Burkhard (Re), 2020 NSSC 241

SUPREME COURT OF Nova Scotia IN BANKRUPTCY AND INSOLVENCY Citation: Burkhard (Re) , 2020 NSSC 241 Date: 20200914 Docket: No. 43577 Registry: Halifax Estate Number : 51-2467887 In the Matter of: The bankruptcy of Nicola Erica Burkhard Judge: Raffi A.

Balmanoukian, Registrar Heard: August 20, 2020, in Kentville, Nova Scotia Final Written Submissions: September 4, 2020 Counsel: Kristi Neilsen, for the Trustee, Grant Thornton Limited Nicola Erica Burkhard, personally (by teleconference) Balmanoukian, Registrar: [ 1 ] This case provides an opportunity to update the exemption regime in place in Nova Scotian bankruptcies, as it pertains to motor vehicles. [ 2 ] In Re Godbout, 2019 NSSC 315 , I attempted to analyze the various permutations in which a bankrupt may find her or himself, depending on their work, their location (and availability of public transit), the value of the vehicle in question, and whether or not there was valid or invalid security.

The result was a rather labyrinthine set of outcomes, on which I opined at para. 22: [22] That can lead to incongruous results. The bankrupt debtor who has a vehicle “free and clear” worth $2,999 can keep it in full but one with a vehicle worth $3,001 might not, or may have to pay all $3,001 (depending on where s/he lived and the vehicle’s use).

A debtor subject to valid security of $10,000 on an $11,000 car would only need to pay $1,000 to his estate (and of course the $10,000 loan); but if the security is invalid, s/he would have to surrender the vehicle or pay $11,000 because a creditor (for example) omitted a middle name or got a serial number transposed in the filing. And the rural, working debtor with a $40,000 vehicle owned outright, and used for the purposes noted in s. 59(3) (

b) PPSA , gets $6,500 to do with as s/he pleases, presumably with the object of obtaining more modest transportation. [ 3 ] Section 59(3)(

b) of the Personal Property Security Act , SNS 1995-6, c. 13, provides for an exemption against a secured creditor, including a receiver (in this case, the Trustee) and exempts: (

b) one motor vehicle having a realizable value of not more than six thousand five hundred dollars at the time the claim for exemption is made, or not more than any greater amount that may be prescribed, if the motor vehicle is required by the debtor in the course of or to retain employment or in the course of and necessary to the debtor’s trade, profession or occupation or for transportation to a place of employment where public transportation facilities are not reasonably available ; [emphases added] I referred to this in Godbout as the “work exemption.” [ 4 ] I concluded after setting out the matrushka-nested matrix that resulted: [23] Nevertheless, those anomalies are for the Court neither to make reply nor reason why.

Any reconciliation of these consequences, unintended or otherwise, is for the Legislature. [ 5 ] As luck – or Murphy’s Law – would have it, about two weeks later, the $3,000 vehicle exemption then in place under the Judicature Act , RSNS 1989, c. 240, s. 45(1) (f), was amended by NS OIC 2019-278, to increase the base exemption to $6,500 ( Value of Chattels Exempt from Seizure Regulations , NS Reg. 162/2019 ), effective October 1, 2019 (the “tools of trade” exemption was also increased from $1,000 to $6,500). [ 6 ] That amendment does not assist Ms.

Burkhard; in my view, it is neither retroactive nor retrospective, and Ms. Burkhard’s

insolvency date is January 28, 2019. [ 7 ] The amendment does, however, considerably simplify the automotive exception/exemption rules in Nova Scotia, going forward. In essence, it eliminates the “$3,000.01 to $6,500” category I discussed in Godbout . Were I to set out the rules today for a post-October 1, 2019 filing, paragraph 20 of that decision would read (using the nomenclature as to “work,” “PMSI,” “valid security,” etc. that I defined earlier in that decision, and to which reference should be made for clarity): 1. Vehicle under $6,500 a. Security? i.

Yes, and valid – vehicle exempt subject to rights of secured creditor ii. Invalid security? If so, no exemption b. No security - exempt 2. Vehicle $6,500.01+ a. Valid security? i. Yes A. PMSI? I. Yes – no exemption II. No – no exemption but $6,500 payable to debtor if vehicle seized b. Invalid security – no exemption c. No security A. PPSA 59(3)(b) “work” exemption? I. Yes - $6,500 payable to bankrupt if seized or surrendered – Trustee has obligation to realize on the asset II.

No – No exemption [ 8 ] Here, the debtor’s vehicle is worth approximately $5,300 and was owned “free and clear” at the time of her filing (I note that the Trustee listed this as $4,477, being “black book less 15%.” That is a methodology of which I disapprove. “Black Book” represents wholesale values and in my view, deducting further from that is ordinarily a “discount on a discount” and does not reflect “realizable value” within the meaning of the PPSA. I have grossed up accordingly). [ 9 ] Therefore, Ms. Burkhard would have an exemption today under my paragraph 1.b above without further inquiry.

But, she does not have that exemption as of the date of her filing because the exemption at the time was $3,000 not $6,500. (I note that she has two other motor vehicles – one fully secured, and a tractor in which she has a partial interest and in which she has or is in the process of paying its value into the estate). [ 10 ] She would not have an exemption in January 2019 unless she required the $5,300 vehicle (a) “in the course of or to retain employment” OR (b) “in the course of and necessary to the debtor’s trade, profession or occupation,” OR (

c) to work in a “place of employment where public transportation facilities are not reasonably available” (PPSA 59(3)(b)). [ 11 ] Ms. Burkhard lives in Nova Scotia’s picturesque Annapolis Valley. Of its many splendours, public transportation is not one of them, in her specific locale. She is gainfully employed. [ 12 ] Accordingly, she has an exemption of $6,500 under the 59(3)(

b) PPSA , although not under s. 45 of the Judicature Act as it was in effect at the time of her bankruptcy . [ 13 ] I reiterate, for clarity, my comments at paragraph 10 or Godbout: There is no “equity exemption” to bring a vehicle within this provision. Thus, a bankrupt with a vehicle worth $3,500 with a $1,000 encumbrance (or a $52,500 vehicle with a $50,000 encumbrance) has a $3,500 or $52,500 vehicle, not a $2,500 “net” vehicle. [ 14 ] The trustee is to recalculate the amount, if any, payable by the debtor to her estate in accordance with this decision. Any overpayment is to be refunded.

Upon being presented with those calculations, I will issue the appropriate conditional or absolute order. Balmanoukian, R.