Dyrland (Bankrupt), Re, (2008) 459 A.R. 118 (QB)

• Judge: Veit, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: June 13, 2008
• Citations: (2008), 459 A.R. 118 (QB);2008 ABQB 356

Dyrland (Bankrupt), Re (2008), 459 A.R. 118 (QB)

MLB headnote and full text

Temp. Cite: [2008] A.R. TBEd. AU.047

In The Matter Of the Bankruptcy of Ricky Steven Dyrland (BK03 95643; 2008 ABQB 356)

Indexed As: Dyrland (Bankrupt), Re

Alberta Court of Queen's Bench

Judicial District of Edmonton

Veit, J.

August 6, 2008.

Summary:

A bankrupt made an assignment into bankruptcy on March 26, 2002. His application for discharge was adjourned sine die. His trustee was discharged on January 27, 2004. More than two years after the original trustee's discharge, on March 29, 2006, a new trustee was appointed to complete the administration of the bankruptcy and realize and distribute the property. The new trustee asked the court for advice and directions concerning the application of Alberta's Limitations Act on bankruptcy claims. The Alberta Treasury Branch (ATB), a creditor, asked for a direction to the new trustee that it continue to deal with ATB as a proven creditor with a valid and outstanding claim against the bankrupt's estate. The Canada Revenue Agency, another creditor, sought a declaration that, pursuant to the provisions of s. 222 of the Income Tax Act, its claim against the bankrupt was not statute-barred by the Limitations Act.

The Alberta Court of Queen's Bench determined the issues and granted directions.

Bankruptcy - Topic 3781

Creditors - General - Claims - Evidence and proof - General - In Alberta, the lifting of the statutory stay of proceedings against a bankrupt following the discharge of a trustee resulted in the resumption or continuation of a limitation period - A creditor argued that because the Bankruptcy and Insolvency Act (BIA) did not require that a proven creditor "reprove" its claim every two years, a "proven creditor" need not seek a Remedial Order under provincial legislation to maintain its claim in the bankruptcy - The Alberta Court of Queen's Bench rejected the argument - While it was true that the BIA did not require creditors to re-file their claims when there was a gap between the discharge of the original trustee and the re-appointment of that trustee or the appointment of a new trustee, it was also true that the BIA did not anticipate or require stasis during the "gap" period - The BIA did not prevent a trustee from re-assessing claims as the administration of a bankruptcy went forward - When action was taken by a trustee pursuant to the BIA, the Trustee recognized those claimants who had a currently valid claim under provincial legislation and applied those claims to the assets which currently formed part of the bankrupt's estate - There was therefore no operational conflict between the BIA and the provincial limitations statute - When a subsequent trustee took any action in the bankruptcy, he had to assure himself that the claims remained valid and he could only distribute the assets which remained - In this way, the legislative authority of both the Legislature and Parliament were respected - The bankrupt could not "take advantage" of the gap to allow their obligations, or some of them, to evaporate during the "gap" period - On the contrary, during the gap period, the bankrupt lost the protection of the bankruptcy legislation and was again at the mercy of all his creditors - See paragraphs 53 to 56.

Bankruptcy - Topic 9244

Discharge of trustee - Effect of discharge - Respecting property of bankrupt - The Alberta Court of Queen's Bench stated that, in Alberta, once a trustee was discharged, if the bankrupt remained undischarged, the statutory stay of proceedings against the bankrupt contained in the Bankruptcy and Insolvency Act came to an end - See paragraphs 41 to 43.

Bankruptcy - Topic 9244

Discharge of trustee - Effect of discharge - Respecting property of bankrupt - The Alberta Court of Queen's Bench stated that the lifting of the statutory stay of proceedings against a bankrupt following the discharge of a trustee resulted in the resumption or continuation of a limitation period - In order to be fair and predictable, bankruptcy legislation required trustees to treat all creditors of a debtor alike by requiring trustees to ascertain the legitimacy of a bankrupt's purported obligations - Part of that legitimacy was compliance with the applicable limitations legislation - The effect of the lifting of the stay was that each of the creditors was then entitled to take whatever permissible individual action it saw fit to undertake, even though that action might hinder the bankrupt's eventual rehabilitation and even though by that action it might appropriate to itself all or most of the bankrupt's scarce assets, leaving the other unsecured creditors with fewer, or no, assets against which their claims could be enforced - It was not unfair that the lifting of the stay required the creditors to resume their limitations vulnerability as they were in no worse position than they were in prior to the recourse to the bankruptcy regime - See paragraphs 44 to 52.

Bankruptcy - Topic 9244

Discharge of trustee - Effect of discharge - Respecting property of bankrupt - A bankrupt made an assignment into bankruptcy on March 26, 2002 - His application for discharge was adjourned sine die - His trustee was discharged on January 27, 2004 - More than two years after the original trustee's discharge, on March 29, 2006, a new trustee was appointed to complete the administration of the bankruptcy and realize and distribute the property - The lifting of the statutory stay of proceedings against a bankrupt following the discharge of a trustee resulted in the resumption or continuation of a limitation period - The Alberta Treasury Branch (ATB), a creditor who had filed a proof of claim in the bankruptcy for $115,059, asked for a direction to the new trustee that it continue to deal with ATB as a proven creditor with a valid and outstanding claim against the bankrupt's estate - The Alberta Court of Queen's Bench held that ATB's claims were vulnerable to the trustee's invocation of the Limitations Act (Alta.) - ATB knew it could obtain a remedial order as required by s. 3(1) of the Limitations Act in order to keep its claim alive after the discharge of the original Trustee but did not do so - That claim was therefore statute-barred - Bankruptcy legislation did not create a priorities regime amongst unsecured creditors based upon mere filing of a claim - Rather, since bankruptcy legislation did not create a parallel civil claims universe, it presupposed that unsecured claims filed in the bankruptcy would be assessed as to validity according to provincial law - See paragraphs 10 and 77 to 80.

Limitation of Actions - Topic 2055

Actions in contract - Actions for debt - Acknowledgements - In Alberta, the lifting of the statutory stay of proceedings against a bankrupt following the discharge of a trustee resulted in the resumption or continuation of a limitation period - The Alberta Court of Queen's Bench stated that the inclusion of a debt in a bankrupt's statement of affairs did not constitute an acknowledgement for the purposes of a limitation period - The uniqueness of the bankruptcy situation in this context was that the bankrupt was no longer the "person liable in respect of it" (Limitations Act, s. 8(3)) - Once an assignment in bankruptcy was made, the bankrupt gave up their ability to acknowledge liability since all the bankrupt's property became vested in the trustee - Indeed, the law was clear that a trustee was able to disallow a claim that had been listed by a bankrupt in his/her statement of affairs - See paragraphs 64 to 72.

Limitation of Actions - Topic 9308

Postponement or suspension of statute - General - During defendant's bankruptcy - In Alberta, the lifting of the statutory stay of proceedings against a bankrupt following the discharge of a trustee resulted in the resumption or continuation of a limitation period - The Alberta Court of Queen's Bench opined that where there had been a part payment, the limitation period re-started when the trustee was discharged - See paragraph 67.

Limitation of Actions - Topic 9308

Postponement or suspension of statute - General - During defendant's bankruptcy - In Alberta, the lifting of the statutory stay of proceedings against a bankrupt following the discharge of a trustee resulted in the resumption or continuation of a limitation period - The Alberta Court of Queen's Bench stated that receipt of a dividend during the bankruptcy proceeding constituted a part payment for the purposes of a limitation period - The operation of the limitation period began again at the time of the part payment (Limitations Act. s. 8(2)) - The court determined that the payment of a dividend in a bankruptcy proceeding restarted the limitation period from the date of the trustee's discharge - It did not restart the limitation period upon the part payment because the part payment did not affect the automatic stay of proceedings which itself suspended the operation of the provincial limitations period - That suspension remained in effect until the trustee's discharge - See paragraphs 73 to 76.

Cases Noticed:

Ramjag (Bankrupt), Re, [1995] 8 W.W.R. 94; 171 A.R. 135 (Q.B. Registrar), refd to. [para. 11].

Fraser, Re (1996), 41 C.B.R.(3d) 33 (Sask. Q.B.), refd to. [para. 11].

Morgan (Bankrupt), Re (1999), 137 Man.R.(2d) 215; 12 C.B.R.(4th) 48 (Q.B. Bktcy. Registrar), refd to. [para. 11].

Canada (Attorney General) v. Fekete (1999), 242 A.R. 193; 10 C.B.R.(4th) 102; 1999 CarswellAlta 297 (Q.B. Master), refd to. [para. 11].

Amex Bank of Canada v. Johnson (2007), 418 A.R. 321; 2007 ABPC 130, refd to. [para. 11].

Gibson v. Canada (2005), 334 N.R. 288; 2005 FCA 180, refd to. [para. 11].

Aevo Co. v. MacLeod (D & A) Co. (1991), 7 C.B.R.(3d) 33 (Ont. Gen. Div.), refd to. [para. 11].

Canadian Tabulating Card Co., Re (1972), 17 C.B.R.(N.S.) 248 (Ont. S.C.), refd to. [para. 11].

Marquette (A.) & Fils Inc. v. Mercure, [1977] 1 S.C.R. 547; 10 N.R. 239, refd to. [para. 11].

British Columbia v. Henfrey Samson Belair Ltd., [1989] 2 S.C.R. 24; 97 N.R. 61, refd to. [para. 11].

Royal Bank of Canada v. Larue, [1928] A.C. 187 (P.C.), refd to. [para. 11].

Husky Oil Operations v. Minister of National Revenue et al., [1995] 3 S.C.R. 453; 188 N.R. 1; 137 Sask.R. 81; 107 W.A.C. 81; 35 C.B.R.(3d) 1, refd to. [para. 11].

Drummie, Re, 2004 CarswellNB 17 (Q.B.), refd to. [para. 12].

Deloitte, Haskins and Sells Ltd. v. Alberta (Workers Compensation Board) - see Jacs Jackets & Crests Ltd., Re; Workers' Compensation Board (Alta.) v. Deloitte, Haskins & Sells Ltd.

Jacs Jackets and Crests Ltd., Re; Workers' Compensation Board (Alta.) v. Deloitte Haskins and Sells Ltd., [1985] 1 S.C.R. 785; 63 A.R. 321; 60 N.R. 81; 55 C.B.R.(N.S.) 241, refd to. [para. 12].

Smith, Re (1993), 17 C.B.R.(3d) 119 (Ont. Gen. Div.), refd to. [para. 12].

Bouvier Co., Re (1933), 14 C.B.R. 446 (Ont. S.C.), refd to. [para.12].

Cassidy, Re (1922), 2 C.B.R. 459 (Ont. S.C.), refd to. [para. 12].

Abramyk et al. v. Abramyk et al. (2000), 200 Sask.R. 222; 24 C.B.R.(3d) 163 (Q.B.), refd to. [para. 12].

Markevich v. Minister of National Revenue, [2003] 1 S.C.R. 94; 300 N.R. 321; 2003 SCC 9, refd to. [para. 13].

Gibson v. Canada (2005), 334 N.R. 288; 2005 D.T.C. 5252; 2005 FCA 180, leave to appeal refused (2005), 348 N.R. 196 (S.C.C.), refd to. [para. 13].

Collins v. Canada Customs and Revenue Agency (2005), 281 F.T.R. 303; 2005 D.T.C. 5679; 2005 FC 1431, refd to. [para. 13].

Canada (Agence des Douanes et du Revenu v. Fortin, [2005] J.Q. no. 1008 (C.A.), refd to. [para. 14].

Sherazee (Bankrupt), Re, [2006] O.T.C. 637 (Sup. Ct. Bktcy. Reg.), refd to. [para. 14].

Thiessen v. Antifaev, [2003] B.C.J. No. 519 (Sup. Ct.), refd to. [para. 14].

Ackerman v. Concorde Investment Corp. et al. (2000), 201 Sask.R. 111; 2000 SKQB 556, refd to. [para. 15].

Ryan v. Moore et al., [2005] 2 S.C.R. 53; 334 N.R. 355; 247 Nfld. & P.E.I.R. 286; 735 A.P.R. 286; 2005 SCC 38, refd to. [para. 15].

Bradford & Bingley plc v. Rashid, [2006] 1 W.L.R. 2066; 361 N.R. 93; [2006] UKHL 37 (H.L.), refd to. [para. 15].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 69.3(1) [para. 42, Appendix D].

Limitations Act, R.S.A. 2000, c. L-12, sect. 3(1)(a) [para. 26, Appendix B]; sect. 3(1)(b) [paras. 27, 78, Appendix B]; sect. 8(2) [paras. 29, 74, Appendix B]; sect. 8(3) [para. 70, Appendix B].

Authors and Works Noticed:

Alberta, Institute of Law Research and Reform, Limitations, Report for Discussion No. 4, pp. 175 to 177 [para. 15, Appendix C].

Houlden, Lloyd W., Morawetz, Geoffrey B., and Sarra, Janis P., The 2008 Annotated Bankruptcy and Insolvency Act (2007), para. A § 4 [para. 11].

Counsel:

Bryan P. Maruyama (Parlee McLaws LLP), for Browning Crocker Inc., Trustee in the Estate of Ricky Steven Dyrland;

Geoffrey N. Edgar (Miller Thomson LLP), for Alberta Treasury Branches;

Daniel G. Segal, and Maria Teeling (Department of Justice), for Canada Revenue Agency.

This matter was heard on June 13, 2008, by Veit, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, who delivered the following memorandum of decision on August 6, 2008.