Foerster (Re)

Foerster (Re)

s.172.1 applies and, on the facts, the bankrupt engaged in misbehaviour by promoting and participating in a disallowed tax shelter and prioritizing other payments over taxes; considering the statutory factors the court must impose a monetary condition of discharge; ordered payment of $136,000 (just under 15% of CRA's total claim) and additional conditions including suspension until May 16, 2015, filing income/expense reports and filing tax returns while undischarged.

Citation
2014 BCSC 1565
Parties
Applicant (bankrupt): Bruce Herbert Foerster; Respondent (creditor): Her Majesty the Queen, Minister of National Revenue (Canada Revenue Agency)
Court
Supreme Court of British Columbia
Jurisdiction
Canada
Judgment Date
18 August 2014
Procedural Posture
Bankruptcy and Insolvency / Discharge Hearing (application for Discharge)
Outcome
Conditional discharge granted subject to monetary payment and reporting conditions; discharge suspended until May 16, 2015.
Legal Topics
Discharge, Tax Driven Bankruptcy, Section 172.1 BIA, Surplus Income, Conditional Discharge
Source Language
English
Bankruptcy Tax Law Insolvency Discharge Tax Driven Bankruptcy Section 172.1 BIA Surplus Income Conditional Discharge

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Parties

Bruce Herbert Foerster

Applicant (bankrupt)

Her Majesty the Queen, Minister of National Revenue (Canada Revenue Agency)

Respondent (creditor)

Procedural Posture

Bankruptcy and Insolvency / Discharge Hearing (application for Discharge)

Legal Issues

  1. 1 Whether s.172.1 of the BIA precludes an absolute discharge for tax-driven bankruptcies
  2. 2 Whether the bankrupt should be treated as an 'honest but unfortunate debtor' or as having engaged in misbehaviour warranting a monetary condition
  3. 3 Whether a monetary payment is required as a condition of discharge and, if so, the appropriate quantum

Ratio Decidendi

s.172.1 applies and, on the facts, the bankrupt engaged in misbehaviour by promoting and participating in a disallowed tax shelter and prioritizing other payments over taxes; considering the statutory factors the court must impose a monetary condition of discharge; ordered payment of $136,000 (just under 15% of CRA's total claim) and additional conditions including suspension until May 16, 2015, filing income/expense reports and filing tax returns while undischarged.

Court Disposition

Conditional discharge granted subject to monetary payment and reporting conditions; discharge suspended until May 16, 2015.

Orders

  • The bankrupt shall pay to the trustee the sum of $136,000 as a condition of discharge.
  • The bankrupt is entitled to pay the $136,000 in full at any time but the discharge shall be suspended until May 16, 2015 regardless of such payment.