Melgaard (Re), 2016 ABQB 620

Court of Queen’s Bench of Alberta Citation: Melgaard (Re), 2016 ABQB 620 Date: 20161107 Docket: BE01 422922 Registry: Calgary Between: In the Matter of the Bankruptcy of Neil Peter Melgaard _______________________________________________________ Memorandum of Decision of J. Farrington , Registrar in Bankruptcy _______________________________________________________ [ 1 ] This is an application by the bankrupt Neil Peter Melgaard for his discharge.

As is occasionally the case, there has been an ongoing tension and frustration between the trustee’s desire and need for further financial information, and the bankrupt’s belief that sufficient information has been provided in response to the trustee’s inquiries. [ 2 ] The bankrupt made his assignment on October 27, 2010. The trustee was Bromwich & Smith Inc. It was discharged on March 11, 2015, leaving the bankrupt undischarged. [ 3 ] The bankrupt appeared in Court on a number of occasions on a self-represented basis to have his discharge application heard.

On the previous appearance before me there were service difficulties. Those have now been resolved and I heard the application on October 18, 2016. [ 4 ] The former trustee’s position is that the bankrupt ought to be prohibited from applying for his discharge for five years while the rights of creditors remain reinstated. I indicated during argument that I thought that position was excessively harsh. [ 5 ] I reserved my decision so that I could carefully review all of the materials, including some of the previous affidavit material filed by the bankrupt.

I have now completed that review. [ 6 ] Trustees have substantial experience in bankruptcy matters, and when they ask for material, it is generally for good reason.

In most instances, material requested by a trustee ought to be provided.

Section 158 of the Bankrupcty and Insolvency Act , RSC 1985, c. B-3 sets out the duties of a bankrupt. Among other things, those duties include: (

e) make or give all the assistance within his power to the trustee in making an inventory of his assets; (

k) aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors; (

o) generally do all such acts and things in relation to his property and the distribution of the proceeds among his creditors as may be reasonably required by the trustee, or may be prescribed by the General Rules, or may be directed by the court by any special order made with reference to any particular case or made on the occasion of any special application by the trustee, or any creditor or person interested; and [ 7 ] If material requested by a trustee is not promptly provided, the reasons should clearly be explained by the bankrupt to the trustee.

If an agreement cannot be reached, the bankrupt should clearly explain his or her reasons to the Court at an early available opportunity. There are usually many opportunities to resolve differences. Compelling order applications and trustee discharge applications are two such opportunities. While there can sometimes be valid reasons for not providing material, they must be articulated by the bankrupt so that they can be resolved.

Ignoring the matter compounds any difficulties. [ 8 ] A bankrupt should remember that in most cases the simplest way to proceed to their discharge hearing and conclude their bankruptcy is to comply with their duties under the Bankruptcy and Insolvency Act , including answering reasonable inquiries of the trustee. [ 9 ] In this case the trustee raised some questions about the bankrupt and his financial affairs. The concerns included questions about whether the bankrupt had an interest in an ongoing business in which the bankrupt had said he had no further involvement.

There were also questions about a 2006 Searay 200 Sundeck boat which the bankrupt says was owned by his deceased spouse. Additionally, there were questions about the estate of the bankrupt’s wife (who passed away in May 2010), and a copy of her will was requested. There were also monthly report issues. None of those requests appear to have been onerous, or difficult to answer, or out of the ordinary. [ 10 ] I have reviewed carefully the material on the Court file and the tax information provided by the bankrupt.

I find that the tax income information provided now answers any concerns about surplus income. [ 11 ] The bankrupt’s response on the Sea Ray boat was not particularly helpful. He showed a bill of sale purportedly made one month before his wife’s death transferring the boat from his late wife to the bankrupt’s brother. The bill of sale is vague as to the consideration and terms involved. In addition, somewhat inconsistent information has been provided. The bankrupt’s affidavit of May 3, 2012 suggests that the boat was sold by his late wife to his brother.

The bankrupt’s July 2, 2013 affidavit says that the boat was transferred in trust to his brother for the bankrupt’s young daughter. The bill of sale makes no mention of trust arrangements, and the story appears to have changed between the two affidavits. [ 12 ] The bankrupt does not, from what I can see in his materials, ever answer the trustee’s request for matters pertaining to his late wife’s estate. It may be that there was no significant inheritance, but the trustee’s request was a simple one. The trustee requested a copy of the will. If there was a will it ought to have been provided.

If there was not a will, a direct response on the question, ought to have been provided. There is no indication in the materials that a response was provided. The trustee was simply trying to satisfy itself that there was no significant inheritance. [ 13 ] The simplest way to deal with concerns raised by a trustee on a discharge application is to directly answer each of the concerns in the affidavit filed in support of the application. [ 14 ]

Section 192 of the Bankruptcy and Insolvency Act provides: 192

(1) The registrars of the courts have power and jurisdiction, without limiting the powers otherwise conferred by this Act or the General Rules, (

g) to summon and examine the bankrupt or any person known or suspected to have in his possession property of the bankrupt, or to be indebted to him, or capable of giving information respecting the bankrupt, his dealings or property; [ 15 ] In my view, this is an appropriate case for an examination under s. 192 (g). The trustee has been discharged, and ought not to be put to the expense of attempting to deal with any unanswered questions in the bankruptcy further. The bankrupt’s materials do not specifically address some of the outstanding issues which have been raised by the trustee.

As a result, I direct that the bankrupt appear before me on January 17, 2017 at 10:00 am for the continuation of his discharge hearing. At that time, I intend to question the bankrupt under oath pursuant to section 192(1) (

g) of the Bankruptcy and Insolvency Act , and thereafter I will deliver a decision on the bankrupt’s discharge application. [ 16 ] In order that the bankrupt not be taken by surprise, I confirm that the questions that I will ask will pertain primarily to gathering a further understanding about the boat and the estate of his late wife. If the bankrupt has any documents that would shed further light on those issues, he is directed to bring them to the continued discharge hearing.

The former trustee is of course welcome to attend. [ 17 ] It is in the interests of the bankrupt and his former trustee that this matter be concluded. I cannot, however, conclude the discharge application without questioning the bankrupt on these two issues, as it is essential that the integrity of the bankruptcy process be preserved. [ 18 ] I add that it may be that the outstanding information has not been addressed in the self-represented bankrupt’s affidavits because he did not realize the necessity of doing so, or it may be that the issues have been intentionally avoided.

I reserve any comment in that regard until I have more information.

[ 19 ] Finally, I want to emphasize that this procedure is not appropriate for every case, and it is not a substitute for an affidavit that properly addresses the issues on the discharge hearing. It arises from the unique facts of this case where the trustee and the bankrupt are particularly at odds, and the necessary range of inquiry on the outstanding matters is narrow and focused. Heard on the 18 th day of October, 2016. Dated at the City of Calgary, Alberta this 4 th day of November, 2016. J. Farrington Registrar in Bankruptcy Appearances: Appearances: Bromwich & Smith Inc. Heide MacAlister Neil Peter Melgaard Self Represented Litigant