John Andrew Siwiec

The Court of Appeal for Ontario considered whether Seabrook Bros.

Mechanical Ltd., a subcontractor and lien claimant, was entitled to a revised assessed value for its security in the insolvency proposal of North House Foods Ltd. The court held that there was no appeal as of right under s. 193(a)-(c) of the Bankruptcy and Insolvency Act, but granted leave to appeal under s. 193(e) due to the importance of the issue.

The appeal was dismissed, as the motion judge had not erred in finding that the appellant's security (a lien on a leasehold interest) had no realizable value in the circumstances.

The court clarified the onus on dissatisfied creditors under s. 50.1(4) of the BIA and the limited recourse for lien claimants in insolvency.

This decision concerns the costs arising from an unsuccessful application brought by Seabrook Bros.

Mechanical Ltd. to challenge a proposal trustee's valuation of security under the Bankruptcy and Insolvency Act.

The proposal trustee, Doyle Salewski Inc., sought $5,000 in costs, which was granted.

The debtor, North House Foods Ltd., sought partial indemnity costs of $23,413.72.

The court reduced North House Foods' costs to $8,000, citing their failure to deliver a Costs Outline (Form 57B) in advance as required by Rule 57.01(6) and proportionality concerns, noting that the proposal trustee's arguments were largely persuasive in the underlying application.

The moving party, Seabrook Bros.

Mechanical Ltd., applied under s. 50.1(4) of the Bankruptcy and Insolvency Act to revise the Proposal Trustee's $0 valuation of its construction lien security against North House Foods Ltd.'s leasehold interest.

The court dismissed the application, finding that Seabrook failed to demonstrate that the security had any realizable value on a forced sale, despite expert reports suggesting value to the debtor.

The court emphasized that the valuation was not about the debt itself, but the enforceability and net recovery from the collateral, considering impediments like lease assignment restrictions and the theoretical nature of realizing on such security in a proposal context.

The defendants moved for an order requiring the plaintiffs to post security for costs.

The plaintiffs, a Ukrainian national residing abroad and a British Virgin Islands corporation with no Ontario assets, argued that Mr. Spektor's shares in Black Iron Inc. (BKI) were sufficient assets and that the defendants' wealth and a forum selection clause should negate or reduce the security.

The court found the BKI shares too volatile and illiquid due to the war in Ukraine and trading volume to serve as sufficient security.

It rejected arguments based on the forum selection clause and the defendants' affluence, distinguishing the case from Yaiguaje.

The motion for security for costs was granted, with the plaintiffs ordered to post $270,000 in installments, a reduction from the $318,000 sought, primarily due to the counterclaim.

This costs endorsement follows the dismissal of applications by Belokon, Entes, Sistem, and Stans (the "Applicants") to recognize and enforce arbitral awards against the Kyrgyz Republic (the "Republic"), and to declare an exigible ownership interest of the Republic in Centerra Gold Inc. shares held by Kyrgyzaltyn JSC.

The Republic and Kyrgyzaltyn (the "Respondents") sought costs.

The court awarded costs on a partial indemnity basis, rejecting claims for full or substantial indemnity.

It also determined that costs should be payable on a several, not joint and several, basis due to the unrelated nature of the Applicants and the court-directed common issue hearing.

The court limited the costs award to the common issue hearing, excluding prior jurisdiction motions or general recognition application costs, and considered previous compensation for materials.

The applicants sought a declaration that the Kyrgyz Republic held an exigible ownership interest in shares of Centerra Gold Inc. registered in the name of its wholly-owned subsidiary, Kyrgyzaltyn JSC, to enforce arbitral awards.

The court dismissed the applications, finding that the Agreement on New Terms (ANT) unambiguously established Kyrgyzaltyn JSC as the beneficial owner of the shares, not the Republic.

The court rejected arguments based on contract interpretation under New York law and trust principles under Canadian law, emphasizing the separate legal personality of the subsidiary and the lack of evidence for an ownership interest or trust.