Debates of Dec. 8th, 1995

Bankruptcy And Insolvency Act

[Jim Hart, Reform, Okanagan—Similkameen—Merritt, BC]

Mr. Speaker, I am pleased to have the opportunity to rise on behalf of the people of Okanagan-Similkameen-Merritt to speak in support of Bill C-323, an act to amend the Bankruptcy and Insolvency Act (order of discharge).

I begin my remarks by congratulating my Reform Party caucus colleague, the hon. member for New Westminster-Burnaby, on the fine job he has done in bringing this legislative proposal forward for the consideration of the House. In my view, all members of the House should be quick to rally in support of this bill.

Very simply, the changes to the bankruptcy laws being proposed by my colleague would prevent persons from declaring bankruptcy in order to escape paying civil damages for an assault or battery they have been found to have committed by a Canadian court. Clearly, Canadians want the members of the House to support changes in our laws that will protect the victims of crime in our society.

Canadians have demanded measures that will address the damage done by violence in our homes, our streets and our playgrounds. We on this side of the House were elected on a mandate to bring changes to the criminal justice system. The wave of support for the Reform Party of Canada which swept across the west in the last election is based on the demand by the Canadian electorate for changes in the way our society deals with crime and, in particular, violent crime.

I take this opportunity to give fair warning to the Liberals that this wave of support for the Reform Party of Canada will sweep across the nation in the next federal election. I have no doubt about it.

The efforts of my colleague will not go unnoticed by Canadians. He has introduced a private member's bill which seeks to add civil damages awarded in respect of an assault or battery to the debts listed in the Bankruptcy and Insolvency Act which cannot be released by the act. Again, I congratulate my fellow British Columbian for his efforts on behalf of all Canadians and the Reform Party of Canada.

Canadians know that the Liberals have proposed changes to the bankruptcy laws of our country. Canadians are aware of the gutless and poor legislation the Liberal Minister of Industry has presented in the House. In true Liberal Party fashion the government is ramming the changes to the Bankruptcy and Insolvency Act through the House on a fast track like it has with so many other bills.

Bill C-109, the weak and cowardly Liberal government changes to our country's bankruptcy laws, was introduced and read for the first time on November 24, 1995. It was read the second time on November 28, 1995. That is four days later, for the Liberals across the floor who are counting the days on their calendars. Bill C-109 will become another bright light on the Christmas tree of Liberal red book broken promises. Bill C-109 will be rocketed through the House like a missile, with no debate, or as little as possible, no amendments, no regrets and no apologies.

Bill C-96 creates a new department for the federal government. The creation of a new department is a far cry from the demands of Canadians to reduce the size of government. The new department is exempt from having to submit an annual report. The books are being hidden by the Liberals.

Bill C-101 is another bill debated in the House. It was a collection of weak and ineffective changes to the Railway Act. That bill was so far from what stakeholders in the industry wanted that it was worthless.

Bill C-107 was another great debate for the Liberals. It was cast in stone. It could not be changed, not one word. There was nothing to debate. The Liberals passed it in a matter of days, patted each other on the back and congratulated the Minister of Indian Affairs and Northern Development for all the hard work he had done to steer the bill through the House.

Canadians are absolutely amazed by Bill C-62. It is so seriously flawed the Liberal minister is scrambling to make changes to the bill even before it gets sent to committee.

If the Liberals care to pay any attention to my warning of their fate in the next election then they should endorse my colleague's bill. Bill C-323 will go a long way in fighting violent crime in our society. The victims of these crimes need the resources it takes to recover from the violence that has been committed against them. The perpetrators of these violent acts are using the country's bankruptcy laws as a convenient tool to get away with their crimes.

Do the Liberals really want to be known as the political party that stands 100 per cent in support of the segment of society that uses violence as a response to events in their lives? Do the Liberals really want to be known as the political party having the guts to stand up to the perpetrators of violence? Or do members of the House want to be known for saying to perpetrators of violence: "You cannot hurt someone and just walk away". This has to be said to those who beat up on women, to those who punch smaller persons, to those who sexually violate another human being, including children.

That is what Bill C-323 is asking us to do. It is asking us to deal with bullies. It is asking us to stand up for those who have been hit by a bully. This is elementary. This bill is trying to put on the statute books something that we all learned in the school yard.

The Liberals have already chosen not to do what this bill is asking. I hope that people watching me right now will pick up a pen and write down on a piece of paper Bill C-323, then go to their phone book, look up the phone number of their Liberal member of Parliament and phone him or her. Tell them that you want to register your vote as a yes for Bill C-323 on your behalf. This is to make sure that bullies are punished.

I am willing to put politics aside on this one. We need to protect the people in society who have been victims of violence. We are talking about violent acts which have been proven to be committed. Courts have decided how much the person perpetrating the violence owes the victim. The aggressor laughs at the court order, declares bankruptcy and walks away from the terrible damage done by the violent action. The victim who is probably already paying high medical bills, losing time off work or is being affected in any number of sad, tragic ways, can do nothing. They are stripped of their ability to recover because some smart lawyer has figured out a way to exonerate the client from having to pay for an act of violence.

I cannot believe that on behalf of my constituents I am standing here today and literally begging the Liberals to listen. I am asking them, on humanitarian grounds, to support something that is so basic that any Canadian with an ounce of morals or integrity would support it.

Most Canadians would be surprised to know that those committing violent acts can get off scot free through the bankruptcy laws. Any self-respecting Canadian would say: "Let's put a stop to that today".

Canadians cannot believe that the Liberals ignored the chance to do something about this situation with the proposed changes to the bankruptcy laws. The Reform Party's private member bill, C-323, has been on the Order Paper since last spring. The Liberals knew it existed. They chose not to include this idea in their amending bill introduced just last month. This is shameful. This is embarrassing. Canadians are very disappointed.

I am the national defence critic for the Reform Party of Canada. I have served in the Canadian Armed Forces. As a matter of fact I am still on the supplementary reserve list.

The Canadian Armed Forces is famous throughout the world for standing up to bullies. We did this for 30 years in Cyprus. We are peacekeepers. We are known for having a fair and just society. We are admired for our willingness to take our notion of right and wrong to virtually every corner of the planet and assist in keeping peace, preventing bullies from hitting on people and getting away with it.

I am proud to support Bill C-323. The Reform Party of Canada is proud of my colleague's bill. The people of Okanagan-Similkameen-Merritt, whom I represent, are proud to have me speak in favour of the bill.

[Raymond Bonin, Liberal, Nickel Belt, ON]

Mr. Speaker, thank you for the opportunity to speak to the private member's bill put forward by the hon. member for New Westminster-Burnaby.

This legislation is a clear example of a good idea whose time has come. In fact, the idea of amending the Bankruptcy and Insolvency Act so that people who have been accused of sexual and physical assault cannot use bankruptcy as a way of avoiding penalties imposed by the civil courts has also been raised by government legislation.

Bill C-109 was introduced a couple of weeks ago. Under it, fines for physical and sexual assault become non-dischargeable in the event of bankruptcy. The legislation before us takes this idea one step further and I think it is a good step. Under Bill C-323 the pre- and post-judgment interest on awards would also be non-dischargeable. I want to commend the hon. member for New Westminster-Burnaby for his foresight in closing this loophole. This is an excellent amendment to the laws regarding bankruptcy.

The hon. member's bill inadvertently opens another loophole. Section 178 of the Bankruptcy and Insolvency Act refers to a number of instances where debts are non-dischargeable. Among them are alimony payments, child support and fraud.

In cases where the courts award pre- and post-judgment interest in these other circumstances, I do not think the bankrupt should be able to escape these obligations simply by declaring bankruptcy. Nor do I think this was the intention of the hon. member when he tabled this legislation.

The bill after all seeks social justice. It is an endeavour to make sure that those who have incurred debts and interest charges by order of the court cannot escape their obligations by declaring bankruptcy.

I am certain that if the hon. member had the opportunity to redraft the legislation, he would do so in a way that would close down the loopholes for the bankrupts listed in section 178. I would suggest to him that the surest way of having his recommendation adopted would be to withdraw Bill C-323 and resubmit his proposal as an amendment to Bill C-109 now at second reading.

I am convinced that the amendment will be welcomed by the committee. We have already heard expressions of support from both sides of the House. We all know that the hon. member for New Westminster-Burnaby has hit upon an excellent idea and a worthy amendment and we all want to see it incorporated in law as soon as possible.

That is why I support the principle of Bill C-323 but I cannot support the bill as it now stands. I encourage the hon. member to withdraw Bill C-323 and present its substance as an amendment to Bill C-109 at committee. There it will be incorporated into a bill that has been designed to address the broad spectrum of both consumer and corporate issues that relate to bankruptcy.

Many of the amendments to the Bankruptcy and Insolvency Act contained in Bill C-109 are aimed at redressing an imbalance between consumer debtors and their creditors. The legislation puts more pressure on debtors to rehabilitate and to act more responsibly by repaying their debts. For example, as we have discussed in the House before, most consumer bankrupts are discharged nine months after bankruptcy. Even if they start obtaining surplus income, it is costly for creditors to get back what they are owed.

Under Bill C-109 consumer debtors will be required to remit a portion of their surplus income, the income which exceeds the minimum cost of living. The creditor will not have to go to the courts to receive his due.

The legislation also covers student loans. Some students have declared personal bankruptcy upon graduation as a means of discharging their student loans. Under the new law, students will continue to be able to declare bankruptcy but their student loans will not be discharged for another 24 months.

Under the new amendments, insolvent spouses may submit a joint proposal for bankruptcy. This will help save time, cut costs and streamline the process. Former spouses will no longer be able to use the bankruptcy laws as an easy way to get out of making support payments. Spousal and child support payments become provable priority claims.

The legislation also contains measures to ensure that low income families will not lose their GST credit refunds. Such refunds will be exempted from seizure in the event of a bankruptcy.

All these are good amendments. Among the good amendments is the proposal to ensure that people who have been accused of sexual or physical assault do not use bankruptcy as a way of avoiding penalties imposed by the civil courts.

The hon. member has added a very useful amendment to this last provision. I look forward to discussions in committee on it if he is willing to withdraw his bill.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

Mr. Speaker, all laws passed by Parliament are designed to deal with inefficiencies and injustices created by free and voluntary interactions among people. Canada's Bankruptcy and Insolvency Act is no exception.

People dealing honestly and with the best of intentions borrow money from others in order to establish businesses or carry them over periods of temporary insolvency. In this world of uncertainty, occasionally the best made plans of borrowers go wrong. They are unable to meet the repayment schedules to which they have committed themselves.

Historically, creditors used to have powerful instruments of coercion to assure that debtors make every effort to repay their debts. The stories of debtor prisons are the stuff of Dickens' novels. They have done much to influence our thinking about the injustices involved in the old, harsh methods of dealing with debtors.

These attitudes are that debtors unable to pay their debts are in trouble for reasons beyond their control. They typically are poor and need to be protected from rich creditors. Moreover, it is not in the interests of society that individuals who have hit a streak of bad luck should be stigmatized for life and forever unable to get back into business or even just mainstream life. The conditions described in Dickens' novels were that the poor were stripped of everything. They were stigmatized. Indeed those were bad times and some changes were needed.

The existing Bankruptcy and Insolvency Act reflects social attitudes. It makes it possible for individuals to declare bankruptcy to escape the social and economic penalties that historically were imposed on debtors. In Canada and in most industrialized countries today, debtors can clean the slate, walk away from past mistakes

and start all over again by the simple act of asking courts to declare them bankrupt.

Canadians believe generally that these rules are desirable and create a better society. They also believe that bankruptcy itself and the stigma attached to having declared bankruptcy are sufficient deterrents to abuse of the privileges granted under the law.

I might note that there are significant differences between countries. I understand that in the United States, some successful businessmen who today are millionaires brag about the fact that they have been bankrupt at least two or three times. One of the significant cultural differences in the United States, Canada and Europe is the fact that we typically do not have these kinds of entrepreneurs that go around saying it was quite all right to have been bankrupt a couple of times.

[Paul Forseth, Reform, New Westminster—Burnaby, BC]

They have no shame.

[Herb Grubel, Reform, Capilano—Howe Sound, BC]

My colleague whispers into my ear that they have no shame. I personally think this is reflective of a more dynamic, risk taking society which has all kinds of benefits for creating wealth and generally raising the income of citizens. However, there are always excesses.

As is the case with so many well-intentioned laws, this law on bankruptcy has been shown to have a number of unintended consequences. This law is subject to increasing abuse, especially as the memory of the disgrace of debtor prisons and social ostracism are receding from the public conscience.

Bill C-323, the amendment to the bankruptcy act introduced by my Reform Party colleague from New Westminster-Burnaby, is aimed at curbing one of the unintended consequences of what otherwise is a well-intentioned good act. If accepted it would reduce the ability of individuals to escape responsibility for the payment of fines which have been imposed by civil courts in response to damages caused by violence, typically against women.

The intention of the existing legislation clearly was not to open bankruptcy as an avenue which could be used by violent offenders to escape the penalty which society through court actions has imposed on them. This private member's bill is consistent with public sentiment on this subject. I support it and urge members of this House to pass it.

The proposed legislation continues to protect innocent victims of bankruptcy from the historic, often unjust and socially undesirable consequences of excessive penalties. Making sure the perpetrators of violent acts against people are duly convicted in a court of law and required to pay a fine is not equivalent to bringing back debtor prisons. It is a necessary and in my view highly desirable act that would restore equity and would close a loophole in the existing law.

I have every confidence in the ability of those entrusted with carrying out the intent of this act to distinguish between cases where bankruptcy is designed to escape responsibility and where it is the result of genuine bad luck. The risk of mistakes in such decisions is worth the social benefit in terms of greater equity envisaged by the designer of this bill. I urge that his ideas receive the assent they deserve.

[The Deputy Speaker]

I wonder if we might agree not to see the clock until the next member has finished his submission. Is there unanimous consent?

[Some hon. members]

Agreed.

[Alex Shepherd, Liberal, Durham, ON]

Mr. Speaker, I listened intently to the speech of the hon. member for Capilano-Howe Sound who said how different our culture and our attitudes are toward bankruptcy. I do not believe that is the case.

For example, members of the Reichmann family, in the pursuit of some of their objectives not only within Canada but also internationally, used the protection of chapter 11 of the United States and also our own creditors arrangement act. Many of our countrymen are alarmed and curious to understand how it was possible, after all the smoke had cleared from that period of time in our history, that over 2,500 employees of the Canadian Imperial Bank of Commerce had lost their jobs, but at the same time many of the executive staff were promoted and that today the Reichmann family still has partial ownership of Canary Wharf. These are the people that my Reform colleagues would like to support, I suppose.

I will now move into the area of this bill. It was a very honourable presentation by the member for New Westminster-Burnaby. Rather than take the time of the House today, I can state that it was never the intention that this act be abused by people trying to escape societal obligations. I believe it is very appropriate that the member bring forward this legislation at this time.

The question seems to be whether it is appropriate that this bill go forward. Another bill is currently being debated, Bill C-109, a government bill, which overlaps and has some similarities to this bill. When I try to compare these two bills, I discover that their differences are twofold. One is that the member's bill talks about assault and battery, whereas the minister's bill talks simply of assault.

My reading of the word assault would include the definition of the word battery. I do not believe that is a significant difference between Bill C-109 and the private member's bill.

The other difference, as I understand it, is that the hon. member includes the concept of interest related to awards or judgments in the area of assault and battery. That would be different from the existing bill of the minister.

I am not a lawyer, but I understand in law that when we specify in one aspect of the bill a specific such as interest, that by definition a judge will assume that we meant interest only in that particular area and that some of the other areas of the bill would not have interest judgments attached to them. As a consequence, I believe we need to either amend the existing legislation in Bill C-109 which talks about interest, so that we are clear that interest is included in all the categories, or we need to delete the interest adjustment aspect from the member's bill.

The bill presented by the member is a good one and deserves the support of the House, but it is a matter of time allocation. This House is very busy. We have been putting through a lot of legislation recently and I am sure the government has much more legislation to present in the new year. We have to find a way in which we can do this efficiently.

It seems to me that the most efficient way to handle the matter would be for the member to move an amendment to Bill C-109 at committee stage. Indeed, I would be happy to support the member in that initiative.

Today I would have to say that I have to oppose the bill, not because I oppose it in principle, not at all. I support the initiatives of the member. I would oppose it simply on the grounds of time allocation.

I believe there are many members on this side of the House that would support the initiatives of the member to bring forward amendments to Bill C-109 during committee stage, dealing with the aspect of interest.

[The Deputy Speaker]

The time provided for the consideration of private members' business has expired.

Pursuant to Standing Order 93, the order is dropped to the bottom of the order of precedence on the Order Paper.

It being 2.35 p.m., the House stands adjourned until Monday at 11 a.m.

(The House adjourned at 2.33 p.m.)