Szeto (Bankrupt), Re, 2015 BCCA 363

• Judge: Neilson, Garson and Willcock, JJ.A.
• Court: Court of Appeal (British Columbia)
• Case Date: August 19, 2015
• Jurisdiction: British Columbia
• Citations: 2015 BCCA 363;(2015), 376 B.C.A.C. 210 (CA)

Szeto (Bankrupt), Re (2015), 376 B.C.A.C. 210 (CA);

    646 W.A.C. 210

MLB headnote and full text

Temp. Cite: [2015] B.C.A.C. TBEd. AU.025

Cruise Connections Canada (appellant/applicant) v. Alan Szeto (respondent/respondent)

(CA42112; 2015 BCCA 363)

Indexed As: Szeto (Bankrupt), Re

British Columbia Court of Appeal

Neilson, Garson and Willcock, JJ.A.

August 19, 2015.

Summary:

The plaintiff obtained judgment against former employees (including Szeto) in conversion, conspiracy and breach of contract. Judgment was joint and several. The employees left the plaintiff for a rival company. They misappropriated confidential client lists and pre-existing bookings to take business away from the plaintiff for the benefit of their new employer. Some of the employees (not Szeto specifically) had made false entries in the plaintiff's database to attempt to hide their activities. Szeto made a voluntary assignment in bankruptcy and subsequently sought an absolute discharge. At issue was whether the judgment debt against Szeto survived the bankruptcy under s. 178(1)(e) of the Bankruptcy Act as a "debt ... resulting from obtaining property or services by false pretences or fraudulent misrepresentation".

The British Columbia Supreme Court, in a judgment reported [2014] B.C.T.C. Uned. 1563, held that Szeto's liability was predicated on breach of contract, conversion and civil conspiracy, not fraudulent misrepresentation or false pretences. Fraud and false pretences were not pleaded. As there was no finding that Szeto personally participated in any false pretences or fraud, his joint liability did not fall under s. 178(1)(e) and the judgment debt did not survive the bankruptcy. The plaintiff appealed.

The British Columbia Court of Appeal allowed the appeal. The essential test for both "false pretences" and "fraudulent misrepresentation' was whether the bankrupt was "deceitful" in obtaining the plaintiff's property. It was unnecessary for the plaintiff's action to plead or try the case on the basis of fraud. The trial judge made specific fact findings that engaged s. 178(1)(e). Where other employees were guilty of deceptive conduct in falsifying entries in the plaintiff's database, it mattered not that Szeto did not personally engage in the deceitful conduct that would trigger s. 178(1)(e). The finding of joint liability made Szeto liable for all of the conduct of the other employees, including the deceitful conduct in making the false entries.

Bankruptcy - Topic 8987

Discharge of debtor - Liabilities not released by discharge - Act of fraud of debtor - See paragraphs 11 to 52.

Torts - Topic 5086

Interference with economic relations - Conspiracy - Conspiracy to injure - See paragraphs 41 to 43.

Cases Noticed:

Louie (H.Y.) Co. v. Bowick (2015), 373 B.C.A.C. 159; 641 W.A.C. 159; 2015 BCCA 256, refd to. [para. 8].

McKee (Bankrupt), Re (1997), 203 A.R. 283; 47 C.B.R.(3d) 70 (Q.B. Bktcy. Reg.), refd to. [para. 13].

Toronto-Dominion Bank v. Merenick, [2007] B.C.T.C. Uned. E78; 2007 BCSC 11261, refd to. [para. 13].

Iroquois Falls Community Credit Union Ltd. v. Miljours, [2009] O.J. No. 169 (Sup. Ct.), refd to. [para. 13].

Simone v. Daley et al. (1999), 118 O.A.C. 54; 170 D.L.R.(4th) 215; 43 O.R.(3d) 511 (C.A.), refd to. [para. 14].

Valastiak v. Valastiak (2010), 283 B.C.A.C. 204; 480 W.A.C. 204; 2010 BCCA 71, refd to. [para. 21].

Canada Cement LaFarge Ltd. et al. v. British Columbia Lightweight Aggregate Ltd. et al., [1983] 1 S.C.R. 452; 47 N.R. 191, refd to. [para. 41].

Mogul Steamship Co. v. McGregor, Gow & Co., [1892] A.C. 25 (H.L.), refd to. [para. 41].

Crofter Hand Woven Harris Tweed Co. v. Veitch, [1942] A.C. 435 (H.L.), refd to. [para. 41].

Lonrho Ltd. v. Shell Petroleum Co., [1981] 2 All E.R. 456; [1982] A.C. 173, refd to. [para. 42].

Bank of Montreal v. Tortora et al. (2010), 287 B.C.A.C. 14; 485 W.A.C. 14; 2010 BCCA 139, refd to. [para. 42].

EnerWorks Inc. v. Glenbarra Energy Solutions Inc. et al., [2012] O.T.C. Uned. 414; 2012 ONSC 414, refd to. [para. 42].

Osborne et al. v. Pavlick et al. (2000), 134 B.C.A.C. 311; 219 W.A.C. 311; 2000 BCCA 120, refd to. [para. 45].

The Koursk, Re, [1924] P. 140 (C.A.), refd to. [para. 47].

Statutes Noticed:

Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, sect. 178(1)(e) [para. 11].

Counsel:

M.R. Davies, for the appellant;

B. La Borie, for the respondent.

This appeal was heard on May 4, 2015, at Vancouver, B.C., before Neilson, Garson and Willcock, JJ.A., of the British Columbia Court of Appeal.

On August 19, 2015, Garson, J.A., delivered the following judgment for the Court of Appeal.