IN THE MATTER OF THE BANKRUPTCY OF: CYRIL MORGAN

[Indexed as: Morgan, Re]

95-01-42819

Man. Q.B.

1999 Man. D. J. 185
1999 ACWSJ 28613

May 27, 1999

JUDGES: [*1] Lee (Registrar)

COUNSEL: Leigh C. Taylor (the former trustee)
Douglas G. Ward, Q.C. for the bankrupt
Denyse T. Cote for Revenue Canada

CATCHWORDS: 
BANKRUPTCY AND INSOLVENCY - Discharge - Conditional discharge - 
General/miscellaneous.

HEADNOTE: In the granting of a conditional discharge, an increase in the 
bankrupt's income may be taken into consideration. The bankrupt should not 
be allowed to enjoy a substantial improvement in his lifestyle without 
regard for his pre-bankruptcy debts.

SUMMARY: 
Decision: Application granted.
 
Facts: The bankrupt was a radiologist. He was wrongly advised by an 
accountant not to pay income tax for a three-year period on the basis that 
he would be able to average his income over three years. The bankrupt then 
had a very large outstanding income tax bill and in 1994 he declared 
bankruptcy. At that time he was married with three dependent children and 
was unable to practise as a radiologist in Manitoba. In 1995 he moved to 
the United States. The bankrupt did not attend the discharge hearing in 
1995 but the trustee obtained a discharge in 1997. Revenue Canada then 
instituted proceedings through the Internal Revenue Service in the United 
States to pursue the outstanding debt. The bankrupt was [*2] now gainfully 
employed in Alabama. The bankrupt's application for a discharge and for the 
former trustee to be reappointed to complete the administration of the 
estate was opposed by Revenue Canada. Reasons: It was not clear and 
unambiguous that the 1992 amendments to the Bankruptcy and Insolvency Act, 
were intended to be a legislative direction that an action could be 
commenced against an undischarged bankrupt once the trustee had been 
discharged. The trustee should be reappointed to complete the 
administration of the estate and the application of the bankrupt for his
discharge should be considered on its merits. The purpose of the Act is to 
permit the rehabilitation of the bankrupt unfettered by his or her debts 
and to provide for a basic minimum allowance for subsistence following the 
assignment into bankruptcy. A bankrupt is not entitled to maintain a 
lifestyle he or she may have enjoyed previously, at the expense of 
creditors, without regard to his or her obligations, both ongoing and under 
the bankruptcy process. The bankrupt had enjoyed an increase in income 
since his assignment in bankruptcy. He had made lifestyle choices at the 
expense of sound fiscal management. However, [*3] his primary obligation 
was to deal with his pre-bankruptcy debts. The court would not now consider 
the bankrupt's age and his need to save money for retirement as a priority 
when he himself had not done so over the last several years. The bankrupt 
had to pay $100,000 over 60 months. Measures were put in place to enforce 
the payment of the bankrupt's obligations.

OTHER-REFERENCES: 
Statutes Considered: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3

JUDGMENT: Registrar Lee 
Overview 

 [1] The bankrupt, Cyril Morgan, is a radiologist who experienced financial 
difficulties in the early 1990's relating in large measure to a number of 
changes in his employment. During this period of time he failed to pay 
income taxes during a three-year period, allegedly on the advice of an 
accounting professional. Primarily as a result of the outstanding income 
tax owing to Revenue Canada and interest accumulated thereon, Dr. Morgan 
made an assignment in bankruptcy on October 24, 1994. Between the date of 
the assignment and the initial discharge hearing which was scheduled for 
July 4, 1995, Dr. Morgan moved from Winnipeg, Manitoba to Rochester, New 
York. Dr. Morgan did not appear at the discharge hearing and the matter was 
[*4] adjourned sine die. 

 [2] Gilbert Desroches, a complex case officer with Revenue Canada, was an 
inspector in connection with this bankruptcy and apparently instructed the 
trustee to proceed as quickly as possible to obtain his discharge. The 
trustee did in fact obtain a discharge on October 28, 1997. 

 [3] After the trustee obtained his discharge Revenue Canada instituted 
proceedings through the Internal Revenue Service in the United States to 
pursue the outstanding indebtedness which Revenue Canada had claimed in the 
bankruptcy, buoyed by the Re Ramjag (1995), 33 C.B.R. (3d) 89 and Re Fraser 
(1996), 41 C.B.R. (3d) 33 decisions which had issued out of the Alberta and 
Saskatchewan Courts of Queen's Bench respectively. In both those cases the 
Minister of National Revenue had successfully persuaded the registrars that 
s.69.3(1) of the Bankruptcy and Insolvency Act, 1992, c.27 had the effect 
of changing the law to permit any creditor to pursue an undischarged 
bankrupt for collection of a pre-bankruptcy debt or claim once the trustee 
was discharged. 

 [4] Upon learning that he was being pursued by the IRS on behalf of 
Revenue Canada, Dr. Morgan contacted the former trustee and was [*5] 
advised to pursue his discharge. 

 [5] Revenue Canada has not only opposed the discharge of Dr. Morgan but 
has opposed the application by the former trustee to be reappointed to 
complete the administration of the estate. These matters are the subject of 
this decision in which I have determined to order the reappointment of the 
trustee and grant a conditional discharge to the bankrupt. In reaching my 
decision I have considered and rejected Re Fraser and Re Ramjag as to the 
effect of s.69.3(1). Circumstances of the Bankrupt Prior to the Bankruptcy 

 [6] Dr. Morgan was born in Sierre Leone, Africa in 1944 and obtained his 
medical degree from the University of Volvograd in the Soviet Socialist 
Republic in 1974. He completed his internship in Sierre Leone in 1976 and 
moved to the United Kingdom in that year to obtain a specially in 
radiology. In 1986 or 1987 Dr. Morgan took a sabbatical from his job in the 
United Kingdom and came to Newfoundland. After working in Newfoundland for 
one year he was advised that his license to practice would not be renewed 
because he had not completed the appropriate Canadian examinations. He 
moved to Chatham, New Brunswick where he was able to secure [*6] a position 
as a radiologist. He was being paid at a certain rate, but because of a 
dispute over his salary due to his lack of Canadian certification, he was 
required to repay his employer a substantial amount of money during the 
first year and had his salary reduced by twenty-five percent during the 
second year. Dr. Morgan determined to move to Manitoba to complete his 
residency requirements in radiology so that he could obtain his Canadian 
certification. His evidence is that he was advised by an accountant that he 
would be able to income average his income tax over three years, 1988, 1989 
and 1990 since he was planning to complete his residency in Manitoba in 
1990 and would receive no income in that year. He says he took the 
accountant's advice and did not file income tax returns or pay any income 
tax for those three years. Dr. Morgan moved to Winnipeg, Manitoba and 
completed his residency between June, 1990 and the Fall of 1991 during 
which time he did not receive any income. In the Fall of 1991 he obtained a 
position and, upon consulting a new accountant in January, 1992, learned 
that the advice he had received from the accountant in New Brunswick was 
incorrect and that he did [*7] have a significant tax liability to Revenue 
Canada. He attended at Revenue Canada in the Spring of 1992 to discuss his 
tax liability and discovered that the liability at that time was over 
$200,000.00 plus interest and penalties. He anticipated commencing payment 
of the tax liability out of his earnings but within approximately one month 
of this meeting he lost his position and was advised by the College of 
Physicians and Surgeons that he would not be permitted to practice as a 
radiologist in Manitoba. Subsequently, he obtained a few small jobs in 
Saskatchewan paying less than $30,000.00 a year and in March, 1993 obtained 
a job as an entry level physician at the Health Sciences Centre which paid 
an annual salary of $50,000.00. During this period of time Dr. Morgan also 
encountered domestic problems. Although his wife filed a petition for 
divorce and Dr. Morgan left the marital home for some time, he and his wife 
subsequently reconciled. Dr. Morgan then approached Revenue Canada in 1994 
to determine how to deal with his tax liability and discovered that the 
indebtedness to Revenue Canada had risen to approximately $400,000.00. At 
this time Dr. Morgan formed the conclusion [*8] that he needed to seek 
relief from this burgeoning tax debt and he made an assignment in 
bankruptcy on October 24, 1994. Revenue Canada filed a proof of claim as an 
unsecured creditor in the amount of $403,628.68 inclusive of penalty and 
interest accrued to that date. Dr. Morgan's only other creditors were the 
Bank of Nova Scotia, which filed a proof of claim in the amount of 
$10,568.20 and CIBC Visa, which filed a proof of claim in the amount of 
$2,555.43. [7] At the time of the assignment Dr. Morgan was married and had 
three dependent children who were fifteen years old or younger. His wife 
did not make an assignment in bankruptcy. Dr. Morgan disclosed his only 
assets to be two RRSP's which were valued in the statement of affairs at 
$42,000.00. The trustee in fact realized some $45,500.00 from these assets. 
Dr. Morgan and his family were residing in a home in Winnipeg which was 
valued at $147,000.00 free of encumbrances. This home was owned by Mrs. 
Morgan. 

Circumstances of Dr. Morgan Following the Assignment in Bankruptcy 

 [8] A first meeting of creditors was held on November 15, 1994. At that 
time Dr. Morgan reported that he was considering going to the United [*9] 
States for training because his credentials as a radiologist in Canada had 
been challenged and he had not passed the exams required to obtain his 
certification in Canada. Dr. Morgan did in fact relocate to Rochester, New 
York to train for a fellowship in approximately March, 1995. His wife sold 
her home and the family moved to Rochester, New York with Dr. Morgan. 

 [9] After Dr. Morgan and his family moved to New York, Revenue Canada made 
certain assessments against Mrs. Morgan pursuant to s.160 of the Income Tax 
Act with respect to transactions relating to the Winnipeg home and a motor 
vehicle. As a result of Federal Court proceedings the amount of $44,503.59 
was applied to reduce the Revenue Canada claim against Dr. Morgan. This 
amount was applied directly against the outstanding indebtedness of Revenue 
Canada and was not paid to the trustee for the general benefit of 
creditors. The amount is not reflected in the Trustee's s. 170 Report as a 
realization in the estate and the current Amended Trustee's s.170 Report 
reflects the original proven claim of Revenue Canada as opposed to the 
reduced claim outstanding after the credit of those moneys. It is of note 
that Revenue Canada had [*10] made assessments totalling $94,995.30 which 
had been collected originally by Revenue Canada. However, Pauline Morgan 
was entitled to a refund of $50,491.71 pursuant to a successful appeal of 
the original assessment. 

 [10] As indicated earlier, Dr. Morgan did not attend at the discharge 
hearing in April, 1995. His evidence in this regard is that he understood 
that Revenue Canada would be opposing his discharge and his trustee was 
attempting to negotiate reasonable conditions of discharge with Revenue 
Canada. At some point after that date communication broke down between the 
trustee and Dr. Morgan. Dr. Morgan commenced employment as an assistant 
professor at the University of Rochester in March, 1996 and maintained that 
employment until July, 1998. He then moved to the University of South 
Alabama in Mobile, Alabama where he resides currently. Since commencing 
employment in the United States his employment income has been substantial. 
In 1996 his annual net income after taxes in American dollars was 
$94,676.00 and in 1997 was $114,848.00. According to Dr. Morgan's April 21, 
1999 affidavit his current gross income in Alabama is $185,000.00 U.S. with 
a net income of approximately [*11] $10,802.17 U.S. per month. 

Position of Revenue Canada 

 [11] Revenue Canada had enlisted the aid of the IRS in the United States 
to commence collection proceedings against Dr. Morgan. After these 
proceedings werecommenced and prior to the collection of any funds Dr. 
Morgan reinstituted the discharge application process. Revenue Canada 
maintains that the court should deny Dr. Morgan access to the discharge 
process and allow Revenue Canada to pursue Dr. Morgan outside of bankruptcy 
for the collection of the outstanding amount of its proven claim. Revenue 
Canada relies on Re Ramjag and Re Fraser for the authority to pursue Dr. 
Morgan. Revenue Canada submits that the trustee should not be permitted to 
be reinstated so that the collection activity commenced by the IRS may 
proceed. It also urges the court to refuse Dr. Morgan adischarge from the 
bankruptcy for the same reason. Revenue Canada submits that these 
collection proceedings, albeit for the benefit of Revenue Canada alone, 
donot prejudice the other creditors as they are only minor and have taken 
no interest in these proceedings to date. 

 [12] Revenue Canada characterizes the conduct of Dr. Morgan as lacking in 
good faith [*12] and in particular cites the failure by Dr. Morgan to make 
any payments on account of surplus since the assignment and particularly 
while he has resided in the United States and been earning substantial 
income. Revenue Canada submits that Dr. Morgan only became interested in 
the bankruptcy proceedings and dealing with his discharge after the IRS 
initiated collection onbehalf of Revenue Canada. 

 [13] Revenue Canada is concerned that, if the court deals with the 
bankrupt's discharge application and grants a conditional discharge, the 
conditional order of discharge will not be easily enforceable by the 
trustee. The trustee lost contact with the bankrupt previously and did not 
collect surplus income payments on behalf of the estate in the past and 
Revenue Canada submits that it is unlikely that the trustee will make any 
effort to ensure that the bankrupt complies with any conditions of 
discharge. 

 [14] As an alternate position, however, Revenue Canada submits that if the 
court considers granting a conditional discharge, a substantial financial 
condition should be imposed given the conduct of the bankrupt and the 
amount of surplus income which the bankrupt has had available since 1996. 
[*13] Revenue Canada further submits that there must be conditions in place 
that give some assurance that the payment of any financial condition can be 
easily enforced. Bankrupt's Position [15] The bankrupt submits that the 
interpretation of s.69.3(1) of the BIA reflected in Re Fraser and Re Ramjag 
is wrong. Counsel submits that the interpretation runs contrary to the 
historic intent of bankruptcy legislation in Canada and the result of this 
interpretation would be that any creditors could proceed to seize any 
assets of an undischarged bankrupt following the discharge of the trustee 
and claim priority to the trustee with respect to such assets. The bankrupt 
submits that the view taken by Scott Bomhof in the Case Comment on Re 
Fraser (41 C.B.R. (3d) 39) represents a correct view of s.69.3(1) and that 
s.69.3(1) does not substantively change the bankruptcy legislation. 

 [16] Counsel submits that even if these cases were correctly decided, the 
cases can be distinguished in that in Re Fraser, Registrar Herauf 
acknowledges that the recourse of the bankrupt would be to comply with the 
duties imposed upon him and proceed to a discharge hearing. Dr. Morgan has 
indeed done this and [*14] should be granted a discharge. The court should 
only refuse a discharge where the conduct of the bankrupt is egregious. He 
submits that this is not suchan extreme case and that a conditional 
discharge should be granted. The court should consider the fact that the 
principal debt relates to the non payment of income tax for three years 
1988, 1989, and 1990 and that the evidence is uncontroverted that the non 
payment of tax was as a result of advice given to Dr. Morgan by his former 
accountant. The court should consider the fact that Dr. Morgan voluntarily 
approached Revenue Canada to make arrangements to pay outstanding taxes. 
This is not a situation where Revenue initially pursued Dr. Morgan. The 
court should also consider the circumstances of Dr. Morgan which followed 
his initial contact with Revenue Canada in 1992 - specifically his loss of 
employment as a radiologist and his subsequent marital difficulties. The 
court should further consider the realization to the estate by the trustee 
and the further payment to Revenue Canada by Mrs. Morgan pursuant to court 
order. Although Dr. Morgan has obtained employment generating substantial 
income over the last few years, the court should [*15] consider that he has 
no pension, is 54 years of age, partly supports a niece in the U.S. and his 
mother in SierreLeone, and does not have the kind of surplus income that is 
suggested by Revenue Canada. The bankrupt submits that as a professional 
person he has certain appearances to be maintained and obligations which 
mitigate against applying thesurplus income guidelines of the 
Superintendent. He suggests that he would be prepared to pay an amount of 
$60,000.00 over a sixty month period. Decision S.69.3(1) 

 [17] Revenue Canada has relied on the decisions in Re Fraser and Re Ramjag 
to argue that the court should refuse to reinstate L.C. Taylor as trustee, 
should refuse the bankrupt a discharge and should permit Revenue Canada, 
one of the unsecured creditors with provable claims in this bankruptcy, to 
proceed to collection of its proven claim outside the bankruptcy process 
through the arrangement it has with the IRS. I respectfully disagree with 
the interpretation of s.69.3(1) given by Registrar Breitkreuz in Re Ramjag 
and adopted by Registrar Herauf in Re Fraser. 

 [18] ln Re Ramjag the Registrar deals with s. 69.3(1) as a case of first 
impression. He finds support for [*16] the interpretation argued for by 
Revenue Canada in that case in the decision of Manitoba Public Insurance 
Corporation v Wallace (1988), 69 C.B.R. (NS) 56. He mentions that Krindle, 
J. held that s.49(1)(the predecessor section to section 69) did not apply 
to actions commenced after the discharge of the trustee and that leave was 
not required to commence the action. However, it should be noted that 
Krindle, J. went on to strike out the plaintiffs statement of claim on the 
basis that it was frivolous and vexatious. The bankrupt had received a 
discharge, thereby discharging all claims provable in the bankruptcy, and 
Krindle, J. held that to permit the plaintiff to commence an action based 
upon a statutorily released debt would be improper. The Registrar in Re 
Ramjag points out that Krindle, J. followed the decision of the Ontario 
District Court in Kaufman v Genge (1952),33 C.B.R. 191. That too is an 
interesting fact situation. In Kaufman , the trustee was discharged and the 
bankrupt had received an order suspending his discharge for two years. The 
court held that a bankrupt with a suspended discharge was undischarged. The 
court did in fact allow a creditor, who had a proven claim [*17] in 
bankruptcy and had received a dividend in the bankruptcy to sue for The 
unpaid balance of the claim. I am not aware of any cases with facts similar 
to the Kaufman v Genge case which have followed that decision, and I think 
it is wrongly decided. 

 [19] The Registrar then considered a line of cases which hold the contrary 
view, namely that even if the trustee is discharged, there is not a right 
of action which does not otherwise exist. Cases considered included Kott v 
Waxman (1952), 33 C.B.R. 178 (Que S.C.), Markis v Soccio (1954), 35 CS.R. 1 
(Que S.C.), Potapoff v Kleef (1964), 6 C.B.R. (NS) 165 (B.C.C.A.) and 
Canada v Perreault (1992), 9 C.B.R. (3d) 181 (Sask Q.B.). 

 [20] The Registrar makes this comment with respect to this line of cases 
at p. 94 "With respect to the line of cases ... with all due respect to 
these judgments, it does not seem just or equitable that the bankrupt 
should be able to file for bankruptcy and be allowed to sit in bankruptcy 
without complying with duties under the Bankruptcy and Insolvency Act . A 
bankrupt should be entitled to the stay provisions under this Act until he 
shows that he is unwilling to perform his duties under this Act. Trustees 
[*18] usually obtain their discharges because they cannot obtain any co-
operation from the bankrupt" [21] Although this may indeed reflect the view 
of the Registrar, I am not persuaded that this reflects the historical and 
philosophical underpinnings of bankruptcy legislation. Certainly this was 
not the rationale for the decision in Kaufman v Genge since the bankrupt 
had cooperated with the process, presented himself for discharge and had 
been given a suspended discharge by the court. 

 [22] In Re Fraser , the Registrar quotes at p. 37 an extract from the 
decision of Matheson, J. in Perreault at p. 186 which is as follows:  "It 
may be noted that the conclusion of Collins J. was not that leave of the 
court is required to commence an action against an undischarged bankrupt, 
even after the trustee has been discharged. He stated that no action 
involving a claim provable in bankruptcy should be permitted to proceed. It 
therefore seems that it would have been sufficient for the British Columbia 
Court of Appeal to merely state that Potapoff's action was improper, and 
should be struck out, rather than importing into the Bankruptcy Act a 
requirement for obtaining leave of the court to commence [*19] the action 
when the "leave" section apparently had no application." 

 [23] The Registrar then states at p. 37 that: "This reasoning is an 
articulate explanation of the philosophical underpinnings of bankruptcy 
legislation. I would have followed this line of decisions had I been 
satisfied that the amendment was not clear or unambigious." [24] Re Ramjag 
and Re Fraser place a great deal of significance on the fact that s.69.3(1) 
represents a departure and a change in legislative intent from the previous 
section 69(1) because the words "unless with the leave of the court and on 
such terms as the court may impose" have been deleted from the section. 
However, s.69.3(1) provides that it is subject to subsec (2) and to ss.69.4 
and 69.5. Sections 69.4 and 69.5 are new sections of the Act which were 
introduced along with s.69.3. The Registrar states at p. 95 in Re Ramjag 
that: "One could argue that s.69.4 applies to s. 69.3(1) even if the 
trustee isdischarged ... However, based upon the plain meaning of s.69,3(1) 
and the decision of the court in Manitoba Public Insurance Corp v Wallace 
and Kaufman v Genge s. 69.4 should not apply to s.69.3(1) if the trustee 
has been discharged." [*20] 

 [25] In Re Fraser the Registrar does not consider s.69.4. As pointed out 
in the Case Comment of Scott Bomhof which immediately follows the reported 
decisionof Re Fraser in 41 C.S.R. (3d), there are some strong counter 
arguments to the conclusion reached by the Registrars in Re Ramjag and Re 
Fraser . The 1992 stay provisions of the BIA were part of a larger 
amendment which saw the introduction of new circumstances where a stay is 
imposed under the BIA. Bomhof suggests that the addition of s.69.4 to 
reflect this makes the text deleted from s.69 redundant to s.69.3(1). 
Accordingly, it is not clear and unambiguous that the 1992 amendment was 
intended to be a legislative direction that an action could be continued or 
commenced against an undischarged bankrupt once the trustee had been 
discharged. (at.p. 40) 

 [26] Bomhof also suggests that it is the entirety of the bankruptcy 
legislation and not strictly s. 69.3 which imposes a stay until the 
bankrupt is discharged. He cites a portion of the decision of Collins, J. 
in the Markis case and concludes at p. 41 that: ".....the BIA contains a 
complete code of procedures that apply to protect the bankrupt's property 
from preferential [*21] seizure by one or more creditors both before and 
after the discharge of the trustee. The result of allowing individual 
creditors to proceed against an undischarged bankrupt after the trustee has 
been discharged is that creditors who are able to get to court the quickest 
will have the best chance of receiving a distribution of the bankrupt's 
assets. Given that all of the bankrupt's exigible property, including any 
property acquired by the bankrupt after the date of bankruptcy but before 
the bankrupt's discharge, is vested in the trustee, there would appear to 
be no reason for commencing or continuing an action for a provable debt 
other than to harass a bankrupt in the hope of obtaining a preferred 
settlement outside of theBIA distribution." 

 [27] I agree with Bomhof that this has historically been and continues to 
be the intent of the BIA and the predecessor bankruptcy legislation. 
Although there is something attractive about the notion of placing greater 
negative consequences on an undischarged bankrupt who has not cooperated 
with the bankruptcy process, I am persuaded that a much clearer legislative 
amendment is required to give that effect. I am not prepared to accede to 
the [*22] interpretation of s. 69.3(1) given in Re Ramjag and Re Fraser 
and, having rejected that interpretation, I am satisfied that the trustee 
should be reappointed to complete the administration of the estate and that 
the application of the bankrupt for his discharge should be considered on 
its merits. 

Discharge Application 

 [28] The bankrupt seeks a conditional discharge and through the submission 
of counsel asks the court to consider a number of factors which have been 
outlined herein, and suggesting that a financial condition of $60,000.00 
payable over 60 months would be appropriate. Revenue Canada seeks a 
substantially greater financial condition if the court is entertaining a 
conditional discharge based on the substantial "surplus income" earned by 
the bankrupt subsequent to the bankruptcy. 

 [29] If the bankrupt had presented himself for his discharge in 1995 a 
court would have had only to consider that the bankruptcy was caused by the 
bankrupt's failure to pay income tax for three years on the mistaken advice 
he received from an accountant, and that he voluntarily appeared before 
Revenue Canada to make arrangements to pay his income tax obligations but 
due to some personal [*23] and employment misfortunes he was unable to do 
so. He would have just been starting employment in New York with a good 
level of income. However, the court may have considered that based on the 
realization to the estate including the payment of the portion of the 
equity from the sale of real property, and dueto the uncertainty of the 
employment, the bankrupt was entitled to an absolute discharge, or perhaps 
a discharge with a modest financial condition. The court may well have 
looked only at surplus income from the date of assignment to the date of 
the discharge hearing and not imposed a financial condition based on 
projected future surplus income. 

 [30] The bankrupt did not, however, present himself for discharge. He 
chose to get on with his life without any consideration of his status as an 
undischarged bankrupt with outstanding obligations pursuant to the BIA ,
isolated from the process largely by the Canada-U.S. border. It is fair to 
assume that if Revenue Canada had not involved the IRS to commence 
collection proceedings against Dr. Morgan he would have proceeded on with 
his life in this manner indefinitely. Under the circumstances I am 
persuaded that the court must consider [*24] the financial circumstances of 
Dr. Morgan subsequent to the bankruptcy in determining an appropriate 
amount of a financial condition. [31] The purpose of the BIA is to permit 
the rehabilitation of the bankruptunfettered by his or her debts and 
providing for a basic minimum allowance for subsistence following the 
assignment into bankruptcy. The 1992 amendments introduced the concept of 
mandatory counselling to provide tools for the bankrupt to learn to 
maintain a lifestyle appropriate to the level of income andtaking into 
consideration any ongoing obligations under the bankruptcy process. A 
bankrupt is not entitled to maintain a lifestyle he or she may have enjoyed 
atthe expense of creditors previously, or otherwise feels entitled to, 
without regard to his or her obligations, both ongoing and under the 
bankruptcy process. 

 [32] Dr. Morgan has enjoyed substantial increases in income since his 
assignment in bankruptcy in 1994. He suggests that he should be entitled to 
certain benefits of that increased income such as private schooling for 
children, maintenance of an expensive home, etc. It may be that following 
his discharge and after his obligations under the bankruptcy are [*25] 
concluded,he can make those lifestyle choices. However, at this time, Dr. 
Morgan has a primary obligation to deal with his prebankruptcy debts 
through the bankruptcy process, It appears that Dr. Morgan has expanded his 
lifestyle as his income has increased. According to a statement of income 
and expenses dated August 19, 1998, which is included as an attachment to 
the affidavit sworn April 21, 1999, Dr. Morgan has no assets with a value 
in excess of $1,000.00 other than a bank balance of approximately 
$4,000.00. With net income after taxes of $9,000.00 permonth U.S. his 
monthly expenses are $8,500.00 U.S. This statement of income and expenses 
discloses no moneys having been set aside for retirement. Dr. Morgan has 
continued to make lifestyle choices at the expense of any type of sound 
fiscal management. It appears that he has not saved or set aside any moneys 
for his retirement and chosen rather to use virtually all of his monthly 
income on living expenses without considering any obligations he might have 
pursuant to his bankruptcy. He now comes to the court asking the court to 
consider his age and his need to save money for his retirement. Dr. Morgan 
clearly did not make [*26] that a priority when making lifestyle choices 
over the last several years and I am not prepared to make that a priority 
in considering an appropriate financial condition. Revenue Canada presented 
to the court, in an affidavit of Gilbert Desroches sworn April 28, 1999, a 
calculation of surplus income payments which should have been made for the 
years 1996, 1997, 1998 and January to April, 1999 if the Federal surplus 
income guidelines were applied strictly. According to these calculations, 
which were not challenged by the bankrupt, the total amount for this period 
of time is $298,816.00. There is indeed a huge differential between the 
amount of surplus income which the Canadian government feels should have 
been available for creditors and the amount of money which Dr. Morgan has 
saved during this period of time (essentially nothing). [33] Counsel for 
the bankrupt submits that as a medical professional the court should make 
allowances for Dr. Morgan and urges the court to consider the "station in 
life" line of cases. In Re Varma (1995), 30 C.B.R. (3d) 263 I had occasion 
to consider these "station in life" arguments and expressed the view at p. 
268 that "..... I believe that this [*27] argument is less and less 
accepted by the courts in today's environment. The Federal government has 
established guidelines which should be considered when determining what an 
appropriate financial contribution by the bankrupt to his or her creditors 
should be. I am not persuaded that a "professional person" should be given 
any special reference inhaving these guidelines disregarded. " 

 [34] In that case, the bankrupt was a medical doctor with net monthly 
income of $9,500.00 who argued that all of his monthly expenses were 
justified and reasonable and that he only had the sum of $500.00 per month 
to contribute to his creditors. I ordered the bankrupt to pay the sum of 
$75,000.00 within a period of 42 months. In that case the bankrupt had 
proven unsecured claims in the amount of over $900,000.00 together with 
additional provable claims of approximately 1.2 million dollars. Although 
my decision as to the quantum of thecondition was varied downward on appeal 
in an unreported decision of Mykle, J., that decision did not in any way 
address the station in life argument or my reasoning with respect to that 
argument. I consider it significant that the 1998 amendments have now [*28] 
codified the former Superintendent's guidelines to become Standards 
required to be applied by trustees. It is especially significant that s. 5 
of Directive 11 provides that: "Where the total monthly surplus income of 
the bankrupt is equal to or greater than $1,000.00, at least 50% but no 
more than 75% of the amount determined in subsection 5(1) shall be required 
from the bankrupt." 

 [35] Clearly bankrupts in higher income brackets, often professionals such 
asdoctors and dentists, are expected by the legislation to contribute a 
greater rather than lesser proportion of their surplus income. 

 [36] Also, s. 4 sets out the types of deductions which should be taken 
into consideration for determining net income. There is nothing in that 
section which suggests that a highly paid, salaried, professional should 
have any special consideration for lifestyle in determining what the net 
income is for purposes of utilizing the  Superintendent's Standards. I 
think these recent amendments should put the nail in the coffin of the 
"station in life" argument and the historic line of cases supporting that 
argument. 

 [37] I have determined that the appropriate amount of a financial 
condition is $ [*29] 100,000.00. This amount shall be paid over a period of 
no more than 60 months with minimum payments during the first 6 months in 
the amount of $1,000.00 per month and after the first 6 months the minimum 
monthly paymentswill be $1,500.00 each month. Notwithstanding the minimum 
monthly payments, Dr. Morgan shall be required to pay the full sum of 
$100,000.00 prior to the end of the 60 month period. The first month in 
which a payment shall be required will be June, 1999 and payments shall be 
required no later than the 15th day of each month. Securing the Condition 

 [38] A significant concern to me is the method of securing payment of Dr. 
Morgan's obligations. Counsel for Dr. Morgan submits that he has come to 
the court and has every intention of complying with the order of the court. 
However, Dr. Morgan is resident in the United States and there is no 
question in my mind that enforceability is complicated by this fact. Due to 
the circumstances of this particular case I am satisfied that the court 
should ensure that measures are in place to facilitate enforcement of the 
payment of Dr. Morgan's bankruptcyobligations. I invited submissions from 
the bankrupt, the opposing creditor [*30] and the trustee with respect to 
the matter of enforceability. The submission of the trustee essentially was 
that the court should not take any special step or make any provisions to 
ensure enforceability. The opposing creditor and the bankrupt have provided 
a variety of suggestions. Upon consideration of the proposals I am 
satisfied that a couple of different possibilities exist which would have 
the desired effect and I will leave it between the bankrupt and the 
opposing creditor to reach agreement as to the method to be employed. The 
options include: 

 [39] 1. The bankrupt shall provide to the trustee forms of consent to 
judgment which would be registrable in any state in which the bankrupt is 
residing and in Manitoba. In the event of default under the repayment of 
the conditional order the trustee would be at liberty to enter judgment 
against Dr. Morgan for the amount unpaid on the conditional order and 
proceed with execution. To assist in this regard I would suggest that there 
should be consideration of having an assignment of that judgment from the 
trustee to Revenue Canada for collection purposes. 

 [40] 2. Order that the conditional order is in favour of Revenue Canada 
with Revenue [*31] Canada undertaking to collect the moneys and apply them 
in accordance with the provisions of the bankruptcy regime including the 
payment of the appropriate superintendent's levy, trustee's costs and 
proportionate share of the other unsecured creditors. 

 [41] 3. Take an assignment of wages from the bankrupt on condition that it 
isconsented to by the bankrupt's current employer and any future employer 
and register it in the Personal Property Registry in the state or province 
in which Dr. Morgan resides. 

 [42] These are essentially the proposals presented by the bankrupt and it 
appears to me that one of these options or a combination would provide the 
assurance of enforceability desired by the court and by Revenue Canada. In 
the event that the parties cannot agree to one of these options or wish to 
address any aspect of these options further, they may arrange for an 
appearance before me to speak to the matter further. 

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