IN THE MATTER OF THE Bankruptcy of Martha Lorraine Beach
ENDORSEMENT OF CIVIL MOTION, APPLICATION OR CASE CONFERENCE
SHORT TITLE OF PROCEEDINGS: IN THE MATTER OF THE Bankruptcy of Martha Lorraine Beach
BEFORE: Associate Justice Perron
HEARD ON: March 9 2026
COUNSEL: Percy Ostroff, counsel for MNP Ltd as Trustee John Haralovich, Trustee Denise Sayer, counsel for Heliotrope Investment Corporation (creditor) Martha Lorraine Beach, Bankrupt
ENDORSEMENT:
This is the return of the discharge hearing of Ms. Beach’s bankruptcy and is further to my endorsement of February 2, 2026.
Prior to discussing the specific issues related to the discharge, I will briefly summarize the various proceedings involving Ms. Beach because the context is relevant to the Trustee and Heliotrope’s opposition of Ms. Beach’s discharge.
Ms. Beach and her spouse, Jonathan Gary Beach, were each declared bankrupt in November 2022 on application by Heliotrope. Pending the determination of the application, Ms. Beach caused her corporations to bring motions and an appeal seeking to overturn interim consent orders. The motions and appeal were not successful.
The Beaches subsequently appealed their bankruptcy orders and brought motions to file fresh evidence in support of their appeals. The appeals and motions were dismissed by the Court of Appeal in November 2023.
In February 2024, Heliotrope successfully moved to appoint a Receiver over three corporations: 1324789 Ontario Inc., 1073650 Ontario Inc. and 2290998 Ontario Inc. (the “Corporations”). Ms. Beach is the sole director and officer of the Corporations.
The Receivership is ongoing. The Corporations’ most significant assets consist of real property, and only one property has been sold to date. Ms. Beach holds shares in the Corporations.
MNP Ltd. is both the Trustee in the Beach bankruptcies and the Court-appointed Receiver.
Commencing in 2018, the Beaches also commenced several proceedings, including appeals and complaints to governing bodies, against their creditors including Heliotrope and its affiliates. Several of these proceedings are ongoing and will need to be sorted out by the Trustee and/or the Receiver.
Heliotrope has recently brought a motion seeking to have the Beaches and the Corporations declared vexatious litigants.
At the original return date for Ms. Beach’s discharge hearing in February 2026, the hearing was adjourned on consent to permit further discussions between the parties. Ms. Beach stated that she was prepared to fully cooperate with the Trustee and that she was trying to extricate herself from the ongoing litigation which is being pursued by Mr. Beach.
On return of the hearing on March 9th, the parties reported that they have not been able to reach a consensus on all the proposed terms of discharge.
The Trustee recommends that Ms. Beach’s discharge be suspended for 12 months and be subject to various conditions including that she provide all information and all books and records to the Trustee and the Receiver, release all of her rights in all ongoing litigation, and pay the sum of $100,000.
Heliotrope submits that it is premature to consider the terms of Ms. Beach’s discharge and that the hearing should be adjourned until the Trustee and the Receiver have fully administered her estate. In the alternative, Heliotrope generally agrees with the recommendations of the Trustee but also requests that the conditions require unequivocal cooperation in all respects of the ongoing administration. Heliotrope also seeks to reserve its rights to compel a comeback hearing to request the imposition of additional or revised conditions if further breaches are identified.
In her written materials, Ms. Beach denies that there are section 173 facts and submits that she should be entitled to an absolute discharge. Alternatively, she generally agrees with the Trustee’s recommended conditions except for the payment obligation. She submits that any obligation to pay should reflect her actual and reasonably foreseeable ability to pay and states that she is able to pay $15,000 over two years.
Have the opposing parties proven that there are section 173 facts?
The Trustee and Heliotrope oppose Ms. Beach’s discharge on several grounds and submit that she has generally failed to meet her obligations under the Bankruptcy and Insolvency Act.
The section 173 facts set out in the Trustee’s report include:
a. Her assets are not 50 cents on the dollar of the unsecured liabilities (173(1)(a);
b. She has put her creditors to unnecessary expense by frivolous defence of actions brought against her (173(1)(f));
c. She has committed offences under the Act including making material omissions in statements or accounting (i.e. false/misleading HST claims) (173(1)(l); and
d. She has failed to perform the duties imposed under the Act or to comply with Orders of the Court including refusing to maintain and/or surrender corporate records for the Corporations (173(1)(b) and (o)).
Ms. Beach also had outstanding amounts to pay for surplus income, however all payment obligations have now been satisfied. Any breach of section 173(1)(m) has therefore been cured.
Courts have found that a Trustee’s report is deemed to be evidence of the statements contained within it, without the need for a Trustee to testify at the discharge hearing. While the Court is not bound by the Trustee’s report, the report should be entitled to considerable weight and the Court should accept the statements in the report unless the statements are contradicted by other evidence (see summary of applicable principles in Re Chang, 2021 ONSC 3483 at para 123).
I have considered the evidence of the Trustee, Heliotrope and Ms. Beach and I am satisfied that the Trustee and Heliotrope have proven that there are several section 173 facts that I must consider in relation to Ms. Beach’s discharge.
Section 173(1)(a): Ms. Beach is responsible for her assets not being equivalent to 50 cents on the dollar on her unsecured debts
Although the exact ratio of assets over unsecured debts will be ascertained once the administration of the Receivership is complete, it is clear that the value of Ms. Beach’s assets will not be worth anywhere near 50% of her unsecured debts.
To date, the value of proven unsecured claims is $526,125.46. The Trustee has not yet delivered section 30 notices therefore this amount is expected to increase. In addition, the value of proven unsecured claims does not include Heliotrope’s unsecured claim – which is being disputed by the parties in other proceedings - which Heliotrope quantifies at approximately $1,461,524. The amount of Heliotrope’s claim appears to exclude the claims of its affiliates. In the statement of affairs, the quantum of declared unsecured debt was in excess of $3,500,000.
In contrast, Ms. Beach’s assets were valued at only $18,533 at the time of preparing the statement of affairs. So far, the Trustee has only realized $47,704.56 including Ms. Beach’s surplus income payments. The amounts realized also include a third party guarantee in the amount of $16,807.75. After the guarantee is returned, this leaves a net realization to date of $30,900.
The Trustee’s evidence, which I accept, is that although the Receiver has not realized on all of the Corporations’ real property, he does not anticipate that there will be significant equity from the sale of the properties. Although the value of Ms. Beach’s shares in the Corporations are connected to the Receiver’s realizations, the Trustee’s evidence is that there is a very slim, if not a zero chance, that any funds will flow from the Receivership to Ms. Beach or that there will be any future realizations by the Trustee in the bankruptcy.
The Trustee also reported that the unsecured claims include hundreds of thousands of dollars owed to the Beach parties’ former counsel who acted for them in the myriad of legal proceedings referenced above. So far, two different law firms have filed claims in excess of $400,000 and the Trustee has received a claim from a third law firm (which has not yet been vetted) for approximately $100,000.
The opposing parties’ position is that the high amount of unpaid legal fees incurred is just one example of spending that supports a finding that Ms. Beach should be held responsible for increasing the amount of her unsecured debts well past the 50% threshold over her assets.
The onus of proving that she should not be held responsible for the imbalance of the 50% ratio lies with Ms. Beach. Her position is that she should not be held liable because the bankruptcy arose from a failed real estate venture and prolonged litigation, but there has been no finding of fraudulent transfers, gambling or diversion of assets. Regarding the legal fees, Ms. Beach stated that at the time legal counsel was instructed to take proceedings, for example, the appeal of the bankruptcy orders, she believed that the proceedings were in the best interest of the Corporations to protect the corporate assets.
I recognize that Ms. Beach is now trying to extricate herself from the ongoing litigation, and I believe she is sincere in that desire and her intention to now cooperate with the Trustee and the Receiver. However, she has not offered any evidence to refute the allegations of the opposing parties other than bald denials or assertions, and she admits to having incurred hundreds of thousands of dollars of legal fees and maintains the belief that this was appropriate.
Although the exact ratio of debts over assets will only be ascertained once the Receivership is administered, I am satisfied that Ms. Beach’s assets are not equal to 50 cents on the dollar on her unsecured debts. Ms. Beach has not proven that this fact has arisen from circumstances for which she cannot justly be held responsible.
Ms. Beach has put her creditors to unnecessary expense by bringing a frivolous or vexatious defence to actions properly brought against her
Ms. Beach submits that no order has been made declaring her a vexatious litigant in the bankruptcy proceeding and that the statutory requirements of this section cannot be met. However, Ms. Beach has not provided any authority to support such a narrow interpretation of this section.
In its plain and ordinary meaning, subsection 173(1)(f) provides that the Court may consider a defence “to any action properly brought against the bankrupt” by the bankrupt’s creditors. The scope of this fact therefore includes the positions taken by the bankrupt in any proceeding by creditors and is not limited to the bankruptcy proceeding itself.
Therefore, although Heliotrope’s motion seeking to declare the Beach parties as vexatious litigants has not yet been determined, that does not preclude a finding under section 173(1)(f).
As outlined in Heliotrope’s materials, in several decisions since 2018 this Court has found that the allegations made by the Beaches in various proceedings opposed and/or commenced by them were: an “unsupportable grievance”, “not strong” and “ill-conceived”. The Court has also found that the Beaches made allegations of fraud against others without any evidentiary foundation. The Court of Appeal has described the Beaches’ lawsuits and proceedings as a “morass of litigation” with duplicate claims. Ms. Beach – along with some of the other Beach parties - has also made complaints to various regulators and professional bodies as well as to the police regarding alleged improprieties by her creditors and counsel acting for the creditors.
In his second report to the Court in November 2025, the Receiver stated that it will take a prolonged and substantial investment of time and fees for him to make recommendations to resolve the various outstanding pieces of litigation involving the Beach parties. The Court approved the Receiver’s second report on December 15, 2025.
There appear to be between $328,250 and $382,250 of costs awards in favour of Heliotrope (and/or its affiliated creditors) against Ms. Beach and/or one of the Corporations resulting from the above proceedings. Although these cost awards were made on a joint and several basis, including against Mr. Beach in some cases, the amounts are owed by Ms. Beach and some of the Corporations under her control as their sole director.
In its preliminary proof of claim in the bankruptcy, Heliotrope claimed that Ms. Beach owed unpaid costs awards of $291,145.28 as of December 7, 2025 on a joint and several basis.
At least one Court found, in 2020, that there was evidence that Mr. and Ms. Beach have received funds, from the sale of assets and mortgaging properties, which could have been applied to costs awards but were instead used to pay other creditors (1324789 Ontario Inc. v Marshall et al, 2020 ONSC 4651 at para 6).
Black’s Law Dictionary defines “frivolous” as “lacking a legal basis or legal merit; not serious; not reasonably purposeful”. The same dictionary defines “vexatious” as “([o]f conduct) without reasonable or probable cause or excuse; harassing; annoying”.
I do not need to make any fresh or independent findings. The previous findings made by this Court and the Court of Appeal are ample evidence to support that Ms. Beach has put her creditors to unnecessary expense by advancing defences that were unsubstantiated and without merit. The creditors were successful in their claims, which is evidence that those proceedings were properly commenced.
I do not purport to make any findings today that are binding on the Court at the upcoming determination of the vexatious litigant motion/application. For purposes of the discharge hearing only, I am satisfied that, in accordance with the previous findings of this Court and the Court of Appeal, Ms. Beach advanced defences that were unsubstantiated and without merit at great cost to her creditors. As such, those defences were “frivolous” in the plain and ordinary meaning of that term.
Ms. Beach has committed offences under the Act including making material omissions in statements or accounting (Subsection 173(1)(l))
In her materials and submissions, Ms. Beach did not directly address the allegations made in respect of the alleged breaches of subsection (1)(l).
In his report, the Trustee alleges that Ms. Beach filed false and misleading HST claims for the Corporations in attempt to generate credits for the Corporations. Heliotrope’s materials include further evidence in support of this allegation by reference to the Receiver’s reports which have been approved by the Court.
The opposing parties’ evidence, which I accept, is uncontested. I am therefore satisfied that Ms. Beach committed an offence under the Bankruptcy and Insolvency Act or other statutes in connection with her property or the bankruptcy proceedings and that a fact under subsection 173(1)(l) has been proven.
Ms. Beach has failed to perform the duties imposed under the Act or to comply with Orders of the Court including omitting to maintain and/or disclose business carried on by the bankrupt (subsections 173(1)(b) and (o)).
In their materials, the opposing parties have provided numerous examples of Ms. Beach’s failure to maintain and disclose the books and records of the Corporations, of which she is the sole director and officer. These breaches include failure to provide the Receiver with information and failure to comply with Court Orders regarding disclosure, all as outlined in the First and Second Reports of the Receiver.
The Trustee’s evidence is that although he has received some information, including his recent receipt of some bank statements, he continues to not have full books and records of the Corporations to file HST returns or to carry out a fulsome investigation. Mr. Haralovich confirmed that the although the Receiver has recently been able to secure the Beaches’ home and retrieve boxes of records, the Receiver has not yet had an opportunity to review the records and it is unknown if those records are complete.
There have also been previous findings by the Court, including in the context of the bankruptcy proceeding, that the Beaches have not been forthcoming about their assets and liabilities and that they provided evasive answers on cross-examination. Some of those findings were made specifically against Ms. Beach (see for example Beach (Re), 2022 ONSC 6474 at paras 46-48, 50, 63, 74-75).
Some of these findings were made at the initial bankruptcy application which supports that in the three years before the bankruptcy, Ms. Beach failed to keep and disclose adequate books and records.
Ms. Beach’s evidence is that she has always complied with her obligations and provided the Trustee with information that was in her possession or control. She stated that after the appeal of the bankruptcy order was dismissed in November 2023, she requested all of the information that she could and provided it to the Trustee. This statement appears to be an admission that until the outcome of the appeal, she did not provide the information.
Ms. Beach also stated that her husband handled the recordkeeping, bookkeeping and day-to-day management of the Corporations. Notwithstanding that fact, she says that she did her best to provide the Trustee (and Receiver) with information and records that were available to her. She further stated that Mr. Beach threatened her after learning that she provided information to the Trustee. She therefore left home abruptly in January 2024 due to concerns for her safety. Her evidence is that she does not have access to, or possession of, any of the books and records and that she should not be held responsible for this fact.
I recognize that Ms. Beach now appears willing to be cooperative. In fact, since the Receiver has secured the home, Ms. Beach stated that when she entered the home to retrieve her personal items, she identified another box of records that could be helpful to the Trustee and Receiver. She also stated she would meet with Mr. Haralovich to assist him with his review of the records.
However, Ms. Beach’s cooperation comes at a very late stage in this saga. I am also not satisfied with her explanation regarding her lack of cooperation with the Trustee by reason of the bankruptcy decision being under appeal. In addition, as the sole officer and director of the Corporations, it was incumbent on her to maintain access and control over the Corporations’ records and to ensure proper oversight of the record and bookkeeping.
While she has provided some information, in several of her responses to the Trustee since November 2023, Ms. Beach simply states she doesn’t have access to the information or doesn’t possess the records. Why did she did not take steps to gather and secure the books and records once the litigation with her creditors commenced? Why did she not take steps to secure the books and records after the petition in bankruptcy was commenced? One would think she required access to those books and records to adequately respond to the proceedings.
Even if I accept her evidence of Mr. Beach’s threats in January 2024, Ms. Beach’s explanations do not address her omissions prior to leaving the home, or why she has not taken steps since January 2024 to obtain an order for access to the books and records. There is also no explanation for Ms. Beach’s failure, as the Corporation’s sole director and officer, to ensure that proper books and records were kept.
There is ample evidence before me to support that Ms. Beach failed to keep such books and records as are usual and proper in carrying out her business and that she has failed to disclose those records which constitute facts pursuant to subsection 173(1)(b).
Ms. Beach’s apparent willful blindness and total delegation to her spouse of the recordkeeping, which appears to have been woefully inadequate and in some cases false and misleading, constitutes neglect of her business affairs and in that sense, she has brought on or contributed to the bankruptcy which is a fact under subsection 173(1)(e).
The duties of a bankrupt are enumerated in section 158 of the Act and include an obligation to deliver all their property, including books and records, to the Trustee as well as an obligation to assist the Trustee in making an inventory of their assets. Therefore, Ms. Beach’s omissions regarding record and bookkeeping, and her previous failure to cooperate with the Trustee, also support findings of fact under subsection 173(1)(o) as do several additional breaches and omissions discussed above in these reasons.
What is the appropriate outcome of the discharge hearing in view of the section 173 facts?
Pursuant to subsection 172(2) of the Act, on proof of facts under section 173, I must either refuse the discharge, suspend the discharge or impose conditions on the discharge.
The Court has broad discretion in granting or refusing the discharge and will consider three factors: “the interests of the creditors in obtaining payment of their claims, the interests of the bankrupt in obtaining relief from his or her financial obligations, and the integrity of the bankruptcy process” (Poonian v British Columbia (Securities Commission), 2024 SCC 28 at paras 23-24).
However, the caselaw recognizes that a complete refusal of any type of discharge is an unusual order, particularly in view of the Act’s intention to provide relief to “honest and unfortunate” debtors and to promote rehabilitation (Bank of Montreal v Giannotti, 51 O.R. (3d) 544 at paras 26-27).
Heliotrope submits that the facts of this case warrant the refusal of Ms. Beach’s discharge at this time, subject to Ms. Beach requesting her discharge after the Receiver has completed his mandate and after the full extent of the facts - and breaches and omissions - related to the administration, are known.
Although there are many similar findings of fact in Ms. Beach’s case and the Giannotti case, where the Court of appeal refused the bankrupt’s discharge, there is also an important distinction. In Ms. Beach’s case, she appears to have turned the page and has begun to cooperate and she has demonstrated an intention that she is prepared to continue to cooperate with the Trustee.
Although I agree with Heliotrope that the full extent of facts under section 173 is not yet known, there is ample evidence to support findings of fact under section 173. I am also satisfied that even if further facts come to light, the most egregious breaches have already been identified. I also accept the Trustee’s evidence that there are unlikely to be any further material facts that could have a significant impact on the Court’s consideration of the appropriate discharge conditions.
While Heliotrope opposes the discharge, its alternative position is that a conditional discharge is appropriate. The Trustee is of the view that sufficient information is known to grant Ms. Beach her discharge, subject to complying with strict conditions including:
a. To provide the Trustee and the Receiver with all information and documents requested including but not limited to those specifically identified in the draft Order;
b. To release any rights she has in connection with any ongoing litigation in which she or the Corporations are a party, and to authorize the Trustee and Receiver to elect to pursue, discontinue, settle or otherwise deal with the litigation as they deem appropriate;
c. To pay a sum to the Trustee or sign a consent to judgment in favour of the Trustee such that failure to pay permit the Trustee to file a writ of execution; and,
d. That Ms. Beach never again own shares in the Corporations.
The Trustee also recommends that Ms. Beach’s discharge be suspended for 12 months.
I have also considered the fact that the bankruptcy order was made in 2022 and that Ms. Beach is 64 years old. Although she is still working, and stated that it is her intention to continue to work as long as she is able to do so, she is approaching retirement.
Following further discussions during the hearing, Heliotrope and the Trustee generally agree on the proposed conditions recommended by the Trustee applicable to Ms. Beach’s discharge. In her alternative position, Ms. Beach also stated that she generally agreed with the recommendations except for the payment condition.
In all circumstances, I am satisfied that it is appropriate to grant Ms. Beach’s discharge subject to her compliance with the conditions proposed by the Trustee, including Ms. Beach’s full and unequivocal cooperation in the bankruptcy and the receivership proceedings.
With respect to the period of suspension of 12 months proposed by the Trustee, I agree that a 12 month suspension is appropriate in view of the extent and nature of the section 173 facts.
Regarding the payment condition, the Trustee and Heliotrope propose the payment of $100,000. According to the Trustee, Ms. Beach’s current net annual income is approximately $58,000 and she has made monthly surplus payments of $1,175 for 21 months. The Trustee submits that at minimum, those payments could and should continue while she remains employed. I note that the Trustee’s calculation of surplus income reflects the revised amounts payable by Ms. Beach as a single income family since her separation from Mr. Beach in February 2024.
Heliotrope relies on the Court’s decisions in Morris, Re (Bankrupt) 2004 SKQB 4 and Re Chang, 2021 ONSC 3483, to submit that monetary conditions are appropriate where the bankrupt has a capacity to contribute, if the bankrupt could have offered a viable proposal and/or where the bankrupt’s conduct warrants a strong response.
Ms. Beach is prepared to pay $15,000 over two years. If her affidavit, she asserts that her basic living expenses are $42,000 annually exclusive of transportation, clothing, insurance and medical costs. She did not produce any supporting documents regarding these expenses. While I acknowledge that she is approaching retirement, the evidence regarding her retirement income is uncertain and she indicated that she intends to continue working for as long as she is able.
I agree with the Trustee that at a minimum, Ms. Beach has the ability to pay $1,175 a month while she continues to be employed. It is also abundantly clear, that Ms. Beach’s creditors were prejudiced by Ms. Beach’s depletion of available funds to pursue the litigation campaign and that, at the outset, it likely would have been possible to make a proposal to creditors although it is difficult in the circumstances to quantify what amount would have been possible.
In the circumstances, I find that it is appropriate that Ms. Beach’s discharge be conditional on her making an additional payment of $75,000 to the Trustee for the benefit of her creditors which amount shall be secured by a consent to judgment in favour of the Trustee. Taking into account the surplus income payments made to date, this means that Ms. Beach will have contributed a total of approximately $100,000 towards her estate. Ms. Beach’s payments shall be made in minimum monthly payments of $1,175 and in the event of default, the Trustee shall be entitled to enter the judgment and obtain an execution for filing with any sheriff’s office.
With respect to Heliotrope’s request that Ms. Beach’s discharge be subject to their reservation of rights to compel the continuance of this discharge hearing to prove further section 173 facts or seek to impose further conditions, I find that this would be equivalent to adjourning the hearing or refusing the discharge until such time as the Receiver’s administration is complete which position I have already rejected above.
The Trustee has included a provision in the draft Order which requires the Trustee to satisfy the Court that Ms. Beach has complied with the conditions before she is entitled to an absolute order of discharge. I have confidence in the Trustee, as an officer of the Court, that he will only move to confirm Ms. Beach’s full discharge once he is satisfied that the conditions have been met. I am therefore satisfied that paragraph 4 of the draft Order is appropriate in its current form.
Ms. Beach’s discharge is subject to the conditions and period of suspension outlined in the attached draft Order1 which I have revised in accordance with the requested changes agreed upon by the parties during the hearing and to reflect my reasons above. I have signed the draft Order and it shall be issued.
Date: March 16, 2026
Associate Justice Perron
Footnotes
- I note that I removed a finding of fact under section 173(1)(c) from the preamble of the draft Order. There was insufficient evidence before me to reach a finding that Ms. Beach has continued to trade after becoming aware of being insolvent. The Trustee’s report did not include a finding of fact under this section at paragraph 6 of his report and Heliotrope did not assert evidence of such a fact in its materials.