May a deceased person who dies in bankruptcy having failed to complete his duties under the Bankruptcy and Insolvency Act be discharged from bankruptcy?
This was the question that the British Columbia Supreme Court wrestled with earlier this year in a reported decision that began by noting that there was no jurisdiction on point.
The BC Court dealt with three matters in bankruptcy chambers, noting that neither the trustees involved, or the representatives of the Office of the Superintendent of Bankruptcy Canada called upon, were able to provide the Court with any authority upon which the discretion to grant a discharge to a bankrupt following his demise might be exercised.
The BIA legislates the discharge of bankrupts. The Court (which by definition under the BIA include a registrar in bankruptcy) has the discretion to grant or refuse a discharge. The discharge language is permissive, indicating a discretionary decision. Each bankruptcy case must turn on its particular facts.
What then is the effect of the death of the bankrupt who is not yet completed his duties?
The BC Court began by noting that the discharge process is essential to the proper administration of the bankruptcy system and that a discharge is not a matter of right. The success or failure of any bankruptcy system depends upon the proper administration of the discharge provisions.
In deciding whether a bankrupt should be discharged, consideration must be given both to the rehabilitation of the bankrupt and the integrity of the bankruptcy system. In regards to the rehabilitation objective, the Court observed that the point is moot; the bankrupt is deceased.
The court further concluded that, generally speaking, the integrity of the system is also not compromised in circumstances where a deceased bankrupt is discharged despite not having completed counselling. This is the case, for example, where the bankrupt passes away unexpectedly or merely runs out of time to complete the requirement. In these cases, the bankruptcy system is not perceived as too lax when its effect on the bankrupt is cut short by their death.
In the BC Supreme Court case of Simoes, Re., upon application of these principles, the bankrupts involved were discharged.