CITATION: Lewis v. Mauricio, 2026 ONSC 4638
COURT FILE NO.: BK-26-3-0T35 CV-25-00034835
DATE: 20260811
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Jeffery Michael Lewis, Kim Matthew Lewis and James Brian Flynn, Applicants
AND:
Elizabeth Mauricio, Respondent
BEFORE: Justice E. ten Cate
COUNSEL: Gregrory Wrigglesworth, for the Applicants
Gurman Bhatti, for the Respondent
HEARD: July 15, 2026 (hybrid)
endorsement
[1] This is an application under s. 43 of the Bankruptcy and Insolvency Act (“BIA”)[1].
[2] The Applicant creditors have been unable to recover on a judgment obtained because of the Respondent debtor’s failure to pay a mortgage on a rental property. They seek an order declaring the Respondent bankrupt and appointing a trustee in bankruptcy.
[3] The Respondent, an individual debtor, owns several properties herself and through her corporation. She resists the application because she claims she has adequate assets but requires additional time to resolve outstanding tax debt.
[4] The parties agree the Respondent owes the Applicants $255,547.15 plus costs and interest.
[5] The parties also agree that the priority granted to Canada Revenue Agency (“CRA”) is lost in bankruptcy such that CRA ceases to have priority over secured creditors unless their lien is registered in priority to the mortgage. The effect of bankruptcy is to relegate CRA to the position of unsecured creditor, and to reverse priority such that the Applicants’ claims have priority over CRA’s.
[6] The Applicants take the position that: (1) failure to make payment on the mortgage due date; (2) failure to pay the judgment; and (3) failure to pay the amount owing to CRA causing a lien to be registered against the property; are clear evidence that the debtor committed acts of bankruptcy.
[7] The Respondent takes the position that the application should be dismissed because the Applicants have not satisfied the statutory requirements under s. 43 of the BIA.
Factual Background
[8] The facts are not in dispute.
[9] The Applicants granted a mortgage to the Respondent which was guaranteed by Reyna Investments Ltd. a.k.a. Reyna Investment Ltd. (“Reyna”), a corporation of which the Respondent is the sole director and shareholder.
[10] Mortgage funds were advanced in October 2022 in the principal amount of $424,000. On October 17, 2022, a mortgage was registered on title to two properties owned by the Respondent and her corporation: 48 Clark Street, Leamington, Ontario (“Clark Property”) and 2 Otton Lane, Leamington (“Otton Property”). Assignments of Rents and Leases were also registered against both properties.
[11] On April 3, 2023, a lien was registered against the Clark Property in favour of CRA.
[12] The mortgage was due and payable on October 12, 2023, but the Respondent failed to make payment on the due date.
[13] The Applicants served a Notice of Intention to Enforce Security on February 12, 2024. On April 22, 2024, the Respondent acknowledged indebtedness of $439,08.99. A Notice of Sale Under Mortgage for the Clark Property was served on June 7, 2024, and it was listed for sale.
[14] On June 28, 2024, demand was made by CRA pursuant to ss. 222(1) and 222(3) of the Excise Tax Act (“ETA”)[2] for unremitted GST/HST owed by the Respondent in the amount of $980,484.09.
[15] The Otton Property was sold on December 19, 2024, and the proceeds applied against mortgage indebtedness, reducing the amount outstanding to $253,161.06. Other than those proceeds of sale, no other payments were received.
[16] Judgment was obtained against the Respondent on March 13, 2025, for $255,547.15 plus costs and interest. A Writ of Seizure and Sale was filed with the Sheriff’s office.
[17] This application was issued on April 16, 2025.
[18] CRA was served with the application but did not respond.
[19] BDO Canada LLP in Kitchener, Ontario has agreed to act as trustee of the property of the Respondent.
Legal Framework
[20] The Applicants must satisfy s. 43(1) of the BIA which establishes two threshold requirements: (1) the debt or debts owing amount to at least $1,000 (conceded), and (2) the debtor has committed an act of bankruptcy within six months preceding the filing of the application.
[21] Section 42(1)(j) of the BIA provides that a debtor has committed an act of bankruptcy where the debtor ceases to meet their liabilities generally as they become due.
[22] In Levesque v. 363148 Ontario Ltd.[3], Rady, J. set out the nature of bankruptcy proceedings and the standard of proof:
It is well established that proceedings under the BIA are quasi-criminal in nature. The act(s) of bankruptcy and all allegations set out in the application must be proven on sufficient evidence: Re Holmes (1975), 1975 CanLII 667 (ON HCJ), 9 O.R. (2d) 240 (S.C.); Re: Valente (2004), 2004 CanLII 8018 (ON CA), 70 O.R. (3d) 31 (C.A.).
[23] The Court of Appeal in Levesque confirmed the test to be used to determine when a debtor fails to meet their liabilities generally as they become due:
To demonstrate that a debtor has ceased to meet his liabilities generally as they become due generally requires, in the absence of special circumstances, (i) proof of the outstanding debt owed to the applicant and (ii) evidence that the debtor has ceased to meet his liabilities to its creditors in general. The existence of unpaid creditors is not sufficient, in and of itself, to establish an act of bankruptcy; the applicant must prove, on the balance of probabilities, that the debtor has ceased to meet its liabilities generally as they become due. Since the machinery of the BIA is for the benefit of the creditors of a debtor as a class, establishing that a debtor has ceased to meet his liabilities generally requires some evidence that the debtor has ceased to meet liabilities other than those incurred towards the applicant creditor.[4]
[24] The onus lies on the petitioning creditor to establish each of the element’s prerequisite to a bankruptcy order on sufficient evidence.[5]
[25] A bankruptcy order may be made in the case of a single debt where there are special circumstances:
It is now well-settled in the case law that the failure to pay a single creditor can constitute an act of bankruptcy under s. 42(1)(j) when there are special circumstances, which have been recognized in three categories: (a) where repeated demands for payment have been made within the six-month period; (b) where the debt is significantly large and there is fraud or suspicious circumstances in the way the debtor has handled its assets which require that the processes of the BIA be set in motion; and (c) prior to the filing of the petition, the debtor has admitted its inability to pay creditors generally without identifying the creditors.[6]
Analysis
[26] There are three individual creditors, but only one mortgage debt. Arguably, the Applicants need to prove special circumstances because effectively there is only one creditor. However, unlike Levesque, where the petitioning creditor presented no evidence of other obligations, CRA is also a creditor as evidenced by the lien registered on the properties. In my view, there are multiple creditors and special circumstances need not be shown.
[27] The Respondent submits: (1) the Applicants have not complied with s. 43(2) of the BIA which requires them to either surrender their security or providing a proper estimate of the value of their security and proceeding only for any unsecured shortfall; (2) they have not proven an act of bankruptcy within the six months preceding the filing of the application; and (3) the Applicants have not proven the Respondent ceased to meet her liabilities generally as they became due as required by s. 42(1)(j) of the BIA.
(i) The Applicants have complied with s. 43(2) of the BIA
[28] The Applicants are secured creditors. Their application contains an estimate of the value of their security (nil) and details regarding the debt owed to them. After the CRA lien is deducted, there is no real dispute regarding the proper value of their security. They are proceeding only for the unsecured shortfall of approximately $256,000; they have therefore complied with s. 43(2) of the BIA.
(ii) The Applicants have proven an act of bankruptcy within the six months preceding the application
[29] The application was issued on April 16, 2025. The relevant statutory period is therefore October 16, 2024, to April 16, 2025.
[30] The mortgage went into default in October of 2023. After commencing enforcement proceedings, the Applicants received partial proceeds after the sale of one property in December of 2024. The remaining debt crystallized on March 13, 2025, when judgment for the balance was obtained. The act of bankruptcy therefore occurred within six months of the commencement of the application.
(iii) The Applicants have proven the Respondent ceased to meet her liabilities generally as they become due as required by s. 42(1)(j) of the BIA
[31] The real question is whether the Respondent debtor has ceased to meet her liabilities generally as they become due.
[32] The only evidence relied upon by the Respondent is an affidavit of her accountant, George Wang. He deposed he was retained on November 5, 2025, to “review her finances and dispute a CRA assessment of tax liabilities, which is currently assessed at roughly $2,300,000”. Based upon his “high-level overview” of her financial situation, he estimates that she has “roughly $3 million” in equity in her real estate portfolio in Ontario, with ownership split between personal and her corporation.
[33] His affidavit contains a list of those properties along with estimates of their fair market value, and amounts owing on each property. No source for the figures in the chart was identified (other than the Respondent who did not swear an affidavit), and no appraisals or other supporting documents were appended.
[34] Mr. Wang also deposes that he is advised by the Respondent that she contacted an appraisal company to complete independent appraisals to complete independent appraisals for her personally and corporately owned properties to verify these values. He was advised by CRA that the Respondent will be required to file outstanding corporate tax returns before negotiating a payment plan. He is currently in the process of filing a Voluntary Disclosure Program application for outstanding corporate tax returns; seeking a Stay of Interest and Relief of Interest and Penalties due to the Respondent’s health issues; and Filing an Adjustment Request for HST returns between the years 2021 and 2024.
[35] In Mr. Wang’s professional opinion, the Respondent “may have a reasonable prospect of reducing the CRA assessment, particularly where HST may have been overstated for reporting periods between 2021 and 2024” but he gives no estimate of the overstatement.
[36] The application commenced in April of 2025, over one year ago. After numerous adjournments, the parties appeared before Moore, J. on April 10, 2026, to argue a contested adjournment. Respondent’s counsel advised that appraisals were required on eight properties, three updated appraisals have been received, and another requires updating. The Respondent sought a further one-month adjournment. According to the endorsement, counsel advised that “until recently it was hoped that things could be resolved so [he] only recently hired appraisers”. The matter was then adjourned to a special appointment on July 15, 2026, peremptory on the Respondent.
[37] Despite representations made to the court in April of 2026, no appraisals were presented as evidence at the hearing of the application.
[38] The Respondent argues that should be afforded an unspecified opportunity to file her tax returns and to negotiate with CRA. However, it is apparent that Moore, J. heard submissions from the Respondent that appraisals of the properties are being delayed pending negotiations with CRA. Meanwhile, the Applicants must wait indefinitely for payment.
[39] Regardless of any equity in the properties, the mortgage is nearly three years overdue, there is an unsatisfied judgment to the Applicants, and no reliable evidence that the debt can be satisfied. The current amount owing to CRA is nearly $1 million and is not being paid. For these reasons, I am persuaded the Respondent has ceased to meet her liabilities generally as they become due as required by s. 42(1)(j) of the BIA.
Disposition
[40] I therefore adjudge the Respondent to be bankrupt and appoint BDO Canada LLP as Trustee in Bankruptcy for the Respondent.
Costs
[41] If the parties cannot agree on costs, submissions limited to three pages exclusive of bills of costs may be made as follows:
a. Applicants within 15 days; and
b. Respondents withing 10 days after receipt of the Applicant’s submissions.
[42] There shall be no right of reply without leave. If submissions are not received within this time frame, I assume costs are resolved.
“Justice E. ten Cate”
Justice E. ten Cate
Date: August 11, 2026
1Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-5.
2Excise Tax Act, R.S.C. 1985, c. E-15.
3Levesque v. 363148 Ontario Ltd., 2015 ONSC 5028 (unreported), at para. 4, affirmed at Levesque (Re), 2016 ONCA 393.
4Levesque (Re), C.A. para. 7 citing Re Ivany, 2012 ONSC 7058, at para. 12.
5Levesque (Re), C.A. at para. 8
6Re Valente (2004), 2004 CanLII 8018 (ON CA), 70 O.R. (3d) 31 (C.A.), at para. 8.