Supreme Court

Bankruptcy And Insolvency

Husband released from equalization claim by bankruptcy and discharge

Parties married in 1980, separated in 1999 and filed for divorce in 2000. Husband remained living on family farm, registered in his name alone. Parties consented to accounting and valuation of assets but prior to valuation, husband made assignment in bankruptcy. Wife not listed as creditor and received no notice of assignment. After husband discharged, master proceeded with valuation and concluded that wife entitled to equalization payment. Master’s report did not address effect of husband’s bankruptcy and discharge on wife’s equalization claim. Court of Appeal upheld master’s report but found that wife’s equalization claim provable in bankruptcy and extinguished by discharge. Appeal to Supreme Court of Canada dismissed. Manitoba remains equalization jurisdiction. Equalization scheme based on principle of equal division of value of family assets after process of accounting and valuation. Debtor spouse retains own property but must make equalization payment if spouses did not own assets of equal value. Proprietary interests not granted until stage of payment of equalization claim. Under Family Property Act (Man.) (“FPA”), equalization claim is debt owed by one spouse to other. Court of Appeal properly treated wife’s claim as debt. Interpretation of Bankruptcy and Insolvency Act (Can.) (“BIA”), requires acceptance of principle that every claim swept into bankruptcy and that bankrupt released from all of them upon being discharged unless law sets out clear exclusion or exemption. Parliament has not accorded any preferred or secured position to claim for equalization payment. Provable claim under BIA includes all debts and liabilities that exist at time of bankruptcy. Right to payment existed from time of separation and hence existed at time of bankruptcy. All that remained was to determine quantum by applying clear formula that left little scope for judicial discretion. Wife’s claim determinable under FPA and provable under BIA. Husband released from equalization claim by bankruptcy and discharge.

Schreyer v. Schreyer

(July 14, 2011, S.C.C., McLachlin C.J.C., Binnie, Deschamps, Abella, Rothstein and Cromwell JJ., File No. 33443) Decision at 179 A.C.W.S. (3d) 872, 84 W.C.B. (2d) 770 was affirmed. 203 A.C.W.S. (3d) 794 (40 pp.).

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