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When a bankrupt has, without reasonable context or rational excuse or justification, defaulted egregiously in compliance with its Bankruptcy and Insolvency Act, it is sufficient cause under s.41(2) of the BIA to discharge a trustee

Ontario

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Canada

In Frost (Re), 2021 NSSC 296, a bankrupt made an assignment in bankruptcy, and thereafter emigrated from Canada, leaving unpaid tax bills in his wake. He explicitly told the Trustee he was not doing to complete his undischarged duties under the Bankruptcy and Insolvency Act. He got back in touch eventually, for the purpose of trying to obtain a clean background check. The Trustee directed him to complete his duties, but he again refused. The Court declined his eventual application to be discharged.

Discharging the Trustee

Registrar Balmanoukian held that it is “sufficient cause” under s. 41(2) of the BIA to discharge a Trustee when a bankrupt has, without reasonable context or rational excuse or justification, defaulted egregiously in compliance with obligations under the BIA (para. 9). The registrar held that once the Trustee has been discharged – whether through the BIA General Rules or by the Court – the stay is lifted and creditors may pursue their remedies if the bankrupt has not been the subject of an absolute, suspended, or possibly conditional discharge (para. 11).  The weight of authority, with the possible exception of certain decisions from Manitoba, supports this reading of the effect of a Trustee’s discharge, when the bankrupt has not received an absolute, suspended, or possibly conditional order of discharge (para. 12).

BIA Stay Suspends Limitation periods

The Registrar held, obiter, that the BIA stay of proceeding suspends the running of limitation periods, and the clock resumes when the stay is ended (para. 39).

April 14, 2022
Frost (Re), 2021 NSSC 296