Executive Summary: Key Legal and Evidentiary Issues

• Appeal concerned whether creditor Malkiat Gill proved an additional $110,000 in advances beyond the $590,000 accepted by the trustee under a bankruptcy claims process.

• The trustee, acting under a court-approved claims process order, relied primarily on independent banking source documents to determine “Amounts Advanced” and “Amounts Received” in a Ponzi-like loan scheme involving the Debtors and BC Currency Exchange Inc.

• Internal records such as spreadsheets and documents like the June 2018 Agreement and the uncashed $700,000 cheque were treated cautiously because of generally deficient and unreliable record-keeping in the Debtors’ and BCCE’s affairs.

• The court applied the “true appeal” framework under s. 135(4) of the Bankruptcy and Insolvency Act, using a palpable and overriding error standard for factual issues and declining to convert the proceeding into a hearing de novo.

• Attempts to introduce or rely on fresh evidence, including portions of the Brar Affidavit, were rejected as irrelevant or incapable of affecting the result under the Palmer test as restated in later authorities.

• The court held that Mrs. Gill had not met her onus to prove the disputed $110,000 and dismissed the appeal, thereby upholding the trustee’s partial disallowance and the allowed claim of $213,750.

Facts and background

The matter arises in the bankruptcy proceedings of four entities: Conian Developments Inc. (Conian), Conian Developments (La Voda) Inc. (La Voda), Conian Developments (La Voda II) Inc. (La Voda II), and FLII Construction Ltd. (FLII), collectively referred to as the “Debtors”. The Debtors carried on business as a real estate development enterprise under the control of Rana Khaliq. The court describes that Mr. Khaliq ran a Ponzi-like lending scheme (the “Loan Scheme”) through the Debtors and other companies under his sole control, including BC Currency Exchange Inc. (BCCE) and 0831694 BC Ltd. The Loan Scheme involved the intermingling and diverting of funds invested in these companies, often without the investors’ knowledge and without proper records of the transactions. BCCE is also bankrupt, and its estate is administered separately by McEown + Associates Ltd. as trustee in bankruptcy (the “BCCE Trustee”). On July 20, 2023, the court granted an order substantively consolidating the estates of Conian, La Voda and La Voda II and ordering the procedural consolidation of all the Debtors’ estates, and also granted a Claims Process Order for the Debtors’ creditors (the “Conian CPO”). A separate claims process order had previously been granted on May 20, 2022 for BCCE’s creditors (the “BCCE CPO”). On May 2, 2025, by a further order, the assets of the Conian, La Voda, La Voda II and BCCE estates were to be treated as common assets for distribution to creditors of those entities, while the assets of FLII’s bankruptcy estate were to remain separate for distribution to its creditors and were not relevant to this application. Under that order, claims against the consolidated estate filed under the Conian CPO were to be adjudicated by the trustee in bankruptcy of the Debtors (the “Conian Trustee”), with the BCCE Trustee and the Conian Trustee required to review each other’s disallowances.

Claims process and standard of review

The Conian CPO defined key terms such as “Amounts Advanced”, meaning the aggregate of all amounts advanced by or on behalf of a direct lender to any of the joint debtors to invest in the Loan Scheme, and “Amounts Received”, meaning the aggregate of all amounts received by or on behalf of a direct lender in respect of amounts advanced. It also provided that the Conian Trustee would allow a proof of claim for a direct lender claim only for the amount by which “Amounts Advanced” exceeded “Amounts Received”, and that in determining “Amounts Received”, the trustee would, in the absence of contrary acceptable evidence, assume that interest was received as evidenced in the records of BCCE or any of the joint debtors. The Conian CPO further stated that, on receiving a completed proof of claim, the Conian Trustee would review it and either accept the claim or issue a notice of revision or disallowance (NORD). A creditor who received a NORD could apply to set it aside by notice of application supported by an affidavit containing all intended evidence, and the hearing of any appeal from a NORD would proceed as a true appeal and not a hearing de novo. The appeal in this case was brought under s. 135(4) of the Bankruptcy and Insolvency Act. The court noted that such appeals are true appeals and cited case law confirming that where questions of mixed fact and law or fact alone are raised, the standard of review is palpable and overriding error, whereas questions of law attract a correctness standard. The court found that no pure questions of law were raised and that the core of the appeal was factual: whether the Conian Trustee erred in rejecting that Mrs. Gill had advanced an additional $110,000 beyond what was accepted.

Mrs. Gill’s proof of claim and supporting documents

In accordance with the Conian CPO, the Conian Trustee provided creditor Malkiat Gill with a claims package including a proof of claim form. That form contained a note emphasizing that all relevant documentation had to be attached, and that the validity of the claim would be determined solely on the proof of claim and attachments, with limited opportunity to introduce fresh or new evidence on any appeal. On September 23, 2023, Mrs. Gill filed two proof of claim forms against the La Voda estate: one for $700,000 and one for $1,120,626.19. Only the $700,000 proof of claim (the “Proof of Claim”) was at issue on this appeal. In support of the Proof of Claim, Mrs. Gill attached several schedules and documents. Schedule “A” was a spreadsheet referencing three advances on August 27, 2016 in the amounts of $20,000, $40,000 and $640,000 and monthly interest payments of $8,750 from September 2016 to March 2020, totalling $376,250. Schedule “B” contained various documents, including an uncashed cheque from BCCE to Mrs. Gill dated October 27, 2016 for $700,000 (the “2016 Cheque”); copies of cheques and drafts payable to BCCE totalling $640,000 and related account statements, specifically a $500,000 cheque dated August 27, 2016 that cleared through a joint account owned by Mrs. Gill and her daughter Lakhbir Gill-Chattha, a $50,000 cheque dated September 1, 2016 that also cleared through the Gill/Gill-Chattha joint account, a $40,000 cheque dated August 31, 2016 from M Kanj Construction Ltd., and a bank statement for a joint account of Raghbir Gill and her husband, Amarjit Johal, showing a $50,000 debit on August 31, 2016 and handwritten notes “$20k” and “$40k”. Schedule “C” was a document dated June 5, 2018, described as an agreement between Mrs. Gill, Conian and Mr. Khaliq (the “June 2018 Agreement”), which recited that funds loaned by Mrs. Gill to BCCE in the amount of $700,000 on or about August 28, 2016 were transferred and advanced to Conian Developments Inc. for a 156-unit condo project, that Conian would pay 15% per annum with monthly payments of $8,750 until completion, and that Khaliq personally guaranteed the funds.

Trustee’s review of the claim and evidentiary record

In adjudicating the Proof of Claim, the Conian Trustee also reviewed business records of the Debtors and BCCE in its possession, including spreadsheets prepared or assembled by the BCCE Trustee (the “Spreadsheets”) and BCCE’s bank statements for the relevant period (together, the “Documents”). Based on the Proof of Claim and the Documents, the Conian Trustee concluded that Mrs. Gill had advanced $590,000 to BCCE. This conclusion was based on proof of two advances: $550,000 from the joint bank account of Mrs. Gill and her daughter and $40,000 from M Kanj Construction Ltd. The Conian Trustee disallowed the claimed $50,000 said to be supported by the August 31, 2016 debit on the Gill/Johal bank statement, finding that the debit came from a bank account not connected to Mrs. Gill and that there was no explanation or documentation as to why this amount should be included in her Proof of Claim. The further referenced amounts of $20,000 and $40,000, noted only as handwritten entries on the Gill/Johal statement, were also disallowed because no source documentation was provided to show that Mrs. Gill had made those advances. While one of the Spreadsheets attributed $700,000 of deposits into BCCE’s account to Mrs. Gill, the Conian Trustee found that this figure was not supported by BCCE’s bank statements or by the supporting documents Mrs. Gill produced. The Conian Trustee did, however, identify loan interest payments made to Mrs. Gill from September 2016 to March 2020 totalling $376,250, as she had asserted in Schedule “A”. On July 11, 2025, the Conian Trustee issued a NORD partially disallowing Mrs. Gill’s claims to the extent of $110,000. In accordance with the Conian CPO, the Conian Trustee determined that the “Amounts Advanced” by or on behalf of Mrs. Gill totalled $590,000 and that the “Amounts Received” by or for her benefit totalled $376,250, resulting in an allowed claim of $213,750. Mrs. Gill filed a notice of application on August 14, 2025 appealing the NORD and later delivered Affidavit #3 of her daughter and representative, Sarjinder Dhaliwal, although she ultimately did not rely on that affidavit at the hearing.

Fresh evidence and assessment of unreliable records

During the hearing, Mrs. Gill sought to rely on further material as fresh evidence, specifically portions of Affidavit #1 of Ramona Brar sworn August 7, 2024 (the “Brar Affidavit”). Ms. Brar was a representative of certain unsecured creditors of BCCE and an inspector of the BCCE estate, and her affidavit had been filed in support of the earlier application for substantive consolidation that led to the order made by the court in May 2025. The court reviewed the applicable law on admission of fresh evidence, including Galaxy Sports Inc. (Re) and the four-part test from R. v. Palmer as restated in later authority, and noted that while there were some circumstances that might justify relaxing a strict approach—such as Mrs. Gill’s age, self-represented status and lack of sophistication, and the trustee’s prior knowledge of the Brar Affidavit—the determinative issues were relevance and whether the evidence could affect the result. The court held that the portions of the Brar Affidavit on which Mrs. Gill relied described how BCCE conducted currency-exchange transactions, including exchanges of cheques and bank drafts and the issuance of post-dated cheques, but there was no evidence that Mrs. Gill’s advances to BCCE were for currency-exchange purposes. The court therefore found the Brar Affidavit irrelevant to determining how Mr. Khaliq operated his business in relation to Mrs. Gill’s alleged advances and concluded that it could have no bearing on the outcome.

The court also placed the evidentiary issues in the context of the generally poor record-keeping of BCCE and the Debtors, as previously described in reasons issued on the consolidation application. The court referred to findings that documentation of the purpose of funds injected into BCCE was often lacking, that there was incomplete documentation of movements of funds between Conian and BCCE, and that it was impracticable or impossible to discern which BCCE investors’ money was transferred to Conian. The Conian Trustee had represented that many loans to BCCE were not supported by any documentation, that many lenders believed they were entitled to recovery via the Conian estates regardless of documentation, and that promissory-note-type documents did not necessarily evidence actual transfers from BCCE to Conian. The court accepted those representations and agreed that it was not possible, given the state of the record-keeping, to trace individual advances of money to Conian. In this context, the court accepted that the Conian Trustee was understandably wary of relying on internal records such as the Spreadsheets and documents like the June 2018 Agreement and instead placed greater reliance on independent source documentation such as cheques, bank drafts and bank statements.

Court’s analysis of the disputed $110,000 and outcome

The central issue on appeal was whether Mrs. Gill met her onus to establish that the Conian Trustee made a palpable and overriding error in disallowing the additional $110,000 and that this amount fell within “Amounts Advanced” by or on her behalf under the Conian CPO. Mrs. Gill acknowledged that she could not produce source documents such as cheques or drafts for the disputed amounts, which were only referenced in other people’s documentation—the Gill/Johal bank statement—and through handwritten notes. She stated that she could not obtain copies of cheques or drafts for these amounts because banks did not scan them in 2016 and did not scan them currently. She argued that the Conian Trustee took an unduly rigid evidentiary approach and ignored evidence she said supported a total advance of $700,000, including the 2016 Cheque for $700,000 dated October 27, 2016, her assertion that this cheque related to a two-month loan, her claim that she received another cheque for $17,500 representing interest for that two-month term, the fact that BCCE paid her $8,750 monthly from September 2016 to March 2020 (which she said was consistent with a 15% annual return on $700,000), her view that a 17.79666101% implied rate on $590,000 would be unreasonable, and the terms of the June 2018 Agreement.

The court found that several aspects of the evidence undermined Mrs. Gill’s position. It noted that in 2023 she was able to obtain source documentation from certain banks for some advances but presented no evidence in her Proof of Claim explaining what efforts were made to obtain documentation from the “other bank” (Scotiabank) or the results of those efforts. The Gill/Johal bank statement had no apparent connection to Mrs. Gill, and the handwritten notations of “$20k” and “$40k” on that statement were unexplained and unconnected to any evidence that these amounts were advanced by Mrs. Gill. The court also observed discrepancies in her interest-payment evidence: although she asserted that there was a post-dated cheque for $17,500 dated October 27, 2016, Schedule “A” in her Proof of Claim showed two payments of $8,750 on September 27 and October 20, 2016 both referencing cheque #22271, while BCCE’s bank statement showed that cheque #22271 was for $8,750 and was cashed on September 28, 2016. These discrepancies were not explained and, in the court’s view, justified the Conian Trustee’s skepticism. The court further accepted the Conian Trustee’s position that the Spreadsheets were inconsistent with the source documents: one spreadsheet suggested advances of $20,000, $40,000 and $640,000 on September 19, 2016 totalling $700,000, whereas Mrs. Gill’s own source documents showed a $500,000 cheque dated August 29, 2016 and $50,000 and $40,000 cheques dated September 1, 2016 totalling $590,000.

In conclusion, the court held that the Conian Trustee, acting under the Conian CPO, was required to undertake a claims process and that Mrs. Gill, having chosen to participate, was required to prove her claim under s. 124 of the Bankruptcy and Insolvency Act by providing evidence supporting the “Amounts Advanced”. The court found that, although it was unfortunate that Mrs. Gill could not obtain source documents for the alleged further advances, the documentation she did provide did not overcome that difficulty. The Conian Trustee properly considered all of the evidence in the record but could not rely on much of it because it was unreliable and inconsistent, and instead based its decision on the reliable evidence produced by Mrs. Gill or found in the records. The court concluded that the Conian Trustee did not make a palpable and overriding error in disallowing part of Mrs. Gill’s claim to the extent of $110,000. The appeal was therefore dismissed, and the trustee’s NORD and allowed claim of $213,750 remained in place.