Bankruptcy of Arash Nashid, 2017 ONSC 1054

CITATION: Bankruptcy of Arash Nashid, 2017 ONSC 1054 COURT FILE NO.: 31-2071135 DATE: 20170207 SUPERIOR COURT OF JUSTICE - ONTARIO Re: In the matter of the Bankruptcy of Arash Nashid BEFORE: Master Jean COUNSEL: J. Figliomeni, counsel for the creditors K. Page, counsel for the bankrupt No one appearing for the Trustee, taking no position ENDORSEMENT: The bankrupt filed his bankruptcy on December 21, 2015. The assignment in bankruptcy followed the commencement of litigation by the moving parties in November, 2015 and the grant of default judgment on December 14, 2015.

It would appear that the creditors’ judgment was a precipitating factor in the bankruptcy. The creditors are the single largest creditor of the bankrupt. Total debts disclosed in the statement of affairs is $1.465 million. The creditors’ judgment is in the amount of $992,000. By letter dated December 30, 2015, the creditors filed a proof of claim for $993,595 and further, the creditors notified the Trustee that they intended to opposed the bankrupt’s discharge from bankruptcy.

The letter further notified the Trustee of the creditors’ concerns as to the propriety of the bankrupt’s business and other dealing and their belief that they had reason to believe that the bankrupt had committed BIA offences. The creditors sought the bankrupt to be examined and requested bank records and documentation concerning the sale of the bankrupt’s home at 9 Plantain Lane, Richmond Hill. Later, the creditors were appointed inspectors of the estate. The creditors then set about to obtain more information from the bankrupt.

The creditors obtained two orders from Master Mills in April, 2016 and September, 2016 for production and for an examination. The creditors then appeared before Wilton-Siegel J. on October 4, 2016 on a contempt motion, which was adjourned with the examination date rescheduled to October 13, 2016. The creditors brought a motion in December, 2016 to compel undertakings, for an order that the bankrupt reattend for follow up examination and for orders that other witnesses be examined under s. 163(2) of the BIA.

It was on the attendance in December, 2016 that the creditors learned that the bankrupt had been discharged – and later learned that the Trustee had issued a certificate of automatic discharge to the bankrupt. The motion is brought to set aside the automatic discharge. For the following reasons, the motion is granted.

At para. 4 in Re Blanchard [1996] OJ No. 2383 (OCGD) , Metivier J. held that the court had jurisdiction to set aside an automatic discharge, looking to the legislative intent of the BIA to provide relief to a debtor and interpreting the statute to give effect to that intent in the context of fairness to the creditors and the integrity of the insolvency system. In this case, the jurisdiction should be exercised where there is injustice or an appearance of injustice. At para. 11 of the Blanchard, supra, Metivier J. said: “There is at the very least an appearance of injustice that must be remedied.

The bankrupt cannot be allowed to slip through or appear to slip through the discharge process, because of inadvertence on the part of the trustee and on the party who made his opposition known. I view the creditor’s notice of intent to oppose to have been given in every substantive way – to all concerned. The creditor failed in form only.” I conclude that I have jurisdiction to set aside an automatic discharge. It is my view that injustice requires the automatic discharge to be set aside. I consider the following factors in arriving at this disposition: 1 .

Timeliness of the Notice of Opposition: The creditors gave notice to the trustee of their intent to oppose the bankrupt’s discharge immediately upon learning of the bankruptcy, I view the failure to serve and file a formal notice of opposition to be one of form as opposed to substance. Consequently, the decisions relied upon by the bankrupt are distinguishable and, in any event, are not binding on this court. 2 . The trustee’s actions prejudiced the creditors: The trustee, with knowledge of the creditors’ opposition, ought not to have issued the certificate of discharge.

It ought to have sought instructions from the creditors, who are the inspectors, before issuing the certificate of discharge. By not respecting the creditor’s opposition (albeit informal) and by failing to obtain instructions from the inspectors, the trustee effectively ignored the creditors’ rights and preferred the bankrupt’s rights. 3 . The bankrupt was aware of the creditors’ opposition: It is accepted that no formal notice of opposition was served and filed with the court. However, the trustee was aware of the opposition and ought to have applied for a hearing date.

In addition, the bankrupt knew of the creditors’ opposition – or must have known of it, by April, 2016. The creditors’ letter dated December 30, 2015, was contained in every motion record before the court filed throughout 2016. In fact, the bankrupt acknowledged that he learned of the letter, although he did not say when. It is fair to infer that he learned of the letter – and the reference to the creditors’ opposition – before the automatic discharge date. I draw an adverse inference from the failure of the bankrupt to indicate the date on which he saw the December 30, 2015 letter. 4 .

Inadvertence of the lawyer: It is clear that a formal notice of opposition was not filed due to inadvertence. It is equally clear that the creditors were interested and pursued the bankrupt for information, etc. at all relevant times. I am not prepared to prevent the creditors from exercising their rights to oppose discharge due to their lawyers’ inadvertence. 5 . There is no prejudice to the bankrupt: It is clear from the actions of the creditors that they were interested and active creditors. They are the single largest creditors of the estate. They have brought motions to seek production and information.

They have examined the bankrupt and other family members. This is not a case where it can be said that the bankrupt was lulled into a belief that he could rely on his discharge. There is no prejudice to the bankrupt, in fact or presumed, given the notice of the creditors’ opposition and the lack of evidence as to the effect of being placed back into bankruptcy. 6 . The creditors are prejudiced if they are not permitted to oppose discharge: It is clear that they desire input and involvement in the insolvency process. Their rights to seek a remedy are imperiled. 7 .

Timeliness of the motion to set aside: The creditors have acted promptly to bring the motion to set aside the automatic discharge upon learning that the trustee had issued a certificate of discharge. 8 . The integrity of the insolvency system: The bankrupt seeks the protections of the BIA and will be released of significant debts upon discharge. The public interest is well served by observance of proper process that takes into account all interests, those of the bankrupt and the creditors.

Order to go setting aside the automatic discharge and extending the time for the creditors to serve and file a notice of opposition to discharge to February 28, 2017. Released Date: February 7, 2017

(original signed) Master M. Jean