Legal Blog: Collections
The Bankruptcy and Insolvency Act (BIA) exists to give debtors, some unfortunate and some not, a second chance financially. Regrettably, sometimes it is also a third or fourth chance financially because some bankrupts simply do not learn – or perhaps, they learn all too well. Under the BIA, a trustee in bankruptcy is appointed to take control of all of the bankrupt’s assets, convert them into money, and distribute them rateably to the bankrupt’s ordinary creditors. Of course, there are many more twists and turns than those set out above in our (perhaps, over-simplified) explanation.
To allow the trustee to do its job, section 69.3 of the BIA prohibits any creditor from any remedy against the bankrupt or the bankrupt’s property and prohibits all actions, executions, or other proceedings against the bankrupt for the recovery of a claim provable in bankruptcy. This stay of proceedings continues until the day that the trustee is discharged from its obligations, a date that is often later than the date on which the bankrupt is discharged from bankruptcy.
However, like many aspects of legislation, there are exceptions to the rule and, sometimes, exceptions to the exceptions. Section 69.4 of the BIA allows a person affected by a stay to apply to the court for a declaration that the stay does not apply to that person. The court may make this declaration if it is satisfied that (a) the person is materially prejudiced by the stay or (b) it is equitable on other grounds to make the declaration.Continue Reading >
Fiorito v. Wiggins 2017 Ont CA
Husband had been awarded $200,000 in costs after a bitter family law battle with wife. The court then ordered a review of access provisions. Before the review, husband brought a motion to obtain security for or payment of the $200,000 costs order as a condition of proceeding with the review. On that motion, wife filed evidence that she intended to pay the costs award and denied a suggestion that she intended to file for bankruptcy after the review to thwart husband’s claim. The motions judge only restrained wife from disposing of her RSPs and dissipating her assets. After the motion and during the review, wife assigned into bankruptcy. Husband then moved under section 69.4 of the Bankruptcy and Insolvency Act to lift the stay; although RSPs are exigible under Ontario law, they are not seizable upon a bankruptcy. The court granted that motion on equitable grounds for 4 reasons: (1) the debt arose from family law proceedings that husband had to pursue to have any relationship with his children; (2) wife had not paid anything towards the costs and husband would receive nothing once wife was discharged from bankruptcy; (3) wife reneged on assurances that she had made to the court in the previous motion; (4) none of the other creditors would be prejudiced because the lifting of the stay would have resulted only in husband being able to attack an asset (the RSP) that the other creditors would not have been able to attack regardless.Continue Reading >
We no longer have debtor’s prisons; they were abolished before confederation. We cannot imagine putting people in jail merely because they are unable to pay their debts. However, we can easily imagine some creditors who would love to see their debtors in jail. Can a creditor ever be instrumental in jailing a debtor? Yes, but only if the debtor is guilty of civil contempt, an issue that was front and centre in Greenberg v. Nowack and again in 2363523 Ontario Inc. (“Ontco“) v. Nowack, 2016 decisions of the Ontario Court of Appeal.
You will note that both cases involved the same defendant. He seems to be a nasty piece of work. The Greenbergs gave him their life savings to invest on their behalf, never to be returned. When they sued, they and the defendant entered into an agreement for repayment. The defendant defaulted and the Greenbergs obtained a judgment for $3.5 million.Continue Reading >
Gerger Mechanical Ltd. v. Salvarinas 2012 Ont SCJ
On a motion, usually made without notice, for a certificate of pending litigation (CPL) arising out of an alleged fraudulent conveyance, the plaintiff need only demonstrate that it has put forward a reasonable claim to set aside a transfer based on fraud and that it already has a judgment against the transferor or would successfully recover judgment if there was just an action outstanding. The plaintiff does not have to demonstrate that the transfer was made with an intent to defeat or delay creditors or that the balance of convenience favours issuing a CPL. That may be the case on a motion to set aside a CPL, but not the original motion to obtain a CPL.Continue Reading >
The Ontario Municipal Act (the “Act“) establishes a procedure by which a municipality can sell property if the owner fails to pay arrears of property tax. A municipality has to wait a significant amount of time before it sells the property and some municipalities wait even longer than the minimum time. Even after the property is sold, any surplus (after payment of all arrears, interest, and costs) must be paid into court and any person who has a claim to the surplus funds may, within one year, apply to the court for payment of all or part of the funds. If no one makes application for the surplus, the Act deems the funds to be forfeited to the municipality.
What happens when a person (be it an owner, mortgagee, lien claimant, execution creditor, etc.), otherwise entitled to some or all of the funds, misses the deadline and applies too late? This question was answered in a 2016 decision of the Ontario Court of Appeal in Poplar Point First Nation Development Corp. v. Thunder Bay (City).Continue Reading >
In our newsletter of June 2015, we discussed Walchuk Estate v. Houghton, a 2015 decision of the Ontario Superior Court of Justice. In that case, the debtor failed to attend an examination in aid of execution and the creditor obtained a court order pursuant to which the debtor was ordered to attend the examination on a specified date and to bring specified documents. The debtor assigned himself into bankruptcy. He then attended the examination, but brought no documents. Instead, he brought a notice of stay of proceedings that his trustee in bankruptcy issued for him.
The creditor moved for a contempt order and the motions judge held that the intervening bankruptcy did not affect a determination as to whether the debtor was in contempt of a previous order. The debtor appealed that decision.Continue Reading >
Greenberg v. Nowack 2016 Ont CA
2363523 Ontario Inc. v. Nowack 2016 Ont CA
These cases involve the same judgment debtor, with different judgment creditors. In each case, the debtor was supposed to invest the creditors’ money and, somehow, the money disappeared. Each judgment was in the millions of dollars. In each case, the debtor was ordered to produce all financial transactions, bank statements, cheques etc so that money given to him could be traced. In each case, the debtor ignored the various orders, stalled, and prevaricated. In each case, the creditors brought civil contempt proceedings. In Greenberg, the motions judge thought it necessary for a creditor to prove that the debtor wilfully and deliberately disobeyed the relevant order. The Court of Appeal held that all that was required was an intentional act or omission that breached the order. The Court sent the matter back to another Superior Court judge for determination. In 2363523 Ont, the creditor was further along and had obtained not only a determination of contempt, but a 30 day jail sentence for the debtor. The debtor appealed. The Court dismissed the appeal and gave the debtor 45 days from his release to comply with the order. The Court indicated that the purpose of contempt proceedings is not to punish, but to force the contemnor to do what is ordered to be done.Continue Reading >
Tiziana‘s article was recently featured in Canadian Lawyer Magazine. Click here to read: Catch me if you can: The art of pursuing fraudulent debtors
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