Gurniak (Bankrupt), Re, 2011 SKQB 292

• Judge: Schwann, J.
• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: July 26, 2011
• Jurisdiction: Saskatchewan
• Citations: 2011 SKQB 292;(2011), 379 Sask.R. 141 (QB)

Gurniak (Bankrupt), Re (2011), 379 Sask.R. 141 (QB)

MLB headnote and full text

Temp. Cite: [2011] Sask.R. TBEd. AU.021

Richard Stanley Gurniak (applicant) v. Royal Bank of Canada and Deloitte & Touche Inc. (respondents)

(Court No. 16634; Estate No. 23-1187699; 2011 SKQB 292)

Indexed As: Gurniak (Bankrupt), Re

Saskatchewan Court of Queen's Bench

Judicial Centre of Regina

Schwann, J.

July 26, 2011.

Summary:

Gurniak made a voluntary assignment in bankruptcy on April 3, 2009, when events beyond his control (personal injury in motor vehicle accident and homeless due to home burning down) left him unable to service his debts. Liability to Gurniak was admitted in accident litigation, but damages were not yet assessed. This was the bankrupt's second bankruptcy. The bankrupt applied for a discharge. The bankrupt's largest creditor (Royal Bank) opposed the discharge. At issue was (1) whether Gurniak was entitled to a discharge, (2) whether all or part of his as yet undetermined damages for lost past and future income was "income" for the purpose of the surplus income regime under s. 68 of the Bankruptcy and Insolvency Act and (3) whether the value of certain non-exempt assets (fire insurance proceeds), assigned to the Royal Bank under a s. 38 order allowing the Royal Bank to commence legal proceedings to enforce its claim, should be paid into the estate. The Trustee sought an adjournment of the discharge application pending resolution of the accident litigation.

The Saskatchewan Court of Queen's Bench declined to adjourn the discharge application. Gurniak, a two time bankrupt, was not entitled to an automatic discharge. The court granted a discharge, suspended for six months (the usual suspension period for second time bankrupts), conditional upon payment of an additional $9,110 in surplus income payable at a rate of $500 per month. Any award for lost past income would be consumed by legal fees, taxes and the Trustee's costs if ordered to be included in "income". There was conflicting authority on whether damages for future lost income was "income" for purposes of the surplus income regime. The court resolved the conflict by exercising its discretion to exclude any amount for lost future income in "income" for surplus income purposes. The court declined to order Gurniak to pay into the estate the value of the non-exempt assets subject to the s. 38 order allowing the Royal Bank to commence legal proceedings to recover that amount.

Bankruptcy - Topic 440.5

Property of bankrupt - Particular property - Damages for lost wages - Gurniak made a voluntary assignment in bankruptcy on April 3, 2009, when events beyond his control (disabled in motor vehicle accident and home burning down) left him unable to service his debts - Liability to Gurniak was admitted in accident litigation, but damages were not yet assessed - This was the bankrupt's second bankruptcy - The bankrupt applied for a discharge - The bankrupt's largest creditor (Royal Bank) opposed the discharge - At issue was (1) whether Gurniak was entitled to a discharge, (2) whether all or part of his as yet undetermined damages for lost past and future income was "income" for the purpose of the surplus income regime under s. 68 of the Bankruptcy and Insolvency Act and (3) whether the value of certain non-exempt assets (fire insurance proceeds), assigned to the Royal Bank under a s. 38 order allowing the Royal Bank to commence legal proceedings to enforce its claim, should be paid into the estate - The Saskatchewan Court of Queen's Bench held that Gurniak, a two time bankrupt, was not entitled to an automatic discharge - The court granted a discharge, suspended for six months (the usual suspension period for second time bankrupts), conditional upon payment of an additional $9,110 in surplus income payable at a rate of $500 per month - Any award for lost past income would be consumed by legal fees, taxes and the Trustee's costs if ordered to be included in "income" - There was conflicting authority on whether damages for future lost income was "income" - The court resolved the conflict by exercising its discretion to exclude any amount for lost future income in "income" for surplus income purposes - Gurniak need not pay into the estate the value of the non-exempt assets subject to the s. 38 order in the Royal Bank's favour - Such would result in double jeopardy and the Royal Bank could point to no authority to impose such an order.

Bankruptcy - Topic 6448

Administration of estate - Actions by trustee - Assignment of - [See Bankruptcy - Topic 440.5 ].

Bankruptcy - Topic 8863

Discharge of debtor - Suspension of discharge - Length of suspension - [See Bankruptcy - Topic 440.5 ].

Bankruptcy - Topic 8922

Discharge of debtor - Conditional discharge - Considerations (incl. surplus income) - [See Bankruptcy - Topic 440.5 ].

Bankruptcy - Topic 9025

Discharge of debtor - Hearing - Adjournment - Gurniak made a personal assignment in bankruptcy due to his inability to service his debts after suffering disabling injuries in a motor vehicle accident and losing his home to fire - Gurniak had been in bankruptcy for more than two years - He applied for a discharge - The Trustee sought an adjournment until the accident litigation was resolved - Liability to Gurniak was admitted, with damages for, inter alia, lost past and future income yet to be determined - The Saskatchewan Court of Queen's Bench refused to adjourn the discharge application - Gurniak was in bankruptcy for over two years - Proceedings under the Bankruptcy and Insolvency Act were designed to proceed summarily except in situations where the bankrupt failed to perform his duties or there were extenuating circumstances (e.g., fraud investigation) - No such circumstances existed here - The bankruptcy process would be diminished if a bankrupt were kept in limbo pending the conclusion of an external process - The court stated that "in any event, any unresolved issue is purely financial and can be resolved through the terms of a discharge order" - See paragraphs 24 to 26.

Cases Noticed:

Landry (Bankrupt), Re (2000), 135 O.A.C. 381; 21 C.B.R.(4th) 58; 192 D.L.R.(4th) 728 (C.A.), refd to. [para. 17].

Cole (Bankrupt), Re (2001), 197 N.S.R.(2d) 32; 616 A.P.R. 32; 28 C.B.R.(4th) 19 (S.C. Bktcy. Reg.), refd to. [para. 22].

Kolody (Bankrupt), Re (1999), 178 Sask.R. 137; 10 C.B.R.(4th) 22 (Q.B. Bktcy. Reg.), refd to. [para. 22].

Shakell, Re (1988), 70 C.B.R.(N.S.) 270 (Ont. S.C.), refd to. [para. 28].

Anderson (Bankrupt), Re (2004), 358 A.R. 183; 2 C.B.R.(5th) 27; 2004 ABQB 349 (Bktcy. Reg.), refd to. [para. 35].

MacLeod (Bankrupt), Re, [2008] O.T.C. Uned. D34; 45 C.B.R.(5th) 214 (Sup. Ct. Bktcy. Reg.), refd to. [para. 36].

Bell (Bankrupt), Re, [1996] B.C.T.C. Uned. 207; 20 B.C.L.R.(3d) 92; 39 C.B.R.(3d) 236 (S.C. Bktcy.), refd to. [para. 36].

O'Reilly (Bankrupt), Re, [2001] B.C.T.C. Uned. 338; 28 C.B.R.(4th) 64; 2011 BCSC 1157 (Reg.), refd to. [para. 40].

Dore (Bankrupt), Re (2001), 214 Sask.R. 314; 34 C.B.R.(4th) 4; 2001 SKQB 524 (Bktcy. Reg.), refd to. [para. 40].

Ford (Bankrupt), Re (2009), 277 N.S.R.(2d) 1; 882 A.P.R. 1; 53 C.B.R.(5th) 298; 2009 NSSC 124 (Bktcy. Reg.), refd to. [para. 42].

Gladstone v. Bronson Granite & Marble Ltd. et al. (1998), 71 O.T.C. 283; 4 C.B.R.(4th) 265 (Gen. Div. Bktcy.), refd to. [para. 54].

Penfold et al. v. Provenzano (1996), 11 O.T.C. 344; 30 O.R.(3d) 230; 42 C.B.R.(3d) 148 (Gen. Div.), refd to. [para. 54].

Authors and Works Noticed:

Houlden, Lloyd W., Morawetz, Geoffrey B., and Sara, Janis P., Bankruptcy and Insolvency Law of Canada (3rd Ed.) (2005 Looseleaf Update), p. 6-79 [para. 40].

Houlden, Lloyd W., Morawetz, Geoffrey B., and Sara, Janis P., The 2011 Annotated Bankruptcy and Insolvency Act (2010), pp. 96 [para. 54]; 421 [para. 32]; 762 [para. 27]; 763 [para. 28].

Wood, Roderick J., Bankruptcy and Insolvency Law (2009), p. 115 [para. 34].

Counsel:

Jim Kroczynski, for the Royal Bank of Canada;

Rick Carlson, for Richard Gurniak;

Marla Adams, for Deloitte & Touche Inc.

This application was heard before Schwann, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Regina, who delivered the following judgment on July 26, 2011.