Todd (Bankrupt), Re, 2009 SKQB 120

• Court: Court of Queen's Bench of Saskatchewan (Canada)
• Case Date: March 31, 2009
• Jurisdiction: Saskatchewan
• Citations: 2009 SKQB 120;(2009), 333 Sask.R. 82 (QB Reg.)

Todd (Bankrupt), Re (2009), 333 Sask.R. 82 (QB Reg.)

MLB headnote and full text

Temp. Cite: [2009] Sask.R. TBEd. AP.027

In The Matter Of the Bankruptcy of Gregory Don Todd and Lori Gay Evans-Todd

(Bankruptcy Nos. 16386, 16387; Estate Nos. 23-1055999, 23-1062130; 2009 SKQB 120)

Indexed As: Todd (Bankrupt), Re

Saskatchewan Court of Queen's Bench

In Bankruptcy and Insolvency

Schwann, Registrar in Bankruptcy

March 31, 2009.

Summary:

The bankrupts (Gregory and Lori) applied for their respective discharge from bankruptcy.

A Registrar of the Saskatchewan Court of Queen's Bench, In Bankruptcy and Insolvency, ordered a conditional discharge upon further payment into their estates for the benefit of their creditors. Gregory would be discharged from bankruptcy upon payment of $10,000, composed of $8,000 for conduct and $2,000 for the balance outstanding to re-purchase the equity in his vehicle. Payments would be $250 per month. Lori would be discharged from bankruptcy upon payment of $5,000 payable at the rate of $150 per month.

Bankruptcy - Topic 486

Property of bankrupt - Exemptions or exclusions - Proceeds from sale of exempt property - The Todds (Gregory and Lori), through their corporate structure, purchased the assets of SaskCo, which had been operating a Dollar Store - The purchase price of $250,000 was financed by $35,000 cash, a $150,000 loan from the Business Development Bank of Canada (BDC) and approximately $105,000 by way of vendor financing from SaskCo - Shortly after taking over the business, the Todds realized that it required an injection of capital - They refinanced their mortgage which substantially increased their monthly mortgage payment - At the same time, the Todds' marriage was dissolving - The parties fell behind on the mortgage and tax payments - They sold the matrimonial home - The sale yielded proceeds of $37,178.01, of which which $20,589.00 was paid to Lori and $16,589.01 was paid to Gregory - Both spent their share - The Dollar Store failed - The Todds filed an assignment into bankruptcy - They applied for their respective discharge from bankruptcy - The BDC opposed an absolute discharge, asserting that each bankrupt should be required to make a sizable contribution to their estates for the benefit of creditors on the premise that the principal residence exemption, to which they would generally be entitled, was lost by the voluntary sale of their property - A Registrar of the Saskatchewan Court of Queen's Bench, In Bankruptcy and Insolvency, concluded that the sale was not voluntary and the exemption was not lost - The Todds' financial position was rapidly deteriorating - The Todds were so overburdened and overcome by financial demands that selling the family home could not be regarded as voluntary - See paragraphs 29 to 58.

Bankruptcy - Topic 8922

Discharge of debtor - Conditional discharge - Considerations - The Todds (Gregory and Lori), through their corporate structure, purchased the assets of SaskCo, which had been operating a Dollar Store - The purchase price of $250,000 was financed by $35,000 cash, a $150,000 loan from the Business Development Bank of Canada (BDC) and approximately $105,000 by way of vendor financing from SaskCo - Shortly after taking over the business, the Todds realized that it required an injection of capital - They refinanced their mortgage which substantially increased their monthly mortgage payment - At the same time, the Todds' marriage was dissolving - The parties fell behind on the mortgage and tax payments - They sold the matrimonial home - The Dollar Store failed - The Todds filed an assignment into bankruptcy - They applied for their respective discharge from bankruptcy - A Registrar of the Saskatchewan Court of Queen's Bench, In Bankruptcy and Insolvency, ordered a conditional discharge upon further payment into their estates for the benefit of their creditors - The Todds had made a proposal to creditors in 2001 - Accordingly, with a fact established under s. 173(1)(j) of the Bankruptcy and Insolvency Act, s. 172(2) precluded an absolute discharge - This was an appropriate case to impose a conditional order on both bankrupts having regard to the "short time frame between the proposal and bankruptcy, the improvident decision to embark on a business venture especially with no capital investment of their own, and most tellingly, doing so on the eve of marital separation" - Additionally, the bankrupts intentionally increased their mortgage payments concurrent with their marital separation when they knew or should have known that household finances were strained - The integrity of the bankruptcy system would be seriously undermined if the bankrupts were not sanctioned for their actions and poor judgment - See paragraphs 59 to 64.

Bankruptcy - Topic 8930

Discharge of debtor - Conditional discharge - When available - [See Bankruptcy - Topic 8922 ].

Cases Noticed:

Papazoglou (Bankrupt), Re, [1999] Sask.R. Uned. 72; 11 C.B.R.(4th) 95 (Q.B. Bktcy. Registrar), refd to. [para. 27].

Giesbrecht, Re (1983), 50 C.B.R.(N.S.) 46 (B.C.S.C.), refd to. [para. 27].

Neuls (Bankrupts), Re; Touche Ross Ltd. v. First City Trust Co. et al. (1985), 37 Sask.R. 60 (C.A.), refd to. [para. 32].

Hayes, Re, [1931] 1 W.W.R. 301 (Sask. Q.B.), refd to. [para. 32].

Gervais v. Canadian Imperial Bank of Commerce (1985), 56 C.B.R.(N.S.) 238 (Sask. C.A.), refd to. [para. 33].

Bellamy v. Hill (2005), 271 Sask.R. 216; 2005 SKQB 333 (Fam. Div.), refd to. [para. 33].

Hansen v. Hansen (2003), 230 Sask.R. 293; 2003 SKQB 62 (Fam. Div.), refd to. [para. 33].

Wilson (Bankrupt), Re (1996), 178 A.R. 237; 110 W.A.C. 237; 38 C.B.R.(3d) 245 (C.A.), refd to. [para. 35].

Alberta (Treasury Branches) v. Wilson - see Wilson (Bankrupt), Re.

Regal Distributors Ltd. v. Freele (1931), 25 Alta. L.R. 279 (C.A.), refd to. [para. 35].

Royal Bank of Canada v. Nguyen et al., [2004] B.C.T.C. 895; 2004 BCSC 895, refd to. [para. 35].

Kirkpatrick, Re (1984), 35 Sask.R. 97 (Q.B.), refd to. [para. 37].

Higgins Co. v. McNabb (1979), 2 Sask.R. 119 (C.A.), refd to. [para. 42].

Balkwill (Bankrupt), Re (1999), 181 Sask.R. 48 (Q.B. Bktcy. Registrar), refd to. [para. 42].

Biblow (Bankrupt), Re (2009), 333 Sask.R. 95; 2009 SKQB 76 (Bktcy. Registrar), refd to. [para. 59].

Shakell, Re (1988), 70 C.B.R.(N.S.) 270 (Ont. S.C.), refd to. [para. 59].

Authors and Works Noticed:

Buckwold, Tamara M., and Cuming, Ronald C.C., The Modernization of Saskatchewan Money Judgment Enforcement Law, Final Report (2005), generally [para. 32].

Counsel:

Gregory Todd, bankrupt;

Lori Evans-Todd, bankrupt;

E. Dean Burlingham, Burlingham Associates Inc., trustee;

Clayton Barry, for the objecting creditor, Business Development Bank of Canada;

Alan Crozon, for the objecting creditor, 101032308 Saskatchewan Ltd.

These applications were heard by Schwann, Registrar in Bankruptcy, of the Saskatchewan Court of Queen's Bench, In Bankruptcy and Insolvency, who delivered the following judgment on March 31, 2009.