Bankruptcy can’t be used as ‘fiscal car wash’: court official

Using the bankruptcy process “as a fiscal car wash,” just isn't right, says a court official who notes a Nova Scotia man was already lining up his second one three decades ago when he filed his first.

“Robert John Yeo, now 56, applied on January 27, 2020 for a discharge from his fourth bankruptcy,” Raffi A. Balmanoukian, the Nova Scotia Supreme Court's registrar of bankruptcy and insolvency, said in a written decision released this week.

“He didn't get it.” Instead, Balmanoukian ordered that Yeo's “discharge be refused, with leave to reapply no earlier than March 9, 2024.”

The registrar also ordered that if Yeo applies again for bankruptcy, all of his “relevant tax filings are to be up to date, assessed, and paid, and that proof of same be supplied.”

Yeo first filed for bankruptcy in February 1989. He was nearly 26 at the time.

Yeo cited “poor financial management” as the reason for his money troubles.

“About two weeks after receiving his first discharge, on July 9, 2003, Mr. Yeo effected his second filing,” Balmanoukian

said in his written decision released Tuesday.

“With apologies to

Mr. Zimmerman, (a.k.a. famed American folk music hero Bob Dylan) ‘you don't need a weatherman to know which way the wind blows.' The impetus for seeking the first discharge was clearly to pave the way for the second assignment.”

Yeo's second application for bankruptcy cited “failure to make tax remittances on selfemployed income resulting in unmanageable tax liability,” according to Balmanoukian.

In that instance, $51,300 of Yeo's “declared $67,230 in unsecured debt was to (the Canada Revenue Agency), for (harmonized sales tax) and income tax. Another $630 was to the Labour Standards Board.”

The trustee in that case “recommended a payment of $4,800 over 12 months at $400 per month, coupled with a three-month concurrent suspension,” Balmanoukian said, noting that his predecessor “ordered only the latter, resulting in a discharge effective August 24, 2004.”

“Less than five years later,” Yeo applied again for bankruptcy in February 2009, Balmanoukian said. This time, Yeo blamed “inexperience, fell behind on CRA debts and have attempted to work out a payment structure with them unsuccessfully. They have issued Requirements to Pay to numerous General Contractors which has limited my ability to earn income.”

Balmanoukian notes that in that case, “some $43,000 of the $79,000 in (Yeo's) declared unsecured debts was to the Tax Man. The balance was to CIBC and to Canadian Tire Bank.”

In February 2010, the trustee filed an application recommending a conditional bankruptcy and laying out a plan for Yeo to pay off a portion of his debt that the registrar accepted. But five years later, those conditions had not been met.

“The debtor has not responded to repeated reminders of overdue payment,” the trustee wrote on March 6, 2015.

“There matters lay until July 2017,” said Balmanoukian. “On July 26, 2017 the trustee swore an affidavit that Mr. Yeo had, by then, met the terms of the conditional order. (Another one of Balmanoukian's predecessors) issued an absolute order accordingly on July 28, 2017.”

That brings us to Yeo's “present filing, effected ten months after … (the former registrar's) absolute order. This fourth assignment is dated May 24, 2018. It cites ‘failure to make tax remittances on self-employment income resulting in an unmanageable liability; marital separation; health issues,'” Balmanoukian said.

“All I can say in Mr. Yeo's favour at that point is he did not have the audacity to repeat a claim of ‘inexperience.'”

Yeo did, however, the registrar notes, “repeat his tax habits.”

He claimed to owe $55,000, including about $20,000 in interest and penalties dating back to 2010. That made up “the lion's share” of $66,000 in Yeo's unsecured debt.

“At the hearing on January 24, 2020, Mr. Yeo appeared and stated that he had no current source of income and is in poor health,” said Balmanoukian, who later learned Yeo had been in hospital, “had chronic medical issues that were serious … and returning to any kind of employment seems unlikely.”

That left Balmanoukian dealing with what he termed “a situation. An apparently ill and indigent debtor has used the insolvency process as what (former B.C. Supreme Court Justice Mary) Southin aptly termed a ‘fiscal ca rwash' … with routine, repeated, and lengthy disregard for his obligations during insolvency. He has made good his defaults only when the time is nigh for yet another filing; and speaking globally, he has done so mostly and usually explicitly to excise himself of what are mostly tax obligations.”

Each bankruptcy case of this type calls for a “bespoke solution,” Balmanoukian said.

“Here, we have public obligations and private defaults remedied generally only when they became inconvenient to Mr. Yeo. His own health status is not to be ignored, but at this stage and on these facts it plays a secondary role,” the registrar said.

Yeo's tax obligations began building up during his third bankruptcy, Balmanoukian said.

“What I have before me now are far from his first set of problems with the Tax Man, problems for which he seems to believe he has a ready-made and convenient solution.

“That stops here. That stops now.”

Balmanoukian laid out a long list of conditions people should meet to obtain a discharge from bankruptcy.

“Mr. Yeo falls short on almost all of these counts, and has for much of his life. He may or may not work again. In either case, his is a call in stark relief for the court to say unequivocally that this court is not a ‘fiscal car wash' and that it will not allow applicants such as he to give the public a bath,” the registrar said.