Directive No. 3R (Pre-1992)

Use of Related Persons to Perform Services for Bankruptcy Estates and Costs Chargeable to the Estate

---

Printable Version: Use of Related Persons to Perform Services for Bankruptcy Estates and Costs Chargeable to the Estate (PDF Format, 403 KB)

---

Issued: December 15, 1988

Reissued: January 10, 1991

Purpose

This Directive revises and replaces Directive #3 dated September 13, 1985 as well as any previously issued policies on this matter.

Background

1. The purpose of this Directive is to outline the position of the Superintendent of Bankruptcy concerning the use of related persons to perform services in the administration of appointments and the costs chargeable to the estate.
2. It is recognized that some trustees, individual or corporate, use non-arms length corporations or individuals to carry out some administrative services imposed by the Bankruptcy Act.
3. The reporting of such expenses as disbursements and the payment from estate funds for services by related persons without previously obtaining permission from the inspectors and/or the court contravenes Rule 63(1) of the Bankruptcy Act and it may also be in conflict with the duties and powers of a trustee provided in Section 16 of the Bankruptcy Act.

   Related Persons

4. For the purpose of this Directive, related persons are those defined in Section 4 of the Bankruptcy Act as well as employees, employers or associates of the trustee and firms in which the above individuals or the trustee have an interest.

   Policy

5. All charges incidental to the administration of the estates, including direct or indirect costs for services by a related person are subject to the provisions of subsection 25(1) of the Bankruptcy Act and shall be included as part of the trustee's remuneration in the Statement of Receipts and Disbursements.

   Cost Chargeable to the Estate as Disbursement

6. The trustee is entitled to claim as a disbursement, the actual cost incurred in the administration of an estate.
   1. Travel expenses:
      • where public transportation is used, the actual cost;
      • where the trustee or his employees use their private vehicle, a reimbursement at a reasonable rate (rate usually paid by employer);
   2. Hotel and meal allowances
      • When on travel status, the reimbursement of the actual expense (receipts required).
      Where costs in (a) and (b) above relate to more than one estate, the total cost must be divided equitably amongst all of the related estates;
   3. long distance telephone calls including facsimile, at the actual amount charged;
   4. charges for notices and documents to creditors, at an amount not exceeding 50 cents per page;
   5. photocopies, other than those claimed in the preceding paragraph, at an amount not exceeding 50 cents each;
   6. bank service charges;
   7. storage costs for items other than those referred to under subsection 65(1) of the Rules and in special circumstances where the quantity of the records has resulted in unusually high costs.
7. The trustee may claim as expense the actual costs paid for:
   • taking possession;
   • inspecting assets;
   • delivering assets;
   • stocktaking;
   • investigatory audit;
   • updating of the accounting books and records; and
   • other similar expenses

   where the amount paid was made to a person dealing at arm's length as defined by the present guidelines.

8. The list of expenses appearing under paragraphs 6 and 7 is not exhaustive, these being the principal ones requiring clarification.

   Costs not Chargeable to the Estate as Disbursements

9. Where the work was performed by the trustee or a person not dealing at arm's length, the cost must be included in the remuneration of the trustee and not claimed as a disbursement.
10. The following costs may not be claimed as disbursements by the estate and/or in the Statement of Receipts and Disbursements as these are overhead costs or costs for "the facilities of the trustee" as defined in Rule 63(3):
    1. office equipment and furniture;
    2. telephone system, including special features;
    3. use of office computer equipment;
    4. general costs of administration for the office (i.e. rent, insurance, electricity, etc.);
    5. stationery and office supplies;
    6. the cost to the trustee's office to finance the cost of work-in- progress or estate administration;
    7. storage cost for books, records and documents relating to the administration of the estate as defined under subsection 65(1) of the Rules.
11. There shall be no charges in the Statement of Receipts and Disbursements for unforeseen costs or provisions for future costs unless they are shown under specific charges.

The Superintendent of Bankruptcy
Wally Clare

---

Information on Downloading a PDF Reader
To access the Portable Document Format (PDF) version you must have a PDF reader installed. If you do not already have such a reader, there are numerous PDF readers available for free download or for purchase on the Internet:

• Adobe Reader
• Foxit Reader
• Xpdf
• eXPert PDF Reader

---

Important notice: The XHTML version of this Directive is not the official version. In the event of an inconsistency between the XHTML and PDF versions of this Directive, the PDF version prevails. Users are required to exercise due diligence with respect to the XHTML version.