Kratko (Bankrupt), Re, (2003) 242 Sask.R. 85 (QB)

• Judge: Krueger, J.
• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: October 21, 2003
• Jurisdiction: Saskatchewan
• Citations: (2003), 242 Sask.R. 85 (QB);2003 SKQB 440

Kratko (Bankrupt), Re (2003), 242 Sask.R. 85 (QB)

MLB headnote and full text

Temp. Cite: [2003] Sask.R. TBEd. OC.033

In The Matter Of the bankruptcy of John Andrew Kratko

Lena Wojcichkowsky, Executrix of the Estate of John Andrew Kratko, Deceased (appellant) v. PricewaterhouseCoopers Inc., Trustee of the Estate in Bankruptcy of John Andrew Kratko (respondent)

(2003 Q.B. No. 9836; 2003 SKQB 440)

Indexed As: Kratko (Bankrupt), Re

Saskatchewan Court of Queen's Bench

Judicial Centre of Prince Albert

Krueger, J.

October 21, 2003.

Summary:

Kratko made an assignment into bankruptcy on August 2, 2001. On May 3, 2002, he was granted a conditional discharge. Kratko died on July 19, 2002, still an undischarged bankrupt. Kratko's major asset was an accidental death insurance policy. The beneficiary was the bankrupt's estate. In Kratko's last will and testament, the appellant was named as residual beneficiary. The trustee applied for directions concerning priority to proceeds of the accidental death policy.

A Registrar of the Saskatchewan Court of Queen's Bench, in a decision reported at (2003), 237 Sask.R. 228, found that there was no statutory or common law exemptions applicable to the proceeds of the insurance policy and ordered that the proceeds be remitted to the trustee. The appellant appealed.

The Saskatchewan Court of Queen's Bench dismissed the appeal.

Bankruptcy - Topic 440.6

Property of bankrupt - Particular property - Insurance proceeds payable by bankrupt's insurer - [See Bankruptcy - Topic 488 ].

Bankruptcy - Topic 488

Property of bankrupt - Exemptions or exclusions - Trust property - Kratko made an assignment into bankruptcy on August 2, 2001 - Kratko died on July 19, 2002, still an undischarged bankrupt - Kratko's major asset was an accidental death insurance policy - The beneficiary was the bankrupt's estate - The respondent had paid the $162 annual premium which resulted in the subsequent death benefit - The respondent argued that since she had paid the premium, she was the beneficial owner of the policy and Kratko was holding it in trust for her - A Bankruptcy Registrar rejected the argument and held that no trust existed - The Saskatchewan Court of Queen's Bench affirmed the Registrar's finding - See paragraphs 11 to 12.

Bankruptcy - Topic 2613

Trustees - Duties - Duty to act fairly - Kratko made an assignment into bankruptcy on August 2, 2001 - Kratko died on July 19, 2002, still an undischarged bankrupt - Kratko's major asset was an accidental death insurance policy - The beneficiary was the bankrupt's estate - The respondent had paid the $162 annual premium which resulted in the subsequent death benefit - The respondent was named as a residual beneficiary in Kratko's will - The respondent argued that under the rule in Ex parte James, it would be inconsistent with natural justice and fair dealing to deprive her of the proceeds of the policy - A Bankruptcy Registrar held that the rule in Ex parte James was not applicable - The Saskatchewan Court of Queen's Bench affirmed the Registrar's finding - See paragraphs 14 to 15.

Insurance - Topic 7151

Life insurance - Beneficiaries - Designation of - Alteration or revocation - Kratko made an assignment into bankruptcy on August 2, 2001 - Kratko died on July 19, 2002, still an undischarged bankrupt - Kratko's major asset was an accidental death insurance policy - The beneficiary was the bankrupt's estate - In Kratko's last will and testament, the respondent was named as residual beneficiary - The respondent argued that Kratko had designated her in his will as the policy's beneficiary - A Bankruptcy Registrar rejected the argument - A careful examination of the language of Kratko's will did not support the respondent's contention that Kratko's intent was to designate her as the policy's beneficiary - Kratko was in debt and intended his debts to be paid, with the respondent as a residual beneficiary - The Saskatchewan Court of Queen's Bench affirmed the Registrar's finding - See paragraphs 16 to 20.

Practice - Topic 1850

Pleadings - Counterclaim and set-off - Set-off - Equitable set-off - Kratko made an assignment into bankruptcy on August 2, 2001 - Kratko died on July 19, 2002, still an undischarged bankrupt - Kratko's major asset was an accidental death insurance policy - The beneficiary was the bankrupt's estate - The respondent had paid the $162 annual premium which resulted in the subsequent death benefit - During his assignment, the respondent advanced $7,800 to Kratko - The respondent argued that set-off was appropriate in this scenario - A Bankruptcy Registrar rejected the argument - Since the respondent was an unsecured creditor of the bankrupt's estate, equitable set-off was not available as there were other unsecured creditors in the bankruptcy who had rights as well - The Saskatchewan Court of Queen's Bench affirmed the Registrar's finding - See paragraph 13.

Trusts - Topic 626

Creation of trust - Transactions creating trusts - Proceeds of life insurance - [See Bankruptcy - Topic 488 ].

Trusts - Topic 2310

Constructive trusts - General principles - Circumstances when not imposed - [See Bankruptcy - Topic 488 ].

Cases Noticed:

Condon, Re; Ex Parte James (1874), 9 Ch. App. 609 (C.A.), refd to. [para. 2].

Minister of National Revenue v. Schwartz, [1996] 1 S.C.R. 254; 193 N.R. 241; 16 C.C.E.L.(2d) 141; 96 D.T.C. 6103; 10 C.C.P.B. 213; 133 D.L.R.(4th) 289; 1 C.T.C. 303, refd to. [para. 9].

Patrick v. Patrick (Trustee of), [2000] S.J. No. 110 (C.A.), refd to. [para. 9].

Gilmartin (A Bankrupt), Re, [1989] 1 W.R.L. 513 (Ch. D.), refd to. [para. 10].

Peter v. Beblow, [1993] 1 S.C.R. 980; 150 N.R. 1; 23 B.C.A.C. 81; 39 W.A.C. 81; 101 D.L.R.(4th) 621; 77 B.C.L.R.(2d) 1; 48 E.T.R. 1; 44 R.F.L.(3d) 329; [1993] 3 W.W.R. 337, refd to. [para. 11].

Re/Max Metro-City Realty Ltd. v. Baker (Trustee of) (1993), 16 C.B.R.(3d) 308 (Ont. Gen. Div. Bktcy.), refd to. [para. 13].

Mcdonald, Re (1973), 16 C.B.R.(N.S.) 244 (Ont. H.C.), refd to. [para. 14].

Gooderham, Re, [1946] 1 D.L.R. 165 (Ont. C.A.), refd to. [para. 17].

Neale Estate v. Neale Estate (Beneficiaries of), [1975] S.J. No. 103 (Q.B.), refd to. [para. 18].

Baltzan Estate v. Royal Bank of Canada et al., [1990] 3 W.W.R. 374; 82 Sask.R. 280 (Surr. Ct.), refd to. [para. 18].

Hoare, Re, [1933] O.R. 474; 2 D.L.R. 780 (C.A.), refd to. [para. 19].

Robinson v. Robinson Estate (1988), 72 Sask.R. 95 (Q.B.), refd to. [para. 19].

Counsel:

P.V. Abrametz, for the appellant;

J.M. Lee, for the respondent.

This appeal was heard by Krueger, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Prince Albert, who delivered the following decision on October 21, 2003.