The trustee in bankruptcy brought a motion for directions concerning responsibility for an appeal from an order dismissing a civil action previously commenced by the bankrupt.
The trustee had concluded that prosecuting the underlying actions would likely result in a net liability to the estate and the parties agreed the actions should be returned to the bankrupt pursuant to s. 40(1) of the Bankruptcy and Insolvency Act.
The dispute concerned whether the trustee or the bankrupt should pursue the appeal of the dismissed action after the trustee conveyed its interest back to the bankrupt.
The court held that the trustee had taken reasonable steps to preserve the action prior to dismissal and had not failed in its duties.
Once the action was returned to the bankrupt, responsibility for prosecuting the appeal fell to the bankrupt, who was also ordered to reimburse the trustee’s reasonable legal fees incurred in filing a placeholder appeal.