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[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN CANADA]
discretion to afford debtors varying lengths of time to redeem, depending on the circumstances. Speculative or vague refinancing efforts, however, may expose creditors to an increased risk and thus allow the courts to shorten the timeline in which redemption is available in a receivership. The British Columbia Supreme Court dealt with the same issue more recently in Institutional Mortgage Capital Canada Inc. v Mortise (Scott Road Residential) Holdings Ltd. In citing Haro- Thurlow , the Court affirmed that there is no requirement for the redemption period to run from the date of the hearing of the petition and that the court should consider the debtors' equity of redemption when potentially appointing a receiver. The BCSC outlined a situation when a redemption period could be reduced in The Bank of Nova Scotia v. Sidhu . The Court agreed that a three-month redemption period was more appropriate as it aligned with the respondents' timeline for completing the sale, refinancing transactions, and raising further funds. Debts Surviving Bankruptcy The BIA includes subsections that outline when a claim survives a discharge from bankruptcy, providing exceptions to one of the BIA 's general principles of financial rehabilitation. The recent 2024 Supreme Court of Canada decision in Poonian v. British Columbia (Securities Commission) clarified certain exemptions regarding administrative penalties and disgorgement orders resulting from fraudulent behaviour. Under section 178(1)(a), the second factor in determining in whether a debt can survive bankruptcy is that the debt must be imposed by the court. The word "court" does not capture administrative tribunals or regulatory bodies, but rather solely the judiciary. This stands true even if the fine was imposed by a tribunal
registered by the court, as it was nonetheless given by an administrative body. As such, the Court in Poonian left it open for a discharged bankrupt to be exempt from paying administrative penalties. Section 178(1)(e) provides that a creditor must establish that there were false pretences or fraudulent misrepresentation, the passing of property or services and there must be a direct link between the debt and the fraud. The Court analyzed these three requirements, affirming that a court order declaring fraud must be obtained and that there must be a loss in property or a delivery of services regardless of whether the property was obtained or retained by the bankrupt. Further, they differentiated between debts directly and indirectly arising from fraud, stating that only debt representing the value of the property or services obtained directly through fraud can be non- dischargeable. As a result, the Supreme Court of Canada in Poonian determined that disgorgement could survive bankruptcy whereas administrative penalties could not.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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