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Syndic de Shayoun

JB4784

2021 QCCS 559

SUPERIOR COURT

(Bankruptcy and Insolvency Division)

CANADA

PROVINCE OF QUEBEC

DISTRICT OF

TERREBONNE

No:

700-11-019904-202

DATE:

22 February 2021

_____________________________________________________________________

THE HONOURABLE

babak barin, J.S.C.

_____________________________________________________________________

IN THE MATTER OF THE BANKRUPTCY OF:

FADI SHAYOUN

Insolvent Person

-and-

DEVLETIAN & ASSOCIES INC.

Trustee

-and-

THE SUPERINTENDENT OF BANKRUPTCY

Intervener

_____________________________________________________________________

JUDGMENT REGARDING A CONSUMER PROPOSAL

UNDER THE BANKRUPTCY & INSOLVENCY ACT

SECTIONS 66.12, 66.13, 66.19, 66.22, 69.2, 112 & 127

_____________________________________________________________________

INTRODUCTION

[1] One of the primary objectives of the Bankruptcy and Insolvency Act[1] is to permit the economic rehabilitation of individuals across Canada unfettered by past debts[2]. Another equally important objective of the federal Act is to provide for an orderly and fair distribution of a person’s property among that person’s creditors on a pari passu, or on an equal footing, basis[3].

[2] Enacted initially in 1985, the BIA is a self-contained legal regime available for both reorganization and liquidation of insolvent debtors. It features a rule-based approach to proceedings and contains mechanisms for debtors to make proposals to their creditors for adjustment of debts. If a proposal fails, the Act offers a bridge to bankruptcy whereby the debtor’s assets are liquidated and the proceeds paid to creditors in accordance with a statutory regime of distribution[4].

[3] To adopt the words of the Supreme Court, the Act, while not a business legislation in the strict sense, clearly has its origin in the business world and its interpretation must take this origin into account. The Act in general regulates the conduct of people in the business sphere and, therefore, to interpret it using an overly narrow and legalistic approach would be to misinterpret it.[5]

[4] The provisions enumerated under Part III, Division II of the BIA, starting with section 66.11 were added to the Act in 1992 as part of certain major amendments. The principal purpose of these provisions is to offer natural insolvent persons a more efficient, flexible and attractive reorganizational regime than the one found under Part X.

[5] Under Part X, debtors who are unable to meet their obligations can apply to court in certain participating provinces to fix amounts to be paid into court and distributed among their creditors pro rata or proportionally. Part X does not apply in Quebec.

[6] In 1997, the legislature amended the Act to extend the application of Part III, Division II to consumer bankrupts in certain circumstances. Presently, a consumer debtor is defined as an individual who is either bankrupt or insolvent and whose aggregate debts, excluding any debts secured by his or her principal residence, are not more than $250,000 or any other prescribed amount.

[7] Pursuant to section 66.13 (1) of the Act, a consumer debtor who wishes to make a consumer proposal must obtain the assistance of an administrator and provide that person with information about his or her current financial situation.

[8] An administrator who agrees to assist a consumer debtor must investigate the consumer debtor’s property and financial affairs, so as to be able to assess with reasonable accuracy the debtor’s financial situation and cause of insolvency. The administrator shall not file a consumer proposal if the debtor is not eligible or there has been non-compliance with the requirements of sections 66.12 and 66.13 of the Act.

CONSPECTUS

[9] This decision is being rendered in the course of a review by the court of a consumer proposal dated 27 January 2020 filed by the insolvent debtor, Fadi Shayoun (Shayoun)[6] with the assistance of the trustee in bankruptcy or the administrator as defined in section 66.11 of the Act (Administrator), pursuant to section 66.13 of the Act, and accepted by a majority of his creditors that participated in the voting process.

[10] The review application is filed by the Administrator, pursuant to section 66.22 (1) of Part III, Division II of the BIA, at the request of Ms. Martine Beaudet-Aune (Beaudet-Aune), an unsecured creditor.

[11] Beaudet-Aune, who did not vote in favor of the consumer proposal filed, is owed approximately $63,000. Like the representative of the Attorney General of Canada, intervening on behalf of the Superintendent of Bankruptcy (A.G.), she is of the view that the secured creditor, Mr. Vittorio Masciotra (Masciotra), should not have been allowed by the Administrator to vote in favor of the proposal without complying first with the specific requirements of the Act - sections 66.19, 69.2, 112 and 127 to be exact.

[12] This application before me was argued on the basis of agreed facts and submission of a question of law arising from two different interpretations of these provisions. There are less than a handful of superior court decisions from across Canada that have examined these provisions.

[13] The specific question submitted is whether sections 112 and 127 of Part V - Administration of Estates of the BIA apply to section 66.19 of Part III, Division II - Consumer Proposals of that same statute.

[14] The A.G. and Beaudet-Aune are of the view that in law they do and since the secured creditor, Masciotra, did not comply with them, the consumer proposal should be rejected. The consumer debtor and the Administrator disagree. They also argue that if they are wrong, fairness requires that this matter be remitted to the Administrator for compliance and a new vote.

[15] In light of possible interest in this judgment outside of Quebec, with the prior approval of the parties, I have decided to provide these reasons in English. In any event, the lawyer for the Administrator addressed the court in that language.

BACKGROUND

[16] Three of the only four decisions available from across Canada on this topic come from Quebec. One was rendered in Ontario. The Quebec decisions are dated 2007[7], 2012[8] and 2019[9]. They all agree with one another. The Ontario decision was rendered in 2011[10] and it does not accept the reasons of the 2007 Quebec judgment. While I am not of course sitting on appeal of these decisions, I am being asked by the parties to peruse them and provide an answer with respect to the specific question they have submitted. The parties are of the view that the answer will determine the fate of this case. For reasons that I have expressed at the end of this judgment, I am not exactly of the same view.

[17] The legal representatives of the Administrator and the consumer debtor plead for the acceptance of the Quebec decisions and their reasons. The A.G. and the lawyer for Beaudet-Aune, on the other hand, support the position adopted by the Ontario Superior Court of Justice and submit that its reasons should be applied in Quebec.

[18] Before proceeding any further, as set out in section 69.2 (1) of the Act[11], and subject to, among other provisions, its subsections (2) to (4), it is useful to acknowledge that upon the filing of a consumer proposal under section 66.13 (2), no ordinary or unsecured[12] “creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy” until such proposal is withdrawn, refused, annulled, deemed annulled or the administrator has been discharged.

[19] Section 69.2 (1), therefore, creates a stay on the filing of a consumer proposal that is intended to prevent a creditor from gaining an advantage over other creditors. In other words, once a consumer proposal is filed, all unsecured creditors are prohibited from taking steps to sue or collect on any judgment. This section does not apply where a consumer proposal, other than an amended proposal referred to in section 66.37, is filed within six months after the filing of a previous consumer proposal by the same debtor.

[20] It is also useful to note that, subject to, among others, section 127 of the Act, the filing of a consumer proposal pursuant to section 66.13 (2) of the BIA, does not prevent a secured creditor from realizing or otherwise dealing with his, her or its security in the same manner as he, she or it would have been entitled to realize or deal with in the absence of section 69.2 (4) of the Act, unless a court orders otherwise subject to certain conditions and restrictions. Sections 69.2 (1) and (4) of the Act consequently, have an important role to play in the understanding of Part III, Division II.

[21] In order to answer the question submitted, in addition to closely examining sections 66.19, 112 and 127 of the BIA, this case requires careful consideration of sections 66.12 (4), 66.17, 66.22, 66.24 (2) and (4), 66.28 (2) (b), 66.4 (1), 69.2 (1) and 69.2 (4) of the Act. This last provision, in particular, appears to have escaped the examination of the other superior court decisions. In any case, there appears to be no mention of it in the decisions concerned. I will have more to say about sections 69.2 (1) and (4) later.

RELEVANT PROVISIONS OF THE BIA

[22] In the meantime, for ease of reference, I have reproduced in both English and French, the relevant sections of the BIA. This will allow the parties to go back and forth in this judgment without having to externally refer to what is unquestionably a voluminous Act.

PART III - PROPOSALS

DIVISION II - CONSUMER PROPOSALS

[…]

To whom consumer proposal is made

66.12 (3) A consumer proposal shall be made to the creditors generally.

Creditors’ response

(4) Any creditor may respond to a consumer proposal by filing with the administrator a proof of claim in the manner provided for in:

(a) sections 124 to 126, in the case of unsecured creditors; or

(b) sections 124 to 134, in the case of secured creditors.

Commencement of proceedings

66.13 (1) A consumer debtor who wishes to make a consumer proposal shall commence proceedings by:

(a) obtaining the assistance of an administrator in preparing the consumer proposal; and

(b) providing the administrator with the prescribed information on the consumer debtor’s current financial situation.

Duties of administrator

(2) An administrator who agrees to assist a consumer debtor shall :

(a) investigate, or cause to be investigated, the consumer debtor’s property and financial affairs so as to be able to assess with reasonable accuracy the consumer debtor’s financial situation and the cause of his insolvency;

(b) provide, or provide for, counselling in accordance with directives issued by the Superintendent pursuant to paragraph 5(4) (b);

(c) prepare a consumer proposal in the prescribed form; and

(d) subject to subsection (3), file with the official receiver a copy of the consumer proposal, signed by the consumer debtor, and the prescribed statement of affairs.

Where consumer proposal not to be filed

(3) The administrator shall not file a consumer proposal under paragraph (2) (d) if he has reason to believe that:

(a) the debtor is not eligible to make a consumer proposal; or

(b) there has been non-compliance with anything required by this section or section 66.12.

[…]

Creditor may indicate assent or dissent

66.17 (1) Any creditor who has proved a claim may indicate assent to or dissent from the consumer proposal in the prescribed manner to the administrator at or prior to a meeting of creditors, or prior to the expiration of the forty-five day period following the filing of the consumer proposal.

Effect of assent or dissent

(2) Unless it is rescinded, any assent or dissent received by the administrator at or before a meeting of creditors has effect as if the creditor had been present and had voted at the meeting.

[…]

Voting on consumer proposal

66.19 (1) At a meeting of the creditors, the creditors may by ordinary resolution, voting all as one class, accept or refuse the consumer proposal as filed or as altered at the meeting or any adjournment thereof, subject to the rights of the secured creditors.

[…]

Voting by administrator

(3) The administrator, as a creditor, may not vote on the consumer proposal.

[…]

Application to court

66.22 (1) Where a consumer proposal is accepted or deemed accepted by the creditors, the administrator shall, if requested by the official receiver or any other interested party within fifteen days after the day of acceptance or deemed acceptance, forthwith apply to the court to have the consumer proposal reviewed.

Where consumer proposal deemed approved by court

(2) Where, at the expiration of the fifteenth day after the day of acceptance or deemed acceptance of the consumer proposal by the creditors, no obligation has arisen under subsection (1) to apply to the court, the consumer proposal is deemed to be approved by the court.

[…]

Refusal to approve the consumer proposal

66.24 (2) Where the court is of the opinion that the terms of the consumer proposal are not reasonable or are not fair to the consumer debtor and the creditors, the court shall refuse to approve the consumer proposal, and the court may refuse to approve the consumer proposal whenever it is established that the consumer debtor

(a) has committed any one of the offences mentioned in sections 198 to 200; or

(b) was not eligible to make a consumer proposal when the consumer proposal was filed with the official receiver.

Power of court

(4) Subject to subsections (1) to (3), the court may either approve or refuse to approve the consumer proposal.

[…]

Time for determining claims

66.28 (1)

[…]

On whom approval binding

(2) Subject to subsection (2.1), a consumer proposal accepted, or deemed accepted, by the creditors and approved, or deemed approved, by the court is binding on creditors in respect of

[…]

(b) secured claims for which proofs of claim have been filed in the manner provided for in sections 124 to 134.

[…]

Act to apply

66.4 (1) All the provisions of this Act, except Division I of this Part, in so far as they are applicable, apply, with such modifications as the circumstances require, to consumer proposals.

Part IV - Property of the Bankrupt

Stay of proceedings - consumer proposals

69.2 (1) Subject to subsections (2) to (4) and sections 69.4 and 69.5 on the filing of a consumer proposal under subsection 66.13 (2) or of an amendment to a consumer proposal under subsection 66.37 (1) in respect of a consumer debtor, no creditor has any remedy against the debtor or the debtor’s property, or shall commence or continue any action, execution or other proceedings, for the recovery of a claim provable in bankruptcy until

(a) the consumer proposal or the amended consumer proposal, as the case may be, has been withdrawn, refused, annulled or deemed annulled; or

(b) the administrator has been discharged.

Exception

(2) Subsection (1) does not apply where the consumer proposal, other than an amendment to a consumer proposal referred to in section 66.37, is filed within six months after the filing of a previous consumer proposal in respect of the same debtor.

Secured creditors

69.2 […]

(4) Subject to sections 79 and 127 to 135 and subsection 248(1), the filing of a consumer proposal under subsection 66.13 (2) does not prevent a secured creditor from realizing or otherwise dealing with his security in the same manner as he would have been entitled to realize or deal with it if this section had not been passed, unless the court otherwise orders, but in so ordering the court shall not postpone the right of the secured creditor to realize or otherwise deal with his security, except as follows:

(a) in the case of a security for a debt that is due at the date of the approval or deemed approval of the consumer proposal or that becomes due not later than six months thereafter, that right shall not be postponed for more than six months from that date; and

(b) in the case of a security for a debt that does not become due until more than six months after the date of the approval or deemed approval of the consumer proposal, that right shall not be postponed for more than six months from that date, unless all instalments of interest that are more than six months in arrears are paid and all other defaults of more than six months standing are cured, and then only so long as no instalment of interest remains in arrears or defaults remain uncured for more than six months, but, in any event, not beyond the date at which the debt secured by the security becomes payable under the instrument or act, or law, creating the security.

PART V - Administration of Estates

Voting by secured creditor

112 For the purpose of voting, a secured creditor shall, unless he surrenders his security, state in his proof the particulars of his security, the date when it was given and the value at which he assesses it, and he is entitled to vote only in respect of the balance, if any, due to him, after deducting the value of his security.

[…]

Proof by secured creditor

127 (1) Where a secured creditor realizes his security, he may prove the balance due to him after deducting the net amount realized.

May prove whole claim on surrender

(2) Where a secured creditor surrenders his security to the trustee for the general benefit of the creditors, he may prove his whole claim.

[Underlining is mine]

PARTIE III - PROPOSITIONS CONCORDATAIRES

SECTION II - PROPOSTIONS DE CONSOMMATEUR

[…]

Destinataires

66.12 (3) La proposition est faite aux créanciers en général.

Réponse des créanciers

(4) Tout créancier peut répondre à la proposition en déposant auprès de l’administrateur une preuve de réclamation de la manière prévue :

(a) aux articles 124 à 126, dans le cas des créanciers non garantis.

(b) aux articles 124 à 134, dans le cas des créanciers garantis.

Démarches préliminaires

66.13 (1) Le débiteur consommateur qui souhaite faire une proposition de consommateur doit d’abord :

(a) obtenir les services d’un administrateur pour l’assister dans la préparation de la proposition;

(b) fournir à ce dernier l’information prescrite relativement à la situation financière actuelle du débiteur.

Fonctions de l’administrateur

(2) L’administrateur qui accepte d’assister le débiteur consommateur est tenu :

(a) d’enquêter, ou de faire enquêter, sur les biens et les affaires de celui-ci, de manière à être en mesure d’estimer, avec un degré suffisant d’exactitude, sa situation financière et la cause de son insolvabilité;

(b) de donner des consultations, ou de voir à ce qu’il en soit donné, en conformité avec les instructions données par le surintendant aux termes de l’alinéa 5(4) (b);

(c) de préparer la proposition en la forme prescrite;

(d) sous réserve du paragraphe (3), de déposer auprès du séquestre officiel une copie de la proposition, signée par le débiteur consommateur, et une copie du bilan prescrit de ce dernier.

Interdiction

(3) Il est interdit à l’administrateur de déposer la proposition s’il a des motifs de croire que le débiteur n’est pas habilité à la faire ou qu’il y a eu manquement à l’une ou l’autre des exigences établies par le présent article ou l’article 66.12.

[…]

Accord ou désaccord du créancier

66.17 (1) Tout créancier qui a prouvé une réclamation peut, lors de l’assemblée des créanciers ou avant la tenue de celle-ci, ou encore avant l’expiration des quarante-cinq jours suivant le dépôt de la proposition, indiquer à l’administrateur, de la manière prescrite, s’il approuve ou désapprouve la proposition.

Effet

(2) À moins qu’elle ne soit annulée par la suite, l’approbation ou la désapprobation reçue par l’administrateur avant l’assemblée des créanciers ou lors de celle-ci a le même effet que si son auteur avait été présent et avait voté à l’assemblée.

[…]

Vote sur la proposition

66.19 (1) Lors de l’assemblée des créanciers, ceux-ci peuvent par résolution ordinaire, tous étant, aux fins du vote, regroupés au sein de la même catégorie, accepter ou rejeter, sous réserve des droits des créanciers garantis, la proposition ainsi qu’elle a été déposée ou modifiée à l’assemblée ou à un ajournement de celle-ci.

[…]

Vote par l’administrateur

(3) L’administrateur ne peut, à titre de créancier, voter sur la proposition.

[…]

Demande de révision judiciaire

66.22 (1) En cas d’acceptation - effective ou présumée - de la proposition de consommateur par les créanciers, l’administrateur doit, si le séquestre officiel ou toute autre partie intéressée lui en fait la demande dans les quinze jours suivant l’acceptation, demander sans délai au tribunal de réviser la proposition.

Présomption d’approbation par le tribunal

(2) La proposition est réputée avoir été approuvée par le tribunal si, à l’expiration du quinzième jour suivant son acceptation - effective ou présumée -, l’administrateur n’est pas tenu de présenter la demande prévue au paragraphe (1).

[…]

Approbation refusée par le tribunal

66.24 (2) Lorsqu’il est d’avis que les conditions de la proposition ne sont pas raisonnables ou ne sont pas justes pour le débiteur et les créanciers, le tribunal refuse d’approuver la proposition; il peut en outre refuser de l’approuver lorsqu’il est établi que le débiteur a commis l’une des infractions mentionnées aux articles 198 à 200 ou n’était pas habilité à faire la proposition au moment de son dépôt auprès du séquestre officiel.

Pouvoirs du tribunal

(4) Sous réserve des paragraphes (1) à (3), le tribunal peut approuver ou refuser d’approuver la proposition.

[…]

Détermination des réclamations

66.28 (1)

[…]

Personnes liées par l’approbation

(2) Une fois acceptée - ou présumée telle - par les créanciers et approuvée - ou présumée telle - par le tribunal, la proposition lie ces derniers relativement :

[…]

(b) aux réclamations garanties pour lesquelles des preuves de réclamation ont été produites conformément aux articles 124 à 134.

[…]

Application de la présente loi

66.4 (1) Toutes les dispositions de la présente loi, sauf la section I de la présente partie, dans la mesure où elles sont applicables, s’appliquent, compte tenu des adaptations de circonstance, aux propositions de consommateur.

Partie IV - Bien du failli

Suspension des procédures en cas de dépôt d’une proposition de consommateur

69.2 (1) Sous réserve des paragraphes (2) à (4) et des articles 69.4 et 69.5, entre la date de dépôt d’une proposition de consommateur aux termes du paragraphe 66.13(2) ou d’une modification de la proposition aux termes du paragraphe 66.37(1) et son retrait, son rejet ou son annulation - effective ou présumée - ou la libération de l’administrateur, les créanciers n’ont aucun recours contre le débiteur consommateur ou ses biens et ne peuvent intenter ou continuer aucune action, exécution ou autre procédure en vue du recouvrement de réclamations prouvables en matière de faillite.

Exception

(2) Le paragraphe (1) ne s’applique pas si la proposition de consommateur, autre que la modification visée à l’article 66.37, est déposée dans les six mois suivant le dépôt d’une autre proposition de consommateur à l’égard du même débiteur.

Créanciers garantis

69.2 […]

(4) Sous réserve des articles 79 et 127 à 135 et du paragraphe 248(1), le dépôt d’une proposition de consommateur aux termes du paragraphe 66.13(2) n’a pas pour effet d’empêcher un créancier garanti de réaliser sa garantie ou de faire toutes autres opérations à son égard tout comme il aurait pu le faire en l’absence du présent article, à moins que le tribunal n’en ordonne autrement. Tout report ordonné à cet égard doit toutefois être conforme aux règles suivantes :

(a) dans le cas d’une garantie relative à une dette échue à la date de l’approbation - effective ou présumée - de la proposition ou qui le devient dans les six mois suivants, l’exercice des droits du créancier ne peut être reporté à plus de six mois après cette date;

(b) dans le cas d’une garantie relative à une dette qui ne devient échue que plus de six mois après la date de l’approbation - effective ou présumée - de la proposition, l’exercice des droits du créancier peut être reporté à plus de six mois après cette date - mais en aucun cas au-delà de la date à laquelle la dette devient exigible en vertu de l’acte ou de la règle de droit instituant la garantie - seulement si tous les versements d’intérêts en souffrance depuis plus de six mois sont acquittés et si tous les autres manquements de plus de six mois sont réparés, et seulement tant qu’aucun versement d’intérêts ne demeure en souffrance, ou tant qu’aucun autre manquement ne reste sans réparation, pendant plus de six mois.

PARTIE V - Administration des actifs

Vote d’un créancier garanti

112 Pour les fins de la votation, un créancier garanti énonce dans sa preuve, à moins qu’il ne renonce à sa garantie, les détails de sa garantie, la date à laquelle elle a été donnée, ainsi que le montant auquel il l’évalue, et il n’a le droit de voter qu’à l’égard du reliquat qui lui est dû, s’il en est, déduction faite de la valeur de sa garantie.

[…]

Preuve du créancier garanti

127 (1) Lorsqu’un créancier garanti réalise sa garantie, il peut prouver le reliquat qui lui est dû, après avoir déduit la somme nette réalisée.

Peut prouver sa réclamation entière sur renonciation

(2) Lorsqu’un créancier garanti renonce à sa garantie en faveur du syndic au profit des créanciers en général, il peut établir la preuve de sa réclamation entière.

CONTEXT

[23] The agreed facts are as follows[13].

[24] On 27 January 2020, Shayoun, an insolvent person, filed a consumer proposal pursuant to section 66.13 of the Act. The Administrator filed a copy with the official receiver on that same date reporting that it had investigated the consumer debtor’s property and financial affairs and was of the view that the debtor’s insolvency was due to, among others, his “loss of employment and divorce”. The Administrator also confirmed that the consumer proposal was “reasonable and fair to both the consumer debtor and the creditors” and that the debtor was able to perform it.

[25] On 2 April 2020, the Administrator called a meeting of the creditors. Following a number of postponements, on 5 May 2020, the proposal of the insolvent person was accepted by 54.68%, or the majority, of the participating creditors.

[26] During the April 2^nd meeting, for the purpose of voting, the sum of $138,490.44 was accepted by the Administrator as the total value of debt owed by Shayoun. That amount included a secured debt of $15,000 owed to the creditor, Masciotra.

[27] All of the creditors present or represented during the creditors meeting, except for Beaudet-Aune, who was owed $62,519.33, voted in favor of the proposal. The secured creditor, Masciotra, also voted in favor of the proposal while preserving his entire debt and not realizing or surrendering his security.

[28] According to the Administrator, if the secured debt of Masciotra is excluded, the total amount of debt owed by Shayoun will be $123,490.44 and his proposal can no longer be approved, as only 49.37% of the creditors would then have voted in its favor. Under the circumstances, Beaudet-Aune asked the Administrator to seek revision of the proposal pursuant to section 66.22 (1) of the Act.

[29] Both in his review application, and before the court, the Administrator confirmed that the terms of the consumer proposal for both secured and unsecured creditors were reasonable and fair, that the proposal offered all creditors a better per dollar return than they could otherwise expect under a bankruptcy, that the insolvent debtor was honest and the proposal was a consequence of certain unfortunate circumstances and the creditors who accepted to vote in favor of the proposal were for the most part sophisticated financial institutions, who had no connection to the debtor.

[30] Based on these facts and the interpretation of sections 66.19, 112 and 127 of the BIA as offered by the three Quebec decisions, the Administrator asked the court to approve Shayoun’s consumer proposal dated 27 January 2020.

QUEBEC & ONTARIO POSITIONS

[31] Before proceeding any further, it is useful to better understand what the three Quebec decisions and the one from Ontario have to offer by way of reasons and analysis.

[32] In Laforge, heard on 23 October 2006 and decided on 14 March 2007, the relevant facts were as follows.

[33] At a meeting of creditors held on 17 August 2006, two creditors were interested in voting on the consumer proposal of the consumer debtor, Conrad Laforge - CitiFinancière for $9,916.47 and Caisse Populaire Desjardins de la Rive-Nord du Saguenay (Caisse) as unsecured creditor for $2,219.42 and as secured creditor with respect to a residential mortgage for $51,802.61. The administrator refused to permit the Caisse, however, from voting as a secured creditor and since CitiFinancière was voting in its favor, the proposal was approved by a vote of 84% against 16%.

[34] The Caisse requested, pursuant to section 66.22 of the Act, a review of the consumer proposal, arguing, among other things, that by enacting section 66.19 of the BIA, for the purpose of consumer proposals, the legislature had explicitly derogated from the general rule set out in section 112, that requires a secured creditor be allowed to vote “only in respect of the balance, if any, due to him, after deducting the value of his security.”

[35] In what I understand to be the first decision rendered with respect to section 66.19 (1), Blanchet J. of the Quebec Superior Court offered the following analysis. For the sake of accuracy and completeness, I have intentionally decided to reproduce a significant part of that judgment, in its original language, as follows:

[19] À ce stade, une mise au point importante s’impose. Les articles 50 et 54 L.F.I., évoqués plus haut, ne concernent que les propositions concordataires et on ne saurait les appliquer par analogie à une proposition de consommateur. L’article 66.4 (1), propre à la proposition de consommateur, dispose en effet que :

66.4 (1) Toutes les dispositions de la présente loi, sauf la section I de la présente partie, dans la mesure où elles sont applicables, s’appliquent, compte tenu des adaptations de circonstance, aux propositions faites aux termes de la présente section.

[Soulignement ajouté par Blanchet J.]

[20] De même, l’article 66 (1) fait en sorte que les règles propres à la proposition de consommateur ne puissent pas davantage trouver application en matière de proposition concordataire, puisqu’elles y sont exclues de façon tout aussi expresse. Ainsi, la proposition concordataire et la proposition de consommateur obéissent à des règles distinctes, mais on devra appliquer à l’une et à l’autre toutes les dispositions de la Loi qui pourraient leur être applicables, sous réserve toutefois des adaptations nécessaires.

[21] Cette prémisse étant posée, voyons maintenant les règles applicables à la proposition de consommateur, une mesure réservée à la personne physique « dont la somme des dettes, à l'exclusion de celles qui sont garanties par sa résidence principale, n'excède pas soixante-quinze mille dollars ou tout autre montant prescrit ». (art. 66.11 L.F.I.).

[22] D'abord, contrairement à ce que nous avons pour la proposition concordataire, la proposition de consommateur « est faite aux créanciers en général », sans autre précision ni réserve. L'article 66.12 (3), en effet, se limite à cet énoncé, sans évoquer les notions de catégories et de garanties que l’on retrouve à l'article 50 (1.2) au sujet de la proposition concordataire conventionnelle. Cela dit, l'article 66.12 (4) distingue les créanciers garantis des créanciers non garantis en ce qui a trait seulement à la manière dont ils devront déposer auprès de l'administrateur leur preuve de réclamation.

[23] Mais là s'arrête toute forme de distinction véritable entre les deux types de créanciers. Ainsi, qu'il s'agisse de l'ordre de priorité des réclamations (66.12), de la convocation d'une assemblée à la demande d'un créancier (66.15), de l'appel d'une décision de l'administrateur (66.16), de l'expression par les créanciers de leur accord ou désaccord avec la proposition (66.17), de la nomination des inspecteurs (66.21) ou de la procédure de révision judiciaire d'une proposition du consommateur à la suite d'une acceptation effective ou présumée (66.22), la Loi ne fait plus aucune distinction entre les créanciers garantis et non garantis en matière de proposition de consommateur.

[24] De fait, dans toute la Section ll (art. 66.11 à 66.4), la notion de créancier garanti n'intervient que dans trois dispositions. D'abord, l'article 66.12 (4), évoqué plus haut, dicte la façon pour le créancier de soumettre sa preuve de réclamation. On voit ensuite intervenir ce concept à l'article 66.28, en vertu duquel la proposition, une fois acceptée, lie les créanciers relativement aux réclamations garanties pour lesquelles des preuves de réclamation ont été produites.

[25] Enfin, la notion de créancier garanti apparaît, bien que de façon accessoire, à l'article 66.19 (1) de la Loi. Cette disposition, qui traite précisément du vote sur la proposition de consommateur, se trouve au cœur même du litige:

[26] Nous avons vu plus haut que dans le cadre d'une proposition concordataire ordinaire, le vote sur acceptation ou refus obéit à une série de règles assez complexes, en vertu desquelles les créanciers garantis et non garantis reçoivent des traitements différents. On se rappelle aussi que dans ce cas, la décision par résolution ordinaire n’est pas permise lorsqu’il s’agit de l'acception ou du rejet de la proposition.

[27] Or ici, au contraire, l'article 66.19 (1) prévoit que les créanciers, sans distinction, peuvent accepter ou rejeter la proposition de consommateur par résolution ordinaire. Qui plus est, on prévoit expressément que tous les créanciers sont « aux fins du vote, regroupés au sein de la même catégorie ».

[28] Certes, l'article 66.4 (1) impose d'appliquer à la proposition de consommateur toutes les dispositions non incompatibles de la Loi sur la faillite, ce qui pourrait inclure en théorie l'article 112. Mais cette disposition, rappelons-le, circonscrit le droit de vote du créancier garanti dans le cadre général de la Loi, incluant notamment les cas de faillite, et elle limite la portée de ce droit de vote à la valeur du reliquat laissé après réalisation ou abandon de la garantie.

[29] À l'évidence, cette disposition d’application générale se révèle incompatible avec l'article 66.19 (1), une disposition au contraire très spécifique en vertu de laquelle les créanciers « peuvent par résolution ordinaire, tous étant, aux fins du vote, regroupés au sein de la même catégorie, accepter ou rejeter… la proposition ». De fait, après lecture et relecture de toute la section de la Loi portant sur la proposition de consommateur, le Tribunal cherche en vain la signification que pourrait bien avoir l'article 66.19 (1) si la règle de l'article 112 devait s'appliquer au vote des créanciers sur une proposition de consommateur.

[30] Bien sûr, au regard de l'économie générale de la Loi sur la faillite, on peut à juste titre s'interroger sur les raisons pour lesquelles le législateur fédéral a pu juger bon de déroger de façon aussi flagrante aux concepts usuels et familiers qui paraissent sous-tendre cette même Loi.

[31] Dans l'affaire de la proposition de consommateur de Cournoyer c. Raymond Chabot inc. et le Sous-ministre du Revenu du Québec, le juge Yves Mayrand, de cette Cour, se pose cette question et y trouve réponse. Au paragraphe 10 d'un jugement par lequel il rejette une requête pour convocation d'une assemblée des créanciers, il écrit d'abord:

[10] Il faut dire que la section ll, partie lll de la loi qui touche la proposition de consommateur est récente, fait suite à des amendements de 92 et à des amendements qui ont été par la suite précisés suite à des pressions de groupes de consommateurs qui voulaient trouver un mécanisme ou une mécanique qui ferait en sorte que des consommateurs seraient protégés contre un endettement sans avoir à se mettre obligatoirement en faillite. Ils pourraient effectivement trouver une sorte de forme de dépôt volontaire ou de Loi Lacombe modernisée pour se mettre à l'abri des poursuites, tout en rencontrant leurs obligations et tout en se rééduquant au point de vue de l'administration de leurs biens.

[32] Puis, il enchaîne:

[12] Il nous est apparu à la lecture des auteurs sur le sujet, que l'idée du législateur était de minimiser les frais, de faire en sorte d'éviter les faillites, tant sur le plan statistique, le Gouvernement semblant être intéressé à ce qu'il y ait moins de faillites possible, semblant donner un aperçu de l'état de santé d'un pays et d'avoir une forme secondaire, ou une voie d'évitement pour des gens qui pourraient s'en aller en faillite.

[13] De sorte qu'il n'était pas souhaitable qu'une procédure trop complexe soit mise en place pour atteindre ce but et il n'est pas souhaité ni souhaitable que les créanciers garantis soient forcés de réaliser leurs garanties, ou soient forcés également de tout simplement soumettre le reliquat. Le législateur a mis sur pied, selon nous, une façon de procéder qui englobe les créanciers garantis comme non garantis.

[33] Parmi les auteurs qui l’ont conduit à cette conclusion, le juge Mayrand évoque d’abord l’ouvrage de Houlden & Morawetz, dans lequel on cerne en ces mots l’intention présumée du législateur derrière les dispositions sous étude :

The purpose of the consumer proposal sections is to permit consumer proposals to be handled quickly, efficiently and with a minimum administration and attendant expense.

[34] Le juge cite aussi Massue-Monat et s’arrête ensuite aux observations suivantes du professeur Bohémier :

En règle principale, on est dispensé à toutes fins utiles de la tenue d’une assemblée des créanciers, l’acceptation des propositions du débiteur n’exige qu’une majorité simple (art. 66.19) et sans que les créanciers puissent voter par catégorie.

(…)

La proposition de consommateur s’adresse aux créanciers en général : il ne peut y avoir de catégories de créanciers.

[35] Au terme de cet exercice, le juge Mayrand retient finalement qu’en incorporant à la Loi sur la faillite une section réservée à la proposition dite « de consommateur », le législateur a clairement exprimé son intention de simplifier en certains cas la proposition concordataire et de la rendre plus accessible, notamment en y englobant les créanciers garantis et non garantis.

[36] Mais dans l'affaire Cournoyer, plaide l'intimé, le juge Mayrand disposait d'une requête pour convocation d'une assemblée de créanciers, selon l'article 66.15 (2) b), et non de l'appel d'une décision de l'administrateur sur le vote d'un créancier garanti.

[37] Or, cette distinction, en l’espèce, joue plutôt à la faveur de la Caisse. Statuant sous l'empire de l'article 66.15, en effet, le juge dans l'affaire Cournoyer avait pour seul argument l'absence de distinction dans le texte entre les créanciers garantis et non garantis. À l'inverse, lorsqu'il s'agit plutôt, comme en l'espèce, de réformer une décision de l'administrateur en rapport avec un vote sur la proposition, on a devant soi une disposition en vertu de laquelle tous les créanciers, garantis ou non, doivent clairement être regroupés au sein de la même catégorie.

[38] Il y a lieu, en conséquence, d'accueillir le pourvoi de la Caisse et de casser la décision par laquelle l'administrateur lui a refusé le droit de vote à l'égard de sa créance hypothécaire de 51 802,61 $. Compte tenu des sommes en présence, la décision du Tribunal sur ce premier point conduit au rejet de la proposition, de sorte qu'il ne serait pas nécessaire de disposer de la demande de révision formulée par la Caisse en vertu de l'article 66.22 L.F.I. […]

[Underlining is mine]

[36] Blanchet J., therefore, concluded that section 112 of the BIA does not apply to section 66.19 (1) and, as such, even though section 66.24 (4) of the Act only permits the court to either approve or refuse to approve the consumer proposal[14], a point which I will revert to specifically at the end of this judgment, he annulled the decision of the trustee or administrator dated 17 August 2006 that refused the Caisse the opportunity to vote on the proposal as a secured creditor.

[37] Suffice it to say at this point that in my view, the recourse available under section 66.24 (4) is not the same as the one available under section 66.3 (1), under the heading annulment of consumer proposal. I also note that in the first paragraph of his judgment, in addition to a request for a judicial review, Blanchet J. indicates that the Caisse was likewise seeking an appeal of the administrator’s decision pursuant to section 66.16 (1).

[38] Almost 4 years later, in Schryburt, heard on 21 January 2011 and decided on 10 February 2011, Linhares de Sousa J. of the Ontario Superior Court of Justice, concluded that she could not follow the voting procedure that the administrator in her case had adopted by relying on the decision of Blanchet J. in Laforge. Accordingly, she refused to approve the consumer proposal filed.

[39] The facts in Schryburt were as follows.

[40] The debtors, Guy Schryburt and Johanne St. Denis, husband and wife, filed a joint proposal for approval by the administrator, Ginsberg, Gingras & Associates. At the time the proposal was submitted, the total unsecured debt of the debtors was $484,069 and their total secured debt was $338,001.

[41] The secured debt was guaranteed by their principal residence, which apparently was their sole substantial asset. It was not disputed that the total joint unsecured proven claims for the debtors, as determined by the administrator, was $932,239.87.

[42] On 24 September 2010, a final meeting of the creditors was held and there being a quorum, the creditors voted on the proposal. The result of the vote was 56.57% in favor of its approval. The votes cast reflected the following: $139,505.53 by secured creditors in favor, $350,572.19 by unsecured creditors in favor and $375,183.54 by unsecured creditors against.

[43] It was not contested that the secured creditor, Société de développement communautaire Prescott-Russell (SDC) that voted with the unsecured creditors did so in full value of its remaining secured debt. Canada Revenue Agency (CRA) which was by far the largest unsecured debtor in the amount of $328,952.31 challenged the proposal. The CRA was joined by the Banque Nationale du Canada (BNC) that held an unsecured debt of $57,000.

[44] The CRA and the BNC challenged the proposal on, among others, the voting mechanism adopted by the administrator. Before the Ontario Superior Court, the CRA submitted that:

[…] section 66.17 stipulates that only a creditor “who has proved a claim” may vote on a consumer proposal. Section 127 of the Act provides that to prove its claim, a secured creditor may do one of two things; (a) realize his security and prove the balance due to him after deducting the net amount realized or (b) surrender his security to the administrator for the general benefit of the creditors and prove his entire claim. CRA further argues that the secured creditor must exercise its option and only upon exercising its options can the secured creditor vote as one class together with the unsecured creditors to the extent of the remaining debt arising from the exercise of the options provided for in section 127 of the Act. In the present case the secured creditor, [SDC] did neither. It did not realize its security nor did it surrender its security to the Administrator for the general benefit of the creditors.

[Underlining is mine]

[45] The administrator took the position that the proposal was fair and reasonable and it should be approved. According to the administrator, the proposal offered a better return to the creditors per dollar than would a bankruptcy.

[46] After examining Blanchet J.’s decision, Linhares de Sousa J., concluded:

[24] […] In his reasons Blanchet J.C.S. found an inconsistency in the legislation, between section 112 and section 66.19 of the Act, which led him to conclude that a secured creditor could vote the full value of its claim with the unsecured creditors.

[25] In the interpretation of legislation one must attempt to interpret the sections of a piece of legislation in such a way as to avoid contradictions and inconsistencies, if possible.

[26] In my view, one can avoid the inconsistency in the legislation, as identified by the Superior Court of Quebec, if one approaches the sections in question as suggested by counsel for CRA.

[27] If the secured creditor had proved its claim as required by section 66.17 of the Act and by section 127 of the Act by exercising its options under section 127 to either (a) realize its security and prove the balance due to it after deducting the net amount realized or (b) to surrender its security to the Administrator for the general benefit of the creditors and prove its entire claim, there would be no inconsistency in the legislation and secured and unsecured creditors would vote as one class.

[28] To do otherwise could result in abuse. That is not to say that such abuse has occurred on these facts. I agree with counsel for CRA when he states in […] his Factum […], “To conclude otherwise would mean that secured creditors could vote to approve or refuse consumer proposals with impunity, despite the serious financial consequences for the debtors and unsecured creditors involved without any substantial detriment to themselves.”

[Underlining is mine]

[47] Just over a year later, in Fournier, heard on 11 June 2012 and rendered on 3 July 2012, without referring to Schryburt but after examining the relevance of section 127 of the BIA raised by the parties, Duchesne J., agreed with the analysis made by Blanchet J. and proceeded to apply section 66.19 (1) of the Act, again, at the exclusion of section 112.

[48] He also concluded that if a secured creditor did not comply with the requirements of section 127 of the Act, he, she or it would be prevented from receiving any dividends under section 132 of the Act and not be prohibited from voting under section 66.19 (1).

[49] According to Duchesne J.:

[9] L'article 112 de la Loi fait partie de la section « procédures des assemblées » (art. 105 à 115.1 de la Loi). Cette section s'inscrit sous la partie V (art. 102 à 157 de la Loi) qui traite plus généralement de « l'administration des actifs ».

[10] L'article 112 de la Loi est une disposition d'ordre général qui s'applique à toutes les assemblées de créanciers, que ce soit en matière de propositions concordataires d'application générale (ci-après « PCAG ») (art. 50 à 66 de la Loi) ou de propositions de consommateur (ci-après « PC ») (art. 66.11 à 66.4 de la Loi). En vertu de l'article 127 de la Loi, un créancier garanti peut soit prouver un reliquat après réalisation de sa garantie, soit prouver la totalité de sa créance (garantie et non garantie) après renonciation à la garantie au bénéfice de la masse.

[11] La partie III de la Loi traite des propositions concordataires en général, laquelle comprend les PCAG et les PC.

[12] Les règles propres aux PCAG sont prévues à la section I de la partie III (art. 50 à 66 de la Loi) et celles propres aux PC le sont à la section II de la partie III (art. 66.11 à 66.4 de la Loi).

[13] Les articles de la première section (PCAG) ne peuvent s'appliquer à la deuxième section (PC) et ceux de la deuxième ne peuvent s'appliquer à la première. Par ailleurs, la partie V « Administration des actifs » (articles 102 à 157 de la Loi), s'applique aux sections I (PCAG) et II (PC) de la partie III dans la mesure où ces articles sont applicables.

[14] Cela étant, quel est le sort réservé aux créanciers garantis par la section II (PC) de la partie III, lorsqu'une personne physique (un débiteur consommateur) est insolvable, possède des dettes de 250 000 $ ou moins (à l'exclusion de celles garanties par sa résidence principale) et fait une proposition de consommateur au terme de cette section ?

[…]

[19] La section II (PC) de la partie III prévoit que les créanciers garantis et ordinaires peuvent voter ensemble le rejet ou l'acceptation de la proposition. En effet, l'article 66.19 (1) de la Loi dispose :

66.19 (1) Lors de l’assemblée des créanciers, ceux-ci peuvent par résolution ordinaire, tous étant, aux fins du vote, regroupés au sein de la même catégorie, accepter ou rejeter, sous réserve des droits des créanciers garantis, la proposition ainsi qu’elle a été déposée ou modifiée à l’assemblée ou à un ajournement de celle-ci.

[20] L'article 112 de la Loi qui traite du vote du créancier garanti ne s'applique à la section II (PC) que dans la mesure où il est applicable. L'article 112 se lit comme suit :

112. Pour les fins de la votation, un créancier garanti énonce dans sa preuve, à moins qu’il ne renonce à sa garantie, les détails de sa garantie, la date à laquelle elle a été donnée, ainsi que le montant auquel il l’évalue, et il n’a le droit de voter qu’à l’égard du reliquat qui lui est dû, s’il en est, déduction faite de la valeur de sa garantie.

[21] Cette disposition d'ordre général paraît incompatible avec l'article 66.19 (1) de la Loi, à moins qu'elle ne soit interprétée comme signifiant que si un créancier garanti a réalisé sa garantie et qu'il a un reliquat, il cesse d'être un créancier garanti pour devenir un créancier ordinaire.

[22] Cet article 66.19 (1) de la Loi est spécifique mais paraît clair de sorte qu'il n'y a pas lieu de distinguer là où la loi ne distingue pas.

[23] Comme déjà écrit ci-devant, l'article 127 de la Loi permet à un créancier garanti de réaliser sa garantie et de prouver le reliquat. Donc, s'il renonce à sa garantie, il établit la preuve de sa réclamation entière. Si le créancier garanti d'une PC ne se conforme pas aux articles 127 et suivants de la Loi, il sera exclu du dividende (art. 132 de la Loi) mais non pas du vote. Selon l'article 66.19 (1) de la Loi, les créanciers sont « aux fins du vote regroupés au sein de la même catégorie ».

[24] Au sujet de cet article, M. le juge Yves Mayrand écrivait en 2001 :

[25] Selon le jugement proposé par l'administrateur-intimé comme base de sa décision, le Tribunal devrait conclure que pour permettre à la requérante de voter sur la PC, il faudrait qu'elle ait réalisé sa garantie.

[26] De l'avis du Tribunal, le législateur n'a pas voulu alourdir le processus de redressement de la situation financière d'un consommateur, mais il a plutôt opté pour un assouplissement du mécanisme par une procédure simple et rapide.

[27] Il suffit de noter la durée obligatoire de 60 jours du préavis d'exercice d'un droit hypothécaire, de celle entourant la procédure de délaissement, de la possibilité pour une partie intéressée de retarder la réalisation de la garantie du créancier pour conclure à la difficulté inhérente pour ce dernier de prendre position et de voter.

[28] Selon l'article 112 de la Loi, faut-il le rappeler, le créancier garanti ne peut déposer sa réclamation que pour la portion non garantie de sa créance garantie pour pouvoir voter comme créancier ordinaire. L'application de cette disposition légale à la PC vide de son sens l'article 66.28 de la Loi qui stipule qu'une telle proposition lie les créanciers relativement aux réclamations garanties pour lesquelles des preuves de réclamation ont été produites. Cet article se lit d'ailleurs comme suit :

66.28 (1) Le moment par rapport auquel les réclamations des créanciers sont déterminées est celui du dépôt de la proposition de consommateur.

(2) Une fois acceptée — ou présumée telle — par les créanciers et approuvée — ou présumée telle — par le tribunal, la proposition lie ces derniers relativement :

a) à toutes les réclamations non garanties;

b) aux réclamations garanties pour lesquelles des preuves de réclamation ont été produites conformément aux articles 124 à 134.

[29] En conclusion, tout comme M. le juge Mayrand et M. le juge Blanchet, le Tribunal est d'avis que les propositions de consommateur s'adressent à tous les créanciers indépendamment des catégories de ceux-ci, de sorte que pour fins du vote, ils sont regroupés au sein d'une seule catégorie.

[Underlining is mine. The underlining in the original judgment has been omitted]

[50] Precisely seven years later, in Syndic de Martin-Bossé, heard on 2 July 2019 and decided the next day, in a rather concise decision, my colleague Samson J. relied on the reasons offered in Laforge and Fournier and confirmed the consumer proposal submitted to the administrator dated 18 September 2018.

[51] The facts in Martin-Bossé were as follows.

[52] Following the passing of her husband, Mme Jeannette Martin-Bossé found herself in financial difficulty. She decided in response to file a consumer proposal with her creditors. Among the creditors were two important secured creditors, Banque Laurentienne du Canada (Bank) to whom the debtor owed $130,000 guaranteed by a mortgage on her residence and Fédération des caisses Desjardins du Québec (Federation) to whom the debtor owed $40,000 by virtue of guarantee registered against her vehicle.

[53] The consumer proposal filed on 18 September 2018 envisaged paying in full the secured creditors and in part, pursuant to a plan, the ordinary creditors who would ultimately be able to recuperate over 50% of their debt.

[54] On 19 February 2019, a first assembly of creditors was held. During that assembly, Mr. Christian Royer (Royer), a creditor, requested that a new evaluation of the residence of the debtor be obtained.

[55] On 17 April 2019, the creditors accepted the debtor’s proposal. In the days that followed, Royer asked the administrator, Bellehumeur Syndics inc., to challenge the proposal because:

La liquidation des biens de la débitrice assurerait le paiement intégral des créances non garanties déclarées au bilan.

[56] In other words, the liquidation of the debtor’s belongings could ensure the payment of the total debt owed to the ordinary creditors as set out in the plan. As such, Royer asked the court to exclude the votes of the secured creditors in the approving of the proposal, which in turn would result in the refusal of the proposal.

[57] In approving the consumer proposal accepted by the administrator, Samson J. made the following remarks. For the sake of completeness and accuracy, I will also reproduce the relevant portions of his decision in French:

[17] La procédure de l’administrateur est fondée sur un article spécifique de la Loi:

66.22 (1) En cas d’acceptation — effective ou présumée — de la proposition de consommateur par les créanciers, l’administrateur doit, si le séquestre officiel ou toute autre partie intéressée lui en fait la demande dans les quinze jours suivant l’acceptation, demander sans délai au tribunal de réviser la proposition.

[18] Le différend entre l’administrateur et le créancier soulève le droit des créanciers garantis de voter en même temps et de la même manière que les créanciers non garantis lors de l’approbation de la proposition d’un consommateur.

[19] La jurisprudence est peu nombreuse sur cette question. D’ailleurs, le créancier n’apporte aucun argument, si ce n’est que de s’en remettre au Tribunal.

[20] L’administrateur attire l’attention du Tribunal sur une décision de cette Cour qui a déjà discuté de cette question. En effet, dans l’affaire Fournier (Proposition de) dans laquelle monsieur le juge Gratien Duchesne analyse les textes de la Loi.

[21] Monsieur le juge Duchesne résume ainsi la question qui lui est posée :

[15] C'est essentiellement la question en litige au soutien de l'appel.

[Référence omise]

[22] Pour répondre à cette question, le juge rappelle d’abord le texte de la Loi :

[23] Le juge conclut qu’un créancier garanti peut voter, du moins, pour l’excédent de sa créance eu égard à des évaluations obtenues de la valeur des biens faisant l’objet d’une garantie, ce qui est le cas en l’espèce :

[22] Cet article 66.19 (1) de la Loi est spécifique mais paraît clair de sorte qu'il n'y a pas lieu de distinguer là où la loi ne distingue pas.

[23] Comme déjà écrit ci-devant, l'article 127 de la Loi permet à un créancier garanti de réaliser sa garantie et de prouver le reliquat. Donc, s'il renonce à sa garantie, il établit la preuve de sa réclamation entière. Si le créancier garanti d'une PC ne se conforme pas aux articles 127 et suivants de la Loi, il sera exclus du dividende (art. 132 de la Loi) mais non pas du vote. Selon l'article 66.19 (1) de la Loi, les créanciers sont « aux fins du vote regroupés au sein de la même catégorie ».

[24] Par la suite, se fondant sur des analyses tirées de la doctrine, il conclut ainsi :

[Référence omise]

[25] Conséquemment, la position exprimée par monsieur Royer, créancier non garanti, n’est pas recevable pour contester le processus mis en place par l’administrateur. En conséquence, la proposition de la débitrice est acceptée.

[Underlining is mine]

ANALYSIS

[58] As explained in the opening paragraphs, the BIA displays concurrently, several objectives. One of the main objectives of the Act is to give honest but unfortunate debtors the relief from the crushing burden of their debt so that they can become rehabilitated and begin afresh as contributing members of society.

[59] Another equally important objective of the Act, is to give creditors the highest possible return on the debt and to provide an equitable arrangement for the distribution of the debtor’s estate assets to unsecured creditors. To the extent possible, these two objectives must be balanced adequately to safeguard the integrity of the bankruptcy system.[15]

[60] It is important to recall that “the object of bankruptcy law is to ensure the division of the property of the debtor rateably among all of his creditors in the event of bankruptcy. The Act is intended to put all creditors upon an equal footing.”[16]

[61] Seen in this light, it is clear that the objectives of Part III, Division II dealing with consumer proposals, cannot be dissimilar to that of the statute itself. As explained by authors Houlden & Morawetz, the purpose of the consumer proposal sections is to permit such proposals to be handled quickly, efficiently and with a minimum administration and attendant expense. Negotiations and discussions concerning such proposals must take place within a narrow time frame. A natural person who is bankrupt or insolvent and who owes, as per sections 66.11 and 66.12 (1) of the Act, $250,000 or less, excluding debts owing on mortgages on their principal residence, may make a consumer proposal.[17]

Application of sections 112 and 127

[62] Turning now to the specific question before me, with respect for the views expressed in Laforge and Fournier, and the one in Martin-Bossé that adopts a combination of the other two views, I cannot agree with the proposition that sections 112 and 127 of the BIA do not apply to section 66.19 of the BIA.

[63] In addition to a different statutory reading and understanding of the specific provisions found under Part III, Division II, the principal thrust of my disagreement with the three decisions rests on the content and application of sections 66.4 and 69.2 (4) of the Act, which even though relevant for consumer proposals filed pursuant to, section 66.13 of the Act, is absent in them.

[64] The same comment is in order with respect to the decision of Schryburt rendered by the Ontario Superior Court of Justice, although with respect to this last decision, I do find myself in agreement with the reasons Linhares de Sousa J. offers concerning the application of section 127 of the Act to section 66.19 (1). In saying this, I am of course cognisant of the fact that a judge is not required to follow the decision of the courts of another province on the interpretation of a federal statute unless he or she is persuaded by the correctness of that decision.

[65] For reasons that follow, therefore, I am of the view that sections 112 and 127 of the BIA apply to section 66.19 (1). I am also of the view that to the extent that a secured creditor wishes to be a part of the decision-making process relating to a consumer proposal filed under Part III, Division II that secured creditor must first exercise its option as is required by section 127. Once and only after having exercised its option under that and section 112 can the secured creditor vote as one class together with the unsecured creditors to the extent of the remaining debt arising from the exercise of the options provided for in section 127.

[66] I am also of the view, as I alluded to earlier, that the linchpins for the application of sections 112 and 127 to section 66.19 (1) of the BIA are sections 66.4, 69.2 (1) and (4) of the Act.

[67] This is why.

[68] In 2003, the Supreme Court held[18] that the starting point for statutory interpretation of a federal statute in Canada is E. A. Driedger’s definitive formulation in his Construction of Statutes (2nd ed. 1983), at p. 87:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. In the case of federal legislation […], this modern approach to statutory interpretation is confirmed by s. 12 of the Interpretation Act, R.S.C. 1985, c. I-21, which provides that every enactment “is deemed remedial, and shall be given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects” […].

[Underlining is mine]

[69] According to the Supreme Court, the BIA should not be interpreted in an overly narrow and legalistic manner[19]. The Act puts day-to-day administration of a commercially inspired federal legislation in the hands of trustees in bankruptcy and inspectors as business people and professionals, requiring them in turn to administer it in a practical and not so legalistic manner.[20]

[70] In this case, in order to understand the words of sections 66.19, 112 and 127 of the BIA in their entire context and their grammatical and ordinary sense harmoniously with the scheme of the entire statute, the object of the BIA and the intention of Parliament, the analysis must begin by looking at sections 66.12 (3) and (4) of the Act. These sections identify to whom and in what manner consumer proposals must be sent.

[71] A consumer proposal must be presented to all creditors of the consumer creditor and that proposal must satisfy the requirements of sections 66.12 (1) and (2) and section 66.13 of the BIA.

[72] As indicated earlier, in accordance with section 66.13 (1) of the Act, a consumer debtor who wishes to make a consumer proposal must obtain the assistance of an administrator and provide that person with information about his or her current financial situation. The administrator who agrees to assist the consumer debtor must investigate the consumer debtor’s property and financial affairs, so as to be able to assess with reasonable accuracy his or her financial situation and cause of insolvency. The administrator shall not file a consumer proposal if after such a review the debtor is not eligible or there has been non-compliance with anything required by sections 66.12 or 66.13 of the Act. One of those requirements is explicitly set out in section 66.12 (4).

[73] Indeed, in response to the filing of a consumer proposal, any creditor - secured or not - wishing to participate in the process must file with the administrator a proof of claim in the manner provided for, with respect to unsecured creditors, in sections 124 to 126, and with respect to secured creditors, sections 124 to 134. The rationale behind such an all-inclusive approach is not only expediency but also fair and equal treatment of the creditors in what is meant to be an efficient process.

[74] As section 127 of the BIA is a provision that falls between 124 and 134, a secured creditor wishing to participate in the approval process of the consumer proposal must satisfy its requirements. To use the words of the statute in section 66.12 (3) (b), a creditor wishing to file a proof of claim to respond to a consumer proposal must do so in the manner provided for, among others, in section 127. In other words, once a secured creditor decides to participate in the process, a fact that is optional and not mandatory seeing that the statute uses the word may, then he, she or it must ensure that the proof of claim form filed meets the requirements of, among others, section 127 of the Act found under Part V - Administration of Estates.

[75] The language of the Act cannot be clearer. I will address this point in more detail below. Suffice it to mention in the interim that in filing a proof of claim form, a secured creditor may either realize the security held and prove the balance due after deducting from it the net amount realized or surrender the security for the general benefit of the creditors and prove the entire claim owed to him.

[76] This is confirmed and reiterated by section 66.28 (2) (b) of the Act that indicates that a consumer proposal accepted or approved by the court is binding on the creditors in respect of secured claims for which proofs of claim have been filed in the manner provided for in sections 124 to 134.

[77] Moreover, section 66.17 of the Act, reemphasizes the importance of section 66.12 (4), by allowing a creditor that has proved his, her or its claim through this last provision, to assent or dissent from the consumer plan in the prescribed manner at or prior to the meeting of creditors or prior to the expiration of the 45-day period following the filing of the proposal.

[78] Section 66.19 (1) in turn, permits all creditors that have filed a claim form in the manner set out in section 66.12 (4) (a) and (b), which as I indicated earlier requires, in the case of secured creditors, compliance with the requirements of section 127 found under the headings “Proof by secured creditor” and “May prove whole claim on surrender”, to vote all as one class to accept or refuse the consumer proposal, subject to the rights of the secured creditors.

[79] In my view, the rights of the secured creditors referred to in the last sentence of 66.19 (1) relates precisely to the rights set out in section 127 for the purpose of filing a proof of claim form as required by sections 66.12 (4) and 66.28 (2) and those same rights imported into section 112 of the Act for the purpose of voting as a secured creditor.

[80] In other words, for the purpose of voting only in the same class as the unsecured creditors - so as to form one class - a secured creditor must first choose between the two options set out in section 127 and then vote in accordance with section 112 to either accept or reject the consumer proposal filed. Thereafter, as confirmed in both sections 66.19 (1) and 69.2 (4) the secured creditor will continue to maintain its rights unless a court orders otherwise.

[81] Note that section 112 of the BIA explicitly states that for the purpose of voting, which voting in my view includes the one identified in section 66.19 (1) in a consumer proposal context, a secured creditor shall, unless he, she or it has surrendered the security through section 127 (2), state in the proof - that is the proof of claim form filed pursuant to section 66.12 (4) - the particulars of the security, the date when it was given and the value at which the secured creditor assesses the security or guarantee, and the secured creditor then is entitled to vote only in respect of the balance, if any, due to him, her or it, after deducting the value of the security.

[82] In such a situation, while the secured creditor, for the purpose of voting at the meeting of the creditors held pursuant to section 66.19 (1), can only vote in respect of the balance of his, her or its claim, if any, after deducting the value of the security, the secured creditor does not lose the right to realize on the security, if that procedure becomes necessary, down the road. This, in my view, is what the legislature had in mind, when, among others, it used the words “subject to the rights of the secured creditors.”

[83] Such an approach or reading of the various sections at issue is not only consistent with section 66.4 of the Act, which explicitly excludes the application of Division I of Part III only, but also is in conformity with section 69.2 (4) of the BIA.

[84] Before examining this last section it would be useful to mention that neither section 69.2 (4) nor sections 112 or 127 are found in the excluded part of the Act - Division I of Part III (and hence, sections 50 to 66 of the BIA) - and they all, as the statute requires, are applicable or apply with the modifications specified to consumer proposals.

Application of section 69.2 (4)

[85] This takes me to section 69.2 (4), which as I indicated earlier, along with section 66.4 of the Act, constitute the linchpins for the application of sections 112 and 127 of the BIA to section 66.19 (1).

[86] Section 69.2 (4) found under Part IV - Property of the Bankrupt - explicitly confirms that subject to section 127, which relates to the filing of the proof of claim forms by secured creditors, and which for the purpose of voting also makes section 112 relevant, the filing of a consumer proposal under subsection 66.13 (2) does not prevent a secured creditor from realizing or otherwise dealing with his, her or its security in the same manner as the secured creditor would have been entitled to realize or deal with if this section had not been passed, unless a court orders otherwise.

[87] In my view, sections 66.4 and 69.2 (4) of the Act, undisputedly confirm that Part III, Division II is not a code or regime of its own deprived or devoid of any relationship with the other parts of the statute. The first sentence in section 69.2 (4), makes this section subject to section 127, which, as I indicated earlier, applies with necessary modifications pursuant to section 66.4 to sections 66.12 (4), 66.17 and 66.28 (2) of the Act.

[88] Where a statutory provision is expressed to be “subject to” another statutory provision, the latter provision (the master provision) prevails over the former (the subject provision) if there is any conflict between them[21]. The words “subject to” have been defined in the Fifth Edition of The Dictionary of Canadian Law[22], as something that is “conditional or dependent on” or “bound by a qualification, affected by or likely to be affected by” something else.

[89] Consequently, I am of the view that sections 112 and 127 of the BIA apply to section 66.19 (1) and that to the extent that a secured creditor wishes to be a part of the decision-making process relating to a consumer proposal filed under Part III, Division II, that secured creditor must exercise its option as is required by section 127. Having exercised its option pursuant to sections 112 and 127, the secured creditor can then vote as one class together with the unsecured creditors as provided for in section 66.19 (1).

[90] As such, I agree with the decisions in Laforge, Fournier and Martin-Bossé, when they conclude that in the context of Part III, Division II proceedings, section 66.19 (1) of the Act requires that all creditors - secured and unsecured - vote all as one class, and that is what should be upheld at the end of the day, but this is only after the secured creditors have complied with the requirements of 69.2 (4), 112 and 127 of the Act and not before or never, in the absence of such conformity.

[91] Seen under such light, I fail to see the inconsistency that the courts in Laforge and Schryburt see between sections 112 and 66.19. I also fail to see how the application of section 112 would in any way render “devoid of any sense” section 66.28 of the Act.

[92] As explained earlier, section 66.28 (2) in particular, renders a consumer proposal accepted or deemed accepted by the creditors or approved by the court as binding on the secured creditors, to the extent that the proof of claim forms with respect to the consumer proposal was filed in the manner provided for, among others, section 127. There is therefore nothing incompatible between the application of sections 112 and 66.28 of the BIA.

[93] To use the words of the CRA in Schryburt, to conclude otherwise would mean that secured creditors could vote to approve or refuse consumer proposals with impunity, despite the serious financial consequences for the debtors and unsecured creditors involved without any substantial detriment to themselves.

[94] Put differently, secured creditors would be able to tip the balance between approving and not approving a consumer proposal, in at times marginal circumstances, without the consequence of being affected one way or the other by their decisions.

[95] One of the principal objectives of the BIA is to put all creditors upon an equal footing. The principal objective of the consumer proposal legislated under Part III, Division II is to allow all creditors to vote as one group. Yet such objectives cannot be upheld or promoted if all creditors, secured or not, do not comply with the requirements of the law.

[96] In short, and at the peril of repeating myself, in order for a secured creditor to vote with the unsecured creditors as one class as required by section 66.19 of the BIA, the secured creditor must satisfy the requirements of sections 66.12 (4), 66.17, 69.2, 112 and 127 of the Act. Such an approach not only respects fairness but it also does away with any inconsistencies in the results obtained.

[97] For the foregoing reasons, therefore, I am of the view that the vote that was taken at the creditors meeting of 27 January 2020 with the participation of the secured creditor, Masciotra, and in the absence of his compliance with the requirements of sections 69.2 (4), 112 and 127 of the Act, was irregular and it cannot stand.

Where do we go from here?

[98] This said, where does this leave the consumer debtor, Shayoun under the particular circumstances of this case? Can the court, despite the explicit language of section 66.24 (2) and (4), nevertheless remit the matter back to the administrator to have the secured creditor, Masciotra, to the extent that he continues to remain interested in participating in the process, conform to the requirements of 66.12 (4), 69.2, 112 and 127 of the Act? What of the fate of the consumer debtor, who in this case cannot have his consumer proposal examined for reasonability and fairness as a result of a question of law and past case law?

[99] In the context of consumer proposal filings under Part III, Division II of the BIA, sections 66.24 (2) and (4) of the Act require a court to either approve or refuse a consumer proposal if in its opinion, “the terms of the consumer proposal are not reasonable or are not fair to the consumer debtor and the creditors”. In order for this assessment to take place, the requirements of filing and submitting of that proposal, as set out in, among others, sections 66.12, 66.17, 66.19, 69.2, 112 and 127 of the Act must be fulfilled.

[100] In a different, but in my view certainly by analogy applicable context, Gascon J., as he then was at the Superior Court, offered the following elements recognized by case law as being useful in approving a proposal.

[101] He said that three interests must be assessed by the court: the interest of the debtor, the interest of the creditors generally - it is safe to assume that this means both secured and unsecured creditors -, and the interest of the public with respect to the integrity of the bankruptcy legislation[23].

[102] He then added that the main guidelines to be followed by a court in this respect can be summarized as follows:

a) the burden of proof to convince a court to approve a proposal rests upon the debtor;

b) in deciding whether or not to approve a proposal, a court must weigh the effects of approving the proposal and of not approving it;

c) in the exercise of its discretion in assessing the reasonableness of an approval, a court must be convinced that the creditors will obtain some advantage over bankruptcy;

d) in making this assessment, the conduct of the debtor is a factor to be considered; if there is any suggestion of collusion or secret advantage, the matter should be particularly scrutinized;

e) in assessing the reasonableness of a proposal and in weighing these three interests, a court will be influenced by the level of recovery for the unsecured creditors; when the amounts offered to unsecured creditors are minimal and the payout represents a small fraction of what is owed to them, it will be taken into account in the analysis;

f) similarly, when the circumstances seem to indicate that an investigation under the BIA will assist in clarifying otherwise cloudy issues in the context of the proposal, it is a factor that will influence the exercise of the discretion of a court.

[Underlining is mine]

[103] In this case, for the sake of fairness, and in line with the purpose of the consumer proposal sections - that is to permit consumer proposals to be handled quickly, efficiently, with a minimum administration and attendant expense, and I will add fairly - I am of the view that the interests of not only the debtor and the creditors, but also the public with respect to the integrity of the bankruptcy legislation, requires that this matter be remitted to the Administrator, Devletian & Associes Inc., for it to refile - to the extent that the secured creditor, Masciotra, still remains interested - the secured creditor’s proof of claim form only, after complying with the requirements of sections 66.12, 66.17, 66.19, 69.2, 112 and 127 of the Act and then calculating the vote of all creditors as one, as set out by section 66.19 (1).

[104] If that new vote is insufficient to approve Shayoun’s consumer proposal, then such will be the outcome of the exercise. If, however, the vote leads to an approval and Beaudet-Aune still remains of the view that the debtor’s proposal should not be approved, the parties can write to me and I will hear the remaining part of their application. I will also at that same time hear the outstanding related application of the unsecured creditor, Beaudet-Aune.

[105] In the meantime, I will remain seized of this matter until 31 March 2021 for the above two purposes.

[106] Finally, in the interest of transparency and administration of justice, I ground and justify my discretion in this last instance, not only in the language and spirit of section 66.24 (2) of the BIA but also the general purpose of the Act.

[107] If the authority vested in the court by this last section grants the court the discretion to approve consumer proposals even in the face of an offence under the BIA, that is sections 198 to 200 which include situations such as fraudulent dispositions, failure to comply with certain duties, to disclose the fact of being undischarged or keeping books and records, or to approve a proposal in cases where a debtor was ineligible to make the proposal in the first place at the time it was filed with the official receiver, then it certainly permits the court to provide the parties with an opportunity to rectify an unintended shortcoming in the filing of the proposal due, in part, to certain serious questions relating to the interpretation of the Act.

CONCLUSION

[108] It should be recalled that bankruptcy is part of the law of equity and, therefore, the system put in place by a law relating to such a possibility must promote its principles. “Above all else, the system should be fair and equitable in the demands it makes and the settlements it imposes on participants.”[24]

[109] To summarize, any administrator that is asked to assist with the filing of a consumer proposal by a qualified consumer debtor under Part III, Division II of the Act, must ensure that the requirements of, among others, sections 66.12 (4), 66.13 (3), 66.19 (1), 69.2 (1), 69.2 (4), 112 and 127 are satisfied before the matter is submitted to the official receiver. I have already explained in detail above, the reasons why.

FOR THESE REASONS, THE COURT:

REMITS this matter back to the Administrator, Devletian & Associes Inc., to comply with the requirements of sections 66.12 (4), 66.13 (3), 66.19 (1), 69.2 (4), 112 and 127 of the Bankruptcy & Insolvency Act and the directions of the court as set out above;

WITHOUT LEGAL COSTS, considering the importance of the case for all parties and the general public.


		__________________________________ BABAK BARIN, j.S.C.

Me Iguélé Amélie Sagnon SAGNON AVOCATS Attorney for the insolvent person

Me Ian R. Rudnikoff IAN R. RUDNIKOFF, P. ENG Attorney for the Trustee

Me Jonathan Bachir-Legault PROCUREUR GÉNÉRAL DU CANADA Attorney for the Intervener

Me Julien Robidoux LALONDE GERAGHTY RIENDEAU, AVOCATS, S.P.A. Attorney for the creditor, Martine Beaudet-Aune

Hearing date:	19 January 2021

[1] R.S.C.1985, c. B-3 (BIA or Act).

[2] Industrial Acceptance Corp. v. Lalonde, [1952] 2 S.C.R. 109.

[3] R. v. Fitzgibbon, [1990] 1 S.C.R. 1005.

[4] Century Services Inc. v. Canada (A.G.), [2010] 3 S.C.R. 379, par. 13.

[5] A. Marquette & fils Inc. v. Mercure [1977] 1 S.C.R. 547 p. 556.

[6] Reference to the first or last name of individuals is to render the text more reader-friendly. No disrespect is intended.

[7] Laforge, (Re), 2007 QCCS 1074 (Laforge).

[8] Fournier (Proposition de), 2012 QCCS 3071 (Fournier).

[9] Syndic de Martin-Bossé, 2019 QCCS 2921 (Martin-Bossé).

[10] Schryburt (Re), 2011 ONSC 880 (Schryburt).

[11] This section is found under the heading “Stay of proceedings - consumer proposals” and Part IV - Property of Bankrupt of the BIA.

[12] The addition of this word is my interpretation of what section 69.2 (1) of the Act says, and not what is explicitly found in the statute.

[13] At the hearing, the parties agreed that the summary of the facts prepared and included by the A.G. in its plan of arguments was acceptable to them.

[14] Michaud (Proposition de) 2015 QCCS 2117 at par. 53. See also the decision of Registrar C.E. Thompson of the Saskatchewan Court of Queen’s Bench in The Matter of the Bankruptcy of Dustin Michael Laquerre, [2014] S.J. No. 129 at par. 10 (Laquerre).

[15] Laquerre par. 25.

[16] Hudson v. Benallack [1976] 2 S.C.R. 168 p. 175.

[17] HOULDEN, L. W., The annotated Bankruptcy and Insolvency, Toronto, Ed. Thomson Reuters, 2020, par. E-93, p. 321.

[18] Barrie Public Utilities v. Canadian Cable Television Assn. (2003), [2003] 1 S.C.R. 476 par. 20.

[19] A. Marquette & Fils Inc. v. Mercure, [1977] 1 S.C.R. 547.

[20] Re Rassell (1999), 177 D.L.R. (4^th) 396 (C.A.).

[21] Re A Debtor (No. 22 of 1993), [1994] 1 W.L.R. 47 (Ch. D.).

[22] See: Nancy MCCORMACK, The Dictionary of Canadian Law, 5th ed., Toronto, Thomson Reuters Canada, 2020, p.1036. See also, Judy PEARSALL, The Concise Oxford Dictionary, 10th ed., New York, Oxford University Press, 1999, p. 1427.

[23] Magi (syndic de) 2006 QCCS 5129.

[24] Honsberger, John D., Bankruptcy in Canada, Fourth Edition, Canada Law Book, 2009, p. 6.

AVIS :
Le lecteur doit s'assurer que les décisions consultées sont finales et sans appel; la consultation du plumitif s'avère une précaution utile.