Aikens (Re), 2021 ABQB 891

Court of Queen’s Bench of Alberta Citation: Aikens (Re), 2021 ABQB 891 Date: 20211108 Docket: BK03 104484, 4803 167344 Registry: Edmonton In the Matter of the Bankruptcy of Lawrence Albert Aikens _______________________________________________________ Endorsement of W.S. Schlosser , Registrar in Bankruptcy _______________________________________________________ [ 1 ] This is a dispute about the sale of a matrimonial property Counterclaim, following Mr. Aikens’ assignment into bankruptcy. Cases and Authorities cited by the Parties 1. Bankruptcy and Insolvency Act RSC 1985 c.B-3 ( BIA ); 2.

Alberta Rules of Court AR 125 210, r 4.34; 3. Matrimonial Property Act RSA 2000, c. M-8 ; 4. Marino (Re) , 2019 ABQB 903 (Prowse, M); 5. Carlson v Carlson , 2012 ABCA 173 ; 6. Long v Brisson , 1992 ABCA 184 ; 7. Kopr v Kopr , 2006 ABQB 405 (paras. 19-23 ); 8. Wallace v United Grain Growers , [1977] 3 SCR 701 ; 9. Daemore v Von Windheim , 2011 BCSC 437 (paras. 20-21 ); 10. Robin Wright v Guardian Insurance Company of Canada , 1995 BCWLD 2910 ; 11. Johnson v Fischer , 2020 ONCA 613 (paras. 2-4 );

12. Briggs v Orlowski , 2017 ABQB 724 (paras. 16-21 ); 13. Johansson v Fevang , 2009 ABQB 573 (paras. 12-14 ); 14. Caskey (Re) (Bankrupt) , 1999 ABQB 1065 (para. 5 ); 15. Thompson v Coulombe , 1984 Carswell Quebec 38 (para. 13); 16. R.E.S. v Boan , 2005 SKQB 45 . Cases and Authorities cited by the Court Stout (Estate of) v Golinowski (Estate of) , 2002 ABCA 49 ; 2019 Annotated Bankruptcy and Insolvency Act , Houlden, Morawetz, Sarra, Thompson Reuters (“HM&S”), Alberta Rules of Court 3.58, 3.59. Facts [ 2 ] Mr. Aiken assigned into bankruptcy on September 30, 2003.

A conditional order was granted in 2004 but it was not complied with. Mr. Aiken’s Trustee was discharged in June 2006. Mr. Aiken’s bankruptcy then languished in that twilight zone reserved for undischarged bankrupts without a Trustee. [ 3 ] Mr. Aiken became romantically involved with Ms. S. They were married in October 2008. Unhappy differences developed in their relationship and the parties separated sometime between June 2012 and November 2013. [ 4 ] Ms. S filed a Statement of Claim for Divorce and Division of Matrimonial Property in March 2014. Mr. Aiken defended and counterclaimed in April of that year.

Divorce relief was granted in October 2018 but the division of matrimonial property remains. [ 5 ] Mr. Aiken’s Counterclaim in the matrimonial action sought a remedial constructive trust that would effect equal distribution of the matrimonial assets. [ 6 ] The Trustee considered Mr. Aiken’s Counterclaim in the matrimonial property action to be an asset of the estate and put the Counterclaim up for sale. Ms. S offered $10,000.00. Mr. Aiken offered $5,000.00 down and $15,000.00 from what he might recover. The Trustee took out an application under s. 30 of the BIA expecting to sell it to the highest bidder.

The sale was provisionally allowed. Ms. S contests the sale to Mr. Aiken arguing ( inter alia ) that the Counterclaim is a nullity and it is now too late to advance this claim. [ 7 ] I have had an opportunity to review the pleadings and the submissions of the parties. I have also reviewed the matrimonial file. The property that is subject to the matrimonial property action and which now is in dispute is as follows: 1. A 21-year-old Jeep Cherokee, likely of nominal value. 2.

A vacation/retirement house in Nevada purchased by the Plaintiff in her name during the marriage for $150,000.00 USD and sold just after separation for $165,000.00 USD. There is no indication of net value. Mr. Aiken apparently relinquished any claim to this property as a condition of the purchase. This property was apparently purchased by Ms. S with funds received from an inheritance prior to the marriage. 3. An Edmonton home in Ms. S’s name purchased with an inheritance before the marriage. The home was bought for $440,000.00 and had a mortgage of $330,000.00.

A realtor provided a CMA estimating its value to be $450,000.00 as at June of 2019. The house is now sold and the net sale proceeds are being held in trust. Mr. Aiken lived alone in the house rent-free for roughly 13 months after separation. Ms. S apparently paid for the mortgage, taxes and utilities and her own rental accommodation post-separation. She apparently also paid Mr. Aiken $4,000.00 to move out. 4. A rental condominium purchased in the name of Ms. S’s company prior to the marriage. Analysis [ 8 ] The issue is generated in part by r 3.58, which states: “A counterclaim is an independent action”.

As such, the Counterclaim (arguably) represents a chose in action which, in turn, is a species of property, in this case, caught by s 67(1)(

c) of the BIA ; being property acquired or devolved upon the bankrupt before discharge. As such, a Counterclaim or the chose in action that it represents, belongs to the Trustee, not the bankrupt (s 71 BIA ), until otherwise disposed of. [ 9 ] Ms. S argues that the Counterclaim by Mr. Aiken is an action commenced by an undischarged bankrupt with respect to something he has no right to. As such, she argues, it should be treated as a nullity ( Long, Wallace, Daemore, Robin Wright, Johansson and see “HM&S”, F § .1 and F § .2.

She argues that it cannot now be saved, being outside the two-year limitation under the Matrimonial Property Act . Ms. S further argues that while this Counterclaim might have been offered to creditors of the bankrupt’s estate under s 37 or 38 BIA , it cannot be offered to the bankrupt. [ 10 ] Mr. Aiken argues that I should resist a finding of a nullity ( Kopr at paras. 19-23 per Slatter (then) J and Stout Estate ). He

argues that s 30 of the BIA permits the sale of property to a bankrupt as would be the case if a bankrupt purchased any non-exempt asset. The Trustee’s application to affirm the sale was brought under s 30(1)(

a) of BIA . [ 11 ] Matrimonial property actions are not something that would normally lend themselves to purchase and sale. To evaluate the various arguments put forth by Ms. S and Mr. Aikens, it is necessary to look at the substance of the pleadings. [ 12 ] Both the claim, the defence and the Counterclaim seek equal division of the matrimonial property. The main issue centers on what starts out being exempt and, correspondently, the value of any benefit or advantage from this property over the course of the marriage. Ms.

S seeks to have these various properties declared to be exempt which, having been brought into the marriage, or purchased with an inheritance received prior to the marriage would appear to be the starting point. Mr. Aikens wishes to have his contributions to this property over the course of the marriage taken into account along with return of the Jeep. [ 13 ] A claim for setoff could formerly only be claimed by way of counterclaim (old r 93). Setoff may now be claimed in a defence (r 3.59). Thus, what appears to be a free-standing claim to property Mr.

Aiken’s ex-wife claims to be exempt, is primarily a shield against her bid for unequal distribution in her favor by way of the exemptions. [ 14 ] It is understandable that an ex-wife might wish to purchase the contentious portions of her ex-husband’s defence in a contested matrimonial property action, but her offer is in substance, really only a partial settlement offer. [ 15 ] I do not know how the Trustee has valued the matrimonial property, which would be caught by s 67 as well. My quick review of the facts on the matrimonial file is that if Ms. S is correct about the exemptions, the potential value of Mr.

Aiken’s interests in these properties (except for the Jeep) is much less than 50-50. By his Counterclaim, Mr. Aikens is really resisting an effort to use the exemptions to bring his interest close to zero. In other words, from Mr. Aikens’ perspective, it is not really a question of going up from 50 percent, but how much less than equal division he might be entitled to if the exemptions claimed by Ms. S hold up. As such, the Counterclaim is essentially a request for setoff that could have been made by way of defence.

Despite the form it is not really a saleable commodity. [ 16 ] The Counterclaim, being essentially a claim for setoff and a defence is not a claim by an undischarged bankrupt in respect of property that he no longer owns because it has passed to the Trustee. It is the substance that matters not the form. [ 17 ] I make no finding about what the proper division should be but it seems to me that Mr. Aiken has very little prospect of getting more than equal division and a much greater prospect of getting less. Disposition [ 18 ] The sale to Mr. Aiken of the Counterclaim is not permitted.

The $5,000.00 deposit paid by the bankrupt is to be returned, or credited against his obligations to the estate. Dated at the City of Edmonton, Alberta this 5 th day of November, 2021. W.S. Schlosser M.C.Q.B.A. Appearances: Faber Inc. Trustee in Bankruptcy Barry King, Strathcona Law Group for Ms. S Kevin Peddie, for the Bankrupt, Lawrence Albert Aikens