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Hidden Assets & Bankruptcy: Our Complete Guide On Creditor Rights And Recovery Under BIA Section 38

An exuberant creditor who just found $13 million of hidden assets of an undischarged bankruptcy using section 38 of the Bankruptcy and Insolvency Act Canada

Professional legal desk with gavel and documents representing the Section 38 BIA process to find hidden assets

Hidden Assets Introduction

At Ira Smith Trustee & Receiver Inc., we understand that the discovery of hidden assets during a bankruptcy can be both a shock and a source of deep frustration. Whether you are a creditor trying to recover what is rightfully yours or an individual seeking a fair and transparent process, your peace of mind and financial security are our primary concerns. We are here to guide you through the complexities of the law with compassion and expertise.

Hidden Assets Key Takeaways

  • Creditor Empowerment: Section 38 of the Bankruptcy and Insolvency Act (BIA) allows creditors to pursue legal actions that a Trustee has declined or neglected to take.
  • Uncovering Hidden Assets: This provision is a powerful tool for addressing a transfer under value, a transfer of property intended to keep it out of the reach of creditors.
  • The TCC v. Rohland Case: A recent BC Supreme Court decision highlights how creditors can continue to fight for recovery even years after a bankruptcy filing.
  • Self-Funded Recovery: Creditors using Section 38 assume the costs and risks of litigation but gain the primary right to any assets recovered.
  • Professional Guidance is Essential: Navigating Section 38 requires precise legal timing and a deep understanding of insolvency rules.

Hidden Assets: What is Section 38 of the BIA?

In a typical bankruptcy, the Licensed Insolvency Trustee is the only person authorized to manage the debtor’s assets and bring lawsuits to recover property. However, what happens if the Trustee decides not to act? Perhaps the estate has no funds to pay for a lawyer, or the Trustee believes the risk of losing is too high.

This is where Section 38 comes into play. It acts as a “safety valve” for the system. If a Trustee refuses or neglects to take a specific action, a creditor can apply to the court for an order to step into the Trustee’s shoes. This process effectively grants the creditor the right to pursue the claim at their own expense and for their own benefit (up to the amount of their claim plus costs).

Assets of this type are called “property of the bankrupt estate,” and Section 38 ensures that they aren’t lost simply because a Trustee is unable to pursue them.

A coastal property on Bowen Island representing the type of hidden assets involved in the TCC v. Rohland case

Hidden Assets Highlights: The Story of TCC Mortgage Holdings Inc. v. Rohland

The recent case of TCC Mortgage Holdings Inc. v. Rohland, 2026 BCSC 1101, provides a perfect example of Section 38 in action. The details of this case read like a financial thriller, involving multi-million dollar judgments and allegations of hidden properties.

Hidden Assets: The Background

In 2009, TCC Mortgage Holdings Inc. (“TCC”) obtained a judgment against Gregory Rohland for nearly $13 million. By 2020, with interest, that figure had grown to over $16.5 million. Mr. Rohland filed for bankruptcy in 2013 and remains an undischarged bankrupt, meaning he has not yet been released from his legal obligation to pay his debts through the bankruptcy process.

Interestingly, the Trustee in his case was discharged back in 2015. Many people believe that once a Trustee is discharged, the file is closed. However, as this case shows, the bankruptcy itself continues until the debtor is discharged.

The Allegation of Hidden Assets

TCC discovered that a property on Bowen Island, British Columbia, had been purchased in 2016 for approximately $2.5 million. While the property was not in Mr. Rohland’s name, TCC alleged it was being held by nominees, individuals or entities acting on his behalf to hide his true ownership.

TCC argued that this was a fraudulent conveyance, a term used when a person transfers property to another party with the intent to defeat, hinder, or delay their creditors.

The Court’s Hidden Assets Decision

TCC applied under Section 38 for permission to sue the nominees directly to bring the Bowen Island property (or the money used to buy it) into the bankruptcy estate. Justice Coval of the BC Supreme Court granted TCC’s application to amend their legal claims. The court ruled that TCC had a right to pursue these claims, even though the Trustee was long gone and the original bankruptcy had happened years prior.

Hidden Assets: Why Does Section 38 Matter to You?

If you are a creditor, Section 38 is your “Plan B.” It ensures that a debtor cannot simply wait out the Trustee’s patience or take advantage of an estate that lacks the funds to litigate.

For the person in debt, it is a reminder that bankruptcy is a process of “honesty for relief.” The system is designed to provide a fresh start only to those who have fully disclosed their assets. Attempting to hide property can lead to long-term legal battles that persist for decades.

Chains being broken, symbolizing the uncovering of hidden financial structures and hidden assets

Hidden Assets: Comparing the Paths to Recovery

To help you understand the difference between the standard process and the Section 38 route, we have prepared this comparison table:

FeatureTrustee-Led ActionSection 38 Creditor Action
Who Controls the Case?The Licensed Insolvency TrusteeThe Creditor who applied for the order, and any other creditors who choose to join in
Who Pays the Legal Fees?The Bankrupt Estate (if funds exist)The Creditor (out of their own pocket)
Who Takes the Risk?The Estate / TrusteeThe Creditor personally
Who Gets the Recovery?Distributed among all creditorsFirst to the acting creditor (costs + claim), then surplus to the estate
Court Permission Required?Usually not (standard duty)Yes, a Section 38 Order is mandatory

Hidden Assets: How to Navigate a Section 38 Application

If you suspect there are hidden assets in a bankruptcy file, you cannot simply sue on your own. You must follow a specific legal path:

  1. Request Action: You must first formally ask the Trustee to pursue the asset or the claim.
  2. Wait for Refusal: The Trustee must either refuse or fail to act within a reasonable timeframe.
  3. Apply to Court: You must obtain a Section 38 Order. The court will check if your claim is “prima facie” (on its face) valid and not frivolous.
  4. Notify Other Creditors: You are generally required to give other creditors the chance to join your action and share the costs (and the rewards).

We know the tension put upon you when you feel the system isn’t working as it should. Whether you are a creditor or a debtor, our role is to bring clarity to these “grey areas” of the law.

Ira Smith professionals collaborating to provide guidance and support to find hidden assets

Hidden Assets Frequently Asked Questions (FAQ)

Can I use Section 38 if the Trustee has already been discharged?
Yes. As seen in the TCC v. Rohland case, a creditor can still apply for a Section 38 order even after the Trustee is discharged, provided the bankrupt individual themselves is not yet discharged.

What is a “Money Had and Received” claim?
This is a legal term for a claim where one party has received money that, in fairness and justice, belongs to another. In bankruptcy, this is often used when a debtor’s money was funnelled into someone else’s bank account or property.

What happens if I lose a Section 38 lawsuit?
Because you are stepping into the Trustee’s shoes, you are responsible for the costs. If the lawsuit is unsuccessful, you, not the Trustee or the estate, will be responsible for your own legal fees and potentially the legal costs of the winning side.

Is there a time limit for these claims?
Yes. Limitation periods apply to all legal actions. In the TCC v. Rohland case, the question of whether too much time had passed was a major point of debate, which the judge ultimately left for the trial phase to decide. It is vital to act as soon as you suspect foul play.

Hidden Assets: Moving Forward with Confidence

The takeaway from the BC Supreme Court’s decision is clear: the law provides pathways to justice, even in the most complex and long-running bankruptcy cases. At Ira Smith Trustee & Receiver Inc., we believe that “Starting Over, Starting Now” applies to everyone involved in a financial crisis. For creditors, it means finding a new way to pursue recovery. For debtors, it means resolving the past honestly to secure a better future.

It is not your fault that the legal system is complex, but it is our job to make it manageable for you. We provide the expertise of a Licensed Insolvency Trustee combined with the heart of a supportive guide.

Starting Over, Starting Now

Don’t let financial uncertainty dictate your future. If you or your business is struggling with debt, losing sleep, or facing legal action, contact Ira Smith Trustee & Receiver Inc. today.

We offer a free, confidential consultation to discuss your situation, explain your options in plain language, and help you develop a clear, actionable plan. Our team of Licensed Insolvency Trustees is dedicated to providing the compassionate, professional support you need to regain control and achieve a debt-free life.

Take the first step towards a brighter financial future. Call us now.

Ira Smith Trustee & Receiver Inc. is licensed by the Office of the Superintendent of Bankruptcy. Ira and Brandon Smith are members of the Canadian Association of Insolvency and Restructuring Professionals.

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Disclaimer: This analysis is for educational purposes only and is based on the cited sources and professional expertise as a Licensed Insolvency Trustee. The information provided does not constitute legal or financial advice for your specific circumstances. Every situation is unique; the outcomes discussed may not apply to your particular case. Please contact Ira Smith Trustee & Receiver Inc. to discuss your specific needs.

About the Author:

Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a Licensed Insolvency Trustee serving clients across Ontario. His experience includes consumer insolvency and complex court-ordered receivership and corporate bankruptcy administration, giving him practical insight into navigating challenging financial situations to achieve optimal outcomes for businesses, creditors, and professionals. Brandon stays current with landmark developments in Canadian insolvency law, ensuring his clients benefit from a cutting-edge understanding of their rights and options.An exuberant creditor who just found $13 million of hidden assets of an undischarged bankruptcy using section 38 of the Bankruptcy and Insolvency Act Canada

#BankruptcyLaw #Section38BIA #CreditorRights #FraudulentConveyance #InsolvencyRestructuring #IraSmithTrustee #TorontoFinancialHelp #DebtRecovery #LegalCaseStudy #StartingOverStartingNow

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BIA vs CCAA Proceedings Toronto: Which Restructuring Strategy Saves Your Business?

Professional restructuring consultation in the GTA on both BIA Proposals and CCAA restructuring with Ira Smith Trustee & Receiver Inc., a Vaughan Licensed Insolvency Trustee.

BIA vs CCAA proceedings Toronto: A comprehensive guide to business restructuring and corporate debt relief.

BIA vs CCAA Introduction

Good morning. If you are reading this, you are likely navigating one of the most challenging periods in your professional life. We want to start by acknowledging the immense pressure you are under. Running a business in the Greater Toronto Area (GTA) is demanding enough without the added weight of financial distress, creditor calls, and the fear of losing everything you have built. Please know that you are not alone, and your safety and well-being are paramount. Financial crisis is a hurdle, not the end of your story. We are here to help you find the path back to stability.

In this Brandon’s Blog, I talk about how using either the Bankruptcy and Insolvency Act (BIA) or the Companies’ Creditors Arrangement Act (CCAA), can be navigated to restructure and save your business.

BIA vs CCAA Key Takeaways

  • BIA Division 1 Proposals are typically faster and more cost-effective for small to medium-sized enterprises (SMEs) with less complex debt.
  • CCAA Proceedings are reserved for larger corporations with debts exceeding $5 million, offering greater judicial flexibility.
  • A “Stay of Proceedings” is a legal shield that immediately stops creditors from taking legal action or seizing assets while you restructure.
  • Failing a BIA Proposal leads to automatic bankruptcy, whereas a CCAA failure allows for more structured exits or liquidations.
  • Choosing the right strategy depends on your debt load, the complexity of your operations, and your ultimate goal for the business.

Highlights

  1. The Lifeline of Business Restructuring
  2. What is a BIA Division 1 Proposal?
  3. The CCAA: For Complex Corporate Challenges
  4. Direct Comparison: BIA vs. CCAA
  5. Which Strategy is Right for Your Toronto Business?
  6. Frequently Asked Questions (FAQ)
  7. Conclusion: Starting Over, Starting Now

The Lifeline of Business Restructuring

When a business can no longer meet its financial obligations, it enters a state of insolvency. This is a technical term meaning the company’s liabilities exceed its assets or it cannot pay its bills as they come due. In Canada, we have two primary “lifelines” to help businesses avoid total liquidation: the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act (CCAA).

Both pathways are designed to give a “fresh start” to a viable business by allowing it to restructure its debts and continue operating. However, the choice between them is critical. Making the wrong move can lead to the very outcome you are trying to avoid: the permanent closure of your company. Whether you are managing a manufacturing plant in Vaughan or a tech startup in downtown Toronto, understanding these frameworks is the first step toward regaining control.

Corporate debt restructuring in Toronto thourhg BIA Division 1 Proposals or CCAA proceedings for Ontario businesses: Breaking chains representing breaking free from financial insolvency and creditor pressure.

What is a BIA Division 1 Proposal?

The BIA Division 1 Proposal is the most common tool used by small and medium-sized businesses in Ontario to manage insolvency. It is a formal, legally binding agreement between a debtor and their creditors to pay back a portion of the debt over time or to restructure the business operations.

How the Process Works

The process usually begins with filing a Notice of Intention (NOI). This filing triggers an immediate Stay of Proceedings, which acts as a legal “stop button” for all lawsuits, wage garnishments, and asset seizures. This gives the company an initial 30 days, extendable up to six months with court approval, to develop a restructuring plan.

A Licensed Insolvency Trustee (LIT) acts as the Proposal Trustee, overseeing the process and ensuring fairness for both the debtor and the creditors. Once the proposal is drafted, it is presented to the creditors for a vote. To pass, the proposal requires a “double majority”:

  1. A majority in number of creditors who vote.
  2. Two-thirds (66.7%) of the total dollar value of the claims.

Why Choose the BIA?

  • Predictability: The rules are clearly defined in the Act, leaving less room for legal ambiguity.
  • Cost-Efficiency: It involves fewer court appearances than a CCAA proceeding, making it significantly more affordable for smaller companies.
  • Speed: The deadlines are strict, forcing a resolution relatively quickly.

However, there is a catch. If the creditors reject the proposal, or if the court refuses to approve it, the company is automatically assigned into bankruptcy. This “all or nothing” nature makes the quality of the initial proposal and the advice of your business debt restructuring expert vital.

The CCAA: For Complex Corporate Challenges

While the BIA is a set of rigid rules, the Companies’ Creditors Arrangement Act (CCAA) is more like a blank canvas. It is federal legislation designed specifically for large corporations that need a more customized approach to restructuring.

The $5 Million CCAA Threshold

To qualify for CCAA, a company (or a group of affiliated companies) must have total debts exceeding $5 million. If your debt is below this mark, the BIA is your only option.

The Power of the Court

The defining feature of CCAA is judicial discretion. Unlike the BIA, where the process is largely administrative, CCAA is entirely court-driven. This allows a judge in the Ontario Superior Court of Justice to “craft” orders that fit the unique needs of a complex business. This might include:

  • Dealing with multiple classes of creditors separately.
  • Approving a stalking horse bidder process to sell assets while under protection.
  • Granting a broader “Stay of Proceedings” that can extend to third parties or directors.

Why Choose CCAA?

CCAA is ideal when a company has a complicated capital structure, international operations, or multiple layers of secured debt. It offers more flexibility and, crucially, does not result in automatic bankruptcy if the plan is rejected. Instead, the company simply loses its legal protection, and creditors are free to pursue their remedies.

Professional restructuring consultation on BIA Division 1 Proposals and CCAA proceedings for Ontario businessesin in the GTA with Ira Smith Trustee & Receiver Inc., a Vaughan Licensed Insolvency Trustee.

Direct Comparison: BIA vs. CCAA

To help you decide which path fits your situation, here is a direct comparison of the two restructuring frameworks:

We know the tension put upon you when making these decisions. Choosing between these two paths isn’t just a legal formality; it’s a strategic decision that affects your employees, your reputation, and your future.

BIA vs CCAA: Which Strategy is Right for Your Toronto Business?

Determining the right strategy requires a deep dive into your company’s financial health and operational goals. For a local GTA business owner, perhaps a restaurant group with a few locations or a mid-sized construction firm, the BIA Division 1 Proposal is often the “lifeline” of choice. It provides the necessary protection without the prohibitive costs of a court-heavy CCAA process.

However, if you are managing a large enterprise with diverse assets and massive liabilities, the CCAA offers the “surgical precision” needed to restructure without the looming threat of automatic bankruptcy.

At Ira Smith Trustee & Receiver Inc., we specialize in identifying the most efficient route for your specific needs. We focus on the “why” behind the numbers, saving jobs, protecting your legacy, and giving you the peace of mind to sleep through the night again.

Visual comparison of documents for BIA Division 1 Proposals and CCAA proceedings for Ontario businesses.

Frequently Asked Questions (FAQ)

Q: Can a small business use CCAA if they have less than $5 million in debt?
No. The $5 million threshold is a strict statutory requirement. For debts under this amount, the BIA Division 1 Proposal is the designated restructuring tool.

Q: Will my creditors find out about the restructuring?
Yes. Both BIA and CCAA are public processes. All known creditors must be notified so they can participate in the voting or court proceedings.

Q: Can I keep running my business during a BIA or CCAA process?
Absolutely. The entire point of these “debtor-in-possession” (DIP) proceedings is to allow management to continue running the day-to-day operations while the debt is restructured.

Q: What is a “Stay of Proceedings”?
Think of it as a legal shield. It is an order that prevents creditors from starting or continuing any legal actions, seizures, or collection efforts against you while you are under restructuring protection.

BIA vs CCAA Conclusion

Navigating the choice between BIA and CCAA proceedings in Toronto can feel like walking through a minefield. But you don’t have to do it alone. Whether your business needs the structured simplicity of a BIA Proposal or the sophisticated flexibility of a CCAA filing, the goal is the same: Starting Over, Starting Now.

By taking action today, you are choosing to lead your company through the storm rather than letting the storm dictate your future.

Starting Over, Starting Now

Don’t let financial uncertainty dictate your future. If you or your business is struggling with debt, losing sleep, or facing legal action, contact Ira Smith Trustee & Receiver Inc. today.

We offer a free, confidential consultation to discuss your situation, explain your options in plain language, and help you develop a clear, actionable plan. Our team of Licensed Insolvency Trustees is dedicated to providing the compassionate, professional support you need to regain control and achieve a debt-free life.

Take the first step towards a brighter financial future. Call us now.

Ira Smith Trustee & Receiver Inc. is licensed by the Office of the Superintendent of Bankruptcy. Ira and Brandon Smith are members of the Canadian Association of Insolvency and Restructuring Professionals.

, , , , , , , , , , , , , , , , , , , , , , , , , , –

Disclaimer: This analysis is for educational purposes only and is based on the cited sources and professional expertise as a Licensed Insolvency Trustee. The information provided does not constitute legal or financial advice for your specific circumstances. Every situation is unique; the outcomes discussed may not apply to your particular case. Please contact Ira Smith Trustee & Receiver Inc. to discuss your specific needs.

About the Author:

Brandon Smith is a Senior Vice-President at Ira Smith Trustee & Receiver Inc. and a Licensed Insolvency Trustee serving clients across Ontario. His experience includes consumer insolvency and complex court-ordered receivership and corporate bankruptcy administration, giving him practical insight into navigating challenging financial situations to achieve optimal outcomes for businesses, creditors, and professionals. Brandon stays current with landmark developments in Canadian insolvency law, ensuring his clients benefit from a cutting-edge understanding of their rights and options.

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4 PILLARS CLASS ACTION LAWSUIT SETTLEMENT: OUR DEFINITIVE GUIDE TO THE PEARCE V 4 PILLARS LAWSUIT SETTLEMENT

We hope that you and your family are safe, healthy, and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

4 Pillars class action lawsuit: What is a class action proceeding?

Class action lawsuits are familiar to many people. Group legal actions occur when a group of people who have been injured in the same way as defined by law seeks legal action on their behalf. A class action lawsuit involves plaintiffs (persons who have been injured) and defendants (people who are being sued) who are all brought together by the courts, who determine whether a settlement should be reached between them. A class action lawsuit claims to be owed money.

The British Columbia court certified a class-action lawsuit in Pearce v 4 Pillars Consulting Group Inc. (the “4 Pillars class action lawsuit”) on October 29, 2019. In my November 25, 2019, 4 PIllars class action lawsuit Brandon’s Blog titled, HOW DOES DEBT RELIEF WORK: APPARENTLY NOT GREAT 4 EVERYONE, I discussed the issues raised in this class-action lawsuit.

The British Columbia appellate court allowed the 4 Pillars class action lawsuit to proceed as a class action proceeding, dismissing the 4 Pillars’ objections. In my May 24, 2021, 4 PILLARS LAWSUIT GETS GIGANTIC APPROVAL TO PROCEED FROM COURT OF APPEAL FOR BRITISH COLUMBIA Brandon’s Blog I wrote about that decision.

In this 4 Pillars class action lawsuit, the British Columbia Court approved a settlement plan on January 13, 2022. According to the court, the Settlement Administration Plan has been approved and shall be implemented and enforced. In this Brandon’s Blog, I give a brief overview of the 4 Pillars class action lawsuit and describe the Settlement Administration Plan.

4 Pillars class action lawsuit: The 4 Pillars lawsuit class-action

The 4 Pillars class action lawsuit was filed in the British Columbia Supreme Court against 4 Pillars Consulting Group Inc. It is alleged that 4 Pillars’ debt consulting business has violated the provincial Business Practices and Consumer Protection Act (BPCPA) and the federal Bankruptcy and Insolvency Act (Canada) (BIA).

Mr. Paul Pearce attempted to certify his action as a class action. This lawsuit seeks to recoup damages for the debt consulting fees that 4 Pillars charged its clients. The fees were paid in connection with: (i) a consumer proposal under the BIA; or (ii) an informal debt settlement proposal with the person’s creditors, all after April 1, 2016.4 Pillars class action lawsuit: B.C. Court of Appeal Finds Class Action Waiver Clause Unconscionable and Contrary to Public Policy

4 Pillars Consulting Group Inc. appealed the lower court’s 4 Pillars class action lawsuit decision to the Court of Appeal. Its decision was released on May 17, 2021. In agreement with the lower court, the court ruled that a genuine issue must be determined at trial based on all the evidence. So the 4 Pillars’ request to strike the plaintiffs’ BPCPA claims was denied by the judge. The certification stage approved by the lower court was upheld on appeal.

According to 4 Pillars, the class action waiver clauses in its standard form contract signed by its clients and the contracting process they agreed to, barred them from participating in any class proceedings including a class dispute resolution process or class arbitrations. This court ruled that such a class action waiver clause contractual term violated public policy considerations and the substantive rights that the class claimants should have.

There was a substantial conflict between the class action waiver and the administration of justice, as found by the court. That contractual term would successfully bar class actions. It was held to be an unfair contract and that there was unequal bargaining power.

Essentially, class action waiver clauses denied Mr. Pearce, and the class members, access to justice and a legal dispute resolution procedure for claims arising from the connection between them. Accordingly, class certification was upheld and the enforceability of class action waiver clauses was held to be in violation of the class members’ rights and on public policy grounds.

As a result of the Court of Appeal for British Columbia’s decision, access to justice will be given and a trial will be necessary to determine all the legal issues including whether claims can arise from BIA-related offenses. Therefore, 4 Pillars also did not succeed in having this issue struck from the 4 Pillars lawsuit. The claimants wanted to proceed to get their measure of justice.

4 Pillars class action lawsuit: What the Court of Appeal for British Columbia says about the role of 4 Pillars

Both courts found that the 4 Pillars debt restructuring services were:

  • meeting debt-stricken consumers who are either insolvent or on the verge of insolvency and working with them as advisors to individuals;
  • assisting those on the brink of insolvency in drafting a consumer proposal for a LIT;
  • engaging in back and forth discussions with the LIT in an effort to get the LIT to agree to a consumer proposal that is favorable to the debtor;
  • input, on behalf of the debtor, on any response or request from creditors;
  • debtors are charged upfront regardless of whether 4 Pillars actually achieve debt relief for the debtor; and
  • charge higher fees than licensed and regulated professionals.

Debt restructuring businesses (those not licensed by the Superintendent of Bankruptcy) charge this way in general. It is unclear what value they provide if any. Their business model preys on people’s fears of getting advice directly from Licensed Insolvency Trustees.

Services described above are provided by a Trustee at no additional charge over and above the tariff fee set by the government. During our no-cost initial consultation, I provide financial advice regarding unmanageable debt and if you are a candidate for informal debt settlement, I will let you know exactly what to do. In cases where you have too much personal debt and are not eligible for an informal settlement, I have prepared many consumer proposals that have worked. I also serve as a credit counsellor as part of that process.

4 pillars class action lawsuit
4 pillars class action lawsuit

B.C. Supreme Court decision leads to 4 Pillars class action lawsuit settlement

As a result of the class action in British Columbia, I wondered if 4 Pillars would have trouble in Ontario and elsewhere because the appellate court denied the appeal and sent the 4 Pillars lawsuit to trial. It is obvious that 4 Pillars do not want these legal questions answered by a court trial. I also stated that there is a strong possibility that this 4 Pillars class action lawsuit may ultimately strike directly at the heart of the business model of 4 Pillars. Canadian franchisees need to be concerned.

4 Pillars must have been troubled by this too, in addition to losing the litigation and a verdict based on BIA-related offences and running afoul of the legislative intent of the BIA. The 4 Pillars class action lawsuit settlement was negotiated because the company could not afford to lose at trial and they obviously found this to be the most acceptable alternative to litigation. On January 13, 2022, the court approved the Settlement Administration Plan. There is now commercial certainty in BC as a result of this settlement.

It is feasible that a portion of the costs claimants paid to 4 Pillars locations in British Columbia might be refunded as a result of the negotiated settlement. The class action alleges that 4 Pillars franchise businesses breached the BPCPA by providing debt restructuring solutions. The 4 Pillars class action lawsuit sought restitution for monies 4 Pillars supposedly received unjustifiably. Accusations made versus the Defendants are unproven, as well they are rejected by 4 Pillars.

The 4 Pillars class action lawsuit was certified that all persons who paid 4 Pillars fees for a consumer proposal under the BIA or an informal debt repayment proposal with their creditors in BC between April 16, 2016, and August 15, 2021 (the “Class”) are entitled to join. Paul Pearce was appointed as the plaintiff’s representative by the court.

Three settlement agreements were approved by the Honourable Justice Mayer of the British Columbia Supreme Court on January 29, 2021, and November 15, 2021. As a compromise of disputed claims, these settlements are not an admission or finding of liability by the settling Defendants. The approved settlements shows that the goals of class proceedings are being met.

​4 Pillars class action lawsuit settlement: What are the terms of the settlement?

Class members who submit claims are eligible to receive a refund of up to 100% of the eligible fees they paid. Collectively, the Defendants have set up a $7,000,000 Settlement Fund to pay the claims. In addition, a claim that will be assigned to the Class against one of Defendant’s insurers could result in a recovery of up to $800,000.

A person’s refund will be figured out by the total quantity of claims made against this Settlement Fund after paying the approved legal expenses. The quantity of the Settlement Fund readily available to pay claims will be pro-rated if the full amount of claims is less than the Settlement Fund available to pay claims.

The Court has approved legal fees on a contingency fee basis equal to 1/3 of the Settlement Fund (plus taxes) and $103,533.31 in disbursements (including taxes and interest). The Settlement Agreements and Settlement Administration Plan contain all the terms and conditions of this court-approved settlement.

4 Pillars class action lawsuit settlement: How do I make a claim?

​To receive compensation under the settlement, each Class member must complete the online Claim Form by April 28, 2022. The potential claim will be vetted and if it meets the qualifications approved by the court, the claim will be admitted as an approved claim. There is more than one class of individuals able to claim on the Settlement Fund.

4 pillars class action lawsuit
4 pillars class action lawsuit

​4 Pillars class action lawsuit settlement: What if I don’t want to participate?

​In order to opt out of the lawsuit, people not wanting to submit their individual claims must notify class counsel in writing to the Canadian lawyer acting on behalf of the class by not later than April 28, 2022, providing your name and address and indicating that you wish to opt out. Should you opt out of the settlement, you will not receive compensation.

​4 Pillars class action lawsuit settlement: Settlement Claims Deadline

​To receive compensation under this settlement of the representative action, people must submit their individual claims by submitting a Claim Form by April 28, 2022.

4 pillars class action lawsuit
4 pillars class action lawsuit

4 Pillars class action lawsuit settlement: Trouble ahead for 4 Pillars in Ontario and elsewhere because of the class action in British Columbia?

I’m looking forward to seeing if this 4 Pillars class action lawsuit settlement is pursued in the Superior Courts of other provinces for the administration of justice where other 4 Pillars franchisees operate. I hope you found this 4 Pillars class action lawsuit Brandon Blog informative.

Are you worried because you or your business are dealing with substantial debt challenges and you assume bankruptcy is your only option? Call me. It is not your fault that you remain in this way. You have actually been only shown the old ways to try to deal with financial issues. These old ways do not work anymore.

The Ira Smith Team utilizes new modern-day ways to get you out of your debt difficulties while avoiding bankruptcy. We can get you the relief you need and so deserve.

The tension put upon you is big. We know your discomfort factors. We will check out your entire situation and design a new approach that is as unique as you and your problems; financial and emotional. We will take the weight off of your shoulders and blow away the dark cloud hanging over you. We will design a debt settlement strategy for you. We know that we can help you now.

We understand that people and businesses facing financial issues need a realistic lifeline. There is no “one solution fits all” method with the Ira Smith Team. Not everyone has to file bankruptcy in Canada. The majority of our clients never do. We help many people and companies stay clear of bankruptcy.

That is why we can establish a new restructuring procedure for paying down debt that will be built just for you. It will be as one-of-a-kind as the economic issues and discomfort you are encountering. If any one of these seems familiar to you and you are serious about getting the solution you need, contact the Ira Smith Trustee & Receiver Inc. group today.

Call us now for a no-cost consultation.

We will get you or your business back up driving to healthy and balanced trouble-free operations and get rid of the discomfort factors in your life, Starting Over, Starting Now.

We hope that you and your family are safe, healthy, and secure during this COVID-19 pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

4 pillars class action lawsuit
4 pillars class action lawsuit
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4 PILLARS LAWSUIT GETS GIGANTIC APPROVAL TO PROCEED FROM COURT OF APPEAL FOR BRITISH COLUMBIA

NOTE: On January 13, 2022, three settlement agreements were approved by the Honourable Justice Mayer of the British Columbia Supreme Court on January 29, 2021, and November 15, 2021. As a compromise of disputed claims, these settlements are not an admission or finding of liability by the settling Defendants. You can read all about the Settlement Administration Plan and how to file a claim by CLICKING HERE to read our latest 4 Pillars blog.

We hope that you and your family are safe, healthy and secure during this coronavirus pandemic. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom and click play on the podcast.

4 pillars lawsuit
4 pillars lawsuit

The 4 Pillars lawsuit class-action

In my November 25, 2019, Brandon Blog titled “HOW DOES DEBT RELIEF WORK: APPARENTLY NOT GREAT 4 EVERYONE“ I wrote about the litigation involving 4 Pillars Debt and Credit Restructuring Company, 4 Pillars Consulting Group Inc. and other entities (4 Pillars or the 4 Pillars lawsuit), Pearce v 4 Pillars Consulting Group Inc., 2019 BCSC 1851.

Mr. Pearce is suing for damages for the fees billed by 4 Pillars to all persons that paid fees to it in British Columbia in connection with: (i) a consumer proposal under the Bankruptcy and Insolvency Act (Canada) (BIA); or (ii) an informal debt settlement negotiation proposal with the individual’s creditors, all after April 1, 2016.

Mr. Pearce claims that it is appropriate for the refunding fees paid, damages for alleged losses stemming from breaches of the provincial Business Practices and Consumer Protection Act (BPCPA) and BIA, and damages based upon the claim that the fees billed were unscrupulous under section 8 of the BPCPA.

In this Brandon Blog, I describe what the 4 Pillars lawsuit is all about and why the Court of Appeal for British Columbia has allowed it to proceed as a class action proceeding, dismissing the 4 Pillars objections.

4 Pillars lawsuit: What is a class action proceeding?

As part of that litigation, Mr. Pearce applied to the BC Court to have his litigation turned into a class action proceeding. The Court ruled that there were enough grounds for his legal action to move forward as a class-action claim. As can be expected, 4 Pillars objected to that motion. They also unsuccessfully argued that certain sections of the claim should be stricken.

4 Pillars appealed that decision to the Court of Appeal for British Columbia. On May 17, 2021, the Court of Appeal for British Columbia released its decision. In this Brandon Blog, I discuss the appeal, what the appeal court had to say and what it decided in the 4 Pillars lawsuit appeal.

4 pillars lawsuit
4 pillars lawsuit

Debtor Warning – Debt Consultants Sometimes Not What They Appear

What 4 Pillars say their organization’s role is

4 Pillars states that they are professionals who provide a variety of services specific to individuals in debt. They say they outline the choices readily available and also walk people through the procedure. They say that your financial debt settlement will likely be one of the following, which they will manage on your behalf:

  • informal debt settlement
  • consumer proposals
  • bankruptcy

They also say they will work with the person on their aftercare. They also say that their role ranges from providing individual debt settlements on behalf of debtors with collection agencies and their creditors to negotiating with Licensed Insolvency Trustees (individually a Trustee, Bankruptcy Trustee or LIT) on behalf of a debtor in determining the terms of a consumer proposal.

What the Court of Appeal for British Columbia says about the role of 4 Pillars

The Court of Appeal described them this way:

  • 4 Pillars sell their debt restructuring services as debt advisors to individuals on the brink of insolvency who are seeking debt restructuring. They are unlicensed and charge fees above those professionals who are licensed and regulated.
  • Their debt consulting business is not licensed or registered, and they charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Their debt consulting services are:
    • to meet and work with consumers who are struggling with debt;
    • to help them draft a consumer proposal to present to a LIT:
    • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • All of these services are provided with the goal that the LIT will then present the consumer proposal to the debtor’s creditors.
  • 4 Pillars may then provide input, on the debtor’s behalf, on any response or request from the creditors.

4 Pillars lawsuit: What do the 4 Pillars debt consultant’s services actually involve?

Just to remind you, this is what the lower BC Court and the Court of Appeal for British Columbia found the 4 Pillars services to be:

  • to meet and work with consumers who are struggling with debt;
  • to help them draft a consumer proposal to present to a LIT:
  • and to engage in back and forth discussions with the LIT in efforts to have the LIT agree to a consumer proposal that is favourable to the debtor.
  • Provide input, on the debtor’s behalf, on any response or request from the creditors.
  • They charge customers fees up‑front for services regardless of whether the appellants actually achieve any debt relief.
  • Charge fees above those professionals who are licensed and regulated.

This is very common amongst all the debt restructuring businesses. It is questionable what value they provide if any at all. Their business model preys on people’s fears of getting advice straight from Licensed Insolvency Trustees.

The services described above a LIT provides at no additional cost above and beyond what the government-approved tariff fee is. The reality is that you do not need the 4 Pillars Consulting Group Inc.

As a LIT, I provide financial advice regarding your unmanageable debt and if you are a candidate for informal debt settlement, I will tell you exactly what to do in our no-cost initial consultation. If you have too much personal debt and are not a candidate for an informal settlement, I have many times prepared consumer proposals that work. As part of that process, I also act as a licensed credit counsellor.

4 pillars lawsuit
4 pillars lawsuit

Is Debt Settlement Really Worth It?

Debt settlement is really worth it. Going to one of these unscrupulous debt settlement companies, instead of a licensed insolvency trustee for debt settlement is NOT.

If you’ve been struggling with debt, it’s time to consider debt settlement through a consumer proposal with the services of a LIT. It likely won’t sound appealing at first, and you may feel that you are taking a gamble, but the process of debt settlement can be incredibly beneficial to you. Keep in mind that even 4 Pillars introduce you to a LIT in order for you to relieve yourself of your debts, hopefully through a consumer proposal process.

A consumer proposal is the only government-approved debt relief program. A LIT can get you a true debt settlement, without having to pay extra unnecessary fees to any of the debt relief companies.

Now let’s see what the Court of Appeal for British Columbia had to say about this 4 Pillars Consulting debt restructuring services business’s appeal from the lower court decision.

Class action waiver not effective to resist class action certification

The Court of Appeal of British Columbia believes the class action waiver clause is unenforceable as being contrary to public policy. The class action waiver significantly interferes with the administration of justice. It would have the effect of precluding class action lawsuits.

It has the impact of precluding Mr. Pearce, and class participants, from having access to justice and to a dispute resolution procedure in accordance with the law for claims developing from the connection between these parties. Therefore, the class action certification was upheld.

4 pillars lawsuitOther grounds of appeal in the 4 Pillars lawsuit

Having reviewed the evidence filed in respect of 4 Pillars’ applications for summary dismissal and after considering their arguments, the lower court judge was not satisfied that Mr. Pearce’s arguments in the 4 Pillars lawsuit, that 4 Pillars was acting for, or representing, a debtor in arrangements or negotiations with their creditors is bound to fail.

The evidence suggested that 4 Pillars had a role in the negotiations between a debtor and their creditors regarding a consumer proposal – even if they were not directly engaged with creditors.

The lower court’s view was there is a genuine issue to be decided at trial on a full evidentiary record. Accordingly, the judge dismissed the 4 Pillars attempt to strike the portions of the pleadings in respect of the Plaintiffs’ claims under the BPCPA.

The Court of Appeal for British Columbia agreed that it will be necessary to have a trial to figure out if claims can occur from offences of the BIA. Therefore, 4 Pillars was likewise unsuccessful in getting this issue stricken from the 4 Pillars lawsuit.

Trouble ahead for 4 Pillars in Ontario and elsewhere because of the class action in British Columbia?

It will be very interesting to see how this class action 4 Pillars lawsuit winds its way through the BC court. Absent an appeal to the Supreme Court of Canada, it is now game on. Mr. Pearce and all members of the class have the green light to continue the litigation. If successful, it goes to the heart of the 4 Pillars business model. Every franchisee across Canada needs to worry.

I hope you found this 4 Pillars lawsuit Brandon Blog informative.

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