[Recorded by Electronic Apparatus]
Thursday, October 3, 1996
.0941 
[English]
The Chairman: We shall resume consideration of Bill C-5, an act to amend the Bankruptcy and Insolvency Act, the Companies' Creditors Arrangement Act and the Income Tax Act.
We had a good day yesterday in going through many of the amendments, and today we're going to continue this deliberation with clause 122.
Our procedure will be to continue the consideration of the clauses in order, and then we'll turn to clause 105 at the end to consider the amendment from the Bloc.
Mr. Parliamentary Secretary, would you like to pick it up where we left off?
On clause 122
Mr. Bodnar (Saskatoon - Dundurn): On clause 122, the government has amendment G-57, and again this amendment is a technical amendment. It is similar to the one we did yesterday on the BIA. We're under the CCAA right now.
The Chairman: This is a parallel to the amendment we made in clause 30. Are there any questions?
Amendment agreed to [See Minutes of Proceedings]
Clause 122 as amended agreed to
Clause 123 agreed to
On clause 124
Mr. Bodnar: On clause 124 we have government amendment G-58, and that's just to correct a typo.
Amendment agreed to [See Minutes of Proceedings]
Mr. Bodnar: G-59 is also under clause 124.
Mr. Jacques Hains (Acting Director General, Corporate Governance Branch, Department of Industry): This was in the brief of the Canadian Life and Health Insurance Association to this committee when they appeared, where they recommended some clarifications to CCAA amendments. This is one of them.
The Chairman: Are there any questions?
Amendment agreed to [See Minutes of Proceedings]
Mr. Bodnar: Next is government amendment 60.
Mr. Hains: This is internal. All we're doing here is breaking the provisions into paragraphs to make it easier to read and understand.
Amendment agreed to [See Minutes of Proceedings]
Mr. Bodnar: G-61 again is quite a technical amendment.
Mr. Hains: This is just the one that was approved three amendments ago, the source being the Canadian Insolvency Practitioners Association. Remember clause 30? We just amended it again in the CCAA. This is the same thing.
.0945
Mr. Milliken (Kingston and the Islands): I have a question on this one. In their brief yesterday, I guess it was - I've lost track of the days - the CNTU recommended against allowing directors to compromise their liability under the act, and this amendment facilitates that. I know it isn't the one that does it. What answer is the department giving to this request?
Mr. Hains: The proposal in Bill C-5 to allow corporate directors, as part of a reorganization plan, to propose a compromise of their directors' liability was a recommendation that originated from the bankruptcy and insolvency advisery committee. The intent of this particular proposal is to try to provide incentive and encouragement to corporate directors when the going gets tough for their corporations, to stay on instead of leaving sinking ships out of fear of personal liability, to make bold decisions to try to salvage the business.
By that we mean they should make offers to creditors to compromise what they're owed. Often, in so doing, corporate directors automatically increase their own exposure, because those creditors who accept to compromise the debt vis-à-vis the corporations could go through the back door and use some statutory provisions to sue directors for the compromise they willingly accepted of the corporations. So it's an element of fairness. That is the explication of the proposal.
What this particular amendment is doing here - again, it was recommended by the Canadian Insolvency Practitioners Association - is clarifying that the claims that can be compromised are the claims that arose before, but while their reorganization plan is being worked on, the financial obligations, as they accrue, shall be met.
So I think this is a good improvement, a clarification of the intent.
The Chairman: Is that fine?
Mr. Milliken: That's fine.
Amendment agreed to [See Minutes of Proceedings]
The Chairman: Government amendment 62, Mr. Hains. This is an internal....
Mr. Hains: Yes, that's right. It's been identified by our private sector advisers. This amendment is necessary to cover all instances of bankruptcy arising out of a failed proposal. When a proposal is made under either the CCAA or BIA, it could be automatic bankruptcy, retroactive. What this is saying here makes that clear.
Amendment agreed to [See Minutes of Proceedings]
The Chairman: Government amendment 63, Mr. Hains.
Mr. Hains: Again, this is an amendment that was approved by your committee yesterday, Mr. Chairman, on the BIA. We're mirroring it here on the CCAA. The source is the Insolvency Institute of Canada.
Amendment agreed to [See Minutes of Proceedings]
The Chairman: Amendment G-64.
Mr. Hains: This is correcting a mistake that was in Bill C-5. That mistake was brought to our attention for the first time at a conference in Toronto last December, after Bill C-109 was tabled. It's a mistake. The bill reads, I believe, ``debtor'', and it should have read ``monitor'', which makes a big difference.
Amendment agreed to [See Minutes of Proceedings]
Mr. Bodnar: Next is G-65.
Mr. Hains: Again, this mirrors an amendment, which the committee approved yesterday, to the BIA and the CCAA.
Amendment agreed to [See Minutes of Proceedings]
Clause 124 as amended agreed to
On clause 125
The Chairman: We now move to amendment G-66.
Mr. Bodnar: I move that one, Mr. Chair, as I have the other ones.
Mr. Hains: This is very technical, Mr. Chairman. The source is internal, our private sector adviser. It's simply to specify here that the trustee we're talking about in that particular provision is the trustee in bankruptcy, not just a trustee, which could be another person.
Amendment agreed to [See Minutes of Proceedings]
.0950
Mr. Bodnar: I move amendment G-67.
Mr. Hains: We make this amendment to mirror the verb ``prevents'' used in the BIA. We were using different verbs to mean the same thing. I think there is value in harmonization and in making sure that the two laws speak the same language. The source is internal.
Amendment agreed to [See Minutes of Proceedings]
Mr. Bodnar: I move amendment G-68.
Mr. Hains: It has exactly the same explanation, Mr. Chairman.
Amendment agreed to [See Minutes of Proceedings]
Clause 125 as amended agreed to
On clause 126
The Chairman: Next is amendment G-69.
Mr. Bodnar: I so move.
Mr. Hains: This is pure language, Mr. Chairman, identified by our private sector advisers. It's very technical.
Mr. Milliken: I have a little concern about this. This is wider language than is contained in proposed section 22 in the bill. It now says:
The Governor in Council may make regulations prescribing anything that is by this Act to be prescribed
But this says:
- regulation for carrying into effect the object of this Act;
- That is very broad. Can we not narrow the words a little? It's anybody's opinion as to what the
object of the act is. I certainly don't know. I think this is really giving a licence to print laws to
the Government of Canada.
Mr. Milliken: Well, I don't think it's a good intent. Is the object of this act to prevent people from borrowing money? Can you issue regulations under this act to prevent people from borrowing money? I don't think we should make it this broad. I think there should be some tighter limit on this clause.
Mr. Gordon Marantz (Legal Adviser, Department of Industry): Mr. Chairman, the act in its recital states that the object of the act is to promote the rehabilitation of corporate debtors.
Mr. Hains: Plus, Mr. Chairman, if I may, this language clearly says you could not do regulations that would be of the kind you've mentioned there, because it's not one of the provisions of the CCAA. So we're quite limited in what we can do to what the provisions of the CCAA would say.
Mr. Chairman, I would simply add at the end that the committee that inspired us in some of our amendments yesterday was the Standing Joint Committee on Scrutiny of Regulations. That's their job, and they do that very carefully.
Mr. Milliken: But they don't like this kind of clause, I can tell you.
Mr. Hains: They don't object to this kind of clause. It allows us to do the regulations and all those provisions. Then it's their job - and they do that job very carefully - to ask whether you are within or without the object of the act.
Mr. Milliken: But the trouble there is that one might be of the opinion that anything is within the object of the act when you get this kind of clause, which isn't the intent. I think the object ought to be to say....
The words that were there are, in my view, much better:
- regulations prescribing anything that is by this Act to be prescribed
- If the act says you can make regulations on a certain thing, those are the things you should be
regulating on, not something else - not just anything you feel like.
Mr. Milliken: I was on the scrutiny of regulations committee for awhile, so I have some interest in this. I know what happens with this kind of clause. The people who have made the regulation come...and we say we don't think this was intended by the act, it doesn't fall with the ambit. They say, but we can do anything; it says here in the act we can do anything for carrying out the object of the act, and in our view this is part of the object, so we can do it. That's the answer the committee is given.
I think the language should be more restrictive to say that the Governor in Council may make regulations prescribing anything that is required pursuant to a provision of this act to be regulated - or something like that. That would narrow it down. I'm quite happy with that kind of clause.
I think what you've done is to say we can do anything by regulation as long as it fits within the object of the act. In other words, we'll never have to come back to Parliament to amend this unless we want to change something that Parliament has laid down, because we can do anything else by regulation. I don't think that's the intention.
I think if Parliament wants to pass laws, it'll pass laws. The regulations have to be ones that are authorized by some specific provision in the act.
.0955
[Translation]
Mr. Lebel (Chambly): Along the same lines as Mr. Milliken, I think that we are starting to implement the provisions of Bill C-25 even before it's adopted.
You know that in the past, these types of bills specified: ``the Governor in Council may by order''. Here, the expression by order has been removed, thus enabling the officials, with all due respect, to amend the act anyway they see fit, without being accountable to Parliament or its committees.
So I agree fully with Mr. Milliken: the scope of this clause must be limited. I'm not prepared to adopt it as it stands.
Of course for the officials, it's attractive.
[English]
Mr. Max Mandelsohn (Legal Adviser, Department of Industry): May I just point out that one of the reasons for the proposed amendment is that this is a provision intended for the CCAA to parallel the corresponding provision in the BIA. The BIA provision in subsection 209.(1), which is not the subject of an amendment, not the subject of Bill C-5 at all, has wording that is similar to what is proposed in this amendment.
Mr. Milliken: Which I don't like either.
Mr. Bodnar: I'm wondering, Mr. Chairman, if what we should do is deal with amendment G-70; we'll have two matters to deal with then. We would then deal with G-69 and the other amendment on clause 105. If we then take a five-minute break, I'll discuss it with the officials at that time. After that we can come back to G-69.
The Chairman: So we'll allow clause 126 to stand for a moment?
Mr. Bodnar: You can deal with G-70 in the meantime so that we'll only have G-69 to deal with. G-70 only reduces the period of time for a review of this legislation to five years.
The Chairman: I would prefer to let the whole clause stand and then come back to both. Then we'll do them both.
The committee will suspend for five minutes to allow the government to reconsider its amendment.
.0957
.1005
The Chairman: I would like the committee to reconvene and continue its consideration of Bill C-5 and clause 126. Perhaps the parliamentary secretary can summarize the discussions that have taken place and the decision of the government.
Mr. Bodnar: Amendment G-69 is being withdrawn.
Mr. Milliken: Mr. Chairman, I'll move the amendment.
The Chairman: First of all, the proposed amendment that has been under discussion, characterized as G-69, has being withdrawn by the government and Mr. Milliken has the floor to introduce an amendment.
Mr. Milliken: I move that clause 126 be amended on page 94 by deleting lines 37 to 41. That will take out section 22 because there's already a regulatory power in section 18 of the act.
[Translation]
Mr. Leblanc (Longueuil): Peter, those lines don't seem to coincide with the French text.
Mr. Milliken: The line numbers are different. They correspond with lines 39 to 43 in the French version.
Mr. Leblanc: Yes, in the French version.
Mr. Milliken: Because there are already...
Mr. Leblanc: If I had moved that amendment, it would have never been adopted. You proposed it, and I'm supporting it.
[English]
Mr. Bodnar: If Mr. Lebel had proposed that we would have adopted it without discussion.
Amendment agreed to
The Chairman: We now move to amendment G-70.
Mr. Bodnar: That's just reducing it to five years.
Amendment agreed to [See Minutes of Proceedings]
Clause 126 as amended agreed to
Clauses 127 to 129 inclusive agreed to
The Chairman: We now turn to clause 105.
[Translation]
Mr. Lebel: What about clause 104?
The Chairman: Just a moment please, Mr. Lebel.
[English]
We're now on clause 105. Yesterday we began the consideration of the clause. We accepted amendments from the Reform Party. They have been accepted by the committee. We allowed the clause to stand for consideration of some changes that Mr. Lebel has been particularly interested in. I would invite him now to address the committee on those changes.
[Translation]
Mr. Lebel: On clause 105, I move that we strike the proposed paragraph (g), which is an amendment to subsection 178(1) regarding student loans.
.1010
In fact, I move that we eliminate this exception. Several groups that appeared before us said that student loans were an exception that benefitted the government, whereas the purpose of the Bankruptcy and Insolvency Act was to enable people facing temporary hardship to start their economic lives over again on the right foot. That's the general thrust of the act.
When you talk about students, we are inevitably talking about young people who are just getting started in life. Not only does the bill provide an exception to the general rule, the thrust of the act, but in my view, it includes a dual exception with respect to students. This exception is rather difficult to explain.
I remember Mr. Bodnar stressing that students had a certain amount of time to pay back their loans and that we couldn't demand reimbursement in the first six months. In some provinces, the student loan is payable immediately or almost immediately upon completing school. That is what was proposed by the ACEFs, and the Jean Fortin & Accociés group, the trustees who work in the field. Some people are not as aware of this issue, but I think that the exception should not be included in this bill because it penalizes those most in need. That was my proposal.
Do with it what you want; I'm not going to kid myself. But I don't think that this exception belongs in the Bankruptcy and Insolvency Act which is designed to ease things for people in difficulty, who want to put an end to these difficulties and have the chance to start over on the right foot. In my view, students are automatically starting out. It would be a bad start with the exception we have here.
[English]
The Chairman: Mr. Bodnar.
Mr. Bodnar: Mr. Chairman, we're opposed to this particular amendment. For Canada student loans there is a provision for a six-month period of grace for students; after that, if they have financial difficulties, they can get it extended a further 18 months. So during the first two years there is not that difficulty of repayment. It's my understanding as well, in discussing it with Mr. Hains, that the same applies to the province of Quebec and the loans in Quebec.
Even though there is not a problem for students during the first two years if they have financial difficulties, 70% of bankruptcies are within the first two years.
You will recall, Mr. Chairman, that there were suggestions before the committee that the period be longer than two years, that it be as high as five years. It's our position that if we start with two years and see if it works, then it's fine. If it isn't, then we can readdress the matter at a future date. But two years appears to be a reasonable position to start at. We're opposed to the amendment of the Bloc.
The Chairman: Further discussion.
[Translation]
Mr. Lebel: The two-year period is a good starting point. I see there that you want to encourage young people. That means that for the next amendment, you will extend it to five, seven or nine years. That's the direction you're going in.
[English]
Mr. Bodnar: Mr. Chairman, it depends on whether we see that there are any attempts by students to use the Bankruptcy Act to wipe out legitimate loans even though they have an ability to repay. That matter has to be studied in the future. These matters are not made arbitrarily, but only after a close study of the situation, because we do not intend to create hardship for students who are in a difficult position.
The Chairman: How often did you want an intervention? Mr. Milliken.
Mr. Milliken: I want to say I sympathize with the amendment, but I disagree with it. My reason for doing is if a student starting out in life, as the honourable member says, has borrowed all this money from the Government of Canada or at least it's guaranteed by the Government of Canada, and presumably had no assets to begin with unless he or she inherited some assets - but presumably the student hasn't been working in a way that would generate the assets you might expect of someone later in life - the temptation must be very strong to clear these debts by bankruptcy.
.1015
That is going to become increasingly true as debts get larger as tuition fees go up, as they're doing. I don't think it's reasonable to expect the bankruptcy law to provide a break for people who have entered into contractual obligations to pay money for their education and then say ``Well, now I've finished. I have the education. I'm going to make it free by declaring bankruptcy and clearing them off.''
While I have a lot of sympathy with what the honourable member suggests, and there may be some cases of real hardship, I suggest the purpose of the student loan program is to allow students to go to university on the assumption that out of the increased earnings they would normally expect to receive later in life, they would repay those loans.
I agree that perhaps the administrators of the plan have been overzealous in demanding more than their pound of flesh, but that's a matter of administrative difficulty that can be overcome in other ways than by insisting that somehow we allow students to go bankrupt and wipe out the loans. I don't think that's the answer to the problem. There are other ways to solve that one.
While I have sympathy, as I say, with what the honourable member is proposing, I intend to vote against it for the reasons I've just given.
[Translation]
The Chairman: Mr. Lebel, one final comment.
Mr. Lebel: Mr. Milliken, what you are saying presupposes that students are almost assured of having a job within two years after they finish their studies. Unfortunately, that is not the case. There is a complete generation of young graduates aged 25 to 40 who have been working for 15 years on contracts that are renewed every three months. Three months of unemployment, three months of work, a month and a half of work, six months of unemployment. It's a sad reality, but that is what we're presently facing.
The purpose of my proposal, was to prevent a student from going bankrupt twice: once when he's pressed by creditors to pay his credit cards, even if his debts won't be wiped out because the government has kept a reserve, then two years later, when the government catches him. In the end we're not helping him very much.
[English]
Mr. Bodnar: I think we may have to agree to disagree on this.
I would ask that you call the vote on it.
Amendment negatived
Clause 105 as amended agreed to
The Chairman: Shall the title carry?
Some hon. members: Agreed.
The Chairman: Shall the bill carry?
Some hon. members: Agreed.
The Chairman: Shall the committee order a reprint for use at report stage?
Some hon. members: Agreed.
The Chairman: Shall I report to the House?
Mr. Milliken: Before you do that, Mr. Chairman, I hesitate to delay things, but could I ask another question?
[Translation]
Mr. Lebel: Mr. Chairman, I would like to know why we did not keep our motion to amend clause 104, which replaces paragraph 177(a). I was not here, and I would like someone to explain this to me.
[English]
Mr. Bodnar: It was ruled outside the scope of the bill.
The Chairman: Yes, there was a ruling yesterday. I ruled that it was outside the scope of the bill.
[Translation]
Mr. Lebel: But the bill amends section 177. I don't understand.
[English]
The Chairman: The ruling of the chair, which was accepted by the committee yesterday, was that the repealing of a section of the act was outside the scope of the work of the committee.
[Translation]
Mr. Lebel: But I am not dreaming. The committee was supposed to examine clause 104.
The Chairman: It is not possible to do it in committee, but such changes could be made at the report stage in the House. That is provided for in the Standing Orders.
[English]
Mr. Milliken, I'm sorry.
Mr. Milliken: I wanted to ask whether consideration has been given to the repealing of the CCAA as part of this. Several of the witnesses recommended it. We appear not to have done that in this bill, and I wonder what steps, if any, are being taken to achieve that end.
.1020
Mr. Hains: The member is right, Mr. Chairman. Consideration was given in the BIAC process to that option of repealing completely the CCAA and dealing only with one statute called the BIA. Another option that was considered was to bring the CCAA either amended or as is as a new part of the BIA, and so have only one statute. All these options were carefully considered by the BIAC and by the government, Mr. Chairman.
The decision was, however, that for the time being for complex several-hundred-million-dollar reorganizations the BIA rules, if we repeal the CCAA, would be too stringent to allow the flexibility needed for such large complex reorganizations, and that you needed somewhat more flexible rules. Therefore, the recommendation was to keep the CCAA and amend it to try to harmonize the rules as much as possible with the BIA, while keeping an element of flexibility there.
I suppose the issue will resurface again when we look at this thing in five years that has been approved by this committee. Perhaps at that time the options of putting the CCAA as a new part in the BIA for larger and more complex reorganizations would be considered seriously.
Mr. Marantz would like to add something.
Mr. Marantz: Mr. Chairman, to add to what Mr. Hains has said, we have been urged by members of the judiciary to deal with these matters from across the country to avoid repealing the CCAA until there is comfort and familiarity with working large reorganizations into the BIA. The judges know what they're doing because they're dealing with these on an almost daily basis. We are hopeful that we can harmonize the two, perhaps bring them together next time around. But for the moment, the caution was to not throw out the baby with the bathwater.
Mr. Milliken: Thank you, Mr. Chair.
The Chairman: Shall I report the bill as amended to the House?
Some hon. members: Agreed.
The Chairman: It is moved by Mr. Bodnar that in those cases where multiple amendments have been proposed and disposed of by a single vote, the clerk be instructed to record the amendments severally in the Minutes of Proceedings. Agreed?
Some hon. members: Agreed.
The Chairman: I'd like to take a moment just before we finish up with this bill now that it's been approved.
First of all, Mr. Bodnar, through you I thank the department for the help they've given the committee, not only at the table with Mr. Hains but I know there have been other people in the room. A special thanks to Mr. Mandelsohn and Mr. Marantz for being so helpful to the committee and to Margaret Smith for being the researcher attached to the committee, who has been also very helpful.
I'd just like to suggest, if I could, that several issues were raised by witnesses that I think the government should be continuing to work on. I was very pleased to see the amendment accepted to move up the time so that in the next five years we can continue to work.
Issues were raised dealing with environmental liability, and I think we're all interested to see how the definition of ``contiguous'' works out. I think the government should be monitoring that.
There were a number of issues raised with consumer bankruptcies and proposals, and although it's not within the strict confines of this act, I think we're all interested in the issue of the availability of credit. Either the government might want to pursue that through the department or perhaps through this committee in future; that is, access to credit. This is an issue we should begin with; that is, the origins of some of the problems and not just the manifestations through these acts.
The question of student loans was discussed very fully and I think we all agree we have to monitor that. The parliamentary secretary indicated that in his final comments.
There are issues dealing with exempt property and unpaid suppliers. You've dealt with the issue of the Companies' Creditors Arrangement Act. We just went through Mr. Milliken's comments at the end.
I think we all have to be aware that we had excellent witnesses who brought out many issues the members didn't understand. I thank the department again for helping us through these things. I think we all agree that this act has to be watched and improved as we go along. I'm sure people will bring some of these issues again to the attention of the government through the Senate hearings and we can continue to be responsive.
Thank you again for all your help.
We have a couple of things on the business of the committee to deal with very quickly. This is not formally accepted by the committee because there's no longer a quorum, but let me just say to the standing committee this will be our schedule.
[Translation]
Mr. Leblanc, I would like to quickly discuss the committee's agenda.
.1025
[English]
On Tuesday, October 8, at 3:30 p.m., the Canadian Tourism Commission will be coming. On Tuesday, October 22, 1996, and Thursday, October 24, 1996, from 10 a.m. to 1:30 p.m. there will be a roundtable discussion on science and technology. On Wednesday, October 30, at 3:30 p.m. to 6:30 p.m. there will be a meeting with the banks on the quarterly review of financing of small businesses.
Concerning item 3, Monsieur Leblanc and other members of the committee, there may be specific items you wish to have the banks address in this quarterly review. The last time we met we had a very long agenda. If there are particular problems, as for example in industrial sectors or whatever, I'd like to see us zero in on what we want to deal with instead of just having it all over the board. I will direct the banks to be prepared to deal with specific areas and not just the report.
Mr. Milliken: Perhaps you'd like to talk about something easy, like the Bankruptcy Act.
The Chairman: We'll certainly bring that to their attention.
I will circulate to the committee over the next few days proposed terms of reference for the science and technology review. If you have comments, perhaps you can get back to me and then we'll pass a motion at the next meeting as to what the terms of reference should be for our review.
Mr. Milliken: Can we conclude that there will not be a meeting on Thursday, October 10, based on this?
The Chairman: Yes, and I must tell you that I'm not absolutely convinced that the Canadian Tourism Commission will be available as we would like them to be, so you may get a notice of a cancellation of that.
Mr. Milliken: Can I ask, are any of these to be televised? Is that normal in this committee? I'm new on the committee.
The Chairman: Not normally. We thought this was a really riveting bill, but we've passed on the opportunity to televise.
Mr. Milliken: I can understand that.
The Chairman: But in future we'll make a representation on science and technology. I think there's an interest to the public on that.
Mr. Milliken: Okay.
The Chairman: The committee is adjourned to the call of the chair.