This was an application by the Insurance Corporation of British Columbia for a declaration pursuant to the Bankruptcy and Insolvency Act that a judgment against a driver for an intentional act of violence by means of a vehicle survives the discharge provisions of the Act. The court held that section 178 of the Act, which states that a judgment for damages similar in nature to a fine, penalty or restitution order was immune from discharge under the Act, applied, and the judgment debt to ICBC therefore survived the respondent’s bankruptcy.

Sangha (Re), [2004] B.C.J. No. 1211, British Columbia Supreme Court

At issue in this case was the ability of ICBC to collect on a judgment for damages. In 1994, an automobile driven by Mr. Sangha struck two pedestrians. One of the pedestrians was Mr. Sangha’s daughter, and the other was her boyfriend. The RCMP investigated and charged Mr. Sangha, and he eventually pleaded guilty to aggravated assault.

ICBC reached a settlement with both pedestrians and then commenced proceedings against Mr. Sangha to recover the amount of the settlement. ICBC alleged that the accident was an intentional act of violence and accordingly Mr. Sangha had breached his insurance and forfeited his right to indemnity. Judgment was awarded to ICBC on a summary trial application. Shortly after judgment was rendered, Mr. Sangha made an assignment into bankruptcy.

On this application, ICBC argued that the judgment fell within section 178(1)(a) of the Bankruptcy and Insolvency Act, and its judgment should be considered a restitution order or order similar in nature to a fine or penalty. The court looked generally at those provisions and their purpose, and held that society considers those types of orders to be of a quality which outweighs any possible benefit to society of the bankrupt being released of his obligation to pay. The court held that similarly, the perpetrator of intentional vehicular violence should not be able to avoid the civil consequences thereof simply by declaring bankruptcy, as civil consequences may well provide an important deterrent to such behaviour.

It was also relevant that if ICBC’s claim did not survive discharge, ICBC may well be deterred from stepping forward to compensate victims of intentional torts in the future. If a bankrupt could escape this kind of claim, it may provide a disincentive for ICBC to step in and compensate victims.

Finally, the court held that the statutory mechanism of that bankruptcy discharge was created to give an honest unfortunate a fresh start. It was not intended to be a tool upon which perpetrators of violent crime could rely to avoid paying for their actions. The court held that the order in favour of ICBC was in the nature of a penalty, because the bankrupt breached the conditions of his insurance by engaging in an intentional act of violence.

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