Reviving a consumer proposal after the expiry of the five-year period

Re Cumberbatch, 2023 ONSC 5287
Can a court revive a consumer proposal after the expiry of the five-year period under section 66.12(5) of the BIA?

Overview: In this case, the Court extended the time for performance of a consumer proposal beyond the five-year period provided for under subsection 66.12(5) of the BIA, ruling that the circumstances where a revival is appropriate include where a proposal is near complete, the debtor defaults shortly before the proposal’s fifth anniversary, and the debtor is able to cure the default shortly thereafter.

The Debtor made a consumer proposal on January 10, 2018 under section 66.13 of the Bankruptcy and Insolvency Act. On January 16, 2018, the Administrator, David Sklar & Associates Inc., filed the Consumer Proposal with the Office of the Superintendent of Bankruptcy. Under the Consumer Proposal, the Debtor agreed to pay to the Administrator the sum of $7,800, with monthly payments of $130 per month for a 60-month period.

Under subsection 66.14 of the BIA, in the ten days following the filing of a consumer proposal, an administrator is required to, among other things: (a) send a report to the OSB containing the administrator’s opinion as to whether the consumer proposal is reasonable and fair to the debtor and the creditors, and whether the debtor will be able to perform it; and (b) send a copy of the consumer proposal, the report to the OSB, a statement of affairs, and a proof of claim to every known creditor of the debtor.

Subsection 66.18(1) of the BIA provides a mechanism whereby a consumer proposal is deemed to be accepted by the creditors if no request is made for a meeting of creditors in the 45-day period following the filing of a consumer proposal by the OSB or creditors with proven claims in accordance with subsection 66.15(2) of the BIA. In this case, the 45-day period expired on March 2, 2018. No meeting of creditors was called in accordance with subsection 66.15(2) and, as a result, the Consumer Proposal was deemed accepted by the Debtor’s creditors on March 3, 2023.

Subsection 66.22(2) of the BIA provides a mechanism whereby a consumer proposal is deemed approved by the Court if no request has been made by the OSB, or any interested party, for the consumer proposal to be reviewed by the Court in the 15-day period following deemed acceptance of the consumer proposal. The 15-day period expired on March 18, 2018. No request for review of the consumer proposal was made in accordance with subsection 66.22(1). As a result, the Consumer Proposal was deemed approved by the Court on March 19, 2018.

The Debtor defaulted in making payments to the Administrator under the Consumer Proposal. As a result of missed payments due in February, March and April 2022, the Consumer Proposal was deemed annulled effective April 30, 2022 in accordance with subsection 66.31(1) of the BIA. At the time of the annulment, the Debtor had paid $5,460 of the $7,800 payable under the Consumer Proposal. Accordingly, the Administrator moved under subsection 66.31(9) of the BIA for an order reviving the consumer proposal of the Debtor, waiving the Debtor’s defaults, and allowing payments to be made forthwith. The motion was supported by the Debtor, who swore an Affidavit stating that she now had the ability to pay off the remainder of the proposal.

Subsection 66.12(5) of the BIA provides that “a consumer proposal must provide that its performance is to be completed within five years.” Additionally, subsection 66.24(3) of the BIA provides that the court “shall refuse to approve a consumer proposal if it does not comply with subsections 66.12(5) and (6).” By the time the motion for revival was before the Court, the five-year period had already expired. The issue before the Court was whether it had jurisdiction under the BIA to revive a consumer proposal after the expiry of the five-year period.

In support of its argument that the Court has jurisdiction to revive a consumer proposal outside the five-year period, the Administrator relied on Re Watts (2014), Re Moore (2014), and Re Molina (2022), wherein the Courts decided that they had jurisdiction to extend the period of time for performance of a consumer proposal beyond the five-year period in certain circumstances.

The Court was satisfied that it had jurisdiction to revive a consumer proposal after the expiry of the five-year period, when it is appropriate to do so in the circumstances. This is on account of the language in subsection 66.31(9) of the BIA that an administrator may bring the application to revive “at any time.” The circumstances where a revival is appropriate include where a proposal is near complete, the debtor defaults shortly before the proposal’s fifth anniversary, and the debtor is able to cure the default shortly thereafter.

In this case, the Consumer Proposal was deemed annulled as of April 30, 2022. The administrator moved to schedule a revival motion just over nine months later. The Administrator confirmed that, if the Consumer Proposal were revived, the Debtor would pay the amount outstanding under the Consumer Proposal to the Administrator within 30 days of the Court order. Finally, neither creditors nor the OSB took a position in connection with the Administrator’s request for a revival, notwithstanding that they were served with the motion materials on many occasions.

Accordingly, the Court granted the Administrator’s motion.

Judge: Associate Justice Rappos

Counsel: Matthew Harris for the Administrator David Sklar & Associates Inc.