• Post category:Court Cases

Re: Bankruptcy of David Bodanis

When will the court not allow an NOI to be filed?

The Royal Bank of Canada (“RBC”) applied for a bankruptcy order against the Debtor. RBC, among several other creditors, was owed over $240,000 as a result of various judgments and orders dating as far back as 1999, up to 2018. The Debtor sought a second adjournment to allow him to file a notice of intention to make a proposal. 

Section 43(1) of the Bankruptcy and Insolvency Act (the “BIA“) provides that a creditor may file an application for a bankruptcy order where:
  1. the debt exceeds $1,000; and
  2. the debtor has committed an act of bankruptcy within 6 months preceding the application.
Section 42(1)(j) of the BIA defines an act of bankruptcy to include if the debtor ceases to meet his obligations generally as they become due.

The Debtor did not challenge the basic debts owing. He claimed to be solvent but took the position that he had not received accurate payout statements which would enable him to satisfy his obligations. He further claimed that he did not file his NOI earlier because he did not want to interfere with or delay RBC’s application.

The Debtor did not give evidence of his assets or means. He testified that he had signed the NOI prepared by his trustee. Signing NOIs is some evidence of insolvency. Based on the above, the Court was satisfied that the Debtor owed his creditors more than $1,000 and had ceased to meet his liabilities generally as they fell due.

The Court denied the adjournment request because the Debtor did not provide a valid explanation as to why the NOI was not filed more promptly. The Court rejected the claim that no accurate payout statement had been prepared.  The judgments and orders dealt with fixed numbers. The interest rates were prescribed by contract or by law and thus, could easily be ascertained.  In any event, it was open to the Debtor to pay what he thought he owed. Other than a few isolated, relatively modest payments, he never did so.

Failure to pay a judgment constitutes sufficient evidence of an act of bankruptcy.  The existence of more than one unpaid creditor is also sufficient to support a finding that an act of bankruptcy has occurred. The petitioning creditor need not have exhausted all possible civil remedies before turning to the BIA.

The Court rejected the explanation that the NOI was not filed so as not to delay these proceedings. In fact, the Debtor was using the possibility of making a proposal precisely to justify dismissing, or staying, the RBC application. Notably, RBC was neither the only nor the largest of the Debtor’s creditors. While the rehabilitation principle is an important animating feature of the BIA, so is creditor protection and the preservation of confidence in the system.

The Court allowed the application for a bankruptcy order.

CounselRachel Moses of Minden Gross LLP for RBC