amounts of money defrauded at the time the bankruptcy was declared. There could be no conflict in performing that responsibility since the provisions of the Bankruptcy and Insolvency Act, and in particular sections 206(2) and (3), show that the trustee in bankruptcy could have conducted, and might have been statutorily bound to perform exactly the same action on his own and to provide the results to the TPS or the court. He would have been in that position if he had any view whatsoever that fraudulent activity had been involved in the conduct of the bankrupt leading to the filing of the proposal in bankruptcy, and section 202 of the Bankruptcy and Insolvency Act may make it an offence if the Trustee fails in any such duty. Sections 205(1), 206(1) and (2) of the Bankruptcy and Insolvency Act subjects the trustee to stringent controls and regulations, including reporting obligations and cloak him/her with responsibilities like an officer of the court.

[164] In response to the argument raised by counsel for the defence relative to the existence of conflict, I do not dispute that Mr. Heller raised the possibility of conflict. Further, Det. Field seems to have been alive to the possibility of conflict, and so were D.C. Walter and Det. Dionne, but plainly the mere raising of the suggestion or possibility does not establish the existence of a conflict.

[165] Whether a conflict of interest exists in any particular case is always a function of the facts in the particular case, the relationship between the parties, the professional and legal obligations that govern, statutory or common law, and the specific relational issues involving the particular parties. Here, the claim by the defence that there was a conflict of interest that would have prevented the evidence prepared by GT from being adduced at the trial of Mr. Gerstein, had it proceeded, is without foundation because there was no conflict. I adopt the reasons out in paragraph 25 of the Crown’s responding factum as follows:

(i) There was no client relationship, in the usual sense, between Mr. Gerstein and GT as Mr. Godbold was fulfilling the role of trustee in a proposal under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3;

(ii) There could have been no expectation of confidentiality as between Elliott Gerstein as the person making the proposal in bankruptcy and Mr. Godbold as the trustee as it relates to the courts and any matters involving these offences, because the trustee is duty bound to report to the court and owes its obligations to the court, not the bankrupt;

(iii) There was no engagement letter with Mr. Gerstein and the fees for the service provided were paid out of the bankrupt estate;

(iv) The terms of the relationship between Elliott Gerstein and GT are governed by the BIA and are not in any way in conflict with or inconsistent with the work conducted by Mr. David Melamed for the TPS;

(v) Under the BIA, a trustee has the ability to investigate the affairs of the bankrupt and is actually required by law to report to the Attorney General’s office if it believes on reasonable grounds that an offence under the BIA or the Criminal Code was committed by the bankrupt or any other person, and finally,

(vi) If there was not already an ongoing investigation, at some point it seems likely that GT may and likely would have been required to make such a report in light of the allegations of fraudulent conduct that were being made in this case.

I reach the conclusion that there was no conflict within the GT firm in these circumstances for these reasons but separate and apart from the fact that GT also maintained a scrupulous separation of files and information relative to each of those two roles, even if no such “firewall” was technically required.⁴³

[166] The issue ends up being moot owing to the conclusion I have reached on the application to stay the proceedings under s. 11(b) of the Charter. However, I have addressed the alleged conflict issue, particularly relating to that alleged between the role of GT as trustee in bankruptcy of the bankrupt estate of Elliott Gerstein and its role undertaking forensic accounting work for the TPS, in the hope that it will discourage such arguments from being made in the future when the applicable statutory provisions show that the claim is without foundation in such a case.”

PRIOR BANKRUPTCY PROPOSAL PROCEEDINGS

[34]

Prior Bankruptcy Proposal Proceedings

The Bankrupt is a first time Bankrupt. The Bankrupt filed the NOI on February 20, 2007 and on March 19, 2007 filed the Proposal (the “Proposal Proceedings”), appointing GT as the Proposal Trustee.

35Under the terms of the Proposal the amount of $1,000,000.00 (the “Proposal Contribution”) was proposed to be paid by a Third Party, in addition to the Bankrupt’s spouse Iris Gerstein (“Iris”) conveying her interest in the “Proposal Assets” to the Bankrupt, who would then convey his interest in the matrimonial home, being the Cantertrot Property, to Iris.

36The “Proposal Assets” were defined in the Proposal as Jewellery (watches), RRSP’s Vehicles and cash owned by the Bankrupt with an estimated value of $270,000, and the assets of Iris, being the 21 Thornbank Road Thornhill Property (the “Thornbank Property”) then listed for sale at $1.7 million, and Jewellery with an estimated value of $50,000.

37The Proposal Trustee would sell the Proposal Assets and use the net proceeds of sale to add to the $1,000,000 Proposal Contribution to fund payments to the Creditors under the Proposal in full satisfaction of their claims. All parties at the Discharge Hearing agreed that the person that would be paying the Proposal Contribution was the Bankrupt’s Father, Sydney Gerstein.

38The total maximum “Proposal Fund” gross value estimated in the Proposal was $3,020,000, (although it is impossible to estimate the net value of the proposal fund at this point), and specifically excluded any value to be obtained from the Cantertrot Property.

39The Report of the Proposal Trustee was not filed in evidence at this Discharge Hearing, so the Court does not have available to it the comparative values estimated by the Proposal Trustee for recoveries in the Proposal and Bankruptcy scenarios.

40In the Original s.170 Report, the asset values reported by the Bankrupt in the Statement of Affairs, and the realization values as at September 18, 2007 were:

Asset	Value as per Statement of Affairs	Amount Realized
2000 Lexus LX 470	$15,000	$9,960
2004 Lexus LS 430	$35,000	$31,800
35 Cantertrot Court Thornhill (50% owner w/spouse)	$525,000	0
Cash in Financial institutions	$95,000	$41,114
RRSPs	$10,000	$2,668.40
Watches	$115,000	$43,460
Interest	NIL	$2,248.10
Total	$795,000	$131,270.64

Evidence of Trustee in s.170 Report

[41]

Evidence of Trustee in s.170 Report

The evidentiary value of a report by a Trustee under s.170 of the BIA is expressed as follows in Bankruptcy and Insolvency Law of Canada, Fourth Edition, by The Honourable Mr. Justice Lloyd W. Houlden, Mr. Justice Geoffrey B. Morawetz, and Dr. Janis P. Sarra (“Houlden & Morawetz”) § 7:79. Trustee's Report to the Court—Effect of the Report:

“The trustee's report is evidence of the statements contained in it: s. 170(5). The predecessor section to s. 170(5) provided that the report was prima facie evidence of the statements contained in it. The words “prima facie” were dropped in the 1970 revision of the revised statutes: see R.S.C. 1970, c. B-3, s. 140. The omission of the words prima facie does not appear to have altered the effect of the subsection: see Re Leach (1996), 1996 5408 (NS SC), 42 C.B.R. (3d) 173, 1996 CarswellNS 461 (N.S. S.C.).

Since the report is evidence of the statements contained in it, it is unnecessary for the trustee to give oral evidence of what is contained in the report: Re Lefebvre (1932), 13 C.B.R. 396 (Que. S.C.). Unless contradicted by other evidence, the court must accept the statements contained in the report: Re Barrick (1980), 36 C.B.R. (N.S.) 286 (B.C. C.A.); Re Crowley (1984), 1984 5444 (NS SC), 54 C.B.R. (N.S.) 303, 66 N.S.R. (2d) 390, 152 A.P.R. 390 (T.D.).

Where the trustee's report is positive, it is up to the opposing creditors to provide evidence to prove the facts referred to in s. 173: Re Tanner (1993), 1993 820 (BC SC), 21 C.B.R. (3d) 244, 1993 CarswellBC 559 (B.C. S.C.); Re Bualzyk (1998), 4 C.B.R. (4th) 47, 1998 CarswellOnt 2318 (Ont. Gen. Div.)

“Statements” in s. 170(5) include not only statements of facts but also opinions of the trustee: Re Nightingale (1988), 72 C.B.R. (N.S.) 151 (N.S. T.D.); Re Barrick (1980), 36 C.B.R. (N.S.) 286 (B.C. C.A.). Thus, if the trustee reports that the bankruptcy was caused by inexperience, neglect of business affairs, etc., that is a statement coming within s. 170(5). However, if the trustee makes such statements, it should give the reasons which form the basis for the opinion: Re Crowley (1984), 1984 5444 (NS SC), 54 C.B.R. (N.S.) 303, 66 N.S.R. (2d) 390, 152 A.P.R. 390 (T.D.).

Although great weight should be given to recommendations contained in the trustee's report, the court is not bound by them: Re Young (1928), 10 C.B.R. 53 (N.B. K.B.); Re Kemper, [1961] O.W.N. 288, 2 C.B.R. (N.S.) 130 (S.C.); Re Leach (1996), 1996 5408 (NS SC), 42 C.B.R. (3d) 173, 1996 CarswellNS 461 (N.S. S.C.); Re Woodrow (1997), 1997 9687 (SK KB), 46 C.B.R. (3d) 310, 1997 CarswellSask 156 (Sask. Q.B.); Re Barrick (1980), 36 C.B.R. (N.S.) 286 (B.C. C.A.); Re Crowley (1984), 1984 5444 (NS SC), 54 C.B.R. (N.S.) 303, 66 N.S.R. (2d) 390, 152 A.P.R. 390 (T.D.); Re Simpson (1984), 50 C.B.R. (N.S.) 109 (B.C. S.C.); Re Safatli (1995), 34 C.B.R. (3d) 40, 1995 CarswellNS 46 (N.S. S.C.). Thus, if the trustee recommends an absolute discharge for the bankrupt, the court may decide not to follow the recommendation but instead impose a conditional order: Re Letts (1995), 1995 4090 (SK KB), 37 C.B.R. (3d) 38, 1995 CarswellSask 584 (Sask. Q.B.).”

42Kershman, J. in Re Chang, 2021 ONSC 3483 states:

“[124] The bankrupt can contest the statements contained in the trustee’s report and must, under s. 170(6) of the BIA, at or before the time appointed for the hearing of the application of discharge, give notice in writing to the trustee specifying the statements in the report that he proposes at the hearing to dispute.

[125] If the bankrupt does not give notice in writing as required by s. 170(6) of the BIA, the court will take the facts as stated in the report as being established: Roy (Re) (1987), 66 C.B.R. (N.S.) 280 (Ont. S.C.); Grenier c. Bolduc (1957), 37 C.B.R. 162 (Que. C.A.). Similarly, if the bankrupt calls no evidence to contradict what is contained in the report, the court will accept the facts as stated in the report: Upham (Re) (1985), 57 C.B.R. (N.S.) 134 (N.S.S.C.).”

43In the Original s.170 Report the Trustee makes the following statutory statements on the statutory form that constitute evidence on a discharge under the BIA statements:

“4. a) Was the bankrupt required to pay to the estate an amount established by the Directive on Surplus Income? X No

b) Could the bankrupt have made a viable proposal rather than proceeding with bankruptcy? X No

The bankrupt attempted to make a proposal to creditors through third party funding; however the proposal was rejected by creditors at a meeting held on April 25, 2007.

5. a) Did the bankrupt fail to perform any of the duties imposed on the bankrupt under the Act? X No

b) Can the bankrupt be justly held responsible for any of the facts referred pursuant to section 173 of the Act? X Yes

Pursuant to Section 173 (1) (a); (d) (e); (k); (l):

c) Did the bankrupt commit any offence in connection with the bankruptcy? X No

6, a) Did the bankrupt ever make a proposal under the Bankruptcy and Insolvency Act? X Yes;

See Section 4(b)

b) Has the bankrupt been bankrupt before either in Canada or elsewhere? X No

8. a) Is it the intention of the trustee to oppose the bankrupt's discharge? X Yes

The Trustee intends to oppose the discharge of the bankrupt; The Trustee has attached his Notice of Intended Opposition.

b) Does the trustee have reasonable grounds to believe that a creditor or the Superintendent will oppose the bankrupt's discharge for a reason other than those set out in section 173(1)(m) or (n) of the Act? X Yes

The Trustee has been advised that Canada Revenue Agency will be opposing the discharge of the bankrupt.

9. Did the bankrupt refuse or neglect to receive counselling pursuant to the Directive on Counselling in insolvency matters? X No

10. Are there other facts, matters or circumstances that would justify the Court in refusing an absolute order of discharge? X Yes

The bankrupt allegedly stole over 10 million dollars from various companies that he was managing: the bankrupt has been unable to provide evidence of use of the funds.

11. Other pertinent information Yes X

Inspectors Jill McDougall/Len Lotta

Don Mintz

Steven Mintz

44There is no evidence before the Court that any component of the s.170 Report has not been approved by the Inspectors of this Bankruptcy Estate.

45In the Claims Register in the Second Supplement the total unsecured Creditors of the Bankrupt admitted for dividend were $13,058,731.17 (the “Proven Claims”) while the filed claims were $19,871,849.30. The Bankrupt declared $13,338,057.00 in claims on the Statement of Affairs.

46The most significant Proven Claims greater than $500,000 are:

CRA $5,002,113.92

Matanah Investments Corp $1,834,347.00

Dawn Trading Limited $922,242.00

Luray Investments Limited $803,713

Minkids Holdings $803,481

746190 Ontario Limited $796,045

Chelsandy Developments Limited $623,205

47Unusually, the Proven Creditors appear to be almost entirely, with the significant exception of CRA, members of the Mintz, Gerstein, Strasberg, Mernick and Glowinsky families, or their corporations, with no significant third party or institutional creditors, such as unpaid credit cards or lines of credit.

48The Trustee in the Second Supplement explained the nature and quantification of the claims of these creditors, as the Trustee conducted a claims process to deal with claims that were duplicative:

“20. Subsequent to the Supplemental Report the Trustee reviewed the claims filed by creditors in preparation for declaring a dividend. During this review the Trustee noted that there were overlapping claims filed by corporations, their shareholders, joint venture entities and their beneficiaries. The Trustee therefore communicated with the creditors and created a process whereby claims were filed only by legal entities with direct ownership of properties from which the Bankrupt misappropriated funds. This process also required that the Trustee disallow certain previously filed claims. A copy of the current claims register is attached hereto as Appendix “3”and is summarized in the following table.

Creditor	Claim Amount
CRA	$ 5,002,114
781526 Ontario Inc.	158,604
Chelsandy Developments Limited	623,205
Luray Investments Limited	803,713
Matanah Investments Corp.	1,834,347
746190 Ontario Inc.	796,045
2135637 Ontario Inc.	236,331
Minkids Holdings	803,481
Dawn Trading Limited	1,080,846
Howard Mintz	366,772
Rhonda Strasberg	366,772
808001 Ontario Limited	685,952
746191 Ontario Inc.	59,966
1186708 Ontario Inc.	71,696
Estate of Saul Mintz	85,581
Lilliana Buildings Limited	83,308
Total	$ 13,058,735

49CRA, despite having a proven claim of $5,002,113.92, constitutes only 38% of the Proven claims, and as a result, s.172.1 of the BIA is not applicable to this Discharge.

50The Mintz Creditors as defined above (Dawn Trading, Brenthall and Faye) have Proven Claims as at July 14, 2022 totalling $922,242.00 (for Dawn and Brenthall claims), as it appears from the Claims Register that the Faye claim was filed, but not proven.

Property Realizations by Brenthall and Trustee

51The Brenthall Claim was initially filed at the amount of $1,283,028.00. Although not specifically in evidence for this hearing, the parties agreed that the Trustee and Brenthall settled the determination of entitlement to the sales proceeds of the Thornbank Property after the sale was not enjoined by Cumming, J. and a substantial portion of those sales proceeds were applied directly to the Brenthall Claim.

52In the Second Supplement, the Trustee’s Evidence on this issue was:

“14. The Brenthall Summary Judgement states that any proceeds from the sale of the Thornbank Property shall be held in trust pending a further distribution order. The Thornbank Property was sold and the net sale proceeds of approximately $1,389,083 were held in trust by Minden Gross LLP (the "MG").

15. On January 21, 2014, Brenthall obtained an order requiring that the proceeds from the Sale of the Thornbank Property be paid to Brenthall in partial satisfaction of its judgment. MG thereafter paid the Thornbank Property sale proceeds including interest in the amount of $1,438,198 to Brenthall.”

53This was apparently done with the leave of, and approval by, the Court, and the CRA and the other creditors apparently did not oppose that distribution to Brenthall, outside of the s.136 priority scheme. Jyl MacDougall on behalf of CRA was an inspector and presumably the inspectors did not instruct the Trustee to oppose this payment.

54At the time of the Discharge Hearing, the Brenthall Claim was $317,208.50. In effect, the entire principal sum of the Brenthall Judgment has been paid, and a portion of the approx. $463,000 of pre-judgment interest and costs awarded by Cumming, J. has also been paid.

55There were no significant Secured Creditors filing claims in the Proposal or the Bankruptcy.

56With respect to the disposition of the Cantertrot Property jointly owned by the Bankrupt and Iris, the Trustee reported:

“16. The Bankrupt and his spouse each held a 50% interest in the Cantertrot Property. The Trustee and the Bankrupt's spouse agreed to sell the Cantertrot Property and that 50% of the equity would be paid to each party.

17. The Trustee obtained an appraisal of the Cantertrot Property effective January 30, 2013 which valued the Cantertrot Property at $720,000. The Trustee and the Bankrupt's spouse entered into a listing agreement dated April 2, 2013 wherein the Cantertrot Property was listed for sale for $699,000.

18. The Cantertrot Property was ultimately sold for $750,000. After payment of property tax arrears, realtor commissions, and legal fees the Trustee's 50% interest in the proceeds amounted to $345,523.14.”

57As noted above, the Cantertrot Property did not form part of the realization offered to creditors in the Proposal as “Proposal Assets”.

58With respect to other asset realizations, in the Second Supplement the Trustee reports:

“19. With Inspector approval the Trustee sold the follow other assets of the Bankrupt:

a. Watches - $41,000.00

b. Cars - $39,500.00

c. RRSP - $2,688.40

20. The balance in the Bankrupt's bank account at the date of bankruptcy in the amount of $41,114.11 was seized by the Trustee.”

59To summarize from the Supplementary Report and the Second Supplement the total gross realizations in the Estate by the Trustee, as opposed to Brenthall, are:

Cantertrot Property: $345,523.14

Watches: $41,000

Cars: $39,500

RRSP: $2,688.40

Bank Account cash: $41,114.11

Surplus Income: $0

Total: $469,825.65

60On the evidence before the Court Brenthall has recovered $1,438,198, but there is no evidence whether there were other recoveries by Brenthall under the Brenthall Judgment, or whether any of these recoveries were shared with any of the other creditors, other than CRA.

61To the extent possible to determine from the materials before the Court on this Discharge, it appears that, between Brenthall and the Trustee, at least $1,908,023.65 has been recovered from the Bankrupt.

Surplus Income

62The Trustee reports the Bankrupt’s compliance with s.68 of the BIA as follows in the Second Supplement:

“8. In the Supplemental Report the Trustee reported that:

a) the Bankrupt advises that he has not earned any significant income throughout his bankruptcy, lives with his son; and, has minimal income from a dog walking business; and

b) the Bankrupt has only provided Income and Expense Statements for July and August 2007 in which he declared no income or expenses with a notation stating that his expenses are being paid by his parents.

9. On June 14, 2022 counsel for the Bankrupt wrote to the Trustee (the “June 14 Letter”) providing the Trustee with Income and Expenses Statements showing the following:

a) May 2007 to December 2007 – Income NIL, Expenses NIL

b) January 2008 to January 2009 – Income NIL, Expenses $1,000 A copy of the June 14 Letter is attached hereto as Appendix “1”.

10. During examinations the Bankrupt has advised that he was paid $1,100 a month by his father and earned money from a dog walking business during this time period. The Income and Expense Statements that have been provided are clearly not accurate as none of this income is reported.

11. In the absence of accurate Income and Expense Statements the Trustee is unable to calculate if the Bankrupt has any surplus income obligations.”

Tax Returns

63With respect to the Bankrupt’s compliance with his pre and post-bankruptcy tax obligations, in the Second Supplement the Trustee reports that as at July 14, 2022:

“12. The June 14 Letter also provided the Trustee with unfiled pre- and post-bankruptcy income tax returns for 2007 as well as 2008 and 2009 tax returns. All of the provided tax returns show no income.

13. Based on examinations of the Bankrupt the Trustee knows that the Bankrupt earned income in these years therefore the tax returns provided are not accurate.

14. The Bankrupt has an obligation to file tax returns while bankrupt and to pay any taxes owing to CRA.

15. The Bankrupt has not complied with the requirement to file accurate tax returns during his bankruptcy.”

16. The Bankrupt belatedly filed the Tax returns, immediately prior to the Discharge reporting nominal income, so at the time of the hearing the returns filed had not been assessed by CRA.

17. However the Bankrupt’s failure to file these almost 17 years of tax returns, in circumstances where he had been assessed a tax liability in excess of $5 Million, was a key issue in CRA’s opposition to discharge.”

Failure to explain disposition of assets

64In the Second Supplement the Trustee reports as follows with respect to Bankrupt’s explanation of the disposition of the Bankrupt’s assets, including the monies that were the subject matter of the Brenthall Judgment:

“16. In the Supplemental Report the Trustee reported that the Bankrupt had not explained how the misappropriated funds were spent.

17. The June 14 Letter explained that the approximately $6 Million misappropriated by the Bankrupt by way of payments to his credit cards was partially explained by a schedule prepared by the Bankrupt in response to an examination conducted in 2006 in which the Bankrupt provides an explanation for individual credit card expenditures exceeding $10,000 (the "VISA Schedule"). A copy of the VISA Schedule is attached hereto as Appendix "2".

18. The VISA Schedule shows numerous extravagant expenditures for jewelry, clothing, cars and trips totaling $2,612,320.25.

19. While the VISA Schedule does not explain how the full $6 Million was spent it provides insight into how the Bankrupt spent these funds. The Trustee is of the view that the VISA Schedule demonstrates unjustified extravagance in living.”

Opposition by Trustee

65On December 31, 2007, the Trustee issued a Notice of Intended Opposition to Discharge of Bankrupt pursuant to subsection 173(1) on the following grounds:

(i) The Bankrupt's assets are not of a value equal to fifty cents on the dollar on the amount of the Bankrupt's unsecured liabilities: s.173(1)(a);

(ii) The Bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets: s.173(1)(d) ;

(iii) The Bankrupt has contributed to his bankruptcy by unjustifiable extravagance in living: s.173(1)(e);

(iv) A creditor has obtained summary judgment against the Bankrupt and the court declared that the debt owing to the creditor arose out of fraud and survives the bankruptcy: s.173(1)(k).

66The Trustee in the Second Supplement makes the following recommendation on Discharge:

“23. The Trustee recommends that if the Court is willing to grant the Bankrupt a discharge, that the discharge be conditional upon:

a. payment of the sum of $100,000 to the Trustee;

b. filing of all pre- and post-bankruptcy income tax returns and payment of any income tax liabilities resulting from all post-bankruptcy filings.

5. At the Discharge the other Opposing Creditors appearing, being Dawn Trading and CRA, concurred with this recommendation, but opposed on additional s.173 facts.

6. CRA filed a Notice of Opposition dated January 15, 2008 that opposed the discharge on the under s.173(1)(a)(d)(e),(k) and the following additional ground:

“ (e) the earnings of the bankrupt may reasonably be expected to be sufficient, or become sufficient, to meet a part or all of the indebtedness of the bankrupt”

Which is not a specific s.173 fact.

67CRA filed a Notice of Opposition dated January 15, 2008 citing the statutory text of s.173(1)(a),(d),(e), and (k).

68Brenthall filed an opposition on December 6, 2012 where it opposed on the following additional s.173 facts:

“(b) the bankrupt has put his creditors to unnecessary expense by a frivolous or vexatious defence to an action properly brought against the bankrupt;

(c) the bankrupt has failed to perform the duties imposed on the bankrupt under the Bankruptcy and Insolvency Act,

(d) the bankrupt has omitted to keep such books of account as are usual and proper in the business carried on by the bankrupt;

(f) the bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet the bankrupt's liabilities.”

Although not cited specifically, the wording is identical to s.173)(1)(b),(d),(f) and (o).

69Dawn Trading filed an identical Notice of Opposition to the Brenthall Opposition on June 23, 2022.

70CRA and Dawn Trading did not file separate evidence on this Discharge and called no witnesses at the Discharge.

71To summarize the grounds of opposition at this Discharge:

Creditor

Proven Claim

a

b

c

d

e

f

g

h

i

j

k

l

m

n

o

Order requested

Trustee

N/A

X

X

X

X

$100,000 payment Order, filing of all pre and post bankrupt income tax returns and payment of any income tax liabilities resulting

Dawn Trading

$922,242 on claims register provided in Second Supplement

X

X

X

X

Concur

CRA

$5,002,114

X

X

X

X

Concur

Evidence of the Bankrupt

[72]

Evidence of the Bankrupt

The Bankrupt filed an Affidavit sworn on September 27, 2023 (the “Bankrupt’s Affidavit”).

73At Exhibit A to the Bankrupt’s Affidavit were the Transcript of the Examination for Discovery (the “Examination for Discovery”) of the Bankrupt conducted on September 6 and 18 2006 in the action by Brenthall that resulted in the Brenthall Judgment, and the Transcript of the examination on Undertakings (collectively the “Discovery Transcript”).

74At Exhibit B to the Bankrupt’s Affidavit was the Transcript of an examination (the “CRA Transcript”) conducted by the Department of Justice on behalf of CRA under s.163(2) of the BIA on January 23rd 2009 (the “CRA Examination ”).

75At Exhibit C the Bankrupt attached the Quigley Endorsement.

76At Exhibit D the Bankrupt attached the Transcript (the “Dawn Trading Transcript”) of an examination conducted on January 13, 2017by McReynolds on behalf of Dawn Trading under s.163(2) of the BIA (the “Dawn Trading Examination”).

77At Exhibit E was the Costs Endorsement of my colleague Associate Justice Frank dated July 25th, 2023 (the “AJ Frank Endorsement”) in an motion brought by the Bankrupt’s sons to vacate a Certificate of Pending Litigation on the 524 Whitmore Avenue Toronto Property (the “Whitmore Property”), bought by Iris with proceeds of the Cantertrot Property.

78At Exhibit F was a separate Affidavit of the Bankrupt sworn on October 24, 2022 that attached as exhibits the income and expense statements of the Bankrupt for 2018-2021 for the purposes of the Surplus Income requirement (the “Surplus Income Affidavit”).

79In addition, to fulfill the requirements of my endorsement issued on May 2, 2024 at the conclusion of the Discharge Hearing, counsel for the Bankrupt Mr. Harris uploaded further missing income and expense statements made by the Bankrupt for the years 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2021, 2022 and 2023 (the “Missing Income and Expense Statements”).

80Also filed previously before me on a prior case conference by Zeitz, prior counsel for the Bankrupt, and presumably on the instructions of the Bankrupt, was a Case Conference Memorandum dated August 3, 2022 where the Bankrupt, through his then counsel made factual statements and took legal positions on this Discharge (the “Case Conference Memorandum”).

81At the hearing the Bankrupt gave evidence in Chief and was cross-examined on that evidence by Wiebe on behalf of the Trustee, McReynolds on behalf of Dawn Trading and Wang on behalf of CRA, as well as on the evidence in the Bankrupt’s Affidavit, the Discovery Transcript, the Surplus Income Affidavit, the various income and expense statements, the CRA Transcript and the Dawn Trading Transcript.

82The Bankrupt also called as a witness his brother Ira Gerstein (“Ira”).

Evidence on s.163 Examinations and other examinations under the BIA

83Under s.167 of the BIA:

“Any person being examined is bound to answer all questions relating to the business or property of the bankrupt, to the causes of his bankruptcy and the disposition of his property.”

84As stated in Houlden and Morawetz § 7:55. Use of Examination:

“Section 163(3) provides that the evidence of any person examined under ss. 163(1) and (2) shall, if transcribed, be filed in court, and may be read in any proceedings before the court under the Bankruptcy and Insolvency Act to which the person examined is a party.”

85Under s.158 of the BIA, the Bankrupt has the following duties applicable to the context of s.163 examinations under the BIA, and undertakings given in those examinations:

(b) deliver to the trustee all books, records, documents, writings and papers including, without restricting the generality of the foregoing, title papers, insurance policies and tax records and returns and copies thereof in any way relating to his property or affairs;

(f) make disclosure to the trustee of all property disposed of within the period beginning on the day that is one year before the date initial bankruptcy event or beginning on such other antecedent date as the court may direct, and ending on the date of the bankruptcy, both dates included, and how and to whom and for what consideration any part thereof was disposed of except such part as had been disposed of in the ordinary manner of trade or used for reasonable personal expenses;

(g) make disclosure to the trustee of all property disposed of by transfer at undervalue within the period beginning on the day that is five years before the date of the initial bankruptcy event and ending on the date of the bankruptcy, both dates included;

(j) submit to such other examinations under oath with respect to his property or affairs as required;

(k) aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors;

86As I stated in Re Biskupski 2023 CarswellOnt 3291, 2023 ONSC 1694, 16 P.P.S.A.C. (4th) 189, 2023 A.C.W.S. 1056:

“[148] The statutory wording regarding “all his property” and “the particulars of the Bankrupt’s assets” and “aid to the utmost of his power” and “…do all such acts and things in relation to his property…as may be reasonably required by the trustee” all indicate as statutory intent to impose on bankrupts a high standard in proving that they have fulfilled their duties under the BIA, not merely a factual compliance.

[149] As stated in Jefferson, the BIA imposes a duty on the Bankrupt to “…actively aid his Trustee or his creditors in mitigating the damage wrought by his assignment.” and not “…remain passive and hope that the financial storm would blow over.”

87No party objected to the Bankrupt introducing the Discovery Transcript, the CRA Transcript and the Dawn Trading Transcript into evidence for this Discharge.

Evidence in Bankrupt’s Affidavit

88Given the importance of this evidence, and the specific statements made in the Bankrupt’s Affidavit on this Discharge, and in the context of his prior sworn testimony in the transcripts he attached as exhibits to the Bankrupt’s Affidavit, the wording of the affidavit reads as follows (emphasis added):

“2. I was employed as an office manager for Grover Property Management ("Grover") and was hired by Irwin Mintz. There were two property managers at the time.

3. Grover was a partnership which provided management services to Properties. It was created by Sydney Gerstein (my father), Saul Mintz, Irwin Mintz and Morris Wosnick.

4. Irwin Mintz (and his firm M&P) provided accounting services for Grover.

5. On November 15, 2005, Irwin Mintz asserted an allegation that I had, through my position at Grover, misappropriated approximately $9,000,000 from various corporations. That allegation significantly increased the level of animosity between Sydney Gerstein and Irwin Mintz (and their respective families) and spawned more numerous legal proceedings between and among shareholders of the various corporations.

6. In July 2006, the Irwin Mintz family on behalf of Brenthall, filed a legal claim against me and my wife Iris (now deceased) and others for, among other things, damages for breach of fiduciary duty, breach of trust, fraud, and misappropriation of funds from Brenthall (the "2006 Brenthall Action").

7. Mr. Larry Bannack who was hired by the Irwin Mintz Family, was representing Brenthall in the 2006 Brenthall Action. On September 6 and 18, 2006, I was extensively examined under oath by Mr. Bannack as to my assets and how I expended the alleged misappropriated funds. I fully co-operated and provided all of the undertakings that were required. There was never any follow up by Mr. Banack or the Irwin Mintz Family indicating they were unsatisfied with any of his responses to the undertakings. Attached and marked as Exhibit "A" is a true copy of the transcripts.

8. Subsequently, in 2006, the Irwin Mintz Family sold a house that I was constructing at the time. The net sale proceeds amounted to $1,428,921.25. The Irwin Mintz Family has never provided an accounting of how the proceeds were realized and whether Fair Market value was obtained. My understanding is that this amount was eventually paid to Brenthall in satisfaction of the Brenthall Judgement.

9. On February 20, 2007, I filed a Notice of Intention to Make a Proposal pursuant to the Bankruptcy and Insolvency Act (the "BIA"). The Trustee, acting on behalf of the creditors was, and still is, Grant Thornton Limited ("GTL"). Mr. Rae Godbold of GTL at that time had carriage of the file.

10. On March 19th, 2007, I subsequently filed a Proposal to my creditors pursuant to the relevant sections of the BIA. In that Proposal, I offered my creditors $1M, which was to be funded by my father.

11. On April 25th, 2007 a meeting of creditors was convened to discuss and vote on the Proposal. Creditors present at that meeting were Matanah Investments Corp (represented by Ira Gerstein), Brenthall Apartments Limited (represented by Steven Mintz) and Faye Mintz (represented by Don Mintz) and CRA (represented by Jill MacDougal and Len Lotta). The creditors at that meeting determined that the $1M was not sufficient and voted against accepting the Proposal adjudging me into bankruptcy. Today no creditors have anything and millions of dollars have been spent.

12. On April 25th, 2007, subsequent to the meeting of creditors to vote on the Proposal, a meeting of the creditors in Elliott's bankruptcy was convened. At that meeting, Ira nominated himself to act as an inspector in Elliott's bankruptcy, however Rae Godbold, on the advice of Don and Steven Mintz refused to allow him to act as an inspector alleging that he was in a conflict.

13. On October 22nd, 2007, by an Order made by Justice Peter Cumming, the Brenthall Judgment was granted in favor of Brenthall against me for the amounts as previously stated.

14. It is important to note that I never admitted anything. I only conceded the Judgment to end the matter and protect my family. As noted later in the decision of Justice Quigley, most of the documents and events that were pertinent would not come to the forefront until much later. On December 5th 2007, I was charged by the Toronto Police Services.

15. On January 23, 2009, I submitted to a third examination, this time by the Department of Justice. At that examination, present was Mr. Fred Tayar and Mr. Devin Bains on my behalf and Kevin Dias, Jill McDougal and S. Rivera on behalf of the Department of Justice. Again, I was asked the same or similar questions as in the first and second examinations by Mr. Dias and I provided the same and consistent answers. Since 2009, the Department of Justice has never followed up on any of its questions. Attached and marked as Exhibit "B" is a true copy of the transcript, and a copy of the Undertakings chart.

16. On March 13th, 2014, the criminal charges against me were permanently stayed. Attached and marked as Exhibit "C" is a true copy of the decision of Justice Quigley.

17. On January 13, 2017, a fourth examination by Mr. McReynolds on behalf of the Irwin Mintz family took place, this after Mr. Banack examined me twice in 2006 and the department of Justice in 2009. Again most of the questions were the same questions posed to me in 2006. Once again I fully co-operated and provided responses to the undertakings. Since that time there has been no follow up questions by the Irwin Mintz Family or the Wosnick Family. Attached and marked as Exhibit "D" is a true copy of the transcript. Again as I indicated previously, the Irwin Mintz Family and the Morris Wosnick family know there are no assets available but yet continue to waste courts time and other resources to further their vengeance. They appear to be the only creditors that continue to pursue me even after 18 years.

18. On December 13th, 2017, The Mintz family filed a lawsuit against myself, my deceased wife and my children for $11M. On the same date, they sought a Certificate of Pending Litigation against a property. Harley Mintz swore an affidavit for the ex parte application before Master Abrams. This affidavit was later found to not have made full disclosure (among other omissions). Attached and marked as Exhibit "E" is a true copy of the decision of Associate Justice Frank dismissing the Certificate of Pending Litigation and award substantial indemnity costs.

19. Since 2013, my sole source of income has been the dog walking business that I initially assisted my (ex) wife (deceased) with.

20. On October 24th, 2022, I supplied the Trustee with a copy of all my most recent income and expense statements. Attached and marked as Exhibit "F" is a true copy of the affidavit in which I swore, and the attachments.”

Surplus Income Affidavit

[89]

Surplus Income Affidavit

The Surplus Income Affidavit attached assorted documentation for each of 2018, 2019, 2020 and 2021, but not the actual Income and Expense Statements in the statutory form usually submitted. Each year’s documentation provides bank statements showing transactions. The exhibits were not properly commissioned but no party objected to their admission.

90I have summarized the information provided:

Year	Income	Expenses	Claimed Net Surplus/Deficit
2018	$41,882.55	$39,213	$2669.19
2019	$32,502.53	$29,606.26	$2896.27
2020	$32,769.13	$27,949.31	$4,819.82
2021	$25,679.89	$29,600.27	-$3920.38

91The transactions on the Bank Statements appended are unremarkable, mostly for gas, Rogers cable and wireless, utilities, car repairs and maintenance, pet food and veterinary bills. The Bankrupt appears to receive payments from customers directly as e-transfers, rather than directly from his son.

92As the Discharge hearing was in 2024, I required the Bankrupt to provide actual income and expense statements for the missing years noted in the s.170 Report after the conclusion of the Discharge Hearing for my review.

93I allowed Harris through Caselines to file the Missing Income and Expense Statements without an additional Affidavit, given that filing of those Missing Statements of Income and Expenses is an actual duty of the Bankrupt under s.68 and s.158 of the BIA. No party objected to this procedure.

94The Bankrupt did so. Each of the 168 or so Statements of Income and expenses filed in July of 2024 for the period 2010-2023, is dated July 12, 2024, the last possible date to fulfill the terms of my endorsement granting the Bankrupt the indulgence of belatedly filing 14 years of Statements of Income and Expenses AFTER the date of the actual Discharge Hearing.

95For 2010-August 2012 there is no income and only a $90-$113 phone expense. Starting August of 2012 there is some employment income in the range of $307 - $960 in certain months, none in other months, and expenses in the range of $243-$938.

96This continues until January of 2018 when the Bankrupt begins reporting income from $6450 gross- $3047 net, with expenses of 813, but negative net income in other months. In most months there is a very small surplus, but mostly deficits.

Tax Returns of the Bankrupt

[97]

Tax Returns of the Bankrupt

In response to the concerns of CRA, and the Trustee, and as required in my Scheduling Endorsements, the Bankrupt belatedly filed certain of the missing 14 years of tax returns in Caselines on May 2, 2024, on the morning of the actual Discharge Hearing.

98Returns were filed and for Taxation years 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020, 2021. This filing occurred 17 years after the Bankrupt was deemed bankrupt.

99Those tax returns show:

Taxation Year	Income	Result
2010	0	0
2011	0	0
2012	$2,880 business income	0
2013	$3,485 business income	$468.36 refund
2014	$3,840 business income	$176.34 refund
2015	$0	$0
2016	$0	$0
2017	$574 Business income – same as gross sales	$0
2018	$6,704 total business income from $41,823 gross income -deductions $8,676.90 for utilities and $21,382 for “gas and misc”	$763 refund
2019	$7,890 total business income on $32,503 gross income with $8,633.70 deducted for utilities and $17,753 deducted for “Gas and Mis” although multiple “Statements of Business or Professional Activities” were filed for this year, mostly blank	$1519 refund
2020	Net Business income of $10,566 on $32,769 gross income with $8,199 deducted for utilities and $17,838 deducted for “gas and misc” for $6,731 net business income, but multiple Statements of Business and Professional Income filed	$939 refund
2021	-$1,948 negative business income on $25,680 gross revenue with $8,728 in utilities and $18,900 for “gas and mis” deducted	0

100All of these tax returns prepared through Ufile have a date stamp of April 30, 2024 and the Discharge hearing was heard May 2, 2024, so even if they were efiled on April 30th, there would have been no opportunity whatsoever for CRA to assess them and issue Notices of Assessment prior to the Discharge Hearing. The Court has no evidence of what the outcome was of any assessment or reassessment of those returns by the CRA.

101As the Bankrupt reports self-employed business income, there is no evidence before the Court whether the Bankrupt is an HST Registrant. It may be that if he is below the relevant revenue threshold and chooses not to claim input tax credits, there may not be requirement to do so. I will leave that to CRA.

102I will also leave to CRA whether the vehicle expenses and utilities claimed are appropriate deductions when these returns are assessed.

The Case Conference Memorandum

[103]

The Case Conference Memorandum

Although not affidavit evidence, the Bankrupt, through his counsel at the time Zeitz, took some aggressive positions in the Case Conference Memorandum, presumably with on the Bankrupt’s instructions, circa the summer of 2022 in preparation for a Case Conference before me to timetable and schedule this Discharge.

104Some of those statements echo the evidence in the Bankrupt’s Affidavit, but some differ, both factually and in tone.

105The relevant parts of this Case Conference Memorandum, are:

“6. Presently, the principal amount has been repaid, however the amount currently owing under the Brenthall Judgment is approximately $320,000, which represents some combination of pre and post judgment interest and costs.”

7.The Bankrupt was unemployed from 2005 until on or about September 2013. He was initially assisted financially by his father beginning in January 2008, and who has since passed away. He now resides with his adult son living rent-free.

7. [sic] When the Bankrupt learned that his ex-wife became terminally ill in September 2013, the Bankrupt began to assist her with her dog walking business.

8. After his ex-wife passed away and the dog walking business was inherited by his son, the Bankrupt continued to walk dogs. He has earned a minimal living since that time walking dogs. The Mintz creditors are aware, and have in fact stated under oath, that this dog walking business provides a “paltry income”. See paragraph 16 of the Affidavit of Harley Mintz sworn November 20, 2017 attached as Appendix “A”.

9. In June 2022, the Bankrupt provided the Trustee with Income and Expense Statements for the period May 2007 to January 2009. These Statements were rejected by the Trustee as they did not include the cash gifts provided to the Bankrupt by his father. The Bankrupt then submitted revised Income and Expense Statements to the Trustee which included the cash gifts commencing in January 2008, and which were in the amount of $1,100 per month and intended by the Bankrupt’s father to permit the Bankrupt to cover his living expenses. The Trustee again rejected the revised Income and Expense Statements because the Trustee, incorrectly, believes the Bankrupt was receiving the $1,100 per month gift since 2005.

10. In the Trustee’s Second Supplementary Report, the Trustee states that it believes the Bankrupt was earning an income from dog walking during the period May 2007 to January 2009. This is incorrect, as the Bankrupt began assisting his ex-wife after this period, specifically on or about September 2013. This fact was clearly stated by the Bankrupt at question 220 of the January 2017 transcript attached as Appendix “B”.

11. In June 2022 the Bankrupt provided the Trustee with information required to file the pre- and post-bankruptcy income tax returns for 2007. The Bankrupt provided the information on the basis he had no taxable income in 2007 as he was unemployed at this time. The Trustee rejected this information insisting, and without basis, that the Bankrupt had income to report.

12. It is the Bankrupt’s position, and the fact is, that his father’s monetary gifts to him did not commence until January 2008. Notwithstanding, gifts, monetary or otherwise, are not taxable in Canada and therefore need not be reported.

13. Over the course of the last 15 years, the Trustee and the Creditors have conducted numerous investigations into the finances of the Bankrupt.

14. It was reported by LECG (as defined below) in its draft report that the allegedly misappropriated funds were spent in two ways: (1) the Bankrupt used some of the funds to purchase land and commence construction of a residential property; and (2) transferred funds to a credit card to largely fund an extravagant lifestyle. The Bankrupt provided any, and all, assets of value to the Trustee (such as a collection of watches) which were sold. The fact of the matter is that the vast majority of the Bankrupt’s purchases were perishable, immediately consumed, or depreciated almost completely after having been purchased.

15. In 2014, the proceeds from the sale of the real property were paid to Brenthall pursuant to Court order, in the amount of $1,438,198. The sale of the Bankrupt’s matrimonial home netted the Trustee the sum of $345,523.14.

16. The Trustee has sold the cars and liquidated the Bankrupt’s RRSP.

17. The balance of $41,114.11 in the Bankrupt’s account was seized by the Trustee.

18. There are no additional assets to realize upon and the Trustee has stated there are no additional assets available for the creditors.

19. In or about 2007, the Bankrupt provided copies of all the relevant credit card statements to the Trustee. With the exception of the funds spent to acquire and construct the real property, all of the remaining alleged misappropriated funds were processed through the credit card accounts. The Trustee has advised that the police seized the credit card statements when the Bankrupt was charged and they were never returned to the Trustee.

20. The Trustee advises that the statements are now irrevocably lost. In addition, while the statements were in the possession of the Trustee, the Trustee failed to conduct any analysis of them, presumably because Grant Thornton had already completed a forensic analysis on behalf of the Toronto Police Services.

21. On January 23, 2009, CRA conducted an examination of the Bankrupt pursuant to s. 163(2) of the BIA. The Bankrupt answered the questions to the best of his ability. CRA appeared to have been satisfied with the responses as there has never been any follow up or request for a further examination.

22. Certain of the Bankrupt's creditors hired a forensic investigation company, LECG Canada Ltd. ("LECG") to identify funds allegedly misappropriated by the Bankrupt (the "LECG Report”). A draft of the LECG Report was used by several creditors as supporting documentation for their claims. The LECG Report never concluded that the Bankrupt misappropriated funds and nor was it ever finalized.

23. On January 13, 2017, Solmon Rothbart Goodman LLP, counsel for Brenthall, conducted an examination in aid of execution on the Bankrupt. The Bankrupt answered to the best of his ability, given that more than a decade had elapsed by that time. The Bankrupt was also hamstrung to a large extent by the fact that his ex-wife, immediately prior to her death, had disposed of the Bankrupt’s pre-bankruptcy financial files she was storing, without his knowledge.

24. The Bankrupt was ready, willing and able to be examined by the Trustee or any creditor from 2007 onwards. He has never refused to cooperate with the Trustee. In fact, the Trustee only contacted the Bankrupt a handful of times over the 15 plus yeas and it was only to discuss dates for a discharge hearing.

25. The CRA is the largest creditor of the bankrupt estate. The Bankrupt’s lawyers have made many attempts to contact the CRA in order to ascertain the CRA’s position regarding the discharge, but the CRA refuses to respond. The Bankrupt’s counsel has confirmed with the Trustee that it has the correct CRA employee with carriage of the matter (Jyl MacDougall) and has also confirmed the accuracy of that employee’s e-mail address. Nevertheless, the CRA has remained silent and has chosen not to participate in this case conference. The Bankrupt has also learned that the CRA has not participated in this Bankruptcy since at least 2013.

James P. McReynolds has been retained by the Mintz Creditors. By an order of the Ontario Superior Court of Justice dated January 11, 2021, Brenthall was ordered to assign its Judgment against the Bankrupt to 781526 Ontario Inc. (a Mintz company) and to Dawn Trading Limited, a creditor, whose principal is related to the Mintz creditors. Their judgment survives the Bankrupt’s discharge such that there is no good reason for them to maintain their opposition. One would think they would want the Bankrupt to be discharged sooner than later. This appears lost on this creditor and if it is not, then its continued opposition can be seen as nothing other than an abuse of process and a waste of court time.

27. The Trustee’s position on the discharge is excerpted below from its email of July 7, 2022. As at the date hereof, it is understood its position remains as such:

“…The Trustee will no longer be objecting to the Bankrupt’s discharge on the basis that he has not provided details of how the funds were spent. [emphasis added]

The Trustee will however continue with its objection on the following basis:

1. the Bankrupt's assets are not of a value equal to fifty cents on the dollar on the amount of the Bankrupt's unsecured liabilities;

2. the Bankrupt has contributed to his bankruptcy by unjustifiable extravagance in living;

3. a creditor has obtained summary judgment against the Bankrupt and the court declared that the debt owing to the creditor arose out of fraud and survives the bankruptcy;

4. the Bankrupt has failed to provide accurate income and expenses statements;

5. the Bankrupt has failed to prepare and filed accurate tax returns.

While the Trustee understands the Bankrupt may not have assets or income to immediately pay a substantially conditional discharge payment, the Trustee will continue to recommend that the Bankruptcy’s discharge be conditional upon a payment of $100,000 to the estate. [emphasis added]. The Bankrupt and his creditors may make representations to the Associate Justice who will determine the actual amount of a conditional discharge payment, if any.

28. The Trustee has no basis to object to the Bankrupt’s discharge on the grounds it relies on. The Trustee initially objected on these grounds 14 years ago however has since conducted no further investigations. It is therefore inappropriate 14 years later to continue to object on the Same basis when the Trustee has no intention to further investigate in circumstances where the Trustee is aware there are no further assets in the Bankrupt’s possession.

29. The Trustee proposes the Bankrupt’s discharge be granted conditionally upon payment of $100,000 despite acknowledging there is no longer an issue as to how the misappropriated funds were spent and that there is no issue the Bankrupt may have those funds in his possession, care or control and despite recognizing the Bankrupt “may not have assets or income” to pay the $100,000 random amount it recommends. It is also inappropriate for the Trustee to recommend such an onerous condition without any basis and knowing the Bankrupt has no ability to satisfy such a condition. Perhaps some community service would be in order but not a six-figure payment that all stakeholders know the Bankrupt will never be able to pay.

30. The Bankrupt is 62 years of age and unlikely to ever obtain a position with significant renumeration again. It is impossible for the Bankrupt to pay $100,000 and an order for that amount will inevitably result in a motion to vary in a year’s time pursuant to s. 172.1(6) of the BIA. This will only continue to waste court time and resources after more than 15 years.

31. Without reservation or doubt, the passage of time has shown that the creditors would have been significantly better off having voted for the $1,000,000 proposal in 2007.”

106As I pointed out to counsel present at the Case Conference, it is probably best left to the Court to determine if its time and resources are being wasted and by whom, particularly where there are in excess of $13 Million in proven creditors, including CRA for more than $5 Million, and the Bankrupt has admitted, under oath, to misappropriating and spending in excess of $9 Million.

107Secondly, Superintendent’s Directive No. 11R2-2021 — Surplus Income (the “Surplus Income Directive”) specifically states the following relevant to the issues raised by the Bankrupt above, and to this Discharge:

“3. Family Unit — In determining the bankrupt's personal and family situation for the purposes of subsection 68(3) of the Act, it is necessary to establish the earnings and expenses of both the bankrupt and the bankrupt's family unit. The bankrupt must disclose the earnings and expenses of each member of the family unit by providing the LIT with income and expense statements for the entire period of bankruptcy. LITs must use their professional judgment in exercising their duty to apply due diligence when determining the bankrupt's average monthly income. The LIT's file should clearly document the method by which he/she calculated the amount, if any, the bankrupt is required to pay to the estate. As well, the LIT may question each member of the family unit as to their earnings and expenses.

4. For the purposes of this Directive, the bankrupt's family unit includes, in addition to the bankrupt, any persons who reside in the same household and who benefit from either the expenses incurred or income earned by the bankrupt, or who contribute to such expenses or earnings. A person who does not reside in the same household shall be considered as a member of the family unit if the person benefits from or contributes to the expenses incurred or income earned by the bankrupt.

5. Calculation — (1) In order to apply the Superintendent's standards for determining surplus income (Appendix A), the bankrupt shall first complete the monthly income and expense statement of the family unit, including the bankrupt, in Form 65.

(2) The family unit's total monthly income is determined by subtracting from the total of all of its members' monthly incomes the following amounts, as applicable:

(b) in the case of a person who is self-employed, business expenses and deductions as permitted by the Income Tax Act or similar provincial legislation, minimum statutory remittances and instalment tax payments made.

6. Family Situation Adjustment — (1) The amount that the bankrupt is required to pay to the bankrupt's estate as determined in paragraph 5(6) or 5(7) of this Directive shall be adjusted to the same percentage as the bankrupt's portion of the family unit's available monthly income.

(6) If the bankrupt fails to provide the LIT with the information needed to determine the average monthly income in accordance with paragraph 7(2) of this Directive, the LIT shall oppose the discharge of the bankrupt.”

(4) The LIT shall verify the accuracy of the income and expense statement submitted by the bankrupt by requiring that the bankrupt provide:

(a) proof of income; and

(b) proof of payments made pursuant to paragraphs 5(2) and 5(3) above.”

108Section 68(2)(b) of the BIA states:

“total income

(a) includes, despite paragraphs 67(1)(b) and (b.3), a bankrupt’s revenues of whatever nature or from whatever source that are earned or received by the bankrupt between the date of the bankruptcy and the date of the bankrupt’s discharge, including those received as damages for wrongful dismissal, received as a pay equity settlement or received under an Act of Parliament, or of the legislature of a province, that relates to workers’ compensation; but

(b) does not include any amounts received by the bankrupt between the date of the bankruptcy and the date of the bankrupt’s discharge, as a gift, a legacy or an inheritance or as any other windfall.

109But as I pointed out at the Case Conference, in August of 2022, with respect to s.68(2)(b), even if not “total income” for the purposes of s.68 and the Surplus Income Directive, gifts, legacies and inheritances can still each fit within the definition of “property of a bankrupt” under s.67(1)(c) of the BIA:

“(c) all property wherever situated of the bankrupt at the date of the bankruptcy or that may be acquired by or devolve on the bankrupt before their discharge,..”

110I also pointed out that whatever the Bankrupt claimed it was, the Trustee had a duty to determine whether it was a “gift” for the purposes of the Surplus Income calculation, and the Bankrupt had a duty under the Surplus Income Directive and the BIA to provide the Trustee with that information, which he had not, at that point, for 13 years.

111As it turns out he only provided the Income and Expenses Statements described above, after the Discharge hearing, as a result of my specific Order that he do so by July 12, 2024, and even then on the last possible day to comply with my Order to do so at the Discharge Hearing.

112To solve the Bankrupt’s dilemma that CRA was not providing a position, I invited DOJ/CRA to provide their position.

113In response, DOJ on behalf of CRA attended the Discharge Hearing and supported the Trustee’s recommendation.

114Most disconcerting in the context of determining whether the Bankrupt has been rehabilitated and should be granted a discharge, is the minimization of how the Bankrupt finds himself here 17 years later, with statements like “…that the allegedly misappropriated funds were spent in two ways” which dovetails with the attempts by the Bankrupt to stop the sale of the Thornbank Property which were rejected by Cumming, J., the attempt to allege that the Trustee was in a conflict of interest and was a tool of the Mintz’s, and that Al Mintz was the actual perpetrator of the fraud, which was rejected by Quigley, J., and which contradicts the Bankrupts own prior sworn testimony, which I will now review.

Examination for Discovery and Examination on Undertakings

[115]

Examination for Discovery and Examination on Undertakings

To summarize the Bankrupt’s own sworn testimony on September 6, 2006 at the Examination for Discovery in the Action that led to the Brenthall Judgment and Cumming, J. Reasons relevant to the issues on this Discharge, the Bankrupt confirmed as correct the following facts:

1. His salary at Grover was approx. $50,000 per year as Office Manager (Q.12);

2. That he worked at Grover from January 1992 to November 14, 2005 (Q.11);

3. That he was not a beneficiary of any Trust (Q.55);

4. That his salary was actually paid from a number of sources, including $29,000 from Ankare Property Maintenance, and $21,000 from Matanah Investments Corp. (“Matanah”), for which Matanah had been reimbursed by Brenthall (Q.78) ;

5. That he was not a shareholder of Matanah, but received a dividend cheque of approximately $1,000 a month; (Q.87);

6. Matanah’s shareholder was Syd Gerstein, his father (Q.90);

7. Matanah declared special dividends every two years, and he was paid from $50,000 to $150,000 (Q.98), and those amounts were determined by his father and his brother Ira, and the other children also had these dividends;

8. That his annual disposable income was $35,000 (Q.123);

9. He refused to answer why he had a bank balance in his savings account of $252,000 and where a deposit in the amount of $721,510 to his savings account on December 16, 2005 came from (Q.294-295);

10. In November and December 2005 he was moving the amount of $817,000 and $720,000 from and back to his savings account from GIC’s to get a better rate, and he paid a $98,000 Visa Bill (Q.383-404);

11. That he deposited cheques from Accusash Energy Products in his personal savings and chequing accounts from 1997 to April 2005 usually in an amount less than $5000 (Q.436-442);

12. The monies deposited from those cheques was used to pay for Thornbank Property construction expenses and to pay living expenses (Q.450-454);

13. That Brenthall issued cheques to Accusash over a period of time of $497,000 and that the Bankrupt was still in possession of some of those funds in his savings account (Q.475-482);

14. That he spent $44,000 to purchase three TV’s (Q.619);

15. That he received free trips, computers and consumer electronics from a Brenthall supplier that had received in excess of $600,000 of business from Brenthall (Q.638, 642, 657);

16. That he spent in excess of $300,000 for Bar Mitzvah celebrations for his sons (Q.678);

17. That he spent $1,200,000 on the Thornbank Property, tore down the house that was there, and constructed a 9,000 sq. ft. home on the site, that the $50,000 deposit and the $751,420 due on closing were paid from monies in his savings account (Q.763-774, 790) and the construction costs for the new home were another $1.5 million (Q.810);

18. That he paid off the $400,000 mortgage on the Thornbank Property from monies in his bank accounts (Q.777);

19. That he attempted to creditor proof himself by putting Thornbank Property in the name of Iris (Q.798);

20. That he estimated that his watch and jewelry collection had a value of $163,000 (Q.922);

21. He paid over $100,000 in cash to trades on the Thornbank Property which he obtained by selling watches and jewelry for cash (Q.944);

22. His 2002 Tax return declared $29,000 in employment income from Grover through Ankare and taxable dividends of $139,000 from Matanah (Q.996-998);

23. That Matanah was the Gerstein family Trust (Q.1004-1007);

116To summarize the Bankrupt’s own sworn testimony at the continued examination on undertakings from the Examination for Discovery on September 18, 2006, relevant to the issues on this Discharge, the Bankrupt confirmed as correct the following facts:

1. The total renovation expenses to tear down the original house at the Thornbank Property purchased for $1,200,000 and build a 9000 sq. ft. replacement were $1,123,188 (Q.1118);

2. On schedules prepared from the Visa statements provided in answer to undertakings, the Bankrupt confirmed that the total purchases from the following merchants were:

a) watches and jewelry purchased from Royal de Versailles by the Bankrupt was $1,199,350. (Q.1148);

b) Chanel clothing $258,000 (Q.1149);

c) Gucci clothing $215,000 (Q.1163);

d) Davids Shoes $8100 (Q.1165);

e) Hermes Purses $64,900 (Q.1169);

f) Holt Renfrew Fur Coats $24,299 (Q.1172);

g) Louis Vuitton clothing and shoes $238,000 (Q.1182-1183);

h) Accessible Security for a safe and watch winders $21,000 (Q.1192-1193);

i) Air Canada and American Airlines $14,500 and $30,000 (Q.1200);

j) Barneys New York for 1 dress $55,000 (Q.1202);

k) Bergdorfs NYC Clothing $7500 (Q.1205);

l) Bike Depot for 4 bicycles $52,500 (Q.1209-1216);

m) Chopard in NYC $14,000, Las Vegas $25,000 and St. Martin $15,000 - all for watches (Q.1220-1222);

n) Clublink green fees $29,000 (Q.1226);

o) Don Valley North Toyota for cars and maintenance $171,000 (Q.1237);

p) EP Kaufman Montreal for 2 Patek Phillipe watches $101,000 (Q.1244-1246);

q) Henry’s for camera and video equipment $13,000 (Q.1252);

r) Interactive Frontier for a home golf swing analyzer and software $21,000 (Q.1257 -1264);

s) John Lobb New York for hand-made shoes $15,000 (Q.1265-1279);

t) Marriott in Cancun $18,000 (Q.1280);

u) La Samanas resort, St. Martin $57,000 (Q.1282);

v) Ritz Carlton hotels in various places $40,000 (Q.1295);

w) Stavros for Bar Mitzvah suits for Bankrupt and sons $133,000 (Q.1316);

x) Trutone Electronics for TVs and stereo equipment $60,000 (Q.1318);

y) That the Bankrupt earned 7,205,591 points on various credit cards at a rate of 1 point earned for each dollar spent to November of 2005 (Q.1327);

z) That in the CRA Voluntary Disclosure Letters (as defined below) the Bankrupt made a voluntary disclosure to CRA for previously unreported income of $9,107,841 (Q.1328-1339);

aa) That the Bankrupt reported total income on his tax returns of:

Year	Total income reported
2002	$169,978
2003	$34,877
2004	$192,827
2005	$33,191

The CRA Examination

[117]

The CRA Examination

To summarize the Bankrupt’s own sworn testimony at the CRA Examination held on January 23, 2009, relevant to the issues on this Discharge, the Bankrupt confirmed as correct the following facts:

a) As at January 2009 he was being gifted $1100 per month by his father to pay for his living expenses for both himself and his son Alexander (Q.6);

b) That he authorized Jacques Bernier, his tax counsel at the time, to send voluntary disclosure letters to CRA dated February 15th, 2006 and May 15th 2006 (collectively the “CRA Voluntary Disclosure Letters”) which stated (Q.89):

"Our client is an individual who is 46 years old and who lives in Thornhill. Until November 2005, he was this controller of a real estate management entity. His salary was approximately $50,000 a year. The entity managed a few thousand residential units which were owned by a number of corporations and/or partnerships. For a number of years, our client took from the entity several millions by means of loans or misappropriations. The funds were so taken by using a fictitious entity and by improper charges” .

c) That he was the office manager and was paid a salary of about $50,000 per year (p.18);

d) That he did take from the entity several millions of dollars by way of loans or other misappropriations using a fictitious entity and improper charges and that the fictious entity was not a registered corporation (pg.19-20, and Q. 126);

e) That the Bankrupt’s misappropriation began in 1998 and ended in 2005 (Q.126 and 127);

f) There was no agreement with the entities that permitted him to take monies as a loan (Q.138-139);

g) At that point, no monies had been repaid by him (Q.139);

h) That he reported the following dividend income from Matanah on his tax returns based on T5s provided to him by his father (Q.154):

Year	Dividends reported
1998	$53,000
2000	$93,000
2002	$139,875
2004	$120,000

i) That despite declaring this dividend income, he was never actually paid these dividends by Matanah (Q.158-159);

j) That he had signing authority for Matanah and had signed cheques payable to himself (Q.166-179);

k) That he didn’t know why his father was paying him $1000 per month from Matanah, which income he declared (Q.179-182,Q. 195, Q.208);

l) After the date of Bankruptcy, the $1,100 his father paid him was deposited in the account of his wife Iris (Q.256);

m) When he was employed by Grover, his actual salary was only $25,000 to $29,000 per year (Q.351-353);

n) That in addition to this income his father paid him $1000 per month, and he also made some small amounts from a tax return preparation business, but that was the extent of his income (Q.353);

o) That he complained to his father about his $29,000 salary, but when he asked for a raise he was told to go see Al Mintz, who turned down a raise for the 7 years the Bankrupt worked for Grover (Q.387-401);

p) That the misappropriated money totaled approximately $9,131,000 which he voluntarily declared as income (Q.420);

q) That the $9,131,000 was all spent on the Thornbank Property and lifestyle (Q.421-424);

r) That the Thornbank Property was entirely owned by Iris, but the Bankrupt made all of the payments for the Thornbank Property (Q.434-437);

s) That the purchase price for the Thornbank Property was $1,200,000 and he spent another $1.8 million on building the new home for a total of $3 Million (Q.441-449);

t) The remaining $6 Million he admits to misappropriating was spent on Lifestyle (Q.462-465);

u) That the bulk of the $6 Million was spent by Iris but he also spent funds on watches and cars (Q.467);

v) That he did not fight the summary judgment motion that led to the Brenthall Judgment (Q.512);

w) He does not know what became of the Jewelry purchased by his wife (Q.529-531);

x) That at the time of the examination post-Bankruptcy, his father was also paying his rent and providing him with a car (Q.597, Q.624-629).

118There is no evidence before the Court as to whether the CRA pursued Iris, her estate, or the sons of the Bankrupt under the provisions of s.160 of the Income Tax Act.

The Dawn Trading Examination

[119]

The Dawn Trading Examination

To summarize the Bankrupt’s own sworn testimony at the Dawn Trading Examination held on January 13, 2017, relevant to the issues on this Discharge, the Bankrupt confirmed as correct the following facts:

a) The Bankrupt stated “I don’t remember” or a variation (by my count) at least 82 times out of 342 questions asked, including with respect to questions that were previously affirmatively answered by the Bankrupt in the Examination for Discovery and the CRA Examination;

b) That his wife Iris had destroyed all of his paperwork that he had left in her house when he moved out in late 2007 or in 2010, including tax returns and banking records (Q.20-23, Q.36);

c) That he is listed as a beneficiary of the Matanah Family Trust (Q.164-174);

d) That his testimony at the Examination for Discovery was not correct, and despite having declared dividends from Matanah as income, he never received actual payments of those dividends from Matanah (Q.173-176);

e) That the Bankrupt doesn’t actually receive income directly from his son’s dog walking business, that instead his son tells him how much to retain from clients of the business that pay the Bankrupt directly for his services (Q.235);

f) This income is approximately $1,200-1,800 per month in this manner (Q.235);

g) The Bankrupt at this point uses his son’s car to get around (Q.266);

h) That at this point in 2017 he owed 407 ETR $9,000 post-bankruptcy (Q.317).

Evidence of Ira Gerstein at Discharge Hearing

[120]

Evidence of Ira Gerstein at Discharge Hearing

The Bankrupt called his brother Ira as a witness at his discharge. Ira’s sworn testimony can be summarized as follows:

a) Ira has a Commerce Degree from the University of Toronto, is a CA, and was a Licensed Insolvency Trustee until 2012 (p.18);

b) He is currently President and a director of Matanah, which is the Gerstein Family Holding company (p.19);

c) There was always acrimony between his father, Irwin Mintz and between Irwin Mintz and Saul Mintz in relation to their business dealings (p.19);

d) Grover managed 2500 apartment units on behalf of the 6 families involved in the business including the Irwin Mintz, Saul Mintz and Syd Gerstein families (p.19);

e) The properties were held in either joint ventures or corporations and Grover managed all of the properties for all of the joint ventures and corporations (p.20);

f) That offers to settle had been made for first $2.4 million then in the proposal of $1 Million inside and outside the Proposal, but these were all refused by Harley Mintz (p.20-21);

g) That the Mintz family refused to allow him to be an inspector because they believed that the Bankrupt had shares of Matanah, but no action was brought against Matanah to obtain the alleged shares;

h) He specifically stated the following (p.21. Ln.16):

“So, Matanah, just so that you’re aware, is the second largest creditor in this bankruptcy next to CRA. And as far as CRA’s claim is, those are just notional assessments that were raised when Elliott filed voluntary disclosure through the voluntary disclosure program on the alleged $9 million.”

[From the Claims Register, Matanah has a Proven Claim in the amount of $1,834,347]

i) When the Bankrupt was dismissed in 2005, the Saul Mintz, Irwin Mintz, Morris Woznick, Sharon Gerstein and Syd Gerstein families began suing each other (p.21);

j) Minutes of Settlement were allegedly entered into, and Ira alleged that the Mintz family failed to comply with the settlement, stating, specifically (p.22):

“So, in order to come to an agreement and withdraw our claims, we entered into minutes of settlement. In those minutes of settlement, the one thing that the Gerstein families wanted was for one of Don Mintz (ph) or Stephen Mintz (ph) to resign as an inspector to allow the Gerstein family to participate in this bankruptcy in order so - in order that we can provide the information so that this administration could move along much faster.

But instead, the Mintz family refused to comply with the minutes of settlement. Harley Mintz, Irwin Mintz’s son, brought a motion to enforce those minutes of settlement. We brought a cross motion to have the minutes set aside because they breached the contract. We were successful at getting costs against the Mintz family because they breached the contract.

They wouldn’t allow the Gersteins to participate in this bankruptcy. And Don Mintz basically said he just wasn’t going to comply with those minutes of settlement. Again, my view is that the Mintz family made every effort possible to keep the Gersteins out of this bankruptcy so that they can control it, and that’s what they’ve done.”

k) With respect to the circumstances of the disallowance of the Proof of Claim of Matanah by the Trustee and the appeal he alleged (p.23-24):

“A. Yes, I did. In fact, so again, just to show the control that the Mintz family had of this bankruptcy, Matanah filed a proof of claim in this bankruptcy when everybody else did, including the Mintz family.

For some reason, Matanah’s proof of claim got disallowed by the trustee in bankruptcy, claiming that we didn’t provide a proper Schedule A. That was impossible because no one could provide a Schedule A at that time.

The LECG report hadn’t been completed. Still isn’t completed to this day, by the way. But it hadn’t been completed at that time. So, when he disallowed - they disallowed my claim, I filed a notice of a motion to oppose the disallowance.

Soon after I filed that, I got a letter from a guy by the name of Glenn Cooper (ph), who was representing the trustee at that time, and, in my view, he was trying to bribe me to get these reports. So, he asked me in that letter, he said, “Mr. Gerstein, we have a copy of your notice of motion. We’ll consider reinstating your proof of claim if you provide us with a copy of the LECG report and a copy of the Gerstein family trust.” Well, I provided all of that information to him.

I would have assumed the Mintz family would have given it to the trustee because they were the ones that commissioned the report. So, I gave them that. My claim wasn’t reinstated at that point. And so, that’s what happened again. Again, I believe that the Mintz family advised the trustee to disallow our claim because, as I said, nobody can provide any evidence of any alleged fraud at that time. We were - our claim was the only one that was disallowed next to Iris Gerstein’s claim.”

m) That the unsigned LECG Forensic Report dated August 9, 2006 at Appendix 7 to the Supplementary Report was never finalized (p.24-25);

n) That CRA allegedly abused the Income Tax Act by reassessing Syd Gerstein to obtain the Matanah Family Trust documentation in order to determine whether the Bankrupt owned shares in Matanah (p.26);

o) That the shares of Matanah were held in a discretionary Trust as to distribution of income and capital and that Syd Gerstein chose not to give anything from the Trust to the Bankrupt, and Syd Gerstein’s Will also excluded the Bankrupt from receiving any assets, and that Wiebe reviewed that documentation (p.27);

p) With respect to the proven CRA Claim (p.29):

“Q. No, that’s fine. Do you have any - do you have any knowledge as to how, Elliott’s - how the tax bill was incurred by Elliott?

A. Yeah, my understanding is, is that back in 2007, maybe prior to the bankruptcy, Elliott obtained legal advice from a law firm advising him to make voluntary disclosure on the - the alleged $9 million under the voluntary disclosure program. And so, the CRA raised notional assessments based on that.

Q. Okay. And to the best of your knowledge, does Elliott have any assets?

A. Elliott has no assets as far as I know - I’m aware. None.

q) With respect to the AJ Frank Endorsement, Ira stated (p.28):

“MR. HARRIS: Q. And this is the - this is the property that the CPL was registered on and that Associate Justice Frank made the ruling to remove the CPL with the costs that attached to the affidavit of - or you probably don’t know, but that’s the ruling we’re talking about. Correct?

A. Correct. Yes. Associate - yeah. Because if you read Associate Justice Frank’s, you know, cost award in his reasoning, he determined that Mr. McReynolds - as far as I’m concerned, Mr. McReynolds and his client made many misrepresentations to the court, which, in my view, just goes to show that the Mintz family would go to any length in this bankruptcy, and anything related to this bankruptcy, to obtain whatever they think that - you know, they want, which - go ahead.”

r) With respect to whether the Bankrupt ever received actual payments of any actual cash Dividends from Matanah (p.34):

“A. I see what you’re - what he’s saying in there, but I never received any dividends. My family reported dividends on our tax returns, but we never received any monies. So, if Elliott received monies regarding that, I don’t know anything about it. I know that none of us did.”

And referring to his father Syd Gerstein (p.41):

Q. Okay. But he would have had the ability to issue a dividend in Matanah?

A. Yeah, he could choose to issue a dividend. He - as I said, let me just clarify, none of us ever received any dividends. We were asked to report those dividends on our tax returns for tax planning purposes only. No one received a dime. My father never wanted anybody to receive anything during that period of time, ever.

Q. Okay. And --

A. And, again, that’s why the Gerstein family trust was in place [indiscernible] my father to distribute income at his discretion.”

s) That Ira and his 5 siblings are paying for counsel for the Bankrupt (p.37);

t) When I raised the issue of Ira, a former LIT, making broad allegations in his testimony against the Trustee, Ira stated (p.39):

“THE WITNESS: Well, I’m alleging the fact that practically speaking, to make a recommendation to the court of a condition that he knows that the bankrupt can’t satisfy, I just personally think is inappropriate. It just doesn’t make sense. When you consider the costs that have been incurred, the trustee had about $500,000 to begin with. Today, he's got not much left when you consider the additional legal fees. When you consider the fact that the creditors refused the $1 million offer, you know as well as I do, Your Honour, that you can’t get blood from the stone, and in this bankruptcy world, if you get 10 cents on the dollar, you’re lucky. So, I just think that it’s just been a waste of court’s time. And, you know, a lot of people are involved, and people need to move on with their lives. That’s my view. Again, I think –

THE COURT: All right.

THE WITNESS: I think practically.”

Testimony of the Bankrupt at the Discharge Hearing

[121]

Testimony of the Bankrupt at the Discharge Hearing

The Bankrupt’s sworn testimony can be summarized as follows:

a) The Whitmore Property belongs to his sons and was formerly Iris’s property (p.44-45);

b) That he has no assets (p.45);

c) He uses the money received on from the dog walking business to pay the utilities on this property in lieu of rent (p.45);

d) His lawyer is being paid for by his sons;

e) With respect to how the Brenthall Judgment was obtained (p.51):

“A. Well, Brenthall took me to court, and at the time my lawyer that was representing me resigned and we had to find a new lawyer. And he found - during the conflict test, I couldn’t find one except for two weeks before the court hearing. And my lawyer at the time, Stephen Graff, I think - I’m not sure his name - said that there’s nothing - we don’t have any evidence to oppose it. So, I conceded to it. I didn’t admit to it, but I conceded to it. And it wasn’t until later during the preliminary inquiry and the motions that the evidence came about. But I did not - I didn’t have the knowledge that I could have the judgment set aside if I had new evidence. But it’s gone on too long now.”

f) That he does not have the means to pay the $100,000 conditional Order recommended by the Trustee (p.53);

g) On cross-examination by McReynolds about his income from his son (p.56-57):

“Q. Okay. And that your best year, you were paid by your son approximately $30,000?

A. Yes and - I guess so; yes.

Q. Now, you don’t have a salary, per se. He just pays you what he - what he chooses?

A. Yeah, you should know this. In 2017, you asked these questions.”

h) With respect to the Brenthall Judgment and the Cumming, J. Reasons:

“Q. Mr. Gerstein, you briefly spoke about the judgment of Justice Cumming from October 2007, and you said that you did not oppose it. Essentially, you conceded it. Are you now saying judgment the incorrect?

A. Well, had I had the new evidence, I would have either fought it at the time, or I would have had - if I knew that I could have the judgment set aside, I would have.

Q. Are you suggesting that you did not commit fraud?

A. I have not been convicted of it.

Q. That’s not what I asked, sir. I asked, are you saying that you did not commit fraud and that paragraph three of the order is in fact incorrect?

A. As my criminal lawyer said, I have done nothing wrong.”

i) With respect to his income at Grover prior to his dismissal the Bankrupt confirmed he made $50,000 per year (p.59);

j) The Bankrupt testified as follows with respect to the source of the funding for the $1.199 Million spent at Royal de Versailles jewelers that he had previously admitted to in the Examination for Discovery:

“ Q. Okay. It’s in the questions 94 through 97 that we put to your - to your brother, but that the transcript says what it says. But further down in the transcript, and this is when you came back after the first session, at question 1148, you indicate that you spent $1.199 million with purchases at Royal de Versailles prior to your bankruptcy.

A. I don’t recall.

Q. That’s great. That is from Exhibit A to your affidavit or your discharge, and these are questions that Mr. Bannock [sic] was asking you on your second attendance with him. It’s part of your Exhibit A. And at question 1148, he says:

Without belabouring the point, let’s just do the next one. On Exhibit 46, it appears that the list of purchases from Royal de Versailles total some $65,000.And then the list on Exhibit 47 on top of the next page total $1.133 million for approximately $1,199,350 in total purchases from Royal de Versailles.

Your answer, “Correct.”

So, Mr. Gerstein, if the finding of Fog (ph) was incorrect, where’d the money come from?

A. I don’t - I don’t remember. I don’t recall. It’s been how many years now? Sixteen years?

Q. You’re not prepared to say at your discharge hearing and bankruptcy where the money came from for all these purchases?

A. I don’t remember.”

k) With respect to the amount of income he now earns (p.62-63):

Q. So, can we then summarize to say that the fact that you’ve had minimal income throughout your bankruptcy has been a choice as opposed to the circumstances that you find yourself in?

A. I don’t know if it’s been a choice. I think it’s been out of the situation, because so many things have happened to me in the situation. My wife passing away. The pan- with the pandemic hitting, you know, half the clients leave, but you still have to provide the best services for the clients that remain. So, it’s all about my kids.

And

Q. So, the purpose of my questions here really is to - the bankruptcy process is intended - and the calculation of surplus income is intended to have the bankrupt contribute towards the creditors. And it would appear that there would have been a fairly substantial contribution towards your creditors over the course of your bankruptcy if you had been - were being paid fairly for the effort that you’re putting in?

A. Well, I’ll put it this way, if I work by myself, I’d be making about 60 grand a year too, but I’m not. This is for my children.”

l) The Bankrupt confirmed that his son directs which of his clients pay him directly, and that the client pays him directly as an independent contractor and that his son pays him no money, and that he usually makes less than $32,000 (p.69).

LAW AND ANALYSIS

Law related to determination of discharge of the Bankrupt generally

[122]

Law and Analysis

The general principals related to discharge were summarized by Hallett, J. in Crowley, Re 1984 5444 (NS SC), 1984 CarswellNS 25, [1984] N.J. No. 52, 152 A.P.R. 390, 29 A.C.W.S. (2d) 462, 54 C.B.R. (N.S.) 303, 66 N.S.R. (2d) 390, (“Crowley”) which has been cited with approval or followed more than 92 times, including by many Judges and Registrars in Bankruptcy of the Ontario Superior Court of Justice:

“1 What are the principles that the court should apply in considering an application for discharge by a bankrupt? There are very few Supreme Court of Canada decisions on the subject and the sections of the Bankruptcy Act, R.S.C. 1970, c. B-3, provide little guidance as to how the judge who hears an application for a discharge is to exercise his discretion. The only clear guideline is that if one of the facts mentioned in s. 143 is proven, then the court cannot grant an absolute discharge. Where the difficulty comes in is under what circumstances should a bankrupt who does not qualify for an absolute discharge be ordered to pay money to the trustee or consent to a judgment as a condition of his discharge or merely have the inconvenience of having his discharge suspended for a period of months. There seem to be two basic and conflicting themes that run through the decisions of the courts on this subject. On the one hand, the courts emphasize the purpose of the Bankruptcy Act is not only to provide for an orderly scheme of distribution of the assets of a bankrupt amongst his creditors but to allow a bankrupt to get on with his life unfettered by the burden of debt which he had incurred. Typical of such statements is that contained in Indust. Accept. Corp. v. Lalonde, 1952 2 (SCC), [1952] 2 S.C.R. 109, 32 C.B.R. 191, [1952] 3 D.L.R. 348, where Estey J., in a unanimous decision of the court, stated at pp. 356-57:

The purpose and object of the Bankruptcy Act is to equitably distribute the assets of the debtor and to permit of his rehabilitation as a citizen, unfettered by past debts. The discharge, however, is not a matter of right and the provisions of ss. 142 and 143 plainly indicate that in certain cases the debtor should suffer a period of probation. The penalty involved in the absolute refusal of discharge ought to be imposed only in cases where the conduct of the debtor has been particularly reprehensible, or in what have been described as extreme cases. The conduct of the debtor in this case, while not sufficient, with great respect, to justify the absolute refusal, does justify his discharge only subject to the imposition of terms.

It is to be noted that in the Lalonde case the Supreme Court of Canada allowed an appeal and imposed a condition on the bankrupt that he consent to judgment in the amount of $5,000 as the cost of obtaining his discharge.

2 While one of the principal purposes and objects of the Bankruptcy Act is to permit the rehabilitation of a debtor as a citizen, unfettered by his past debts, there are many cases in which a bankrupt in modest circumstances and with dependents is ordered to consent to a judgment in a percentage of his indebtedness. Typical of this class of cases is Kozack v. Richter, 1973 166 (SCC), [1974] S.C.R. 832, 20 C.B.R. (N.S.) 223, [1973] 5 W.W.R. 470, 36 D.L.R. (3d) 612. The [C.B.R. (N.S.)] headnote adequately summarizes the fact of that case as follows:

The appellant suffered injuries in a motor vehicle accident which was caused by the wilful and wanton misconduct of the bankrupt. After the appellant recovered judgment for $12,909.03 plus costs of $1,194, the respondent filed an assignment in bankruptcy. The bankrupt was a wage-earner with a large family in modest circumstances. The Judge of the Court of Queen's Bench hearing the application for discharge of the bankrupt suspended the discharge for three months. The Court of Appeal for Saskatchewan varied the order and required the bankrupt to consent to judgment for $1,800 without interest payable at the rate of $50 per month.

Held (ABBOTT J. dissenting), the bankrupt was required to consent to judgment in the amount of $7,200 plus the costs of the hearing in the Supreme Court of Canada as a condition of his discharge. This amount was payable at the rate of $50 per month. The application of the provisions of the Bankruptcy Act should result in a plaintiff receiving recovery for personal injuries caused by the gross negligence of the bankrupt. The Bankruptcy Act was not intended to enable a judgment debtor to get rid of a judgment for damages. Abbott J. would have dismissed the appeal on the ground that the judicial discretion exercised by the Court below was reasonable and should not be interfered with by a second appellate Court. He also found that no distinction exists under the Bankruptcy Act between a bankruptcy arising out of trade debts and one arising out of the commission of a tort.

3 Pigeon J., writing for the majority of the court (there was one dissent), stated at p. 225:

In the present case, respondent's bankruptcy was precipitated by his condemnation to pay damages to the appellant. This being due to a finding of "wilful and wanton misconduct" on his part, certainly his financial predicament cannot be said to have arisen "from circumstances for which he cannot justly be held responsible". The Courts below did not ignore this provision. However, the sanction meted out in the first instance was purely nominal. In the Court of Appeal, respondent was in effect ordered to make payments that would hardly cover more than appellant's costs in the trial Court and in the Court of Appeal. Although respondent is a wage-earner with a large family in very modest circumstances, I cannot agree that the proper application of the provisions above quoted should result in a plaintiff making no recovery for personal injuries caused by gross negligence. It would mean that motorists in respondent's situation would be able to tell such a claimant: "There is no use suing me, if you lose you will have to pay the costs, if you win I will make an assignment in bankruptcy and you will get nothing."

4 The dilemma facing a judge in considering an application for discharge is reflected in the following two quotations from Bankruptcy Law of Canada (1984), vol. 1, by Houlden and Morawetz, at pp. H-18 and H-19, para. H10:

It is incumbent upon the court to guard against laxity in granting discharges so as not to offend against commercial morality. It is nevertheless the duty of the court to administer the Bankruptcy Act in such a way as to assist honest debtors who have been unfortunate: Re Beerman and Sands(1925), 5 C.B.R. 781 (Ont. S.C.)...

The purpose of the Bankruptcy Act is to enable someone who has had financial misfortune or a series of misfortunes to be purged or relieved of the consequences and to obtain a new start financially. It is not to be considered as a process which can be resorted to on a regular basis with a view to washing out one's debts: Re Lebel(1979), 31 C.B.R. (N.S.) 320 (Ont. S.C.).

5 Despite the inherent difficulty created by these two conflicting themes, the case law does provide some firm footing to assist a judge in the exercise of his discretion when determining how to apply the provisions of s. 142 of the Bankruptcy Act in any particular case. The following are some principles, procedures and evidentiary considerations that a judge might follow on a discharge application in determining whether or not to impose conditions of payment as a cost of the discharge. I take the view that a mere suspension in any case is pointless although authorized. Therefore, in most cases the court will be choosing between granting an absolute discharge or imposing a condition that requires some payment by the bankrupt.

6 First, each case must be decided on its own facts. That statement has been made in countless cases. Re Gigault(1981), 37 C.B.R. (N.S.) 119 (Ont. C.A.), is but one. That is a simplistic statement but nevertheless very true, as is evident from a reading of the cases. This is so because s. 142 of the Bankruptcy Act provides no guidance for the exercise of the judge's discretion except that he must refuse an absolute discharge if a s. 143 fact is proven against the bankrupt. The court must look carefully at the causes of the bankruptcy.

7 Second, in considering the application for discharge, the court must have regard to not only the interests of the bankrupt and his creditors but also to the interest of the public: Re Sceptre Hardware Co., 1922 365 (SK KB), 3 C.B.R. 734, [1923] 1 W.W.R. 966, [1923] 1 D.L.R. 1201 (Sask.). This concept was well stated by Wetmore L.J.S.C., in Re Abbott; Abbott v. Royal Bank of Can.(1983), 1983 592 (BC SC), 50 C.B.R. (N.S.) 182, 48 B.C.L.R. 387 (S.C.), where he said [p. 184], "The court must always balance the public interest in commercial morality with its interest in the re-establishment of the debtor".

8 Third, if, as is usually the case, the assets of the bankrupt are not of a value equal to 50 cents in the dollar of the bankrupt's unsecured liabilities, the onus of proving that this fact arose from circumstances for which the bankrupt cannot justly be held responsible is on the bankrupt: Re Lougheed, 1939 513 (BC SC), 54 B.C.R. 428, 21 C.B.R. 180, [1940] 1 W.W.R. 31.

9 Fourth, the court is not bound by the trustee's report but it is prima facie evidence with respect to the facts contained therein: Re Hoerner, Williamson & Co.(1925), 5 C.B.R. 613 (C.S. Que.). The trustee's report should be carefully considered by the court. The trustee should be in attendance at the discharge hearing so that he can be called by either the bankrupt or a party opposed to the application to explain the basis for his conclusions, be they favourable or unfavourable to the bankrupt. Pursuant to s. 140(5) of the Act the statements in his report to the court are prima facie evidence but often no reasons are given for the opinions expressed. For example, in the case before me the trustee's report simply says the causes of the bankruptcy were "misfortune" and that the conduct of the debtor was not subject to censure. While the trustee was present in court, he was not called. It might have been helpful had he been cross-examined as to the "misfortune" he perceived so that the court could assess the reliability of his opinion.

10 Unless contradicted by the evidence, the court must accept the statements in the trustee's report: Re Barrick(1980), 36 C.B.R. (N.S.) 286 (B.C.C.A.). The onus is on the party opposing the application for discharge to adduce sufficient evidence to justify the court disregarding a trustee's report that is favourable to the bankrupt. By producing a favourable report the bankrupt has met the initial burden of proving that the fact that the assets are not equal to 50 cents in the dollar of his unsecured liabilities arose from circumstances for which he cannot justly be held responsible. It is then up to the creditor opposing to bring before the court evidence upon which the court could come to a contrary conclusion: Dawson Auto Parts Ltd. v. Dorais, 1944 230 (QC CA), [1944] R.L. 405, 26 C.B.R. 52 (C.A.).

11 Fifth, if the application for discharge is opposed, the bankrupt should be available for cross-examination: Re Hood(1975), 1975 1976 (ON SC), 21 C.B.R. (N.S.) 128 (Ont.).

12 Sixth, an order for discharge should only be outrightly refused if the debtor's conduct has been "particularly reprehensible, or in ... extreme cases". What is meant by this statement in Indust. Accept. Corp. v. Lalonde [at p. 200] is that only rarely will there be an outright refusal of a discharge but rather the court will consider one of the other alternatives of suspension or attaching conditions to the discharge where an absolute discharge cannot be granted because a s. 143 fact has been proven unless the debtor's conduct has been particularly reprehensible or in extreme cases.

13 Seventh, in considering if an order should be made that involves the payment of money by the bankrupt as a condition of his discharge, the court must bear in mind that he is entitled to have available for the maintenance of himself and his family a reasonable amount out of his after-acquired income: Clarkson v. Tod, 1934 5 (SCC), [1934] S.C.R. 230, 15 C.B.R. 253, [1934] 2 D.L.R. 316; Re Bayliss and Doerksen(1982), 40 C.B.R. (N.S.) 16 (Ont. H.C.). Accordingly, it is generally necessary for the court to have before it evidence of the bankrupt's income and living expenses so the court's discretion can be rationally exercised.

14 Eighth, the court does not view with favour assignments made to avoid paying a large claim of a single judgment creditor where judgment was obtained as a result of the discreditable conduct of the debtor. Under such circumstances, the courts have generally imposed a condition that the bankrupt consent to judgment in a partial amount of the claim: Kozack v. Richter, supra. This approach has most recently been followed by the Ontario Court of Appeal in Re Gigault, supra, and Re Balson(1982), 46 C.B.R. (N.S.) 319. In the Gigault case, the judge who heard the application in the first instance had required as a condition of discharge that the bankrupt consent to judgment in a very nominal amount and in the Balson case an absolute discharge had been granted. The Ontario Court of Appeal in both cases imposed meaningful payments as a condition of discharge.

15 Ninth, where a bankrupt takes a reasonable risk in embarking on a new adventure which fails because of economic factors over which he has no control, the bankrupt has satisfied the onus under s. 143(1)(a) of proving that the fact that his assets were not of a value equal to 50 cents in the dollar arose from circumstances for which he cannot justly be held responsible: Re Bayliss and Doerksen, supra.

16 Tenth, the Act provides no guidelines for the exercise by the judge of his discretion whether to suspend or impose conditions where a factor mentioned in s. 143 is proven. The discretion of the judge is very broad and should not be interfered with on appeal unless the judge, in arriving at his decision, has omitted the consideration of or misconstrued some facts or violated some principle of law: Indust. Accept. Corp. v. Lalonde, supra.

17 In recent years there has been a trend