SUPREME COURT OF Nova Scotia
IN BANKRUPTCY AND INSOLVENCY
Citation: Beaton (re), 2023 NSSC 21
Date: 20230118
Docket: No. 45279
Registry: Sydney
Estate Number: 51-2090598
In the Matter of: The Consumer Proposal of Finnan Alexander Beaton
(aka Ryan Lynn Beaton)
| Registrar: |
Raffi A. Balmanoukian, Registrar in Bankruptcy
|
| Heard: |
January 16, 2023, in Sydney, Nova Scotia |
| Counsel: |
Finnan Alexander Beaton, applicant |
Balmanoukian, Registrar:
[1] Only Nixon could go to China.
[2] In several reported and unreported decisions, I have been clear that I take seriously files in which there is a significant student loan component, or which are the subject of student loan “hardship discharge” applications. In regular discharge applications, if there is significant student loan debt and a partial ability to pay, I have no hesitation in making a conditional order, whether the loan is otherwise dischargeable under s. 178(2) of the Bankruptcy and Insolvency Act, RSC 1985, c. B-3 as amended (the “BIA”) or not under s. 178(1).
[3] In “hardship” applications under s. 178(1.1) of the BIA, I require clear and cogent evidence to a civil standard that the good faith/hardship test has been met before exercising my discretion to discharge the loan. This is particularly so given my binary jurisdiction to discharge the loan in full, or not at all, with no authority in between.
[4] Examples include
Re Wood, 2020 NSSC 24 (s. 178(1.1) application refused, both tests failed)
Re McCrossin, 2019 NSSC 21 (s. 178(1.1) application refused, both tests failed)
Re Sullivan, 2018 NSSC 334 (s. 178(1.1) application granted, but based on untenable minimum monthly payment and with no Court authority to vary it)
Re Simon, 2018 NSSC 332 (adjourned pending further evidence of good faith; s. 178(1.1) application later granted in an unreported oral decision)
Re Crocker, 2019 NSSC 121 (conditional order on bankruptcy discharge)
Re Theriault, 2019 NSSC 300 (s. 178(1.1) application granted)
Re Stoyles, unreported oral decision, appeal dismissed in unreported decision of Justice Norton, SCP 499738 (conditional order based in part on dischargeable student loan in a second bankruptcy)
Re Handspiker, 2018 NSSC 333 (general discharge principles applicable to student loan-oriented bankruptcies, incorporating Re Burke (1992), 114 NSR (2d) 160 (SC))
Re Hughes, 2018 NSSC 189 (s. 178(1.1) application allowed on the particular facts so as to allow for further education)
[5] I have also expressed frustration that the loan authorities have not contested discharge applications (general or 178(1.1)) when appropriate (Theriault, supra). I have challenged the appropriateness of consents to s. 178(1.1) applications when I have thought the facts or evidence to support one or both elements of the “hardship test” to be wanting; the burden remains on the applicant to a civil standard and the fact the Crown has consented does not change that, or the Court’s function and discretion.
[6] Therefore, I hope I may have some “street cred” in the assertion that I take student loan debt seriously. It is a topic in which I exercise the discretion that I have carefully with a view to the high public obligation that, when appropriate, can flow from the debtor’s having drawn upon public resources to their personal and permanent betterment.
[7] It is against that backdrop that I write with considerable disappointment in continuing to see s. 178(1.1) applications that should never have to be made, because the loan – at least under the law as it long stands in Nova Scotia – should never have been actioned for post-insolvency collection in the first place.
[8] It is not the first time I have seen this. It shall be the last for which there are no cost consequences.
[9] Mr. Beaton seeks discharge of his student loans under Section 178(1.1) of the BIA. At the conclusion of the hearing, I indicated that he would receive an order declaring that they are discharged by virtue of his performance of a Consumer Proposal, with reasons to follow. These are they.
[10] Mr. Beaton studied from 2002 to 2006 (for which he had student loans) and again in a different program at a different institution from 2008 to 2010 (for which he didn’t). He filed a consumer proposal in 2016, which was completed in 2020.
[11] Afterwards, he was contacted by the student loan authorities, seeking to resume payment. When – and only when - he made application under s. 178(1.1) of the BIA, the federal Department of Justice wrote to him that it “consents to your discharge…..on a without costs basis.” Although Mr. Beaton indicated that this was satisfactory to him, it is not satisfactory to me. It is wrong.
[12] Mr. Beaton’s case falls squarely within the facts of Re Goulding, 2020 NSSC 22. In other words, his is a “multiple date” situation – in which he had two periods of study, one more than 7 years prior to his Consumer Proposal (to which the loan applied), and one less than that (for which there was no loan).
[13] In Goulding, I put the issue this way:
[1] This case raises, squarely, the issue of whether this Court should use the “single date” or “multiple date” method of determining whether a student loan is discharged under s. 178(2) of the Bankruptcy and Insolvency Act, RSC 1985, c. B-3, as amended (the “BIA”).
[2] Simply put, if a student loan is more than seven years old (meaning seven years after ‘end of study’) at the date of a bankrupt’s filing, it is dischargeable as a s. 178(2) debt. If it isn’t, it’s not (s. 178(1)), but may be discharged pursuant to a s. 178(1.1) “hardship” application once it is more than five years post-study.
[3] So, to borrow and paraphrase a political expression, “it depends how you define ‘seven years old’.” Does a student who is in-and-out of school, with or without student loans for each (or any) session, reset the clock each time s/he enrols, or does the clock stop each time s/he ceases study?
[4] Mr. Goulding illustrates this situation nicely. He was a student from 1995 to 1999 (for which he received student loans), and again from 2003 to 2005 (for which he did not). He declared bankruptcy in 2011.
[5] Thus, if one uses a “single date” method, the student loans are not discharged; if one uses a “multiple date” method, the loans applicable to 1995-9 would be included in the general 178(2) discharge provision.
[14] The rules of student loan discharge eligibility, and the student loan hardship discharge application procedure, apply to consumer proposals: BIA, s. 66.4(1); Re Cardwell, 2006 SKQB 164. Accordingly, upon performance of his Consumer Proposal, Mr. Beaton’s “over seven year old” student loans were discharged as a matter of law, as it has long stood in Nova Scotia. He should never have had to make this application and go through the angst and uncertainty inherent in any Court proceeding, particularly to a layperson.
[15] This is not new, novel, or obscure law. My predecessor, Registrar Cregan, adopted the “multiple date” rule in Re McNutt, 2008 NSSC 466. I adopted it in Goulding, supra. Goulding has also been the subject of case comment: Matilda Lici, Will the Court Use the “Single Date” or “Multiple Date” Method to Determine Whether a Student Loan is Discharged? [1] Cody Reedman, Government Student Loans- Multiple Date versus Single Date Approach: Goulding (Re): Banking and Finance Law Review (August 2020).
[16] The Multiple Date method is the law in Saskatchewan: Re Hildebrand, 2010 SKQB 321.
[17] It is the law in Ontario: Re St. Dennis, 2017 ONSC 2417.
[18] It is the law in Newfoundland and Labrador: Re Collins, 2013 NLCA 17.
[19] It is the law in New Brunswick: Re Mortimer, 2012 NBQB 109; Re Whitaker, 2019 file 24165, unreported.[2]
[20] The “multiple date” approach has, however, been rejected in Quebec: Bataille, 2021 QCCS 4991; AG Quebec v. NP 2011 QCCA 726.
[21] The “single date” approach had also been adopted in British Columbia: Re Mallory, 2015 BCSC 5. It was also confirmed in Re Piekut, 2021 BCSC 1883. However, in recognition that this approach has been rejected in other jurisdictions, including this one, the British Columbia Court of Appeal has granted leave to appeal in Piekut (2022 BCCA 50) and it is my understanding that this remains in process.
[22] In short, while there are different interpretations across Canada, the prevailing view – and the view for at least 14 years in Nova Scotia – is that when there are two or more periods of study (with an interruption adequate to constitute an “end of study date” for loan purposes), the seven year timeline for the purposes of calculating student loan age begins to run after the end of that period of study, not the last period of study. This is especially so where, as here (and as with Mr. Goulding), a latter period of study is loan-free. It is absolutely disingenuous that a person who goes back to school without a loan “brings forward” a prior loan that otherwise would have been discharged by virtue of age, upon being discharged from bankruptcy or having performed a proposal; but the “one and done” student with an identical (original) period of study is free and clear. As I said in Goulding, supra, it is the epitome of “a little learning is a dangerous thing” and completely inconsistent with public policy.
[23] It is incumbent upon the loan administration officials, whether in the Department of Justice, the Canada Revenue Agency, or wherever, to recognize and apply the law in the jurisdictions that have weighed in on the issue. It should not be making collection efforts against individuals in the hope that the debtor doesn’t recognize the difference, or doesn’t make a Court application.
[24] If a stakeholder disagrees with a Court decision, the proper avenue is to appeal, or to seek legislative change to achieve consistent results across Canada. Not to ignore it unless and until someone raises it, or to adopt a policy based on an approach used in a different jurisdiction because it is more to their liking.
[25] This decision shall therefore serve as notice that, unless and until there is legislative change or unless and until I am overruled by binding authority, I will no longer be accepting consents such as the one in this file “on a without costs basis.” Stakeholders are invited to appear in Court and convince me that Goulding does not apply to a particular situation (I left certain caveats in that decision open for argument, not applicable here), or indeed argue that I and at least four other jurisdictions are wrong. However, I consider it time to adopt the approach of Registrar Evans in Whitaker to award costs against the Crown when the law is settled in this jurisdiction and the approach taken – at least up to the point of application – disregards that.
[26] I will issue an order declaring that the student loans have been discharged by virtue of the full performance of the Consumer Proposal. Any payments made (or refunds/entitlements withheld, such as tax refunds or HST credits) after the certificate of full performance are to be returned to Mr. Beaton, forthwith.
Balmanoukian, R.