Digest: Monaghan, Re (Bankrupt), 2018 SKQB 210

• Date: July 18, 2019

Reported as: 2018 SKQB 210

Docket Number: BKY 26/18 JCR , QB18200

Court: Court of Queen's Bench

Date: 2019-07-18

Judges:

• Thompson

Subjects:

• Bankruptcy and Insolvency � Conditional Discharge

Digest: The Minister of National Revenue opposed the bankrupt�s application for absolute discharge on the grounds of a high tax bankruptcy as defined in s. 172.1 of the Bankruptcy and Insolvency Act (BIA). As well, the assets of the bankrupt were not of a value equal to 50 cents on the dollar on the amount of the bankrupt�s unsecured liabilities. The Canada Revenue Agency (CRA) had filed a proof of claim of $419,800 ($280,200 in income tax liability and $139,500 in penalty and interest) after the bankrupt had made his assignment. He had not paid taxes from 2004 to 2014. The Minister submitted that the bankrupt could be held responsible for his bankruptcy but he argued that he was an honest but unfortunate bankrupt who was an unwitting victim of fraud because he relied on the advice of professions in regard to his participation in a tax shelter known as the Global Learning Gifting Initiative (GLGI). For the first three years that the bankrupt participated in the GLGI program, he received assessments and refunds without a hint that CRA was concerned about the program. In 2007 the bankrupt was made aware that CRA questioned the legitimacy of GLGI and it began disallowing tax credits claimed by the bankrupt. He admitted that he made no efforts to pay his income tax debt and that all payments to the CRA were a result of garnishees. The 61-year-old bankrupt was in poor health and had little prospect of working again. He had RRSPs worth $765,700 that were exempt under the BIA. The trustee�s report indicated that the bankrupt�s assets were worth $915,500 and his proven unsecured liabilities amounted to $435,300. His assets were worth more than 2.1 cents on the value of his unsecured liabilities.
HELD: The bankrupt was given a conditional discharge. He was ordered to serve a one year suspension and would be eligible to apply for a discharge order if he paid $100,000 in minimum monthly payments of $1,000. The court found that this was a high tax bankruptcy under s. 172.1 of the BIA and that the bankrupt contributed to the bankruptcy by rash speculations within the meaning of s. 173(e) of the BIA because after he received notice that the CRA had intentions to revoke some of GLGI�s charities� charitable status and after he had received...