Supreme Court

SUPREME COURT OF Nova Scotia

IN BANKRUPTCY AND INSOLVENCY

 

Citation: Cole (re), 2022 NSSC 62

Date: 20220303

Docket: No.  42795

Registry: Halifax

Estate Number: 51-2120243

In the Matter of:  The bankruptcy of Elizabeth Marie Cole

 

Judge:	Raffi A. Balmanoukian, Registrar
Heard:	August 16, 2021, in Kentville, Nova Scotia
Final Written Submissions:	May 25, 2021
Counsel:	Edward A. MacDonald, for the Trustee, Grant Thornton Limited Trinda L. Ernst, QC, and Shirley Mailman, articled clerk, for the bankrupt, Dr. Elizabeth Cole Caitlin Ward, for the objecting creditor, Canada Revenue Agency

 

 

Balmanoukian, Registrar:

[1]             This is an unusual and, in some ways, a tragic case.  And in an unusual fashion, in part, will I address it.

[2]             I intend to direct my comments, and disposition, in large measure directly to the bankrupt, Dr. Elizabeth Cole.[1]  To the extent I must lapse into legalese to explain my reasoning, I will consign as much as I can to footnotes.  My objective is to speak directly to Dr. Cole (albeit in the third person), in a way that addresses her own difficulties and the difficulties her financial decisions have caused for others, while applying the law and my proper discretion in balancing the interests at hand.

[3]             In doing so, I have been aided considerably by the submissions of counsel.  All were fair and respectful, to each other and to Dr. Cole.  I am grateful.

[4]             Taxes have been a perennial problem for substantially all of Dr. Cole’s life as a practicing physician[2].  Filing them has been problematic; paying them, even more so.  This is despite her having made a significant and until recently reliable income in her invaluable calling. 

[5]             What makes this case different from other like-seated professionals is that the money that should have gone to taxes has not gone to living her own life beyond her personal means.  It has not, by all and uncontradicted accounts, gone to luxury houses or cars, expensive vacations, or keeping up with the Joneses.  It has, instead, largely been dissipated from being too easy a target for family who have turned to her to resolve their own, generally legitimate, financial and personal woes. 

[6]             Added to that, a significant motor vehicle accident in December 1998 left Dr. Cole with incomplete financial and personal recovery[3] and limitations on her ability to work as an emergency room physician.  Now, as she surpasses ordinary retirement age, those limitations are more manifest and have also contributed to mental health issues.  I need not burden this decision, or publicize unnecessary details, with their minutiae.  They are in filed and verbal evidence and there is no dispute that they are real.  Real as well are their impacts on Dr. Cole’s ability to discharge the undoubted demands of her profession.

[7]             There is something of a tragic irony to Dr. Cole’s tax problems.  She appreciates that in Canada, taxes drive health care.  Taxes pay her salary.  Taxes pay for equipment and beds and treatment.  The long hours and incursions on her time (such as needing to do administrative tasks on her own time without pay, due to the demands for her medical expertise every moment of her shift) are directly affected by lack of public resources.  She is intimately aware of the number of people in rural Nova Scotia (in particular) without the health care commensurate with a first world public health system, because of the strains placed on public budgets. 

[8]             In short, taxes help keep Dr. Cole, and the rest of us, alive.  When public debts are unpaid, there are no easy public policy alternatives.  Taxes can go up for the rest of us.  Programs and services – including the E.R. in which Dr. Cole practices – can be cut or eliminated or be restricted to those with the private resources to pay.  Authorities can borrow against the future.  Economists might add other options, none of which are palatable or sustainable.  The point remains that Dr. Cole appreciates, perhaps even better than the average citizen, how much her substantial and sustained tax default has a direct and measurable impact upon us. 

[9]             Nonetheless, Dr. Cole’s tax problems are as momentous as they are perennial.  They continue to the present day, a complicating factor in my disposition.  It does no good to formulate conditions that simply push her post-bankruptcy tax liabilities down the road to a point where a third bankruptcy is inevitable.  As it is, one is at least possible if not probable; part of my job is to minimize that potential or, at a minimum, put Dr. Cole on a footing where those liabilities can be addressed in some sensible fashion, given all the circumstances.

[10]         To contextualize the horns of this dilemma, I turn to a brief history.

Chronic non-filing and non-payment

[11]         Dr. Cole filed for her first bankruptcy in 2000 (about a year and a half after her motor vehicle accident).   At that time, she had accrued personal income tax debt for 1994 through 1999 totalling $251,185.09 (the Superintendent’s records show total liabilities of $351,295 and only nominal assets).  Of that, CRA collected $39,757.86 leaving a balance at discharge in August 2001 of $211,427.23. 

[12]         In 2009, Dr. Cole filed a proposal which included $542,144.42 in tax debt from 2003 through 2009[4].  In other words, the only tax years completely “paid” were the 2000 post-bankruptcy tax year, 2001, and 2002.  Dr. Cole swore that she could not work for four years post-accident, which would be late 1998 to late 2002.   It is reasonable to surmise that she had little or no taxable income in those years.

[13]         That proposal, approved by this Court in May 2010, contained a “tax compliance” clause, namely that Dr. Cole was to file and pay her tax returns during the proposal. 

[14]         She did not file for 2010, 2011, or 2012 and incurred a post-proposal tax liability in the comparatively modest amount of $27,091.51.  Predictably, this did not sit well with CRA; however, they did not seek to annual the proposal.

[15]         In September 2015, the Trustee under the proposal was discharged.  By then, to her credit, Dr. Cole had paid $189,050 into her proposal[5].  Approximately $157,000 was disbursed as a dividend (net of costs and levies), the lion’s share of which ($136,710.18) went to CRA.  Third party demands by CRA that were not affected by the proposal’s stay of proceedings netted another $74,232.83 (this may explain the comparatively modest post-proposal tax liability cited above, although the years to which this $74,232.83 was allocated was not clear to me).[6]

[16]         In 2016, Dr. Cole filed for this current bankruptcy.  By that time, her tax debt ballooned to $1,199,499.05, representing the net balance of 2003 through 2016 taxes[7].  The proven unsecured claims in this estate are $1,239,712.90.[8]

[17]         The Trustee, as required, filed Dr. Cole’s “pre and post” tax returns for the 2016 year.  Dr. Cole had not, as of early 2021, filed her 2017, 2018, or 2019 returns.  Her 2020 return was not due at the time Ms. Lien swore her January 29, 2021 affidavit.

[18]         Aside from one payment of $2,086.52, Dr. Cole made no voluntary “post-bankruptcy” tax payments as of the time of Ms. Lien’s affidavit.  She did pay $56,800 to the Trustee on account of her “surplus income” payment obligations.  She had no non-exempt unsecured assets.

[19]         By the time of hearing, Dr. Cole had made progress towards filing her post-2016 tax returns[9], but there was no evidence of subsequent payments.  An order under s. 68 of the Bankruptcy and Insolvency Act, RSC 1985, c. B-3 (the “BIA”) did not result in payments to the estate, either (it is not disputed that Dr. Cole is also in substantial arrears in her payment obligations under the BIA as well, although the exact amount was indeterminate at the time of hearing[10]).

[20]         To put it another way – in the decade between the 2009 proposal and her last estate payment in May 2019, Dr. Cole paid $245,850 to Trustees, most of which has been or will be paid to CRA net of fees and levies; $74,232.83 was obtained directly by CRA from third party demands; and $2,086.52 was paid by Dr. Cole voluntarily to CRA, against some $1.35 million in taxes, interest, and penalties[11].  While not entirely clear, it appears that 2009 (the year of the proposal) returns were filed and, for the post-proposal period, paid.

[21]         The CRA calculated Dr. Cole’s taxable income from 2004 to her May 2016 bankruptcy filing averaging just under $190,000 for each full year in that period.  It ranged from a low of $149,478 for the 2006 year to a high of $247,694 in 2011.  Through that lens and excluding whatever was paid for the 2009 “post proposal period,” it appears that Dr. Cole paid the Trustee, or CRA collected, about $322,000 against $2,333,129 in taxable income, for an effective rate of under 14%.[12]

[22]         Again, to avoid losing track of the point, Dr. Cole’s estimated post-bankruptcy tax debt was estimated in January 2021 at $154,155.73.   Ms. Lien affirmed in her May 14, 2021 affidavit that the actual amount as of that date (May 14, 2021) was $156,388.91, not including the 2020 or 2021 tax years.

Position of the Crown

[23]         The Crown’s original draft order and argument call for the following:  a five year suspension (and potential payment of ‘surplus income’ for an additional five years if a s. 68 enforcement order is unfruitful); payment of the balance of Dr. Cole’s  2016-19 “surplus income” obligations to her estate; filing and payment of post-bankruptcy taxes; compliance with her tax obligations up to the time of her discharge; and discharge of the Trustee (with the associated lifting of the stay of proceedings) if there is default of performance.

[24]         The Crown revised this position in its brief of May 31, 2021 to call for a s. 68 order, payment of $60,000, filing (but not payment) of post-bankruptcy tax returns, and filing of income and expense statements until discharge. 

Position of Dr. Cole

[25]         As noted, Dr. Cole is now 66.  She is her household’s sole breadwinner; she has no dependents in the sense of having minor children or dependent spouse although, as alluded above and as will be discussed further, she considers herself to have substantial family obligations.

[26]         She asks, through counsel, to pay the Trustee 15% of her gross salary pursuant to s. 68 of the BIA, file her 2017-20 tax returns, provide income and expense statements “until her CRA debt is satisfied” (which I take to mean post-bankruptcy debt), and $60,000 “on her debt to the CRA.”  It is unclear whether that refers to the debt captured by the bankruptcy or post-CRA debt.  I take it, for current purposes, to mean post-bankruptcy debt.

Position of the Trustee

[27]         The Trustee, by the time of hearing, took what is essentially a “watching brief” position.  It reiterated the outstanding estimated s. 68 surplus income payment obligations, but for all intents and purposes left CRA and Dr. Cole to their submissions.

Discussion - overview

[28]         The BIA requires me to look at four factors when, as here, the bankrupt comes within the scope of s. 172.1, the so-called “high tax debt” provision.  But before turning to those, I make some initial observations.

[29]         I agree with Ms. Ward’s observation that the bankrupt’s longstanding issues are a case of Dr. Cole “not being able to get out of her own way.”  Her tax problems are both chronic and acute, and entering their fourth (calendar) decade.  The avoidance continued in this Court.  Dr. Cole was encouraged at every stage to obtain counsel but did so belatedly, requiring two adjournments.  A subsequent hearing had to be adjourned at the last minute, for mental health reasons[13]; her second counselling was performed well outside of the statutory timeframe; her payments to her estate are substantially below the estimated balance due and apparently ceased in 2019; her proposal may very well have been successful but for the default under the “tax compliance” clause; and most importantly for current purposes, her post-bankruptcy tax conduct has mirrored that of prior years.

[30]         These are things the Court must take seriously.  I have weighed in on such issues in other cases, quoting with approval the colourful words of Justice Southin that the bankruptcy process is not a “fiscal carwash.”  I have added that high tax debt is, both by statute and by common sense, not the same as “any other debt,” especially on a repeat basis.[14]

[31]         In Sorochan, I distilled a variety of tax cases, and their treatment across Canada, into the following propositions:

Summary

[74]         Tax-driven insolvencies, and for that matter those involving substantial public debt in other forms, are “not the same” as those involving mostly consensual creditors.  This does not replace the rehabilitative aspects of the BIA, but calls for a more nuanced and balanced inquiry so as fairly to address all interests, including those of public equity and system integrity.

[75]         Section 172.1 prohibits an automatic or absolute discharge when the debtor has “high tax debt” within the meaning of that section.

[76]         The factors set out in s. 172.1(4) are mandatory considerations when s. 172.1 applies; they may be considered in other tax driven cases.

[77]         Factors other than those set out in s. 172.1(4) may be considered if applicable.

[78]         Repeat or especially egregious failures to file, or failures to file and pay, or cases of tax avoidance/evasion call for special consideration. 

[79]         Part of debtor rehabilitation includes inculcating the responsibility for and ongoing nature of tax filing and remittances.  This may often include an order requiring the debtor, as a condition of discharge, to file, be assessed for, and/or pay relevant returns over and above the requirements of s. 172.1(5).

[80]         A discharge is something that is earned; it is not an entitlement.

[81]         There is a presumption – a rebuttable presumption – that a high tax debtor is not “honest but unfortunate.”  There is an additional rebuttable presumption that the tax debt does not come under the ‘saving’ provision of s.173(1)(a) that it is not a debt for which the debtor cannot justly be held responsible.  The burden of rebutting those presumptions is on the bankrupt.

[82]         The discharge hearing is not a substitute for a tax appeal. 

[83]         The Court should, pursuant to s. 172.1(4)(d) and by common law, direct its mind to the debtor’s prospects over the medium term in formulating a s. 172.1 disposition.

[84]         Conditions should generally be significant, but attainable over a reasonable period of time.  They should not require the debtor to live in poverty, but also not permit a wholesale return to the debtor’s old ways or old ways of life.

[85]         Those conditions should generally be over and above the minima provided for in ss. 68 and 158 of the BIA.  No hard-and-fast rule should be set as to a percentage of debt or timeline.

[86]         The Court should have adequate evidence at hand to evaluate the specific matter at hand and to issue a bespoke disposition.

[32]         Before turning to the mandatory factors in the BIA, and how they apply to Dr. Cole, I add this.  While there is some common ground between the Crown’s revised position and that of Dr. Cole, there is not a joint recommendation.  As will appear, even if there was I would consider a $60,000 payment such a marked departure from a proper exercise of my discretion as to bring the administration of the BIA (and the administration of justice) into disrepute and, by extension, also be contrary to the public interest.  It is markedly out of line with the expectations of reasonable persons.  It would cause a loss of confidence in the BIA process and respect for the tax process.  I am hard pressed to think that a conscientious citizen would think it reasonable or acceptable that a taxpayer with a consistent income in the $200,000 range should have an effective remittance rate, directly or indirectly, of around 14%[15] over a period of decades, and particularly when the source of that income is the self-same public fisc.

[33]         If this was an “ordinary high tax debt” case, this would be the point where I would launch into a bespoke but firm discussion with the debtor (some might say “rant”), with substantial payment and compliance terms as part of the system integrity and debtor rehabilitation process.  I have had a depressing number of occasions to engage in that exercise, both reported and not.  I have already discussed the place of taxes in a civilized society. The monetary lifeblood they provide in our “social contract” is in especially sharp focus for a medical professional.   Dr. Cole’s tax practices in terms of both filing and payment have been nothing short of abominable. 

[34]         But this is not an “ordinary high tax debt” case.  The ones I have had to date (both under 172.1 and in general) have predominantly fallen into categories that broadly include ‘living beyond one’s means’ or ‘chronic underreporting / underground economy’ activities.  In this case, although there is no justifiable excuse for Dr. Cole’s failure to file or failure to pay,[16] she did not deny nor was in a position to deny her significant income (as her primary payor was the government itself).  Her lifestyle I will discuss in turn, as I now pivot to the four factors I am required to consider under s. 172.1(4) of the BIA.

The circumstances of the bankrupt at the time the personal income tax debt was incurred:  s. 172.1(4)(a)

[35]         I have alluded to, but it is now time to examine more closely, Dr. Cole’s personal circumstances. 

[36]         Ordinarily, Dr. Cole’s income would have been more than adequate to take care of herself and her tax obligations; or if not, it would have been the result of improvident lifestyle choices which would factor very negatively into my disposition.

[37]         Ultimately, what we have here is the confluence of mental and physical health issues, both for Dr. Cole and her family, that have culminated in over a quarter century of tax problems.   Ms. Ernst, QC’s brief sets these out in some detail, and in the interests of delicacy I summarize them here only insofar as is necessary to illustrate my reasons for disposition.

[38]         Dr. Cole’s first assignment in 2000 was a combination of family issues, a motor vehicle accident (with associated work implications), and chronic non-filing (with associated interest and penalties).  I have discussed those above and they are not the timeline or debts at issue here.  They are relevant insofar as to provide background to the continuing circumstances that I must consider under s. 172.1(4)(a).

[39]         Put briefly – Dr. Cole has ADD[17] as well as lingering effects from her motor vehicle accident.  More significantly, her two adult children have substantial physical and mental health issues which Dr. Cole addresses through substantial financial support to varying degrees, trips to where they live (western and northern Canada), and so on.  She testified that her son, in particular, would call up to 30 times a day, usually looking for money.  In addition, she had parental care responsibilities in Newfoundland after her brother died in 2012.  Ms. Ernst, QC put it well at para. 14-15 of her brief:

Dr. Cole is a parent to two children with extensive mental health issues.  Dr. Cole, as a result of childhood and domestic trauma, suffers a great deal from mental health issues herself.  Dr. Cole’s career, albeit one she enjoys, is a stressful and mentally taxing commitment.

Over  the years, Dr. Cole has prioritized the needs of her family, and there have been a myriad of them.  The family stressors that Dr. Cole is constantly under, primarily as a result of her children’s mental health conditions, are extraordinary.  Her emotional bandwidth and ability to care for her own basic needs and obligations have suffered.

[40]         The Crown does not contest these assertions.

[41]         In this way, Dr. Cole’s case has certain similarities to Re Harding, which I decided in 2021[18]; Mr. Harding continually and perennially allocated his significant resources to what he considered to be family obligations, at the expense of tax remittances.  If anything, Dr. Cole is a more extreme case, in the sense that Mr. Harding did spend considerably towards asset acquisition and maintenance (as part of that family rubric and whose resultant equity was captured in his subsequent bankruptcy).  Dr. Cole’s expenditures have, globally speaking, simply “gone out the door.” 

[42]         I am not sure all of this adds up to the extent advocated to the Court.  The fact remains that for many years, Dr. Cole lived off of some 86% of her considerable gross income (by which I mean after professional expenses but before tax).  At her average income and over this period of time, her family support would have had to have been enormous, given that she has no meaningful assets, exempt or otherwise.  Indeed, during the course of her bankruptcy, her house (which was subject to subprime or non-prime financing) was foreclosed.  Her automobile is dated and to repeat, the Court is not aware of any meaningful exempt assets.[19]

[43]         Nonetheless, the bottom line at this stage is that Dr. Cole made good money over a period of years, didn’t pay her taxes (or for the most part file them), and has nothing to show for it.    No doubt she was viewed at least at some points (and likely to the present) by her family as a walking ATM.  Put simply, that has to stop; or, at least, Dr. Cole has to stop allowing herself to be viewed as such.

[44]         I also accept that she had substantial personal travel expenses as part of her family dynamic (she also said she was off work as a result, but this would factor into reduced income, which has already been accounted for in the amounts assessed).  The only useful conclusion I can make is that while her own circumstances had their own challenges, her “circumstances….at the time the personal income tax debt was incurred,” in the sense of what she considered to be her family obligations, were onerous and expensive to the point of being overwhelming.   While I may have my doubts that this accounts for all of her outlays, I don’t need an accounting for every penny.

[45]         As I have said in other cases, this is an explanation, not an excuse.  It is not for Dr. Cole, or anyone else, unilaterally to re-allocate tax money to her own priorities.  As I have sometimes put it for both public and private debt, “what you do with your money is your business; what you do with someone else’s becomes my business, when it gets to this Court.”  Nonetheless, the circumstances of the debtor are relevant to disposition both by virtue of the statutory mandate cited above, and by common sense.  The 30-year old who “pockets cash” to fund their bling (until caught) will find themselves on a very different footing than a 66 year old with chronic medical issues, no meaningful assets, and expenses incurred through perceived or real family health and welfare obligations.

The efforts, if any, made by the bankrupt to pay the personal income tax debt:  172.1(4)(b)

[46]         In large measure, I have discussed this already.  Aside from one minor payment, it appears that the only remittances to CRA were (a) through garnishment (b) through her proposal or first bankruptcy and (c) through payments into her current estate.  Ms. Lien asserts, and it was not disputed, that Dr. Cole made no arrangements to pay her taxes in any other fashion, and indeed has accrued significant post-bankruptcy tax debt as well.

[47]         Dr. Cole is clearly intelligent and capable of realizing her need to set aside money for “tax time”;  she gave verbal testimony that she had mentally earmarked 30% of her gross revenue for taxes from time to time but these funds always managed to make their way to other calls upon her resources.  The fact that not all of her cash on hand were her resources perennially escaped her prioritization, and “tax time” never came[20].  As a result, what could have been a manageable tax bill if paid (or collected) as it accrued mushroomed beyond any serviceable measure.  And here we are.

Whether the bankrupt made payments in respect of other debts, while failing to make reasonable efforts to pay the personal income tax debt:  s. 172.1(4)(c)

[48]         Dr. Cole’s statement of affairs shows noticeable debt to both primary and secondary credit sources, namely chartered bank and finance company loans.  These totalled a little over $80,000.  While she did not use the term “money pit,” Dr. Cole testified that she had to spend some $30,000 on her house to address structural and related matters; as stated, the house was subsequently foreclosed and there was no surplus.  I note the statement of affairs listed a large municipal tax bill, suggesting to me that much like her income tax, Dr. Cole’s private payment habits ranged from delinquent to non-existent.

[49]         As I have said in the other cases, whether one incurs a debt and then pays it in priority to taxes, or simply uses cash on hand to pay for something instead of remitting to CRA, is something of a distinction without a difference.  What is clear to me is that while CRA is by far the largest creditor, it is not the only one; Dr. Cole had other debt and it appears most of it went “out the door” without tangible results in the sense of having assets to show for it.  On balance, I do not find an aggravating factor here that she was clearing off “everyone else except the tax man,” as for example might be the case if one prioritized a non-dischargeable debt (e.g. a fine) or repaying a friend over payment of a tax bill.

The bankrupt’s financial prospects for the future:  s. 172.1(4)(d)

[50]         As is often the case, I consider this the most important factor when deciding what is appropriate, and an appropriate exercise of my discretion, for Dr. Cole.

[51]         I have already noted her age and residual issues from her motor vehicle accident.  She testified that she “hopes to work until 70,” although that feasibility is questionable.  The public demand for her vocation, as opposed to her personal ability to work in it, needs little comment.  She can have all the work she can do (and, to return to part of the irony I have set out above, all the work that the public can fund).

[52]         Dr. Cole’s financial prospects turn also on her own ability to make two major sea changes:  keeping abreast of her taxes so they do not become unmanageable even before they “blow up” with interest and penalties; and being able to say “no” to her adult children.

[53]         Neither of these is easy.  Both are critical if she is to have any path forward.  These dovetail with the statutory factor of “financial prospects for the future” because without these changes, quite simply she doesn’t have any.  That is aside from the advancement of age and decline of heath.

[54]         On the issue of Dr. Cole’s ability to practice full-time medicine, I have limited evidence.  I observed her in Court and while she does have apparent restrictions, their duration and extent are uncertain.  She submitted medical evidence which, overall, does not convince me one way or the other that she will exit her profession any time soon, or conversely that she will be able to handle the day-in, day-out demands of the ER for years to come.  The best conclusion I can reach for her income generation potential is “guarded.”  The best conclusion I can reach for her income management and tax compliance potential is “trust, but verify.”

Disposition

[55]         I began this decision by saying that I hoped to address my comments largely to Dr. Cole directly.  I have attempted to convey the message that while she has given me context and reasons, she has not given me comfort that there is any coherent path forward.

[56]         I am not allowed to give Dr. Cole an absolute discharge; it would not be reasonable to do so if I could.  For almost 30 years (as of this decision), her tax practices both in filing and in remittance, have been delinquent.  Her conduct in these proceedings have consumed extra resources, some more justifiable than others.[21]  As I have emphasized repeatedly, these are the taxes which pay her salary, which enable the citizens of Canada to call on her lifesaving skills and experience. 

[57]         Debtor rehabilitation is a cornerstone of the BIA.  But that self-same rehabilitation includes an appreciation of the perennial nature of taxes.  They are one of our two certainties.  There is no rehabilitation in simply cutting Dr. Cole loose with the triumph of hope over experience that she will sin no more.  Indeed, in this case all evidence is the opposite. 

[58]         There is a rebuttable presumption that a high tax debtor is not “honest but unfortunate,” to use the well-worn insolvency lexicon.  Dr. Cole’s situation and choices may arouse empathy, even sympathy.  But the fact remains that almost her whole life as a physician has been marked by non-filing and non-payment, despite a realization of her obligation to do so and first-hand exposure of the public consequences of not doing so. 

[59]         This is her third intersect with the insolvency process, all tax-driven, and it is not “honest but unfortunate” to use that process as a “plan B” for tax obligations from 1994 to the present, with little interruption.  Her priorities may be understandable; but they are not hers unilaterally to set with money that is not hers, payable as a result of an enviable income paid, in turn, with tax dollars.

[60]         Nothing I do here will have the effect of giving Dr. Cole a “fresh start.”  There is none to be had.  Even if I suspended her discharge for a day to effect technical compliance with the BIA, she would come out the day after tomorrow with another estimated $156,000 in taxes (not including 2020 or 2021) and would likely find herself straight back into the insolvency process, without eligibility for an automatic discharge.  If she filed for a third bankruptcy (and fourth insolvency), her matter would have to come to Court, and the timeline and conditions of her discharge would likely be substantial.

[61]         While there is no joint recommendation, I consider the figure of $60,000 cited to me to be inadequate.[22]  As I said at para. 85 of Sorochan above, the obligations on a high tax debt bankrupt should be more than, not less than, the pro forma duties under ss. 68 and 158 of the BIA.  It is estimated but not finally determined that Dr. Cole has a remaining surplus income payment obligation from 2016-9 far in excess of $60,000.  That exact amount will depend on three things:  whether she has non-discretionary expenses that were not factored in by the Trustee, whether her tax returns (as now apparently completed) for the 2016-9 years show income different from that estimated by the Trustee, and whether Dr. Cole is able to claim dependents for that period given the calls made on her resources in that period. 

[62]         I have a discretion, rarely exercised, to deviate from s. 68.  I do not exercise it at this point for three reasons:  first, Dr. Cole’s current income and work situation is in some flux; second, it is not clear to me the extent of her remaining s. 68 obligation except that it likely exceeds $60,000; and third, to allow Dr. Cole to receive yet a further discount on her financial obligations, which are overwhelmingly to CRA, would offend both the integrity of the process (or, put another way, bring the administration of justice into disrepute) and offend the public interest and reasonable public expectations.

[63]         In my view, it is more sensible to require Dr. Cole to adhere to her s. 68 payment obligations, as potentially recalculated.  If she finds herself without “reasonable probability” of compliance – as opposed to inconvenience or difficulty – she can apply under s. 172.1(6) for modification after a year.  She can also apply to vary the order under s. 187(5) if applicable. 

[64]         I am especially concerned, in these circumstances, with Dr. Cole’s post-bankruptcy filing and payment record.  That pattern is what got us here in the first place.  And the second.  And the third.  I am ordering that all of Dr. Cole’s relevant post-bankruptcy tax filings be filed and assessed up to date to the time of her discharge.

[65]         Ordinarily, I add that these are to be filed, assessed, and paid.  I do not do so here, fundamentally as her post-bankruptcy debt is to an extent that it would be impracticable and Dr. Cole would not have any navigable path to discharge.  Instead, I am ordering that at least 50% of the principal amount of her post-bankruptcy tax debt be paid at the time of her discharge[23].  Proof of the amount payable, and of payment to CRA, shall be provided to the Trustee.

[66]         In making this order, I am not in any way providing Dr. Cole with a “unilateral tax cut.” The post-bankruptcy debt is still the debt.  I am saying that she doesn’t get her discharge until half the principal is paid.  What happens to the other half, and to interest and penalties, may very well be the subject of another filing; but she has to exit this process first.[24]

[67]         Payments to the Trustee shall be at least 15% of Dr. Cole’s gross revenue, payable in arrears no later than the 15^th of the following month.  I note that the existing s. 68 order has come to naught.  It is not clear to me why.  If it is necessary to issue a further order, I will consider such as is within my jurisdiction.  If it is necessary for CRA to apply to lift the stay under s. 69.4 to obtain its payment as ordered above, it may do so.

[68]         I will include a default clause to the effect that if Dr. Cole is not in compliance for more than 60 days, the Trustee is to give her 30 days’ notice that it will apply to the Court for its discharge unless the default is remedied.  The Trustee is ordered to make such application forthwith as the case may arise.  If discharged, the Trustee would be ordered to advise creditors of the resultant end of the stay of proceedings in a prominent fashion.[25]

[69]         Section 172.1(5) of the BIA requires me, if I suspend the discharge, to order Dr. Cole to file income and expense statements.  This is not a suspended order; it is a conditional order under s. 172.1(3).  I do not see the utility in making an order for income and expense statements over and above the 36-month post-bankruptcy period; Dr. Cole’s aversion to financial paperwork is part of the problem to begin with and this adds nothing.  I reiterate, however, that getting control over saying “no” to family members, no matter how importuning they may be or how compelling may be their stated need, is front and centre to Dr. Cole’s ability to comply with this disposition, and to get on with her own life.

[70]         Counsel for CRA shall prepare the order for consent, or dissent, by the Trustee and Ms. Ernst, QC.  In the event the parties are unable to agree, I will settle its form and content.

[71]         An award of costs serves no purpose here; none were sought; none are awarded.

[72]         I thank the parties for their patience in awaiting this decision, and for their professionalism throughout.

Balmanoukian, R.