Stephanie Lauriault

The bankrupt, a 72-year-old self-employed businessman with significant tax debts, applied for a discharge from bankruptcy.

The discharge was opposed by the Canada Revenue Agency and the Trustee in Bankruptcy.

The court found that the bankrupt had engaged in unjustifiable extravagance and had structured his affairs through a family trust to artificially lower his income.

The court granted a conditional discharge, requiring the bankrupt to pay $100,000 to the Trustee for the benefit of his creditors.

The applicants sought an order requiring the Canada Revenue Agency to return funds seized from a tax debtor and pay them into court pending the outcome of a related proceeding.

The applicants alleged the tax debtor had misappropriated the funds from an estate.

The court dismissed the application, finding that even if it had jurisdiction to make the order, there was no need to do so because the funds were secure in the hands of the Receiver General and did not require preservation by payment into court.

Following the dismissal of a motion for partial default judgment and partial summary judgment, the court considered the appropriate costs award.

The defendant Crown sought substantial indemnity costs including significant expert disbursements.

The court reviewed the general principles governing costs under Rule 57 of the Rules of Civil Procedure and s. 131 of the Courts of Justice Act.

It concluded that the moving party's evidence supporting an alleged equitable mortgage was deficient and unreasonable in the context of the summary judgment motion.

Substantial indemnity costs and expert disbursements were awarded to the Crown.

A creditor applied under s. 37 of the Bankruptcy and Insolvency Act to vary a trustee’s decision not to realize on a bankrupt’s residential property, which initially had negative equity but later increased in value prior to discharge.

The court considered whether post‑bankruptcy increases in real property equity constituted after‑acquired property divisible among creditors.

The court held that increases in equity prior to discharge generally vest in the trustee for the benefit of creditors unless the trustee has formally divested the property.

However, because the bankrupt relied on representations from the trustee and continued making mortgage payments that reduced principal, equitable considerations applied.

The bankrupt was credited for principal reduction on the mortgage, while the creditor was entitled to the remaining increase in equity beyond the original appraisal.

The moving party sought partial summary judgment and default judgment declaring an equitable mortgage or equitable interest over two Ottawa properties, asserting priority over liens registered by the Canada Revenue Agency for tax debts of one of the defendants.

The claim relied primarily on a written agreement and the alleged use of funds provided by the moving party in property transactions.

The court held that the agreement did not establish the essential elements of an equitable mortgage, including a clearly defined debt and intention to charge specific property as security.

Significant disputes existed regarding the source of funds and the parties’ intentions, raising credibility issues.

The court concluded that these issues required viva voce evidence at trial and dismissed the motion for summary judgment.

The court determined whether agreed costs arising from a successful Rule 21 determination of a question of law should be payable immediately or in the cause pending appeal.

The underlying motion, brought by the tax authority under Rule 21.01(1)(a) of the Rules of Civil Procedure, sought determination of a legal issue prior to trial.

The court held that the Rule 21 proceeding constituted a discrete proceeding capable of disposing of the action and therefore warranted immediate costs consequences.

The successful parties were awarded agreed partial indemnity costs payable forthwith rather than in the cause.

The existence of a pending appeal did not justify delaying payment of the costs.