Wasylynuk (Re), 2022 ABKB 650

Court of King’s Bench of Alberta Citation: Wasylynuk (Re), 2022 ABKB 650 Date: 20220929 Docket: B203 614598 Registry: Edmonton In the Matter of the Bankruptcy of Betty Ann Wasylynuk Corrected judgment: A corrigendum was issued on October 6, 2022; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Decision of W.S. Schlosser , Registrar in Bankruptcy _______________________________________________________ [ 1 ] This is an opposed application for a bankrupt’s discharge. The bankrupt, Ms.

Wasylynuk, has completed all of her duties. She is a first time bankrupt with surplus income. The bankruptcy was driven by litigation costs when Ms. Wasylynuk unsuccessfully sued her surviving brothers and sisters for a share of her father’s estate. [ 2 ] The opposing creditors are Ms. Wasylynuk’s siblings. In earlier proceedings, the bankrupt brought an application to set aside her father's will and an inter vivos gift made by her father that gave everything to one of her siblings. The will and the gift were both drawn up by lawyers with doctors’ certificates of competence and capacity.

They were upheld both at first instance and on appeal. Leave to appeal to the Supreme Court of Canada was refused. [ 3 ] The opposing creditors deny that Ms. Wasylynuk is an honest but unfortunate debtor. They object to her discharge on the grounds that her assets were less than fifty cents on the dollar, arising from circumstances for which the bankrupt could not justly be held responsible (s 173(1)(

a) of the Bankruptcy and Insolvency Act, RSC 1985, c B-3 ( BIA ). They argue that the bankrupt has failed to account satisfactorily for a loss of assets, or a deficiency of assets to meet the bankrupt’s liabilities (s 173(1)(

d) BIA ), and a failure to make a proposal (s 173(1)(

n) BIA ). [ 4 ] The bankrupt began her challenge to her father's will and his disposition of his property in 2008. Thus began 10 years of litigation for a share of the estate. All of it had been given to one of her brothers, who was to care for the father and, after his passing, divide it as he thought fit. Ms. Wasylynuk would not accept the share offered by her brother. She wanted more. [ 5 ] The bankrupt’s claim was denied by Associate Chief Justice Nielsen after a hearing spanning eight days. Associate Chief Justice Nielsen detailed his decision in 40 pages of thorough and complete reasons (reported sub nom Wasylynuk v Bouma , 2018 ABQB 159 ).

[ 6 ] The chambers judge did not find that the bankrupt’s conduct was reprehensible, scandalous or outrageous, so as to attract solicitor client costs. Nevertheless, he awarded costs on double Column 5 as result of the formal offer that Ms. Wasylynuk failed to beat. These costs totaled $193,051.74 and were awarded October 15, 2018. [ 7 ] Ms. Wasylynuk then appealed Associate Chief Justice Nielsen's decision to the Court of Appeal. On June 10, 2019, her appeal was unanimously dismissed, with appeal costs in the amount of $34,650.00 (reported at Wasylynuk v Bouma, 2019 ABCA 234 ).

The bankrupt sought leave to appeal to the Supreme Court of Canada, which was denied. [ 8 ] Over the course of this litigation, the bankrupt had retained five different firms. Her lawyers at first instance had their fees reviewed and assessed.

The Assessment Officer referred the case to a Master (as they then were), which was unsuccessfully appealed, first to a Justice and ultimately to the Court of Appeal, (reported at 2019 ABCA 129 , April 9, 2019). [ 9 ] Among her unsecured creditors are McLennan Ross (her first instance lawyers) in the amount of $56,103.00, Purdon Lintz, her assessment lawyers, and DD West LLP ($125,648.00), her appeal lawyers. [ 10 ] Ms. Wasylynuk was represented at this hearing. The unsecured claims of Ms. Wasylynuk consist primarily of lawyers’ fees and costs. Ms.

Wasylynuk’s siblings estimate they spent in the area of $750,000.00 defending this litigation; of which the costs awards from first instance through appeal will cover less than a third. [ 11 ] Ms. Wasylynuk claimed her husband funded much of her litigation; which seems puzzling since most of the lawyers appear to have gone unpaid. Ms. Wasylynuk disclosed assets of about $5,500.00 on her Form 79: consisting of a motor vehicle, furniture and personal effects, all of which were exempt. Ms. Wasylynuk’s main asset was her home in St. Albert that she shared in joint tenancy with her husband.

She estimated the home value to be $450,000.00 (which I note is less than its appraised value for property taxes). The home was encumbered at that time only with a mortgage with a face value of $173,000.00. [ 12 ] By my rough calculation, Ms. Wasylynuk’s equity in the matrimonial home would have been: $450,000.00 (stated value) $173,000.00 (mortgage ) Balance $277,000.00 (equity) divided by 2 = $138,500.00 If I subtract Ms. Wasylynuk’s exempt equity, her non-exempt equity in the matrimonial home was approximately $118,000.00. [ 13 ] In June 2018, shortly after the Court Appeal decision, Ms.

Wasylynuk signed an Agreement Charging Land in favour of her husband. The agreement was said to support her husband’s litigation loans of $277,000.00. Mr. Wasylynuk also claimed an unsecured amount totaling $152,365.00 for loans for the same purpose. There is no supporting documentation tendered in support of these loans. [ 14 ] The Agreement Charging Land meant that Ms. Wasylynuk did not have to buy back the non-exempt equity in her home in her bankruptcy. It also put the home out of reach of her siblings with respect to the litigation costs.

Their writ for the litigation costs went on title after the caveat protecting the Agreement Charging Land. Judging by the disclosure on Ms. Wasylynuk’s Form 79, this Agreement Charging Land would almost certainly have made her insolvent. [ 15 ] The timing of this encumbrance is particularly troubling. The Agreement Charging Land was made 13 months prior to bankruptcy, putting it just outside of the 12 months time limit for challenging non arms-length transactions under s 95(1)(

b) of the BIA . The Fraudulent Preferences Ac t , RSA 2000, c F-24 and the Statute of Elizabeth (Fraudulent Conveyances Act, 1571, 13 Eliz 1, c 5) have greater reach but the Trustee apparently had no appetite for it, perhaps, in part, because the estate was under

summary administration. [ 16 ] As noted, the timing of this caveat eclipsed Ms. Wasylynuk’s siblings’ writ for costs, filed just afterwards. It put the matrimonial home out of reach of sale proceedings under the Civil Enforcement Act, RSA 2000, c C-15 prior to bankruptcy. [ 17 ] Ms. Wasylynuk is 59 and is a specialized nurse in a teaching position. She makes nearly $60 per hour. She continues to enjoy living in this now fully encumbered matrimonial home with her husband that is now out of reach of her creditors. [ 18 ] The Trustee explained that a proposal was ruled out because the litigation between Ms.

Wasylynuk and her siblings that led to this bankruptcy was highly acrimonious. Both Ms. Wasylynuk and her husband, who is now recently retired, had steady and stable household income. I am not certain that a proposal would have been doomed to failure because of ill will between the siblings, particularly since a proposal would almost certainly have achieved a greater return for the creditors. [ 19 ] Ms. Wasylynuk has paid just under $51,000.00 into the estate over her 21-month bankruptcy. Her monthly surplus amount is just over $2,000.00.

At the surplus rate, a 60-month proposal (for example - and it could have gone longer given that her aggregate debts exceeded $250, 000.00) would have achieved $120,000.00; or about the value of the non-exempt equity in her home. [ 20 ] I acknowledge that the proceedings leading to Ms. Wasylynuk’s bankruptcy were highly acrimonious but suggest that a proposal would not have been inherently unacceptable when the recovery in a proposal was compared with what might be expected in the bankruptcy. [ 21 ] I am satisfied that all three s 173 facts raised by the objecting creditors have been proved.

In the circumstances, s 172 permits three options: to refuse, to suspend, or to discharge on conditions. I am not satisfied that taking such pains to insulate your main asset from your creditors signals a readiness to make a fresh start. Ms. Wasylynuk appears to prefer to avoid her responsibilities arising from this failed estate litigation. [ 22 ] I am satisfied that a Conditional Order should be granted. The condition for Ms. Wasylynuk’s discharge is that she be required to pay an additional $60,000.00 into the estate at $2,000.00 per month. Ms. Wasylynuk’s counsel mentioned a potential health issue that

could impair her ability to earn income. This is not fully supported with any evidence. However, Ms. Wasylynuk may reapply if the state of her health prevents her from complying with the order. Heard on the 29 th day of August, 2022. Dated at the City of Edmonton, Alberta this 29 th day of September, 2022. W.S.

Schlosser Registrar in Bankruptcy Appearances: Elaine Foreman Cameron - Okolita Inc for the Bankruptcy Trustee Sean Fitzgerald, KC Miles Davison LLP for the Bankrupt Ian Wilson Miller Thomson LLP for the Opposing Creditors. _______________________________________________________ Corrigendum of the Reasons for Decision of W.S. Schlosser, Registrar in Bankruptcy _______________________________________________________ Corrected the title of the document; removed the word ‘the’. Corrected the Docket number.