In the Matter of the Bankruptcy of Angela Moubarak, 2026 ONSC 3699

IN THE MATTER OF THE Bankruptcy of Angela Moubarak, 2026 ONSC 3699

ENDORSEMENT OF CIVIL MOTION, APPLICATION OR CASE CONFERENCE

SHORT TITLE OF PROCEEDINGS: IN THE MATTER OF THE Bankruptcy of Angela Moubarak

COURT FILE NO.: Estate No 33-3052679 BK-24-03052679-0033 CV-24-00094494-0000 (“Action 1”) CV-24-00098106-0000 (“Action 2”)

BEFORE: Associate Justice Perron

HEARD ON: February 2 2026

COUNSEL: Christine Shehata for Félix Poliquin-Boutin, for the creditor Michelle Hamilton Sheldon McRae, for the bankrupt Angela Moubarak John Haralovich of MNP Ltd., Trustee

ENDORSEMENT

1There is a saying that if you lend money to a friend, you often lose both the friend and the money. This matter is an illustration of those words of caution.

2Ms. Hamilton and Ms. Moubarak have been friends for over 25 years. In September 2022, Ms. Hamilton loaned Ms. Moubarak $180,000. Some payments were made but the vast majority of the debt remains outstanding. Following several excuses and promises to pay, Ms. Hamilton lost hope that her friend would repay the debt and commenced a first court action in January 2024.

3On March 7, 2024, Ms. Moubarak made an assignment in bankruptcy.

4Ms. Hamilton alleges that Ms. Moubarak owes her fiduciary obligations and that there is a constructive trust over Ms. Moubarak’s property. Ms. Hamilton also alleges that during her investigation of the bankruptcy, she discovered that Ms. Moubarak had forged her signature on a gift letter to secure a mortgage with the funds loaned to her by Ms. Hamilton.

5Notwithstanding the stay triggered by the bankruptcy filing, Ms. Hamilton commenced a second court action against her friend in December 2024 where she alleges that Ms. Moubarak made fraudulent misrepresentations to secure the loan and/or that the loan was obtained under false pretenses. She also claims constructive fraud.

6Ms. Hamilton brings this motion today seeking to lift the stay to proceed with the two civil actions. She also seeks an order granting her leave nunc pro tunc to validate the issuance of the second action.

7Ms. Hamilton initially also sought declarations that the stay of proceedings does not apply because the actions survive bankruptcy pursuant to section 178(1)(d) and (e) of the Bankruptcy and Insolvency Act. However, at the outset of her submissions, Ms. Hamilton confirmed she was not pursuing that relief today.

8For the reasons set out below, I decline to lift the stay or to validate the second action. The debt owed to Ms. Hamilton is an unsecured debt provable in the bankruptcy.

Summary of Key Facts Regarding the Loan, the Bankruptcy Proceedings and the Civil Actions

9In the summer of 2022, Ms. Moubarak shared her financial struggles with her friend. She was in the middle of a separation and required a loan to purchase a new property.

10In addition to the matrimonial home she occupied with her former spouse, Ms. Moubarak also owned a rental property on Eric crescent. She indicated that her plan was to sell the rental property in order to purchase the South Russell property, but that the sale of Eric was delayed due to the tenancy. Ms. Hamilton agreed to loan Ms. Moubarak $180,000 for the purchase of the South Russell property.

11There is a dispute between the parties as to any representations made by Ms. Moubarak during the loan discussions. Ms. Hamilton alleges that Ms. Moubarak said she had no other debts secured against the Eric property and that she expected to receive $700,000 as an equalization payment from her separation. Ms. Moubarak denies those allegations and says she represented that she believed she could repay the loan. Ms. Moubarak alleges that Ms. Hamilton made no further inquiries about her financial situation, but that Ms. Hamilton was aware that she had other debts.

12On September 1, 2022, Ms. Hamilton drew $180,000 from her line of credit and obtained a bank draft which she provided to Ms. Mourabak.

13On September 6 and 7, 2022, the parties executed a promissory note in witness of Ms. Moubarak’s parents in the amount of $185,000¹. The note was drafted in french and states the following:

Pour valeurs reçues, je soussignée Angela Moubarak résidant au […..Québec…], promets de payer à Michelle Hamilton résidant au […..Ontario….], un montant de cent quatre-vingt-cinq mille dollars (185 000,00$) payable au moment de la vente de la propriété située au 2070 Eric Crescent, Ottawa au plus tard dans DOUZE (12) mois à compter de la date des présentes, le tout avec intérêt au taux de préférentiel plus un demi, l’intérêt sera payable à chaque mois.

14Ms. Moubarak completed the purchase of South Russell on or about September 14, 2022.

15The sale of the Eric property closed on or about November 17, 2022. Ms. Hamilton called Ms. Moubarak to congratulate her friend on the sale of the property. During this call, Ms. Hamilton alleges that Ms. Moubarak disclosed for the first time that “there had been two prior refinances of the property” and that the net proceeds of the sale were only $43,000 but that she owed her brother $10,000 as well as other debts. Ms. Hamilton did not receive any of the proceeds from Eric as partial repayment towards the loan.

16In the months that followed, the parties had several communications about repayment. Ms. Moubarak provided excuses for not paying and stated she was working on several options including cashing out her pension and refinancing her affairs to repay the loan. None of these options materialized.

17During the course of these communications, Ms. Hamilton’s evidence is that Ms. Moubarak pleaded for more time to pay the loan and unless she was granted with more time, she would have to declare bankruptcy.

18Ms. Hamilton provided her friend with additional time, however, she clearly became exasperated by the unfruitful promises of repayment. She retained counsel in the Fall of October 2023 and initiated a court action in January 2024.

19Attempts at settlement did not materialize and Ms. Moubarak was noted in default in the action on or about February 29, 2024.

20Ms. Moubarak made an assignment in bankruptcy on March 7, 2024.

21Ms. Hamilton filed a proof of claim with the Trustee on April 21, 2024. The claim was filed as an unsecured claim for $190,000.

22The Trustee admitted Ms. Hamilton’s claim in full. Ms. Hamilton represents the majority of the unsecured claims in the bankruptcy. The claims proven to date, and admitted for dividend, total $242,412.08.

23Ms. Moubarak’s discharge hearing is upcoming. In her affidavit sworn October 2025, Ms. Hamilton states that she will file a notice of opposition to the discharge.

Summary of Parties’ and Trustee’s Position on the Motion

24Ms. Hamilton’s position is that the funds she advanced to Ms. Moubarak were subject to a constructive trust and that Ms. Moubarak had a fiduciary duty to apply the sale proceeds from the Eric property. Because the sale proceeds are misappropriated trust funds, they do not form part of Ms. Moubarak’s estate; as such, Ms. Hamilton’s claim is not a provable claim in bankruptcy and is not subject to the stay. In addition or alternatively, Ms. Hamilton’s position is that she is materially prejudiced by the ongoing stay and that the stay should be lifted to permit her to continue Action 1.

25Ms. Hamilton also takes the position that she was deceived by Ms. Moubarak’s representations at the time the loan was advanced. In addition, Ms. Hamilton alleges that, during her investigation of the bankruptcy, she discovered that Ms. Moubarak had forged her signature on a gift letter to secure a mortgage for the purchase of the South Russell property. This alleged fraudulent conduct forms the basis for Action 2, the action she seeks to validate nunc pro tunc.

26Ms. Moubarak opposes all the relief sought. She denies that there was any fiduciary relationship between her and Ms. Hamilton or that the debt is impressed with a trust. She denies that there was any fraud, false pretenses or fraudulent misrepresentations. She also alleges that Ms. Hamilton was fully aware of the gift letter, and that Ms. Hamilton authorized Ms. Moubarak to sign the letter on her behalf.

27Ms. Moubarak’s position is that the claim is an unsecured claim arising from liquidated damages owed pursuant to the promissory note, and that the claim is a claim provable in bankruptcy. She opposes the lifting of the stay on the basis that the lifting of the stay would inhibit the orderly administration of the estate, and that the stay may prejudice other creditors.

28The Trustee does not support the lifting of the stay on the basis that doing so would not allow for the equal treatment of all unsecured creditors. The Trustee also takes the position that Ms. Hamilton’s claim is an unsecured claim provable in the bankruptcy and that the claim, as articulated in Action 1, would not survive bankruptcy. The Trustee also takes the position that the allegations made by Ms. Hamilton can be addressed in the bankruptcy proceedings including the upcoming discharge hearing.

Should the Stay of Proceedings be Lifted to permit Ms. Hamilton to Continue the Civil Actions?

29Because Ms. Hamilton was not seeking declarations pursuant to section 178 of the Act at the motion, no submissions were made in support of the request for a declaration that the claim was not a claim provable in bankruptcy pursuant to section 121 of the Act.

30The central issue on this motion is whether the stay of proceedings should be lifted to permit Ms. Hamilton to continue the two civil actions.

31Pursuant to section 69.4 of the Act, on application by an affected creditor, the Court may declare that the stay no longer applies if it is satisfied that: a) the creditor is likely to be materially prejudiced by the continued operation of the stay; or b) that it is equitable on other grounds to make such a declaration.

32It is well settled that the onus is on the applicant creditor to establish a basis for lifting the stay. The approach to be taken on the motion was confirmed by the Court of Appeal:²

In considering an application for leave, the function of a bankruptcy Court is not to inquire into the merits of the action sought to be commenced or continued. Instead, the role is one of ensuring that sound reasons, consistent with the scheme of the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, exist for relieving against the otherwise automatic stay of proceedings.

33That said, it is also well settled that the test on a lift stay motion:

“does not […] preclude any consideration of the merits of the proposed action where relevant to the issue of whether there are “sound reasons” for lifting the stay. For example, if it were apparent that the proposed action had little prospect of success, it would be difficult to find that there were sound reasons for lifting the stay.”³

34In Avocate Mines⁴, Registrar Ferron provided examples of cases where the stay has been lifted. Those examples have since become a non-exhaustive list of factors that the Court may consider as situations where there may be “sound reasons” to lift the stay. Those factors are:

a. Actions against the bankrupt for a debt to which a discharge would not be a defence;

b. Actions in respect of a contingent or unliquidated debt, the proof of which and valuation has that degree of complexity which makes the summary procedure prescribed by the Act inappropriate;

c. Actions in which the bankrupt is a necessary party for the complete adjudication of the matters at issue involving other parties;

d. Actions brought to establish judgment against the bankrupt to enable the plaintiff to recover under a contract of insurance or indemnity or under compensatory legislation; and,

e. Actions in Ontario which, at the date of bankruptcy, have progressed to a point where logic dictates that the action be permitted to continue to judgment.

35Ms. Hamilton’s position is that she would be materially prejudiced by the stay because if it is maintained, she would be unfairly treated as a creditor because the funds were trust funds that do not form part of the estate. In her material, Ms. Hamilton refers to the “funds” as the net proceeds of sale from the Eric property, but also as the totality of the funds she loaned to Ms. Moubarak. This argument relates back to Ms. Hamilton’s position that the debt would survive bankruptcy pursuant to section 178 of the Act; in essence, Ms. Hamilton is therefore relying on Advocate Mines factor (a) above.

36Other than (a) above, there are no other Advocate Mines factors that apply to the circumstances of this case. The debt is a liquidated debt and is readily quantifiable. The only parties to the civil actions are Ms. Moubarak and Ms. Hamilton; while Ms. Moubarak’s evidence would obviously be required in the proceedings, there are no other parties whose claims are affected by the civil actions. The actions are at an early stage.

37While I cannot consider the evidence before me on this motion to determine the merits, I can consider the evidence to assess whether Ms. Hamilton’s actions have little prospect of success such that it would not be “sound” to lift the stay. I also note that Ms. Hamilton has squarely made the merits an issue on this motion because she relies on the merits to support her position that she is prejudiced by the stay. It is from this lens that I consider the merits of both actions below.

38Starting with the claims in Action 1, I find that Ms. Hamilton would face significant hurdles.

39First, there appear to be deficiencies in the Statement of Claim supporting Action 1⁵ including:

a. Ms. Hamilton seeks a declaration that all of the property held in the defendant’s name is held as a constructive trust, including the South Russell property. Ms. Hamilton also pleads that Ms. Moubarak is a trustee holding the South Russell property in trust for Ms. Hamilton. However, nowhere in the claim does Ms. Hamilton plead that the proceeds of sale from the Eric property are trust funds nor does she plead that the funds loaned pursuant to the note are trust funds.

b. In addition, Ms. Hamilton has not pled material facts supporting the creation of a trust or a trust arrangement: certainty of intent, of subject matter and of object.⁶ There are no facts pled to support that Ms. Hamilton advanced funds to Ms. Moubarak for her to hold in trust. To the contrary, Ms. Hamilton pleads that the funds were borrowed to acquire the South Russell property. The pleading sets out facts supporting the creation of a typical loan contract.

c. Ms. Hamilton also asserts that Ms. Moubarak stands in the position of fiduciary to Ms. Hamilton with respect to the South Russell property. However, as above, nowhere in the claim does Ms. Hamilton plead that Ms. Moubarak was a fiduciary with respect to the funds loaned or the proceeds from the Eric property.

d. In addition, Ms. Hamilton has not pled any other material facts to support the existence of a fiduciary relationship between her and Ms. Moubarak.⁷

40Second, and similarly to her pleading, Ms. Hamilton’s affidavit evidence does not include any allegations of fact that would be necessary to establish the creation of a trust arrangement or the existence of a fiduciary relationship as between her and Ms. Moubarak.

41Third, the promissory note itself does not include any terms that would suggest the creation of a fiduciary relationship between Ms. Hamilton and Ms. Moubarak not does it suggest the formation of a trust⁸. The note is also devoid of any terms that suggest that the funds advanced, or that the proceeds from Eric would be held in trust.

42The note says that the indebtedness would be payable at the time of the sale of the property at the latest one year from the date of the note. The note does not say that the indebtedness would be paid from the sale proceeds of Eric or that Ms. Moubarak undertook to remit the proceeds to Ms. Hamilton upon the sale. There is also no evidence that Ms. Hamilton asked Ms. Moubarak to sign a direction that the debt be paid from the sale proceeds; such a direction is fairly common, and certainly a prudent request, when a creditor expects to be paid from the proceeds of sale of real property.

43The express terms of the promissory note suggest the formation of a typical contract for indebtedness, subject to interest and terms of repayment. There are no other documents to support the loan. This case is completely distinguishable from the caselaw relied upon by the moving party where in those cases, such as Ieluzzi, the contractual documents included an express provision that funds would be held in trust.

44As Ms. Moubarak also points out, the existence of the promissory note (the contract) may also constitute a juristic reason for any enrichment which would put a wrinkle in Ms. Hamilton’s alternative plea for restitution of the funds on the basis of unjust enrichment⁹.

45The caselaw that Ms. Hamilton relies upon is also distinguishable because the funds do not clearly fall under an identifiable category of exempt assets, such as RRSPs, as was the case in the Brennan¹⁰ decision.

46I also note that the draft settlement documentation that was sent by Ms. Hamilton to the Trustee provided for a standard consent to judgment to be signed and held in escrow subject to default¹¹. The draft judgment is silent on breach of trust and/or fraud.

47Fourth, Ms. Hamilton filed a proof of claim with the Trustee as an unsecured creditor. She has not withdrawn that proof of claim. As indicated above, the Trustee has accepted Ms. Hamilton’s unsecured claim in full.

48In view of the considerations above, I have great difficulty accepting Ms. Hamilton’s submission that she is materially prejudiced by the stay on the basis that the funds were trust funds that belonged to Ms. Hamilton and do not form part of the assets vesting with the Trustee.

49With respect to Action 2, Ms. Hamilton did not include a copy of the statement of claim in her materials. None of the parties produced a copy of this second claim. I therefore cannot consider the soundness of the allegations as pled in that claim.

50In her affidavit, Ms. Hamilton states that as the matter evolved into a bankruptcy and as Ms. Moubarak’s “intentions and conduct became increasingly apparent during the course of the litigation, I realized it was important to bring a claim addressing Angela’s fraudulent and deceitful conduct, among other matters.” She therefore instructed her new counsel to prepare a new claim which was issued on December 5, 2024.

51Contrary to the requirements of the Act, Ms. Hamilton did not bring a motion seeking to lift the stay prior to commencing the second court action. It is also concerning that she waited almost a year to bring the within motion.

52Based on a review of Ms. Hamilton’s affidavit, notice of motion and factum, the fraudulent and deceitful conduct that is the subject of Action 2 would appear to include the alleged forged gift letter to Westboro Mortgage and the alleged misrepresentations by Ms. Moubarak at the time of the loan, including omissions which allegedly concealed Ms. Moubarak’s lack of intention to ever repay the loan.

53If the action were to proceed to trial, the Court would need to make credibility determinations regarding the alleged misrepresentations and omissions. Based on the parties’ respective affidavits and exhibits before me on this motion, there do not appear to be any contemporaneous documents to corroborate either party’s position on the alleged misrepresentations and omissions at the time of the loan. This appears to be a classic “he said, she said” scenario where one party asserts that representations were made while the other party denies them.

54I did review the emails produced by Ms. Hamilton after January 2023 where she is following up with Ms. Moubarak and asking for repayment of the loan. Although Ms. Hamilton asserts in several of the emails that the proceeds from the sale of the Eric property is “her” money and she is asking Ms. Moubarak to account for the sale proceeds, in an email dated December 2, 2023, Ms. Hamilton says “the loan we agree to was an INTERIM BRIDGE LOAN until your property sold on Erik”. In another email dated December 15, 2023, Ms. Hamilton says that she assumed Ms. Moubarak was saying the truth when she said she had equity in the property (I assume this is a reference to the Eric property), that she had 20k coming from Elie (Ms. Moubarak’s former spouse), that she would cash out her pension, did not qualify for refinancing etc.

55Without making any determinations on the merits of the alleged misrepresentations including the omissions, I note that some of the statements in Ms. Hamilton’s emails are not consistent with the allegations she makes in her affidavit. For example, an interim bridge loan is quite different from a trust arrangement. The reference to Ms. Moubarak expecting 20k from her former spouse is a far cry from Ms. Hamilton’s allegation in her affidavit where she says that Ms. Moubarak represented she was expecting $700,000 on equalization. In addition, Ms. Moubarak offers some explanation in her affidavit regarding the lack of expected net equity resulting from the sale of the Eric property (the sale price was lower than expected).

56Other than Ms. Hamilton’s assertions, I also struggled to find evidence in the materials to support some of Ms. Hamilton’s statements in her factum, for example, that Ms. Moubarak “concealed” that the Eric property had already been refinanced twice. In addition, there is no evidence that Ms. Hamilton attempted to conduct any due diligence prior to advancing the funds to her friend. For example, it does not appear that Ms. Hamilton conducted any searches, such as obtaining a parcel identifier (a PIN) on the Eric property or the matrimonial home, prior to advancing the funds. The PINs would have revealed any encumbrances on title. There is no evidence that Ms. Moubarak prevented Ms. Hamilton from pulling a PIN or from conducting any other due diligence. There is also no evidence that Ms. Hamilton sought to secure the loan, for example, by requesting a charge against the South Russell property.

57Regarding the alleged forged gift letter, which Ms. Hamilton states she obtained in October 2024 following a PIPEDA request, there are also competing version of events in the parties’ affidavits as to whether Ms. Hamilton was aware of the requirement for the gift letter and whether she authorized Ms. Moubarak to sign the letter on her behalf. While that issue would also require a trial to be determined with finality, once again, there is evidence in the motion material before me that puts a significant wrinkle in Ms. Hamilton’s position.

58In particular, Ms. Moubarak has produced an email dated September 2, 2022 where she writes to Ms. Hamilton and asks if Ms. Hamilton would be ok filling out a document. The “re” line of the email is “Gift Letter to Complete”. The email is also a “forward” of an email from Ms. Moubarak’s mortgage broker which discusses the results of an appraisal, the new “pay-down numbers” and the requirement of a gift letter. Unfortunately, Ms. Moubarak did not include the attachment to this email in her materials to verify whether the letter was the same version of the executed gift letter that Ms. Hamilton obtained from the PIPEDA request. In any event, in her email, Ms. Moubarak says “Just put that you’re my sister in relationship section…or mother ;) lol”.

59Ms. Hamilton delivered a short supplementary record which is dated the same day as Ms. Moubarak’s record. The only evidence in this supplementary record is the creditors’ package for the bankruptcy and evidence on the timing of Ms. Hamilton retaining counsel to assist her in the bankruptcy proceedings.

60Ms. Hamilton did not deliver any other reply material. She did not deliver an affidavit denying receipt of the September 2^nd email above. She did not deliver an affidavit denying Ms. Moubarak’s version of the conversation that is alleged to have occurred whereby Ms. Hamilton authorized Ms. Moubarak to sign the gift letter on her behalf. During his submissions, Ms. Hamilton’s counsel could offer no additional insight on the email exchange.

61Even if the gift letter was not attached to this email, the content of the email chain itself is not consistent with Ms. Hamilton’s statements in her affidavit that she was not aware of the lender’s requirement for the gift letter. As Ms. Moubarak’s counsel also correctly points out, Ms. Moubarak’s production of this email, and her admission that she provided incorrect information to her mortgage broker, is an admission against interest.

62How is this relevant on this motion? Ms. Hamilton relies on the alleged forgery to plead fraud in support of her position that she is materially prejudiced by the stay. This argument once again relates to her position that the subject-matter of the action and any resulting judgment would not be discharged in bankruptcy therefore there is sound reason to lift the stay.

63However, in view of the lack of corroborating evidence to support her allegations, the contradictions between some of the documents and the allegations in her affidavit and Ms. Hamilton’s complete silence in reply to Ms. Moubarak’s affidavit, I once again have great difficulty accepting Ms. Hamilton’s submission that she is materially prejudiced by the stay with respect to the issues raised in Action 2, which action will also face significant hurdles.

64Because Ms. Hamilton relies on the substantive issues that are at the heart of both actions to support her argument that she is prejudiced by the ongoing stay, I would expect that she would put her best foot forward with respect to the evidence produced on this motion. Without making any determinations on the merits and recognizing that ultimately, the Court would need to make credibility findings after viva voce evidence to make a final determination, I find that this is one of those cases where the evidence before me leads me to conclude that Ms. Hamilton’s actions have little chance of success such that it would not be sound the lift the stay to allow her to proceed with the actions.

65Even if I am wrong in my assessment of the actions, as discussed above, Ms. Hamilton has also failed to convince me that she is prejudiced by the stay. Although I have some sympathy for Ms. Hamilton’s plight - I have no doubt that she whole heartedly wanted to help her friend and fully expected that her friend would repay the funds – I agree with Ms. Moubarak and the Trustee that Ms. Hamilton shares the same prejudice as the other unsecured lenders in the bankruptcy. She loaned funds, those funds were not repaid in breach of contract and she will now be out of pocket to absorb the loss and, as it turns out, be on the hook to pay her line of credit.

66In addition, I agree with the Trustee that if the stay were lifted, it would delay the administration of Ms. Moubarak’s bankruptcy and prejudice the other unsecured creditors.

67In her statement of affairs, Ms. Moubarak declared that the South Russell property was fully encumbered (Westboro Mortgage holds a first ranking mortgage and Money Advisors holds a subsequent ranking charge) and that she had no other non-exempt assets. Ms. Moubarak also declared that within the twelve months preceding the bankruptcy, she transferred her 1% interest in the matrimonial home to her former spouse for no consideration. She also declared that within the last five years, she sold the Eric property and received approximately $44,135 in net proceeds which she used to pay a loan due to her brother. The reason for the insolvency is stated as her inability to pay the damages sought by Ms. Hamilton in the statement of claim.

68As the Trustee correctly points out, the two transactions above will be investigated by him in the bankruptcy. The OSB has also conducted an examination therefore there is evidence from that examination upon which the parties may rely¹². The Trustee has registered a caution on title to the South Russell property as there may be equity in the property. Ms. Moubarak may also be required to pay surplus income to the estate. The Trustee is currently holding approximately $11,000.

69I also pause here to note that, at the very latest, Ms. Hamilton would have become aware of these two transactions – with particulars of the consideration, net proceeds and allocation of proceeds – when she received the creditors’ package in or about March 2024. Ms. Hamilton would therefore have had the benefit of this information when she delivered her proof of claim to the Trustee as an unsecured claim.

70The Trustee submits that in the circumstances, the more appropriate and cost effective remedy available to Ms. Hamilton – along with the other creditors in the estate – would be to oppose Ms. Moubarak’s discharge and request conditions for the discharge. For example, Ms. Moubarak might be required to reimburse (to her estate) the funds that she paid to her brother as a condition to her discharge.

71That said, if the stay was lifted to allow Ms. Hamilton to seek to recover the proceeds of sale from Eric, including by way of tracing order as against an interest in the South Russell property and any equity in that property, it would lead to the result that Ms. Hamilton and the Trustee (and any other opposing creditor) would all be chasing after the same funds. Until Ms. Hamilton’s civil actions are determined, the Trustee would not be able to effectively administer the estate which would cause prejudice to the creditors and Ms. Moubarak. There would also be duplication of costs and effort and multiplicity of proceedings as between the civil actions and the bankruptcy proceeding.

72In addition, because Ms. Hamilton is the largest unsecured creditor in the bankruptcy, she will receive the most significant dividend from the estate. In his affidavit, the Trustee estimates Ms. Hamilton’s proportion of the proven claims at approximately 78%. The fact that Ms. Hamilton will receive the largest dividend mitigates any potential prejudice to her.

73I therefore agree with the Trustee that lifting the stay would cause unequal treatment and/or prejudice to Ms. Moubarak’s other creditors, including uncertainty and delay in the administration of the estate. Because I have also found that the civil actions have little prospect of success, and because Ms. Hamilton has remedies available to her in the bankruptcy process – in particular at the discharge stage – I would also decline to exercise my discretion to lift the stay on equitable grounds.

The Nunc Pro Tunc Declaration is not Necessary or Appropriate in the Circumstances

74Because I have found that I would not lift the stay to permit Action 2 to proceed, the request for the nunc pro tunc validation of the issuance of the Statement of Claim in Action 2 and the ancillary relief request by Ms. Hamilton is moot.

75That said, I would also have declined to grant such a declaration because the moving party does not meet the applicable test¹³. Pursuant to my findings above, Ms. Hamilton’s other creditors would be prejudiced by the declaration as would Ms. Moubarak. The timing of the order sought is not a mere irregularity because the stay triggered by the bankruptcy was already in place at the time of issuance of Action 2; lifting the stay is not a routine matter and would have required a motion by Ms. Hamilton. I also find it inappropriate that Ms. Hamilton issued the claim before obtaining leave of the Court.

76There is also an issue as to whether the limitation period had expired by the time Action 2 was issued because of Ms. Hamilton’s receipt of the email dated September 2022 referencing (and it seems, attaching) the gift letter.

Conclusion

77For reasons set out above, the motion is dismissed. I decline to grant the nunc pro tunc declaration to validate the issuance of Action 2. I decline to lift the stay to permit Ms. Hamilton to proceed with Actions 1 and 2.

78If the parties cannot agree on costs of the motion, they may send me brief written submissions, not exceeding 3 pages double-spaced plus costs outlines, as follows: Ms. Moubarak shall deliver her written submissions within 30 days, Ms. Hamilton shall respond within 20 days thereafter. The materials shall be sent to my attention by email at Ottawa.associatejudges@ontario.ca.

Footnotes

1. 1It is admitted that the amount of $185,000 was an error and that the note ought to have stated $180,000 as the amount of the loan.
2. 2Ma v Toronto-Dominion Bank, 2001 CanLII 24076 (ON CA) at para 2 citing Re Francisco (1995), 1995 CanLII 7371 (On CTGD).
3. 3Re Ma at para 3.
4. 4Re Advocate Mines Limited, [1984] O.J. No 2330 at paras 3 to 7.
5. 5I note that none of the parties produced a complete copy of the Statement of Claim for Action 1. I tracked down page 3 of the pleading in the Court’s filing system which sets out paragraphs 1(a) to (g) of the prayer for relief.
6. 6Infoplace Ticket Centres Ltd. (Re), 2009 CanLII 72078 (ON SC) at para 3; In the Matter of the Bankruptcy of James Tong, 2006 BCSC 962 at para 25.
7. 7Frame v Smith, 1987 CanLII 74 (SCC), [1987] 2 SCR 99 at paras 60-64. See also Re Ieluzzi (#2), 2012 ONSC 1474 at paras 33-34.
8. 8
9. 9Rathwell v Rathwell, 1978 CanLII 3 (SCC), [1978] 2 SCR 436 at pages 455-456.
10. 10Re Brennan, 2019 ONSC 4712.
11. 11Neither Ms. Hamilton nor Ms. Moubarak raised any issue with settlement privilege on this motion with respect to the Trustee’s production of the unexecuted Minutes of settlement as an exhibit to his affidavit.
12. 12The transcripts from the OSB examination was not included in the motion material before me.
13. 13Canadian Imperial Bank of Commerce v Green, 2015 SCC 60 at para 90.