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Legal Blog: Bankruptcy
Sep
04
2025
Privies (BIA)
Ernst & Young Inc. v. Anwar 2025 Sask KB
Trustee in bankruptcy applied to void transactions as transfers at undervalue (s. 96) or preferences (s. 95) under the Bankruptcy and Insolvency Act. Investigations revealed $1,383,800 in questionable transactions, primarily involving transfers to family members and associated entities of the bankrupts’ principal. The court found that several payments totaling $1.013 mil to the principal and his spouse were transfers at undervalue that diminished the bankrupts’ estates; the bankrupts received insufficient or no consideration,. Two payments to the principal’s nephew, totaling $140,000, were deemed voidable preferences. The court also declared several individuals and entities privy to and liable for these transfers. A privy is someone who benefits directly or indirectly from, and has knowledge of, the transaction for less than fair market value.
Continue Reading >Jul
14
2025
Fraudulent Preference
RPG Receivables Purchase Group Inc. v. American Pacific Corporation 2025 Ont CA
Trustee in bankruptcy moved to set aside, under s. 95(1)(a) and (2) of the Bankruptcy and Insolvency Act (BIA). The bankrupt had paid $400,000 to one of its major suppliers approximately one month before it assigned itself into bankruptcy. The bankrupt was insolvent when it made the payment. The bankrupt stated that it made the payment so that it could get more supply from that creditor that it would use to produce product to satisfy its major customer. The court held that paying past indebtedness to enable the continuation of the business is inconsistent with a preference only if the plan to continue in the business had a reasonable basis and, in this case, it did not. The payment was set aside.
Continue Reading >Jul
14
2025
Undervalue Transfer – Trust
E. Sands & Associates v. Gidda 2025 Ont SCJ
Trustee in bankruptcy moved to set aside, under s. 96(1)(b) of the Bankruptcy and Insolvency Act (BIA), a previous house transfer from the bankrupt to a non-arms length transferee. The transfer was under value. The transferee argued that the bankrupt had been a trustee under an express trust in favour of the transferee and was merely transferring the legal interest back to the transferee. The alleged express trust was not in writing and was therefore invalid pursuant to s. 9 of the Statute of Frauds. The transferee wanted the trustee to reimburse it for paying mortgage and other expenses to maintain the property while she lived there; however, the judge noted that these expenses did not increase the capital value of the property and that, therefore, the bankrupt was never enriched and the transferee never suffered a detriment because of those payments.
Continue Reading >Apr
18
2024
Consumer Proposal Annulled
Re Singh 2024 Ont SCJ (AJ)
A consumer proposal may be annulled under s. 66.31(1) of the BIA – even after the trustee has been discharged and the debtor has paid everything he promised to pay – if the debtor were not eligible to file a consumer proposal in the first place or the court’s approval were obtained by fraud. In this case, the debtor did not notify the trustee of the creditor’s judgment and the amount of that judgment meant that the debtor owed more than $250,000, the limit for a consumer proposal. The associate judge annulled the proposal.
Continue Reading >Apr
16
2024
Bankruptcy Survival
Brinkman Bankruptcy 2023 Ont SCJ
By way of a motion in the bankruptcy action, brought almost immediately after the trustee’s discharge, a creditor sought a declaration that that her judgment survived bankruptcy. The creditor had given the bankrupt funds to invest in a specific corporation; he did not do so and pocketed the money. The judge granted the declaration pursuant to s. 178(1)(d) of the BIA.
Continue Reading >Nov
20
2023
Limitations and Assigned Action
AssessNet Inc. v. Taylor Leibow Inc., bankruptcy trustee 2023 Ont CA
Creditor sued debtors’ former bankruptcy trustee. It first needed to obtain a s. 38 order and an order granting leave to do so under s. 215 of the BIA. The trustee claimed that the action was statute barred. Section 12 of the Limitations Act deals with an assigned action (including an action under s. 38 which was assigned from the current trustee in bankruptcy) has to be brought within 2 years from earlier of the dates that the predecessor and the claimant first knew or ought to have known of the matters in issue. In this case, the fact that the creditor’s representative was an inspector of the bankrupt estate was irrelevant because an inspector owes a duty to act in the best interests of the estate, not in its own best interests and suing the then trustee was not in the best interests of the estate. Further, the claimant was not able to sue the trustee until it obtained the s. 38 and s. 215 orders and the action was commenced within two years of obtaining them.
Continue Reading >Feb
15
2023
Bankruptcy Annulment
Tran v. Royal Bank of Canada 2022 Ont SCJ
Creditor with a debt of $488,000 obtained an order of bankruptcy against debtor. One year later, debtor’s father bought the creditor’s debt (at a discount) and debtor applied to have the bankruptcy annulled. After all, the creditor did not care, the trustee did not care, and her father did not care. The judge did. s. 181(1) allows a judge discretion to annul a bankruptcy order if it ought not to have been made. In this case, the order should have been made. Further, the judge held that the there were public considerations. The bankrupt’s conduct is important.
Continue Reading >Oct
26
2022
Debt Surviving Bankruptcy
Royal Bank of Canada v. Bedard 2022 Ont CA
The Court overturned an order stating that the debt survived bankruptcy. Although fraud was involved, there were other issues that would affect a survival order and these should be dealt with by the Bankruptcy Court when and if the debtor became bankrupt.
Continue Reading >Sep
16
2022
Fraudulent Preference
Golden Oaks Enterprises Inc. v. Scott 2022 Ont CA
Trustee in bankruptcy brought an action against people who had received commissions and interest exceeding the criminal rate from a one-person corporation conducting a Ponzi scheme. The Court agreed that the people receiving the commissions had to return these funds because the corporation was insolvent from the start and was using fresh money to pay the commissions. S. 95(1)(b) of the BIA was invoked to justify the return as fraudulent preferences made to non-arm’s length people. For limitations purposes, the Court refused to attribute the individual fraudster’s knowledge to the corporation even though the corporation benefitted from the fraudster’s acts. The Court held that it would be improper to allow people who received criminal rates of interest to shield behind the corporate attribution rule at the expense of others creditors.
Continue Reading >Sep
12
2022
Costs and Bankruptcy Survival
Yanic DuFresne Excavation Inc. v. Saint Joseph Developments Ltd. 2022 Ont SCJ
Debtor went bankrupt and creditor brought a motion, even after the debtor and trustee had been discharged, that the debt survived bankruptcy under s. 178(1)(d) of the BIA. The creditor was successful and costs of the motion were agreed at $50,000. The debtor argued that the costs should not survive bankruptcy because they were incurred after the bankruptcy. The judge held that if a judgment survives bankruptcy, it would be inequitable that costs would not. Costs are an intrinsic aspect and a consequence of the judgment. Debtor appealed (unsuccessfully) the original motion decision, but not the decision as to costs.
Continue Reading >