2020 NLSC 159, 2020 NLSC 159

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION In Bankruptcy and Insolvency Citation : Briggs (Re) , 2020 NLSC 159 Date : December 17, 2020 Docket : 202001G6000 In The Matter of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 , as amended (the “ BIA ”); And In The Matter of the Bankruptcy of the Estate of the late Jean Louise Briggs Before: Justice David F. Hurley Judgment: Justice Robert P. Stack Place of Hearing: St. John’s, Newfoundland and Labrador Date(

s) of Hearing: December 12, 2019; December 9, 2020

Summary: A trustee in bankruptcy brought an application for directions pursuant to

section 34 of the Bankruptcy and Insolvency Act relating to the bankruptcy of the estate of the late Dr. Jean Louise Briggs. The bankruptcy followed an ex parte application brought by the trustee on behalf of the Canadian executrix of the estate under section 49(1) of the BIA for leave to file an assignment in bankruptcy. Pursuant to section 181(1) of the BIA , the Court ordered that the bankruptcy be annulled because:

(1) The application for leave to file an assignment in bankruptcy should not have been made without notice to the U.S. executor;

(2) At the time that the application was made, the estate was not insolvent on the measure of its liabilities exceeding the value of its assets; and

(3) The Canadian executrix and the trustee had not presented all of the material circumstances before the Court.

The Court found that the bankruptcy should have never occurred and that it did was largely because of the actions of the trustee.Pursuant to sections 181(2) and 187(55) of the BIA, the Court ordered:

(1) The estate vests once again, in accordance with their respective interests, in the Canadian executrix and U.S. executor, or theirrespective lawful successors;

(2) The trustee is not entitled to any fees or disbursements relating to the bankruptcy;

(3) Any approvals of accounts for fees and disbursements submitted by the trustee are rescinded;

(4) The trustee was granted leave to bring for taxation any account for legal fees and disbursements relating to the sale or transferof real property in Canada;

(5) The trustee shall, without delay, prepare the final statements of receipts and disbursements referred to in

section 151 of theBIA; and

(6) The U.S. executor may have his costs paid from the Canadian estate in accordance with Column 5 of the Scale of Costspursuant to Rule 55 of the Rules of the Supreme Court, 1986. The trustee shall bear its own costs. Appearances: Tim Hill, Q.C. Appearing for Grant Thornton Limited, Trustee in Bankruptcy of the Estate of Jean Louise Briggs Andrew W. Costin Appearing for Horace Wilkinson Briggs II, U.S. Executor of the Estate of Jean Louise Briggs Authorities Cited: CASES CONSIDERED: Granovsky Estate v. Ontario, (ON SC), [1998] O.J. No. 508, 156 D.L.R. (4th) 557 (Ct. J.(Gen. Div.)); Edell v.

Canada Revenue Agency, 2011 ONSC 1943; Im v. Im (Trustee of), 2011 ONSC 3993; Hervias (Re), 2018 BCSC1579; Blatherwick v. Blatherwick, 2014 ONSC 1433; Tousignant, Re (2001), (QC CA), 28 C.B.R. (4th) 144, 102A.C.W.S. (3d) 1035 (Que. C.A.), leave to appeal refused 2001 CarswellQue 2779, 2001 CarswellQue 2780 (S.C.C.); American BullionMinerals Ltd., Re, 2008 BCSC 639; Ruby v. Canada (Solicitor General), 2002 SCC 75; Bailey v. Johnson (1872), L.R. 7 Ex. 263; Eliasv. Hutchison (1980), (AB KB), 12 Alta. L.R. (2d) 241, 27 A.R. 13 (Q.B.), aff’d 1981 ABCA 31; Cockfield Brown Inc.(Trustee of) v.

Réseau de télévision TVA Inc., (QC CA), [1988] R.J.Q. 1807, 11 A.C.W.S. (3d) 62 (C.A.); HOJNational Leasing Corp., Re, 2008 ONCA 390; Garritty, Re, 2006 ABQB 238; Vince v. Cinezeta InternationaleFilmproduktionsgesellschaft Mhb & Co. Kg, 2013 SKQB 423; Saskatchewan Economic Development Corp. v. Michalyca ManagementLtd. (1991), (SK KB), 12 C.B.R. (3d) 277, 31 A.C.W.S. (3d) 578, (Sask. Q.B.); Kalau v. Dahl (1985), (AB KB), 59 A.R. 224, 39 Alta. L.R. (2d) 156 (Q.B.)); Taylor (Re), 2017 NLTD(G) 177; Lipson, Re, (ON CA),[1924] 3 D.L.R. 761, 4 C.B.R. 432 (Ont. S.C. (App.

Div.)) STATUTES CONSIDERED: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3; Judicature Act, R.S.N.L. 1990, c. J-4 RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D; Bankruptcy and Insolvency General Rules,C.R.C., c. 368 TEXTS CONSIDERED: Lloyd W. Houlden, Geoffrey B. Morawetz & Janis P. Sarra, The 2019-2020 Annotated Bankruptcy andInsolvency Act (Toronto: Thomas Reuters, 2019)

REASONS FOR JUDGMENT Stack, J. : INTRODUCTION [ 1 ] Grant Thornton Limited, the Trustee in Bankruptcy (the “Trustee”) of the estate of the late Dr. Jean Briggs, has brought an application for directions pursuant to Section 34(1) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “ BIA ”). The issues are whether the bankruptcy should be annulled, as requested by her U.S. executor, and, if so, on what terms. [ 2 ] This matter comes to me pursuant to

section 32 of the Judicature Act , R.S.N.L. 1990, c. J-4 . The BIA application was heard by Hurley J. of this Court on December 12, 2019. Sadly, Hurley J. passed away before he could render his decision. [ 3 ] The matter was called to determine how to proceed with the BIA application.

Section 32 of the Judicature Act provides: 32.

(1) When a judge who has reserved a decision in a proceeding (

a) dies without giving a decision; (

b) retires, resigns or is appointed to another court without having given the decision within the time set out in

section 31; or (

c) does not give the decision within 12 months from the time it was reserved by that judge, a judge may upon application order that the proceeding be retried or reheard by another judge.

(2) Upon the retrial or rehearing under subsection (1), the judge retrying or rehearing the proceeding may direct that the retrial or rehearing (

a) be upon a transcript of the court reporter's notes; (

b) be upon that transcript and additional evidence given orally or by affidavit; (

c) be upon that transcript and additional evidence given orally and by affidavit; (

d) be upon new evidence; or (

e) otherwise.

(3) The judge presiding at the retrial or rehearing may give direction as to the disposition of the costs of the original trial or hearing and the cost of obtaining and providing copies of the transcript of the court reporter's notes. [ 4 ] Fortunately, comprehensive affidavits, complete with extensive documentary evidence, as well as pre- and post-hearing briefs were filed. The hearing took more than an hour and a transcript has been prepared. Consequently, the record is complete and it should enable another judge to render a decision.

The present circumstances do not require the additional time or cost of scheduling a full rehearing of the matter. The parties are entitled to a result as soon as is practical. With their consent, I ordered that I would rehear the matter based upon the record while reserving the right to call upon the parties if I had any questions or required clarification on any point. facts [ 5 ] Based upon the evidentiary record, I have made the findings of fact that follow. [ 6 ] Dr. Briggs made two wills; one was made in Canada and one was made in the United States of America.

There was a different executor named in each of the wills. Dr. Briggs was a citizen of both countries, was a Canadian resident, and owned real and personal property in both the United States and Canada. She passed away on July 27, 2016. Letters of Probate of the Canadian Last Will and Testament of Dr. Briggs were issued out of this Court on October 6, 2016, with Estate No. 201601E15366, and Shelley Bryant was appointed the Canadian executrix.

Horace Wilkinson Briggs II was appointed the U.S. executor. [ 7 ] On July 5, 2017, the Trustee (then the proposed trustee), on behalf of the Canadian executrix, made an ex parte application to the Court for leave to allow the Canadian executrix to make an assignment in bankruptcy on behalf of that estate.

The order was granted by the deputy registrar, and the Canadian executrix made the assignment in bankruptcy on the same day. [ 8 ] The affidavit of the Canadian executrix filed in support of the ex parte application stated that, “The liabilities of the Estate far exceed the assets available and the Estate is insolvent.” The most significant liability was for taxes owed to Canada Revenue Agency (“CRA”) in the amount of $190,162. [1] This exceeded the value of the assets in Canada. That tax liability arose out of a deemed disposition of real property owned by Dr.

Briggs in the U.S., with the tax payable by April 30, 2017. The Trustee assisted the Canadian executrix in the preparation of the affidavit and prepared and filed the ex parte application with the Court. [ 9 ] At the time of the bankruptcy, there was insufficient cash available in the Canadian estate to pay the amount due to CRA or the

other liabilities of the estate. [10] At the time that the ex parte application was made to the Court, the Canadian executrix and the Trustee were both aware ofrecent appraisals of properties owned by Dr. Briggs in whole or in part on Gott Island, Maine, and in New Hampshire. The former, whichwas owned outright by Dr. Briggs, was appraised at USD 1,100,000 (or USD 750,000 if certain conservation restrictions desired by Dr.Briggs were imposed upon it); the New Hampshire properties, in which she held a divided interest, were appraised at USD 555,000.

TheGott Island property, at least, was unencumbered. [11] The Statement of Affairs filed following the bankruptcy listed Dr. Briggs’ property in Maine and the others in New Hampshireeach at $1.00 with a note associated with each that read “Net realizable value undetermined”.

The Statement of Affairs was prepared by,or with the assistance of, the Trustee. [12] There is evidence that both before and after the bankruptcy, there were discussions between Grant Thornton and the U.S.executor about whether the amount due to CRA and the other obligations of the estate in bankruptcy would be paid by the U.S. executoror by the beneficiaries directly. Negotiations regarding the CRA debt were conducted by the Trustee with CRA and the U.S. executor.

ISSUES [13] As indicated, this matter has come before the Court pursuant to an application for directions pursuant to section 34(1) of theBIA brought by the Trustee. In addition, the U.S. executor has brought an application to bring a counterclaim against the Trusteepursuant to Rule 29.07 of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D.

In that counterclaim, the U.S. executorwould seek the following: (1) an order setting aside the bankruptcy pursuant to section 181(1) of the BIA; (2) an order vacating any trustee fees, legal fees, or other administrative fees that have been incurred by the Trustee relating to thebankruptcy pursuant to section 181(2) of the BIA; (3) an order that the Trustee be personally liable for interest and penalties assessed by CRA in relation to the estate that haveaccrued since the date of bankruptcy pursuant to section 181(2) of the BIA; and (4) an order requiring the Trustee, in its personal capacity, to pay solicitor-client costs to the U.S. executor pursuant to section197(1) of the BIA. [14] The hearing of the matter before Hurley J. proceeded primarily on the issue of whether the bankruptcy should be annulledpursuant to section 181(1) of the BIA.

The matters raised in the “counterclaim” were addressed primarily in post-hearing briefs submittedto Hurley J. [15] The Court must consider the following questions:

(1) Should the bankruptcy be annulled pursuant to section 181(1) of the BIA?

(2) If the bankruptcy should be annulled, then what terms should be imposed pursuant to section 181(2)? Should the bankruptcy be annulled pursuant to section 181(1) of the BIA? Two Wills [16] As a starting point, the law recognizes that a person can have two wills, with a different executor for each. In Granovsky Estatev. Ontario, (ON SC), [1998] O.J. No. 508, 156 D.L.R. (4th) 557 (Ct. J. (Gen.

Div.)), the court held that where thereare two wills dealing with real property in two jurisdictions, each executor has limited powers in respect of only those assets referred to inthe particular will for which they have been named executor. As a result, the Canadian executrix had no direct authority to act in respectof Dr. Briggs’ U.S. real property.

Assignment - Section 49(1) of the BIA [17] By section 49(1) of the BIA, an executor is required to seek leave of the Court to file an assignment in bankruptcy: An insolvent person or, if deceased, the executor or administrator of their estate or the liquidator of the succession, with the leave of thecourt, may make an assignment of all the insolvent person's property for the general benefit of the insolvent person's creditors. [Emphasis added.] [18] Although there were two executors, only the Canadian executrix sought leave to make an assignment in bankruptcy and she didso on an ex parte basis without notice to the U.S. executor. [19] The assignment in bankruptcy effectively assigned all the deceased’s property, both U.S. and Canadian, to the Trustee.

That is,on a bankruptcy, all the assets of the deceased, both Canadian and extra-territorial, vested in the Trustee. In Lloyd W. Houlden, GeoffreyB. Morawetz & Janis P. Sarra, The 2019-2020 Annotated Bankruptcy and Insolvency Act (Toronto: Thomas Reuters, 2019), the learned

authors stated at F§110: With respect to the right of a Canadian trustee to claim possession of foreign assets, all the property of the bankrupt, both movable andimmovable, wherever situate, vests in a licensed insolvency trustee when bankruptcy occurs: see definition of “property” in s. 2, and s. 71of the BIA.

To obtain possession, the trustee may have to comply with the formal requirements of the law of the jurisdiction where theproperty is located, but legal title is conferred on the trustee by the BIA. [20] The assignment in bankruptcy, therefore, directly affected the U.S. executor and the property under his administration. Annulment – Section 181(1) of the BIA [21] The U.S. executor submits that it is appropriate for me to annul the bankruptcy. [22] A bankruptcy can be annulled in accordance with section 181(1) of the BIA.

Section 181 provides: 181(1) Power of court to annul bankruptcy If, in the opinion of the court, a bankruptcy order ought not to have been made or an assignment ought not to have been filed, the courtmay by order annul the bankruptcy. 181(2) Effect of annulment of bankruptcy If an order is made under subsection (1), all sales, dispositions of property, payments duly made and acts done before the making of theorder by the trustee or other person acting under the trustee's authority, or by the court, are valid, but the property of the bankrupt shallvest in any person that the court may appoint, or, in default of any appointment, revert to the bankrupt for all the estate, or interest orright of the trustee in the estate, on any terms and subject to any conditions, if any, that the court may order. 181(3) Final statement of receipts and disbursements If an order is made under subsection (1), the trustee shall, without delay, prepare the final statements of receipts and disbursementsreferred to in

section 151. [23] The 2019-2020 Annotated Bankruptcy and Insolvency Act at H§71 and D§68(2) provides a useful

summary of some of thecases that touch upon the application of

section 181. Included among those cases are:

(1) Edell v. Canada Revenue Agency, 2011 ONSC 1943, where it was held that bankruptcy annulment is to be used sparingly, inspecial circumstances. In exercising its discretion, the court must take into consideration and balance all the interests of the creditors, thebankrupt, and third parties.

(2) In Im v. Im (Trustee of), 2011 ONSC 3993, the court held that section 181(1) of the BIA gives the court the power to annul abankruptcy if, in the opinion of the court, an assignment in bankruptcy ought not to have been filed. An annulment will be granted onlywhere it is shown that when the debtor made the assignment, the debtor was not an insolvent person or abused the process of the court orcommitted a fraud on his or her creditors. Furthermore, in deciding whether an assignment ought not to have been filed, events must beconsidered as they existed when the assignment was filed, not as they evolved after the assignment.

(3) In Hervias (Re), 2018 BCSC 1579, the British Columbia Supreme Court held that there are two broad considerations on asection 181(1) application: first, whether the bankruptcy assignment ought not to have been filed, considering the facts that existed atfiling; and second, whether the court ought to exercise its discretion to annul the bankruptcy. Notwithstanding that courts are cautious inexercising their jurisdiction to annul a bankruptcy, they will consider whether there are special circumstances that would justify this rareremedy.

(4) In Blatherwick v. Blatherwick, 2014 ONSC 1433, the court considered the bankruptcy of a director of a group of companiesthat consisted of a complex web of entities registered in Canada and other jurisdictions. It was found that on the face of the evidence, thebankrupt appeared insolvent. Nevertheless, difficulties arose with respect to the web of multiple offshore companies to which he wasconnected and as a result, in the absence of a trial and a much fuller evidentiary record, his insolvency was an open question.

(5) In Tousignant, Re (2001), (QC CA), 28 C.B.R. (4th) 144, 102 A.C.W.S. (3d) 1035 (Que. C.A.), leave toappeal to the Supreme Court of Canada refused, 2001 CarswellQue 2779, 2001 CarswellQue 2780 (S.C.C.), it was held that the debtorwas making an improper use of the BIA and the assignment was detrimental to the public order where the debtor had steadyemployment, earned a good salary, had modest living expenses, only owed money to one creditor, and made no attempt to negotiatepayment with the creditor.

(6) In American Bullion Minerals Ltd., Re, 2008 BCSC 639, the British Columbia Supreme Court annulled a bankruptcyapplication that had previously been brought by the controlling shareholder of a debtor company, on the basis that the applicant had notplaced all the material facts and liabilities before the court, and the financial statements presented to the court did not accurately portraythe debtor company’s financial situation. Application brought ex parte

[ 24 ] The Canadian bankruptcy directly affected the assets administered by the U.S. executor insofar as those assets vested in the Trustee on the assignment. Dr. Briggs went to some pains to ensure that her Canadian assets and her U.S. assets were administered separately upon her death.

Although there may have been legal reasons why some or all of them might fall under a single jurisdiction (an assessment for income, estate or other taxes are examples that come to mind), the Canadian executrix and the Trustee ought not to have brought those assets together under the BIA without giving the U.S. executor an opportunity to be heard. No case for urgency was set out. I find, therefore, that the U.S. executor ought to have received notice of the application for leave to file an assignment in bankruptcy so that he could make submissions for or against leave being granted. [ 25 ] In Ruby v.

Canada (Solicitor General) , 2002 SCC 75 , Arbour J. wrote for the court at paragraph 27: 27 In all cases where a party is before the court on an ex parte basis, the party is under a duty of utmost good faith in the representations that it makes to the court. The evidence presented must be complete and thorough and no relevant information adverse to the interest of that party may be withheld …. Virtually all codes of professional conduct impose such an ethical obligation on lawyers …. [ 26 ] The instruction in Ruby is all the more important in a case such as this.

Because the application under section 49(1) was brought in the name of the estate, no defendants or respondents were identified in the style of cause. The Court had no immediate basis, therefore, upon which to identify adverse or interested parties. The duty of utmost good faith referred to in Ruby extends to identifying for the Court all persons who may have a direct interest in the proceeding, especially those with an adverse interest.

There may be occasions, as well, where persons with an indirect interest should also be identified; such occasions will be determined on a case-by-case basis. [ 27 ] Failing to provide notice to the U.S. executor of the application to seek leave to make an assignment in bankruptcy amounted to an abuse of the process of the Court and would cause me to annul the bankruptcy. Application brought without presenting a true picture of the circumstances [ 28 ] Of equal concern, the ex parte application did not provide the Court with a complete picture of the estate’s assets and other circumstances.

Even though the deemed disposition of the Gott Island property triggered the CRA assessment and ostensibly caused the alleged insolvency, the value of that property was not brought to the attention of the Court. This is notwithstanding that both the Canadian executrix and the Trustee were aware of the valuation of that property at USD 1,100,000 (or at least USD 750,000) prior to the section 49(1) application. [ 29 ] The Trustee and the Canadian executrix shared an obligation to present the Court with a complete and thorough set of information upon which the Court could evaluate whether the estate was insolvent.

This is because only an insolvent person may make an assignment in bankruptcy ( section 49(1) of the BIA ). “Insolvent person” is defined in

section 2 : … insolvent person means a person who is not bankrupt and who resides, carries on business or has property in Canada, whose liabilities to creditors provable as claims under this Act amount to one thousand dollars, and (

a) who is for any reason unable to meet his obligations as they generally become due, (

b) who has ceased paying his current obligations in the ordinary course of business as they generally become due, or (

c) the aggregate of whose property is not, at a fair valuation, sufficient, or, if disposed of at a fairly conducted sale under legal process, would not be sufficient to enable payment of all his obligations, due and accruing due[.] [ 30 ] Because all of the property of the late Dr. Briggs, wherever situated, vested in the Trustee, the combined value of the Canadian assets and the U.S. assets exceeded the liabilities of the estate. Taking the unencumbered value of the Gott Island property into account, the Trustee concedes that the estate was not an “insolvent person” within the third part of the definition.

This was the sole basis for the application under section 49(1) relied upon by the Canadian executrix. On this basis, the assignment in bankruptcy ought not to have been filed and the bankruptcy should be annulled. [ 31 ] I note that although counsel for the Trustee submitted that the estate may have been insolvent by some other measure, I am evaluating the matter based upon the facts existing at the time that the ex parte application was granted. The application pursuant to section 49(1) was exceedingly sparse and did not set forth the grounds upon which it was alleged that the estate was insolvent.

To determine what grounds were being relied upon, one must look to the affidavit of the Canadian executrix filed in support of the application. The only reference there is that the “liabilities of the Estate far exceed the assets available and the Estate is insolvent”. No reliance was made upon either of the other two measures by which the estate could be declared insolvent under the definition of “insolvent person”.

I cannot go back in time and confirm the assignment based upon grounds that were not presented to the Court when the order granting leave was made. [ 32 ] In any event, it is not at all clear that at the time of the assignment the estate was insolvent under either of the other two parts of the definition of insolvent person. The evidence discloses that the beneficiaries wished to keep the Gott Island property. Consequently, there were ongoing discussions between the Trustee and the U.S. executor as to whether the latter, or the beneficiaries, would pay the

obligation to CRA and other debts of the estate. These discussions were not brought to the attention of the Court. Consequently, even ifthe Canadian executrix had relied on the first or second tests for insolvency, all of the material facts needed to decide the matter were notbefore the Court. Conclusion on section 181(1) [33] In

Summary:

(1) The application for leave to file an assignment in bankruptcy should not have been made without notice to the U.S. executor;

(2) At the time that the application was made, the estate was not insolvent on the measure of its liabilities exceeding the value ofits assets; and

(3) The Canadian executrix and the Trustee had not presented all of the material circumstances before the Court. [34] It is appropriate to grant the rare remedy of annulment. Pursuant to section 181(1) of the BIA, therefore, I order the bankruptcyannulled. [35] I note that although an order of annulment is dated on the day on which it is made, it cannot be issued or delivered until afterthe expiration of the appeal period, and if an appeal is filed, until after the appeal has been finally disposed of (section 182(1)).

Rule 31of the Bankruptcy and Insolvency General Rules, C.R.C., c. 368 (the “General Rules”) provides that an appeal from an order of thebankruptcy judge to the Court of Appeal shall be brought within ten days. If the bankruptcy should be annulled, then what terms should be imposed pursuant to section 181(2) of the BIA?

Section 181(2) of the BIA [36] Section 181(2) of the BIA addresses the consequences of an annulment of a bankruptcy: 181(2) If an order is made under subsection (1), all sales, dispositions of property, payments duly made and acts done before the makingof the order by the trustee or other person acting under the trustee’s authority, or by the court, are valid, but the property of the bankruptshall vest in any person that the court may appoint, or, in default of any appointment, revert to the bankrupt for all the estate, or interestor right of the trustee in the estate, on any terms and subject to any conditions, if any, that the court may order. [37] Although I have made an order under section 181(1) of the BIA annulling the bankruptcy, all payments made and acts done bythe Trustee are valid unless otherwise ordered.

Furthermore, the property of the bankrupt vests in such person as I shall appoint, or, indefault of any appointment, reverts to the bankrupt (section 181(2)) subject to any payment made or act done. The effect of an order ofannulment is to remit the person whose bankruptcy is annulled to his or her original situation (Bailey v. Johnson (1872), L.R. 7 Ex. 263).This aspect of the matter is complicated in this case because it is indicated in the evidentiary record that the Canadian executrix has, orintends to, resign. No application for resignation has been filed with the Court.

Until a resignation of the Canadian executrix has beenformally effected, therefore, the assets of the bankruptcy estate vest back in the respective executors. The “counterclaim” [38] As indicated, the U.S. executor sought to bring a “counterclaim” against the Trustee pursuant to Rule 29.07 of the Rules of theSupreme Court, 1986. This is an improper procedure insofar as the BIA and the General Rules do not contemplate counterclaims.However, portions of the U.S. executor’s claim can be addressed pursuant to section 181(2) as will be seen below.

For the rest, the U.S.executor may seek to bring an action against the Trustee pursuant to

section 215 of the BIA by which the U.S. executor could be grantedleave to commence an action in the Court exercising its civil jurisdiction. Section 187(5) of the BIA [39] As part of the relief he seeks, the U.S. executor wants taxed bills of costs submitted by the Trustee rescinded. [40] The U.S. executor relies on section 187(5) of the BIA which states, “Every court may review, rescind or vary any order madeby it under its bankruptcy jurisdiction.” This

section applies insofar as certain accounts for legal services provided to the Trustee havebeen taxed and allowed by the Court. [41] The 2019-2020 Annotated Bankruptcy and Insolvency Act provides some useful commentary on how the Court should review,rescind, or vary an order, at paragraph I§24, pages 1028-1033:

(1) The jurisdiction given by section 187(5) should be sparingly exercised; it is a matter of indulgence and must be carefullyguarded (Elias v. Hutchison (1980), (AB KB), 12 Alta. L.R. (2d) 241, 27 A.R. 13 (Q.B.), aff’d 1981 ABCA 31;Cockfield Brown Inc. (Trustee of) v. Réseau de télévision TVA Inc., (QC CA), [1988] R.J.Q. 1807, 11 A.C.W.S. (3d) 62(C.A.)).

(2) There must be a fundamental change in circumstances between the original hearing and the time of the motion to vary, orevidence must have been discovered that was not known at the time of the original hearing and that could have led to a different result(HOJ National Leasing Corp., Re, 2008 ONCA 390).

(3) Relief under section 187(5) is discretionary and the court’s discretion should be exercised judicially with regard to recognizedprinciples and applicable authority (Garritty, Re, 2006 ABQB 238). [42] Schwann J. in Vince v. Cinezeta Internationale Filmproduktionsgesellschaft Mhb & Co. Kg, 2013 SKQB 423, at paragraph 27,provided a framework for judicial consideration of applications under section 187(5):

27 … (

i) The issue on the application is whether the order should remain in force because of changed circumstances or freshevidence and not, as on appeal, whether it ought to have been made. (ii) Fresh evidence in this context means that it is material, substantial in nature, and something that, with reasonablediligence, could not have been known at the time of the original application. (iii) The application must be made promptly, within a reasonable time of acquiring knowledge of the order. (iv) Review jurisdiction is exercised sparingly; it is a matter of indulgence that must be carefully guarded. (

v) In exercising its discretion, the court must consider the rights not only of the debtor and of the creditors but also of thepublic. (vi) The court should resort to its s. 187(5) jurisdiction if it is just and expedient in the control of its own process. (vii) Trustee conduct is a factor where statutory non-compliance results in lack of notice, particularly if it negatively affectsthe integrity of the bankruptcy system. (viii) The applicant bears the onus of establishing that exercise of the review jurisdiction is warranted. [43] The U.S. executor also pointed me to paragraph 26 of Vince: 26 Relief under s. 187(5) is discretionary in nature.

This Court’s discretion must be exercised judicially with regard to recognizedprinciples and applicable case authority. In general terms, courts have consistently recognized and adopted the following principles inrelation to the exercise of s. 187(5) of the BIA: • this jurisdiction should be sparingly exercised (Carlson, Re, 2012 ABCA 173, 90 C.B.R. (5th) 328 (Alta. C.A.); Elias v.Hutchison (1981), 1981 ABCA 31 , 121 D.L.R. (3d) 95, 37 C.B.R. (N.S.) 149 (Alta.

C.A.)); • while no time limit is prescribed to bring a s. 187(5) application, it nonetheless must be brought promptly and could fail forlaches if not done so (354828 Ontario Ltd., Re (1979), 30 C.B.R. (N.S.) 176, [1979] O.J. No. 3346 (Ont. S.C.); 1064521 Ontario Ltd., Re(1998), (ON SC), 38 O.R. (3d) 407, [1998] O.J. No. 920 (Ont. Bktcy.)); • s. 187(5) should not be used as a substitute for an appeal, particularly after the appeal period has passed (HOJ National LeasingCorp., Re, 2008 ONCA 390, 42 C.B.R. (5th) 208 (Ont.

C.A.)); • a change in circumstance must be established, i.e. the applicant must bring forward new evidence of a substantial nature thatwas otherwise not available at the time of the original hearing; (Strachan, Re (1980), 34 C.B.R. (N.S.) 136, [1980] O.J. No. 2963 (Ont.S.C.); Northlands Cafe Inc., Re (1996), (AB KB), 44 C.B.R. (3d) 170, 192 A.R. 211 (Alta. Q.B.)); • the onus is on the applicant to establish the new facts or evidence relied upon in support and to demonstrate that rescission is anappropriate remedy in the circumstances. (Christiansen v.

Paramount Developments Corp., 1998 ABQB 1005, 8 C.B.R. (4th) 220 (Alta.Q.B.)). Trustee’s fees and disbursements [44] The Trustee submits that rather than invoking section 187(5), its fees and disbursements should be taxed in the normal coursein accordance with the BIA and the General Rules. The U.S. executor says that the Trustee should not be entitled to any fees or to

reimbursement of any disbursements because of its role in effecting an improper bankruptcy. I find that this aspect of the matter can beaddressed based upon the record before me. The issues were extensively canvassed in post-hearing briefs. It is more efficient for as manyof the issues as possible to be dealt with now to avoid unnecessary Court proceedings. [45] I am persuaded in part by the submissions of the U.S. executor. The Trustee was not a mere professional bystander in thismatter. Grant Thornton had provided tax advisory services to the Canadian executrix and the U.S. executor prior to the bankruptcy.

Itadvised the Canadian executrix to make an application for leave to file an assignment and actually brought the matter to Court on herbehalf. I find that, prior to that application, the Trustee was aware of the valuation of the Gott Island property and was aware that thevaluation was not brought to the attention of the Court.

I also find that the Trustee was aware of the concerns the U.S. executor had aboutthe CRA assessment and was involved with negotiations with CRA relating to that indebtedness. [46] Given the evidence now before the Court, it is clear that the Court was not provided with sufficient relevant information uponwhich either the bankruptcy could occur or costs associated with the bankruptcy could be taxed. I find that there has been a change incircumstances insofar as there is now evidence before the Court that would have resulted in the application for leave under section 49(1)being denied.

Had notice been given to the U.S. executor and a complete picture of the assets and liabilities of the estate been provided tothe Court, there would not have been a bankruptcy. [47] None of the estate of the late Dr. Briggs, her beneficiaries, or her creditors derived any benefit from the bankruptcy. I cannothelp but conclude that these unfortunate events stem largely from the actions of the Trustee and, therefore, warrant an order that theTrustee not be entitled to any fees or, except as noted below, to reimbursement of any disbursements relating to the bankruptcy.

Anyaccounts that have already been taxed and approved are rescinded pursuant to section 187(5). To the extent that any of these have beenpaid, therefore, I order that the estate be reimbursed by the Trustee. [48] There are two exceptions to the rescission order. First, it does not apply to any account for advisory services rendered by GrantThornton prior to the bankruptcy; those accounts fall outside the bankruptcy and are subject to any normal recourse.

Second, some of theprofessional services rendered in connection with the bankruptcy relate to legal services necessitated by the sale or transfer of realproperty in Canada. Legal fees and disbursements would have had to have been incurred on the sale of that property, irrespective ofwhether or not there had been a bankruptcy. Notwithstanding my determination that any taxation of invoices is rescinded, leave isgranted to the Trustee to bring to me for taxation any accounts for legal fees and disbursements related to the sale or transfer of realproperty in Canada.

To such end, I retain jurisdiction to tax any account for legal fees and disbursements relating to the sale or transfer ofthose assets. Costs on this application [49] Notwithstanding my comments on the conduct of the Trustee, I am not prepared to order that it personally pay the costs of theU.S. executor on the application before me.

Although bankrupting the estate was an ill-advised strategy, I am not satisfied that theTrustee acted in bad faith or with an ulterior motive. [50] To the extent that the U.S. executor feels aggrieved by, and alleges damages flowing from, the actions of the Trustee or theCanadian executrix that have not been addressed by this decision, he may seek recourse as may be appropriate. [51] The U.S. executor may have his costs of this application paid from the estate in accordance with Column 5 of the Scale ofCosts pursuant to Rule 55 of the Rules of the Supreme Court, 1986. The Trustee shall bear its own costs.

A few words about the procedure in the Court sitting in Bankruptcy and Insolvency [52] Before I conclude this decision, let me say a few words about procedure. Although not in all respects germane to the casebefore me, I make these comments because the Court regularly sees proceedings brought in bankruptcy and insolvency that do notfollow the appropriate procedures. [53] As we saw, the motion for leave to file an assignment in bankruptcy was brought under section 49(1) of the BIA. However, itwas filed in the probate file of the estate of Dr. Briggs.

Although a bankruptcy estate number was assigned, no file of the Court sitting inbankruptcy and insolvency was created. Because it was filed ex parte it was unopposed, and the order granting leave was made by thedeputy registrar (section 192(1)(

f) of the BIA). [54] The application for directions under

section 34 of the BIA was brought in the probate file as well. A motion to annul abankruptcy under section 181(1) of the BIA must be brought to the court sitting in bankruptcy and insolvency, and if it is brought in theordinary courts, it will be dismissed (Saskatchewan Economic Development Corp. v. Michalyca Management Ltd. (1991), (SK KB), 12 C.B.R. (3d) 277, 31 A.C.W.S. (3d) 578, (Sask. Q.B.); Kalau v. Dahl (1985), (AB KB), 59 A.R.224, 39 Alta. L.R. (2d) 156 (Q.B.)). Nevertheless, because the motion for leave was granted, I find the filing of the

section 34application in the probate file to be a formal defect or irregularity that, pursuant to section 187(9) of the BIA, does not invalidate theproceeding. Nevertheless, when the matter was first called before me, I ordered that a file of the Court in bankruptcy and insolvency becreated and that all of the materials relating to the bankruptcy be transferred to that file. The probate file will remain for any mattersrelating to the administration of the Canadian will. [55] Moving to more general comments, I wish to remind practitioners, both trustees and counsel, that this Court adopts a specialfunction sitting in bankruptcy and insolvency as conferred by section 183(1)(

g) of the BIA. The rules of procedure for the Court sitting inbankruptcy and insolvency are set forth in the General Rules.[2] For example, Rule 9 provides that the style of cause shall refer to theCourt “in Bankruptcy and Insolvency” and otherwise deals with the formalities of the style of cause. The General Rules do not alwaysaccord with the Rules of the Supreme Court, 1986. Examples of note are Rule 5 dealing with service and Rule 10 which provides a ten-day period in which to bring an appeal to the Court of Appeal.

These are just two examples; the General Rules are a comprehensive codeand it is important that they be adhered to. [56] A special onus falls upon a trustee practicing before the Court. A trustee is an officer of the Court (Taylor (Re), 2017

NLTD(G) 177, per Orsborn J. at paragraph 52; see also Lipson, Re, (ON CA), [1924] 3 D.L.R. 761, 4 C.B.R. 432, at451 (Ont. S.C. (App. Div.)) and by Rule 8 of the General Rules is not required to be represented by a barrister or solicitor on any courtproceeding under the BIA.[3] Being an officer of the Court and having a right of audience before the Court impose upon a trusteeobligations analogous to those of a barrister and solicitor.

A trustee, like a barrister and solicitor, must be knowledgeable about and abideby the General Rules, the Rules of the Supreme Court, 1986, and the common law relating to the practice before the Court. As anexample of this last point, see the discussion above relating to applications made ex parte. [57] I have set out the foregoing not to chide the Trustee or its counsel in this case. However, as mentioned, the Court regularly seesmatters brought that are not in compliance with the General Rules. It is hoped that this reminder will help ameliorate that situation. DISPOSITION [58] In

summary:

(1) The bankruptcy is annulled;

(2) The estate vests once again, in accordance with their respective interests, in the Canadian executrix and U.S. executor, or theirrespective lawful successors;

(3) The Trustee is not entitled to any fees or disbursements relating to the bankruptcy;

(4) Any approvals of accounts for fees and disbursements submitted by the Trustee are rescinded;

(5) The Trustee has leave to bring for taxation any account for legal fees and disbursements relating to the sale or transfer of realproperty in Canada;

(6) The Trustee shall, without delay, prepare the final statements of receipts and disbursements referred to in

section 151 of theBIA; and

(7) The U.S. executor may have his costs of this application paid from the Canadian estate in accordance with Column 5 of theScale of Costs pursuant to Rule 55 of the Rules of the Supreme Court, 1986. The Trustee shall bear its own costs. _____________________________ Robert P. Stack Justice