The Canadian Abridgment eDigests - Bankruptcy and Insolvency

The Canadian Abridgment eDigests -- Bankruptcy and Insolvency
BKY.II.3.a
2005-16
September 05, 2005
Subject Title: Bankruptcy and insolvency
Classification Number: II.3.a
Assignments in bankruptcy -- Annulment of assignment -- By creditor
Wife brought petition for divorce and division of matrimonial property -- Subsequent to receiving
petition husband sold his one-half interest in family farm to his brother, payable over 14 years with no
interest -- At hearing for interim distribution of family property husband acknowledged that there was
payment due to him of approximately $35,000.00 and that he would pay half of this to wife -- Husband
failed to make payment to wife and claimed that he instead used funds to pay debt owed to parents --
Debt to parents was not listed on husband's financial statements -- Applicant received cheque from his
father for $17,340.00 and failed to disclose this to court during hearing for interim distribution of family
property -- Husband was ordered to pay $17,340.00 into his lawyer's trust account -- Husband
subsequently made assignment in bankruptcy -- Husband's bankruptcy Statement of Affairs listed assets
of $381,980.00 and unsecured debts of $111,920.00 -- Half of debts were owed to parents and
approximately $20,000.00 of debt was to credit cards which was accrued over six weeks preceding
assignment in bankruptcy -- Wife brought motion to annul husband's assignment in bankruptcy and to
have family property preserved -- Motion granted -- Annulments of assignments in bankruptcy are
discretionary and should only be made when assignment constitutes abuse of process -- Husband's
actions of deliberately incurring credit card debt, failing to disclose assets and apparent solvency
constituted abuse of process -- Husband shall be restrained from disposing of property except by written
consent of wife or by court order.
Hannay v. Hannay (2005), 2005 CarswellSask 404, 2005 SKQB 258 (Sask. Q.B.) [Saskatchewan]
BKY.V.1

Subject Title: Bankruptcy and insolvency
Classification Number: V.1
Interim receiver -- Appointment
Each of 17 companies listed in style of cause was corporation to which Companies' Creditors
Arrangement Act ("CCAA") applied and was subject to initial order of December 17, 2004 --
Companies operated barn producing live hogs for market, save only C Inc., which was controlling
shareholder of other 16 entities -- Under CCAA, stay was granted in respect of creditors' claims and O
Inc. was prevented from terminating its contract to purchase all hogs -- O Inc. claimed right to terminate
contract because of clause in contract granting that right in event of insolvency proceedings -- Right to
terminate was suspended by court under its CCAA powers -- While sincere effort had been made by C
Ltd. to initiate proposal, six months had passed, during which companies had prospered under CCAA
protection -- Court acceded to motion for appointment of interim receiver under s. 47(2) of Bankruptcy
and Insolvency Act ("BIA") -- Combination of CCAA order and s. 47(2) BIA receivership is judgemade
device that enables restructuring or reorganization to take place without involvement of company
management -- Because CCAA regime is not intended to be permanent, court proposed to extend
existing stay of creditors' rights against C Inc. to September 15, 2005, and to maintain existing CCAA
regime during that time -- Extension was intended to be final as interests of O Inc. and other creditors
could not be suspended indefinitely.
Community Pork Ventures Inc. v. Canadian Imperial Bank of Commerce (2005), 2005 CarswellSask
442, 2005 SKQB 294, 11 C.B.R. (5th) 75 (Sask. Q.B.) [Saskatchewan]
BKY.VII.11.a
Subject Title: Bankruptcy and insolvency
Classification Number: VII.11.a
Proposal -- Companies' Creditors Arrangement Act -- Application of Act
Each of 17 companies listed in style of cause was corporation to which Companies' Creditors
Arrangement Act ("CCAA") applied and was subject to initial order of December 17, 2004 --
Companies operated barn producing live hogs for market, save only C Inc., which was controlling

shareholder of other 16 entities -- Under CCAA, stay was granted in respect of creditors' claims and O
Inc. was prevented from terminating its contract to purchase all hogs -- O Inc. claimed right to terminate
contract because of clause in contract granting that right in event of insolvency proceedings -- Right to
terminate was suspended by court under its CCAA powers -- While sincere effort had been made by C
Ltd. to initiate proposal, six months had passed, during which companies had prospered under CCAA
protection -- Court acceded to motion for appointment of interim receiver under s. 47(2) of Bankruptcy
and Insolvency Act ("BIA") -- Combination of CCAA order and s. 47(2) BIA receivership is judgemade
device that enables restructuring or reorganization to take place without involvement of company
management -- Because CCAA regime is not intended to be permanent, court proposed to extend
existing stay of creditors' rights against companies to September 15, 2005, and to maintain existing
CCAA regime during that time -- Extension was intended to be final as interests of O Inc. and other
creditors could not be suspended indefinitely.
Community Pork Ventures Inc. v. Canadian Imperial Bank of Commerce (2005), 2005 CarswellSask
442, 2005 SKQB 294, 11 C.B.R. (5th) 75 (Sask. Q.B.) [Saskatchewan]
BKY.XVI.9
Subject Title: Bankruptcy and insolvency
Classification Number: XVI.9
Discharge of bankrupt -- Refusal of discharge
Conduct of bankrupt -- Bankrupt 45-year-old man was formerly employed as securities dealer --
Bankrupt declared bankruptcy after being disallowed from securities training by Ontario Securities
Commission -- Bankrupt later found part-time employment -- Bankrupt brought application for
discharge, which was opposed by his Receiver -- Application dismissed -- Bankrupt failed to disclose
RRSPs and interest in matrimonial home to trustee on statement of affairs -- This was in contravention
of provisions of Bankruptcy and Insolvency Act designed in order for trustee to assess value of estate
and candour of bankrupt -- Bankrupt was dishonest not only in statement of affairs but also in court with
respect to interest in and value of matrimonial home -- Bankrupt's conduct established facts under Act
that precluded absolute discharge -- Bankrupt had outstanding surplus income obligation of
approximately $1,000 -- Bankrupt's discharge to be conditional upon his paying outstanding surplus
income obligation as well as additional $9,047 in light of his conduct in bankruptcy and earning ability
-- Because of damage to bankruptcy system in face of less than full disclosure by bankrupt, discharge
was suspended for six months commencing upon satisfaction of payment condition.

Bromberg, Re (2005), 2005 CarswellOnt 3024 (Ont. S.C.J.) [Ontario]
BKY.XVI.12
Subject Title: Bankruptcy and insolvency
Classification Number: XVI.12
Discharge of bankrupt -- Annulment or rescission of discharge
Discharge obtained by fraud -- Bankrupt told trustee that he might be receiving settlement for bicycle
accident -- In June 2004, bankrupt received settlement of $7,700.00 for inability to complete postsecondary
education due to injuries -- Bankrupt failed to tell trustee about settlement -- In July 2004,
bankrupt had sworn affidavit in support of application for discharge from bankruptcy -- Bankrupt
claimed in affidavit that he had no income and was residing with his sister -- Bankrupt swore that since
date of assignment in bankruptcy he had acquired or become entitled to acquire no assets -- Based on
this evidence, registrar granted order suspending bankrupt's discharge for six months -- Trustee brought
motion to rescind suspended order of discharge due to bankrupt's failure to disclose settlement funds --
Motion granted -- Section 180(2) of Bankruptcy and Insolvency Act grants court discretion to annul
fraudulently obtained discharges -- Discharge should be annulled due to fraud and discharge will be
conditional on payment of entire settlement of $7,700.00 -- Bankrupt must not be allowed to keep any of
settlement because settlement was compensation for economic loss which was property claim which
vests in trustee.
Hogg, Re (2005), 2005 CarswellMan 198, 2005 MBQB 109 (Man. Q.B.) [Manitoba]
BKY.XVII.1.a.i
Subject Title: Bankruptcy and insolvency
Classification Number: XVII.1.a.i

Effect of bankruptcy on other proceedings -- Proceedings against bankrupt -- Before discharge of
trustee -- General principles
Judgment creditor registered writ of seizure and sale against corporation for its real property --
Corporation subsequently made proposal in bankruptcy -- Corporation's creditors did not accept
proposal -- Bankrupt corporation brought motion for discharge of writ of seizure and sale of bankrupt's
real property so that it could refinance property -- Motion dismissed -- Section 69 of Bankruptcy and
Insolvency Act grants automatic stay of all actions against bankrupt by any creditor, in which case
creditor could not act on writ -- However, there was no authority under Bankruptcy and Insolvency Act
or any other Act to allow bankruptcy judge to lift writ in order to allow refinancing -- Trustee of
proposal can move before court where judgment was granted on regular motions list to have writ lifted if
judgment creditor does not consent to lifting writ.
Gazeta Inc., Re (2005), 2005 CarswellOnt 3125 (Ont. S.C.J.) [Ontario]
BKY.XVII.3
Subject Title: Bankruptcy and insolvency
Classification Number: XVII.3
Effect of bankruptcy on other proceedings -- Miscellaneous issues
Plaintiff lender and defendant borrowers allegedly entered into loan agreements -- Lender registered
mortgages on two properties allegedly granted by borrowers as security for indebtedness -- On alleged
default by borrowers, lender issued notices of sale with respect to both properties -- Borrowers filed for
creditor protection under Bankruptcy and Insolvency Act -- Borrowers brought motion for order
restraining lender from proceeding under notices of sale -- Lender brought cross-motion for summary
judgment for order of possession of properties -- Borrowers took position that signatures on loan
agreements were forged and denied granting mortgages -- Cross-motion for summary judgment
dismissed -- Lender failed to satisfy requirements of R. 20.04(2) of Rules of Civil Procedure to show
that no genuine issue existed for trial -- Court's limited mandate under rule did not permit refuting
borrowers' assertion of forgery despite strong forensic affidavit evidence that signatures on agreements
were those of borrowers -- Fact that summary judgment was not available did not preclude court from
considering cross-motion as bankruptcy filing by borrowers in their personal capacity was not relevant
to their alleged position as secured creditors.

George v. Migone (2005), 2005 CarswellOnt 2363 (Ont. S.C.J.) [Ontario]
BKY.XVIII.4
Subject Title: Bankruptcy and insolvency
Classification Number: XVIII.4
Practice and procedure in courts -- Stay of proceedings
Two insolvent companies ("debtors") became involved in legal dispute over extent of indebtedness to
creditor -- At trial, loans were found to be legal and enforceable, unpaid, and fixed at $9.5 million, only
$1 million of which was secured -- Receiver manager was appointed by order authorizing sale of assets
and interim orders of relief from forfeiture pending disposition of appeals -- Debtors brought application
seeking stay of order appointing receiver -- Application was dismissed -- Debtors brought new
application for stay of order authorizing sales process of assets -- Application dismissed -- Debtors were
duly served with notice, but chose not to oppose order -- Debtors were served with order, but chose not
to appeal -- No explanation for failure to act was offered -- Application went beyond terms of order
already granted and amounted to injunctive relief in its attempt to enjoin case management judge from
further supervising sales process -- No basis for such order existed, particularly where order itself was
not subject of appeal.
Stampede Oils Inc. v. Knox L.L.C. (2005), 2005 CarswellAlta 740, 2005 ABCA 191 (Alta. C.A. [In
Chambers]) [Alberta]
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