2011 QCCA 726, 2011 QCCA 726

Québec (Procureur général) c. N.P. 2011 QCCA 726 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL NO: 500-09-019435-098 (765-02-000049-902) DATE : APRIL 14, 2011 CORAM : THE HONOURABLE ANDRÉ BROSSARD, J.A. JACQUES A. LÉGER, J.A. JEAN BOUCHARD, J.A. ATTORNEY GENERAL OF QUEBEC APPELLANT – Respondent v. N. P. RESPONDENT – Opponent And HUMAN RESOURCES OFFICER Impleaded third party / Garnishee JUDGMENT [ 1 ] THE COURT; On appeal from a decision of the Court of Quebec, District of Richelieu (the Honourable Claude H.

Chicoine), rendered on January 30, 2009, that granted the respondent’s motion in opposition and declared inoperative the appellant’s seizure by garnishment enforcing a judgment obtained against the respondent on May 29, 1991, that ordered him to repay a first student loan contracted during the 1980s; [ 2 ] Having examined the file, heard the parties and on the whole deliberated; [ 3 ] For the reasons of Léger, J.A., with which Brossard and Bouchard, JJ.A. agree; [ 4 ] ALLOWS the appeal; [ 5 ] OVERTURNS the decision rendered by the Honourable Claude H.

Chicoine, J.C.Q., on January 30, 2009, in file 765-02- 000049-902; [ 6 ] DISMISSES the respondent’s motion opposing the seizure by garnishment in the preceding file; [ 7 ] THE WHOLE with costs throughout against the respondent. ANDRÉ BROSSARD, J.A. JACQUES A. LÉGER, J.A. JEAN BOUCHARD, J.A. Mtre Daniel Benghozi BERNARD, ROY (Justice-Québec) For the appellant Mtre Robert C. Ally ALLY, MERCIER For the respondent Date of hearing: October 25, 2010

REASONS OF LÉGER, J.A. [ 8 ] The respondent contracted a first government student loan during the 1980s. Before he started to repay it, he took out a second one in 1997 to finance his return to school. In 2005, however, before he had started to repay either one of these loans, he decided to assign his property. [ 9 ] The appeal concerns the conditions required to liberate the respondent from the first loan under the bankruptcy discharge order obtained after his bankruptcy, notwithstanding the exception under paragraph 178(1) (

g) of the Bankruptcy and Insolvency Act (“ BIA ”): 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 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 within ten years after the date on which the bankrupt ceased to be a full- or part-time student ; [1] [Emphasis added] [ 10 ] Note that the respondent acknowledged both before the trial court and this Court that he was not discharged from the second student loan he contracted after resuming studies in 1997.

Therefore, only the first loan is at issue in this appeal. [ 11 ] Following the decision at trial, this Court is asked to determine the following: • When does a student cease to be a student within the meaning of the Act respecting financial assistance for education expenses [2] “ A AFAEE” ? Is it when the loan becomes payable, as affirmed by the trial judge? • How does resuming studies effect the calculation of the period before one may be released from a student debt?

In other words, are there one or several dates on which studies end? • May a student declare bankruptcy and be released from the debt contracted during the initial period of studies if ten years have passed between the two periods of study? • Finally, does a creditor have to oppose a bankrupt’s discharge in order to protect his claim where the claim is listed under

section 178 of the BIA ? [ 12 ] Naturally, the relevant statutory framework and factual background must be examined before these questions are answered. I. STATUTORY FRAMEWORK [ 13 ] It is useful to reproduce certain excerpts of the A AFAEE , the statute applicable to the exception in the BIA provision cited above. This is the statute enacted by the Quebec government to administer its student financial assistance program: 2. For the purposes of this Act, … “student” means a person who pursues studies in vocational training at the secondary level or studies at the postsecondary level ; … 23.

For the purposes of this subdivision, “full exemption period” means the period beginning on the date on which a borrower obtains a first loan or resumes being a full-time student , and ending at the end of the month in which the borrower ceases to be a full-time student or, if the borrower is in a situation provided for by regulation, at the time mentioned therein; and “partial exemption period” means the period of six months following the end of the full exemption period. (Emphasis added.) 24.

During a borrower's full exemption period, the Minister shall pay the interest on the balance of the loan, at the rate fixed by

regulation, to any financial institution which has made a guaranteed loan. During the borrower's partial exemption period, the borrower must pay the interest on the balance of the loan at the rate fixed by regulation. At the end of this period, any interest not paid by the borrower shall be capitalized. Despite the second paragraph, the interest on the portion of the loan repaid pursuant to

section 22 shall be borne by the Minister. 25. The borrower must begin to reimburse his loan to the financial institution in accordance with the terms and conditions prescribed by regulation when his partial exemption period expires or, if he is in a precarious financial situation within the meaning of the regulation, from the time and in accordance with the terms and conditions prescribed by regulation. … 28. The Minister shall reimburse to any financial institution the losses in principal and interest resulting from a guaranteed loan. 29. The Minister is subrogated by operation of law in the rights of a financial institution to which he makes a repayment under

section 27 or 28. However, subrogation does not take place if the borrower dies during the full exemption period. 30. Recovery of an amount owed shall be prescribed by five years from the time it becomes payable. However, the prescription shall be interrupted if the debtor resumes his studies on a full-time basis. … 43. The following persons are not eligible for financial assistance for studies in vocational training at the secondary level or for studies at the postsecondary level: (1) a person who, pursuant to

section 29, must repay a loan amount, as long as this amount has not been repaid, unless the person has made an agreement with the Minister with respect to repayment terms and conditions or has been informed of the Minister's intention to recover the amount from the amount of any future financial assistance; … (Emphasis added.) II. FACTUAL BACKGROUND [ 14 ] While a student between 1980 and 1986 the respondent applied for, and obtained, a first student loan from a financial institution totalling $10,805.

The loan was guaranteed by the Government of Quebec in accordance with the Student Loans and Scholarships Act . [3] [ 15 ] Under the respondent’s loan agreement with the financial institution, he was to start repaying the loan once the exemption period expired on July 1 st 1987, which he never did.

Consequently, on November 15, 1989, the Minister for Employment and Social Solidarity (the “Minister”) had to repay the financial institution in question, thereby becoming subrogated in the latter’s rights. [4] [ 16 ] Shortly thereafter, the Minister instituted an action for recovery against the respondent and obtained judgment on May 29, 1991, ordering the latter to repay the total loan in question.

Even though the order was made on a confession of judgment, and despite the subsequent steps taken by the Minister to enforce it, the latter has never been able to recover anything since. [ 17 ] Some years later, in 1997, the respondent decided to go back to school. He wished to finance his studies with a second loan. Therefore, in accordance with subsection 43(1) of the AFAEE , first had to sign an agreement with the Minister to establish his eligibility for student financial assistance and then sign an acknowledgment of debt in the Minister’s favour in the amount of $20,040.95. AFAEE .

He undertook once again to repay the loan at the end of this second period of study. Lastly, the Minister interrupted its recovery measures and suspended the calculation of interest on the respondent’s first loan for the entire time it would take to complete this new degree. [ 18 ] The respondent went back to school between January 17, 1997, and December 20, 2000, obtaining a second loan to finance his studies after fulfilling the above-mentioned conditions..

The respondent failed to respect his undertaking to start repaying after his studies were completed, and once again the Minister had to indemnify the financial institution in question, becoming subrogated once more in the latter’s rights. [ 19 ] Starting in 2001, the Minister vainly tried to recover the respondent’s student loans.

On February 22, 2005, the respondent finally assigned his property and applied for and obtained an order of discharge from his bankruptcy within the period prescribed in the BIA , unopposed by the Minister. [ 20 ] The appellant continued recovery proceedings and, on July 16, 2008, obtained an order for seizure by garnishment against the respondent to enforce the 1991 judgment, referred to above. Shortly thereafter, the respondent presented a motion to stay the seizure by garnishment.

[ 21 ] The respondent’s motion was heard on November 27, 2008. He argues that he was discharged from the first student loan, notwithstanding the exception under the above-mentioned BIA section, as more than ten years had passed between the end of his first degree completed in 1986 and the beginning of his second one in 1997. [ 22 ] The trial judge accepted the respondent’s argument. Despite the modest sums involved, the appellant was granted leave to appeal given the legal issues and principles raised on appeal. III.

TRIAL JUDGMENT [ 23 ] As already noted, the trial judge only heard arguments regarding the first student loan. He had to determine whether the respondent ceased to be a student in 1986 or 2000, within the meaning of the exception under paragraph 178(1) (

g) of the BIA , before deciding whether to release him from his student loan debt under the bankruptcy order of discharge. If it was determined that the year was 1986, the respondent would be released from said debt as more than ten years had passed since he had “ceased to be a student… “; if the year was 2000, he would not be. [ 24 ] According to the judge, paragraph 178(1) (

g) of the BIA is clear. Referring to the AFAEE , he held that students lose this status when they terminate their full-time studies and their student loans become payable. In this case, he found that the respondent terminated his studies in 1986 and that his debt to the Minister became payable on July 1, 1987, such that a twenty year period had passed since he ceased to be a student. Consequently, the judge concluded that the exception in the above-cited BIA provision did not apply and that the respondent was discharged from the first student loan from the appellant under the bankruptcy order of discharge. [ 25 ] He noted that

section 23 of the AFAEE exempts students from repaying their loans while studying and during the following six months and covers the possibility that a borrower may “[resume] being a full-time student”. In his view, this confirms his

interpretation that the respondent must be released from his first student debt because another

interpretation would be contrary to the general objective of the BIA , which is the social and economic rehabilitation of insolvent persons. [ 26 ] In passing, the judge indicated that the appellant [ translation ] “failed” [5] to oppose the respondent’s discharge, thereby permitting him to distinguish the case law submitted by the former. IV. GROUND FOR APPEAL [ 27 ] Essentially, the question is whether ten years had passed since the respondent “ceased to be a student” or more precisely, when he ceased to be a student.

To answer this question, the Court must determine when the period started running, the effect of resuming studies on the calculation of the period and, if applicable, whether the ten years between the two study periods entitled the respondent to a discharge. V. ANALYSIS [ 28 ] The appellant argues that the judge erred in using sections 23 and 25 of the AFAEE to determine that the ”date on which the bankrupt ceased to be a student” corresponded to the date his first loan became payable. [ 29 ] He maintains that the judge’s

interpretation results in multiple possible dates when studies may end. He also points out that this can lead to incongruity given the Minister’s obligation to suspend recovery measures against a student debtor during the subsequent period of studies. Thus, one may imagine the debtor theoretically being discharged from the first contracted loan before the Minister had the opportunity to recover his claim. [ 30 ] The appellant submits that the restrictive

interpretation accepted by the judge is contrary to the legislator’s intent when it enacted the exception under the BIA provision in question, which was to reduce [ translation ] “the financial losses incurred by governments following the bankruptcy of a student to whom the government has a statutory obligation to lend. ” [6] [ 31 ] The appellant considers that the judge was not justified in stating that he should have opposed the respondent’s discharge because the relevant exception in the BIA specifically provides that “an order of discharge does not release the bankrupt from” his student debt. [ 32 ] On the other hand, the respondent distinguishes this case, arguing that more than ten years had passed from the time the degree was completed in 1986 and his resumption of studies in 1997.

He also maintains that despite the trial judge’s finding, the period started running as of the actual date his studies ended in 1986, and not when his loan became payable on July 1, 1997. Lastly, he emphasizes that paragraph 178(1) (

g) is an exception to the general principle of the BIA , which is the economic and social rehabilitation of the insolvent person. * * * 1. When does a student cease to be a student? [ 33 ] First of all, I believe the judge erred in using the date the student loan became payable within the meaning of the AFAEE to determine when the studies ended. In the overall context within which the statute was enacted, the date a student loan is payable is not relevant to determining when students lose their status.

It goes without saying that the provincial legislator grants a six month exemption period once studies have ended before they have to start repaying their loans, but nowhere is it provided that student-loan debtors retain their status as students during this period. Rather, the status of student is defined in

section 2 of the AFAEE as one who “pursues studies…”, and in this case this provision is the only one that may serve as a reference for his status. A contrario, it is obvious that students lose this status when they finally cease studying. [ 34 ] I find that the judge erred in failing to give this provision its full effect in order to understand or discern the meaning of the expression “ceased to be a student … “. Not only is it more specific for this purpose, but sections 23 and 25 of the AFAEE , on which the

judge did rely, are of no use as they only concern the management of a student loan. [ 35 ] The concept of student status within the meaning of the AFAEE cannot be related to obtaining a student loan, and there is no provision in the BIA or the AFAEE that justifies the

interpretation accepted by the judge to determine the date when studies ended. [ 36 ] With respect, in following this line of reasoning, the judge appears to confuse the concept of borrower within the meaning of the AFAEE and that of student within the meaning of the BIA . A potential result of such reasoning would be to find that in only students with a government-guaranteed student loan have student status within the meaning of the AFAEE . This is definitely not the legislator’s intent.

These sections do no more than confer an advantage on student-loan debtors who go back to school by temporarily suspending recovery measures and the correlative calculation of interest, even if the students do not contract new loans to finance the resumption of their studies. 2. Did the respondent “cease to be a student” in 1986, despite resuming studies more than ten years later? [ 37 ] Once again with great respect, I find that the judge erred in adopting an

interpretation in accordance with the principle whereby [ translation ] “the goal of the Bankruptcy and Insolvency Act is the social and economic rehabilitation of the insolvent person”, [7] as stated by my colleague Chamberland, J.A. in Tringle . [8] This principle has admittedly not changed, but it is of no use in resolving the issue here. [ 38 ] It should first be noted that the exception in the BIA provision at issue was enacted within a specific context, as my colleague Thibault, J.A. pointed out in Quebec (Attorney General) v.

Paulin : [9] [ translation ] [76] These sources reveal that the legislator’s intent was to minimize government losses due to bankrupt debtors being discharged from their student loans. [77] The means chosen by the legislator was to give government lenders an advantage by controlling the discharge of bankrupt students for a two-year period, later extended to ten years. [78] This measure was justified on two premises. The first is the fact that student loans enable beneficiaries to increase their future income.

In this context, bankruptcy should not allow them to escape their responsibilities while retaining the advantage of being educated and the associated benefit of being capable of increasing his income. [79] The second premise concerns the fact that most student loan programs include measures to make it easier for debtors in a financially critical situation to repay student debts. [80] In my opinion, the grammatical analysis and the consideration of the purpose of the Act and its context when it was enacted eliminate any doubt concerning the

interpretation of section 178(1)(

g) B.I.A. The intention was to confer a benefit on governments and prevent them from suffering losses as a result of students being discharged of their student debts, for a ten-year period after the completion of their studies.

This applied to all loans granted to students not under a statute relating exclusively to training but under any statute concerning training. [Emphasis added] [ 39 ] In adopting this, the legislator wished to reconcile, on the one hand, the legitimate objectives of government lenders who otherwise considered themselves too easily cheated and, on the other, the right of unfortunate but honest debtors to the chance to restore their economic health.

This is why this provision does not prevent the discharge of a bankrupt from a government student loan but merely defers it until the end of a suspended period. [10] Thus, the legislator’s intent is more nuanced than the trial judge understood. [ 40 ] The BIA exception is quite obviously meant to avoid, if not prevent, opportunistic bankruptcies from occurring before students actually take advantage of the intangible asset of the knowledge they acquired through their studies.

In cases of bankruptcy discharge, this statutory provision enables governments to benefit from an exceptional measure to recover student loans and thus ensure the viability of student financial assistance programs. [ 41 ] As my colleague Thibault, J.A. pointed out in the above excerpt, the exception in the BIA provision in question is, among other things, consideration for privileges conferred by the government creditor to the student, particularly those privileges provided in sections 23 to 25, previously discussed. [ 42 ] In addition, contrary to what the respondent argues, a restrictive approach is not required here just because

section 178 lists exceptions to the general principle of discharging the bankrupt. This was recently recalled by the Honourable Paul Chaput of the Superior Court in Damache. [11] He specified that this approach is contrary to the teachings of the Court in Paulin [12] whereby the general principles of

interpretation must first be used before resorting to the rules of exception, where applicable. To this effect, he cites another passage written by my colleague Thibault, J.A.: [ translation ] [34] As these authors state, the “modern principle” of

interpretation is the fundamental approach adopted by Canadian case law. It provides judges with four interpretive tools: the legislative context, the grammatical and ordinary sense of words, the function of the Act, and purpose of the Act. This fundamental rule may be completed by other interpretive elements that are not expressly listed such as: a liberal

interpretation of the governing principles, a restrictive

interpretation of exceptions, public policy considerations, etc.

[35] According to Bell Express Vu Limited Partnership v. Rex , the other principles of

interpretation — such as the strict construction of penal statutes and the “ Charter values” presumption — receive application only where ambiguity remains as to the meaning of a provision after applying the purposive approach. [36] In my opinion, the appellant and the respondent are both right and wrong. The appellant is right to refer to the modern principle of

interpretation, but is wrong to refuse to consider that an exception provision may require restrictive

interpretation if there is ambiguity. Conversely, the respondent is wrong to refuse the modern principle of

interpretation, but is right to recall that an exception provision may be interpreted restrictively. As the Supreme Court stated, the other principles of

interpretation may be used if the meaning of a provision cannot be determined using the purposive approach. [37] Therefore, if the meaning of section 178(1) (

g) B.I.A. cannot be determined through the purposive approach, the

interpretation principle for exception provisions is indicated. Conversely, where the meaning of a provision is clear after using such an approach, there is no need to apply complementary

interpretation principles. [ 43 ] A restrictive

interpretation is not appropriate here, my colleague Thibault, J.A. having concluded in Paulin [13] that the meaning of section 178(1) (

g) of BIA emerges using a purposive approach. [ 44 ] That said, we now arrive at the heart of the matter: did the legislator, in enacting paragraph 178(1) (

g) BIA , contemplate creating a multitude of dates when studies end? In my view, the answer is no. [ 45 ] The trial judge’s

interpretation, which corresponds to that of some registrars elsewhere in Canada, [14] presents some serious practical problems. Imagine a situation where a student obtains a first diploma thanks to government loans, temporarily interrupts his studies, resumes his studies on a continuous basis, and finally declares bankruptcy shortly after obtaining his second degree.

The consequence of having more than one possible date when studies end is to enable partially that which the legislator specifically sought to prohibit: opportunistic bankruptcies, declared without student actually having tried to capitalize on their education, and without the Minister having had the opportunity to recover the debt.

The legislator cannot have desired such a result. [ 46 ] I must therefore conclude that, with respect to the application of the exception in paragraph 178(1)( g ), there is only one date when studies end, and it is calculated from the time the student finally ceases to be a full- or part-time student. In my opinion, the fact that ten years passed between the two periods of study changes absolutely nothing in this case because, according to the proposed

interpretation, the respondent simply did not stop being a student in 1986. As the Honourable Gaétan Dumas correctly points out in Fontaine v. Quebec ( Ministère de l'Éducation, du Loisir et du Sport ) : [15] [ translation ] [34] Indeed, if the court may declare that there are two dates when studies end when studies are suspended for a ten-year period, using the same rule, why may it not do so if studies are suspended for only one year?

This would oblige the government to take a case- by-case approach, which is what the amendments to the Bankruptcy and Insolvency Act were meant to avoid. [ 47 ] First of all, this result may appear surprising, even unfair, but it must be noted that the Minister is a very particular lender, which explains why he benefits from such an exception. Thus, the government lender will sometimes agree to finance an insolvent individual under the AFAEE program even though the recipient may have been a bad risk.

It should be recalled that, in this case, the Minister unsuccessfully waited several years to be repaid for the first student loan, which now totals more than $20,000. No banking institution would have agreed to finance the respondent under these conditions were it not for the AFAEE program. The respondent was nonetheless loaned the money required to resume his studies. Why?

Because the Minister grants student loans according to students’ needs and, unlike a bank, gives more when the student has less. [ 48 ] It should also be noted that students who resume studying are exempt from repaying the principal and interest on all their student loans. [16] The respondent was accorded that privilege: the Minister interrupted the recovery measures as well as the calculation of interest. [17] [ 49 ] Finally, it is equally important that an individual who resumes studying without having repaid a loan for which he or she is in default under

section 29 of the AFAEE is not eligible for financial assistance “ unless the person has made an agreement with the Minister with respect to repayment terms and conditions” . [18] The respondent in this case had to sign an acknowledgment of debts in order to receive new student loans in 1997.

If he had declared bankruptcy prior to resuming his studies, there is every reason to believe he would have been asked to repay the loan from which he would have been discharged before granting him a new loan. [19] [ 50 ] Indeed, an Alberta statute expressly provides that bankrupts may not obtain student loans unless they have repaid those for which they were exempted. [20] Are we to think the Minister in this case should have asked the respondent to declare bankruptcy before granting him a new loan? I believe we must give weight to

section 43 as well as the contractual undertaking to repay the first debt, freely entered into by the respondent, in addition to the one that was to accumulate until his new period of studies ended. [ 51 ] In

summary, I believe that paragraph 178(1) (

g) of the BIA refers to one single date when studies end. The clock is turned back to zero when a student goes back to school. In my opinion, this is the only

interpretation that respects the legislator’s intention to avoid opportunistic bankruptcies, to give the Minister the opportunity to recover loans granted under more than advantageous conditions, and finally, to ensure that the right to bankruptcy is reasonably exercised, after a period that gives the student time to build on his assets so acquired. 3.

The appellant’s failure to oppose the respondent’s discharge [ 52 ] Before concluding, something must be said about the judge’s observation that the appellant [ translation ] “failed” to oppose the respondent’s application for an order of discharge, thus suggesting that such an omission was relevant to interpreting the case law submitted by the appellant.

[ 53 ] With great respect, it is common ground that the appellant did not need to oppose the application because the BIA provision in question very clearly stipulates: “an order of discharge does not release the bankrupt...”. On this subject, I adopt the comments of my colleague Dalphond, J., then of the Superior Court: [21] [ translation ] [49] That said,

section 178 BIA does not prevent a student or former student from assigning property during the prescribed period. If the student has several debts at that time, he will be released from them in the absence of opposition (168.1(4) and 178(2) BIA ), except for those relating to his student loans (178(1)(

g) BIA ), and without the government needing to intervene in the file to oppose or impose conditions on the discharge. VI. CONCLUSION [ 54 ] I would therefore allow the appeal, overturn the decision at trial, and dismiss the motion to stay the seizure by garnishment in file 765-02-000049-902, the whole with costs throughout against the respondent. JACQUES A. LÉGER, J.A.