In Kirschner v. Moore, 2022 BCSC 1226, a decision discussed in a previous post, a claimant, Ms. Kirschner, had commenced a family law proceeding when bankrupt that included a property claim that had vested in the trustee in bankruptcy. Rather than dismiss the property claim, the Court provided the trustee with 60 days to apply to be added as a party to the proceeding, failing which the property claim would be dismissed.
Following that decision, Ms. Kirschner filed a consumer proposal and the trustee brought an application seeking a declaration with retroactive effect that, upon the deemed approval of the consumer proposal, the family law proceeding had been validly commenced. Between the first hearing date for the trustee’s application, and the second date to complete the hearing three months later, the consumer proposal was deemed approved.
In Kirschner v. Moore, 2023 BCSC 450, the Court concluded that Ms. Kirschner could proceed with the property claim in her family law proceeding. The deemed approval of the consumer proposal re-vested the property claim in Ms. Kirschner pursuant to section 66.4(2) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3:
- (2) Where a consumer proposal is made by a consumer debtor who is a bankrupt, …
- (d) the approval or deemed approval by the court of the consumer proposal operates to annul the bankruptcy and to revest in the consumer debtor, or in such other person as the court may approve, all the right, title and interest of the trustee in the property of the consumer debtor, unless the terms of the consumer proposal otherwise provide.
Key Takeaways
The Court held that where an action as a whole is not a nullity because it includes claims a bankrupt was entitled to commence (such as other aspects of Ms. Kirschner’s family law proceeding), the irregularity of including a claim that had vested in a trustee in bankruptcy can be cured. A retroactive order was unnecessary, however, given that after the re-vesting of the claim through the deemed approval of the proposal the Court was only “regularizing the existing state of affairs” in Ms. Kirschner’s proceeding.
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