Dureault, J.:—The bankrupt, an independent distributor of Old Dutch Foods Ltd. products, made an assignment in bankruptcy on May 3, 1991, following a tax reassessment. He applies for an absolute discharge.
Revenue Canada, as the sole preferred creditor, opposes the application. It is owed a balance of approximately $97,000 in taxes, interest and penalties. The trustee’s report indicates a realization of assets in the amount of $1,850 which, after payment of administration fees, will leave very little for the creditor. The anticipated dividend is expected to be in the range of 0.5%. At some point prior to the assignment, the bankrupt had offered to pay his tax liability at the rate of $500 per month. When the offer was refused, the bankrupt made the assignment.
The assessment covered the period 1985 to 1989. In addition to the tax reassessment, the bankrupt was charged with tax evasion. He pled guilty in late February, 1992, and was assessed a fine of $15,000 to be paid within two years. This obligation will have to be met out of current income. If paid in monthly instalments, he would have to remit $625 each month.
Under section 172 of the Bankruptcy Act, R.S.C. 1985, c. B-3 ("the Act"), the Court is required to refuse the absolute discharge on proof of any of the facts referred to in section 173. I am satisfied that Revenue Canada has established the following facts:
1. Under paragraph 173(1)(a) of the Act, the assets of the bankrupt are of a value far below 50 cents in the dollar on the amount of his unsecured liabilities, due to circumstances for which he can justly be held responsible
— tax reassessment as a result of overstating business promotional expenses.
2. Under paragraph 173(1)(k) of the Act, the bankrupt has been guilty of fraud as evidenced by his recent guilty plea on a charge of income tax evasion.
Proof of these facts disentitles the bankrupt to an absolute discharge and it is accordingly refused.
That leaves open the two remaining courses of judicial action: suspension or conditional discharge. I agree with the line of cases holding that a suspension of discharge is not a viable option and is really counterproductive in all but exceptional cases. A conditional discharge is the last remaining option. The court is left to consider the kind of conditions which ought to be imposed in the circumstances of this case.
A condition generally imposed requires the bankrupt to make an appropriate remittance for the benefit of his creditors within a specified period. I have received evidence in this case which has not been seriously challenged that the bankrupt's 1991 income from his distributorship should be approximately $44,000 after tax or $3,670 net monthly after taxes. An assumption is made that the 1991 expenses have remained constant with 1990. These figures make allowances for payment of a gross salary of $12,000 to his wife. The bankrupt now has four children. Assuming that his wife can support herself on the salary she is paid, this leaves the bankrupt and his four children dependent on his income. Nothing has been factored in to allow for the general downturn of the economy although it only seems reasonable to expect that this particular sector will not escape some compressions.
The court has been provided with the Superintendent's Guidelines for payments required from income. According to these tables, a monthly net income of $3,600 supporting five persons should permit the bankrupt to make a monthly payment of $445 for the benefit of his creditors. If the $15,000 fine is paid in monthly instalments, it takes $625 out of the monthly income. The payment exceeds the amount suggested in the tables. One must not lose sight of the fact that the fine eventually will find its way in[to] the coffers of Revenue Canada.
The wife of the bankrupt is the owner of a summer cottage and has built up some equity. This asset could be used by her to assist her husband, either with the payment of the fine or a payment for the benefit of his creditors. Furthermore, the public interest requires that the bankrupt not avail himself of the Bankruptcy Act protection to wipe out a large tax liability resulting from a fraudulent tax evasion. In balancing the interests of the bankrupt, that of his creditors, and the public interest, I have concluded that the following conditions attaching to his discharge would be appropriate in the circumstances:
(a) that he make a payment of $7,000 to the trustee for the benefit of his creditors within two years from this date. This amount represents a remittance of just slightly less than 10 per cent of the amount of tax owing after crediting payment of the fine.
(b) that he make payment of his fine of $15,000 according to the exigencies thereof within two years from this date.
Order accordingly.
Order accordingly.