Re Bakhshi, 2021 ABQB 100

Court of Queen’s Bench of Alberta Citation: Re Bakhshi, 2021 ABQB 100 Date: 20210208 Docket: B201-472622 Registry: Calgary In the Matter of the Bankruptcy of Kirandeep Bakhshi _______________________________________________________ Reasons for Decision of the Honourable Madam Justice M.H. Hollins _______________________________________________________ Appeal from Master J.

Prowse, Registrar in Bankruptcy Dated the 30 th day of November, 2020 (Docket: B201-472622) [ 1 ] This is an appeal from the decision of a Registrar in Bankruptcy, confirming the decision of a Trustee in Bankruptcy to disallow a secured claim for failure to properly register the financing statement evidencing the secured interest. Background [ 2 ] BNA Debt Solutions (“ BNA ”) is the Trustee in Bankruptcy for Ms. Kirandeep Bakhshi. In January of 2018, Mr. Charanjit Tamber loaned Ms. Bakhshi $15,000 to purchase a 2013 Toyota Rav 4. As of November 18, 2020, she still owed Mr.

Tamber approximately $10,050. [ 3 ] At this hearing, Mr. Nykoforuk of BNA advised the court that Mr. Tamber had attended Ms. Bakhshi’s initial meeting with BNA and was told that he should register his security interest in the Rav 4 as Ms. Bakhshi was contemplating declaring bankruptcy. Mr. Tamber did so on January 9, 2019. Sometime later in 2019, Ms. Bakhshi declared bankruptcy. [ 4 ] Unfortunately, Mr. Tamber made an error in the serial number (Vehicle Identification Number or VIN) when he completed the paperwork to register his security interest.

He registered his Security Agreement against VIN#2T3RFREVXDW 003T when the proper VIN# was 2T3RFREVXDW 003777 .

[5] The Trustee took the position that Mr. Tamber’s security interest was invalid and denied his claim as a secured creditorunder s.135(2)(

c) Bankruptcy and Insolvency Act (“BIA”), RSC 1985 c.B-3 [as amended]. Mr. Tamber was notified of this disallowanceon December 17, 2019. He then deleted the existing registration and filed an Amended Security Agreement on January 3, 2020,correcting the serial number. [6] Mr. Tamber appealed the Trustee’s decision to the Registrar in Bankruptcy (s.135(4) BIA) on November 30, 2020. At thathearing, Mr. Tamber, who was representing himself, asked the Registrar to allow him to rely on the corrected registration, pleading thatit had been an honest mistake.

The Registrar responded that he regrettably had “no power to change the situation” and dismissed Mr.Tamber’s appeal. [7] It is from that decision that Mr. Tamber now appeals to this court (s.192(4) BIA). [8] This appeal is allowed. Mr. Tamber’s initial registration of his financing statement was not seriously misleading, despite theerror in the VIN. This should have been the issue put before the Registrar. However, because the issue was framed as whether or not apost-bankruptcy registration could “fix” the problem (which it could not), the Registrar failed to consider the proper legal test indismissing Mr.

Tamber’s appeal from the Trustee’s disallowance. Standard of Review [9] Appeals from a Registrar in Bankruptcy to a Justice of this Court are appeals on the record; Re Anstead, 2017 ABQB 700 atpara12. [10] The standard of review on an appeal from the Registrar is as described by Mah, J in Re Morrison, 2019 ABQB 757 at para 24: With regard to the Commercial Court's review of a Registrar's decision, I adopt the approach outlined in Sally Creek Environs Corp., Re, 2010 ONCA 312(Ont.

C.A.) at paras 68-70: • findings of fact are deserving of deference unless there is "palpable and overriding error"; • questions of law and matters of principle are reviewed on the standard of correctness; • questions of mixed fact and law lie along a spectrum between the above two standards; • an error in characterizing or considering the proper legal test to be applied attracts correctness; and • in order to interfere with a discretionary determination, the reviewing Court must find that the Registrar erred in principle or in law orfailed to take into account a proper factor or took into account an improper factor, leading to a wrong conclusion, thus permitting thereviewing Court to substitute its discretion.

New Evidence [11] Mr. Tamber also seeks to have new evidence admitted on this appeal. Because this is an appeal on the record, I am restrictedto the material that was before the Registrar on November 30, 2020 unless Mr. Tamber can satisfy the Palmer test for admitting newevidence: 1. The evidence was not initially discoverable by reasonable due diligence; 2. The evidence is relevant to a material issue before me; 3. The evidence is credible; and 4. The evidence, had it been available, could reasonably be expected to have affected the result.

R v Palmer, (SCC), [1980] 1 SCR 759; Re Morrison, supra at para 27. [12] The new evidence in question is the January 6, 2021 Affidavit of Tammy Shannon which attaches results of searches done ofthe Alberta Personal Property Registry (“PPR”). These search results demonstrate that Mr. Tamber’s initial registration would haveshown up as an inexact match for anyone searching either the correct VIN of the Rav 4 or searching for Ms.

Bakhshi by name. [13] In my view, this evidence is admissible under the Palmer test. [14] There is no question that the PPR search results are credible, being generated from a government registry that exists to provideaccurate information of this type. Further, while the search results may not be determinative of whether or not the error was seriouslymisleading (Case Power & Equipment v MST Trucking Co, 1994 ABCA 274 at paras 26-33), there is no question in my mind that thisevidence is important to answering that question. In my view, had this evidence been before the Registrar, the result of Mr.

Tamber’sappeal from the Trustee’s disallowance could reasonably be expected to have been different. [15] While Mr. Tamber could have conceivably obtained a PPR search result before November 30, 2020, he was self-represented

at that point. I accept that he was acting in good faith and attempting to pursue his claim diligently. He was simply unaware that he could argue that the initial registration was valid because it was not seriously misleading, despite the error.

Was the Registration Seriously Misleading? [ 16 ] The Personal Property Security Act , RSA 2000, c.P-7, s.43(6) and (7) operate together to invalidate the defective registration of a financing statement in the Personal Property Registry when, and only when, that defect or error is “seriously misleading”. [ 17 ] As our Court of Appeal has said: ...not every error invalidates, nor even every misleading error. Only seriously misleading ones do. That is strong language.

It should not be watered down or limited to trivial faults; Case Power & Equipment, supra at para.21. [ 18 ] The New Brunswick Court of Appeal described the “seriously misleading” test thus: An error in a financing statement, tied to either the debtor’s name or the serial number of collateral, is “seriously misleading” if a search using the correct information fails to reveal an exact or close match. It is expected that a search that offers a list of close approximations, may well trigger an obligation on the searcher to conduct further searches.

The question is whether the reasonable searcher would ignore the close matches or pursue at least those which are so similar that it would be imprudent for the reasonable person to ignore them; GMAC LeaseCo Ltd v Moncton Motor Home & Sales (Trustee of) , 2003 NBCA 25 at para.98. [1] [ 19 ] The search results attached to Ms. Shannon’s Affidavit show that, notwithstanding the error in the VIN number used to register Mr. Tamber’s Security Agreement, a search of Ms.

Bakhshi’s name shows both the original erroneous registration (ending in 003T) and the amended registration (ending in 3777), both registered against a 2013 Toyota Rav 4. More importantly, a search of the Rav 4 itself turns up the erroneous registration as an “inexact match”. [ 20 ] At worst, these results would prompt a reasonable person to inquire further as to Mr. Tamber’s interest in the Rav 4; Toyota Credit Canada Inc. v Fauvelle (Trustee of) , 2017 MBQB 179 at para 24 . Therefore, it cannot be said that the error in the VIN number in Mr.

Tamber’s original registration of his financing statement was so seriously misleading that it invalidated his secured claim at that date of Ms. Bakhshi’s bankruptcy. [ 21 ] When Mr. Tamber asked the Registrar to accept his post-bankruptcy registration, the Registrar understandably assumed there was no valid registration at the date of bankruptcy. Neither Mr. Tamber nor the Trustee advised the Registrar that, at the date of bankruptcy, Mr.

Tamber had a financing statement registered that, while containing an error, could still be valid under s.43(7) PPSA . [ 22 ] It is not known whether the Trustee considered the validity of the initial PPR registration in light of the “seriously misleading” test but if so, that was not included in the Notice of Disallowance nor raised with the Registrar. While this is all likely simply the unfortunate result of a self-represented litigant not knowing how to frame the legal issue, it now results in an appealable error because the Registrar did not consider the proper legal test. [ 23 ] The appeal is allowed.

Even though the original registration was later deleted by Mr. Tamber, it was there and valid on the date of the bankruptcy. If there was any other reason to have disallowed his secured claim besides the error in the original registration, the Trustee may notify me with a copy to Mr. Tamber. Otherwise, BNA is directed to finalize Ms. Bakhshi’s bankruptcy on the basis that Mr. Tamber’s secured claim is valid. [ 24 ] As the Trustee took no position on this appeal, there will be no costs awarded. The Court would like to express its thanks to counsel who assisted Mr. Tamber on this appeal.

Heard on the 14 th day of January, 2021. Dated at the City of Calgary, Alberta this 8th day of February, 2021. M.H. Hollins J.C.Q.B.A. Appearances:

Mr. Curtis Wolff for the Appellant, Mr. Charanjit S. Tamber Mr. Barry Nykyforuk for the Respondent, BNA Debt Solutions (taking no position)