IN THE SUPREME COURT OF NOVA SCOTIA
IN BANKRUPTCY AND INSOLVENCY
Citation: Pace (Re), 2006 NSSC 235
Date: July 24, 2006
Docket: B 28637
Registry: Halifax
District of Nova Scotia
Division No. 1
Court No. 28637
Estate Nos. 51-820717
51-820718
In the Matter of the Bankruptcy of
George Clarence Pace and Doreen Theresa Pace
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D E C I S I O N
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Registrar: Richard W. Cregan, Q.C.
Heard: July 14, 2006
Present: Jason G. Breeze representing the Trustee,
McCuaig & Company Inc.
Darrin Ulley representing the Superintendent of
Bankruptcy
[1] The Applicants made an assignment in bankruptcy on September 30, 2005. It is their third bankruptcy, the first having been in 1983 and the second in 1992.
[2] Mr. Pace works for a lighting fixture company in sales and Mrs. Pace works at Zellers. They are respectively 58 and 55 years of age. The cause of the first bankruptcy was excessive credit, related to the expenses of having young children to bring up. They were having a period of unemployment at the time of the second bankruptcy. The present bankruptcy is the result of their inability to service their debt load. Their unsecured liabilities consist of what appears to be several credit card accounts totalling $29,125.
[3] They have a leased automobile. The lease is in their daughter’s name, but they make the monthly payments. The car is needed for Mr. Pace for transportation to his work in Burnside.
[4] Their net employment income at the time of their bankruptcy was $1902 per month. At that time their expenses exceeded that amount by $634. This presumably explains the credit card debt they accumulated. They say that since their bankruptcy have been able to live with their income.
[5] They now ask to be discharged. The Trustee recommends that, considering their two previous bankruptcies, their discharge should be suspended for one year.
[6] They each were examined by the Official Receiver. I quote from the examination report for Mr. Pace:
Mr. Pace indicated, during the Examination, that the cause of all 3 bankruptcies was over extension of credit. When asked if he felt that he had learned anything, from his previous two experiences in bankruptcy, he indicated that he realized that he should not be using credit but he continued to do so anyway.
[7] It recommends that his discharge should be suspended for three years.
[8] From the report for Mrs. Pace, I quote:
After reviewing the Conduct of the Bankrupt, the Causes of Bankruptcy and the Disposition of Property and considering that Ms. Pace is a Third Time Bankrupt and has indicated to the Official Receiver that she has not learned anything from her two previous bankruptcies, The Office of the Superintendent of Bankruptcy recommends that the Court consider issuing a Suspension Order of Discharge for a period of three years.
[9] At the hearing the Superintendent’s recommendation was revised to a refusal with right to reapply in two or three years. The Superintendent’s Office is particularly concerned that their successive bankruptcies are the result of the misuse of credit cards.
[10] Let me comment on three of the cases referred to by the Superintendent’s representative.
[11] First is Re Hardy (1979), 30 C.B.R. (N.S.) 95, a decision of Anderson J. of the Ontario Supreme Court, In Bankruptcy. The bankrupt had been discharged previously in 1958 and 1974. I quote the following from page 96:
3 In my view, a third bankruptcy is one too many. The well-recognized principle underlying bankruptcy law is that a debtor may, in proper circumstances, be relieved of this obligation and enabled to re-establish himself financially. I do not consider that he should be enabled to do so upon a recurring basis. The process of the Act and of the court should not be considered to bestow a licence to incur debts and be purged of them at periodic intervals.
4 The present bankruptcy results from an assignment made on 17th August 1977. It may be that at some time in the future the court, upon evidence that the bankrupt has undergone some change such as to make him financially responsible, may be disposed to make an order of discharge.
His discharge was refused.
[12] The second is Re Randall (1984), 54 C.B.R. (N.S.) 121 (Ont., Sutherland J.), where it is made clear that any suggestion in Re Hardy that a refusal is mandatory after a third bankruptcy should not be taken as binding. For such a rule to be of universal application would require some statutory recognition, which does not now exist.
[13] The third case is Re Willier, 14 C.B.R. (5th) 130, a decision of Registrar Baker of the British Columbia Supreme Court. Being a recent case, it is a good update of the law. I quote Registrar Baker:
12 By the time an individual has entered a third bankruptcy the purpose and the intent of the Act shifts from its remedial purpose of assisting well-intentioned but unfortunate debtors to one of protecting society, and in particular unsuspecting potential creditors. The best intentions and hopes of such bankrupts become subordinated to the need to protect others from the bankrupt’s demonstrated financial incompetence, negligence, and carelessness. If there can be a concept of debtors’ recidivism, it is demonstrated in stark relief by a third time bankrupt.
13 To even consider a discharge for a third time bankrupt the court must be satisfied that the bankrupt has gained sufficient insight and made sufficient changes in his or her life that it is not reasonably possible that further bankruptcy will occur.
The bankrupt’s discharge was suspended for three years.
[14] What these authorities mean to me in deciding this case is that there is no rule of law that a third time bankruptcy must result in refusal of discharge, but the court must nevertheless pay very careful attention to the future prospects of a third time bankrupt. The court must be concerned that something has happened to, or something has been learned by the bankrupt that will give some sense of assurance that the cycle of bankruptcy has been broken. Simply giving a lengthy suspension of discharge may not be enough. A suspension may only be a suspension of the ability to start the credit abuse all over again.
[15] The Trustee recommends a suspension of one year. The Superintendent recommends refusal with right to reapply in two or three years. I think something is required to assure that Mr. and Mrs. Pace have learned something from their bankruptcy and have established a life style and financial discipline compatible with their income before they can be discharged.
[16] Their discharge is refused, but with liberty to reapply in 18 months. In the meantime they are to prepare and file with the Trustee each month a statement of their income and expenses. The Trustee is asked to monitor these statements and consult with Mr. and Mrs. Pace when thought appropriate. On their reapplication for discharge, the Court will look to the Trustee for a report and recommendation. Mr. and Mrs. Pace will be responsible for the fees of the Trustee for this work. The fees should be quite modest, if they give their full cooperation.
R.
Halifax, Nova Scotia
July 24, 2006