J. Court No. 1690 IN THE COURT OF QUEEN'S BENCH PROVINCE OF SASKATCHEWAN IN BANKRUPTCY IN THE MATTER OF THE BANKRUPTCY OF DOMINIC EUSTACE BETWEEN: DOMINIC EUSTACE and HER MAJESTY THE QUEEN in Right of Canada, as represented by the Minister of National Revenue OBJECTING CREDITOR and PEAT MARWICK THORNE INC. TRUSTEE Court No. 191 IN THE MATTER OF THE BANKRUPTCY OF VERONICA ANN EUSTACE BETWEEN: VERONICA ANN EUSTACE and HER MAJESTY THE QUEEN in Right of Canada, as represented by the Minister of National Revenue OBJECTING CREDITOR and PEAT MARWICK THORNE INC. TRUSTEE C.I. McCannell on behalf of the bankrupts G. Berscheid on behalf of Her Majesty the Queen Ian Schofield on behalf of the trustee JUDGMENT MacPHERSON C.J.Q.B. March 1, 1996 To avoid needless duplication will refer throughout to Dr. Dominic Eustace as "Dr. Dominic" and to Dr. Veronica Ann Eustace as "Dr. Veronica". The two doctors are both medical practitioners and have been practicing medicine together in Wolseley, Saskatchewan, since 1973. Dr. Dominic is 51 years of age and Dr. Veronica 49 years of age. They have seven children, five of whom are 18 years of age or older and are studying for undergraduate or post-graduate university degrees. The other two children are aged 14 and 16; the younger lives at home, attending school in Wolseley, and the other is studying grade 12 in France. Each doctor filed in bankruptcy in 1995 and in eachcase the major unsecured creditor is Revenue Canada. Neither doctor meets the 50% threshold of ss. 173(1)(a) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, as amended by S.C. 1992, c. 27 ("the Act"), and it is possible, perhaps likely, that each of them has committed one or more of the sins outlined in ss. (b) to (m). However, there has been no suggestion of any knowing dishonesty on the part of either of them. As in many bankruptcies, they have both been poor business managers for example, Dr. Dominic at the outset of the bankruptcy declared $371,450.00 of unsecured creditors, but the trustee has determined that the actual amount is $138,109.70 of which $11,764.74 is the claim of Revenue Canada. In Dr. Veronica's case, she declared unsecured creditors of $386,450.00, whereas the trustee has determined the actual amount is $132,386.70, which is entirely the Revenue Canada claim. In spirited argument presented by Mr. Berscheid, counsel for Revenue Canada, he pointed out, and it was not disputed, that the combined medical earnings of the two doctors in the four years prior to the bankruptcy averaged about $18,000.00 per month, and the expected after-tax family income averaged $10,200.00 per month. There seems no reason why this income level cannot be maintained. Based on RevenueCanada\'s Superintendents Guideline of Payments (which I takeinto account along with all other factors), this monthlyfamily income after-tax and reasonable living expenses shouldleave $3,349.00 per month for the benefit of creditors. Hewent on to argue that as a condition of discharge, the twodoctors should make combined payments of $3,349.00 per monthfor a period of 36 months for a total of $120,564.00 over thethree year period. I have carefully considered Mr. Berscheid\'spresentation as well as the written brief which he filed andthe numerous cases referred to therein, but I am of the viewthat the payments proposed by him are unreasonably high in allthe circumstances. In reaching this conclusion, have taken into account the expenses of the doctors as set out in their affidavits and the able argument of their counsel, Mr. McCannell. The doctors have heavy family responsibilities, although it is at least questionable the extent to which they should be expected to support their children who are studying at the university level. As to the daughter who is presently studying for her grade 12 in France, although no evidence was given as to the cost of maintaining her, it is apparent to me that the cost must be substantially higher than maintaining her at their home in Wolseley where she can also study at the grade 12 level. The doctors must also consider the financial wisdom of maintaining two substantial homes, one in Wolseley and one in Saskatoon, both of which carry heavy mortgage payments, as well as municipal taxes and normal upkeep. They must also take steps to curtail their other monthly spending. Dr. Dominic has made a substantial contribution toSaskatchewan, both locally and provincially. He has served as President of the Saskatchewan College of Physicians and Surgeons, he is presently mayor of the Town of Wolseley and he has contributed in many other ways as well for these contributions, he is entitled to great credit. However, thisdoes not relieve either doctor from making reasonable paymentsto the trustee as a condition of their discharge from thebankruptcy. They have wisely entered into an agreement with chartered accountant to act as their financial manager, and copy of that agreement dated February 9, 1996, is exhibited to Dr. Dominic's affidavit; this is recognition of their past financial mismanagement and is commendable arrangement for them given their past difficulties. It is my hope that the doctors will continue their medical practice in Wolseley believe can take judicial notice of the fact there is anything but an overabundance of doctors in rural Saskatchewan. also believe they will be better able to continue their Wolseley medical practice if the stigma of their bankruptcies is removed. For this reason Ifeel the consent judgment option under ss. 172(2)(c) of theAct is most appropriate, both for the doctors and thecommunity they serve. Having taken into consideration all of the foregoing, order as follows: 1.In respect of the bankrupt, Dr. Dominic Eustace: (a)If he consents to judgment there will be ajudgment in favour of the trustee in the amount of $45,000.00to apply to the unsecured claims. (b)The judgment shall not be enforced so long as thebankrupt pays to the trustee the sum of $1,250.00 per month onthe first day of each and every month commencing on the firstday of April, 1996, and continuing thereafter on the first dayof each month for a total period of 36 months. (c)The judgment will not bear interest. (d)The trustee shall apply the said payments firstly in payment of its reasonable fees and distribute the balance from time to time pro rata amongst the unsecured creditors. (e)Upon the bankrupt consenting to this judgment, thebankrupt shall receive an absolute discharge. 2.In respect of the bankrupt, Dr. Veronica Ann Eustace: (a)If she consents to judgment there will be ajudgment in favour of the trustee in the amount of $45,000.00to apply to the unsecured claim. (b)The judgment shall not be enforced so long as thebankrupt pays to the trustee the sum of $1,250.00 per month onthe first day of each and every month commencing on the firstday of April, 1996, and continuing on the first day of eachmonth thereafter for a total period of 36 months. (c)The judgment will not bear interest. (d)The trustee shall apply the said payments firstly in payment of its reasonable fees and distribute the balance from time to time to the sole unsecured creditor, Revenue Canada. (e)Upon the bankrupt consenting to this judgment, thebankrupt shall receive an absolute discharge. C.J.Q.B. In Bankruptcy
Two doctors filed in bankruptcy in 1995 and in each case the major unsecured creditor was Revenue Canada. Neither met the 50% threshold of ss.173(1)(a) of the Bankruptcy and Insolvency Act and each likely committed one or more acts of bankruptcy under ss.(b) to (m). However there was no suggestion of dishonesty. The combined medical earnings in the four years prior to the bankruptcy averaged $18,000 per month and the after-tax family income averaged $10,200 per month. HELD: A consent judgment under ss.172(2)(c) was ordered such that if each doctor consented to the payment of $45,000 to be paid at a rate of $1,250.00 per month for 36 months without interest there would be an absolute discharge. 1)The payments proposed by Revenue Canada of $3,349.00 per month were unreasonably high in all the circumstances. 2)Their contributions to the community did not relieve either doctor from making reasonable payments to the trustee as a condition of their discharge from the bankruptcy.