It’s a question that’s been bothering me ever since Alex Jones, the far-right conspiracy theorist and host of Infowars, filed for bankruptcy back in December of 2022. For those who may not remember, Jones spent years claiming that the 2012 massacre of 20 young children and six staff at Sandy Hook Elementary School in Newtown, Connecticut, was staged with actors as part of a government plot to seize Americans’ guns. For years, he encouraged his followers to harass and attack the grieving families of the Sandy Hook victims, making their lives a living hell.
Well, last year, the Connecticut court issued two judgments against Jones for nearly $1.5bn in damages to the families of victims of the Sandy Hook massacre. Coincidentally, it was around this time that Jones began filing for bankruptcy. Ensuing bankruptcy filings would show that Alex Jones’ company, Infowars, happened to owe millions of dollars in secured loans to several companies, which, in another unbelievable coincidence, happened to be owned by his friends and family. This meant that his other creditors, namely the families of the Sandy Hook victims, would be left with little to nothing to satisfy the Connecticut Court’s judgment debt.
While it will be up to a bankruptcy judge to decide whether or not these debts are legitimate, a number of many commentators noted that this was a clear attempt to force the Sandy Hook families into a settlement, something that his own bankruptcy filings not so subtly hinted at when it stated, “While Jones comes to this court in good faith and wants to reach an amicable resolution between all the parties, it is imperative that all parties do the same.”
But as many legal professionals pointed out, this probably won’t work since 11 U.S.C. § 523(a)(6) provides that a debt for willful and malicious injury by the debtor to another entity or the property of another entity is not dischargeable. Fortunately, for people who are not Jones, defamation falls squarely under willful and malicious injury.
All this got me wondering why we here in Canada, don’t have our own 11 U.S.C. § 523(a)(6), for these kinds of bad-faith bankruptcy applications. Our own equivalent legislation, the Bankruptcy and Insolvency Act, lists only eight specific classes of debts that are not released by an order of discharge. These exceptions are narrow, and none work to survive a judgment debt for willful and malicious injury in civil torts.
The closest thing we have is Subparagraph 178 (1)(a.1) which states that an order of discharge does not release the bankrupt from any award of damages by a court in civil proceedings for either (i) bodily harm intentionally inflicted, or sexual assault, or (ii) wrongful death resulting therefrom. However, as the Superior Court of Ontario in Marshall, Re, 2001 CanLII 28287 clarified, 178(1)(a.1) only refers to debts arising from criminal acts and did not apply to civil torts like defamation.
Over the years, Courts have applied a narrow interpretation of the provisions in section 178 of the BIA, leading to bankruptcy courts discharging civil judgment debts arising out of things like physical assault, false or misleading statements on financial documents, and the theft of trade secrets and confidential information.
Canada’s bankruptcy laws have long emphasized the importance of the fresh-start principle. But while one of the fundamental objectives of the bankruptcy regime is debtor rehabilitation, the discharge should also not encourage wrongdoers and dishonest debtors to escape the effects of their misconduct against innocent creditors. With that in mind and in light of recent events, it may be time for Parliament to re-examine section 178 of the BIA.
Max H. Shin, Associate Lawyer