Legal Blog: Bankruptcy

May
25
2017

Stay of Action – Bankruptcy

Posted in Bankruptcy, Five Liners

2811472 Canada Inc. v. Canada 2017 Ont SCJ (Master)

Once an action has been stayed by virtue of a bankruptcy, the registrar has no jurisdiction to administratively dismiss the action.

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Mar
30
2015

Fraudulent Conveyance, Preference

Posted in Bankruptcy, Five Liners

Bayerische Landesbank Girozentrale v. Sieber Estate (Trustee) 2015 Ont SCJ

The debtor engaged in extensive shenanigans and transfers. He claimed a trust in favour of a corporation when the corporation was not incorporated until many years after the date the trust allegedly arose. Shares were backdated. The trust agreement was backdated. The creditor obtained a section 38 BIA order. The court held that the trust was a sham. There was no documentation of the creation of the trust. The trust had no accounting records, financial statements, bank accounts, bank records, or tax returns. That in itself was sufficient to be fatal to the supposed existence of the trust. It was a non-operational phantom trust. Once one of the badges of fraud exists, a presumption of fraud takes hold and the defendants must provide some adequate explanation. Of review of cases on fraudulent conveyance and trusts, the judge set aside the fraudulent conveyance to vest the disputed property with the creditor by virtue of the section 38 order.

The creditor had served an offer to settle requiring the debtor to pay $310,000 or to transfer title to the property. Since the judge ultimately ordered the property transferred to the creditor, he held that the offer was as good as or better than his award. Accordingly he awarded partial indemnity cost to the date of the offer and substantial indemnity costs after it. He also noted that it was within the debtor’s contemplation that transferring his property in the manner in which he did would spawn some rather expensive litigation. The judge noted that the complexity of the issues may be taken into account. There was no mention of substantial indemnity costs as a result of the finding of fraud. This was unusual.

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Mar
11
2015

178(1)(d) of BIA and Breach of Trust

Posted in Bankruptcy, Five Liners

Abraham v. McBean 2015 SCJ

Paralegal held liable because she allowed a mortgage transaction to be completed after the proposed mortgagor had sold the property to a numbered company. The trial judge determined that, after advancing funds in her trust account without notifying the mortgagee of the change in the ownership of the property, the paralegal breached her trust obligations and disregarded the interests of the party she was retained to protect.

On application to release the bankrupt paralegal from her subsequent bankruptcy, the bankruptcy judge held that section 178 (1) (d) of the Bankruptcy and Insolvency Act did not apply. It did not apply to every breach of trust, but only a breach akin to misappropriation or defalcation. Since there was no finding by the trial judge of bad faith or dishonesty against the bankrupt paralegal, the section did not apply.

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