2005 BCSC 155 In the Matter of the Bankruptcy of Mossman and Mulholland

Before: The Honourable Madam Justice Dorgan

Reasons for Judgment

(In Chambers)

Counsel for the bankrupt:	W.A. Scott
Counsel for creditors:	W.R. Southward
Date and Place of Hearing:	November 16, 2004
	Victoria, B.C.

Background

[1] On February 19, 2002, Ms. Mossman made an assignment in bankruptcy arising from the failure of her business.

[2] On February 5, 2003, Ms. Mossman appeared before Master Patterson, who was sitting as a registrar in bankruptcy. She applied for an absolute discharge. One creditor, the landlord of the premises once occupied by Ms. Mossman’s business, opposed. That creditor has a judgment against Ms. Mossman for $11,001.52.

[3] The learned Master granted the creditor’s application to cross-examine the bankrupt pursuant to s. 163 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “Act”).

[4] Following the examination the matter once again came before Master Patterson. On June 19, 2003 the Master ordered a conditional discharge. Ms. Mossman was required to pay $5,496.31 to the Trustee in Bankruptcy for the benefit of the creditors, plus costs.

[5] On April 6, 2004, Ms. Mossman appealed the Master’s order. Hutchison J. dismissed her appeal. Costs were granted to the creditor.

Present Application

[6] Ms. Mossman now applies for a modification of the Master’s order pursuant to s.172 (3) of the Act. That section reads:

172 (3) Where at any time after the expiration of one year after the date of any order made under this section the bankrupt satisfies the court that there is no reasonable probability of his being in a position to comply with the terms of the order, the court may modify the terms of the order or of any substituted order, in such manner and on such conditions as it may think fit.

[7] Ms. Mossman asks for the following relief:

1. An order cancelling her obligations under the June 19, 2003 order;

2. The creditor’s breach of Rule 11(2) (a) and Rule 40 (13) be rectified;

3. An award of costs of this and all previous related hearings;

4. Reimbursement be made to her for all monies paid to the Trustee for the benefit of creditors after the order of conditional discharge; and

5. That she be discharged absolutely.

[8] The creditor opposes all relief sought by the applicant and seeks an order that the application be dismissed with costs.

[9] The relief sought in paragraphs 1 through 4 generally relates to matters raised and adjudicated upon in the proceedings before the Master or on the subsequent appeal. Consequently, this court has no jurisdiction to deal with them. The sole issue on this application is:

Is Ms. Mossman entitled to a modification of the June 19, 2003 Master’s order granting a conditional discharge?

[10] An application under s. 172(3) is not an appeal from the original order, nor is it a new hearing. What is to be determined is whether, after one year of the original order, the bankrupt has no reasonable probability of being able to comply with the terms of the order such that a modification is warranted (Re Whyte (1980), 35 C.B.R. (NS) 194, [1980] O.J. No. 2951 (Ont. S.C.)).

[11] A bankrupt who seeks a s. 172(3) modification must meet the test set out in Elliot (Trustee of) v. Elliot, (1994) 29 C.B.R. (3d) 174 (B.C.S.C.), which requires the court to consider:

1. Whether or not there have been changes in circumstances that have occurred since the order was made and whether those changes were within the bankrupt's control;

2. Whether or not there is material indicating that the bankrupt cannot comply with terms of the conditional order of discharge, which must be more than a statement of income and expenses;

3. The credibility of the bankrupt; and

4. Whether or not there is evidence that the bankrupt has made a bona fide effort to comply with the discharge order during the preceding year.

[12] An adverse finding on any of these factors will be sufficient to deny an application for an order of modification (Re Appleby (2001), 27 C.B.R. (4th) 1, [2001] O.J. No.3247 (Ont. S.C.)).

Change of Circumstances

[13] Ms. Mossman argues that her circumstances have changed and that the changes are beyond her control. She submits her state of health adversely impacts her ability to comply with the terms of the order. In evidence are letters written by her doctor dated April 22, 2003 and July 20, 2004. The first letter was written prior to the original order. While it was not before the Master when the original order was made, it was before the Chambers Judge when he dismissed Ms. Mossman’s appeal and confirmed the conditional order. The second letter, in part, confirms that Ms. Mossman’s condition as described in the first letter has not changed over the last year. It confirms that she continues to suffer from symptoms related to stress and anxiety. This medical information does not indicate a change in circumstances.

[14] The second letter goes on to refer to “flashbacks” Ms. Mossman has experienced arising from events in her childhood. Ms. Mossman deposes these flashbacks were triggered by her recent court appearances relating to her bankruptcy. She is currently receiving counselling to assist her with these issues. While this information was not before the Master or the Chambers Judge, it does not disclose a change in circumstance relevant to the issue before me.

[15] Ms. Mossman submits the conditional discharge order was based on an incorrect assessment of her family home. The 2003 B.C. Assessment before the Master valued the home at $157,000. The 2004 Re-Assessment values the home at $152,000. While the Re-Assessment may be evidence that the 2003 Assessment was inaccurate, I do not see how the Re-Assessment would have any impact on Ms. Mossman’s obligation or ability to pay the judgment. As far as I can tell on the evidence, the monthly mortgage payment remains the same. I find the evidence of the valuation of Ms. Mossman’s home is not a change in circumstance.

[16] I find that Ms. Mossman has not met the change in circumstances portion of the Elliot test.

[17] While it is not necessary for this court to go on to consider the remaining three factors outlined in Elliot, I do make three additional findings.

Ability to Comply with the Order

[18] Ms. Mossman deposes that on the evidence of her current wages and likely future earnings, she is unable to meet the terms of the conditional discharge. The Master had evidence that Ms. Mossman earned between $550 and $650 per month. Her 2003 Income Tax Return, which was not before the Master, shows she earned a total gross income of $3,590 or approximately $300 per month at the time of the order. She submits that she is currently earning approximately $540 per month. Her current earnings closely reflect the range of earnings which was before the Master. The evidence regarding Ms. Mossman’s current financial circumstances does not persuade me that she is unable to comply with the conditional order.

Credibility

[19] The evidence on this application does not give rise to an adverse finding in regard to Ms. Mossman’s credibility.

Bona Fide Effort to Comply

[20] Since April 2004, Ms. Mossman has made six payments for the benefit of the creditors which total $190.00. This is some evidence that she has made a bona fide effort to comply with the order of conditional discharge.

[21] Ms. Mossman also urges the court to rectify the creditor’s alleged breach of Rule 11(2)(a) and Rule 40(13). The effect of such a request would be to decide whether the Master based his decision on materials that were improperly placed before the court. In disposing of this issue it is important to note two things. The first is that this application is not an appeal of the Master’s decision, it is a request to modify that decision based on the factual situation which exists now, as opposed to the factual situation which existed at the time of the original application. As such, the requested relief is outside the jurisdiction of this court. Further, the alleged breach was raised by the applicant in the appeal of the Master’s decision that was heard by Hutchison J. This is not an appeal of that decision either; it is an entirely separate application. Accordingly, the creditor’s alleged breach is simply not persuasive or indeed relevant to the issue before this court, which is “Should the conditional discharge order be modified?”

[22] Finally, Ms. Mossman argues that the Master’s order for costs ought to be re-visited under the rubric of a consideration of costs on this application. The original order was subsequently clarified by the trustee and later affirmed by the Chambers Judge on appeal. This court has no jurisdiction to vary previous orders for costs; this is not an appeal.

[23] In conclusion, the application to modify the order for conditional discharge is dismissed. Costs follow the event.

“J.L. Dorgan, J.”
The Honourable Madam Justice J.L. Dorgan

Citation:	*In the Matter of the Bankruptcy of Mossman and Mulholland,*
	2005 BCSC 155