We hope that you and your family are safe, healthy and secure during this COVID-19
pandemic. Ira Smith Trustee & Receiver Inc.
is absolutely operational,
and Ira, in addition to Brandon Smith, is readily available for a telephone
consultation or video meeting. Trustee in bankruptcy.
No action against trustees without leave of the court.
Canadian insolvency laws say that there
cannot be any legal action against trustees in bankruptcy now called
a licensed insolvency trustee without the prior leave of the court.
The leave application more often than not,
would be brought before a bankruptcy judge.
However, as you will see below, any judge of the Ontario Superior Court
of Justice could hear such an application involving a trustee in bankruptcy.
Section 215 of the Bankruptcy and Insolvency Act (Canada) (BIA) provides
protection in the Canadian bankruptcy laws for all officials in the bankruptcy
process, including the bankruptcy trustee. S. 215 states.
"Except by leave of the court,
no action lies against the Superintendent
and official receiver and interim receiver or a trustee with respect to any report
made under or any action taken pursuant to this Act."
In my January 9, 2019
Brandon's Blog, Privacy breach lawsuit against Licensed insolvency Trustee fails,
I described one attempt that failed to obtain leave of the court to begin
litigation against the trustee in bankruptcy.
Our bankruptcy and insolvency courts
believe that the test to determine whether a court should use its discretion to give
leave for litigation to be commenced against either a trustee in bankruptcy or
a court appointed receiver was not a tough test.
The protection is only to make sure that the receiver or trustee in bankruptcy
is protected against senseless or burdensome actions which have no basis.
In this Brandon's Blog, I describe a recent Ontario court decision that further
clarifies a basis for when the court will exercise its discretion and allow
litigation against a licensed trustee in bankruptcy.
As the motions judge used the old
terminology, I will stick with it in this blog.
Action against the trustee in bankruptcy background.
The Motion judge's endorsement was released on May 31, 2021.
The endorsement was from a motion
by the plaintiff for a determination as to whether or not leave of the court under
S.215 of the BIA was required.
The plaintiff's position was that it was not.
But if it was such leave should be granted.
The defendant trustee in bankruptcy
position was that leave was required and should not be granted.
The plaintiff, Mr.
Flight, ended up filing bankruptcy
proceedings four times over a 13 year period of time.
He filed the same type of bankruptcy over and over again.
He claims his financial situation is
the fault of the defendant trustee in bankruptcy.
He used the same trustee in bankruptcy for all of his bankruptcies.
It is not clear in this motion how
the trustee is responsible for his having to file personal bankruptcy
all those times. Mr.
Flight brings on litigation against
the trustee in bankruptcy, claiming negligence, fraud,
breach of fiduciary duty, unjust enrichment and conversion.
The complainant claims the accused failed to identify and take suitable action
relating to a fraud perpetrated by the bookkeeper for Mr.
Flight's sole proprietorship business.
The plaintiff's amended claim seeks a declaration the defendant engaged
in misfeasance, negligence, fraud and breach of fiduciary duty in his
personal capacity and that the defendant was unjustly enriched.
The plaintiff's claim against the trustee in bankruptcy.
The main subject matter of the claim, alleges the bookkeeper's theft caused
the plaintiff's repeated bankruptcies and that the defendant trustee
in bankruptcy ought to have detected this fraud in the administration of the four
bankruptcies. The plaintiff maintains that the trustee
in bankruptcy then failed to take any meaningful action to address the alleged
fraud and its impact on the fourth bankruptcy after its discovery.
In particular, the plaintiff claims the trustee failed to diligently commence
an action against the former bookkeeper, failed to investigate the fraud,
failed to adjust the plaintiff's surplus income failed to recommend debt relief
options or financial options, and certainly no other possible insolvency
process, such as a consumer proposal, alternative to bankruptcy and failed
to have the plaintiff promptly discharged from his fourth bankruptcy.
The defendant's alleged grand failure to act caused Mr.
Flight damages of ten million dollars
from loss of business, loss of profit, loss of income and pain and suffering.
The court's analysis.
As I mentioned above, the threshold issue under Canadian
insolvency legislation is whether the plaintiff required leave to commence
this action if it is determined that leave is required.
The analysis then moves to whether the claim meets the test for leave.
The motion judge stated that there is authority to support the plaintiff's
position that the insolvency laws state that leave is not required,
where the trustee in bankruptcy is being sued in its personal capacity.
More particularly, the Supreme Court of Canada held
that the leave provision under the BIA is not to be interpreted as though it applied
to any action arising out of the administration of the estate.
That is not the way Section 215 is worded.
To allege that the trustee in bankruptcy made an
act of omission is a claim that is not
with respect to a report made under or any action taken pursuant to the BIA.
Trustee in bankruptcy, the court's decision.
The plaintiff alleges, causes of action against the trustee
in bankruptcy, in his personal capacity, in their amended statement of claim
and affidavit materials for negligence, fraud, breach of fiduciary duty,
unjust enrichment and conversion. Starting with a confidential consultation
and with each bankruptcy assignment,
the motion judge concluded that the plaintiffs do not require leave under S.
215 of the BIA to commence this action based on this conclusion.
The motion judge did not need to consider anything further.
You will observe, as I previously stated,
none of the court's evaluation had anything to do with whether the claims had
a possibility of success in its litigation legal process.
The motion judge, who was not a bankruptcy judge but rather a motion judge,
felt the accusations were such that they were not purposeless or burdensome actions
that have no basis. As the main action will now proceed
I will follow the case to find out what
the exact details are and the various bankruptcy claims that Mr.
Flight is making regarding the conduct
of trustees involved as the case is reported.
I will report to you. Finding a good
licensed insolvency trustee trustee in bankruptcy near you.
I hope that you found this trustee in bankruptcy Brandon's Blog interesting
if you are concerned because you or your business are dealing with substantial debt
challenges and you assume bankruptcy is your only option.
Call me.
It is not your fault that you remain in this way.
You have actually been only shown the old ways to try to deal with financial issues.
These old ways do not work anymore.
The Ira Smith Team utilizes new modern day ways to get you out of your debt
difficulties with debt relief options as alternatives to bankruptcy.
We can get you the relief you need and so deserve.
Our professional advice will create for you a personalized debt free plan
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The tension put upon you is big.
We know your discomfort factors.
We will check out your entire situation and design a new approach that is as
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We will design a death settlement strategy for you.
We know that we can help you now.
We understand that people and businesses
facing financial issues need a realistic lifeline.
There is no one solution fits all method with the Ira Smith Team.
Not everyone has to file bankruptcy in Canada.
The majority of our clients never do is we know the alternatives to bankruptcy.
We help many people and companies stay
clear of filing an assignment in bankruptcy.
That is why we can establish a new
restructuring procedure for paying down debt that will be built just for you.
It will be as one of a kind as
the economic issues and discomfort you are encountering.
If any one of these seems familiar to you
and you are serious about getting the solution, you need to become debt free.
Contact the Ira smith trustee & receiver inc.
today.
Call us now for a no cost bankruptcy consultation.
We hope that you and your family are safe,
healthy and secure during this covid-19 pandemic Ira Smith Trustee & Receiver Inc.
Absolutely operational.
And IRA, in addition to Brandon Smith,
is readily available for a telephone consultation or video meeting.