Mutter (Bankrupt), Re, (2010) 485 A.R. 175 (QB)

• Judge: LoVecchio, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: March 23, 2010
• Citations: (2010), 485 A.R. 175 (QB);2010 ABQB 312

Mutter (Bankrupt), Re (2010), 485 A.R. 175 (QB)

MLB headnote and full text

Temp. Cite: [2010] A.R. TBEd. MY.072

In The Matter Of the Bankruptcy of Darren Michael Mutter (BK01 089252; 2010 ABQB 312)

Indexed As: Mutter (Bankrupt), Re

Alberta Court of Queen's Bench

Judicial District of Calgary

LoVecchio, J.

May 6, 2010.

Summary:

A trustee in bankruptcy applied for advice and direction respecting the distribution of proceeds from the forced sale of the bankrupt's principal residence. At issue was whether the bankrupt was entitled to a $40,000 exemption amount or whether that amount was payable to the Minister of National Revenue pursuant to the garnishment provisions in the Income Tax Act and the Excise Tax Act.

A Registrar of the Alberta Court of Queen's Bench, In Bankruptcy and Insolvency, in a decision reported at 471 A.R. 99, held that the requirements to pay issued to the trustee were invalid. The court directed the trustee to pay the $40,000 to the bankrupt. The Minister appealed.

The Alberta Court of Queen's Bench dismissed the appeal. In addition to confirming the Registrar's order, the court quashed the requirements to pay issued to the trustee by the Minister.

Bankruptcy - Topic 4

General principles - Purpose of bankruptcy law - A trustee in bankruptcy applied for advice and direction respecting the distribution of proceeds from the forced sale of the bankrupt's principal residence - At issue was whether the bankrupt was entitled to a $40,000 exemption amount (Alberta Civil Enforcement Act, s. 88(g); Civil Enforcement Regulations, s. 37(1)(e)) or whether that amount was payable to the Minister of National Revenue pursuant to garnishment provisions in the Income Tax Act (ITA) and the Excise Tax Act (ETA) - A Registrar stated that the issue was whether the trustee giving the $40,000 exemption to the bankrupt was a payment as contemplated by s. 224(1) of the ITA and s. 317(3) of the ETA - Although the bankrupt had lost the ability to dispose of or deal with his property, the property still remained the bankrupt's property, even when in the trustee's hands (Bankruptcy and Insolvency Act (BIA), s. 71) - The BIA did not specify how the exemption amounts were to be returned to the bankrupt when property valued in excess of the allowable exemption amount was sold - The BIA only prohibited the exemption amounts from being distributed among the bankrupt's creditors (BIA, s. 67(1)(b)) - As the exemption amounts were always the bankrupt's property, once those amounts were severed from those amounts payable to the creditors, the bankrupt regained the ability to deal with that property - Although the trustee might transfer funds to give control over the property back to the bankrupt, this was not the type of "payment" contemplated by s. 224(1) of the ITA and s. 317(3) of the ETA - The Alberta Court of Queen's Bench, while agreeing with the Registrar's analysis, stated that the matter could be decided on a different basis - The bankruptcy exemptions in the federal and provincial legislation were specifically defined and were narrow in providing some form of financial assistance or "nest egg" for a bankrupt - As s. 317(3) of the ETA stated that it applied "despite ... any other enactment of Canada other than the Bankruptcy and Insolvency Act.", it was subject to the s. 67(1)(b) BIA exemption and the requirement to pay issued by the Minister under s. 317(3) could not stand - Section 221(4) of the ITA was silent on whether it was subject to or applied not withstanding the BIA - To read "notwithstanding the BIA" into s. 221(4) would take away the minimal financial stake given to a bankrupt leaving an already destitute person even further behind - Reading "subject to the BIA" into s. 224(1) made the provision more consistent with the other exemption provisions and the policy behind the exemption itself and was what parliament intended.

Bankruptcy - Topic 402

Property of bankrupt - General - What constitutes - [See Bankruptcy - Topic 4 ].

Bankruptcy - Topic 410

Property of bankrupt - General - Transfer of exempt assets - Effect - [See Bankruptcy - Topic 4 ].

Bankruptcy - Topic 483

Property of bankrupt - Exemptions or exclusions - Property exempt from seizure under provincial laws - [See Bankruptcy - Topic 4 ].

Bankruptcy - Topic 485

Property of bankrupt - Exemptions or exclusions - Residence - [See Bankruptcy - Topic 4 ].

Bankruptcy - Topic 4485

Preferred creditors - Claims by Crown - For income tax - [See Bankruptcy - Topic 4 ].

Bankruptcy - Topic 4486.1

Preferred creditors - Claims by Crown - For goods and services tax (GST) - [See Bankruptcy - Topic 4 ].

Income Tax - Topic 3901

Interpretation - General - [See Bankruptcy - Topic 4 ].

Income Tax - Topic 9233

Enforcement - Collection - Garnishment - Third party demand - Property affected - [See Bankruptcy - Topic 4 ].

Sales and Service Taxes - Topic 5204

Goods and services tax (incl. harmonized sales tax) - Administration, collection and enforcement - Requirement to pay - [See Bankruptcy - Topic 4 ].

Statutes - Topic 502

Interpretation - General principles - Intention of Parliament or legislature - [See Bankruptcy - Topic 4 ].

Statutes - Topic 513

Interpretation - General principles - Omissions or gaps - [See Bankruptcy - Topic 4 ].

Statutes - Topic 522

Interpretation - General principles - Taxing statutes - [See Bankruptcy - Topic 4 ].

Cases Noticed:

Harris, Re (1984), 55 A.R. 6 (Q.B.), refd to. [para. 19].

Investors Group Trust Co. v. Eckhoff et al., [2008] 3 C.T.C. 432; 307 Sask.R. 164; 417 W.A.C. 164; 2008 SKCA 18, refd to. [para. 22].

Marcoux v. Canada (Procureur général) (2001), 278 N.R. 19; 2001 FCA 92, refd to. [para. 35].

Minister of National Revenue v. Canadian Medical Protective Association (2009), 389 N.R. 187; 2009 FCA 115, refd to. [para. 36].

Statutes Noticed:

Excise Tax Act, R.S.C. 1985, c. E-15, sect. 317(3) [Appendix].

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 224(1) [Appendix].

Authors and Works Noticed:

Dunlop, Charles Richard Bentley, Creditor-Debtor Law in Canada (2nd Ed. 1995), p. 454 [para. 22].

Counsel:

George F. Body (Department of Justice Canada), for the Crown;

Douglas R. Lint, Q.C., amicus counsel for the bankrupt, Darren Michael Mutter.

This appeal was heard at Calgary, Alberta, on March 23, 2010, by LoVecchio, J., of the Alberta Court of Queen's Bench, who delivered the following reasons for judgment on May 6, 2010.