COURT FILE NOS.: 32-2661987 and 31-2662182

DATE: 2024-11-29

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: In the Matter of the Bankruptcy of Sandra Dixon

In the Matter of the Bankruptcy of Francine Lorraine Leung

BEFORE: Associate Justice Rappos

COUNSEL: Paul Ihnatiuk, representative of BDO Canadian Limited Tara Woodfull, representative of the OSB

HEARD: November 28, 2024 (virtually)

ENDORSEMENT

[1] BDO Canada Limited is the trustee in bankruptcy in both of these proceedings, which are governed by the summary administration provisions of the Bankruptcy and Insolvency Act ("BIA").

[2] Sandra Dixon and Francine Lorraine Leung each filed an assignment in bankruptcy on July 31, 2020. Ms. Dixon and Ms. Leung both received automatic discharges from bankruptcy on May 1, 2021 through the operation of subsection 168.1(1) of the BIA.

[3] BDO was discharged as Trustee for Ms. Dixon on February 2, 2023, and for Ms. Leung on October 25, 2022.

[4] BDO subsequently brought motions to be re-appointed as Trustee. The motions were granted on July 11, 2024 for Ms. Dixon and March 26, 2024 for Ms. Leung.

[5] The Trustee now brings motions to annul the automatic discharges from bankruptcy received by Ms. Dixon and Ms. Leung. In its motion materials, the Trustee states that both Ms. Dixon and Ms. Leung jointly owned properties with their respective spouses.

[6] Ms. Dixon and Ms. Leung both provided to the Trustees letters of opinion for their properties from the same realtor at Royal LePage. In each case, the value for the properties was roughly equivalent to the amount owed under the mortgages. As a result, the Trustee did not identify any non-exempt equity for the bankruptcy estates.

[7] The Trustee subsequently received information that the values were incorrect. The Trustee obtained its own evaluations earlier this year, which shows the values of the properties being significantly higher than that set out in the opinions of value provided by the bankrupts.

[8] As a result, the Trustee, at the instruction and request of the OSB, brought the re-appointment and annulment motions so that it may pursue the equity in the properties for the benefit of creditors.

[9] The Trustee served its motion materials on Ms. Dixon, Ms. Leung, all known creditors in both proceedings, and the OSB. No party has taken any steps to oppose the motion.

[10] The Trustee cites no section of the BIA that it is relying on for the purposes of this motion. The Trustee did not file any legal submissions for the motions.

[11] As I have previously written, as noted in Bankruptcy and Insolvency Law of Canada, 4th Edition at §8.164, "a registrar derives its authority from the Act and the Rules and has no inherent jurisdiction. If authority for an act cannot be found in the BIA or the [Bankruptcy and Insolvency General Rules], then the registrar cannot perform it." The learned authors of the text go on to state that "if the power to hear a matter is not expressly conferred on the registrar by s. 192 or some other section of the Act or the Rules, the registrar has no jurisdiction to hear it."

[12] In the circumstances, I was required to consider which sections of the BIA may grant authority to the Court to annul automatic discharges.

[13] Subsection 180(1) provides that "where a bankrupt after his discharge fails to perform the duties imposed on him by this Act, the court may, on application, annul his discharge." That section is not applicable, as the Trustee has raised no issues regarding the conduct of the bankrupts following their discharge from bankruptcy.

[14] Subsection 180(2) of the BIA provides that "where it appears to the court that the discharge of a bankrupt was obtained by fraud, the court may, on application, annul his discharge."

[15] Mr. Ihnatiuk argues that this section is applicable, as the opinions of value may have been fraudulent. As well, Ms. Woodfull informed the Court that the OSB has referred a complaint to the Real Estate Council of Ontario about this realtor.

[16] There is nothing in the affidavits filed for these motions that provides that the letters of opinion appeared to be fraudulent. As a result, I am not prepared to grant annulments under subsection 180(2) of the BIA based on the record before me.

[17] In Cameron, Re, Justice Blair (as he then was) held that subsection 187(5) of the BIA was applicable to a motion to annul a discharge.[^1] That section provides that "every court may review, rescind or vary any order made by it under its bankruptcy jurisdiction."

[18] In Cameron, Re, Justice Blair set out factors the court is to review when considering whether to annul a discharge.[^2] Blair J. referred to Tong, Re[^3] as a precedent for an annulment motion under subsection 187(5) of the BIA.

[19] Justice Blair also referred to the decision of Justice Farley in Baker, Re, where Farley J. considered a motion for annulment of an automatic discharge because of inadvertence of the trustee by applying subsection 187(9) of the BIA.[^4]

[20] That section provides that "no proceeding in bankruptcy shall be invalidated by any formal defect or by any irregularity, unless the court before which an objection is made to the proceeding is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by any order of that court."

[21] In my view, even in circumstances where a motion is unopposed, a trustee in bankruptcy must provide legal submissions where it is requesting an annulment of a discharge from bankruptcy. As no submissions considering the applicable law and cases were filed, I am adjourning these motions sine die.

[22] The Trustee shall review these decisions, note them up, review the applicable sections of Houlden & Morawetz, and prepare legal submissions that set out the section(s) of the BIA they say should be applied by the Court, and how the facts of the case support the granting of the annulment motions based on the tests set out in the relevant jurisprudence.

Associate Justice Rappos

DATE: November 29, 2024

[^1]: Cameron, Re, 1995 ONSC 7251, 26 O.R. (3d) 794, 36 C.B.R. (3d) 272, 1995 CarswellOnt 947 (SCJ), para. 7.

[^2]: Ibid., paras. 11-12.

[^3]: Tong, Re, 23 C.B.R. (3d) 39, 1993 CarswellOnt 244 (SCJ).

[^4]: Baker, Re, 1994 ONCA 10568, 21 O.R. (3d) 501, 29 C.B.R. (3d) 10, 1994 CarswellOnt 314 (SCJ).