Jean (Re), 2012 ABQB 666

Court of Queen ’ s Bench of Alberta Citation: Jean (Re), 2012 ABQB 666 Date: 20121030 Docket: BE01 303722 Registry: Calgary Between: In the Matter of the Bankruptcy of Andre Joseph Ernest Jean _______________________________________________________ Memorandum of Decision of J.B. Hanebury, Registrar in Bankruptcy _______________________________________________________ [ 1 ] Mr. Jean became a bankrupt in 2009. The application for his discharge from bankruptcy was before this court in February, 2011. At that time I adjourned the application for one year and directed that he provide further information.

A history of the matter, and my reasons, are found at Jean (Re) , 2011 ABQB 63 . I will not repeat the entire history of the matter or those reasons here. It is sufficient to repeat part of my conclusions at paragraphs 31 and 32: In this case the conduct of the bankrupt has been reprehensible in the extreme. He has flouted the court process, lied under oath, and then when caught and ordered to pay solicitor and client costs because of his behaviour, assigned himself into bankruptcy. Furthermore, he has ignored his obligations to Revenue Canada. [ 2 ] Mr.

Jean has two primary creditors, Canada Revenue Agency and his former wife, Ms. Varga, to whom he owes past maintenance and the aforementioned solicitor and client costs. Only Ms. Varga appeared at this application in relation to the reconsideration of Mr. Jean ’ s discharge. [ 3 ] In 2011 it was directed that Mr. Jean could reapply for his discharge in one year if he filed in sworn format his monthly

[ 3 ] In 2011 it was directed that Mr. Jean could reapply for his discharge in one year if he filed in sworn format his monthly income and expense statements; provided in sworn format the information necessary for the trustee to determine to his satisfaction whether funds were being hidden by his employer, Ms.

Chichenko ’ s company, and whether he was being appropriately compensated; filed with the trustee monthly, in sworn format, a statement of the efforts he had made to find employment, should he become unemployed; filed and paid his 2010 income tax on time; provided a letter from the Office of the Director of Maintenance Enforcement that it was satisfied with his co-operation during the one-year period; and made arrangements to pay his trustee ’ s fees. [ 4 ] The trustee came back before the court on July 11, 2012. His supplementary report indicated that the conditions were generally satisfied but noted that Mr.

Jean was working for Onawell Consulting Inc., a company owned by his partner, Ms. Chichenko. The company is the vehicle used for Mr. Jean to undertake his oilfield consulting work and Ms. Chichenko has another childcare business that she runs. Its financial reports were unaudited and marked “ Notice to Reader ” . [ 5 ] The unaudited information provided indicated that income splitting was occurring and that allowances for living and travel were being paid to Mr. Jean in excess of $3000.00 per month.

The Court found that the information provided was insufficient to determine if money was being diverted or retained that should be paid out to Mr. Jean. The Court directed that the trustee investigate the matter further and return to the court for the continuation of Mr. Jean ’ s application for discharge. INFORMATION PROVIDED FOR THIS APPLICATION [ 6 ] The trustee met with the bookkeeper and accountant for Onawell Consulting Inc. to assist him in determining if the compensation paid to Mr. Jean was appropriate. A subsequent supplementary report was filed. [ 7 ] This report indicates that Mr.

Jean ’ s taxes were overdeducted which acted to reduce the amount owed for surplus income. Therefore his surplus had to be recalculated and further funds are owing in the sum of $5,830.34. It also indicated that hard assets, including a trailer, a portable office and an ATV, were purchased for $82,000.00 by the company, allegedly for Mr. Jean ’ s work in remote locations. [ 8 ] The trustee notes that the income of Mr. Jean is increasing. [ 9 ] The report also notes that taxes were not deducted at source in 2012, with the result that both Mr. Jean and Ms. Chichenko will have tax liabilities for the 2012 tax year.

While the subsistence and other allowances paid to Mr. Jean were not included in his monthly statements to the trustee, the trustee notes that they are not out of line with that paid to federal public service employees for travel. Similarly, rent was paid for a portion of the house allegedly used to operate the business. Again the amount is apparently not out of line with Canada Revenue guidelines but was not shown on the monthly statements.

However, guidance provided to all trustees by the Office of the Superintendent of Bankruptcy indicates that these sums are not required to be included in a bankrupt ’ s monthly statements. [ 10 ] As to the income splitting between Mr. Jean and Ms. Chichenko, the trustee advises that he is unable to establish that it is “ absolutely appropriate ” . However, he notes that it appears that Ms. Chichenko does perform some administrative services for the company. [ 11 ] The trustee calculated that surplus for 21 months required to be paid under the Bankruptcy and Insolvency Act would be $79,464.00.

After the deduction of the sum already paid, the amount remaining is $66,531.00. The trustee stated that he had no recommendations as to any sanctions, whether monetary or otherwise, that should be imposed in relation to Mr. Jean ’ s conduct and left that matter to the court. [ 12 ] Ms. Varga read a statement to the court and provided further comments. She said that she is ready to have this matter come to an end and therefore did not oppose the payment proposed. However, she also sought the payment of her spousal arrears, ongoing support, and the court-ordered costs that appear to have precipitated Mr.

Jean ’ s bankruptcy. She said that Mr. Jean has the ability to earn a good income, is very capable of lying, and in her view, continues to hide his assets. She alleges the assets purchased by the company are at least in part for his recreational and holiday purposes.

[ 13 ] Mr. Jean wished to question Ms. Varga on her statement. I pointed out to him that the last time the parties questioned each other it quickly became acrimonious and did not provide information useful to the court. He advised that the purpose of his questions was to put his story to the court and explain the nature of his employment. Therefore I asked Mr. Jean to put this information to the court directly. [ 14 ] Mr. Jean advised that his consulting work had moved from the gas side of the business to the oil side, to take advantage of the greater amount of oil work available.

He essentially acts as a liaison between oil companies and their service providers to ensure the terms of their contracts are being carried out. He said that the nature of the business is cyclical and new legislation meant that he would now have to take more rest days, rather than working weeks without a break. Mr. Jean advised that he did not really object to the trustee ’ s recommendation for a further payment. If this was the finding of the trustee, he said, he would have to go along with it. [ 15 ] Mr. Jean raised a concern that the court would not believe his evidence.

As to his conduct, he said his conduct has been exemplary since the bankruptcy and he expressed some exasperation with the ongoing concerns raised about his conduct. ANALYSIS [ 16 ] Credibility is the primary issue in this application. Mr. Jean and Ms. Chichenko have been found by Greckol J. to have lied under oath: Jean v. Jean , Edmtn. No. 4803-128214, May 22, 2009 (unreported). One repercussion of this finding is that Mr. Jean cannot expect the court to, without question, to accept his evidence at face value. He gave up that expectation when he first deceived the court. However, as to the nature of Mr.

Jean ’ s work, this court can take judicial notice of the fact that the industry in which he works is cyclical. That is a fact known to all Albertans. [ 17 ] As to the allegations of the use of company assets for personal purposes, the improper splitting of income, the unnecessary payment of subsistence, car and rental allowances and the possible hiding of income, all of these are possible subterfuges. Without a formal audit and the retention of a private detective, steps no one is prepared to fund, the bona fides of Mr. Jean ’ s actions cannot be ascertained.

The facts and figures presented by the trustee are not so egregious that they are, on their face, incapable of justification. Recognizing that, and acknowledging the comments of the parties in relation to the sum recommended by the trustee, I accept that recommendation as the amount of income remaining to be paid. [ 18 ] The bankrupt is required to pay $66,531.00 to the trustee for surplus income alone. In light of Mr. Jean ’ s seasonal and cyclical business, an ongoing high monthly payment is not feasible.

Therefore, his discharge is conditional on the outstanding balance being paid at the rate of $1200.00 per month, with the total sum to be paid by June 30, 2015. Mr. Jean will have to make higher payments in some months to meet this end date. [ 19 ] Unfortunately for Ms. Varga, this court cannot direct to whom those funds are to be paid. The trustee is bound by the provisions of the Bankruptcy and Insolvency Act . Neither the Court nor the trustee can prefer one creditor over another. Any preference must be a statutory preference. Therefore, the Court cannot order the trustee to pay the funds received to Ms.

Varga to the detriment of another creditor. [ 20 ] However, from the materials filed by the trustee, it appears that the Director of Maintenance Enforcement may have a preferred claim for part of the arrears owing, with the result that funds remaining after the payment of trustee fees will go to the Director: see s. 136(1)(d.1). Furthermore, a debt for alimony is not released upon the bankrupt ’ s discharge: s. 178(1)(c). Therefore Ms. Varga or the Director of Maintenance Enforcement can take further action on the arrears upon Mr. Jean ’ s discharge. [ 21 ] As to Ms.

Varga ’ s claim for the judgment of solicitor and client costs awarded in her favour, s. 178(1) (

d) and (

e) of the Bankruptcy and Insolvency Act provide that certain claims tied to fraud can survive a discharge from bankruptcy. The process for dealing with such claims is discussed in Re Covey [2012] ABQB 565 (Registrar). It is up to Ms. Varga to pursue a declaration from the Court that her claim to those costs survives Mr. Jean ’ s bankruptcy. [ 22 ] The fundamental goal of the Bankruptcy and Insolvency Act is to help an honest but unfortunate debtor rebuild his or her life. When debtors enter bankruptcy who do not meet those criteria, but are bankrupt as a result of their own wrongful or inappropriate

actions, the court seeks to ensure that new habits are learned before the bankrupt is discharged. Mr. Jean is such a bankrupt. He has a history of not paying his taxes or his maintenance. Therefore, his discharge will also be conditional on both maintenance payments and his taxes being filed and paid on time until the date of his discharge. [ 23 ] The last matter for consideration is Mr. Jean ’ s conduct. Regardless of his conduct since bankruptcy, as I made clear in my prior decision, his conduct prior to bankruptcy is subject to censure.

The most frequently used forms of censure are a suspension of the date of discharge and an additional payment requirement. [ 24 ] Mr. Jean has been in bankruptcy since 2009. In my view, a suspension is not in order as it is unknown how long it will take Mr. Jean to pay the outstanding amount. Therefore, it is more appropriate to set the earliest date by which he may be discharged, regardless of how quickly he makes the payments. [ 25 ] The earliest date by which Mr. Jean can be discharged is July 31, 2014, assuming all conditions have been met, including the filing and payment of his 2013 income tax return.

There are ongoing monthly costs incurred by the trustee while Mr. Jean makes his monthly payments. Therefore Mr. Jean is required to pay a further $250.00 per month until the $66,531.00 is paid in full to help offset those costs. [ 26 ] The payments required are to commence by December 1, 2012. [ 27 ] The trustee is to draft an order based on these reasons and directly submit it for my signature. Heard on the 17 th day of October, 2012. Dated at Calgary, Alberta this 30 th day of October, 2012. J.B. Hanebury Registrar in Bankruptcy Appearances: Mr.

Sandy Lyons Bromwich & Smith - Trustee Peggy Lynn Varga self Represented

Andre Joseph Ernest Jean self Represented