Mallory (Re), 2013 BCSC 202

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Mallory (Re), 2013 BCSC 202 Date: 20130208 Docket: 12 1701 Registry: Victoria In the Matter of the Bankruptcy of Douglas John Scott Mallory Before: Master Bouck (Sitting as Registrar in Bankruptcy) Reasons for Decision Counsel for the Applicant: H. Wellman Counsel for Attorney General of Canada on behalf of Her Majesty the Queen in Right of Canada as Represented by the Minister of National Revenue: C.L. Eames Counsel for Ministry of Justice, Legal Services Branch: S. Davis Place and Date of Trial/Hearing: Victoria, B.C.

December 17, 2012 Place and Date of Judgment: Victoria, B.C. February 8, 2013 The Application [ 1 ] Mr. Mallory seeks a declaration that any obligation to re-pay student loans received between 1997 and 2001 was extinguished upon his discharge from bankruptcy. That discharge order was granted on May 2, 2009. [ 2 ] The application is opposed by both lenders, British Columbia Student Loans (“BCSL”) and Canada Student Loans (“CSL”). [ 3 ] The relief sought concerns the application of s. 178(1)(

g) of the Bankruptcy and Insolvency Act, R.S.C. c. B-3 and amendments thereto (the “ BIA ”). The legal arguments made at this hearing mirrored those discussed in Dreger (Re), 2013 BCSC 200 , but with some additional submissions found in the written notice of application and responses. [ 4 ] In contrast to the application in Dreger (Re) , however, the applicant does not seek to be relieved of his student loan obligations pursuant to s. 178(1.1) of the BIA (commonly referred to as the “Hardship” provision). Facts [ 5 ] Mr.

Mallory attended the University College of the Cariboo (“UCC”) between September 1997 and June 2001. He received a Bachelor of Arts degree at the conclusion of those studies. The studies were financed by monies received from both CSL and BCSL. Mr. Mallory estimates that he received a total of $38,000 in loans during the course of these studies. [ 6 ] According to BCSL records, Mr. Mallory was advanced the sum of $3,536 on each of December 29, 2000 and December 24, 2001 related to his enrolment at UCC. [ 7 ] Like the applicant in Dreger (Re) , Mr.

Mallory wanted to become a teacher. [ 8 ] From September to December 2001, Mr. Mallory attended the University of Victoria (“UVic”) in an effort to “raise [his] GPA to get into the teaching program”. Mr. Mallory withdrew from UVic on January 15, 2002. [ 9 ] On January 2, 2002, less than two weeks before his withdrawal, a further $3,536 was advanced to Mr. Mallory by BCSL. [ 10 ] On July 9, 2002, Mr. Mallory entered into an agreement with CSL requiring the repayment on the principal balance of $10,608 by instalments commencing August 31, 2002.

[ 11 ] On or about November 4, 2002, Mr. Mallory executed a consolidation agreement with BCSL. As the name suggests, the agreement provides that the two advances noted above were to be consolidated for the purposes of repayment. The repayment was to commence “30 days from the first day of the seventh month following the Period of Study End”. The agreement stipulated that date to be November 30, 2002. [ 12 ] Following his withdrawal from UVic, Mr. Mallory entered the workforce where he remained for approximately four years. During this period, Mr.

Mallory received interest relief on all of his student loans. [ 13 ] Mr. Mallory entered the Bachelor of Education program at UVic in September 2006 and graduated with the sought after degree in June 2008. [ 14 ] Student loans were once again acquired to assist in this endeavour. Monies were advanced by BCSL in January and September 2007 and February 2008, and by CSL in September 2006, June and September 2007 and also February 2008. [ 15 ] Mr. Mallory estimates receiving about $20,000 in student loans during this two-year period. [ 16 ] Unfortunately, Mr.

Mallory was unable to secure a regular teaching job and was soon unable to meet his expenses as they came due. [ 17 ] An assignment into bankruptcy was made on August 1, 2008. The student loan debt (about $54,000), represented 60% of Mr. Mallory’s total unsecured liabilities. In addition to the student loans, Mr. Mallory owed more than $25,000 in consumer credit and was in arrears to the Medical Services Plan of B.C. [ 18 ] As noted, Mr. Mallory was discharged from bankruptcy on May 2, 2009. No creditors opposed the discharge. [ 19 ] Mr.

Mallory assumed that his student loans received between 1997 and 2001 were extinguished upon this discharge order. However, that was not the position of either CSL or BCSL who apparently began collection efforts after May 2009. [ 20 ] Mr. Mallory then turned to his former trustee for advice. The trustee contacted CSL. After some delay, CSL eventually confirmed its position that these earlier student loans were not discharged as there was a “passive consolidation” between the loans and the borrowings made in 2005. In those circumstances, Mr. Mallory’s loans could not be extinguished under s. 178 (1)(

g) of the BIA . [ 21 ] Further communication ensued between Mr. Mallory’s counsel and the lenders’ counsel, resulting in this application being brought before the registrar. [ 22 ] Mr. Mallory has made no repayments whatsoever on his student loan debt. Discussion [ 23 ] The statutory authority upon which this application depends is as follows: 178.

(1) An order of discharge does not release the bankrupt from ... (

g) any debt or obligation in respect of a loan made under the Canada Student Loans Act , the Canada Student Financial Assistance Act or any enactment of a province that provides for loans or guarantees of loans to students where the date of bankruptcy of the bankrupt occurred ▪ (

i) before the date on which the bankrupt ceased to be a full- or part-time student, as the case may be, under the applicable Act or enactment, or ▪ (ii) within seven years after the date on which the bankrupt ceased to be a full- or part-time student; or [ 24 ] As stated in Dreger (Re) , the parties agree that the registrar has the jurisdiction to make the declaration sought. [ 25 ] As also stated in Dreger (Re) , the central issue on this application is whether there can be multiple dates on which an applicant “ceases to be a student” under s. 178(1)(g). [ 26 ] According to the Quebec Court of Appeal, there can be only one date and that is when all educational pursuits supported by student loans have concluded: Quebec (Procureur General) v.

N.P. , 2011 QCCA 726 (“ N.P. ”) That is, Mr. Mallory would not be eligible under s. 178(1)(

g) as this application is brought less than seven years after the last course of studies finished (June 2008). [ 27 ] In N.P. , the Court of Appeal reasoned that Parliament must have intended this result as it prevented students from making “opportunistic” assignments into bankruptcy to rid themselves of debt without having made reasonable use of their publicly-funded education to repay that debt: N.P. at paras. 40 and 51 . [ 28 ] According to various registrars in bankruptcy, there can indeed be multiple dates under s. 178(1)(

g) as the relevant date is that on which the applicant ceased to be a student for the purposes of the particular loan: Hildebrand (Re), 2010 SKQB 3 ; McNutt (Re), 2008 NSSC 166 ; Mortimer (Re), 2012 NBQB 109 (the “Registrars’ decisions”). [ 29 ] The issue has apparently yet to be determined in British Columbia, at least in a reported decision. [ 30 ] In Dreger (Re) , I decided that the Registrars’ decisions were more persuasive and ought to be followed. I accepted and adopted the reasoning of Registrar Schwann in Hildebrand(Re) that:

There is nothing in [s.178(1)(g)] to suggest or even imply that the date the bankrupt ceased to be a full- or part-time student must relate orconnect to the totality of his or her government student loans. ... this language supports the opposite conclusion, that is, whether a studentloan debt survives depends on when the bankrupt ceased to be a full- or part-time student in relation to that debt. [Para. 31.] [31] At the time of hearing Dreger (Re), I did not have the benefit of the written and oral submissions of BCSL. Those submissionsapproach the legal analysis of s. 178(1)(

g) from a somewhat different angle.

This observation is not intended as any criticism of counselfor CSL who appeared on the Dreger (Re) matter and brought forceful and compelling argument to both applications. [32] In that regard, it should be noted that while the hearing in Dreger (Re) preceded this application, the more fulsome responsivematerial from CSL was initially filed in this proceeding (and referred to in the Dreger (Re) submissions). [33] In Dreger (Re), I decided that stare decisis does not require deference to a decision of an appellate court of another province: atpara. 45. [34] Nor am I required by the law pronounced in Husky Oil Operations Limited v.

M.N.R., (SCC), [1995] 3 S.C.R.453 to follow N.P. on the basis that a federal statute (the BIA) should be consistently applied in all provinces and territories. [35] With respect to s. 178(1)(g), the particular legislation under which the loan is advanced dictates when an individual “ceases tobe a student”: Pyke (Re), 2005 NSSC 33 at paras. 18-20.

N.P. concerned loans advanced under a Quebec statute which differs inlanguage from that found in either the Regulations to the Canada Student Financial Assistance Act, .S.C. 1994, c. 28 (“CSFAA”) (forCSL) or the written policy for issuance of student loans by the British Columbia government. [36] In those circumstances, N.P. should not be applied uniformly to all applications under s. 178(1)(g): Collins (Re), (July 12,2012), court file no. 17795 Supreme Court of Newfoundland and Labrador. [37] However, BCSL further submits that consideration ought to be given to the French version of s. 178(1.1) of the BIA which alsouses the phrase “ceases to be a student”.

It submits that the French version of this phrase (which arguably has a different meaning thanthe English version) clearly supports the analysis found in N.P., and is “irreconcilable” with the registrars’ decisions. In thosecircumstances, the French version ought to be preferred as Parliament must have intended the phrase to have the same meaningthroughout the BIA. [38] Nonetheless, BCSL acknowledges that the French and English versions of s. 178(1)(

g) are, in fact, quite similar in meaning. [39] In my view, absent some ambiguity in the French and English versions of s. 178(1)(g), there is no basis to import the suggestedFrench

interpretation of “ceases to be a student” from another provision in the BIA. [40] Applying the CSFAA Regulations, Mr. Mallory ceased to be a full-time student after completion of his Bachelor of Arts degree:see ss. 5(3)(b), 7 and 8. This conclusion is supported by both the repayment terms and the loan consolidation agreements required by thelenders in 2002. [41] It is acknowledged that the timing of Mr. Mallory’s assignment gives the appearance of an opportunistic bankruptcy frownedupon in not only N.P. but also Cunningham (Re), 2012 NBQB 352. Nevertheless, Mr.

Mallory remains obligated to repay the loansobtained after June 2001. [42] In the result, there will be a declaration that Mr. Mallory’s government student loans received between 1997 and June 2001were discharged on May 2, 2009. “C.P. Bouck” Master C. P. Bouck