Heater Estate v Ellis, 2016 ABQB 580

Court of Queen’s Bench of Alberta Citation: Heater Estate v Ellis, 2016 ABQB 580 Date: 20161017 Docket: 1601 01859 Registry: Calgary Between: Charles Frederick Heater, as Personal Representative of the Estate of Alan Gus Heater Plaintiff - and - Lee K. Ellis and Linda Lalonde Defendants _______________________________________________________ Reasons for Judgment of J.T. Prowse , Master in Chambers _______________________________________________________ [ 1 ] The plaintiff obtained a judgment against the defendant Linda Lalonde and issued a garnishee summons against her bank and her employer.

This resulted in the bank paying funds to the Clerk of the Court. [ 2 ] Prior to the Clerk paying these funds out to the plaintiff as garnisheeing creditor, Ms. Lalonde filed a consumer proposal, which resulted in a stay of proceedings against all her creditors, including the plaintiff. [ 3 ] The plaintiff has applied to lift the stay of proceedings. [ 4 ] For the reasons which follow, I decline to lift the stay of proceedings.

The relevant provisions of the Bankruptcy and Insolvency Act . [ 5 ] The stay of proceedings is contained in

section 69.2 of the Bankruptcy and Insolvency Act (the “BIA”) which states:

(1) Subject to ..., on the filing of a consumer proposal under subsection 66.13(2) ..., no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy until (

a) the consumer proposal or the amended consumer proposal, as the case may be, has been withdrawn, refused, annulled or deemed annulled; or (

b) the administrator has been discharged. [ 6 ] The plaintiff applies for a lift of the stay pursuant to

section 69.4 of the BIA which states: A creditor who is affected by the operation of sections 69 to 69.31 ... may apply to the court for a declaration that those sections no longer operate in respect of that creditor or person, and the court may make such a declaration, subject to any qualifications that the court considers proper, if it is satisfied (

a) that the creditor or person is likely to be materially prejudiced by the continued operation of those sections; or (

b) that it is equitable on other grounds to make such a declaration. Chronology of events [ 7 ] The plaintiff obtained judgment in the amount of $11,327.33 against Ms. Lalonde on July 7, 2016. The debt arose as Ms. Lalonde and her then common law partner borrowed $20,000 from his best friend for a down payment on a house, but failed to repay it. [ 8 ] The plaintiff issued a garnishee against Ms. Lalonde’s employer and her bank account on July 27, 2016. [ 9 ] Ms. Lalonde unsuccessfully attempted to enter into a payment plan with the plaintiff.

She filed an affidavit in that regard in which she asserted that she had been left destitute, unable to pay her rent and unable to purchase prescription medication for high blood pressure. [ 10 ] TD Canada Trust paid $2,103.78 to the Clerk of the Court on August 15, 2016. As the plaintiff was the only judgment creditor, in due course those funds would have been paid out to the plaintiff. [ 11 ] Ms. Lalonde filed a consumer proposal on August 22, 2016 with Bromwich & Smith Inc. being the administrator under the proposal.

Bromwich & Smith Inc. notified the Clerk’s office, who then declined to pay the funds out to the plaintiff.

Analysis [ 12 ] The purpose of a consumer proposal is to provide debtors with an opportunity to compromise their debts, and hopefully to be able to make orderly payments which, in the end, will result in their creditors receiving more than if the debtor was forced into bankruptcy. [ 13 ] It is implicit in proceedings under the BIA that creditors of equal rank are to be treated on a pari passu basis. [ 14 ] In my view, there is no justifiable basis for allowing the plaintiff to carry on realizing on its judgment, and thus obtain a priority over other creditors of equal rank. [ 15 ] So far as prejudice is concerned, it is understandable why the plaintiff is concerned. [ 16 ] When a stay results from a bankruptcy, the debtor’s exigible property vests in the trustee for the benefit of all creditors. [ 17 ] When a stay results from a proposal, the debtor’s property does not vest in the administrator and may not, in the end, benefit the enforcement creditor even on a pari passu basis. [ 18 ] Given the efforts which the plaintiff made here to realize on its judgment, I think it appropriate that the garnisheed funds be distributed to the administrator in trust that they only be used for either fees of the administrator, payments under an accepted proposal, or trustee’s fees if the proposal is unsuccessful and bankruptcy results, and I so order.

Heard on the 11 th day of October, 2016. Dated at the City of Calgary, Alberta this 17 th day of October, 2016.

J.T. Prowse M.C.C.Q.B.A. Appearances: John P. Roggeveen for the Plaintiff Bromwich & Smith Inc. for the Defendant Lalonde