Moss (Bankrupt), Re, (2009) 243 Man.R.(2d) 88 (QB)

• Judge: Clearwater, J.
• Court: Court of Queen's Bench of Manitoba (Canada)
• Case Date: July 15, 2009
• Jurisdiction: Manitoba
• Citations: (2009), 243 Man.R.(2d) 88 (QB);2009 MBQB 197

Moss (Bankrupt), Re (2009), 243 Man.R.(2d) 88 (QB)

MLB headnote and full text

Temp. Cite: [2009] Man.R.(2d) TBEd. JL.046

In The Matter Of: The Estate Of Danny Moss, A Bankrupt.

Keith G. Collins Ltd., as Trustee of the Estate of Danny Moss, a Bankrupt (plaintiff) v. Danny Moss and Carrie Moss (defendants)

(BK 97-01-49147)

Carrie Moss (plaintiff) v. BMO Nesbitt Burns Inc. (defendant)

(CI 00-01-17835)

(2009 MBQB 197)

Indexed As: Moss (Bankrupt), Re

Manitoba Court of Queen's Bench

Winnipeg Centre

Clearwater, J.

July 15, 2009.

Summary:

Moss, an insurance broker, sold six life insurance policies to his mother (Eliza) valued at $700,000, naming Moss as beneficiary. A few months before Moss made an assignment in bankruptcy, change of beneficiary forms in favour of his daughter (i.e., Eliza's granddaughter, Carrie) were executed by or on behalf of his mother and delivered to each of the insurers. When Eliza died, Carrie received the insurance proceeds. Carrie gave Moss complete control over her investments. Moss opened a margin account for Carrie with BMO Nesbitt Burns Inc. and losses of $320,000 occurred. Carrie sued BMO for negligence. BMO sought a declaration that claimed that Carrie had no legal or equitable interest in the funds invested in BMO because the change in beneficiary forms were invalid (i.e., not executed by Eliza), such that the policy proceeds became property of Moss's bankruptcy trustee on Eliza's death. The bankruptcy trustee commenced a separate action against Moss and Carrie, seeking, inter alia, a declaration that all insurance proceeds were property of the bankrupt (Moss) under the Bankruptcy and Insolvency Act. A trial was directed on certain issues.

The Manitoba Court of Queen's Bench, in a decision reported at (2009), 235 Man.R.(2d) 286, dismissed the claims of the bankruptcy trustee and BMO for declaratory relief, rejecting their arguments that the change of beneficiary forms were invalid. The court found that Moss signed Eliza's name on the forms. However, he had authority to do so impliedly, if not expressly, by virtue of a general power of attorney that he held from her at that time. Notwithstanding the power of attorney, the court was also satisfied that in applying for the insurance and in subsequently executing and delivering the change of beneficiary forms to the insurers, Moss was acting as Eliza's agent. It was not a mandatory requirement of the Insurance Act that the named insured in a policy of life insurance sign the change of beneficiary form personally. Moss therefore had no interest in the policies of insurance subsequent to the delivery of the change of beneficiary forms to the insurers, and in particular, at any time subsequent to his assignment in bankruptcy. Accordingly, the proceeds in question could not be considered property of the bankrupt within the meaning of the Bankruptcy and Insolvency Act. Before judgment was entered, the bankruptcy trustee and BMO requested a reconsideration. They asserted that the decision was based on a clear mistake and/or fundamental misapprehension because the decision relied on alternate defences (that Eliza had expressly or implicitly authorized Moss to sign the forms for her) that had been abandoned before trial.

The Manitoba Court of Queen's Bench denied the motion.

Bankruptcy - Topic 7208.2

Setting aside transactions prior to bankruptcy - General - Change of beneficiary in life insurance policy - The trustee in bankruptcy of Danny Moss's estate and BMO Nesbitt Burns Inc. (the applicants) sought declaratory relief, including an accounting (and payment) of approximately $700,000 of life insurance proceeds received by Carrie Moss from six policies on the life of her grandmother, Eliza - The applicants asserted that change of beneficiary forms provided to the insurance companies had not been executed by Eliza and that, as such, they were invalid and that the insurance proceeds were property of the bankrupt - The court dismissed the claims - Before judgment was entered, the applicants requested a reconsideration - The applicants asserted that the decision was based on a clear mistake and/or fundamental misapprehension because the decision relied on alternate defences (that Eliza had expressly or implicitly authorized Danny Moss to sign the forms for her) that had been abandoned before trial - The Manitoba Court of Queen's Bench denied the motion - The court disagreed with the suggestion that the abandonment by the defendants of the alternate defences precluded the court from applying the law to the facts as they were found - To accept that the abandonment of alternate positions amounted to an admission of fact that the person who signed Eliza's name to the forms was committing a fraud on Eliza or the insurers was simply not correct - Although Danny and Carrie Moss had lied as to the way in which Eliza's name was placed on the forms, the evidence did not satisfy the court that Danny Moss acted fraudulently in signing Eliza's name to the forms - The onus was on the applicants to prove fraud - Simply proving that Eliza had not signed the forms was not sufficient - The policies were Eliza's property - Any change of beneficiary by her or on her behalf did not constitute a "preference" or a "fraudulent preference" as those terms were used in bankruptcy law - See paragraphs 11 to 15.

Bankruptcy - Topic 7212

Setting aside transactions prior to bankruptcy - Fraudulent preferences - What constitutes a fraudulent preference - [See Bankruptcy - Topic 7208.2 ].

Bankruptcy - Topic 7244

Setting aside transactions prior to bankruptcy - Fraudulent preferences - Evidence and proof - [See Bankruptcy - Topic 7208.2 ].

Fraud and Misrepresentation - Topic 7

Fraudulent misrepresentation (deceit) - General principles - What constitutes fraud - [See Bankruptcy - Topic 7208.2 ].

Insurance - Topic 7151

Life insurance - Beneficiaries - Designation of - Alteration or revocation - [See Bankruptcy - Topic 7208.2 ].

Practice - Topic 6105

Judgments and orders - Amendment, rescission and variation of judgments and orders - Before judgment or order perfected or entered - [See Bankruptcy - Topic 7208.2 ].

Practice - Topic 6107

Judgments and orders - Amendment, rescission and variation of judgments and orders - Amendment or variation - Circumstances permitting - [See Bankruptcy - Topic 7208.2 ].

Counsel:

Richard W. Schwartz and Alfred Thiessen, for the plaintiff (BK 97-01-49147);

J. Edward (Ted) Crane, for the defendants (BK 97-01-49147);

J. Edward (Ted) Crane, for the plaintiff (CI 00-01-17835);

David J. Kroft and Andrew P. Loewen, for the defendant (CI 00-01-17835).

This motion was heard by Clearwater, J., of the Manitoba Court of Queen's Bench, Winnipeg Centre, who delivered the following judgment on July 15, 2009.