Executive Summary: Key Legal and Evidentiary Issues

• Authority of the court to annul an automatic discharge under the Bankruptcy and Insolvency Act (BIA) was challenged and analyzed.

• The trustee’s administrative error in failing to file a Notice of Intended Opposition before the automatic discharge date was scrutinized.

• The court considered whether the trustee had a bona fide intention to oppose the discharge and if the failure was due to inadvertence.

• Potential prejudice to the bankrupt from rescinding the discharge and the likelihood of a different outcome at a discharge hearing were evaluated.

• The trustee’s grounds for opposing discharge included the bankrupt’s failure to attend required counselling and submit income documentation.

• Jurisdictional questions regarding whether a Registrar in Bankruptcy could grant the requested relief were addressed.

Background and facts

Ryan Scott Cosgrove made an initial assignment into bankruptcy on August 24, 2020. While in bankruptcy, he filed a Consumer Proposal on April 30, 2021, which was accepted by creditors and deemed approved by the court. This approval annulled the bankruptcy as per the Bankruptcy and Insolvency Act (BIA). However, the Consumer Proposal was later deemed annulled on October 1, 2023, due to Mr. Cosgrove falling three payments in arrears, which resulted in a new deemed assignment into bankruptcy.

Due to an administrative oversight, the Licensed Insolvency Trustee, BDO Canada Ltd., failed to file a Notice of Intended Opposition before the automatic discharge date of July 2, 2025. As a result, Mr. Cosgrove was automatically discharged under the BIA, although no Certificate of Discharge was issued. Upon discovering the error, the Trustee promptly filed and served the necessary notices and reports, and subsequently applied to the court to annul the automatic discharge and adjourn the discharge application indefinitely.

The Trustee’s grounds for opposing the discharge included Mr. Cosgrove’s failure to attend mandatory counselling, failure to submit required income and expense statements, and inability to determine whether surplus income was payable. Mr. Cosgrove did not appear at the hearings or dispute the Trustee’s amended report.

Legal issues and court’s analysis

The court was tasked with determining whether it had the authority to annul an automatic discharge, which statutory test should apply, whether the discharge should be annulled, and if the discharge hearing should be adjourned. The court reviewed the relevant provisions of the BIA and recent jurisprudence, concluding that it did have statutory authority under sections 168.1(5), 187(5), and 187(9) of the BIA to annul automatic discharges. The court adopted the test from Nientyas (Re), focusing on the trustee’s bona fide intention, the nature of the error, potential prejudice to the bankrupt, and the likelihood of a different outcome at a discharge hearing.

Outcome and conclusion

The court found that the Trustee had a bona fide intention to oppose the discharge, that the failure to file the notice was an administrative error, and that a discharge hearing would likely result in a different outcome due to the uncontested facts. No undue prejudice to Mr. Cosgrove was identified beyond the annulment itself. As a result, the court granted the Trustee’s application, annulled Mr. Cosgrove’s automatic discharge, and adjourned the discharge hearing indefinitely to allow further investigation and compliance with statutory requirements.

BDO Canada Ltd., the Licensed Insolvency Trustee, was the successful party in this matter. No specific monetary award, costs, or damages were ordered or could be determined from the decision.